fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 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, 2011 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal............................................................................................................................................. i-iv Certificate of Achievement for Excellence in Financial Reporting..........................................................................v List of Principal Officials ........................................................................................................................................vi Organization Chart .................................................................................................................................................vii 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 Fund (Exhibit 8)....................................................................................28 Index of Notes to the Financial Statements ......................................................................................................29 Notes to the Financial Statements................................................................................................................30-53 Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule – General Fund (State Highway Fund)........................................................54 Note to Required Supplementary Information..................................................................................................55 Information About Infrastructure Assets Reported Using the Modified Approach .....................................56-60 2011 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2011 TABLE OF CONTENTS (continued) Page Supplementary Information Non-Major Governmental Funds Financial Statements: Combining Balance Sheet (Exhibit 9) ....................................................................................................61-62 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Exhibit 10) ..........63-64 Fiduciary Funds Financial Statements: Combining Statement of Net Assets – Agency Fund (Exhibit 11)...............................................................65 Statement of Changes in Assets and Liabilities – Agency Fund (Exhibit 12)..............................................66 STATISTICAL SECTION Overview ................................................................................................................................................................67 Index of Statistical Section.....................................................................................................................................68 Financial Trends: Change in Net Assets (Table A-1) ...............................................................................................................69-72 Statement of Revenues, Expenditures, and Changes in Fund Balances (Table A-2) ...................................73-76 Fund Balances of Governmental Funds (Table A-3) ........................................................................................77 Expenditures of Federal Awards (Table A-4) ...................................................................................................78 Government-wide Expenses by Function (Table A-5) .....................................................................................79 Government-wide Revenues (Table A-6) .........................................................................................................80 Net Assets by Component (Table A-7).............................................................................................................81 Revenue Capacity: Highway User Revenue Fund Collections (Table B-1) ....................................................................................82 Highway User Revenue Fund Distributions (Table B-2)..................................................................................83 Fuel Tax Rates (Table B-3)...............................................................................................................................84 Motor Vehicle Fuel Tax – Top Ten Suppliers (Table B-4)...............................................................................85 Gasoline Volume Sold – Top Twenty-Five Suppliers (Table B-5)..............................................................86-87 Debt Capacity: Highway User Revenue Fund – Legal Debt Margin (Table C-1) .....................................................................88 Highway Revenue Bonds – Bond Coverage (Table C-2) .................................................................................89 Transportation Excise Tax Revenue Bonds – Bond Coverage (Table C-3)......................................................90 Transportation Excise Tax Revenue Bonds – Debt Service Revenue and Cost Per Capita (Table C-4) ..........91 Ratios of Outstanding Debt by Type (Table C-5) .............................................................................................92 2011 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2011 TABLE OF CONTENTS (continued) Page Demographic and Economic Information: Number of Vehicle Registrations Per Year (Table D-1)...................................................................................93 Vehicle Registrations Per Year Compared to Fuel Sales (Table D-2) ..............................................................94 Demographic and Economic Statistics (Table D-3)..........................................................................................95 Principal Employers (Table D-4)......................................................................................................................96 Operating Information: Full-Time Equivalents (FTEs) (Table E-1).......................................................................................................97 Capital Assets – Schedule by Function and Activity (Table E-2).....................................................................98 Capital Assets – Schedule of Changes by Function and Activity (Table E-3)..................................................99 Total Public Road Mileage by Highway Class and Governmental Ownership (Table E-4) ...........................100 Daily Vehicle Miles Traveled with Population Data (Table E-5)...................................................................101 Acknowledgments .....................................................................................................................................................102 2011 Comprehensive Annual Financial Report Introductory Section fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 Certificate of Achievement for Excellence in Financial Reporting Presented to Arizona Department of Transporation For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2010 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. v 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 Terry W. Conner Assistant Director Enforcement & Compliance Division Jennifer A. Toth Assistant Director Multimodal Planning Division John H. Nichols Assistant Director Administrative Services John R. Fink Assistant Director for Finance and Accounting Arizona State Transportation Board Member William (Bill) J. Feldmeier, Chairman Barbara (Bobbie) Ann Lundstrom , Vice Chairwoman Felipe Andres Zubia Victor Flores Stephen W. Christy Kelly O. Anderson Hank Rogers Counties District 6 (Yavapai, Yuma, Mohave, and LaPaz Counties) District 3 (Cochise, Greenlee, and Santa Cruz Counties) District 1 (Maricopa County) District 1 (Maricopa County) District 2 (Pima County) District 4 (Gila, Graham, and Pinal Counties) District 5 (Navajo, Apache, and Coconino Counties) 2011 Comprehensive Annual Financial Report vi Term Expires 2012 2013 2012 2014 2015 2016 2017 State State of of Arizona Arizona Department Department of of Transportation Transportation Organization Chart Organization Chart Citizens Governor State Transportation Board Director Executive Director For Planning & Policy Multimodal Planning Division Chief of Operations Administrative Services Division Motor Vehicle Division Enforcement & Compliance Division Intermodal Transportation Division Transportation Services Group vii Financial Section fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 CERTIFIED PUBLIC ACCOUNTANTS Hein f 25 versary th A nni 1986-2011 INDEPENDENT AUDITORS’ REPORT The Honorable Janice K. Brewer Governor of the State of Arizona Members of the Arizona State Legislature We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the Arizona Department of Transportation (Department), as of and for the year ended June 30, 2011, which collectively comprise the Department’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the Arizona Department of Transportation. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. As discussed in Note 1.A, the financial statements of the Arizona Department of Transportation are intended to present the financial position, and the changes in financial position and cash flows, where applicable, of only that portion of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the State of Arizona that is attributable to the Arizona Department of Transportation. They do not purport to, and do not, present fairly the financial position of the State of Arizona, as of June 30, 2011, and the changes in its financial position, and its cash flows, where applicable, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Arizona Department of Transportation, as of June 30, 2011, and the respective changes in its financial position, and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 10120 N. Oracle Road, Tucson, Arizona 85704 Tel: (520) 742-2611 Fax: (520) 742-2718 Co. HEINFELD, MEECH & CO., P.C. & , Meech eld As described in Note 4.A, the Department implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, for the year ended June 30, 2011, which represents a change in accounting principle. In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2011 on our consideration of the Arizona Department of Transportation’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 14, budgetary comparison information on pages 54 and 55, and information about infrastructure assets reported using the modified approach on pages 56 through 60 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Department’s financial statements as a whole. The accompanying supplementary information such as the Introductory Section, Supplementary Information, and Statistical Section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the financial statements. The Supplementary Information is the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. HEINFELD, MEECH & CO., P.C. Certified Public Accountants November 30, 2011 2 Arizona Department of Transportation Management’s Discussion and Analysis June 30, 2011 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, 2011. We encourage readers to consider the information presented here in conjunction with the Letter of Transmittal, which can be found on pages i-iv, 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 $16.0 billion, compared to $15.4 billion for fiscal year 2010, an increase of 4.2 percent. Of this amount, $126.1 million represents unrestricted net assets and may be used to meet the Department’s ongoing obligations to citizens and creditors as compared to $125.8 million at the end of 2010. • The Department’s capital assets are $18.0 billion, compared to $17.3 billion for fiscal year 2010, an increase of 3.9 percent. This increase is attributable to the results of increased highway construction activity. The Department’s invested in capital assets, net of related debt, is $15.2 billion, compared to $14.6 billion for fiscal year 2010, an increase of 3.7 percent. • The Department’s non-current liabilities are $3.1 billion, compared to $3.0 billion in 2010. The Department had $150.3 million more in bonds outstanding in 2011 than in 2010. During fiscal year 2011, there were $338.6 million in bonds issued and $188.3 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 $1.1 billion, as compared to approximately $938.8 million in 2010. • The total restricted fund balance is $949.5 million; of this amount, approximately $945.6 million is restricted for capital projects. The nonspendable portion of fund balance represents $9.8 million in inventories while the remainder of $126.8 million represents the committed fund balance portion. • The proprietary funds reported net assets at year-end of $76.4 million, as compared to $75.0 million in 2010. 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. 2011 Comprehensive Annual Financial Report 3 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 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, highway, highway maintenance, and motor vehicle. Taxes, fees, and federal grants finance most of these activities. Business-type Activities Activities for which the Department charges a fee to customers to pay 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 (HELP) are reported here. The government-wide financial statements can be found on pages 15-16 of this report. This report includes two schedules (Exhibit 3.1 and Exhibit 4.1) that reconcile the amounts reported on the governmental fund financial statements (prepared using the modified accrual basis of accounting and current financial resources measurement focus) with governmental activities (prepared using the accrual basis of accounting and economic resources measurement focus) on the appropriate government-wide statements. The following summarizes the impact of utilizing Governmental Accounting Standards Board Statement 34 (GASB 34) 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, bonds, 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. 2011 Comprehensive Annual Financial Report 4 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 • 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 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 goods and services to outside customers, to other agencies, or to other divisions of the Department. The Department’s enterprise funds are the Arizona Highways Magazine Fund and the Highway Expansion and Extension Loan Program Fund. The internal service fund reports activities that provide supplies and services for the Department’s other programs and activities and other state agencies. The Equipment Revolving Fund is the Department’s only internal service fund. Internal service fund activities are reported as governmental activities on the governmentwide 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 fund financial statement can be found on page 28. 2011 Comprehensive Annual Financial Report 5 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 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 29-53 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 54-60 of this report. Supplementary Information Other Supplementary Information includes the combining statements for the non-major governmental funds and agency funds, and is presented immediately following the Required Supplementary Information on budget and infrastructure assets. Combining and individual fund statements and schedules can be found on pages 61-66 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 address the financial position and changes to financial position for the Department as a whole as of and for the fiscal years ended June 30, 2011 and 2010. The Department’s combined net assets increased by $642.8 million over the course of this fiscal year’s operations, an increase of 4.2 percent. The net assets of the governmental activities increased by $641.4 million, or 4.2 percent, and business-type activities increased by $1.4 million, an increase of 1.9 percent 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 a greater reliance on federal grants. In February 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA) as an economic stimulus package. The money set aside by this program was to be distributed through a variety of agencies, and to be used for projects such as improving education, building roads, public transportation, criminal justice, health care, and many other areas. The highway construction projects included pavement preservation, traffic interchange reconstruction, roadway widening, bridge rehabilitation, safety fence replacement, and other transportation uses. Construction contracts have been awarded for nearly all projects, and more than half the funds have been expended. As of the end of the fiscal year, the transit project has expended $9.7 million while the highway construction projects have expended $454.3 million. 2011 Comprehensive Annual Financial Report 6 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 The following table reflects the condensed Statement of Net Assets as of June 30, 2011 and 2010: Governmental Activities 2011 2010 Business-type Activities 2011 2010 Total 2011 2010 77,737,935 92,231 77,830,166 $ 1,480,054,893 17,976,007,204 19,456,062,097 $ 1,321,717,669 17,306,972,638 18,628,690,307 2,652,237 129,361 2,781,598 293,727,087 3,131,140,546 3,424,867,633 283,722,564 2,956,611,445 3,240,334,009 92,231 15,159,139,183 75,619,251 746,003,302 <662,914> 126,051,979 75,048,568 $16,031,194,464 14,620,191,304 642,412,639 125,752,355 $15,388,356,298 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 $ 1,401,025,969 17,975,953,546 19,376,979,515 $ 1,243,979,734 17,306,880,407 18,550,860,141 $ 291,218,260 3,131,004,477 3,422,222,737 281,070,327 2,956,482,084 3,237,552,411 2,508,827 136,069 2,644,896 15,159,085,525 669,811,122 125,860,131 $15,954,756,778 14,620,099,073 566,793,388 126,415,269 $15,313,307,730 53,658 76,192,180 191,848 76,437,686 $ 79,028,924 53,658 79,082,582 $ $ In rounded figures, the total assets of the Department were $19.4 billion, while total liabilities were $3.4 billion, resulting in a net assets balance of $16.0 billion. The majority of the Department’s net assets, $15.2 billion (95.0 percent), was invested in capital assets (e.g., land, infrastructure, buildings, machinery, and equipment), net of any related debt used to acquire those assets. The Department uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Department’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities. The governmental activities reported an increase in capital assets with the largest increase being in the area of construction in progress. The Department issued two bonds in fiscal year 2011 which caused the non-current liabilities to increase for the governmental activities. The business-type activities reported a small increase in net assets for fiscal year 2011; this was primarily due to the receipt of an interfund loan. 2011 Comprehensive Annual Financial Report 7 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 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 2011 2010 Business-type Activities 2011 2010 Total 2011 2010 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 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 $ 133,661,283 220,759,085 743,718,082 124,307,064 146,935,991 575,447,784 $ 5,772,911 - $ 6,541,051 - 206,545,412 199,672,233 - - 206,545,412 199,672,233 874,191,798 704,726,732 9,798,513 9,414,904 3,604,096 12,491,462 2,918,911,367 893,287,384 690,503,437 9,526,737 16,346,982 707,616 8,257,587 2,664,992,815 554,941 6,327,852 514,171 7,055,222 874,191,798 704,726,732 9,798,513 9,969,845 3,604,096 12,491,462 2,925,239,219 893,287,384 690,503,437 9,526,737 16,861,153 707,616 8,257,587 2,672,048,037 93,040,027 37,069,567 129,699,887 99,948,875 345,590,127 65,781,111 34,720,987 102,931,834 102,925,906 122,747,606 - - 93,040,027 37,069,567 129,699,887 99,948,875 345,590,127 65,781,111 34,720,987 102,931,834 102,925,906 122,747,606 1,024,756,349 254,702,299 163,035,322 128,768,466 - 1,057,720,144 251,391,647 83,229,758 129,626,215 - 5,664,153 6,288,136 1,024,756,349 254,702,299 163,035,322 128,768,466 5,664,153 1,057,720,144 251,391,647 83,229,758 129,626,215 6,288,136 2,276,610,919 1,951,075,208 125,981 5,790,134 147,040 6,435,176 125,981 2,282,401,053 147,040 1,957,510,384 713,917,607 - 537,718 851,400 620,046 - 642,838,166 - 714,537,653 - 713,917,607 14,599,390,123 $ 15,313,307,730 1,389,118 75,048,568 $76,437,686 620,046 74,428,522 $ 75,048,568 642,838,166 15,388,356,298 $ 16,031,194,464 714,537,653 14,673,818,645 $ 15,388,356,298 642,300,448 <851,400> 641,449,048 15,313,307,730 $ 15,954,756,778 $ 2011 Comprehensive Annual Financial Report 8 $ 139,434,194 220,759,085 743,718,082 $ 130,848,115 146,935,991 575,447,784 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 Governmental Activities The following chart depicts revenues of the governmental activities for the fiscal year ended June 30, 2011: Revenues - Governmental Activities $2,918,911,367 Fuel and motor carrier taxes and fees 24.1% Income from investments 0.3% Other revenues including flight property taxes and gain on sale of capital assets 0.9% Transportation excise taxes 7.1% Vehicle registration, title, license and related taxes 29.9% Charges for services 4.6% Operating grants and contributions 7.6% Capital grants and contributions 25.5% $2.3 billion (or 79.5 percent) of the Department’s revenues are from the following three revenue sources: • Vehicle registration, title, license, and related taxes comprise the Department’s largest revenue source of $874.2 million (29.9 percent). • Capital grants and contributions represent the Department’s second largest revenue source of $743.7 million (25.5 percent). • Fuel and motor carrier taxes and fees represent the Department’s third largest revenue source of $704.7 million (24.1 percent). The Department’s two main funding sources, the Highway User Revenue Fund (HURF) and the Maricopa County Transportation Excise Tax, posted positive year-over-year growth in fiscal year 2011 for the first time since fiscal year 2007. HURF collections totaled approximately $1.2 billion, an increase of 0.9 percent from fiscal year 2010 and equal to the Department’s estimate. Maricopa County Transportation Excise Tax collections totaled $309.2 million, an increase of 3.4 percent over fiscal year 2010, and 2.7 percent above the Department’s estimate. The Transportation Excise Tax distribution to the Department was $206.5 million compared to $199.7 million for fiscal year 2010. Both revenue sources remained under pressure during fiscal year 2011 due to high unemployment, lower personal income and population growth, and lower home values. Fuel prices spiked in February and March 2011, which caused consumers to curtail their spending, but fuel prices did eventually move downward during the last few months of the fiscal year. Capital grants and contributions increased from fiscal year 2010 due to an increase in the amount received in federal aid for fiscal year 2011. The increase in the Maricopa Regional Area Road Construction Fund was due to projects which utilized federal ARRA funding, and therefore, increased the capital grants and contributions revenue. 