Maricopa County transportation excise tax year end report

              MARICOPA REGIONAL AREA ROAD FUND
TRANSPORTATION EXCISE TAX
FISCAL YEAR 1998
YEAR-END REPORT
PREPARED BY:
ARIZONA DEPARTMENT OF TRANSPORTATION
FINANCIAL MANAGEMENT SERVICES
OFFICE OF FINANCIAL PLANNING
AUGUST 1998
REGIONAL AREA ROAD FUND
MARICOPA TRANSPORTATION EXCISE TAX
EXECUTIVE SUMMARY
In October 1985, the voters of Maricopa County approved the Maricopa County Transportation Excise Tax in an
amount up to ten percent of the State transaction privilege tax rates. This transportation excise tax, often referred to
as the "1/2 cent sales tax", is levied upon business activities in Maricopa County, including retail sales, contracting,
utilities, rental of real and personal property, restaurant and bar receipts, and other activities. The transportation
excise tax revenues are deposited in the Maricopa County Regional Area Road Fund (RARF) which is administered
by the Arizona Department of Transportation. The revenues deposited into the RARF account are the principal
source of funding for the Regional Freeway System in Maricopa County and are dedicated by statute to the purchase
of right-of-way, design and construction of controlled access highways. The "1/2 cent sales tax" is expected to yield
$3.6 billion for the period January 1986 through December 2005.
For Fiscal Year (FY) 1998, Maricopa County transportation excise
tax collections totaled $209.3 million, an increase of 8.8 percent
over the FY 1997 revenue level. When compared to the forecast,
collections exceeded the estimate by 2.1 percent. The collections
have moderated from a high of 12.2 percent in FY 1995 and 11.3
percent in FY 1996 to 8.8 percent in FY 1998.
On a percent basis, the major business activities providing the most
growth over last year’s revenues were rental of personal property at
14.5 percent, and contracting at 13.6 percent. The retail sales and
restaurant and bar had moderated growth of 8.1 percent and 6.9
percent respectively. These growth levels were mainly attributable
to increases in employment, personal income and population.
PAGE 1
RARF COLLECTIONS
$0
$50
$100
$150
$200
$250
1997 ACT 1998 ACT 1998 EST
FISCAL YEAR
RETAIL SALES:
Retail sales collections for FY 1998 totaled $104.1 million, an
increase of 8.1 percent or $7.8 million over the FY 1997 revenue
level. Retail sales collections finished the year 0.6 percent above the
forecast. This revenue category continues to represent the largest
component of excise tax collections, contributing just under 50
percent of the total tax receipts in FY 1998. Historically, tax revenues
from retail sales have maintained positive growth. In FY 1998, the
strength of retail sales for was centered in apparel and accessory
stores, miscellaneous automotive, motorcycle and boat stores, and
motor vehicle dealers.
PERFORMANCE BY CATEGORY
Maricopa County’s retail sales collections have moderated from a high
of 13.6 percent in FY 1994 and 12.1 percent in FY 1995 to 8.1 percent
in FY 1998. This growth has been a product of strength in wage and
salary employment, population and personal income growth, and low
interest rates. The Arizona Business forecast for wage and salary
employment growth is estimated at 4.2 percent in Calendar Year (CY)
1998 and 3.6 percent in CY 1999. Although there is an expected
slowdown in employment growth compared to CY 1996 and CY 1997,
retail sales growth is expected to be above average in the foreseeable
future..
PAGE 2
WAGE & SALARY EMPLOYMENT
MARICOPA COUNTY
0 . 0 0 %
2 . 0 0 %
4 . 0 0 %
6 . 0 0 %
8 . 0 0 %
1 0 . 0 0 %
CY
92
ACT
CY
93
ACT
CY
94
ACT
CY
95
ACT
CY
96
ACT
CY
97
ACT
CY
98
EST
CY
99
EST
RETAIL SALES
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
Source: Greater Phoenix Blue Chip Economic Forecast, April 1998
UNEMPLOYMENT RATE MARICOPA COUNTY
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
CY92
ACT
CY93
ACT
CY94
ACT
CY95
ACT
CY96
ACT
CY97
ACT
CY98
EST
CY99
EST
PERSONAL INCOME
MARICOPA COUNTY
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
CY92
ACT
CY93
ACT
CY94
ACT
CY95
ACT
CY96
EST
CY97
EST
CY98
EST
CY99
EST
CONTRACTING:
In FY 1998, contracting collections totaled $30.6 million. This
represented a 13.6 percent increase over the FY 1997 revenue level. The
much anticipated construction slowdown never materialized due to
continued strength in the single family housing and commercial sector.
