ANNUAL REPORT 2012 - 2013 Janice K. Brewer Governor Vanessa P. Hickman State Land Commissioner S e r v i n g A r i z o n a ’s S c h o o l s a n d P u b l i c I n s t i t u t i o n s S i n c e 1 9 1 5 CONTENTS Message From the Commissioner ........................................................................................1 About the Commissioner ......................................................................................................3 Historical Overview ...............................................................................................................4 Organizational Chart .............................................................................................................6 Agency Updates ...................................................................................................................7 Land Exchange Authority ......................................................................................................7 Natural Resources Major Lease Updates: ASARCO & Freeport McMoRan ..................................................8 Mineral Materials Leases: An Update on STL Aggregates ..............................................8 Potash Mining ..................................................................................................................9 Florence Copper Project ..................................................................................................9 Oil and Gas Leases ........................................................................................................10 Uranium Exploration ......................................................................................................10 Abandoned Mine Reclamation .......................................................................................11 Mineral Activities on State Trust Land ...........................................................................11 Water Rights Section .....................................................................................................12 NRCD Environmental Education ....................................................................................13 Real Estate Cottonwood Canyon Road ............................................................................................14 Green Valley Water Recharge Facility ............................................................................15 Communications Sites ...................................................................................................15 Arizona Preserve Initiative Update ................................................................................16 Solar Energy Leases.......................................................................................................16 Major Transactions/Leases ............................................................................................18 State Trust Land Uses ........................................................................................................19 Land Ownership and Management ....................................................................................20 Board of Appeals ................................................................................................................22 Fiscal Year 2013 Revenues ................................................................................................23 Permanent Fund .................................................................................................................25 Expendable Revenue ..........................................................................................................26 Fund and Beneficiary Summary .........................................................................................27 Common Schools K - 12 ................................................................................................28 University Grants ............................................................................................................30 Other Grants ...................................................................................................................33 Financial Schedules Receipts by Category .....................................................................................................37 Rental Acreage and Receipts.........................................................................................38 Treasurer’s Formula Distribution ....................................................................................39 State Trust Land Acreage by Beneficiary ......................................................................40 Janice K. Brewer Governor State of Arizona Please visit our website at www.azland.gov 4 MESSAGE FROM THE COMMISSIONER September 3, 2013 The Honorable Janice K. Brewer Governor of Arizona 1700 West Washington Street Phoenix, Arizona 85007 Dear Governor Brewer: It is my privilege to deliver to you the State Land Department’s (the Department) Annual Report for Fiscal Year 2013 as required by A.R.S. §37-132. The report contains a summary of the Department’s management activities and the revenue the Department earned during the fiscal year. It is my primary and continuing goal to increase revenue for the beneficiaries of the State Trust and to protect its long term interest. In this fiscal year, the Department staff continued their diligent work supporting the Trust. As a result of the careful economic stewardship of the last few years, we generated significant revenues for the Trust beneficiaries. The Department sold 20,370 acres of land for a combined auction price of approximately $181 million. The Department earned almost $239 million in permanent receipts, an increase of approximately $77 million over last year. We have also received significant revenue from other sources. For example, the royalty receipts from mineral sales contributed $13.2 million in proceeds this year. In addition, we had noteworthy revenue in agriculture, grazing, subsurface, and commercial leases this year. The Department brought in over $318 million in receipts in FY 2013, which is an increase of over $100 million from FY 2012. The Department continues to carry an outstanding balance for previous sales that are financed through the Department. The beneficiaries will earn interest on the balance at a rate ranging from 5% to 11% for an average term of seven years. The total outstanding receivable balance from term sales is $426.4 million, which earns interest daily. The revenue earned on this balance will be distributed to our beneficiaries over the next several years. In addition, the payments on the remaining principal will be deposited in the Permanent Fund in future years. The Department completed six auctions of State Trust land previously reclassified as suitable for conservation 1 Vanessa P. Hickman Arizona State Land Commissioner during FY 2013. The City of Scottsdale was the successful bidder on three parcels of land adjacent to the McDowell Mountain Sonoran Preserve. These auctions were for a total of almost 6,400 acres resulting in approximately $45.7 million dollars for the Trust. The City of Flagstaff was the successful bidder on 478 acres, “Picture Canyon,” resulting in approximately $4.8 million dollars for the Trust. Pima County was the successful bidder on 1,416 acres of land for the expansion of Tortolita Mountain Park, resulting in approximately $3.8 million dollars for the Trust. The economic outlook for the Department and Trust beneficiaries is the best that it has been in recent history. On May 8, 2013, the Department had its first competitive auction in years. As a result, the commercial property sold for twice its appraised value, allowing greater returns for the Trust beneficiaries. The Department has also seen additional interest in renewable energy applications. In addition to the two existing solar leases, the Department executed a solar lease with Arlington Valley Solar Energy II on 150 acres west of Buckeye in Maricopa County. This lease is projected to generate $4.9 million during its 35 year term. The Department leased approximately 400 acres to Sun Streams LLC, just east of Palo Verde in Wintersburg, Maricopa County. This lease will generate a minimum of $6.4 million over its 30 year term. Thank you for the opportunity to serve Arizona and the Trust beneficiaries as the State Land Commissioner. The opportunities that exist for the Department over the next year to increase revenue generation for K-12 education and the other Trust beneficiaries are exciting; I look forward to working alongside you, your staff, the staff at the Department, and the citizens of Arizona to make appreciable advancements of the interests of those we serve. Sincerely, Vanessa P. Hickman State Land Commissioner 2 ABOUT THE COMMISSIONER In November 2012, Vanessa Hickman was appointed as the Arizona State Land Commissioner. As such, she oversees the management of 9.3 million acres of Trust land across Arizona. Prior to beginning her tenure as Commissioner, Vanessa served as the Deputy State Land Commissioner and Deputy General Counsel to Governor Janice K. Brewer. Vanessa also worked in private practice in real estate litigation, land use and zoning. Vanessa graduated Magna Cum Laude from Arizona State University with a Bachelor of Arts Degree. She received her Juris Doctor from the Sandra Day O’Connor School of Law at Arizona State University. Vanessa is a Faculty Associate at Arizona State University, a member of the Arizona State Bar and serves on the ULI Arizona Advisory Board, ULI Women’s Leadership Initiative, Valley Partnership Board of Directors, the Arizona State Parks Board, Legislative Governmental Mall Commission, Transportation and Trade Corridor Alliance Steering Committee, on the Governor’s Natural Resource Review Council and is an active member of the Western States Land Commissioner’s Association. 