2011 Comprehensive Annual Financial Report 9 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 The following chart depicts expenses of the governmental activities for the fiscal year ended June 30, 2011: Expenses - Governmental Activities $2,276,610,919 Distributions to other state agencies 11.2% Distributions to Arizona counties and cities 45.0% Local governmental assistance 7.1% Interest on long-term debt 5.7% Administration 4.1% Highway 1.6% Highway Maintenance 5.7% Non-capital, including asset preservation 15.2% Motor Vehicle 4.4% $1.6 billion (or 71.4 percent) of the Department’s expenses were for the following: • Distributions to Arizona counties and cities comprise the Department’s largest expense of $1.0 billion (45.0 percent). • Non-capital, including asset preservation, represents the Department’s second largest expense of $345.6 million (15.2 percent). • Distributions to other state agencies represent the Department’s third largest expense of $254.7 million (11.2 percent). Distributions to Arizona counties and cities decreased in fiscal year 2011 as compared to fiscal year 2010. As in the previous fiscal year, various legislative budget bills addressed the deficit in the State General Fund, in part by sweeping funds and transferring excess fund balances from state agencies to the State General Fund. The Department’s distributions to other state agencies increased in fiscal year 2011 due to the legislative action. The large increase in administration expense was primarily in the General Fund (State Highway Fund) due to the Department wanting to better reflect the expenses for direct and indirect cost pools. The increase in local government assistance was due to increased project activity, both revenue and expenditures increased in fiscal year 2011. 2011 Comprehensive Annual Financial Report 10 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 Business-type Activities Net assets for business-type activities increased by $1.4 million in fiscal year 2011. Total revenues were $6.3 million, with charges for services representing 91.2 percent and income from investments 8.8 percent. The total expenses for business-type activities were $5.8 million. The Highway Expansion and Extension Loan Program had a decrease in total revenues (operating and non-operating) of $364 thousand which was primarily due to the Department choosing not to loan money because the return on investment was not sufficient to merit the risk. Interest revenue increased this fiscal year due to the fund not issuing any new loans and receiving loan repayments, which increased average cash balances during the year. The Arizona Highways Magazine had a decrease in operating revenues of $356 thousand primarily due to a reduction in the number of subscribers for the monthly publication; and a reduction in the purchases of related products such as calendars, books, and holiday gift catalog items. Typically magazine subscribers also purchase these related products. This decline in demand is consistent with industry trends for many other consumer periodicals with revenues based predominantly on annual subscriptions, as well as an overall weaker economy, especially in Arizona where the majority of subscribers are located. Financial Analysis of the Department’s Funds As previously mentioned, the Department uses fund accounting to ensure and demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the Department’s governmental funds financial statements (pages 17-24) is to provide information on near-term inflows, outflows, and balances of spendable resources. All major governmental funds are discretely presented on these financial statements, while the non-major governmental funds are combined into a single column. Combining statements for the non-major governmental funds may be found on pages 61-64. As of the end of the fiscal year, the fund balances of the governmental funds totaled $1.1 billion, an increase of $147.3 million over the previous fiscal year. Of the $1.1 billion balance, $87.3 million or 8.0 percent constitutes the unassigned portion of the fund balance, which was available for spending for the general purposes of the Department. The remaining fund balance of $998.8 million, or 92.0 percent, is distributed into the following: $9.8 million for inventories and $22.6 million for land held for resale as nonspendable; $946.0 million represents those funds that are restricted and used to pay for capital projects while $3.5 million represents those funds that are restricted and used to pay for debt service; $10.2 million represents that portion of the fund balance that is committed; and $6.7 million represents those funds that have been assigned. The General Fund (State Highway Fund) is the primary operating fund of the Department. At the end of the current fiscal year, the unassigned fund balance of the General Fund (State Highway Fund) was $73.5 million; the nonspendable fund balance was $32.4 million; the restricted fund balance was $229.6 million; and the committed fund balance was $6.3 million. The Maricopa Regional Area Road Construction Fund is a major special revenue fund that receives a portion of Maricopa County Transportation Excise Tax monies that are used to provide a funding source for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial street system within Maricopa county. Total revenues collected in the fund in fiscal year 2011 were $431.6 million; Transportation Excise Tax revenue of $206.5 million (or 47.9 percent) was the bulk of the revenue. The remaining revenue was mainly federal revenue and income from investments. The Debt Service Fund is used for the accumulation of resources for, and the payment of, general long-term debt principal and interest of the governmental funds. The other financing sources of $331.5 million were transferred in from the General Fund (State Highway Fund) ($154.4 million), Maricopa Regional Area Road Construction Fund ($88.3 million), and Grant Anticipation Notes Fund ($88.8 million), and were used to pay the debt service. 2011 Comprehensive Annual Financial Report 11 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 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 $334.3 million. Capital outlay expenditures of $266.1 million (79.6 percent) accounted for the majority of the expenditures in the Capital Projects Fund. This expenditure for the acquisition and construction of new highways was converted to capital assets on the government-wide statements. Budget Variances As a consequence of lower revenue collections and legislative fund sweeps, the Department reduced its fiscal year 2011 operating spending levels in order to ensure that there would be sufficient cash in the General Fund (State Highway Fund) to cover debt service, contractor payments, fund transfers, and daily operational expenses. Accordingly, actual expenditures for fiscal year 2011 were less than the Department’s appropriated budget. Variances reflect personnel savings resulting from the statewide hiring freeze, operational savings from the elimination of non-mission critical overtime and travel; and deferred roadway equipment replacement, facility repair, and routine highway repair and maintenance. Reference the budgetary comparison schedule on page 54. 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, 2011, amounts to $18.0 billion (net of accumulated depreciation), a $669.0 million increase over the previous fiscal year. Governmental Activities 2011 2010 Land Buildings and improvements Improvements other than buildings Mobile fleet and aircraft Machinery and equipment Infrastructure Construction in progress Total $ 2,619,089,147 110,771,178 25,532,416 41,920,580 12,089,608 11,604,565,886 3,561,984,731 $ 17,975,953,546 $ 2,494,102,975 112,867,876 22,374,013 41,292,766 12,318,584 11,036,788,230 3,587,135,963 $ 17,306,880,407 Business-type Activities 2011 2010 $ $ 7,900 35,069 10,689 53,658 $ $ 7,900 68,859 15,472 92,231 Total 2011 2010 $ 2,619,097,047 110,806,247 25,532,416 41,920,580 12,100,297 11,604,565,886 3,561,984,731 $ 17,976,007,204 $ 2,494,110,875 112,936,735 22,374,013 41,292,766 12,334,056 11,036,788,230 3,587,135,963 $ 17,306,972,638 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 6,722 center lane miles (18,771 travel lane miles) and 4,741 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 3.69 was achieved for fiscal year 2011. 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 2011, a CRI of 93.1 percent was achieved. 2011 Comprehensive Annual Financial Report 12 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 In addition to many smaller projects, the following major highway construction contracts in excess of $10 million were started during fiscal year 2011: Contract Start Date Contract Amount Description System enhancement/traffic management engineering State Route 101 Interstate 10 - Tatum Boulevard in Maricopa County. System enhancement/traffic management engineering State Route 202L HOV Lanes, Gilbert Road to Interstate 10 in Maricopa County. Capacity additions and major widening on Interstate 10 Interstate 8 to State Route 87 (Sunland Gin Road to Picacho Peak TI) in Pinal County. Capacity additions and reconstruction on Interstate 10 Val Vista Road to Earley Road in Pinal County. Capacity additions and reconstruction on State Route 260 in Doubtful Canyon in Gila County. Capacity additions and reconstruction on Interstate 10 and State Route 90 traffic interchange in Cochise County. System enhancement/traffic management engineering State Route 143 Sky Harbor Boulevard traffic interchange in Maricopa County. Capacity additions and major widening on US Highway 93 at Deluge Wash in Mohave County. System enhancements/safety improvements on State Route 85 at Gila Bend in Maricopa County. System enhancement regional supplemental noise walls in Maricopa County. Capacity additions and major widening on US Highway 93 at Wagon Bow Ranch in Mohave County. Construction of new bridges on State Route 89A at Viewpoint Drive traffic interchange in Yavapai County. Pavement preservation Interstate 10 State Line to Fortuna in Yuma County. 1 Fiscal Year 2011 Construction Expenditures $ 1 12/17/2010 $ 89,955,200 51,875,078 7/16/2010 84,688,947 57,610,825 8/4/2010 31,313,131 17,975,159 10/15/2010 31,279,308 4,305,854 10/15/2010 29,359,129 4,583,045 9/1/2010 27,602,268 9,752,446 10/15/2010 17,816,566 5,243,831 11/19/2010 13,847,988 4,529,331 12/17/2010 13,473,722 2,781,923 3/18/2011 11/19/2010 13,256,416 12,088,729 1,715,755 3,605,129 10/15/2010 11,352,403 5,537,668 1/21/2011 10,994,201 6,815,570 Construction Expenditures are strictly those costs paid to the primary contractor for each project shown. Furthermore, the following major highway construction projects had expenditures in excess of $15 million in fiscal year 2011. 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 2011 Project Location Description State Route 202L HOV Lanes, Gilbert Road to Interstate 10 in Maricopa County. State Route 101 Interstate 10 - Tatum Boulevard in Maricopa County. State Route 303L Interstate10/State Route 303L Traffic Interchange in Maricopa County. Interstate 10 Salt River to Baseline Road in Maricopa County. State Route 303L Lake Pleasant Parkway to Interstate 17 in Maricopa County. State Route 303L from Happy Valley Parkway to Lake Pleasant Parkway in Maricopa County. US Highway 93 at Hoover Dam in Mohave County. Interstate 10 Sarival Avenue to Dysart Road in Maricopa County. Interstate 10 Interstate 8 to State Route 87 (Sunland Gin Road to Picacho Peak TI) in Pinal County. State Route 260 at Little Green Valley in Gila County. US Highway 60/Grand Ave SR 303L to 99th Avenue in Maricopa County. 2 Expenditures $ Project Expenditures include not only construction costs, but also engineering and design work, payroll (if applicable), and any other project related costs. 2011 Comprehensive Annual Financial Report 13 2 61,486,435 54,570,008 47,032,275 39,920,907 31,960,989 22,720,317 22,037,855 19,766,482 18,830,490 16,169,956 16,104,570 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2011 Non-Current Liabilities (See Note 5F to the financial statements for additional information) The Department’s non-current liabilities for its governmental and business-type activities as of June 30, 2011, amount to $3.1 billion, an increase of $174.5 million from the previous fiscal year. The increase in capital leases was due to entering into new lease agreements in fiscal year 2011. 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 Compensated absences Total business-type activities Total non-current liabilities 2011 2010 $ 1,600,855,000 877,845,000 392,495,000 180,225,182 14,782,649 4,909,960 59,891,686 3,131,004,477 $1,672,625,000 743,815,000 304,480,000 158,600,871 14,946,119 1,303,783 60,711,311 2,956,482,084 136,069 136,069 129,361 129,361 $ 3,131,140,546 $ 2,956,611,445 The Department has issued revenue bonds in 51 separate issues between 1980 and 2011. All bonds outstanding as of June 30, 2011, are scheduled to mature on various dates, but none 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 from the 1980s to the present. Of the $7.6 billion total in bonds issued between 1980 and 2011, $1.4 billion, or approximately 18 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/Aaa by Standard & Poor’s Ratings Services and Moody’s Investors Service, respectively. The Department’s subordinate lien Highway Revenue Bonds are rated AAA/Aa1 The Department’s Transportation Excise Tax Revenue Bonds are rated AA+/Aa1. The Department’s Grant Anticipation Notes (“GARVEE bonds”) are rated AA/Aa2/AA with the additional rating provided by Fitch Ratings. Refer to Note 6C, subsequent events, on page 53, for additional information. Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with an overview of the Department’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Controller, Arizona Department of Transportation, 206 S. Avenue, Phoenix, Arizona, 85007, or by visiting our website at 17th http://www.azdot.gov/Inside_ADOT/fms/PDF/CAFR11.pdf. 2011 Comprehensive Annual Financial Report 14 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 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, 2011 Governmental Activities Assets Unrestricted cash on deposit with the State Treasurer $ Notes and loans Other, net of allowance for doubtful accounts Due from U.S. Government for reimbursable costs Internal balances Total 38,926,510 $ 1,646,696 - 102,269 102,269 66,422,378 110,994 - 110,994 66,422,378 4,424,033 161,222 24,550 10,640,962 9,513,873 133,445,157 - Receivables: Subscriptions, net of allowance for doubtful accounts Accrued interest Taxes and fees Business-type Activities 6,216,929 9,352,651 133,445,157 <24,550> $ 40,573,206 Inventories Other assets/prepaid items 13,043,516 22,605,923 473,234 392,045 13,516,750 22,997,968 Deferred charges 21,568,357 - 21,568,357 1,089,469,098 17,785,639,764 71,693,881 7,900 1,161,162,979 17,785,647,664 190,313,782 19,376,979,515 45,758 79,082,582 190,359,540 19,456,062,097 17,706,520 14,246,106 136,803,973 32,227 92,445 - 17,738,747 14,338,551 136,803,973 14,937,093 - 14,937,093 107,524,568 - 30,590 2,353,565 107,555,158 2,353,565 210,010,060 2,920,994,417 3,422,222,737 136,069 2,644,896 210,146,129 2,920,994,417 3,424,867,633 15,159,085,525 53,658 15,159,139,183 3,263,593 666,547,529 125,860,131 $ 15,954,756,778 76,192,180 191,848 $ 76,437,686 76,192,180 3,263,593 666,547,529 126,051,979 $ 16,031,194,464 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 5F): 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 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 15 Exhibit 2 Arizona Department of Transportation Statement of Activities for the fiscal year ended June 30, 2011 Program Revenues Expenses 93,040,027 37,069,567 129,699,887 99,948,875 345,590,127 254,702,299 1,024,756,349 163,035,322 128,768,466 2,276,610,919 $ 10,769,571 2,797,580 2,667,173 117,426,959 133,661,283 5,664,153 5,619,322 - - <44,831> 125,981 5,790,134 $ 2,282,401,053 153,589 5,772,911 $ 139,434,194 220,759,085 $ 743,718,082 27,608 <17,223> $ <1,178,489,692> Business-type Activities Total Functions/Programs Governmental Activities Administration Highway Highway maintenance Motor vehicle Non-capital, including asset preservation Distributions to other state agencies Distributions to Arizona counties and cities Local governmental assistance Interest on long-term debt Total governmental activities Business-type Activities Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities Total $ Operating Grants and Contributions Capital Grants and Contributions Charges for Services $ $ 50,302,930 170,456,155 220,759,085 Governmental Activities $ Net revenues 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 $ <1,178,472,469> $ Change in net assets Net assets - July 1 Net assets - June 30 641,449,048 15,313,307,730 $ 15,954,756,778 206,545,412 874,191,798 704,726,732 9,798,513 9,414,904 3,604,096 12,491,462 <851,400> 1,819,921,517 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 16 3,843,690 739,874,392 743,718,082 Net Revenues $ <78,426,766> 755,905,335 <127,032,714> 17,478,084 <345,590,127> <254,702,299> <1,024,756,349> 7,420,833 <128,768,466> <1,178,472,469> <17,223> $ <1,178,489,692> 554,941 851,400 1,406,341 206,545,412 874,191,798 704,726,732 9,798,513 9,969,845 3,604,096 12,491,462 1,821,327,858 1,389,118 75,048,568 $ 76,437,686 642,838,166 15,388,356,298 $ 16,031,194,464 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 Governmental Funds Financial Statements Major Funds General Fund (State Highway Fund) This fund is used to account for all financial transactions applicable to the general operations of the Department. The fund receives money from the Highway User Revenue Fund including vehicle registration, title, license, and related fees, and fuel and motor carrier taxes. Reimbursements for certain construction expenditures are received from the federal government, Arizona cities and counties, and other state agencies. The fund also receives interest and other revenues. The fund disburses money primarily for the design, construction, 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 