When compared to the forecast, contracting collections surpassed the
estimate by 3.4 percent in FY 1998. This revenue category is the second
largest of the excise tax collection categories and has posted growth rates
over ten percent in each year of the last six fiscal years.
RETAIL SALES: Continued
Personal income growth in Maricopa County in CY 1997 was estimated at 7.9 percent, compared to 8.7 percent for
CY 1996. The projected growth in personal income is estimated at 7.2 percent and 6.7 percent in CY 1998 and CY
1999, respectively. The unemployment rate has steadily decreased in Maricopa County to 2.9 percent in CY 1997
from 6.4 percent in CY 1992. However, the estimated unemployment rates for Maricopa County in CY 1998 and
CY 1999 are expected to move slightly upward to 3.6 percent and 3.9 percent, respectively. The Blue Chip
Economic Forecast estimates retail sales in Maricopa County will increase by 6.0 percent in CY 1998 and 5.6
percent in CY 1999.
PAGE 3
CONTRACTING
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
Source: Greater Phoenix Blue Chip Economic Forecast, April 1998 Source: Greater Phoenix Blue Chip Economic Forecast, April 1998
MULTI-FAMILY HOUSING PERMITS
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
CY92
ACT
CY93
ACT
CY94
ACT
CY95
ACT
CY96
ACT
CY97
ACT
CY98
EST
CY99
EST
SINGLE FAMILY HOUSING PERMITS
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
CY92
ACT
CY93
ACT
CY94
ACT
CY95
ACT
CY96
ACT
CY97
ACT
CY98
EST
CY99
EST
CONTRACTING: Continued
Maricopa County single family housing permits increased by 3.5 percent in CY 1997, compared to 5.0 percent in
CY 1996. The forecast for CY 1998 and 1999 shows decreases of 6.8 and 8.6 percent, respectively. Construction
activity in the multi-family sector saw a 7.1 percent decrease in CY 1997 from the CY 1996 level. In CY 1996, the
multi-family category increased by 6.8 percent. The multi-family housing sector is expected to decrease by 17.6
percent in CY 1998 and 3.1 percent in CY 1999. Vacancy rates are expected to increase moderately in CY 1998
and 1999.
PAGE 4
In FY 1998, the contracting sector benefited from lower interest rates, population growth, and high consumer
confidence. Interest rates dropped slightly during the first quarter of FY 1998, and continued downward in the
second quarter and stayed level for the last two quarters. In March 1998, the interest rate for a conventional 30 year
fixed rate mortgage was 6.8 percent, compared to 7.8 percent in March 1997. The Federal Reserve increased the
discount rate by 25 basis points in March 1997, but monetary policy change did not impact contracting in Maricopa
County during FY 1998.
Source: Greater Phoenix Blue Chip Economic Forecast, April 1998 Source: Greater Phoenix Blue Chip Economic Forecast, April 1998
CONSTRUCTION EMPLOYMENT
MARICOPA COUNTY
0
20
40
60
80
100
CY 92
ACT
CY 93
ACT
CY 94
ACT
CY 95
ACT
CY 96
ACT
CY 97
ACT
CY 98
EST
CY 99
EST
MORTGAGE INTEREST RATES
MARICOPA COUNTY
4
6
8
10
12
MAR
90
MAR
91
MAR
92
MAR
93
MAR
94
MAR
95
MAR
96
MAR
97
MAR
98
The construction employment sector continues to see growth as a result of increased housing and commercial real
estate construction. Total construction employment reached 92,000 in CY 1997, compared to 89,000 in CY 1996.