3 HISTORICAL OVERVIEW LAND GRANT The Commission was charged with assessing, evaluating, and making recommendations about the Trust land granted by Congress to the State. The Commission was to report back to the Legislature with its findings and conclusions by the end of the second Legislative session. Endowment of public lands for educational purposes was a practice established by the Northwest Ordinance in 1787. Congress established the Territory of Arizona on February 24, 1863 and granted sections 16 and 36 of each township for the benefit of the Common Schools. The Commission concluded that Arizona should not sell its Trust land outright, as other states had done. Instead, it should put the lands to their highest and best use. The decision to sell or lease the land should be based upon the potential use of each parcel. The Commission recommended the creation of a permanent State Land Department “... in order that the multitudinous detail attached to the State’s The Enabling Act, passed on June 20, 1910, allowed for Arizona statehood. In addition to the previously designated sections of land, the Enabling Act assigned sections 2 and 32 of each township to be held in trust for the Common Schools. The needs of other public institutions were considered by Congress, and more than two million additional acres were allocated for their use. 1914 photo of Arizona Governor George W.P. Hunt and members of the Arizona State Land Commission: Catherine Grove, George W.P. Hunt, Ethel Shoemaker, and E.L. Trippel. (Photo courtesy of Arizona State Library, Archives and Public Records, Histo- Two men by a Model T Ford in the Pinal Mountains of Gila County, Arizona. (Photo courtesy of Arizona State Library, Archives and Public Records, History and Archives Division, Phoenix, #98-1660) ry and Archives Division, Phoenix, #97-6948) varied land interests may have constant attention and to prevent irretrievable loss.” CREATION OF THE LAND DEPARTMENT On May 20, 1912, an act of the First Legislature created the threemember State Land Commission to serve as Arizona’s temporary Land Department. The members were Mulford Winsor, Chairman; Cy Byrne, Secretary; and William A. Moody, member. The State Land Department and the system by which Trust lands were to be managed were established in 1915 by the State Land Code. In compliance with the Enabling Act and the State Constitution, the State 4 TRUST REVENUE Land Code gave the Department authority over all Trust lands and the natural products from these Trust lands. Revenues earned from Trust land are classified as either permanent or expendable receipts. Revenues derived from the sale of State Trust land and natural products are referred to as permanent receipts which are deposited into the permanent funds and invested in stocks, bonds, and interest-bearing securities by the State Treasurer. The Treasurer distributes money from the funds to the beneficiaries according to a constitutional formula. Since the Department’s inception, its mission has been to manage the Land Trust and to maximize its revenues for the beneficiaries. All uses of the land must benefit the Trust, a fact that distinguishes it from the way public land, such as parks or national forests, may be used. While public use of Trust land is not prohibited, it is regulated to ensure protection of the land and compensation to the beneficiaries for its use. Expendable revenue includes lease revenue from Trust land leases and permits, interest from sales contracts, and the Treasurer’s formula distribution. This revenue is distributed directly to the beneficiaries for their use. BENEFICIARIES There are 13 beneficiaries of State Trust land revenues. The Common Schools is the beneficiary with the largest Trust land acreage, originally receiving about 8.4 million acres of land. A 14th beneficiary, County Bonds, was funded by Trust revenues until it was eventually paid. Revenues derived from County Bond lands are now added to the Common Schools’ grant. Grant Common Schools (K-12) and County Bonds University of Arizona (Act of 2/18/1881) University Land Code Normal Schools Grant Agricultural & Mechanical Colleges School of Mines Grant Military Institutes Grant State Charitable, Penal, and Reformatory Miners' Hospital Grant Penitentiary Grant Legislative, Executive & Judicial Buildings State Hospital Grant School for the Deaf & Blind Total Acres Original Land Endowment Pattern Today, the original school section pattern exists only in a few locations such as the remote Arizona Strip. About three-quarters of the school section acreage was relocated through selections and exchanges that have consolidated the Trust lands into large blocks in Pinal, Pima, Graham, Greenlee, and Cochise counties in central and southeastern Arizona; north and northwest of Phoenix in Maricopa and Yavapai counties; and in the checkerboard railroad grant zone across Mohave, Yavapai, Coconino, Navajo, and Apache counties. Acres as of FY 2013 9,400,000 8,064,796 60,000 51,414 200,000 137,906 200,000 174,786 150,000 124,944 150,000 123,254 100,000 80,168 200,000 77,225 100,000 95,231 100,000 76,111 100,000 64,229 100,000 71,248 100,000 82,560 10,960,000 9,223,873 5 Land Endowment by Township Township = 36 Sections Each Section = 1 Square Mile ORGANIZATIONAL CHART Commissioner’s Office Urban Land Planning Oversight Committee Board of Appeals Administration Division Land Information, Title and Transfer Natural Resources Real Estate Commercial Lease and Sales Information Systems & Resource Analysis Geographic Information Systems Budget & Procurement Title & Contracts Range, Agriculture and Conservation Accounting Administrative Procedures & Information Water Rights Rights of Way State Cartographer’s Office Environmental/ Trespass Planning & Engineering Information Technology Appraisal Cadastral Human Resources Minerals 6 AGENCY UPDATES LAND EXCHANGE AUTHORITY In 1990, an Arizona Supreme Court decision Fain Land and Cattle Co. v. Hassell, 163 Ariz. 587 1990 declared State land exchanges unconstitutional on the basis that they constitute a sale without public auction. The Court found the exchange statutes A.R.S. §§ 37-604 -607 unconstitutional as they apply to Trust land. Because the Department also manages some sovereign land, the statutory scheme regulating exchanges of State sovereign land remained valid. Since the Fain decision, several attempts to amend the State’s Constitution to allow for exchanges of Trust land for other lands were unsuccessful. Did You Know?  The Department processed 1,212 new customer applications; issued 7,545 recreational use permits and retrieved 7,320 lease and contract files for customers.  The Department’s Public Records area answered more than 3,000 customer inquiries.  Over 5,000 customers visited the Department in FY 2013.  There are currently 7,623 rights of way and 11,589 leases or permits. In the 2012 general election, the voters approved Proposition 119 to amend the State Constitution to allow for exchanges of Trust land if specific requirements are met. In addition, Laws, 2012 Chapter 278, revises A.R.S. § 37-604, codifying specific limitations and requirements regarding exchanges of Trust land. Land exchange authority allows the Department to address a number of state-federal land management issues such as Trust lands captured within federal holdings and the exchange of Trust land to facilitate military base preservation. Currently, there are approximately 1,500,000 acres of State Trust land impacted by federal land management decisions. These lands, estimated to have a surface value in excess of $430 million, are located in national monuments, military withdrawals, federal wilderness areas, national conservation areas or are impacted by federal land management decisions on adjacent federal lands. Examples include four national monuments established in Arizona by Presidential Proclamation in 2000 and 2001. The boundaries of the four monuments encompass approximately 95,000 acres of State Trust surface land and 77,000 acres of State Trust mineral estate. While the State lands are not officially part of the monuments, the monument boundaries suggest to the public that the State lands are part of the monument. Trespass