Department and its agents that are not designated for other purposes. The revenues include: motor fuel taxes, a portion of vehicle license tax, vehicle registration fees, driver license fees, dealer fees, permits, and other miscellaneous fees. These monies are distributed to the General Fund (State Highway Fund), the Department of Public Safety, the Economic Strength Project Fund, incorporated cities, counties, and other legislatively appropriated entities. Debt Service Fund This fund is used to administer all payments of principal and interest on bonds and notes issued by the Arizona Transportation Board for Highway Revenue Bonds, Transportation Excise Tax Revenue Bonds, and Grant Anticipation Notes (GARVEE bonds). Capital Projects Fund This fund is used to administer bond proceeds for Arizona Transportation Board Highway Revenue Bonds, Arizona Transportation Board Transportation Excise Tax Revenue Bonds, 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, 2011 Special Revenue Funds Maricopa Regional Area Road Construction Fund General Fund (State Highway Fund) Assets Unrestricted cash on deposit with the State Treasurer Receivables: Interfund (Note 5D) 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 $ 18,986,777 - $ Highway User Revenue Fund - $ - 82,450,212 1,910,694 3,323,343 78,769,683 9,765,026 22,605,923 1,626,600 2,076,407 27,427,847 - 11,049,320 8,128,423 - 16,213,341 55,373,058 - 229,558,642 $ 447,370,300 411,303,936 $ 442,434,790 $ 38,789,437 57,967,180 94,609,454 166,195,853 $ $ Liabilities and fund balances Liabilities: Accounts payable $ 9,395,656 Accrued payroll and other accrued expenditures 13,249,008 Contracts and retainage payable 80,038,045 Interfund payables (Note 5D) 926,085 Amounts due to: Other state agencies Arizona counties and cities Surety and rental deposits 177,148 1,910,694 Deferred revenue (Note 5C) Total liabilities 105,696,636 Fund balances: (Note 5G) Nonspendable Restricted Committed Total fund balances Total liabilities and fund balances $ Motor Vehicle Division Clearing Fund 9,765,026 229,558,642 102,349,996 341,673,664 $ 447,370,300 150,009 34,881,239 - $ 11,738 81,934,378 35,031,248 9,428,907 22,284,942 207,250 57,967,180 84,249,737 166,195,853 400,703,542 6,700,000 407,403,542 $ 442,434,790 57,967,180 166,195,853 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 17 7,741,188 18,304,893 $ $ $ Exhibit 3 Debt Service Fund $ Total Non-Major Governmental Funds (See Exhibit 9) Capital Projects Fund - - $ 18,313,493 - - 2,831,702 4,306,235 3,952,901 27,247,627 - 103,121,855 66,422,378 6,216,929 9,352,651 133,445,157 9,765,026 8,128,423 22,605,923 1,276,310 $ 1,276,310 299,704,097 $ 299,704,097 14,227,222 $ 70,879,180 $ 1,089,469,098 1,485,827,710 $ $ $ $ - $ Total Governmental Funds 1,626,600 66,297 232,195 21,884,689 220,651 $ 37,300,270 17,203,141 13,642,950 136,803,973 103,012,607 - 1,626,600 5,508,186 989,889 4,306,235 33,208,142 14,937,093 107,524,568 384,398 6,216,929 399,725,659 1,276,310 1,276,310 $ 1,276,310 298,077,497 298,077,497 $ 299,704,097 19,908,994 17,762,044 37,671,038 $ 70,879,180 9,765,026 949,524,985 126,812,040 1,086,102,051 1,485,827,710 $ 2011 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, 2011 Total fund balances - governmental funds (Exhibit 3) $ 1,086,102,051 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 B1). Internal service funds are used by management to charge the costs of equipment rentals to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net 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 B2). Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (Note 4 B3). Net assets of governmental activities (Exhibit 1) 17,933,520,314 45,853,301 6,216,929 <3,116,935,817> $ 15,954,756,778 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 19 This page intentionally left blank Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2011 Special Revenue Funds 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 Highway Highway maintenance Motor vehicle Total current expenditures $ Motor Vehicle Division Clearing Fund - $ 206,545,412 224,245,586 304,669,062 - - 462,430,932 14,391,769 - 292,818,459 348,899,622 - 423,464,766 50,302,930 7,109,276 845,000 113,329 3,039,740 1,313,529 2,946,766 1,018,049,984 218,478,410 1,954,138 2,127,157 1,240,770 1,290,630 431,636,517 476,822,701 379,061 2,991,647 645,088,789 79,232,477 34,222,358 120,716,320 85,956,241 320,127,396 479,831 2,958,816 3,438,647 4,152,052 4,152,052 4,429,832 4,429,832 The notes to the financial statements are an integral part of this statement. 2011 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 - $ 206,545,412 - - 11,840,369 36,766,279 9,798,513 991,335,346 704,726,732 9,798,513 917,012 917,012 2,508,886 2,508,886 94,859,933 169,440,082 1,014,814 322,797 110,860 798,410 2,683,600 327,635,657 736,803,109 219,743,012 10,078,228 845,000 436,126 9,082,716 798,410 2,554,299 9,912,643 2,902,659,546 59,374 59,374 336,434 336,434 1,368,588 163,035,322 3,576,830 167,980,740 81,476,704 200,216,496 120,716,320 98,114,955 500,524,475 (continued) 2011 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, 2011 Special Revenue Funds Maricopa Regional Area Road Construction Fund General Fund (State Highway Fund) Expenditures (continued) 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 $ 42,735,250 32,234,127 $ 267,113 39,786,379 Motor Vehicle Division Clearing Fund $ Highway User Revenue Fund 86,690,979 385,979,670 $ 86,417,639 554,241,318 12,177,217 36,328 187,163,794 282,103,646 876,577,758 732,242 60,310,429 156,190,273 260,725,083 476,822,701 645,088,789 141,472,226 170,911,434 - - <154,458,652> <2,400,000> 3,711,987 2,529,280 17,532 <150,599,853> <88,261,828> 11,095,085 <77,166,743> - - - - <9,127,627> 93,744,691 313,658,851 350,801,291 $ 341,673,664 $ 407,403,542 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 22 $ $ Exhibit 4 Debt Service Fund $ Total Non-Major Governmental Funds (See Exhibit 10) Capital Projects Fund - $ - $ Total Governmental Funds 38,098,718 10,270,451 $ 254,209,699 1,022,511,945 188,310,000 144,711,874 333,081,248 2,098,655 65,704,593 266,126,129 334,265,811 4,829,523 221,179,432 201,219,459 144,748,202 2,098,655 313,178,816 709,249,571 3,147,740,822 <332,164,236> <331,756,925> 106,456,225 <245,081,276> 331,546,772 331,546,772 338,585,000 38,875,926 377,460,926 <88,826,292> <88,826,292> 331,546,772 <331,546,772> <2,400,000> 3,711,987 2,529,280 349,697,617 38,875,926 392,414,810 $ <617,464> 45,704,001 252,373,496 1,893,774 1,276,310 $ 298,077,497 $ 17,629,933 20,041,105 37,671,038 147,333,534 938,768,517 $ 1,086,102,051 2011 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, 2011 Net change in fund balances - total governmental funds (Exhibit 4) $ 147,333,534 Amounts reported for governmental activities in the Statement of Activities (Exhibit 2) are different because: Capital outlays are reported as expenditures in governmental funds (Note 4 C1). Bond proceeds provide current financial resources to governmental funds. However, issuing debt increases long-term liabilities in the statement of net 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 4 C2). Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets (Note 4 C2). Internal service funds are used by management to charge the cost of equipment rentals to individual funds. The net loss of the internal service funds is reported with governmental activities (Note 4 C3). Some items reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds (Note 4 C4). Change in net assets of governmental activities (Exhibit 2) 668,694,189 <386,474,888> 217,199,195 1,365,912 <6,668,894> $ 641,449,048 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 24 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 Proprietary Funds Financial Statements Major Funds Arizona Highways Magazine Fund The fund consists of receipts generated from the sale of the Arizona Highways Magazine and other branded products. The fund provides for the production and sale of the Magazine and related products that promote the State of Arizona. Highway Expansion and Extension Loan Program Fund This fund is an innovative financing mechanism to administer monies designated to provide loans and credit enhancement assistance to the Department and to sponsors of local transportation projects. Non-Major Fund Internal Service Fund The Equipment Revolving Fund is primarily funded by the charges it collects from the Department of Transportation, other state agencies, and local organizations to support the repair and maintenance of vehicles and equipment. Exhibit 5 Arizona Department of Transportation Statement of Net Assets Proprietary Funds June 30, 2011 Business-type Activities - Enterprise Funds Highway Expansion and Extension Loan Program Fund Assets Current assets: Unrestricted cash on deposit with the State Treasurer Receivables: $ Interfund 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 $ 1,646,696 Total $ 1,646,696 Governmental Activities Internal Service Fund $ 1,626,240 110,994 3,893,583 71,693,881 75,698,458 22,338 102,269 161,222 473,234 392,045 2,797,804 22,338 102,269 110,994 3,893,583 161,222 473,234 392,045 71,693,881 78,496,262 3,278,490 4,904,730 Non-current assets: Loans receivable Capital assets not subject to depreciation Capital assets subject to depreciation, net of accumulated depreciation Total non-current assets Total assets 530,450 - 7,900 530,450 7,900 - 530,450 76,228,908 45,758 53,658 2,851,462 45,758 584,108 79,080,370 42,433,232 42,433,232 47,337,962 Liabilities Current liabilities: Accounts payable Accrued payroll and other accrued expenses Interfund payables Due to Arizona counties and cities Unearned revenues (Note 5C) Compensated absences Total current liabilities 2,499 30,590 3,639 36,728 32,227 89,946 2,353,565 132,430 2,608,168 32,227 92,445 30,590 2,353,565 136,069 2,644,896 118,981 603,156 131,586 587,413 1,441,136 Non-current liabilities: Compensated absences Total non-current liabilities Total liabilities 36,728 2,608,168 2,644,896 43,525 43,525 1,484,661 76,192,180 76,192,180 53,658 189,636 243,294 53,658 76,192,180 189,636 76,435,474 42,433,232 3,420,069 45,853,301 Net assets Invested in capital assets, net of related debt Restricted for loans and other financial assistance Unassigned Total net assets $ $ 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. 2011 Comprehensive Annual Financial Report 25 2,212 76,437,686 $ 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, 2011 Business-type Activities - Enterprise Funds Highway Expansion and Extension Loan Program Fund Operating revenues Sales and charges for services (net of write off $46,256) 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 Travel Depreciation Other Total operating expenses Operating income 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 Total non-operating revenues 153,589 153,589 Arizona Highways Magazine Fund $ $ $ 24,420,139 95,701 24,515,840 1,250,313 11,264,070 11,091,549 100,658 201,784 46,337 30,802 7,558,221 750,468 32,294,202 1,755,970 13,065 1,552,596 678,975 7,314 23,376 476,707 13,581 38,574 180,654 4,740,812 1,755,970 13,065 1,598,653 678,975 7,708 23,376 514,207 13,581 38,574 180,714 4,824,823 69,578 878,510 948,088 545,321 <41,970> - 9,620 <757> <921,700> 554,941 <42,727> <921,700> 19,816 <1,081> 35,273 137,893 <5> <492,600> 503,351 <912,837> <409,486> <300,704> 851,400 - 851,400 - 7,895,494 2,400,000 <851,400> 572,929 75,619,251 $ 76,192,180 $ 817,073 <573,779> 243,294 1,390,002 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net assets of business-type activities $ The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 26 5,061,950 153,589 557,372 5,772,911 46,057 394 37,500 60 84,011 Capital contributions Transfer in Transfer out Changes in net assets Total net assets - July 1 Total net assets - June 30 5,061,950 557,372 5,619,322 Total Governmental Activities Internal Service Fund <884> 1,389,118 <7,778,362> 1,365,028 44,488,273 $ 45,853,301 Exhibit 7 Arizona Department of Transportation Statement of Cash Flows Proprietary Funds for the fiscal year ended June 30, 2011 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 other agencies, Arizona counties, and cities Payments to suppliers Payments to employees Other receipts Net cash provided by operating activities Cash flows from non-capital financing activities $ Distributions to other state agencies Transfers from other funds Net cash provided by non-capital financing activities Arizona Highways Magazine Fund Cash flows from capital and related financing activities Proceeds from sale of capital assets Acquisition of capital assets Insurance recoveries Interest on capital leases Net cash provided by capital and related financing activities Cash flows from investing activities Income from investments Investment expense Net cash provided by investing activities <921,700> 851,400 <70,300> 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 Unearned revenues Compensated absences Advance/interfund payable Net cash provided by operating activities - - - - $ $ 69,578 9,620 <757> 8,863 4,301,186 144 498 4,371,406 $ $ 5,748,890 67,591,687 73,340,577 $ 878,510 $ 948,088 38,574 $ 39,340 40,943 75,547 <39,424> 4,312 <108,442> 6,210 935,570 $ Non-cash capital and financing activities Certain vehicles were contributed to the Equipment Revolving Fund by the General Fund totaling $7,895,474 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report <492,600> 1,548,600 1,056,000 120,427 <126,831> 137,893 <5> 131,484 554,941 <42,727> 512,214 874,133 772,563 1,646,696 - 27 <921,700> 851,400 <70,300> - 4,874,757 66,819,124 71,693,881 $ 5,067,174 $ 14,577,064 4,380,450 9,971,161 <3,110,531> <14,172,405> <1,587,489> <11,092,855> 557,372 95,701 5,306,976 <621,334> - 545,321 <41,970> 503,351 Net increase in cash Cash - July 1 Cash - June 30 Total 74,325 $ 4,992,849 $ 4,380,450 <37,954> <3,072,577> <45,415> <1,542,074> 557,372 4,371,406 935,570 - Governmental Activities Internal Service Fund 19,816 <1,081> 18,735 $ 584,885 1,041,355 1,626,240 $ <7,778,362> 38,574 4,340,526 40,943 75,547 <39,424> 4,456 <108,442> 6,708 5,306,976 $ 7,558,221 <671,055> 112,280 34,062 <4,566> 128,086 <621,334> fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 Fiduciary Funds Financial Statements 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 Fund June 30, 2011 Assets Restricted cash on deposit with the State Treasurer Total assets $ 415,227 $ 415,227 Liabilities Due to Arizona counties Total liabilities $ 415,227 $ 415,227 The notes to the financial statements are an integral part of this statement. 2011 Comprehensive Annual Financial Report 28 Notes to the Financial Statements Arizona Department of Transportation Index – Notes to the Financial Statements June 30, 2011 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.................................................................................................................................38 Note 3 – Budgeting, Budgetary Control, and Legal Compliance ................................................................................38 Note 4 – Accounting Pronouncements and Reconciliation of Government-wide and Fund Financial Statements .....39 A – New Accounting Pronouncements...............................................................................................................39 B – Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net 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 ......................................................................................................................45 D – Interfund Receivables, Payables, Advances, and Transfers.........................................................................45 E – Leases...........................................................................................................................................................46 F – Non-Current Liabilities ................................................................................................................................47 G – Fund Balances..............................................................................................................................................52 Note 6 – Other Information .........................................................................................................................................52 A – Contingent Liabilities ..................................................................................................................................52 B – Pension and Other Postemployment Benefits ..............................................................................................52 C – Subsequent Events .......................................................................................................................................53 2011 Comprehensive Annual Financial Report 29 Arizona Department of Transportation Notes to the Financial Statements June 30, 2011 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of the Arizona Department of Transportation (Department) conform in all material respects to accounting principles generally accepted in the United States of America (GAAP) as applicable to governments. The Governmental Accounting Standards Board (GASB) is the primary standard-setting body for establishing governmental accounting and financial reporting principles, which are primarily set forth in the GASB’s Codification of Governmental and Financial Reporting Standards (GASB Codification). Following is a summary of the Department’s significant accounting policies. A. Reporting Entity The Department is a department of the State of Arizona (State) and is not a legally separate entity. The Department has no component units. The Director of the Department serves as the Chief Executive Officer and is directly responsible to the governor. The governor appoints a seven-member Transportation Board of the State of Arizona Department of Transportation (Transportation Board) which has responsibility for establishing a complete system of state highway routes, approving all highway construction contracts, and distributing monies for local airport facilities’ projects through a grant program. The Department is responsible for the construction and maintenance of all state highways. The Department cooperates with the various cities and counties within the state in the construction and maintenance of state roads and with the Federal Highway Administration in the construction and maintenance of interstate and other highways. Assistance in the development of local airports, registering motor vehicles and aircraft, licensing drivers, and the publishing of the Arizona Highways Magazine are also responsibilities of the Department. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net 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: charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function; and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. 2011 Comprehensive Annual Financial Report 30 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 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 (FASB) Statements 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). 2011 Comprehensive Annual Financial Report 31 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 The Highway User Revenue Fund is a special revenue fund which collects motor vehicle and liquid use fuel taxes and receives certain Motor Vehicle Division revenues from the Motor Vehicle Division Clearing Fund. These monies are distributed to the General Fund (State Highway Fund), the Department of Public Safety, the Economic Strength Project Fund, incorporated cities, towns, counties, and other legislatively appropriated entities. The Debt Service Fund is used to account for the accumulation of resources for, and the payments of, general long-term debt principal and interest of the governmental funds. The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities in the governmental funds. The Department reports the following major proprietary funds: The Highway Expansion and Extension Loan Program Fund is an innovative financing mechanism to administer funds designated to provide loan and credit enhancement assistance to sponsors of local transportation projects. The Arizona Highways Magazine Fund publishes and markets the Arizona Highways Magazine and various other products that promote the State of Arizona. Additionally, the Department reports the following funds: The Internal Service Fund, which accounts for purchases and maintenance of equipment and materials to be used by other divisions in the Department and other government agencies. The Equipment Revolving Fund is the Department’s only internal service fund. The Agency Fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. The Highway Properties – 24 Percent Fund (which is not included in the government-wide statements) is the Department’s only agency fund. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges for services by the Equipment Revolving Fund to the other governmental functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: charges for services, operating grants and contributions, and capital grants and contributions. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues are charges for services and 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. 2011 Comprehensive Annual Financial Report 32 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 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, 2011, the State’s investment pool 5 was rated AAAF/S1+ by Standard & Poor’s Ratings Service. The weighted average maturity at year end for investment pool 5 was twenty-seven days while for investment pool 7 it was forty-seven days. State statutes require the State Treasurer to maintain separate investment accounts for the portions of the Highway Revenue Bond Proceeds Fund relating to the Highway Revenue Bond issues and the Maricopa Regional Area Road Bond Proceeds Fund relating to the Transportation Excise Tax Revenue Bond issues. These funds may be invested by the Treasurer in the state’s investment pool. The Department’s investments are included in the state investment pool and these investments are not shown in the Department’s name. From the perspective of the Department, the pool functions as both a cash management pool and a demand deposit account. Therefore, the Department presents its equity in the internal pool as required in GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, and carries the investments at amortized cost, which approximates fair value. The Department has restricted cash for payment of capital projects for Maricopa and Pima Counties, for future debt service payments, and for the Statewide Transportation Acceleration Needs account. Receivables, Payables and Advances Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as interfund receivables/payables. All other outstanding balances between the U.S. Government, Arizona counties and cities, and other state agencies are reported as due to/from. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. The other receivables and subscriptions receivable are shown net of allowance for doubtful accounts. For other receivables comprising recoverable insurance claims, the amount reserved for doubtful accounts is comprised of 100% of balances greater than six years old, 95% of balances from four to six years old, and a percentage of balances less than four years old. The subscriptions receivable allowance for doubtful accounts is equivalent to an estimated number of issues delivered on outstanding subscription payments past due more than 90 days. 2011 Comprehensive Annual Financial Report 33 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Notes receivable represents loans made to parties purchasing assets previously owned by the Department for highway construction purposes. Inventories and Prepaid Items The governmental activities inventory is valued at cost, which approximates market, using the moving average method. This inventory is accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. The fund financial statement reports inventory as nonspendable for the like amount indicating it does not constitute available expendable resources. No reservation of net assets is shown in the government-wide statements for inventories. The business-type activities’ inventories are stated at the lower of cost or market. Costs of enterprise fund inventories consisting of resale products and supplies are generally determined by moving average cost and specific identification methods, respectively. Costs of the internal service fund’s inventories (consisting of vehicle parts and supplies, fuels and lubricants, and other supplies) are determined by moving average cost methods. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Restricted Assets Certain proceeds of the Department’s governmental revenue bonds, as well as certain resources of the General Fund (State Highway Fund) and the Highway Expansion and Extension Loan Program Fund (enterprise fund) are classified as restricted assets on the balance sheet because they are maintained in separate accounts and their use is limited by applicable bond covenants or state statutes. State law requires 12.6 percent of the revenues allocated each year to the General Fund (State Highway Fund) from the Highway User Revenue Fund be allocated for design, purchase of right-of-way, or construction of controlled-access highways, arterial streets, and local highways that are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). State Transportation Board policy further allocates 2.6 percent of the revenues 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. Capital Assets Capital assets, which include land, buildings and improvements, improvements other than buildings, machinery and equipment, infrastructure, and construction in progress, are reported in the applicable governmental or business-type columns in the government-wide financial statements. Capital assets are defined by the Department as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. Purchased capital assets are recorded at historical cost or estimated historical cost if historical cost is not available. Donated capital assets are recorded at estimated fair value at the date of donation. Costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset’s life are not capitalized. Outlays for capital assets are capitalized at the time of the purchase or, in the case of infrastructure, at the time of final acceptance by the Department from the contractor. Asset preservation costs are expensed as incurred. 2011 Comprehensive Annual Financial Report 34 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 The Department depreciates non-infrastructure capital assets on a straight-line basis using the following estimated useful lives: Assets Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Years 20-40 20-40 5-15 5-15 Infrastructure was capitalized for the first time in fiscal year 2002. The infrastructure assets are reported in the governmental activities column of the Statement of Net 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 maintain an asset management system that includes an up-to-date inventory of eligible infrastructure assets, perform condition assessments of eligible assets and summarize the results using a measurement scale, estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the Department, and document that the assets are being preserved approximately at or above the established condition level. Deferred/Unearned Revenues In the government-wide statements and proprietary fund financial statements, deferred/unearned revenues are recorded when cash, receivables, or other assets are received prior to revenue being recognized. In the governmental funds, amounts are reported as deferred revenues until they are available to liquidate liabilities of the current period. Deferred/unearned revenues are reported in the government-wide statements for the business-type activities and in the fund statements for both the governmental and proprietary funds. In the government-wide statements, the unearned revenues relate to unearned subscription revenue for the Arizona Highways Magazine. Unearned subscription revenue is recorded when subscription orders are received and is amortized as revenue over the terms of the related subscriptions. Costs associated with the selling of subscriptions are expensed in the year incurred. In the fund statements for the General Fund (State Highway Fund), the deferred revenue represents the amount for the notes receivable for loans made to parties who purchased assets previously owned by the Department for highway construction purposes. For the Non-Major Governmental Funds, the deferred revenue represents loans to various local governments for airport capital improvements designed to generate airport revenues and/or related airport economic development efforts. Loans are typically for construction of aircraft storage hangars, fuel dispensing and storage facilities, and terminal buildings. Loan rates 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. 2011 Comprehensive Annual Financial Report 35 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 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 straight-line method. Bonds payable are reported net of the applicable premium or discount. Debt issuance costs are reported as deferred charges and amortized over the term of the related debt. 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. Fund balances for governmental funds may be classified as nonspendable, restricted, committed, assigned, or unassigned in the fund financial statements. Nonspendable fund balance describes that portion of fund balance that cannot be spent because of its form; restricted fund balance describes that portion of fund balance that reflects resources that are subject to externally enforceable legal restrictions; committed fund balance describes that portion which has self-imposed limitations; assigned fund balance describes that portion of fund balance that reflects a governments’ intended use of resources; and unassigned fund balance represents net resources in excess of what can properly be classified in one of the other categories. The State applies restricted resources first when expenditures are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. E. Revenues and Expenditures/Expenses In the government-wide Statement of Activities, revenues and expenses are segregated by activity (governmental or business-type), then further by function (e.g., Administration, Highway). Additionally, revenues are classified between program and general revenues. Program revenues include charges for services, operating grants and contributions, and capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. General revenue includes all taxes and income on investments. In the governmental fund financial statements, revenues are reported by source. Expenditures are reported by function (e.g., Administration, Distributions to Arizona counties and cities, Distributions to other state agencies, Debt service, Capital outlay). The Distributions to Arizona counties and cities and Distributions to other state agencies are shared tax revenues that are distributed based on statutory requirements. Debt service includes both interest and principal outlays related to 2011 Comprehensive Annual Financial Report 36 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 bonds, loans, advances, board funding obligations, and capitalized leases. Capital outlay includes expenditures for real property or infrastructure (i.e., bridges and roads). Revenues and expenses of proprietary funds are classified as operating and non-operating and are sub-classified by object (e.g., salaries, equipment rental, depreciation). Operating revenues and expenses generally result from providing services and producing and delivering goods. All other revenues and expenses are reported as nonoperating. Other Financing Sources Other financing sources are additions to the governmental fund balances in the fund financial statements and include resources and financing provided by bond issuance, sale of capital assets, capital leases, insurance recovery, and transfers from other funds. Other financing uses are reductions of governmental fund resources in fund financial statements normally resulting from transfers to other funds. F. Interfund Activity and Balances Interfund Activity As a general rule, the effect of interfund activity has been eliminated from the government-wide statements. Exceptions to this rule are activities between the funds reported as governmental activities and the funds reported as business-type activities (e.g., the transfer of the gain or loss from the Equipment Revolving Fund). Interfund Balances Interfund receivables and payables have been eliminated from the Statement of Net Assets, except for the residual amounts due between governmental and business-type activities. 2011 Comprehensive Annual Financial Report 37 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 2. FUNDS BY CLASSIFICATION The following table lists all of the funds whose balances are reflected in this financial report. FUND TYPES MAJOR FUNDS Governmental Funds: General Fund (State Highway Fund) Special Revenue Funds: Maricopa Regional Area Road Construction Fund Motor Vehicle Division Clearing Fund Highway User Revenue Fund Debt Service Fund Capital Projects Fund NON-MAJOR FUNDS Other Governmental Funds: Special Revenue Funds: State Aviation Fund Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Motor Vehicle Inspection and Title Enforcement Fund Motor Carrier Safety Revolving Fund Underground Storage Tank Fund Economic Strength Project Fund Grant Anticipation Notes Fund Local Agency Deposits Fund Proprietary Funds: Enterprise Funds: Arizona Highways Magazine Fund Highway Expansion and Extension Loan Program Fund Internal Service Fund Equipment Revolving Fund FIDUCIARY FUNDS Agency Fund: Highway Properties–24 Percent Fund 3. BUDGETING, BUDGETARY CONTROL, AND LEGAL COMPLIANCE An annual budget for the operating expenditures of the General Fund (State Highway Fund) is submitted to the governor in accordance with state law. The budget is legally enacted as appropriations after approval by the state legislature and signature of the governor. The legal level of control for operating expenditures is set at the agency level and expenditure budgets are appropriated using a lump-sum by agency format with a special line-item appropriation for highway maintenance. Expenditure details for personal services, employee-related expenditures, and all other operating expenditures are specifically allocated within all divisions. In certain divisions, other specific programs are allocated in addition to these categories. Revenue budgets are developed internally by the Department and are not part of the appropriation process. Amendments to the approved appropriations require legislative approval. However, since the Department’s appropriation is a lump sum appropriation, the allocation of funds between personal services, employee-related expenditures, and other operating expenditures is an internal decision. Accordingly, transfers between line items such as personal services and other operating expenditures within a particular program may be made by the program manager. Expenditures may not exceed appropriations. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the first month of the subsequent fiscal year are charged against the prior fiscal year’s budget. The Department’s appropriations lapse at fiscal year-end unless exempted by the legislature. 2011 Comprehensive Annual Financial Report 38 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 In addition, budgets for capital outlay, including land, building, and improvements for the State Highway Fund and State Aviation Fund, are also submitted to the governor in accordance with state law. The capital outlay appropriation includes state highway construction and land, building, and improvements for the State Highway Fund. A legal limitation is adopted for land, building, and improvements; however, legislation allows the Department to spend in excess of its appropriation for state highway construction up to the current fund balance. The Department monitors expenditures through an internal budgetary process and the Five-Year Transportation Facilities Construction Program approved by the Transportation Board. 4. ACCOUNTING PRONOUNCEMENTS AND RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. New Accounting Pronouncements Statement No. 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 has implemented this Statement as appropriate. Statement No. 53 Accounting and Financial Reporting for 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 has implemented this Statement as appropriate. 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 financial statements for periods beginning after June 15, 2010. The Department has implemented this Statement as appropriate. Statement No. 57 OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans The objectives of this Statement are to address issues related to the use of the alternative measurement method and the frequency and timing of measurements by employers that participate in agent multiple-employer other post- 2011 Comprehensive Annual Financial Report 39 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 employment benefit (OPEB) plans (i.e., agent employers). In addition, this Statement clarifies that when actuarially determined OPEB measures are reported by an agent multiple-employer OPEB plan and its participating employers, those measures should be determined as of a common date and at a minimum frequency to satisfy the agent multiple-employer OPEB plan’s financial reporting requirements. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2011. The Department will implement this Statement as appropriate. There will be no impact to the Department. Statement No. 58 Accounting and Financial Reporting for Chapter 9 Bankruptcies The objective of this Statement is to provide accounting and financial reporting guidance for governments that have petitioned for protection from creditors by filing for bankruptcy under Chapter 9 of the United States Bankruptcy Code. It requires governments to remeasure liabilities that are adjusted in bankruptcy when the bankruptcy court confirms (i.e., approves) a new payment plan. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2009. The Department has implemented this Statement as appropriate. There was no impact to the Department. Statement No. 59 Financial Instruments Omnibus The objective of this Statement is to update and improve existing standards regarding financial reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been identified in practice. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2010. The Department has implemented this Statement as appropriate. There was no impact to the Department. B. Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Assets The governmental funds Balance Sheet includes a 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 $ 17,785,639,764 190,313,782 Less Internal Service Fund (Equipment Revolving Fund) assets 17,975,953,546 <42,433,232> $ 17,933,520,314 Deferred revenues for assets shown in the fund statements for the following funds: Governmental funds: General Fund (State Highway Fund) State Aviation Fund $ 1,910,694 4,306,235 $ 6,216,929 2011 Comprehensive Annual Financial Report 40 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 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 Capital leases Compensated absences Advances and notes payable Business activity share of Equipment Revolving Fund gain $ <3,051,420,182> 13,439,934 <4,909,960> <14,151,711> <59,891,686> <2,212> $ <3,116,935,817> 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 Reduction in construction in progress resulting from certain infrastructure project being reclassified from capital outlay to non-capital Change in net capital assets – Internal Service Fund (Equipment Revolving Fund) Assets removed from service, net of accumulated depreciation Other Less depreciation expense – governmental funds Less depreciation expense – Internal Service Fund (Equipment Revolving Fund) 2011 Comprehensive Annual Financial Report 41 $ 709,249,572 <20,610,496> <378,950> <4,079,135> 62,982 <7,991,563> <7,558,221> $ 668,694,189 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 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 debt issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are amortized in the Statement of Activities. The details of this difference are as follows: Debt issued or incurred: Issuance of Transportation Excise Tax Revenue Bonds Issuance of Grant Anticipation Notes (GARVEE bonds) Premium on bonds Bond issuance costs Advances and notes payable $<180,000,000> <158,585,000> <38,875,926> 2,098,655 <11,112,617> $<386,474,888> Principal repayments: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE bonds) Amortization of premium and discount Amortization of debt issuance costs Repayment of advances and notes payable Repayment of capital leases $ 71,770,000 45,970,000 70,570,000 17,251,615 <1,271,879> 11,932,242 977,217 $ 217,199,195 3. The Internal Service Fund (Equipment Revolving Fund) is used by the Department to charge the cost for purchases and maintenance of equipment and material to be used by other funds and state agencies. The gain in the Internal Service Fund (Equipment Revolving Fund) represents over billing and must be eliminated from the government-wide Statement of Activities for the business activity. Internal Service Fund (Equipment Revolving Fund): Changes in net assets Business activity share of Equipment Revolving Fund loss $ $ 1,365,028 884 1,365,912 4. Some items reported in the Statement of Activities do not provide or require the use of current financial resources and, therefore, are not reported in the governmental funds. The details are as follows: Notes and loans receivables Compensated absences Assumption of lease by General Fund (State Highway Fund) $ $ 2011 Comprehensive Annual Financial Report 42 <2,244,404> 158,904 <4,583,394> <6,668,894> Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 5. DETAILED NOTES ON ALL FUNDS A. Capital Assets Capital assets activity for the year ended June 30, 2011, was as follows: July 1, 2010 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 2,494,102,975 11,036,788,230 3,587,135,963 17,118,027,168 Decreases Including Transfers Increases $ 118,197,052 578,082,384 537,415,498 1,233,694,934 $ June 30, 2011 Ending Balance 6,789,120 $ 2,619,089,147 <10,304,728> 11,604,565,886 <562,566,730> 3,561,984,731 <566,082,338> 17,785,639,764 188,530,128 29,563,802 47,485,411 132,603,589 398,182,930 2,024,501 4,224,254 3,192,221 8,067,989 17,508,965 <57,584> <1,988,935> <617,103> <2,663,622> 190,497,045 33,788,056 48,688,697 140,054,475 413,028,273 <75,662,252> <7,189,789> <35,166,827> <91,310,823> <209,329,691> <4,081,413> <1,065,851> <3,047,498> <7,355,022> <15,549,784> 17,798 1,615,236 531,950 2,164,984 <79,725,867> <8,255,640> <36,599,089> <98,133,895> <222,714,491> Total capital assets, being depreciated, net 188,853,239 1,959,181 Governmental activities capital assets, net $ 17,306,880,407 $ 1,235,654,115 Less accumulated depreciation for: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Total accumulated depreciation July 1, 2010 Beginning Balance Business-type Activities Capital assets, not being depreciated: Land $ Capital assets, being depreciated: Buildings and improvements Machinery and equipment Total capital assets, being depreciated 7,900 $ Total capital assets, being depreciated, net Business-type activities capital assets, net 84,332 $ 92,232 $ - $ - $ 7,900 - 981,157 2,182,794 3,163,951 <33,792> <4,782> <38,574> - <946,088> <2,172,105> <3,118,193> <38,574> - <38,574> $ - 2011 Comprehensive Annual Financial Report 43 June 30, 2011 Ending Balance Decreases - <912,296> <2,167,323> <3,079,619> 190,313,782 $ <566,580,976> $ 17,975,953,546 Increases 981,157 2,182,794 3,163,951 Less accumulated depreciation for: Buildings and improvements Machinery and equipment Total accumulated depreciation <498,638> 45,758 $ 53,658 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Depreciation expense was charged to functions/programs as follows: Governmental Activities: Administration Highway Highway Maintenance Motor Vehicle $ 2,441,878 2,140,556 1,867,615 1,541,514 7,991,563 B. Capital assets held by the Department's internal service fund are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities $ 7,558,221 15,549,784 Business-type Activities Arizona Highways Magazine Fund $ 38,574 Construction Commitments The Department’s outstanding commitments for contracts at June 30, 2011, were $378,887,082. Construction contracts: Rural roadways Small urban roadways Urban roadways Large urban roadways General roadways Sub-total Design contracts Other commitments Total Expenditures To Date Remaining Commitment $1,130,649,750 244,259,565 99,628,786 964,162,602 160,720,002 2,599,420,705 735,600,304 245,644,492 $3,580,665,501 $182,736,133 4,821,582 9,089,089 48,228,507 12,741,591 257,616,902 51,348,500 69,921,680 $378,887,082 Area type designations for highways and roads are primarily determined by geographic location and population, as noted below: Rural – outside of urbanized areas and urban clusters, generally long roads carrying little traffic. Urban – interstate highways, freeways, expressways, principal arteries serving major centers of activity in metropolitan areas. Small Urban – in areas of 5,000 to 49,999 in population. Urban – in areas of less than 200,000 in population. Large Urban – in areas of equal to or greater than 200,000 in population. 2011 Comprehensive Annual Financial Report 44 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 C. Deferred/Unearned Revenues In the fund financial statements, the deferred/unearned revenues represent the amount for notes receivable for loans made to parties who purchased assets previously owned by the fund for highway construction purposes. The State Aviation Fund amount represents loans to various local governments for construction of hangars, taxiway extensions, runways, etc. These loans were made at fixed interest rates and with various maturity dates. The proprietary fund includes the amount for unearned subscriptions. The following schedule is a summary of the amounts outstanding as of June 30, 2011: Governmental funds: General Fund (State Highway Fund) State Aviation Fund Proprietary funds: Arizona Highways Magazine Fund D. $ 1,910,694 4,306,235 $ 6,216,929 $ 2,353,565 Interfund Receivables, Payables, Advances, and Transfers The balances of current interfund receivables and payables as of June 30, 2011, were: Receivables Governmental activities: General Fund (State Highway Fund) Maricopa Regional Area Road Fund Highway User Revenue Fund Local Agency Deposits Fund Non-Major Governmental Funds Business-type acivities: Arizona Highways Magazine Payables Amount Highway User Revenue Fund Motor Vehicle Division Clearing Fund Equipment Service Fund Local Agency Deposits Fund Non-Major Governmental Funds Capital Projects Fund Motor Vehicle Division Clearing Fund General Fund (State Highway Fund) General Fund (State Highway Fund) Motor Vehicle Division Clearing Fund $ 81,934,378 163,597 131,586 33,097 187,554 1,626,600 15,292,853 920,488 5,597 2,826,105 103,121,855 Motor Vehicle Division Clearing Fund 22,338 $ 103,144,193 The General Fund (State Highway Fund) receivable of $81,934,378 is an accrual for fuel taxes imposed in fiscal year 2011 from the Highway User Revenue Fund that will be collected in fiscal year 2012. The Highway User Revenue Fund receivable of $15,292,853 is an accrual for vehicle license taxes due in fiscal year 2011 from the Motor Vehicle Division Clearing Fund that will be collected in fiscal year 2012. 2011 Comprehensive Annual Financial Report 45 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Interfund transfers for the year ended June 30, 2011, consisted of the following: Interfund Transfers In: Interfund Transfers Out: General Fund (State Highway Fund) Maricopa Regional Area Road Construction Fund Non-Major Governmental Funds Internal Service Fund (Equipment Fund) Total Debt Service Fund $ 154,458,652 88,261,828 88,826,292 $ 331,546,772 Internal Arizona Service Highways Fund Magazine (Equipment Fund) Fund $ 2,400,000 $ - $ 2,400,000 851,400 851,400 $ Total $ 156,858,652 88,261,828 88,826,292 851,400 $ 334,798,172 The General Fund (State Highway Fund) ($154,458,652), the Maricopa Regional Area Road Construction Fund ($88,261,828), and Non-Major Governmental Funds - Grant Anticipation Notes Fund ($88,826,292) made transfers to the Debt Service Fund to pay bond debt service. The General Fund (State Highway Fund) transferred money to the Internal Service Fund (Equipment Revolving Fund) to provide for continuing operating expenditures. The Internal Service Fund (Equipment Revolving Fund) transferred money to the Proprietary Fund (Arizona Highway Magazine) to provide for continuing operating expenditures. E. Leases Operating Leases The Department leases data processing equipment, other equipment, and certain facilities from various lessors. The majority of these leases are for a one-year term, renewable annually. Total rental expenditures (excluding interfund transactions) for the fiscal year ended June 30, 2011, approximated $3.5 million. In fiscal year 2002, the Department entered into a lease agreement with the city of Phoenix for a facility located on East Washington Street in Phoenix. During fiscal year 2010, the Department renegotiated the lease with the city. This renegotiated lease, effective July 1, 2010, will result in fewer square feet being leased by the Department than had been the case under the original lease. The future operating lease commitments are as follows: Year ending June 30 2012 Future operating lease commitments $ $ Amount 535,510 535,510 In fiscal year 2003, the Department entered into a long-term lease to build a structure to house lab facilities in Gilbert, Arizona. The future operating lease commitments are as follows: Year ending June 30 2012 2013 Future operating lease commitments Amount $ $ 2011 Comprehensive Annual Financial Report 46 127,635 97,758 225,393 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 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 $ 4,583,394 2,109,711 <375,614> 6,317,491 $ The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2011, were as follows: Year Ending June 30 2012 2013 2014 2015 2016 2017 $ Total minimum lease payments Less amount representing interest Present value of minimum lease payments F. Governmental Activities $ 1,291,883 974,664 974,663 974,663 924,004 61,174 5,201,051 <291,091> 4,909,960 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 $1,672,625,000. The Highway Revenue Bonds are secured by a prior lien on and a pledge of motor vehicle and related fuel fees and taxes of the General Fund (State Highway Fund). On September 21, 2006, House Bill 2206 became effective and eliminated the restriction that limited the principal amount of Highway Revenue Bonds that could be outstanding at any time to $1.3 billion. Also, during fiscal year 2007, the Transportation Board received legislative authority to 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. 2011 Comprehensive Annual Financial Report 47 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Highway Revenue Bonds currently outstanding are as follows: Purpose Governmental activities Governmental activities - refunding Interest Rates 3.625% - 5.5% 4.0% - 5.25% Amount $ 1,394,360,000 206,495,000 $ 1,600,855,000 Annual debt service requirements to maturity for Highway Revenue Bonds are as follows: Fiscal year ending June 30 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 2032-2033 Highway Revenue Bonds Principal Interest Total $ 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 87,445,000 68,328,871 155,773,871 91,835,000 63,934,607 155,769,607 502,445,000 245,705,051 748,150,051 420,080,000 123,432,212 543,512,212 177,255,000 48,400,124 225,655,124 6,340,750 90,255,750 83,915,000 $ 1,600,855,000 $ 785,646,480 $ 2,386,501,480 The Department has pledged future motor vehicle and related fuel fees and taxes to repay $1,600,855,000 in outstanding Highway Revenue Bonds issued since 2001. Proceeds from the bonds finance portions of the Transportation Board’s Five-Year Transportation Facilities Construction Program. The bonds are payable solely from motor vehicle and related fuel fees and taxes and are payable through 2033. The total principal and interest remaining to be paid on the bonds is $2,386.5 million. Principal and interest paid for the current year and total pledged revenues were $155.8 million and $503.3 million, respectively. The annual principal and interest payments on the bonds required 31.0 percent of the pledged revenues. Arizona Transportation Board Transportation Excise Tax Revenue Bonds The Maricopa Regional Area Road Construction Fund is used to record all payments of principal and interest for Transportation Excise Tax Revenue Bonds issued by the Transportation Board. These bonds are secured by a portion of transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. The original amounts of Transportation Excise Tax Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $743,815,000. During the year, Transportation Excise Tax Revenue Bonds totaling $180,000,000 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. All Transportation Excise Tax Revenue Bonds mature no later than July 1, 2025. Transportation Excise Tax Revenue Bonds currently outstanding are as follows: Purpose Governmental activities Interest Rates 2.0% - 5.25% $ Amount 877,845,000 2011 Comprehensive Annual Financial Report 48 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Annual debt service requirements to maturity for Transportation Excise Tax Revenue Bonds are as follows: Fiscal year ending June 30 2012 2013 2014 2015 2016 2017-2021 2022-2025 Transportation Excise Tax Revenue Bonds Principal Interest Total $ 45,235,000 $ 43,232,307 $ 88,467,307 47,375,000 41,093,757 88,468,757 49,680,000 38,785,307 88,465,307 52,025,000 36,441,307 88,466,307 54,525,000 33,945,131 88,470,131 315,225,000 127,111,793 442,336,793 313,780,000 40,090,426 353,870,426 $ 877,845,000 $ 360,700,028 $ 1,238,545,028 The Department has pledged future transportation excise taxes to repay $877,845,000 in outstanding Transportation Excise Tax Revenue Bonds issued since 2007. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County. The bonds are payable solely from transportation excise taxes and are payable through 2025. The total principal and interest remaining to be paid on the bonds is $1,238.5 million. Principal and interest paid for the current year and total pledged revenues were $88.5 million and $206.6 million, respectively. The annual principal and interest payments on the bonds required 42.7 percent of the pledged revenues. Arizona Transportation Board Grant Anticipation Notes (GARVEE) The Grant Anticipation Notes Fund administers all payments of principal and interest for notes issued by the Transportation Board and is secured by revenues received from the Federal Highway Administration under grant agreements and certain other federal-aid revenues. The original amount of Grant Anticipation Notes (GARVEE – Grant Anticipation Revenue Vehicles) issued in prior years and outstanding at the start of the fiscal year was $304,480,000. During the year, Grant Anticipation Notes (GARVEE bonds – Grant Anticipation Revenue Vehicles) totaling $158,585,000 were issued to pay (1) cost of the projects (as specified) and (2) costs of issuing the bonds. Grant Anticipation Notes (GARVEE) currently outstanding are as follows: Purpose Governmental activities Governmental activities - refunding Interest Rates 2.5% - 5.0% 3.50% - 5.0% Amount $ 324,110,000 68,385,000 $ 392,495,000 2011 Comprehensive Annual Financial Report 49 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Annual debt service requirements to maturity for Grant Anticipation Notes (GARVEE) are as follows: Fiscal year ending June 30 2012 2013 2014 2015 2016 2017-2021 2022-2026 Grant Anticipation Notes (GARVEE) Principal Interest Total $ 43,885,000 $ 19,301,988 $ 63,186,988 45,340,000 17,181,888 62,521,888 55,265,000 15,018,713 70,283,713 53,330,000 12,286,531 65,616,531 47,355,000 9,673,731 57,028,731 64,780,000 31,040,005 95,820,005 13,282,063 95,822,063 82,540,000 $ 392,495,000 $ 117,784,919 $ 510,279,919 The Department has pledged federal revenues to repay $392,495,000 in outstanding Grant Anticipation Notes (GARVEE – 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 2026. The total principal and interest remaining to be paid on the bonds is $510.3 million. Principal and interest paid for the current year and total pledged revenues were $85.4 million and $643.6 million, respectively. The annual principal and interest payments on the bonds required 13.3 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, 2011, are as follows: Original Issue 2002 Series B - Senior Escrow Type Maturity Date Highway Revenue Bonds July 1, 2012 Total refunded bonds deposited with escrow agent Balance $ 48,595,000 $ 48,595,000 Advances and Notes Payable The Department’s outstanding advances and notes payable as of June 30, 2011, were $59,891,686 in governmental activities. The advances and notes payable represent amounts for other intergovernmental advances. 2011 Comprehensive Annual Financial Report 50 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 Annual debt service requirements to maturity for advances and notes payable are as follows: Fiscal year ending June 30 2012 2016 2021 2022 Governmental Activities Principal Interest $ 16,783,282 $ 22,545,778 151,430 20,411,196 $ 59,891,686 $ - Business-type Activities Principal Interest $ - $ $ - $ Total - Principal $ 16,783,282 22,545,778 151,430 20,411,196 $ 59,891,686 Interest $ - $ Changes in non-current liabilities The activity for the fiscal year ended June 30, 2011, was as follows: Beginning Balance July 1, 2010 Governmental Activities Bonds and notes: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE) Premium on bonds $ 1,672,625,000 Additions $ Reductions - $ Ending Balance June 30, 2011 <71,770,000> $ 1,600,855,000 Due Within One Year $ 75,415,000 743,815,000 180,000,000 <45,970,000> 877,845,000 45,235,000 304,480,000 158,600,871 158,585,000 38,875,926 <70,570,000> <17,251,615> 392,495,000 180,225,182 43,885,000 15,659,847 Total bonds and notes Capital leases Compensated absences Advances and notes payable Total governmental activities 2,879,520,871 1,303,783 14,946,119 60,711,311 2,956,482,084 377,460,926 4,583,394 11,918,980 11,112,617 405,075,917 <205,561,615> <977,217> <12,082,450> <11,932,242> <230,553,524> 3,051,420,182 4,909,960 14,782,649 59,891,686 3,131,004,477 180,194,847 1,189,745 11,842,186 16,783,282 210,010,060 Business-type Activities Compensated absences Total business-type activities 129,361 129,361 90,447 90,447 <83,739> <83,739> 136,069 136,069 136,069 136,069 $ 2,956,611,445 $ 405,166,364 $ <230,637,263> $ 3,131,140,546 $ 210,146,129 Total non-current liabilities The Internal Service Fund predominantly serves the governmental funds. Accordingly, long-term liabilities for that fund are included as part of the above totals for governmental activities. At year-end, $630,938 of the Internal Service Fund’s compensated absences is included in the above amounts. The capital leases will be liquidated by the General Fund (State Highway Fund). The General Fund (State Highway Fund) has paid compensated absences in the past while the advances and notes payable will be repaid with funds from the General Fund (State Highway Fund) and the Maricopa Regional Area Road Construction Fund. Bonds and notes issued by the Department require compliance with a number of covenants. The Department believes that it is in compliance with all such covenants. In addition, certain of the Department’s obligations are subject to Internal Revenue Service regulations pertaining to issuance of tax-exempt debt by governmental entities. The Department does not have and has not accrued a liability under these regulations. 