The forecast for construction employment shows a slight decrease with figures reaching 91,000 in CY 1998 to
87,000 in CY 1999. The decrease is due to slower rates of population and employment growth anticipated for 1998
and 1999. With the decline in the single-family and multi-family housing categories during CY 1998 and 1999,
growth in construction employment will be limited to the commercial and industrial construction sectors.
CONTRACTING: Continued
PAGE 5
SOURCE: ARIZONA BUSINESS - MAY ISSUES
UTILITIES:
Utility tax receipts totaled $15.1 million in FY 1998, compared to
$14.6 million for the FY 1997. This amounts to a 3.5 percent increase
over the FY 1997 receipts level. Utility tax revenues finished 2.4
percent below the estimate in FY 1998. The relatively mild
temperatures from El Nino contributed to the lower than estimated
utility tax collections during FY 1998.
UTILITIES
-5.00%
0.00%
5.00%
10.00%
15.00%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
Source: Greater Phoenix Blue Chip Economic Forecast, April 1998
PASSENGER AIR ARRIVALS
SKY HARBOR INTERNATIONAL AIRPORT
0
4
8
12
16
20
FY 92 ACT FY 93 ACT FY 94 ACT FY 95 ACT FY 96 ACT FY 97 ACT FY 98 EST
RESTAURANT AND BAR:
Another factor reflecting the increase in restaurant and
bar revenues is the steady growth of passenger air arrivals
at Sky Harbor International Airport. In FY 1998, the
number of air arrivals at Sky Harbor International Airport
increased 1.2 percent over FY 1997 level. The increase in
air arrivals during FY 1998 is mainly attributable to
increased business travel and tourism. The growth in air
arrivals for FY 1999 is estimated to be between 1 and 3
percent over the FY 1998 level. Tourism is expected to
continue to be an important factor for Maricopa County
due to the climate, the positive exposure associated with
major sporting events, and the attractive tourist locations
in Maricopa County and the State. The strong national
economy has also attributed to increased tourism to
Maricopa County.
Restaurant and bar receipts increased to $16.9 million in FY 1998,
compared to $15.8 million in FY 1997. This amounts to a 6.9
percent increase over the FY 1997 revenue level. When compared
to the forecast, restaurant and bar collections were 1.9 percent
below the estimate. The increase in restaurant and bar receipts was
a result of increased Maricopa County personal income, population
and tourism. The sharp percentage increase in FY 1996 was partly
due to increased tourism as a result of the Super Bowl, and the
college football national championship game.
PAGE 6
SOURCE: CITY OF PHOENIX, AVIATION DEPARTMENT
RESTAURANT & BAR
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
RENTAL OF PERSONAL PROPERTY:
In FY 1998, the rental of personal property collections amounted to $11.5
million, an increase of 14.5 percent over the FY 1997 level. Rental of personal
property collections were 13.1 percent above the estimate in FY 1998. This
growth can be attributed to continued consumer and business demand for leased
cars and other durable goods. In addition, growth in population and tourism have
also played an important role.
OTHER:
"Other" revenues for FY 1998 reached $11.5 million, a strong increase of 11.9
percent over the FY 1997 total. When compared to the forecast, "other" revenues
were 4.3 percent above the estimate. The "other" revenue category includes
amusements, communications, publishing and printing, advertising,
transportation and towing, pipelines for oil and gas, private cars, and mining.
These items are influenced by the overall level of business activity in the Valley.
Historically, this category has maintained strong growth on a year-to-year basis
primarily due to the diversity of the components of this category.
RENTAL OF REAL PROPERTY:
Rental of real property revenues totaled $19.6 million in FY 1998, compared to
$18.3 million in FY 1997. This amounts to an 6.9 percent increase over the FY
1997 total. When compared to the forecast, rental of real property receipts
exceeded the estimate by 5.7 percent. It should be noted that the sharp increase
in 1989 was due to a change in the rental of real property tax. The growth in
recent years can be attributed to increased population and tourism.
PAGE 7
OTHER
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
RENTAL OF PERSONAL PROPERTY
0.0%
5.0%
10.0%
15.0%
20.0%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
RENTAL OF REAL PROPERTY
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
REVENUE TREND ANALYSIS
In FY 1998, transportation excise tax collections reached $209.3 million, compared to $192.3 million in FY 1997.