and illegal use of these lands occurs because of the mis- 7 NATURAL RESOURCES conception. In addition, the State has limited access to Trust lands due to the federal restrictions placed on the monument’s federal lands. MAJOR LEASE UPDATES: ASARCO & FREEPORT MCMORAN The Department received income of $15.44 million in FY 2013 from mining and minerals-related activities. The majority of this income was from an older mineral lease for copper with ASARCO’s Mission Mine in Pima County that generated $8.4 million in mineral royalty payments to the Trust. The Department’s other significant Mineral Lease, also for copper, with Freeport McMoRan for their Morenci Mine in Greenlee County, generated $2.0 million in mineral royalty income in FY 2013. The Land Information, Title and Transfer Division is currently in the process of drafting rules for land exchanges and expects to open a rule making docket in early 2014. State Trust Land MINERAL MATERIALS LEASES: AN UPDATE ON STL AGGREGATES Surface 9,277,805.64 Oil/Gas 8,964,108.09 Mineral 8,978,118.24 Royalty income from Mineral Materials Leases, i.e. common variety sand and gravel and other aggregates operations, was $1.9 million in FY2013. The Department held two mineral materials auctions during FY2013, with both going to the applicant as the only bidder. The first was held on December 11, 2012 in Pinal County, going to Ralph L. Wadsworth Construction for a one-time sale of $107,500 ($0.25 per cubic yard) for fill material left on State Trust land during the excavation of the Siphon Draw Drainage Control Structure. Wadsworth used the fill material in construction of the State Route 24 interchange at Loop 202 and the Williams Gateway Airport. By the end of June 2013, Wadsworth had removed most of the 430,000 cubic yards estimated to have been left in the fill material and expected to finish removing the rest and reclaiming the surface in the fall of 2013. The second auction was held on May 1, 2013 in Yavapai County, with 10.89 acres going to G&S Gravel for 5,000 tons per year at $0.75 per ton and $1,875 annual surface rental. 8 POTASH MINING Efforts continued for the development of potash mining in the Holbrook Basin and during FY 2013 two companies filed applications for Mineral Leases. The first Mineral Lease application, 11-116760, was filed by American West Potash on September 17, 2012. American West’s application includes 21,406.19 acres in 34 sections. The second Mineral Lease application, 11-117090, was filed by PPI Holding Corporation on May 31, 2013. PPI’s application includes 22,897.67 acres in 41 Sections, and the Department anticipates having this Mineral Lease issued in 2014. Nine of the sections included in PPI’s application were within the Petrified Forest National Park Expansion Area, to the west and south of the original Park boundary, and had been closed to exploration and mining by Commissioner’s Order in September 2005. The ASLD re-opened these sections on April 30, 2013, to help facilitate the development of PPI’s intended mine plan. During FY2013, the three companies drilled a total of 29 holes in the Holbrook Basin, with 8 of those drilled on State Trust lands, as the companies focused more on specific mine development sites rather than general exploration of the entire basin. Both companies have taken additional time in order to reassess the potash market. FLORENCE COPPER PROJECT The Department continues to work with Curis Resources as they attempt to develop the Florence Copper Project. Curis plans to use an in-situ solution mining process to recover a rich copper deposit west of the town of Florence. As of end of FY 2013 Curis was anticipating a final decision from the Arizona Department of Environmental Quality regarding the issuance of an Aquifer Protection Permit for the project. Curis also needs an Underground Injection Control Permit from the U. S. Environmental Protection Agency, which they hope to receive in 2014. Once both Permits are secured, Curis will make public a Plan of Operation and a Reclamation Plan for the Production Test Field (PTF). The PTF will be on a 5-acre portion of their State Mineral Lease, 11-26500, and the information from the PTF will allow Curis to determine if the proposed in-situ mining process is economically viable. Curis’ Mineral Lease with the Department was originally 9 FLORENCE COPPER PROJECT CONTINUED ABANDONED MINE RECLAMATION issued in December 1973, renewed in 1993, and will be up for renewal in December 2013. The Mineral Lease renewal process is expected to be completed in early 2014. During June 2013, the Arizona State Mine Inspector’s Office (ASMI) filled in several abandoned shafts and prospect pits on State Trust lands along Davidson Canyon and AZ State Route 83, about 30 miles southeast of Tucson in Pima County. The Department contributed $978 to help purchase material to fill in one of the deeper and more dangerous shafts which can be seen in the before and after photos. ASMI estimated this old shaft to be 90 feet deep, and even though it had been fenced off and warning signs posted, there were obvious indications of the fence being damaged to provide human access. The ASMI has remediated numerous other abandoned mines on State Trust lands over the years and hopes to continue doing so in the future. OIL AND GAS LEASES Since Kinder Morgan CO2 Company, L.P. (Kinder Morgan) acquired the St. Johns CO2 and Helium Field (the Field) from Ridgeway Arizona Oil Corporation in late January 2012, they have retested ten of the wells drilled by Ridgeway, and during FY 2013 drilled five new wells in the Field, with three of these being on State Trust lands. The Unit Agreement for the St. Johns Gas Field of February 1, 2009 (the UA) includes 80 Oil and Gas Leases covering 111,514 acres of State Trust lands in southeastern Apache County, with the State Trust lands representing more than 80% of the area within the Field. Kinder Morgan plans to drill six more test wells in late 2013 and to start developing the Field in earnest in early 2014, drilling between 25 and 100 new wells per year for a period of three to four years for production of the CO2. Kinder Morgan filed a Right-of-Way application, on July 30, 2012, for the Arizona portion of a 20-inch diameter, 410-mile long pipeline to run underground from the Field, primarily across New Mexico, to near Denver City in Yoakum County, Texas. The Lobos Pipeline, as the project would be known, will have the capacity to deliver 500 million cubic feet of CO2 per day, which would be used for secondary or tertiary recovery of oil from older fields in the Permian Basin of southeastern New Mexico and west Texas. The UA requires Kinder Morgan to file a Field Development Report and post a bond with the Department before development of the Field begins. The image to the left shows the 90 foot deep shaft before reclamation. The image to the right shows the site after reclamation. 10 ASLD Factoids • From 1912 to 2001 the Trust generated $1 Billion –the Trust now stands at over $4.1 billion • In FY 2013, ASLD generated over $318.5 million from Trust lands for the beneficiaries • In FY 2013 ASLD had 11,590 active leases and received 2,340 new applications • Many State Parks hold State Trust land leases – Picacho Peak, Lyman Lake... 11 LEASES AND PERMITS/REVENUE PRODUCTION FY 2013 STATEWIDE WATER RESOURCES PROGRAM In FY 2012, geological and hydrological investigations along with groundwater modeling studies were completed for the Butler Valley groundwater basin and an application for Analysis of Adequate Water Supply (AAWS) was submitted to ADWR. Pursuant to A.R.S. § 45-108 and A.A.C. R12-15712, ADWR approved the AAWS reserving approximately 24,000 acre-feet/year for a 100-year period for future development of State Trust land in the Butler Valley basin. This fiscal year additional geologic and hydrologic investigations were completed for this basin and an application to increase the AAWS for Butler Valley was submitted to ADWR. NOTABLE ACTIONS FROM THE WATER RIGHTS SECTION The Water Rights Section was restructured to focus solely on water for State Trust land, and agricultural leasing was moved to the Range, Agriculture and Conservation Section. Facts & Figures Lease Rentals NUMBER ACRES OF LEASES Agriculture Grazing Mineral Material Exploration Permits Mineral Oil & Gas Mineral SLUPs 152,417 8,368,302 1,669 372,329 10,025 515,053 38,323 Number of Registrations and Water Rights Claims Stockpond Registrations Certificated Surface Water Rights Well Registrations Adjudication Statements of Claimant Water Right Registrations Grandfathered Groundwater Rights The Department executed an Intergovernmental Agreement with the Arizona Department of Water Resources (ADWR) for the loan of specialized equipment for measuring water levels in wells on State Trust lands. In exchange, the Department shares the water level data with ADWR. These measurements will then be incorporated into the ADWR’s Statewide Groundwater Site Inventory database. 