2011 Comprehensive Annual Financial Report 51 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 G. Fund Balances The Department’s fund balance, as of June 30, 2011, is composed of the following: Nonspendable $ 9,765,026 $ 9,765,026 Administration Highway Operations Highway Maintenance Motor Vehicle Inventories Land Held for Resale Other 6. OTHER INFORMATION A. Contingent Liabilities Restricted $ 3,481,884 945,558,404 484,697 $ 949,524,985 Committed $ 95,235,069 160,410 5,660,837 3,149,801 22,605,923 $ 126,812,040 Total $ 98,716,953 945,718,814 5,660,837 3,149,801 9,765,026 22,605,923 484,697 $ 1,086,102,051 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 2011 Comprehensive Annual Financial Report 52 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2011 benefit long-term disability plan, all of which are administered by the Arizona State Retirement (System). The System (through its Retirement Fund) provides retirement (i.e., pension), death, and survivor benefits; the Health Benefit Supplement Fund provides health insurance premium benefits (i.e., a monthly subsidy); and the Long-Term Disability Fund provides long-term disability benefits. Benefits are established by state statute. The System is governed by the Arizona State Retirement System Board according to the provisions of Arizona Revised Statutes, Title 38, Chapter 5, Article 2. The System issues a Comprehensive Annual Financial Report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the Arizona State Retirement System, 3300 North Central Avenue, P.O. Box 33910, Phoenix, AZ 85067-3910, or by calling (602) 240-2000 or (800) 621-3778. Funding policy – The Arizona state legislature establishes and may amend active plan members’ and the Department’s contribution rates. For the year ended June 30, 2011, active plan members were required by statute to contribute at the actuarially determined rate of 9.85 percent (9.6 percent for retirement and 0.25 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 9.85 percent (9.01 percent for retirement, 0.59 percent for health insurance premium, and 0.25 percent for long-term disability) of the members’ annual covered payroll. The Department’s contributions for the current and two preceding years, all of which were equal to the required contributions, were as follows: Fiscal year Health Benefit Long-Term ended June 30 Retirement Fund Supplement Fund Disability Fund 2011 2010 2009 $ 14,551,983 $ 13,068,245 13,762,453 1,175,632 2,585,137 2,551,648 $ Total 423,310 $ 16,150,925 702,369 16,355,751 910,496 17,224,597 The Department's total payroll for fiscal year 2011 was $169.3 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 2011 was $16.2 million each by both the employees and the Department. C. Subsequent Events On September 7, 2011, Moody’s Investors Service notified the Department of a rating downgrade on $1.6 billion of the Transportation Board’s outstanding Highway Revenue Bonds. Moody’s downgraded the senior lien Highway Revenue Bonds from Aaa to Aa1 and the subordinate lien Highway Revenue Bonds from Aa1 to Aa2. On October 13, 2011, the Transportation Board issued $159,460,000 in Transportation Excise Tax Revenue Bonds (Maricopa County Regional Area Road Fund) 2011 Series to pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County, Arizona; and the costs of issuing the 2011 Series Bonds. The 2011 Series Bonds were issued as senior lien bonds and mature from July 1, 2012 through July 1, 2025. Net proceeds totaled $179,416,417 (after receipt of $20,734,786 reoffering premium and payment of $778,369 in underwriting fees and costs of issuance). The bonds were rated Aa1 and AA+ by Moody's Investors Service and Standard & Poor’s Ratings Service, respectively. On October 17, 2011, Standard & Poor’s Ratings Service notified the Department of a rating downgrade on $330 million of the Transportation Board’s outstanding subordinate lien Highway Revenue Bonds. Standard & Poor’s downgraded the bonds from AAA to AA+, with a negative outlook. The ratings on the senior lien bonds were unaffected by this downgrade; however, Standard & Poor’s also placed a negative outlook on the senior lien Highway Revenue Bonds. 2011 Comprehensive Annual Financial Report 53 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 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, 2011 Budgetary Comparison Schedule General Fund (State Highway Fund) for the fiscal year ended June 30, 2011 Budgeted Amounts Original Final Expenditures appropriated by State legislature in 2011 budget Department of Transportation $ 325,794,900 $ 325,794,900 Timing differences: Prior year appropriation expenditures expended in current 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. 2011 Comprehensive Annual Financial Report 54 Actual Amounts $ 288,069,123 12,272,742 5,011,714 14,773,817 469,267,440 32,234,127 42,735,250 36,328 12,177,217 $ 876,577,758 Variance with Final Budget Positive $ 37,725,777 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2011 Note to Required Supplementary Information 1. Budgets and budgetary accounting An annual budget for the operating expenditures of the General Fund (State Highway Fund) is submitted to the governor in accordance with state law. The budget is legally enacted as appropriations after approval by the state legislature and signature of the governor. The legal level of control for operating expenditures is set at the agency level and expenditure budgets are appropriated using a lump-sum by agency format with a special line-item appropriation for highway maintenance. Expenditure details for personal services, employee-related expenditures, and all other operating expenditures are specifically allocated within all divisions. In certain divisions, other specific programs are allocated in addition to these categories. Revenue budgets are developed internally by the Department and are not part of the appropriation process. Amendments to the approved appropriations require legislative approval. However, since the Department’s appropriation is a lump sum appropriation by agency, the allocation of funds between personal services, employeerelated expenditures, and other operating expenditures is an internal decision. Accordingly, transfers between line items such as personal services and other operating expenditures within a particular program may be made by the program manager. Expenditures may not exceed appropriations. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the first month of the subsequent fiscal year are charged against the prior fiscal year’s budget. The Department’s appropriations lapse at fiscal year-end unless exempted by the legislature. For financial reporting purposes, the accompanying financial statements present the legally adopted budget for the operations of the General Fund (State Highway Fund) that is subject to legislative appropriation. In addition, budgets for capital outlay, including land, building, and improvements for the General Fund (State Highway Fund) and State Aviation Fund, are also submitted to the governor in accordance with state law. The capital outlay appropriation includes state highway construction and land, building, and improvements for the General Fund (State Highway Fund). A legal limitation is adopted for land, building, and improvements; however, legislation allows the Department to spend in excess of its appropriation for state highway construction up to the current fund balance. The Department monitors expenditures through an internal budgetary process and the Five-Year Transportation Facilities Construction Program approved by the Transportation Board. 2011 Comprehensive Annual Financial Report 55 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2011 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 6,722 center lane miles (18,771 travel line miles) of roads and 4,741 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 2011 and beyond was adopted by the Transportation Board on June 18, 2010. This Program is a dynamic instrument and adjustments are made to the annual plans based on the needs of the Department to maintain the condition level of the roads and bridges at a level equal to, or greater than, the goals established by the Department. In addition, not only are adjustments made during the life of the Program, circumstances may require that refinements to the individual components of the Program be made during the fiscal year. In comparing Estimated to Actual Expenditures in the tables that follow, significant variances can occur. These variances are primarily due to the methodology used in the preparation of the Program. In this Program, the Estimated Expenditures for the current year are based on “programmed” projects which may or may not be spent in the current year of the Program. Programmed expenditures consist of those items that are planned for the future, with contracts that have not yet been awarded. Furthermore, the Actual Expenditures will include projects that were programmed for a prior year’s Estimated Expenditures, but which did not occur, or were not completed, in the prior year. The following information pertains to the condition assessment and maintenance of infrastructure assets and reflects the Department’s success in achieving condition levels that exceed the established levels. Roads The mission of the Department’s Pavement Management Section (PMS) is to develop and provide a cost effective pavement rehabilitation construction program that preserves the state’s investment in its highway system and enhances public transportation and safety. The requirements of GASB 34 and the PMS both work toward the same basic goal, the efficient, effective management of the Department’s assets to produce long-term benefits while minimizing expenditures. The PMS has developed performance goals for the condition level of the pavement in the state highway system. These goals require periodic assessment of pavement conditions and the budget level needed to meet that goal. The goal is expressed as a measure called “Serviceability” which can be defined as the ability of a pavement to serve the traveling public (as documented in 1961 after American Association of State Highway and Transportation Officials (AASHTO) Road Test, 1956-1961). Serviceability is based on detailed measurements of objective features of the pavement. Many 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: 2011 Comprehensive Annual Financial Report 56 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2011 Information About Infrastructure Assets Reported Using the Modified Approach (continued) Numerical Rating 5 4 3 2 1 0 Weaver/AASHTO Scale Perfect Very Good Good Fair Poor Very Poor PSR Excellent Good Fair Poor Very Poor Impassable 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 2011, an overall rating of 3.69 was achieved, as shown in the following graph: Condition Level-Roads 5 PSR 4 3 Actual 2 Goal 1 0 2007 2008 2009 2010 2011 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 2007 through 2011 were as follows: Fiscal Year 2007 2008 2009 2010 2011 Estimated Expenditures (in millions) $216.4 260.7 264.4 227.4 265.7 Actual Expenditures (in millions) $196.5 247.9 236.0 220.9 373.4 2011 Comprehensive Annual Financial Report 57 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2011 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, 2011, the Department owns and maintains 4,741 bridges with an approximate total deck area of 46,854,728 square feet. Bridges, for purposes of this report, include all structures erected over an opening or depression with a centerline of 20 feet or more. Information related to these bridges is stored and updated in the Arizona Bridge Information and Storage System (ABISS). This system is used to efficiently manage the bridge inventory through storing all bridge related data and assisting bridge engineers in arriving at appropriate bridge preservation decisions. Also, ABISS is used for reporting bridge inventory and condition, on a biennial basis, to the Federal Highway Administration (FHWA). A Condition Rating Index (CRI) is used to track the condition of the bridge network. The CRI is based on four selected bridge inspection condition ratings, which in turn are based on standards established in the FHWA’s “Recording and Coding Guide for the Structural Inventory of the Nation’s Bridges.” The four selected condition ratings that are included in the CRI computation are: the bridge joints condition, the deck condition, the super-structure condition, and the sub-structure condition. The bridge joints condition rating is an Arizona-specific rating item not included in the FHWA condition rating guidelines, whereas the other three condition ratings are federally mandated condition ratings. The CRI is computed by subtracting from one the ratio of the sum of the deck areas of all bridges with a condition rating of four or less (see table below), which indicates that the rated element is at best in a poor condition, to the total sum of the deck areas. The rating system in this guide is as follows: Numerical Rating 9 8 7 6 5 4 3 2 1 Condition Rating Excellent Very Good Good Satisfactory Fair Poor Serious Critical Imminent Failure 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 2011, the CRI was computed at 93.1%. 2011 Comprehensive Annual Financial Report 58 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2011 Information About Infrastructure Assets Reported Using the Modified Approach (continued) Condition Levels-Bridges 95% CRI 94% 93% Actual 92% Goal 91% 90% 2007 2008 2009 2010 2011 Fiscal Year Figure 2 Bridges represent a major public investment, and their inspection and maintenance is an essential function of the Department in its mission of providing products and services for a safe, efficient, and cost effective transportation system. Figure 3 indicates that approximately 57% of the bridges in the state were constructed prior to the 1970s while only 13% have been constructed since 2000. 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 2011 Comprehensive Annual Financial Report 59 90s 2000s 2010s Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2011 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 2007 through 2011 were as follows: Fiscal Year 2007 2008 2009 2010 2011 Estimated Expenditures (in millions) $17.1 13.4 14.3 16.1 11.8 Actual Expenditures (in millions) $22.5 18.1 17.3 22.4 26.0 Actual expenditures on bridge preservation have exceeded estimated expenditures in each of the past five fiscal years. These higher-than-estimated expenditures have been the result of an ongoing effort to maintain the ability of an older inventory of bridges to serve a growing population. This trend explains why the higher expenditures have occurred simultaneously with a decline, during the same period, of the bridge network’s Condition Rating Index (CRI), as described above. 2011 Comprehensive Annual Financial Report 60 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 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 registration fees for non-resident vehicles and single trip and limited use fuel tax permits. Monies are used for enforcement of vehicle safety requirements, and construction and maintenance of transportation facilities within twenty-five miles of the border between Arizona and Mexico. The Motor Vehicle Liability Insurance Enforcement Fund is appropriated by the legislature and receives reinstatement fees for insurance-related driver license and vehicle registration suspensions. Monies are used to administer the State’s Mandatory Liability Insurance Program. The Motor Vehicle Inspection and Title Enforcement Fund is appropriated by the legislature and receives monies from the fees charged for certain vehicle inspections. Monies are used to defray the cost of investigations involving certificates of title, licensing fraud, registration enforcement, and other enforcement related issues. The Motor Carrier Safety Revolving Fund receives fees to administer and enforce the rules governing the safety operations of motor carriers, shippers, and vehicles transporting hazardous materials, substances, or waste. The Underground Storage Tank Fund receives certain Department revenues for distribution to the Department of Environmental Quality. The Economic Strength Project Fund receives monies from the Highway User Revenue Fund for use on approved economic strength projects recommended by the Department of Commerce and Economic Development Commission. The Grant Anticipation Notes Fund receives revenues from the Federal Highway Administration under various grant agreements for the repayment of Grant Anticipation Notes (GARVEE bonds). The Local Agency Deposits Fund receives monies from the U.S. Government and local agencies for the payment of local agency sponsored city streets and county secondary road construction projects. Arizona Department of Transportation Combining Balance Sheet Non-Major Governmental Funds June 30, 2011 State Aviation Fund Assets Unrestricted cash on deposit with the State Treasurer Receivables: Interfund Notes and loans Other (net) Amounts due from U.S. Government Restricted cash on deposit with the State Treasurer Total assets Liabilities and fund balances Liabilities: Accounts payable Accrued payroll and other accrued expenditures Contracts and retainage payable Interfund payables Amounts due to: Other state agencies Arizona counties and cities Deferred revenue Total liabilities Fund balances: Restricted Committed Total fund balances Total liabilities and fund balances Safety Enforcement Motor Vehicle Motor Vehicle and Liability Inspection Transportation Insurance and Title Infrastructure Enforcement Enforcement Fund Fund Fund $ 14,357,458 $ 1,720,886 39,304 4,306,235 1,423,586 75,897 65,764 - 47,465 - 48,270 - $ 20,202,480 $ 1,786,650 $ 458,541 $ 837,185 $ $ $ - $ - 55,544 10,753 $ 411,076 $ 788,915 120,994 963,354 - 62,660 - 21,889 - 26,652 - 4,306,235 5,446,127 73,413 21,889 26,652 14,756,353 14,756,353 $ 20,202,480 1,713,237 1,713,237 $ 1,786,650 436,652 436,652 458,541 810,533 810,533 837,185 2011 Comprehensive Annual Financial Report 61 $ $ Exhibit 9 Motor Carrier Safety Revolving Fund $ Underground Storage Tank Fund 45,269 $ - Economic Strength Project Fund $ Grant Anticipation Notes Fund 989,889 $ - Local Agency Deposits Fund $ Total Non-Major Governmental Funds - $ 18,313,493 - 2,625,302 - - - 5,597 2,529,315 27,171,730 2,831,702 4,306,235 3,952,901 27,247,627 $ 45,269 3,070,438 $ 5,695,740 $ 989,889 $ 2,190,281 2,190,281 8,966,503 $ 38,673,145 14,227,222 $ 70,879,180 $ - $ $ - $ - $ $ $ - - 66,297 - 187,554 - - 20,921,335 33,097 232,195 21,884,689 220,651 - 5,508,186 5,695,740 989,889 989,889 - 20,954,432 5,508,186 989,889 4,306,235 33,208,142 45,269 45,269 45,269 $ 5,695,740 989,889 2,190,281 2,190,281 2,190,281 17,718,713 17,718,713 $ 38,673,145 19,908,994 17,762,044 37,671,038 $ 70,879,180 $ $ 2011 Comprehensive Annual Financial Report 62 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, 2011 State Aviation Fund Revenues Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements Reimbursements from Arizona counties and cities Interest on loans receivable Income from investments Grand Canyon National Park Airport Other Total revenues Expenditures Current: Administration Highway Motor vehicle Total current expenditures Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities Capital outlay Total expenditures Excess of revenues over expenditures $ 8,698,797 353,987 9,798,513 Motor Vehicle Liability Insurance Enforcement Fund Motor Vehicle Inspection and Title Enforcement Fund $ $ $ 3,141,572 - 1,919,811 - 1,963,165 - 3,843,690 310,100 96,393 798,410 2,637,905 26,537,795 12,697 28,936 3,183,205 1,919,811 1,963,165 1,368,588 1,368,588 1,676,123 1,676,123 815,865 815,865 896,192 896,192 3,923,600 9,365,972 4,829,523 19,487,683 1,518,800 3,194,923 937,200 1,753,065 268,700 1,164,892 166,746 798,273 - - 166,746 269,906 436,652 798,273 12,260 810,533 7,050,112 Other financing sources Transfers out for debt service Total other financing sources Net change in fund balances Fund balances - July 1 Fund balances - June 30 Safety Enforcement and Transportation Infrastructure Fund <11,718> 7,050,112 7,706,241 $ 14,756,353 - $ <11,718> 1,724,955 1,713,237 $ 2011 Comprehensive Annual Financial Report 63 $ Exhibit 10 Motor Carrier Safety Revolving Fund $ $ Underground Storage Tank Fund - $ 31,529,316 - Economic Strength Project Fund $ Grant Anticipation Notes Fund 1,000,000 - $ - Local Agency Deposits Fund $ Total Non-Major Governmental Funds - $ 11,840,369 36,766,279 9,798,513 15,500 15,500 9,344 31,538,660 4,867 1,004,867 91,016,243 256 91,016,499 169,440,082 1,014,814 1,259 170,456,155 94,859,933 169,440,082 1,014,814 322,797 110,860 798,410 2,683,600 327,635,657 - 188,242 188,242 388 388 20 20 163,035,322 163,035,322 1,368,588 163,035,322 3,576,830 167,980,740 - 31,350,418 31,538,660 100,000 904,479 1,004,867 20 163,035,322 38,098,718 10,270,451 4,829,523 221,179,432 15,500 - - 91,016,479 7,420,833 106,456,225 - - - <88,826,292> <88,826,292> 15,500 29,769 45,269 - - 2,190,187 94 2,190,281 $ $ $ 7,420,833 10,297,880 $ 17,718,713 2011 Comprehensive Annual Financial Report 64 <88,826,292> <88,826,292> 17,629,933 20,041,105 $ 37,671,038 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 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 Fund June 30, 2011 Highway Properties 24 Percent Fund Assets Restricted cash on deposit with the State Treasurer Total assets $ 415,227 $ 415,227 Liabilities Due to Arizona counties Total liabilities $ 415,227 $ 415,227 2011 Comprehensive Annual Financial Report 65 Exhibit 12 Arizona Department of Transportation Statement of Changes in Assets and Liabilities Agency Fund for the fiscal year ended June 30, 2011 Balance July 1, 2010 Additions Deductions Balance June 30, 2011 Highway Properties - 24 Percent Fund Assets Restricted cash on deposit with the State Treasurer Total assets $ $ 214,891 214,891 $ $ 416,256 416,256 $<215,920> $ $<215,920> $ 415,227 415,227 Liabilities Due to Arizona counties Total liabilities $ $ 214,891 214,891 $ $ 415,956 415,956 $<215,620> $ $<215,620> $ 415,227 415,227 2011 Comprehensive Annual Financial Report 66 Statistical Section fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 Arizona Department of Transportation Overview – Statistical Section for the fiscal year ended June 30, 2011 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. 