All revenue categories showed increases over last year’s revenue levels. Strong personal income and population
growth, lower interest rates, increased single-family and multi-family construction activity, and increased tourism
are some of the factors that have affected the revenue growth in recent years. The Maricopa County economy
continues to become more diversified with strong growth in high technology and financial jobs.
On a monthly basis, RARF revenues continue to follow consistent trends as in previous years with sharp increases
in revenues in the month of January due to Christmas retail sales.
PAGE 8
ANNUAL RARF REVENUE TRENDS
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
MONTHLY RARF REVENUE TREND
10
12
14
16
18
20
22
24
JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN
FY 1998 Actuals FY 1997 Actuals
REVENUE COMPOSITION COMPARISON
Retail sales is the most important
component of the excise tax collections,
generating just under 50 percent of total
revenues. This revenue category has
consistently tracked around 50 percent
since the inception of the excise tax in
FY 1986. The second largest category is
contracting, representing 14.6 percent of
total RARF collections. In FY 1998,
rental of personal property and the
“other” category showed slight increases
in percentage of total revenues, while the
remaining revenue categories all showed
slight decreases.
PAGE 9
RETAIL SALES
46.0%
47.0%
48.0%
49.0%
50.0%
51.0%
52.0%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
CONTRACTING
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
UTILITIES
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
RESTAURANT & BAR
7.6%
7.8%
8.0%
8.2%
8.4%
8.6%
8.8%
9.0%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
RENTAL OF REAL PROPERTY
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
RENTAL OF PERSONAL PROPERTY
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
OTHER
4.60%
4.80%
5.00%
5.20%
5.40%
5.60%
5.80%
86 87 88 89 90 91 92 93 94 95 96 97 98
FISCAL YEAR
REVENUE PERFORMANCE
MARICOPA COUNTY TRANSPORTATION EXCISE TAX
FY 1998 ACTUAL
RETAIL SALES
$104.1M
49.8%
CONTRACTING
$30.6M
14.6%
UTILITIES
$15.1M
7.2%
RESTAURANT
& BAR
$16.9M
8.1%
RENTAL OF
REAL PROPERTY
$19.6M
9.3%
RENTAL OF
PERSONAL
PROPERTY
$11.5M
5.5%
OTHER
$11.5M
5.5%
TOTAL= $209.3 MILLION
PAGE 10
USES
REGIONAL FREEWAY
SYSTEM
$202.4 M
96.7%
REGIONAL PUBLIC
TRANSIT SYSTEM
$6.9 M
3.3%
SOURCES
MARICOPA COUNTY REGIONAL AREA ROAD FUND
TRANSPORTATION EXCISE TAX
REVENUE COMPARISON STATEMENT
FY 1998
NOTE: DIVISION OF COLLECTIONS TO BUSINESS CATEGORIES IS IMPUTED BASED UPON REPORTED TAXABLE INCOME.