338 1,215 19 720 64 294 93 INCOME Agriculture Grazing Mineral Material Exploration Permits Mineral Oil & Gas Mineral SLUPs TOTAL Sale of Products 4,312 125 2,914 7,025 7,475 264 Public Auction Water Sales 326,918 Lease Water Charges 112,097 Mineral Royalties 10,537,191 Mineral Materials 1,908,349 Other Natural Products 328,269 TOTAL 13,212,823 GRAND TOTAL 12 4,326,771 2,775,849 292,765 1,458,432 79,067 900,509 269,192 10,102,585 23,315,408 NRCD ENVIRONMENTAL EDUCATION Natural Resource Conservation Districts (NRCDs) were created following the dust bowl era to ensure participation in conservation efforts spearheaded by the newly formed (1937) Soil Conservation Service (SCS). Arizona passed the Conservation District Law in 1942 (Laws, 1941, Ch. 43, § 2.) NRCD laws are codified in Title 37, Chapter 6 of the Arizona Revised Statutes. Reorganized in 1994, SCS adopted the name Natural Resources Conservation Service (NRCS). The 32 State sponsored NRCDs are composed of a five person board that provides local voluntary leadership and knowledge. The NRCDs make available technical, financial, and educational assistance to provide for the conservation of their Districts’ natural resources. Conservation Districts are not aligned with any particular commodity. Many organizations and agencies utilize the neutral status of the Districts to implement projects and disseminate information regarding the changing environmental and natural resource management issues in Arizona. As a result of this “state, federal, private” partnership, NRCDs play a pivotal role in organizing, implementing, and coordinating with a variety of agencies concerning natural resource initiatives. One of the efforts to coordinate with local, state, and federal agencies has been undertaken by the Winkelman NRCD. Since 1980 the District has focused a vast amount of energy studying the Sonoran Desert Tortoise, a candidate species for protection under the Endangered Species Act, for the purpose of writing, editing, and soon finalizing the Winkelman Natural Resource Conservation District Plan for the Sonoran Desert Tortoise. While the plan is not yet completed, its objective is clear, “The goal of the Conservation Plan is to reduce conflicts between the species and important economic activities associated with research, education, recreation, mining, ranching, development and construction to assure Sonoran Desert Tortoise populations and their habitat are not jeopardized. The Plan will involve but not be limited to cooperation and coordination, including development of management protocols with the Pinal County Board of Supervisors, AGFD, ASLD, BLM, NRCD, Tonto and Coronado National Forest, Arizona State Parks, Gila River Indian Reservation, Ak Chin Indian Reservation and Central Arizona College.” In addition, A.R.S. § 37-1054 A.11 empowers NRCDs to establish Education Centers. NRCD Education Centers provide practical, handson learning experiences that encourage critical thinking and demonstrate the necessity of individual stewardship and rural & urban interdependency. The programs are based on current scientific information, include discussions of economic and social implications, offer delivery of national & regionally recognized environmental education programs, and offer integrated experiential curriculum that motivate students (improving test scores). Currently, 30 Districts sponsor 23 education centers. While the Department is primarily recognized for its mandate to generate revenue for the beneficiaries of the Trust, the Department is also proud of its efforts to inform and educate the residents of Arizona through the Natural Resource Conservation District Environmental Education Program, which has reached over 18,000 students of various age groups within the last year. 13 THE ARIZONA NATURAL RESOURCE REVIEW COUNCIL On January 14, 2013, Governor Brewer signed Executive Order 2013-02 establishing the Arizona Natural Resources Review Council (NRRC) for the purpose of developing an integrated natural resource management strategy for the entire state. NRRC Requirments  The Council shall prepare a comprehensive report and plan to the Governor for long-term land and natural resource management. The report shall include and address multiple use and sustained yield approaches, public access issues and sustainable economic development.  The Council shall develop a coordinated centralized Geographic Information System database model that identifies current and future management priorities for designated land and natural resources areas.  The Council shall identify and prioritize legal, legislative and incentivebased needs that protect and maintain state interests related to wildlife, land, water and other natural resources.  The Council shall provide recommendations to the Governor on a statewide approach to mitigation and conservation banking that includes State government, local governments and the private sector in order to meet long-term natural resource conservation objectives. The NRRC Consists of the Following Agency Directors •Arizona Game and Fish Department •Arizona State Land Department •Arizona Department of Environmental Quality •Arizona Department of Water Resources •Arizona State Forester •Arizona Geological Survey NRRC Meetings •Arizona State Parks Department •Arizona Department of Agriculture •Arizona Department of Transportation At the NRRC’s first meeting on February 25, 2013, it reviewed the Governor’s charge, identified deliverables, and established four subcommittees to address them. A fifth subcommittee was established at the June 2, 2013 meeting. The State Land Commissioner serves as the Chair of the Mitigation and Conservation Banking Subcommittee . An interim report of the NRRC will be issued in the Winter of 2014 and the Council will continue its implementation of the Executive Order in FY 2014. 14 REAL E STATE DIVISION GREEN VALLEY WATER RECHARGE FACILITY Santa Cruz groundwater sub-basin of the Tucson Active Management Area. This amount of recharge is equal to 12,500,000 million gallons of water a day. The Community Water Company of Green Valley (CWCGV) will operate a water recharge facility that will be located in Sahaurita on 72 acres of State Trust land. Construction will begin upon receipt of an Underground Storage Facility permit from the Arizona Department of Water Resources, with operation scheduled to begin during early 2015. Rather than the traditional square basin shape, this facility known as Project Renews uses irregular, organic shapes, intended to be more aesthetically pleasing. The basins also provide a habitat for birds and opportunities for birdwatchers. Lands adjacent to this Right of Way will feature amenities such as picnic tables, informational kiosks and hiking trails that connect to the De Anza National Historic trail. An approximately six mile long pipeline will be constructed to transport the CWCGV CAP water allocation to the recharge facility. At the recharge facility, water will be directed to one of four basins with a combined capacity of 14,000 acre-feet of water per year. The recharge basins are situated in close proximity to the Santa Cruz River, where soil type allows maximum percolation into the Upper COMMUNICATION SITES The Department plays a significant role in providing locations for the State’s communication infrastructure. Private enterprise, public safety, industrial communications are among the lessees of State land communication sites. The sites typically begin with a lease on a small pad of land for a communication tower. The Department encourages the tower owners to place additional communication companies’ equipment on their tower thereby intensifying the land use and income to the Trust. The sub-lessee is considered to be on the tower and is issued a Special Land Use Permit from the Department for a specified fee. Presently, the Department has 100 leases in place and 115 colocators. The rent for these facilities is determined by the communication use and the population density of the county where the facility is located. The Department has divided the rent and fee rates into six levels based upon location and five rent levels based upon use. The highest rates are for television broadcast and the lowest are for public safety. The most common are for cellular service. 