2011 Comprehensive Annual Financial Report 67 Arizona Department of Transportation Index – Statistical Section for the fiscal year ended June 30, 2011 Page Financial Trends Table A-1 – Change in Net Assets ........................................................................................................................69-72 Table A-2 – Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................73-76 Table A-3 – Fund Balances of Governmental Funds..................................................................................................77 Table A-4 – Expenditures of Federal Awards ............................................................................................................78 Table A-5 – Government-wide Expenses by Function...............................................................................................79 Table A-6 – Government-wide Revenues ..................................................................................................................80 Table A-7 – Net Assets by Component ......................................................................................................................81 Revenue Capacity Table B-1 – Highway User Revenue Fund Collections..............................................................................................82 Table B-2 – Highway User Revenue Fund Distributions ...........................................................................................83 Table B-3 – Fuel Tax Rates ........................................................................................................................................84 Table B-4 – Motor Vehicle Fuel Tax – Top Ten Suppliers ........................................................................................85 Table B-5 – Gasoline Volume Sold – Top Twenty-Five Suppliers .......................................................................86-87 Debt Capacity Table C-1 – Highway User Revenue Fund – Legal Debt Margin...............................................................................88 Table C-2 – Highway Revenue Bonds – Bond Coverage...........................................................................................89 Table C-3 – Transportation Excise Tax Revenue Bonds – Bond Coverage ...............................................................90 Table C-4 – Transportation Excise Tax Revenue Bonds – Debt Service Revenue and Cost Per Capita....................91 Table C-5 – Ratios of Outstanding Debt by Type ......................................................................................................92 Demographic and Economic Information Table D-1 – Number of Vehicle Registrations Per Year ............................................................................................93 Table D-2 – Vehicle Registrations Per Year Compared to Fuel Sales........................................................................94 Table D-3 – Demographic and Economic Statistics ...................................................................................................95 Table D-4 – Principal Employers ...............................................................................................................................96 Operating Information Table E-1 – Full Time Equivalents (FTEs) ................................................................................................................97 Table E-2 – Capital Assets – Schedule by Function and Activity ..............................................................................98 Table E-3 – Capital Assets – Schedule of Changes by Function and Activity ...........................................................99 Table E-4 – Total Public Road Mileage by Highway Class and Governmental Ownership ....................................100 Table E-5 – Daily Vehicle Miles Traveled with Population Data ............................................................................101 2011 Comprehensive Annual Financial Report 68 Arizona Department of Transportation Change in Net Assets for fiscal year ended June 30 (Thousands of Dollars) Expenses Governmental Activities: Administration Aeronautics 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 2003 $ 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> NOTES: 1 Adjustments were made to Highway and Non-capital, including asset preservation, for the years 2004 - 2007 to conform to the current year's presentation. 2011 Comprehensive Annual Financial Report 69 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 2010 $ 65,781 - 2011 $ 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 34,721 102,932 102,926 122,747 251,392 1,057,720 83,230 129,626 1,951,075 37,070 129,700 99,949 345,590 254,702 1,024,756 163,035 128,768 2,276,610 5,664 126 5,790 2,282,400 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 6,288 147 6,435 $ 1,957,510 $ $ $ $ $ $ $ $ $ 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 $ 93,040 - 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 $ 9,766 1,266 1,858 111,412 5 146,936 575,448 846,691 5,975 566 6,541 853,232 $ 10,770 2,798 2,667 117,427 220,759 743,718 1,098,139 5,619 154 5,773 1,103,912 $ <1,391,880> $ <1,179,023> $ <1,416,057> $ <1,420,304> $ <1,530,961> $ <1,104,384> $ <1,178,471> <3,178> <1,155> <1,458> <2,386> <2,103> 106 <17> $ <1,395,058> $ <1,180,178> $ <1,417,515> $ <1,422,690> $ <1,533,064> $ <1,104,278> $ <1,178,488> (continued) 2011 Comprehensive Annual Financial Report 70 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 $ $ $ $ 267,563 899,092 547,129 6,528 29,863 26,484 1,776,659 - $ 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 2011 Comprehensive Annual Financial Report 71 2003 $ $ 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 $ 219,165 $ 199,672 976,075 893,287 667,200 690,503 11,975 9,527 33,588 16,347 22,831 8,966 <500> 1,930,334 1,818,302 - $ 206,545 874,191 704,727 9,798 9,415 16,095 <851> 1,819,920 1,819,920 5,563 4,788 1,612 514 <3> <17> <1> 500 5,560 4,771 2,111 514 $ 2,413,795 $ 2,170,534 $ 1,932,445 $ 1,818,816 $ 554 851 1,405 1,821,325 $ $ $ $ $ 745,459 2,385 747,844 1,930,334 2011 1,818,302 992,178 4,102 996,280 2,165,763 2010 $ $ 399,373 8 399,381 2011 Comprehensive Annual Financial Report 72 $ $ 713,918 620 714,538 $ 641,449 1,389 642,838 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 $ 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 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 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 2004 $ $ <352,159> $ <351,196> $ 2011 Comprehensive Annual Financial Report 73 288,600 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 56,484 7,228 130,117 95,144 84,921 2,940 376,834 - <372,558> Table A-2 2005 2006 $ 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 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 - 2007 $ - 2008 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 $ 44,875 3,876 184,240 118,940 103,801 455,732 2009 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 $ 44,322 4,089 171,134 135,629 110,982 466,156 - - 2010 2011 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 $ 199,672 1,002,312 692,632 9,527 544,498 146,936 31,503 936 596 15,853 866 1,800 6,370 2,653,501 46,056 10,471 163,570 111,346 131,665 463,108 52,971 115,061 94,014 101,142 363,188 - - $ 206,545 991,335 704,727 9,799 736,803 219,743 10,078 845 436 9,083 798 2,554 11,137 2,903,883 81,477 200,216 120,716 98,115 500,524 - 306,852 1,086,955 206,903 1,190,962 114,795 1,217,883 173,405 1,241,110 404,569 1,100,959 244,836 1,046,576 254,210 1,023,736 302,202 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 3,967 144,232 143,133 121 201,219 144,748 2,099 156,678 623,829 250,736 663,316 63,273 741,506 158,991 989,882 142,604 1,077,835 217,338 998,502 313,179 709,250 2,980,277 2,994,154 2,786,012 3,328,237 3,519,661 3,157,926 3,148,965 <451,343> $ <815,472> $ <504,425> $ <245,082> $<234,170> $ <192,629> $ <46,679> $ (continued) 2011 Comprehensive Annual Financial Report 74 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 $ <291,854> <321,327> <8,709> <61,809> 7,229 1,082 142,000 331,475 74,250 90,530 10,142 28,147 <107,735> <77,135> 350,728 149,257 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> Debt service as a percentage of non-capital expenditures Debt service as a percentage of total revenues 16.8% 12.2% 2011 Comprehensive Annual Financial Report 75 <18,932> 40,399 <202,902> 39,931 421,954 615,856 $ 461,885 $ 412,954 17.2% 13.8% 449,100 <374,852> <74,249> 16,023 1,407 319,942 130,573 31,647 <145,965> 353,626 - $ <18,932> 452,884 433,952 16.7% 15.2% Table A-2 2005 2006 $ 388,046 $ 262,216 $ <374,162> <251,891> <13,885> <10,325> 18,392 11,118 1,518 537 292,645 118,250 147,400 24,726 22,407 <161,726> 337,280 137,986 103,110 103,110 433,952 $ 537,062 16.9% 14.5% <54,643> <54,643> 537,062 $ 482,419 $ 11.1% 9.2% 2007 2008 2009 225,499 $ <186,856> <38,643> 2,129 10,162 577 325,000 26,201 364,069 303,513 $ <231,563> <71,950> 28,233 1,765 711,479 31,862 773,339 239,447 $ 271,408 $ 331,547 <221,232> <266,934> <331,547> <17,252> <9,013> <2,400> 2,127 3,088 3,712 887 1,765 2,529 796,819 32,628 349,698 58,123 38,876 858,919 32,942 392,415 317,390 321,996 245,000 562,390 482,419 1,044,809 43,447 - $ 321,996 1,044,809 1,366,805 9.4% 7.0% 12.8% 10.4% 2010 - $ 43,447 1,366,805 1,410,252 13.5% 12.2% 2011 Comprehensive Annual Financial Report 76 2011 <471,483> - 147,333 - <471,483> 147,333 1,410,252 938,769 $ 938,769 $ 1,086,102 13.3% 10.8% 14.3% 12.0% Table A-3 Arizona Department of Transportation Fund Balances of Governmental Funds for fiscal year ended June 30 (Thousands of Dollars) General Fund (State Highway Fund): Reserved Unreserved Nonspendable Restricted Committed Total General Fund 77 All other governmental funds Reserved: Debt service Capital projects Unreserved, reported in: Non-major special revenue funds Nonspendable Restricted Committed Total all other governmental funds Total general and other governmental funds 1 2011 2002 2003 2004 2005 2006 $ 121,075 67,253 $ 188,328 $ 134,938 48,696 $ 183,634 $ 155,755 48,619 $ 204,374 $ 166,420 57,123 $ 223,543 $ 172,784 9,342 $ 182,126 $ 24,986 176,245 $ $ $ $ 23,395 $ 224,626 16,386 $ 269,251 20,346 $ 229,578 33,348 $ 313,520 39,898 $ 300,293 49,002 $ 547,118 25,359 $ 803,215 3,574 $1,084,744 9,743 $ 587,968 $ $ 412,954 $ 452,885 $ 433,952 $ 537,063 $ 482,419 $1,044,809 $1,366,805 $1,410,315 $ 938,769 $ 1,086,102 20,786 232,079 18,592 190,640 2,288 277,884 2,159 258,236 2007 2009 2010 $ 507,723 $ 505,691 (10,032) 57,899 $ 497,691 $ 563,590 $ 230,885 94,686 $ 325,571 $ 270,550 80,251 $ 350,801 $ $ $ $ $ 2,688 495,428 2008 $ 3,212 774,644 2,692 1,078,478 NOTE: 1 GASB 54 rules state that Fund Balances should be reported with the categories listed in the above table for 2011. Years 2002 - 2010 will continue to be reported in the old format until 10 years of information is available. 2011 Comprehensive Annual Financial Report 1,894 576,331 $ 9,765 229,559 102,350 341,674 719,966 24,462 744,428 Table A-4 Arizona Department of Transportation Expenditures of Federal Awards1 for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year FAA FRA FTA NHTSA FHWA FMCSA BLM 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 3,844 7,938 3,902 715 610 4,338 4,203 480 242 - $3 $ 21,451 22,769 13,853 15,530 10,169 8,837 8,466 5,549 6,618 5,264 $ 1,132 120 101 106 101 69 96 84 87 83 $ 817,224 574,068 571,867 523,810 353,192 389,575 456,924 384,416 433,472 496,509 $ 3,891 4,148 4,734 2,642 1,769 2,231 282 434 466 282 $ 1,004 124 268 57 544 162 152 79 30 47 BIA Sub-total $ - $ 848,546 609,167 594,725 542,860 <21> 366,364 405,212 278 470,401 391,042 440,915 502,188 FHWA Total $ 169,779 82,267 31,776 31,472 40,559 33,268 42,323 36,324 25,439 19,848 $ 1,018,325 691,434 626,501 574,332 406,923 438,480 512,724 427,366 466,354 522,036 SOURCE: Single Audit Reports - fiscal years 2002 through 2011 NOTE: 1 Federal Aviation Administration (FAA); Federal Railroad Administration (FRA); Federal Transit Administration (FTA) - previously Urban Mass Transit Administration (UMTA); National Highway Transportation Safety Administration (NHTSA); Federal Highway Administration (FHWA); Federal Motor Carrier Safety Administration (FMCSA); Bureau of Land Management (BLM); and Bureau of Indian Affairs (BIA) Total Expenditures of Federal Awards $1,200,000 Thousands of Dollars $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2002 2003 2004 2005 2006 2007 2008 Fiscal Year 2011 Comprehensive Annual Financial Report 78 2009 2010 2011 Table A-5 Arizona Department of Transportation Government-wide Expenses by Function for the fiscal year ended June 30 (Thousands of Dollars) Highway Fiscal Year Administration Aeronautics $ 93,040 65,781 56,282 54,918 51,667 45,002 42,298 57,703 52,533 57,864 $ 10,993 4,373 5,418 10,705 9,804 7,512 3,848 3,751 $37,070 34,721 116,697 132,874 138,788 118,147 125,889 93,656 45,644 46,543 $ 1 475,290 225,679 311,605 324,104 233,732 60,138 261,714 429,571 374,328 188,198 Motor Vehicle $ 99,949 102,926 133,243 112,880 105,961 96,937 91,676 86,845 83,090 82,904 1,279,459 1,309,112 1,505,835 1,415,075 1,334,003 1,394,609 1,393,808 1,183,797 1,149,593 1,064,560 $ 163,035 83,230 48,571 37,285 48,760 36,771 42,440 39,205 30,235 24,791 $128,768 129,626 114,683 92,295 82,450 88,278 86,870 89,431 84,084 89,605 Other Highway Arizona Expansion and Extension Highways Magazine Loan Program 9,394 6,871 9,815 8,460 6,844 $ 5,664 6,288 7,410 7,712 8,072 8,175 10,270 10,007 11,118 10,711 $ 126 147 2,110 4,053 4,355 4,273 4,360 4,414 26,349 5,265 1 NOTE: Includes Non-capital, including asset preservation. Government-wide Expenses $2,500,000 Thousands of Dollars 79 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Highway Maintenance Distributions to Arizona Counties, Cities Local Interest on and Other State Governmental Long-Term Agencies Assistance Debt $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2002 2003 2004 2005 2006 2007 2008 Fiscal Year 2011 Comprehensive Annual Financial Report 2009 2010 2011 Total $ 2,282,401 1,957,510 2,307,429 2,185,569 2,013,206 1,872,429 2,076,000 2,011,956 1,869,282 1,581,036 Table A-6 Arizona Department of Transportation Government-wide Revenues for the fiscal year ended June 30 (Thousands of Dollars) Program Revenues Governmental Operating Grants and Contributions 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 133,661 124,307 139,396 150,024 158,019 134,068 126,267 118,225 117,412 112,724 $ $ 220,759 146,936 90,619 79,747 72,679 67,241 58,948 44,008 34,160 56,481 743,718 575,448 552,488 523,728 354,024 387,614 484,276 418,174 453,758 470,772 Other Charges for Services $ 5,773 6,541 7,418 9,379 10,969 11,293 11,452 12,800 13,477 11,841 1 Taxes Revenues $ 1,795,291 1,792,989 1,874,415 2,067,464 2,097,476 2,186,859 2,056,503 1,907,984 1,798,243 1,720,313 $ 16,079 8,965 22,331 38,772 9,998 11,026 27,120 24,775 21,304 26,484 Total Business-Type Other Income from Investments Revenues $ $ 9,402 16,347 33,588 59,528 55,760 28,538 19,245 8,352 19,803 29,863 1 Income from Government-wide Investments Revenues 851 $ 500 <18> <3> 381 505 425 381 555 514 1,612 4,788 5,563 3,518 2,764 1,588 2,440 5,625 1 NOTE: Includes transfers for multiple years. Government-wide Revenues $3,500,000 $3,000,000 Thousands of Dollars 80 Fiscal Year Charges for Services Capital Grants and Contributions General Revenues Governmental Business-Type $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2002 2003 2004 2005 2006 2007 2008 Fiscal Year 2011 Comprehensive Annual Financial Report 2009 2010 2011 $ 2,926,089 2,672,047 2,722,367 2,933,412 2,764,485 2,830,157 2,786,956 2,536,411 2,461,022 2,434,484 Table A-7 Arizona Department of Transportation Net Assets by Component for fiscal year ended June 30 (Thousands of Dollars) Governmental Activities Business-type Activities Invested in Capital Assets, Fiscal Net of Related Debt Year Restricted Unrestricted Total 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 669,811 566,794 534,535 704,929 1,006,512 466,337 491,995 408,410 439,045 400,315 $ 125,860 126,415 113,053 209,650 236,186 189,669 234,548 208,032 211,796 219,726 $ 15,954,757 15,313,308 14,599,390 14,200,017 13,454,559 12,462,382 11,507,017 10,796,027 10,272,045 9,618,783 $ 15,159,086 14,620,099 13,951,802 13,285,438 12,211,861 11,806,376 10,780,474 10,179,585 9,621,204 8,998,742 Invested in Capital Assets, Net of Related Debt $ 54 92 131 173 225 249 499 810 1,126 1,439 Restricted Unrestricted $ 76,192 75,619 74,703 74,115 71,708 67,713 65,273 63,900 63,225 83,293 $ Primary Government Total 192 $ 76,438 <663> 75,048 <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 $ 15,159,139 14,620,191 13,951,934 13,285,611 12,212,086 11,806,625 10,780,973 10,180,395 9,622,330 9,000,181 $ 746,003 642,413 609,238 779,044 1,078,220 534,050 557,268 472,310 502,270 483,608 $ 126,052 125,752 112,647 209,782 236,288 189,639 234,344 208,924 212,576 221,248 $ 16,031,194 15,388,356 14,673,819 14,274,437 13,526,594 12,530,314 11,572,585 10,861,629 10,337,176 9,705,037 81 Primary Government Net Assets By Component $18,000,000 $16,000,000 Thousands of Dollars $14,000,000 Unrestricted $12,000,000 $10,000,000 Restricted $8,000,000 $6,000,000 Invested in Capital Assets, net of related debt $4,000,000 $2,000,000 $0 2002 2003 2004 2005 2006 2007 Fiscal Year 2008 2009 2011 Comprehensive Annual Financial Report 2010 2011 Table B-1 Arizona Department of Transportation Highway User Revenue Fund Collections for the fiscal year ended June 30 (Thousands of Dollars) Motor Vehicle Operators' Motor Vehicle Motor Vehicle Motor Vehicle Motor License License Fiscal Fuel Tax Reg. Fee Carrier Tax Fees and (In Lieu) Tax Revenues Revenues Revenues Other Fees Revenues Year 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 636,507 633,771 637,054 697,771 725,787 710,115 701,965 656,881 633,826 629,360 $ 175,179 170,453 178,953 196,151 194,308 178,112 163,463 163,689 158,726 151,437 $ 17,466 17,157 18,930 21,758 22,473 20,824 18,573 16,623 23,302 11,896 $ 64,361 59,431 58,500 60,630 57,085 56,495 50,789 42,829 39,906 40,122 $ 275,132 331,080 349,399 400,787 389,503 372,168 318,689 309,688 276,279 259,308 Total Deposited to Arizona Hwy. User Rev. Fund $ 1,168,645 1,211,892 1,242,836 1,377,097 1,389,156 1,337,714 1,253,479 1,189,710 1,132,039 1,092,123 SOURCES: Basic Financial Statements - fiscal years 2002 through 2011 Highway User Revenue Fund Collections $1,500,000 $1,350,000 $1,200,000 Thousands of Dollars $1,050,000 $900,000 $750,000 $600,000 $450,000 $300,000 $150,000 $0 2002 2003 2004 2005 2006 2007 2008 Fiscal Year 2011 Comprehensive Annual Financial Report 82 2009 2010 2011 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 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 522,556 520,484 513,379 680,530 688,451 636,094 483,047 570,801 537,668 519,837 $ 341,502 339,900 346,443 415,556 417,541 385,759 362,965 344,699 324,431 312,252 $ 212,739 211,741 215,817 258,871 260,107 240,309 226,110 214,731 202,105 195,530 Department of Public Economic Strength Safety Project Fund $ 79,216 78,626 84,950 10,000 10,000 63,999 52,216 48,698 54,416 37,066 $ 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Other $ 1 61,478 60,141 81,247 11,140 12,057 10,553 128,141 9,781 12,419 26,438 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 2011 NOTE: 1 An appropriation for Arizona State Parks is included. Fiscal years 2002, 2005, 2009, 2010 and 2011 include distributions to State General Fund. 2011 Comprehensive Annual Financial Report 83 Total $1,218,491 1,211,892 1,242,836 1,377,097 1,389,156 1,337,714 1,253,479 1,189,710 1,132,039 1,092,123 Table B-3 Arizona Department of Transportation Fuel Tax Rates for the fiscal year ended June 30 (Cents per Gallon) Fiscal Gasoline Year Tax 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ Use Fuel Tax 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 $ 1 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 SOURCE: Arizona Revised Statutes §28-5606 NOTES: Gasohol is currently taxed at the same rate as gasoline and use fuel. Use fuel is primarily diesel. 