15 The income to the Trust from communication sites over the fiscal year was $1,461,539. ARIZONA PRESERVE INITIATIVE UPDATE By the end of calendar year 2013, it is anticipated that beneficiaries of the Arizona State Land Department will receive over $35,350,000.00, and three local jurisdictions will have added a combined total of 5,434 acres of open space to their communities. The City of Flagstaff, Pima County and the City of Scottsdale have plans to purchase large tracts of Arizona State Trust Land for preservation purposes. The Trust lands they wish to acquire have been classified by the State Land Commissioner as suitable for conservation purposes. This classification allows local jurisdictions to apply and receive Growing Smarter matching funds administered by the Arizona State Parks Board through the Arizona Preserve Initiative program of the State Land Department. The three jurisdictions have applied to the Parks Board and have been awarded funding to help subsidize their costs to purchase the Trust land at public auction. The largest of the three parcels to be purchased for preservation is in the City of Scottsdale. The 2,365 acre site is contained within the City’s planned McDowell Sonoran Preserve area, and is located south of the Bell Road alignment and east of 120th Street. It includes the southern area of the McDowell Mountains and is extremely rugged land. The Commissioner has set the minimum bid for the parcel at $21,300,000 and is scheduled for auction in November 2013. Pima County has applied for an 818 acre parcel for the eastern expansion of its Tortolita Mountain Park. The Park and the subject Trust lands are located north of the Towns of Marana and Oro Valley. The 818 acre parcel is valued at $2,450,000 and the auction is scheduled in December 2013. The Trust parcels the City of Flagstaff plans to acquire, Observatory Mesa are located west of the city and consist of 2,251 acres. The value of the four parcels totals $11,600,000 and the auction is also scheduled in December 2013. 16 SOLAR ENERGY LEASES SUNSTREAMS AND FOOTHILLS The Department added an additional solar energy lease during fiscal year 2013. The lease was entered with Element Power, a global renewable energy developer owned by Hudson Clean Energy Partners. The subject lease property is located adjacent to the Palo Verde nuclear generating station in Tonopah, approximately 50 miles west of Phoenix. The subject site is 480 acres of sparsely vegetated desert land and is adjacent to land privately owned by Element Power. Element Power intends to develop a photovoltaic solar generating plant that has been named Sunstreams. Sunstreams will have a minimum electrical generating capacity of 25 megawatts per hour. The interconnection point for the power is the Hassayampa Substation. The Hassayampa is one of Arizona’s major substations and is positioned to facilitate the exportation of power to California. Sunstreams will also have the ability to serve the local market. Sunstreams is in the permitting process and has four years to commence producing power. The Department expects rental income from Sunstreams to be in excess of $6,452,500 over the 30 year term of the lease. On March 28, 2012 Arizona Public Service Company (APS) entered a lease for the purpose of developing a photovoltaic solar energy power plant in Yuma County. On April 15, 2013, APS’s power plant named the Foothills Solar Energy Plant, started commercial production and began feeding 17 megawatts of electricity per hour to the grid. Additionally, APS built a substation on the lease property which enhanced the land value by opening additional Trust land to potential electric power plant interconnection. The remaining 18 megawatt capacity for the plant is sched- SOLAR ENERGY LEASES UTILITY SCALE WIND POWER GENERATION ON STATE TRUST LAND uled for completion in the 4th quarter of 2013 for a total of 35 megawatts. The rapid completion of the Foothills Solar Plant will increase the scheduled income to the trust by an additional $331,145. The Dry Lake Wind I (2008) and Dry Lake Wind II (2010) wind energy projects, located north of Snowflake in Navajo County, are online and generating revenue for the beneficiaries. The newest utility scale wind energy facility producing energy and income to the Trust beneficiaries is the Perrin Ranch Wind LLC project. This 99 megawatt installation lies north of Williams and west of SR 64 in Coconino County. Twenty-nine of the 64 turbines in the project are located on Trust land and generating income for the beneficiaries. Through the 50-year term of this right of way, beneficiaries will collect a minimum of $11 million in wind energy revenue in addition to rent normally earned through grazing activities. ARLINGTON VALLEY SOLAR ENERGY II On March 29, 2012 Arlington Valley Solar Energy II (AVSE II) entered a lease for the purpose of developing a photovoltaic solar energy power plant in Maricopa County. AVSE II is owned by LS Power, an independent electrical generating company with offices in New York, New Jersey, Missouri and California. AVSE II began commercial production of their first 19 megawatts of electrical power on May 1, 2013. AVSE II owns additional private property that will be used to develop the plant to its fully developed size of 127 megawatts. The power from AVSE II has been sold to San Diego Gas & Electric and will be delivered through interconnection to the Hassayampa Substation. Early completion of these 19 megawatts will result in an increase of $179,755.00 income to the Trust over the lease term. The newest addition to the wind energy portfolio is the Red Horse Wind II project west of Willcox in Cochise County. Presently under construction, this project will contain thirty-two turbines, thirty-one of which are on Trust land. Throughout the 50-year right of way commitment the ASLD will collect at least $11 million in wind energy revenue from Red Horse Wind II. As with the other three projects, existing surface lessees will remain largely unaffected. 17 MAJOR TRANSACTIONS/LEASES The City of Scottsdale purchased a total of 6,398.54 acres as part of the Arizona Pre$88,200,000 serve Initiative program. The areas included Granite Mountain, Cholla Mountain to Rawhide Wash and the Upper Sonoran Desert. FreePort McMoRan Sierrita purchased $29,640,000 8,307.24 acres on 7/24/12 for the Pima County Mine expansion and buffer. The City of Phoenix purchased 1,543.78 $24,100,000 acres on 1/30/13 for inclusion in the Phoenix Preserve. PAG Noma Master LLC purchased 35.45 acres in the City of Phoenix on 1/29/2013 $14,090,000 planned for auto sales and multi-family development. The City of Flagstaff purchased 477.8 acres $4,778,000 for the Picture Canyon Preserve on 10/30/2012. Pima County purchased 289.22 acres in the $4,350,000 City of Tucson on 4/24/2013 for a Government office complex and park. ASARCO, LLC purchased 640.65 acres on $3,790,000 11/27/2012 for their mission mine expansion. S COTTSDALE MCDOWELL S ONORAN PRESERVE Pima County purchased 1,416.14 acres on $3,780,000 12/20/2012 for inclusion in the Pima County Preserve. $1,940,000 Solar lease 03-115749 to Sun Streams, LLC for 484.87 acres. The City of Sierra Vista purchased 46.65 $1,223,000 acres on 7/3/2012 for a municipal sports field. 18 STATE TRUST LAND USES  10,290 leases and other contracts contain 9,373,220.46 surface acres.  1,097 leases and other contracts contain 899,076.04 subsurface acres. STATE TRUST LAND USES NO. OF SURFACE LEASES Rights Of Way 7,566 Grazing 1,215 Commercial 323 Commercial School Leases 21 Agricultural 338 Use Permits 654 U.S. Government 157 Homesite 1 Institutional 10 Recreational 5 SUBTOTAL (Leases) 10,290 SUBSURFACE Mineral Mineral Exploration Mineral Materials Oil & Gas SUBTOTAL (Leases) TOTAL Leases Certificate of Purchase Balance FY 2003-2013 (Millions) $1,200 $1,000 NO. OF LEASES 64 720 19 294 1,097 11,387 % OF TOTAL % OF LEASES ACREAGE ACREAGE 73.53% 135,018.24 1.44% 11.81% 8,368,301.53 89.28% 3.14% 75,359.27 0.80% 0.20% 1,142.93 0.01% 3.28% 152,417.07 1.63% 6.36% 609,806.71 6.51% 1.53% 18,277.51 0.19% 0.01% 5.63 0.00% 0.10% 12,891.56 0.14% 0.05% 0.01 0.00% 100.00% 9,373,220.46 100.00% % OF LEASES 5.83% 65.63% 1.73% 26.80% 100.00% TOTAL % OF ACREAGE ACREAGE 10,024.76 1.12% 372,329.38 41.41% 1,668.58 0.19% 515,053.32 57.29% 899,076.04 100.00% 10,272,296.50 $800 Did You Know? $600 $400  By statute, all major ASLD transactions must be substantiated by an appraisal to help protect the Trust beneficiaries. $200  The current appraisal staff includes three Certified General Real Estate appraisers with over 86 years of experience combined.  During the past year, the Appraisal Section either appraised or contracted out for appraisal over 108 assignments totaling $433,000,000 in combined land value. $0 19 Land Ownership in Arizona Legend Public Land Ownership CATEGORY Private State Trust BLM Forest Service Indian Reservation Military City or County Parks State Parks Wildlife Refuge Other Natl. Parks 20 PERCENTAGE OF STATE TRUST LAND PER COUNTY COUNTY DISTRIBUTION OF STATE TRUST LAND COUNTY 14 Apache 668,018.1 12 Cochise 1,373,593.3 Coconino 1,125,242.4 10 Acres (Millions) ACRES Gila 31,220.8 8 Graham 496,194.0 6 Greenlee 172,278.5 La Paz 255,100.3 Maricopa 625,103.9 2 Mohave 565,728.9 0 Navajo 371,866.8 Pima 846,218.2 Pinal 1,204,037.0 4 Santa Cruz Yavapai Yuma TOTAL 21 61,543.3 1,264,818.5 190,729.7 9,251,693.8 BOARD OF APPEALS B OARD MEMBERS AS OF JUNE 30, 2013 Richard Poynter, Chair Prescott Arizona Revised Statute §37-132(A)(7) requires all land sales and commercial leases be approved by the Board of Appeals, which also serves as an Administrative Review Board. An appeal from a final decision of the State Land Commissioner relating to appraisals and classifications may be taken to the Board of Appeals. Represents the Third District consisting of Mohave, Yavapai, Coconino, Apache and Navajo counties Sandra B. Kelley, Vice Chair Scottsdale Member-at-Large The State Land Department Board of Appeals consists of five board members (pictured to the left) appointed by the Governor and confirmed by the Senate for six-year terms. Three members represent the 15 counties in the State, which is divided into three districts. Two members hold positions at-large. Jolene U. Dance Phoenix Member-at-Large The Board currently meets monthly. This schedule allows the Board to address appeals of Commissioner decisions related to reclassification and appraisals, as directed by statute. All meetings were held in Phoenix this fiscal year. Norman Chappell, Phoenix Represents the Second District consisting of Maricopa, Pinal, Gila, Yuma and La Paz counties During this fiscal year, the Board approved 3 new commercial leases, 15 renewal leases, 56 rights of way sale appraisals, and 11 land sale appraisals. Vacant Tucson Represents the First District, consisting of Pima, Santa Cruz, Cochise, Graham and Greenlee counties One new appeal was filed with the Board. The appeals was withdrawn and dismissed by the Board. At the close of FY 2013, there were no appeals pending. B OARD MEMBERS, TERM EXPIRED FY 2013 Jeffrey Covill, Chair Phoenix The Commissioner and the staff of the ASLD appreciate the considerable time and effort Board of Appeals members invest in serving the Trust and the citizens of Arizona. Represents the Second District consisting of Maricopa, Pinal, Gila, Yuma and La Paz counties Sanders K. Solot Tucson Represents the First District, consisting of Pima, Santa Cruz, Cochise, Graham and Greenlee counties 22 FISCAL YEAR 2013 Total Trust Revenue FY 2003-2013 $500 $450 $400 $350 FUNDS Expendable 58,256,135.07 Commercial Prepayment 15,607,943.16 School Leases General Trust Land Management Fund Permanent TOTAL LAND DEPARTMENT 0.00 Millions $300 $250 $200 $150 $100 219,603.18 $50 5,593,949.33 $0 238,876,111.67 $318,553,742.41 Treasurer's Distribution Treasurer's Distribution GRAND TOTAL - FY 2013 $67,373,883 $385,927,625.41 23 Land Department Earnings FISCAL YEAR 2013 FY 2013 REVENUES BY BENEFICIARY STATE LAND TREASURER'S TOTAL TOTAL TRUST EXPENDABLE FORMULA EXPENDABLE PERMANENT TOTAL ACRES EARNINGS DISTRIBUTION RECEIPTS RECEIPTS RECEIPTS 8,064,796.03 49,645,195.20 62,417,775.00 112,062,970.20 228,653,031.50 340,716,001.70 174,785.52 195,461.19 70,689.00 266,150.19 168,515.24 434,665.43 124,943.87 90,188.89 209,066.00 299,254.89 1,649.88 300,904.77 80,168.11 49,411.97 11,771.00 61,182.97 3.31 61,186.28 123,254.09 190,069.71 235,446.00 425,515.71 36,722.09 462,237.80 137,906.49 1,200,477.56 380,613.00 1,581,090.56 706,033.53 2,287,124.09 51,414.34 434,299.06 881,688.00 1,315,987.06 4,971,321.63 6,287,308.69 82,559.65 133,672.24 101,606.00 235,278.24 2,901.53 238,179.77 8,839,828.09 51,938,775.82 64,308,654.00 116,247,429.82 234,540,178.71 350,787,608.53 Judicial Buildings 64,228.88 123,380.46 167,816.00 291,196.46 6,540.87 297,737.33 State Hospital 71,248.39 371,400.28 118,691.00 490,091.28 93,780.60 583,871.88 Miners' Hospital ** 95,231.28 1,613,146.16 282,856.00 1,896,002.16 396,194.23 2,292,196.39 & Reformatory 77,225.45 3,124,412.86 2,271,804.00 5,396,216.86 1,061,420.76 6,457,637.62 Penitentiaries 76,110.72 1,085,019.49 224,062.00 1,309,081.49 2,777,996.50 4,087,077.99 9,223,872.82 58,256,135.07 67,373,883.00 125,630,018.07 238,876,111.67 364,506,129.74 BENEFICIARIES Common Schools (K-12)‡ Normal Schools Agricultural & Mechanical Military Institutes School of Mines University Land Code University of Arizona (Act of 2/18/1881) School for the Deaf & Blind Subtotal Education Legislative, Executive & State Charitable, Penal, TOTAL ** ‡ Miners’ Hospital and Miners’ Hospital 1929 combined Including County Bonds 24 PERMANENT FUND  The Department deposited $239 million into the Permanent Funds in FY 2013, increasing the book value to $2,780,284,000. BENEFICIARY SHARE OF PERMANENT FUND June 30, 2013  The Permanent Funds consist of revenues earned from the sale of State Trust land or assets such as minerals or other natural products. Book Value 2,596,625,000 Market Value 3,867,443,000 Normal Schools 2,528,000 4,018,000 Agricultural & Mechanical Colleges 6,244,000 10,598,000 352,000 588,000 7,542,000 12,021,000 University Land Code 13,159,000 20,695,000 University of Arizona (Act of 2/18/1881) 41,780,000 61,113,000 School for the Deaf & Blind 3,420,000 5,587,000 Legislative, Executive, & Judicial 5,484,000 8,827,000 State Hospital 4,003,000 6,647,000 Miners’ Hospital 14,793,000 21,065,000 State Charitable, Penal, & Reformatory 76,191,000 117,597,000 8,163,000 13,154,000 2,780,284,000 4,149,353,000 Common Schools  Each beneficiary has its own Permanent Fund.  The State Treasurer manages the Permanent Funds and invests the funds in stocks, bonds and other interest bearing securities. Distributions from the Permanent Funds to the beneficiaries are based on a constitutional formula. Military Institutes Permanent Fund Book Value FY 2001-2013 School of Mines 3,000 2,500 ( millions) 2,000 1,500 1,000 500 Penitentiaries 0 TOTAL 25 EXPENDABLE REVENUE EXPENDABLE REVENUE BY BENEFICIARY FY 2013  Expendable revenue includes lease revenue from Trust land leases and permits, interest from sales contracts, and the Treasurer’s formula distribution of the Permanent Fund. LEASE AND TREASURERS'S SALES TOTAL FORMULA CONTRACT EXPENDABLE DISTRIBUTIONS INTEREST REVENUE 62,417,775.00 49,645,195.20 112,062,970.20 70,689.00 195,461.19 266,150.19 209,066.00 90,188.89 299,254.89 Military Institutes 11,771.00 49,411.97 61,182.97 School of Mines 235,446.00 190,069.71 425,515.71 $180 University Land Code 380,613.00 1,200,477.56 1,581,090.56 $160 University of Arizona $140 (Act of 2/18/1881) 881,688.00 434,299.06 1,315,987.06 101,606.00 133,672.24 235,278.24 64,308,654.00 51,938,775.82 116,247,429.82 & Judicial Buildings 167,816.00 123,380.46 291,196.46 State Hospital 118,691.00 371,400.28 490,091.28 Miners' Hospital 282,856.00 1,613,146.16 1,896,002.16 2,271,804.00 3,124,412.86 5,396,216.86 224,062.00 1,085,019.49 1,309,081.49 67,373,883.00 58,256,135.07 125,630,018.07  Expendable revenues are distributed directly to the beneficiaries.  Expendable revenue totaled $125.6 million in FY 2013.  Revenue from Trust land leases, permits, and interest earnings from sales financed through the Department totaled $58.2 million. BENEFICIARIES Common Schools  The Treasurer distributed $67.3 million according to the constitutional formula based on the five-year average net return and the Normal Schools Agriculture & Trust Expendable Earnings FY 2001-2013 Mechanical Colleges (m illions) $200 $120 School for the Deaf $100 & Blind $80 Subtotal Education $60 Legislative, Executive $40 $20 $0 Total Expendable Land Department Earnings Treasurer's Formula Distribution State Charitable, Penal & Reformatory Penitentiaries TOTAL 26 FUND AND BENEFICIARY SUMMARY In FY 2013, State Trust receipts totaled $385,927,625.41. A total of $318,553,742.41 was earned for the beneficiaries, $219,603.18 was deposited in the General Fund, $15,607,943.16 was received as commercial prepayments, and $5,593,949.33 was deposited into the Trust Land Management Fund. Of the beneficiary amount, $238,876,111.67 was deposited into the Permanent Funds. The Permanent Funds are managed by the State Treasurer. The remaining $125,630,018.07 in receipts were expendable and were distributed to the beneficiaries for use in their operations. Expendable receipts are comprised of lease revenues, interest on the outstanding sales balance, and the Treasurer’s formula distribution. The table below indicates the number of acres remaining for each grant along with a breakdown on how the expendable receipts are distributed to the beneficiaries. TRUST ACRES GRANT BENEFICIARY 1st $72.3 million of expendable receipts 8,064,796 Common Schools (K - 12) (Includes County Bonds) Receipts over $72.3 million 174,786 Normal Schools 124,944 Agricultural & Mechanical Colleges 80,168 Military Institutes 123,254 School of Mines 137,906 University Land Code Classroom Site Fund Board of Regents to Distribute to Universities 51,414 University of Arizona (Act 0f 2/18/1881) 82,560 School for the Deaf & Blind School for the Deaf & Blind 64,229 Legislative, Executive & Judicial Buildings Legislature, Executive & Judicial Branch 71,248 State Hospital State Hospital 95,231 Miners’ Hospital (2 Grants) Pioneers' Home 77,225 State Charitable, Penal, & Reformatory 76,111 Penitentiaries 9,223,873 State Aid Formula for K - 12 50% Pioneers' Home 25% Department of Corrections Department of Corrections TOTAL 27 25% Department of Juvenile Corrections FUND AND BENEFICIARY SUMMARY Common Schools (K—12)  Public education is by far the largest beneficiary of Trust land managed by the Department. Congress granted two sections of each township to common schools when Arizona became a territory and another two sections when Arizona became a state. The State was able to select federal lands equal to the sections that could not be granted due to the establishment of federal forests, parks and Indian reservations. Today, approximately 8.1 million acres remain in the Trust for common schools.  