1 Lightweight motor vehicles under 26,000 pounds pay $.18 per gallon. 2011 Comprehensive Annual Financial Report 84 Table B-4 Arizona Department of Transportation Motor Vehicle Fuel Tax - Top Ten Suppliers for fiscal year ended June 30 (Thousands) Gallons from Revenue from All Motor Revenue Percentage Top Ten Top Ten Vehicle Fuel Tax from Top Ten Fiscal Year Suppliers Suppliers Revenue Suppliers 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2,898,241 2,905,890 2,871,995 2,839,622 2,807,989 2,588,981 2,545,685 2,627,194 2,553,905 2,431,771 $ 561,353 569,974 565,889 559,609 552,977 504,052 504,128 515,901 498,892 469,864 $ 686,591 683,880 698,959 753,036 772,100 750,574 723,425 697,428 668,643 646,115 81.8% 83.3% 81.0% 74.3% 71.6% 67.2% 69.7% 74.0% 74.6% 72.7% SOURCE: Revenue & Fuel Tax Administration reporting, based on gallonage data reported by fuel suppliers. NOTE: Above data reflects a change in gasoline and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2002 - 2010. Motor Vehicle Fuel Tax Sources $800,000 $700,000 Thousands of Dollars $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2002 2003 2004 2005 2006 2007 2008 2009 Fiscal Year All Fuel Tax Revenue Top Ten Suppliers 2011 Comprehensive Annual Financial Report 85 2010 Table B-5 Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 Range - in Millions of Gallons Suppliers within Range 2002 Percentage of Total Gallons Sold Suppliers within Range 2003 Percentage of Total Gallons Sold Suppliers within Range 2004 Percentage of Total Gallons Sold Suppliers within Range 2005 Percentage of Total Gallons Sold Suppliers within Range 2006 Percentage of Total Gallons Sold 5 5 5 6 1 3 2.5% 5.8% 11.7% 28.5% 8.9% 37.4% 7 2 6 3 5 2 3.8% 2.5% 12.3% 13.8% 39.0% 23.0% 4 4 8 2 4 3 1.6% 3.9% 16.7% 9.4% 27.6% 35.4% 3 4 6 6 3 3 1.5% 3.1% 13.0% 27.0% 19.0% 30.9% 5 2 5 6 3 4 2.4% 2.4% 12.0% 21.8% 17.6% 38.5% 25 94.8% 25 94.4% 25 94.6% 25 94.5% 25 94.7% < 25 26 - 50 51 - 100 101 - 200 201 - 300 > 300 86 NOTE: Above data reflects a change in gasoline and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2002 - 2010. Total Gallons of Gasoline (Thousands) 2,510,433 2,575,965 2,650,746 2,730,911 2,781,197 Gasoline % of Total 77.1% 76.6% 75.8% 75.5% 74.3% Total Gallons of Use Fuel (Diesel) (Thousands) Diesel % of Total 747,062 22.9% 788,622 23.4% 845,256 24.2% 887,406 24.5% 963,551 25.7% NOTE: Above data reflects a change in gasoline and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2002 - 2010. (continued) 2011 Comprehensive Annual Financial Report Table B-5 Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 (continued) Range - in Millions of Gallons Suppliers within Range 2007 Percentage of Total Gallons Sold 6 1 5 6 3 4 2.0% 1.0% 11.1% 24.5% 18.2% 40.4% 25 97.2% < 25 26 - 50 51 - 100 101 - 200 201 - 300 > 300 2008 Percentage of Total Gallons Sold Suppliers within Range 2009 Percentage of Total Gallons Sold Suppliers within Range 2010 Percentage of Total Gallons Sold Suppliers within Range 2011 Percentage of Total Gallons Sold 8 6 3 5 3 1.5% 4.2% 12.1% 11.1% 34.8% 32.7% 7 5 2 3 3 5 3.3% 5.2% 3.2% 11.4% 17.9% 55.8% 7 8 1 2 3 4 2.7% 9.2% 1.5% 9.8% 21.7% 51.6% 7 5 3 3 3 4 3.2% 4.9% 4.6% 15.3% 19.0% 49.8% 25 96.4% 25 96.8% 25 96.5% 25 96.8% Suppliers within Range 87 NOTE: Above data reflects a change in gasoline and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2002 - 2010. Total Gallons of Gasoline (Thousands) 2,871,528 2,797,714 2,634,840 2,607,660 2,616,186 Gasoline % of Total 74.5% 74.5% 75.3% 76.0% 75.9% Total Gallons of Use Fuel (Diesel) (Thousands) Diesel % of Total 981,647 25.5% 959,406 25.5% 864,455 24.7% 824,996 24.0% 829,530 24.1% NOTE: Above data reflects a change in gasoline and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2002 - 2010. 2011 Comprehensive Annual Financial Report Table C-1 Arizona Department of Transportation Highway User Revenue Fund Legal Debt Margin for the fiscal year ended June 30 (Thousands of Dollars) 1,2 Fiscal Year Debt Limit 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 N/A N/A N/A N/A N/A $ 1,300,000 1,300,000 1,300,000 1,300,000 1,000,000 Total Principal Applicable to the Total Principal Legal Debt Limit as a Percentage Applicable to Limit Margin of Debt Limit $ N/A N/A N/A N/A N/A 1,223,425 1,161,355 1,017,360 932,700 734,155 N/A N/A N/A N/A N/A $ 76,575 138,645 282,640 367,300 265,845 N/A N/A N/A N/A N/A 94.11% 89.34% 78.26% 71.75% 73.42% 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 (GARVEE) is the ability to secure the debts with available excise tax monies and available grant revenues, respectively, pursuant to the applicable bond resolutions. 2 As stated in House Bill 2206 of the Second Regular Session of the Forty-seventh Legislature, the $1.3 billion debt limit is eliminated from ARS §28-7510. The general effective date of this change was September 21, 2006. 2011 Comprehensive Annual Financial Report 88 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 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 71,770 68,140 64,190 60,645 57,825 54,830 44,265 51,155 44,490 45,365 Interest Total $83,960 87,661 89,825 75,538 73,785 62,222 60,459 53,149 41,932 38,534 $155,730 155,801 154,015 136,183 131,610 117,052 104,724 104,304 86,422 83,899 1,2 Revenues Coverage $ 504,175 502,874 509,183 658,616 635,140 624,408 461,763 557,854 540,540 523,326 3.2 3.2 3.3 4.8 4.8 5.3 4.4 5.3 6.3 6.2 SOURCES: Highway User Revenue Fund Schedule fiscal years 2002 through 2011; Debt Service Funds fiscal years 2002 through 2011. NOTES: 1 Includes vehicle license tax revenues distributed directly to the State Highway Fund. Fiscal year 2005 is net of a $118 million distribution to the State General Fund. Fiscal year 2009 is net of $66 million, 2010 is net of $44 million and 2011 is net of $45 million distribution to the State General Fund. 2 The Highway Revenue Bonds are secured by a prior lien on and pledge of motor vehicle and related fuel fees and taxes. Highway Revenue Bonds - Bond Coverage $700,000 Thousands of Dollars $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2002 2003 2004 2005 2006 2007 2008 2009 Fiscal Year Revenue Debt Service 2011 Comprehensive Annual Financial Report 89 2010 2011 Table C-3 Arizona Department of Transportation Transportation Excise Tax Revenue Bonds Bond Coverage for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Pledged Year Principal 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 45,970 33,315 13,825 19,045 80,375 208,625 199,400 190,415 163,455 1 Interest Total Revenues Coverage $42,496 38,225 17,193 10,673 1,566 14,318 23,553 31,533 35,445 $88,466 71,540 31,018 29,718 81,941 222,943 222,953 221,948 198,900 $206,545 199,672 219,165 253,742 262,264 316,491 316,806 288,600 268,721 267,563 2.3 2.8 7.1 8.5 N/A 3.9 1.4 1.3 1.2 1.3 SOURCE: Maricopa County Regional Area Road Fund Report NOTES: Bond coverage ratio is based upon total Maricopa County Transportation Excise Tax collections. 1 The Transportation Excise Tax Revenue Bonds are secured by transportation excise taxes collected by the Department of Revenue on behalf of Maricopa County. Transportation Excise Tax Revenue Bonds - Bond Coverage $350,000 Thousands of Dollars $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2002 2003 2004 2005 2006 2007 2008 Fiscal Year Revenue Debt Service 2011 Comprehensive Annual Financial Report 90 2009 2010 2011 Table C-4 Arizona Department of Transportation Transportation Excise Tax Revenue Bonds Debt Service Revenue and Cost Per Capita for the fiscal year ended June 30 (Thousands) Fiscal Maricopa County Total 1 Year Principal Interest Cost Revenue 2010 2009 2008 2007 2006 2005 2004 2003 2002 $ 49,570 13,825 19,045 80,375 208,625 199,400 190,415 163,455 $ 42,496 17,193 10,673 1,567 14,318 23,553 31,533 35,445 $ 92,066 31,018 29,718 81,942 222,943 222,953 221,948 198,900 $ 199,672 219,165 253,742 262,264 316,491 316,806 288,600 268,721 267,563 Cost Population per capita 3,817 4,023 3,955 3,907 3,793 3,649 3,538 3,406 3,296 $ 24 8 8 22 61 63 65 60 Revenue per capita $ 52 54 64 67 83 87 82 79 81 SOURCES: Maricopa County Regional Area Road Fund Report; population data from the U.S. Census Bureau available only through 2010 NOTE: 1 Based upon total Maricopa County Transportation Excise Tax collections. Transportation Excise Tax Revenue and Cost Per Capita $100 $90 Thousands of Dollars $80 $70 $60 Revenue $50 Cost $40 $30 $20 $10 $0 2002 2003 2004 2005 2006 2007 2008 2009 Fiscal Year 2011 Comprehensive Annual Financial Report 91 2010 Table C-5 Arizona Department of Transportation Ratios of Outstanding Debt by Type for the fiscal year ended June 30 (Thousands of Dollars) Governmental Activities Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE) Premium on bonds Capital leases Advances and notes payable Total Governmental activities 2002 2003 2004 2005 2006 2007 2008 2009 2010 $ 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 $ 1,740,765 777,130 329,650 173,313 4,326 42,668 3,067,852 $ 1,672,625 743,815 304,480 158,601 1,304 60,711 2,941,536 145,536 145,536 151,545 151,545 142,414 142,414 146,454 146,454 150,494 150,494 154,534 154,534 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 $ 3,067,852 $ 2,941,536 Business-Type Activities Notes payable Total Business-type Activities 92 Total Primary Government Debt as a Percentage of Personal Income Amount of Debt per Capita 1 1.26% $ 343 1.26% $ 350 1.17% $ 345 1.07% $ 335 0.96% $ 322 1.01% $ 348 1.10% $ 380 1.40% $ SOURCES: U.S. Bureau of Economic Analysis (for population, personal income, and per capita personal income figures); U.S. Bureau of the Census (also for population) population data only available through 2010 1 NOTE: The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Years 2002 through 2009 have been revised to reflect revisions made by the U.S. Bureau of the Census. Per capita personal income is total personal income divided by total midyear population estimates of the U.S. Bureau of the Census. Previous years have been revised to reflect revisions in personal income and population estimates. 2011 Comprehensive Annual Financial Report 465 1.31% $ 441 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 2 Total Vehicles Vehicles 6,741 6,693 6,734 6,609 6,318 5,945 5,639 5,312 5,118 48 -41 125 290 373 306 327 193 479 2010 2009 2008 2007 2006 2005 2004 2003 2002 Arizona Population Change in 1 6,677 6,588 6,499 6,360 6,191 5,974 5,759 5,591 5,451 Population 89 88 139 169 217 215 168 139 148 SOURCE: Vehicle registrations from Motor Vehicle Division's annual reports NOTES: 1 The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Years 2002 through 2009 have been revised to reflect revisions made by the U.S. Bureau of the Census. Population data available only though fiscal year 2010. 2 GASB Statement 34 was implemented in fiscal year 2002. Therefore, ten years of data is not available, but will be accumulated over time. Change in Vehicles Registered Compared to Population Change 600,000 500,000 Change 400,000 300,000 200,000 100,000 <100,000> 2002 2003 2004 2005 2006 2007 Fiscal Year Vehicles Population 2011 Comprehensive Annual Financial Report 93 2008 2009 2010 Table D-2 Arizona Department of Transportation Vehicle Registrations Per Year Compared to Fuel Sales for fiscal year ended June 30 (Thousands) Fiscal Vehicle Percentage Fuel 1 Percentage Year Registrations Change Sales Change 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 6,840 6,741 6,693 6,734 6,609 6,318 5,945 5,639 5,312 5,118 1.5% 0.7% -0.6% 1.9% 4.6% 6.3% 5.4% 6.2% 3.8% 10.3% 3,411,652 3,369,732 3,398,866 3,731,808 3,759,465 3,636,195 3,542,631 3,429,136 3,339,089 3,245,274 1.2% -0.9% -8.9% -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 NOTES: 1 Fuel sales include both gasoline and use fuel (primarily diesel) sales. Fuel Sales numbers for 2009 and 2010 have been revised to reflect revisions made to the Motor Vehicle Division data. Percentage Change in Vehicle Registrations and Fuel Sales 15.0% Percentage Change 10.0% 5.0% 0.0% <5.0%> <10.0%> 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fiscal Year Vehicle Registrations 2011 Comprehensive Annual Financial Report 94 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 Population December 31 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 6,676,627 6,587,653 6,499,207 6,360,238 6,190,987 5,973,970 5,758,692 5,590,820 5,451,472 5,303,869 1 (in thousands) $ 223,716,314 219,026,704 223,961,131 218,587,551 206,958,398 188,152,439 170,026,128 155,607,258 148,174,872 142,864,078 Income 3 $ 33,507 33,248 34,460 34,368 33,429 31,495 29,525 27,833 27,181 26,936 Unemployment Rate 4 10.0% 9.7% 5.9% 3.8% 4.1% 4.7% 5.0% 5.7% 6.0% 4.7% 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. Previous years have been revised to reflect revisions made by the U.S. Bureau of the Census. 2 Personal income estimates for previous years were revised to reflect revisions made by the U.S. Bureau of the Census. 3 Per capita personal income is total personal income divided by total midyear population estimates of the U.S. Bureau of the Census. Previous years have been revised to reflect revisions in personal income and population estimates. 4 The unemployment rates were revised to reflect a revision made by the Arizona Department of Commerce website, www.workforce.az.gov. 2011 Comprehensive Annual Financial Report 95 Table D-4 Arizona Department of Transportation Principal Employers Current and Nine Years Ago Employer State of Arizona Wal-Mart Stores Inc. Banner Health City of Phoenix Wells Fargo Apollo Group Inc. Maricopa County Arizona State University Bank of America Raytheon Co. Honeywell International Inc. Motorola Inc. The Kroger Co. American Express America West Holding Total Calendar Year Ended December 31, 2010 Full-Time Percentage Equivalent of Total State Employees Rank Employment 49,282 1 1.55% 30,608 2 0.96% 28,220 3 0.89% 15,544 4 0.49% 13,100 5 0.41% 13,000 7 0.41% 12,458 6 0.39% 12,221 8 0.38% 12,000 9 0.38% 12,000 10 0.38% 198,433 6.24% Calendar Year Ended December 31, 2001 Full-Time Percentage Equivalent of Total State Employees Rank Employment 49,973 1 1.94% 17,500 2 0.68% 14,000 6 0.54% 13,298 8 0.52% 15,523 4 0.60% 16,000 3 0.62% 15,100 5 0.59% 13,500 7 0.52% 11,000 9 0.43% 10,270 10 0.40% 176,164 6.84% SOURCES: Business Journal, Book of Lists 2011 and 2002 for employers; Arizona Department of Commerce website, www.workforce.az.gov (for annual State employment) 2011 Comprehensive Annual Financial Report 96 Table E-1 Arizona Department of Transportation Full-Time Equivalents (FTEs) for the fiscal year ended June 30 Appropriated Non-appropriated Enforcement & Multimodal Total Arizona Total NonPlanning Motor Vehicle Compliance Appropriated Highways Appropriated Fiscal 1 Total All FTEs Division FTEs Magazine HELP Other FTEs Division Year Administration Highways Division 97 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 745.0 692.0 692.0 692.0 692.0 692.0 686.0 685.0 705.5 745.5 2,267.0 2,153.0 2,255.0 2,255.0 2,223.0 2,223.0 2,227.0 2,223.0 1,632.0 1,707.0 52.0 46.0 46.0 46.0 46.0 46.0 48.0 48.0 48.0 50.0 1,111.0 1,657.0 1,755.0 1,751.0 1,730.0 1,688.0 1,665.0 1,649.0 1,596.0 1,649.0 373.0 4,548.0 4,548.0 4,748.0 4,744.0 4,691.0 4,649.0 4,626.0 4,605.0 3,981.5 4,151.5 NOTES 1 ECD FTE total was included in the Motor Vehicle Division 2002-2010. 2011 Comprehensive Annual Financial Report 22.0 23.0 28.0 28.0 60.0 72.0 72.0 72.0 72.0 72.0 2.0 2.0 3.0 3.0 3.0 3.0 3.0 3.0 44.0 43.0 24.0 24.0 49.0 38.0 31.0 13.0 11.0 11.0 68.0 68.0 52.0 52.0 112.0 113.0 106.0 88.0 86.0 86.0 4,616.0 4,616.0 4,800.0 4,796.0 4,803.0 4,762.0 4,732.0 4,693.0 4,067.5 4,237.5 Table E-2 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds 1 Schedule by Function and Activity June 30, 2011 Function and Activity Buildings and Improvements Improvements other than Buildings Machinery and Equipment 879,017 $ 45,575,224 $ 18,542,694 $ 13,979,936 Land Construction in Progress Infrastructure $ - $ Total 98 Administration Highway: Administrative and other services Highway construction Highway development Materials engineering Traffic engineering Transportation planning and research Highway maintenance Motor Vehicle $ - $ 78,976,871 935,955 2,600,015,605 710,073 4,907,328 11,641,168 37,855,484 10,567,194 98,846 4,894,955 356,896 152,944 43,693,816 47,301,686 1,798,104 384,415 350 7,077 21,667 122,946 9,339,020 3,571,783 3,706,528 3,638,283 2,422,858 3,725,195 1,255,826 236,863 9,206,556 7,301,842 11,604,565,886 - 3,561,984,731 - 44,296,071 17,781,156,114 3,232,127 8,627,227 1,634,389 512,753 67,146,720 69,816,479 Total governmental funds capital assets $ 2,619,089,146 $ 190,497,045 $ 33,788,056 $ 45,473,887 $ 11,604,565,886 $ 3,561,984,731 $ 18,055,398,751 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. 2011 Comprehensive Annual Financial Report Table E-3 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds 1 Schedule of Changes by Function and Activity for the fiscal year ended June 30, 2011 Governmental Funds Capital Assets July 1, 2010 Function and Activity Administration Highway: $ Administrative and other services Highway construction Highway development Materials engineering Traffic engineering Transportation planning and research Highway maintenance Motor Vehicle 72,096,322 Additions $ 7,429,280 Deductions $ <548,731> $ Governmental Funds Capital Assets June 30, 2011 78,976,871 44,343,158 13,526,518,488 3,417,795 8,653,117 1,609,052 556,221 66,946,202 69,058,428 125,889 696,518,670 192,649 12,116 73,291 8,660 516,503 952,013 <172,976> <3,865,775> <378,317> <38,006> <47,954> <52,128> <315,985> <193,962> 44,296,071 14,219,171,383 3,232,127 8,627,227 1,634,389 512,753 67,146,720 69,816,479 Functional sub-total 13,793,198,783 705,829,071 <5,613,834> 14,493,414,020 Construction in progress 3,587,135,963 537,415,498 <562,566,730> 3,561,984,731 $ 17,380,334,746 $ 1,243,244,569 Total governmental funds capital assets $ <568,180,564> $ 18,055,398,751 NOTE: 1 This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net assets. 2011 Comprehensive Annual Financial Report 99 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 Functional Classification 1 2003 2004 2005 2006 2007 2008 2 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 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 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 Urban: Statewide composite: Freeways and expresswa Arterials Collectors Locals Total statewide comp SOURCE: Arizona's Highway Performance Monitoring System (HPMS) 1 NOTES: GASB Statement 34 was implemented in fiscal year 2002. Therefore, ten years of data is not available, but will be accumulated over time. 2 2009 and 2010 information is not available. Total Public Road Mileage 70,000 60,000 Miles 50,000 40,000 Urban 30,000 Rural 20,000 10,000 0 Calendar Year 2011 Comprehensive Annual Financial Report 100 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 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Non-State State All Public Arizona1 Daily Miles Highways Highways Highways Population per capita 84,427 87,608 86,886 91,042 89,016 85,352 75,070 75,396 72,964 67,756 79,699 76,714 81,496 81,456 82,178 78,473 81,808 72,258 69,311 68,281 164,126 164,322 168,382 172,498 171,194 163,825 156,878 147,654 142,275 136,037 6,677 6,588 6,499 6,360 6,191 5,974 5,759 5,591 5,451 5,304 24.6 24.9 25.9 27.1 27.7 27.4 27.2 26.4 26.1 25.6 SOURCES: Arizona's Highway Performance Monitoring System (HPMS); ADOT Multimodal Planning Division office records. The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. NOTES: 1 Years 2002 through 2009 population information has been revised to reflect revisions made by the U.S. Bureau of the Census. Daily Vehicle Miles Traveled 200,000 180,000 Thousands of Miles 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Calendar Year State Highways Non-State Highways 2011 Comprehensive Annual Financial Report 101 2009 2010 fiscal year 2011 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2011 Acknowledgements The Comprehensive Annual Financial Report was prepared by Financial Management Services, Fiscal Operations: Keith Fallstrom Diane Wascher, CPA Jennifer Crummey Curtis Jarrell Yolanda Flores Joel Konopken Winifred Gettings Nichole Zumbrunnen John Valentine 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 Arizona Highways Magazine for their photographs and to Creative Services of Communication and Community Partnerships for their graphic design. State of Arizona Department of Transportation fiscal year 2011 ADOT 206 South 17th Avenue Phoenix, Arizona 85007 www.azdot.gov