In FY 2013, $228.6 million from sales and royalties was deposited into the Permanent Fund for common schools bringing the total balance to $2,596,625,000.  In FY 2013, $112.0 million was generated in expendable receipts from leases and interest on the outstanding sales balance. According to A.R.S. § 37521 B, expendable receipts are distributed first to the School Facilities Board for revenue bonds, second to the New School Facilities Fund, if appropriated, third for basic state aid, and fourth, any receipts in excess of $72.3 million are deposited into the Classroom Site Fund, which will be used for teacher raises, classroom size reduction and dropout prevention programs.  The location of common school grant lands are shown in the above map. As a result of the large number of acres that are strategically located around urban areas, substantial revenues are expected to be generated in future years on behalf of the schools. 28 COMMON SCHOOLS ACRES AND INCOME-FY 2013 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education ACRES 110,118 18,366 7,370,830 6 91,688 521,226 0 INCOME 3,174,838.34 22,127,543.96 2,356,169.03 3,573.67 2,499,229.08 3,147,647.07 0.00 Institutional Taking U.S. Government Other TOTAL SURFACE 5,406 17,438 0 8,135,077 503,460.67 220,616.59 6,334,680.90 40,367,759.31 9,686 332,851 914 444,711 0 788,161 61,552.46 1,286,160.53 107,164.48 814,319.77 0.00 2,269,197.24 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil & Gas U.S. Government TOTAL SUBSURFACE Penalty & Interest Sales Interest School Leases Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance 625,038.43 6,383,200.22 0.00 62,417,775.00 112,062,970.20 228,653,031.50 2,596,625,000.00 Proposition 301 (passed by voters in the 2000 election) created a Classroom Site Fund whereby particular sources of funds, including revenue from the fiduciary management of State Trust land, are directed to fund items such as teacher salaries, classroom size reduction, and dropout prevention programs. According to Proposition 301, the first $72.3 million in expendable revenue for common schools can be used to fund the basic State Aid Formula, which funds education. Expendable revenue in excess of $72.3 million is deposited into the Classroom Site Fund. Classroom Site Fund FY 2003-2013 200 180 160 140 (millions) Common Schools Expendable Earnings FY 2001-2013 180 100 80 60 160 (millions) 120 40 140 20 120 0 100 80 60 40 Fiscal Year 20 COMMON SCHOOL REVENUE (Millions) 2009 2010 2011 Permanent Fund Revenue 0 Expendable Earnings Leases & Sales Interest Treasurer's Formula Distribution 29 2012 2013 138.5 91.7 109.4 155.6 228.7 Treasurer's Distribution 54.3 0 16.2 77.8 62.4 Rent & Interest 74.1 38.1 42.2 39.2 49.7 Total Expendable 128.4 38.1 59.9 117 112.1 Base Year Amount 72.30 72.30 72.30 72.30 72.3 Classroom Site Fund 101.4 0 0 44.7 39.8 FUND AND BENEFICIARY SUMMARY TOTAL UNIVERSITY ACRES AND INCOME-FY 2013 University Grants  Arizona’s three universities (Arizona State University, Northern Arizona University, and the University of Arizona) are the beneficiaries of six Trust grants.  The total expendable revenue distributed to the Board of Regents and then to the universities to fund their operations was $3.9 million in FY 2013. An additional $5.88 million was earned and added to the permanent funds for the six grants, bringing the total Permanent Fund balance to $71.6 million.  The Board of Regents distributes the expendable earnings from the six grants to the University of Arizona, Northern Arizona University and Arizona State University as follows: SURFACE LEASES ACRES INCOME Agriculture 12,985 255,925.16 51,417 691,418.20 596,175 240,054.55 Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE Board of Regents Distribution of Trust Revenues to the Universities SUBSURFACE LEASES Mineral Prospecting Permit Grant Distribution Agricultural & Mechanical Colleges 1/2 to UA and the other 1/2 split between the three universities based on engineering credit hours Military Institutes Grant Split between the three universities based on credit hours TOTAL SUBSURFACE University Land Code Split between the three universities based on credit hours Sales Interest Normal Schools 1/3 to each university UA 1881 Grants UA School of Mines Grant UA Mineral Material Oil and Gas U.S. Government Penalty & Interest 0.00 131,050.95 35,321 425,819.83 0 0.00 5,151 7,145.64 299 9,600.05 0 4,803.75 709,348 1,765,818.13 0 24,007 0.00 125,094.47 284 57,360.09 50,613 68,024.33 0 0.00 74,904 250,478.89 8,692.16 134,919.20 Treasurer's Formula Distribution 1,789,273.00 GRAND TOTAL EXPENDABLE 3,949,181.38 Permanent Fund Receipts Permanent Fund Balance 30 0 8,001 5,884,245.68 71,605,000.00 FUND AND BENEFICIARY SUMMARY University Grants Continued NORMAL SCHOOLS ACRES AND INCOME-FY 2013 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance AGRICULTURAL & MECHANICAL COLLEGES ACRES AND INCOME-FY 2013 ACRES 165 22,539 146,654 0 1,655 5,543 0 2,721 184 0 179,461 INCOME 3,694.85 22,618.69 61,038.37 0.00 3,734.05 12,911.47 0.00 0.00 9,600.05 0.00 113,597.48 0 16,935 120 2,662 0 19,717 0.00 62,857.64 10,560.09 7,193.07 0.00 80,610.80 1,252.91 0.00 70,689.00 266,150.19 168,515.24 2,528,000.00 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE ACRES 251 10,172 107,163 0 1,804 11,054 0 1,917 86 0 132,447 INCOME 3,442.45 2,050.01 41,898.39 0.00 6,910.26 18,880.15 0.00 0.00 0.00 0.00 73,181.26 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE 0 1,089 0 11,725 0 12,813 0.00 2,369.08 3,600.00 10,253.35 0.00 16,222.43 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance 31 MILITARY INSTITUTES ACRES AND INCOME-FY 2013 785.20 0.00 209,066.00 299,254.89 1,649.88 6,244,000.00 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance ACRES 0 1,677 76,749 0 270 3,486 0 0 0 0 82,181 INCOME 0 2,400.00 36,522.72 0.00 282.93 4,593.25 0.00 0.00 0.00 0.00 43,798.90 0 640 0 4,061 0 4,701 0.00 1,280.00 0.00 4,061.04 0.00 5,341.04 272.03 0.00 11,771.00 61,182.97 3.31 352,000.00 SCHOOL OF MINES ACRES AND INCOME-FY 2013 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance UNIVERSITY LAND CODE ACRES AND INCOME-FY 2013 ACRES 2,445 8,483 110,127 0 1,090 6,338 0 0 17 0 128,500 INCOME 37,919.72 11,309.53 43,203.23 0.00 3,906.39 8,186.11 0.00 0.00 0.00 0.00 104,524.98 0 2,731 0 17,835 0 20,565 0.00 55,324.28 0.00 28,936.32 0.00 84,260.60 1,284.13 0.00 235,446.00 425,515.71 36,722.09 7,542,000.00 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE UNIVERSITY OF ARIZONA - 1881 ACRES AND INCOME-FY 2013 ACRES INCOME 3,246 69,695.17 8,238 571,163.47 117,855 45,856.96 0 0.00 2,371 110,053.22 6,306 347,539.63 0 0.00 107 7,145.64 8 0.00 0 1,000.00 138,131 1,152,454.09 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE 0 2,212 0 14,331 0 16,543 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance 32 0.00 2,863.47 0.00 17,580.55 0.00 20,444.02 3,123.21 24,456.24 380,613.00 1,581,090.56 706,033.53 13,159,000.00 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE ACRES 6,879 308 37,627 0 811 2,594 0 406 4 0 48,628 INCOME 141,172.97 81,876.50 11,534.88 0.00 6,164.10 33,709.22 0.00 0.00 0.00 3,803.75 278,261.42 0 400 164 0 0 564 0.00 400.00 43,200.00 0.00 0.00 43,600.00 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE 1,974.68 110,462.96 881,688.00 1,315,987.06 Permanent Fund Receipts 4,971,321.63 Permanent Fund Balance 41,780,000.00 FUND AND BENEFICIARY SUMMARY Other Grants  The remaining six Trust beneficiaries are the School for the Deaf & Blind; the Legislative, Executive and Judicial Buildings; the State Hospital; the Pioneers’ Home; the Department of Juvenile Corrections; and the Department of Corrections. These six beneficiaries were authorized in the Enabling Act and received 100,000 acres, except for the State Charitable Grant which received 200,000 acres. A chart showing the connection between the grants and the beneficiaries is provided below.  The Pioneers’ Home received a total of $4,594,110.59 in expendable receipts in FY 2013.  The Department of Juvenile Corrections received $1,349,054.22 in expendable receipts in FY 2013.  The Department of Corrections received a total of $2,658,135.71 in expendable receipts in FY 2013. Grant Beneficiary School for Deaf & Blind ........................................ School for Deaf & Blind Legislative, Executive & Judicial Buildings .......... Legislature, Executive & Judicial Branch State Hospital ......................................................... State Hospital Miners’ Hospital (2 Grants) ................................... Pioneers’ Home State Charitable, Penal & Reformatory .................. 50% Pioneers’ Home 25% Dept. of Juvenile Corrections 25% Dept. of Corrections Penitentiary ............................................................ Dept. of Corrections Arizona State Schools for the Deaf and Blind Henry C. White was the first principal, appointed by Governor George W. P. Hunt, and classes began in October, 1912. Nineteen children with hearing loss were the first students, and classes were held in a converted residence on the campus of the University of Arizona in Tucson. Arizona Department of Juvenile Corrections Black Canyon School (BCS) operates intake and secure programming for youth. BCS houses all female youth and is located in Phoenix. (Photo courtesy of the Arizona Department of Juvenile Corrections) (Photo courtesy of the Arizona State Schools for the Deaf and Blind) 33 LEGISLATIVE, EXECUTIVE, & JUDICIAL BUILDINGS ACRES AND INCOME-FY 2013 SCHOOL FOR THE DEAF & BLIND ACRES AND INCOME-FY 2013 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance ACRES 2,638 1,453 73,180 0 800 8,220 0 1 32 0 86,323 0 2,282 0 3,130 0 5,411 INCOME 70,023.71 6,962.01 33,301.12 0.00 4,371.16 10,870.40 0.00 1,218.34 0.00 0.00 126,746.74 0.00 2,921.90 0.00 2,729.52 0.00 5,651.42 1,274.08 0.00 101,606.00 235,278.24 2,901.53 3,420,000.00 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE ACRES 1,104 5 56,366 0 1,407 4,226 0 0 92 0 63,201 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE 0 2,161 0 4,403 0 6,654 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance 34 STATE HOSPITAL ACRES AND INCOME-FY 2013 INCOME 20,662.17 25,920.00 25,331.28 0.00 11,302.06 1,573.26 0.00 0.00 0.00 0.00 84,788.77 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE 0.00 34,497.39 0.00 3,238.78 0.00 37,736.17 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE 855.52 0.00 167,816.00 291,196.46 6,540.87 5,484,000.00 ACRES 3,981 204 60,003 0 876 7,201 0 80 108 0 72,454 INCOME 105,614.27 163,842.89 28,825.46 0.00 5,852.40 7,863.45 0.00 23,496.00 0.00 1,495.00 336,989.47 60 2,255 77 0 0 2,392 16,572.00 3,264.46 11,000.00 0.00 0.00 30,836.46 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance 3,574.35 0.00 118,691.00 490,091.28 93,780.60 4,003,000.00 FUND AND BENEFICIARY SUMMARY Other Grants Continued MINERS' HOSPITAL* ACRES AND INCOME-FY 2013 STATE CHARITABLE, PENAL, & REFORMATORY ACRES AND INCOME-FY 2013 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights-of-Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE ACRES 12,866 579 73,322 0 1,564 11,000 0 1 168 0 99,501 INCOME 382,599.02 968,778.92 27,506.09 0.00 17,580.86 33,711.03 0.00 963.62 0.00 0.00 1,431,139.54 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE 119 7,264 230 6,158 0 13,771 822.83 5,973.49 20,239.91 6,157.67 0.00 33,193.90 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance 12,322.31 136,490.41 282,856.00 1,896,002.16 396,194.23 14,793,000.00 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights-of-Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE ACRES INCOME 3,898 97,893.23 2,834 1,687,469.35 62,941 30,614.14 0 0.00 1,146 38,545.82 7,953 840,751.83 0 0.00 475 76,928.50 117 0.00 0 0.00 79,366 2,772,202.87 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE 160 0 138 5,559 0 5,857 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE Permanent Fund Receipts Permanent Fund Balance *Miners’ Hospital and Miners’ 1929 combined 35 120.00 0.00 88,000.32 5,559.23 0.00 93,679.55 258,530.44 0.00 2,271,804.00 5,396,216.86 1,061,420.76 76,191,000.00 PENITENTIARY ACRES AND INCOME-FY 2013 SURFACE LEASES Agriculture Commercial Grazing Homesite Rights-of-Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE ACRES 4,717 456 66,025 0 488 14,342 0 1,778 5 0 87,811 INCOME 212,763.06 731,625.42 30,497.30 0.00 23,430.21 77,571.44 0.00 0.00 0.00 0.00 1,075,887.43 0 1,510 0 480 0 1,990 0.00 519.94 0.00 480.00 0.00 999.94 Penalty & Interest Sales Interest Treasurer's Formula Distribution GRAND TOTAL EXPENDABLE 8,132.12 0.00 224,062.00 1,309,081.49 Permanent Fund Receipts Permanent Fund Balance 2,777,996.50 8,163,000.00 Financial Schedules Receipts by Category ................................................................ 37 Rental Acreage and Receipts .................................................... 38 Treasurer’s Formula Distribution ............................................... 39 State Trust Land Acreage by Beneficiary .................................. 40 36 FINANCIAL SCHEDULES RECEIPTS BY CATEGORY SALES Common Schools (K-12)‡ Leg., Exec. & Judicial LEASE PENALTY & OTHER ROYALTY SALES INTEREST RENTAL INTEREST RECEIPTS TOTAL 12,161,689.27 216,491,342.23 6,383,200.22 42,636,956.55 625,038.43 0.00 278,298,226.70 129,921.33 1.44 6,539.43 0.00 122,524.94 855.52 0.00 93,780.60 0.00 0.00 367,825.93 3,574.35 0.00 465,180.88 Miners' Hospital* 273,535.75 122,658.48 136,490.41 1,464,333.44 12,322.31 0.00 2,009,340.39 St Char., Pen. & Ref. 193,207.61 868,213.15 0.00 2,865,882.42 258,530.44 0.00 4,185,833.62 84,185.66 2,693,810.84 0.00 1,076,887.37 8,132.12 0.00 3,863,015.99 168,515.24 0.00 0.00 194,208.28 1,252.91 0.00 363,976.43 1,649.88 0.00 0.00 89,403.69 785.20 0.00 91,838.77 3.31 0.00 0.00 49,139.94 272.03 0.00 49,415.28 36,722.09 0.00 0.00 188,785.58 1,284.13 0.00 226,791.80 State Hospital Penitentiaries Normal Schools A&M Colleges Military Institutes School of Mines University Land Code 8,913.57 697,119.96 24,456.24 1,172,898.11 3,123.21 0.00 1,906,511.09 155,078.12 4,816,243.51 110,462.96 321,861.42 1,974.68 0.00 5,405,620.69 2,901.53 0.00 0.00 132,398.16 1,274.08 0.00 136,573.77 School Leases 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Commercial Prepayments 0.00 0.00 0.00 0.00 0.00 15,607,943.16 15,607,943.16 13,180,184.07 225,695,927.60 6,654,609.83 50,683,105.83 918,419.41 15,607,943.16 312,740,189.90 97,693.00 U of A (Act of 2/18/1881) School for the Deaf & Blind TOTAL SCHOOLS & INSTITUTIONS F.E.M.A Lands 75,355.00 0.00 0.00 22,338.00 0.00 0.00 Farm Loan Lands 0.00 0.00 0.00 4,149.55 12.52 0.00 4,162.07 Navigable Streambeds 0.00 0.00 0.00 108,782.74 417.08 0.00 109,199.82 Non-Navigable Streambeds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Lands Held in Trust 0.00 0.00 0.00 8,548.29 0.00 0.00 8,548.29 Fees: Lease, Sale & Misc* 0.00 0.00 0.00 0.00 0.00 0.00 0.00 75,355.00 0.00 0.00 143,818.58 429.60 0.00 219,603.18 0.00 0.00 0.00 0.00 0.00 5,593,949.33 5,593,949.33 13,255,539.07 225,695,927.60 6,654,609.83 50,826,924.41 918,849.01 21,201,892.49 318,553,742.41 TOTAL GENERAL FUND TRUST LAND MANAGEMENT FUND TOTAL RECEIPTS *Miner's Hospital & Miners Hospital 1929 Combined ‡ Including County Bonds 37 Rental Acreage and Receipts FY 2013 By Type of Lease SURFACE LEASES Agriculture Commercial School Leases Grazing Homesite Rights of Way Use Permits Public Education Institutional Taking U.S. Government Other TOTAL SURFACE ACRES 152,417 75,359 ** 8,368,302 6 106,110 609,707 0 12,892 18,278 0 9,343,070 RECEIPTS 4,326,771.18 26,470,281.89 0.00 2,775,848.52 3,573.67 2,742,200.54 4,593,065.98 0.00 613,212.77 230,216.64 6,340,979.65 48,096,150.84 10,025 372,329 1,669 515,053 0 899,076 79,067.29 1,458,432.18 292,764.80 900,509.30 0.00 2,730,773.57 SUBSURFACE LEASES Mineral Prospecting Permit Mineral Material Oil and Gas U.S. Government TOTAL SUBSURFACE NON-LEASE REVENUES Penalty & Interest Sales Interest Royalty Land Sales Principal Rights of Way Sales Principal Settlements Commercial Prepayments Fees TOTAL NON-LEASE REVENUES 918,849.01 6,654,609.83 13,255,539.07 206,413,028.60 9,282,899.00 10,000,000.00 15,607,943.16 5,593,949.33 267,726,818.00 Grand Total 318,553,742.41 ** The acres for School Leases is part of the total for Commercial 38 TREASURER'S FORMULA DISTRIBUTION* Year Ending June 30 FY 2012 Year Ending June 30 FY 2013 Increase (Decrease) May 12, 1912 To Date 77,832,917 62,417,775 (15,415,142) 1,302,786,866 90,281 70,689 (19,592) 2,659,769 264,320 209,066 (55,254) 8,975,357 Military Institutes 15,388 11,771 (3,617) 1,236,256 School of Mines 299,966 235,446 (64,520) 1,537,768 University Land Code 479,020 380,613 (98,407) 12,009,813 1,023,757 881,688 (142,069) 24,942,751 School for the Deaf & Blind 129,625 101,606 (28,019) 4,679,457 Legislative, Executive & Judicial Buildings 216,960 167,816 (49,144) 7,586,703 State Hospital Grant 146,483 118,691 (27,792) 3,769,938 Miners' Hospital ** 350,474 282,856 (67,618) 7,499,201 2,725,732 2,271,804 (453,928) 31,480,602 347,261 224,062 (123,199) 5,094,465 83,922,184 67,373,883 (16,548,301) 1,414,258,946 Common Schools Normal Schools Agricultural & Mechanical Colleges University of Arizona (Act of 2/18/1881) State Charitable, Penal, & Reformatory Penitentiaries TOTAL *Information from the State Treasurer **Miners’ Hospital & Miners’ Hospital 1929 Com- 39 State Trust Land Acreage by Beneficiary Beneficiary FY 1978 FY 2013 8,342,469 8,064,796 Normal Schools 172,405 174,786 Agricultural & Mechanical Colleges 134,469 124,944 Military Institutes 82,945 80,168 School of Mines 132,882 123,254 University Land Code 166,354 137,906 University of Arizona (Act of 2/18/1881) 62,216 51,414 School for the Deaf & Blind 84,209 82,560 Legislative, Executive & Judicial Buildings 66,660 64,229 State Hospital 79,198 71,248 Miners' Hospital 48,648 47,545 Miners' Hospital (1929) 53,311 47,686 State Charitable, Penal & Reformatory 80,010 77,225 Penitentiaries 80,830 76,111 9,586,606 9,223,873 Common Schools (K-12)* TOTAL 40 41 1616 West Adams ● Phoenix, Arizona 85007 www.azland.gov