PAGE 11
FY 1997 FY 1998 FY 1998
CATEGORY ACTUAL ACTUAL CHANGE ESTIMATE CHANGE
RETAIL SALES $96,281,460 $104,072,752 8.1% $103,500,000 0.6%
CONTRACTING 26,947,785 30,610,453 13.6% 29,600,000 3.4%
UTILITIES 14,583,395 15,100,775 3.5% 15,470,000 -2.4%
RESTAURANT & BAR 15,820,990 16,916,822 6.9% 16,600,000 1.9%
RENTAL OF REAL PROPERTY 18,298,162 19,551,645 6.9% 18,500,000 5.7%
RENTAL OF PERSONAL PROPERTY 10,073,759 11,539,117 14.5% 10,200,000 13.1%
OTHER 10,251,945 11,471,893 11.9% 11,000,000 4.3%
TOTAL $192,257,496 $209,263,457 8.8% $204,870,000 2.1%
MARICOPA COUNTY REGIONAL AREA ROAD FUND
TRANSPORTATION EXCISE TAX
REVENUES COLLECTED BY CATEGORY
FY 1986 - 1998
(Dollars in Thousands)
PAGE 12
RENTAL RENTAL
FISCAL RETAIL RESTAURANT REAL PERSONAL PERCENT
YEAR SALES CONTRACTING UTILITIES & BAR PROPERTY PROPERTY OTHER TOTAL CHANGE
1986 * $19,244 $5,716 $3,073 $3,682 $1,923 $1,733 $1,615 $36,986
1987 48,085 14,849 8,542 7,579 6,822 4,172 4,782 94,831
1988 51,405 14,188 9,535 8,379 5,994 4,728 4,961 99,190 4.6%
1989 53,927 13,947 10,336 8,795 8,952 4,883 5,410 106,250 7.1%
1990 55,798 13,286 10,685 9,282 10,808 5,289 5,653 110,801 4.3%
1991 56,769 12,715 11,353 9,655 11,091 5,708 6,044 113,335 2.3%
1992 59,108 11,688 10,999 10,280 11,707 6,043 6,671 116,496 2.8%
1993 64,033 13,385 11,874 11,171 12,993 6,672 7,145 127,273 9.3%
1994 72,737 17,039 12,680 12,166 13,414 7,002 7,808 142,846 12.2%
1995 81,546 21,107 13,132 13,291 14,660 8,198 8,384 160,318 12.2%
1996 90,454 24,284 14,198 14,739 16,822 8,734 9,183 178,413 11.3%
1997 96,281 26,948 14,583 15,821 18,298 10,074 10,252 192,257 7.8%
1998 104,073 30,610 15,101 16,917 19,552 11,539 11,472 209,263 8.8%
TOTAL $749,387 $189,152 $130,990 $124,840 $133,484 $73,236 $77,908 $1,478,996
AVERAGE ANNUAL GROWTH (FY 1987 - FY 1998) = 7.5%
*The tax became effective January 1, 1986
ARIZONA TRANSACTION PRIVILEGE TAX
EXCISE TAX RATES
FY 1998
PAGE 13
* In 1990 and 1993, legislation reduced the transaction privilege tax rate for real property rentals, however, for transportation excise
tax purposes, the rate was retained at its prior level.
** In 1994, legislation repealed the transaction privilege tax for livestock and poultry feed, salts, vitamins and other additives for
livestock and poultry. The tax rate was reduced to zero on July 17, 1994 and then the tax classification was repealed on
October 1, 1994.
Percent of Total
Maricopa County Transaction
Transaction Privilege Privilege Transportation
Taxable Activity Tax Collections Tax Rate Excise Tax Rate
Retail Sales 49.74% 5.00% 0.50%
Contracting 14.63% 5.00% 0.50%
Rental of Real Property 9.34% 1.82%* 0.512%
(including hotels & motels)
Utilities 7.22% 5.00% 0.50%
Restaurants and Bars 8.08% 5.00% 0.50%
Rental of Personal Property 5.51% 5.00% 0.50%
Communication 3.20% 5.00% 0.50%
Publishing and Printing 0.96% 5.00% 0.50%
Amusements 1.19% 5.00% 0.50%
Other 0.13% 5.00% 0.50%
Mining 0.00% 3.125% 0.3125%
Wholesale Feed 0.00% 0%** 0.00%
RETAIL SALES Includes retail sales of automobiles, durable goods and other general merchandise,
apparel, building materials, furniture and other tangible personal property. The
tax on food was repealed in July, 1980.
CONTRACTING Includes prime contracting and dealership of manufactured buildings and
owner-builder operations.
UTILITIES Includes producing and/or furnishing to consumers electricity, natural or
artificial gas and water.
RESTAURANT
AND BAR Includes operations of restaurants and drinking establishments.
RENTAL OF
REAL PROPERTY Includes leasing or renting real property, hotels and motels.
RENTAL OF
PERSONAL
PROPERTY Includes leasing or renting tangible personal property.
OTHER Includes operations of amusement places, intrastate telecommunication services,
publication of a directory of subscribers, job printing, engraving, embossing
and publication, publication of newspapers, magazines and other periodicals,
intrastate transportation of persons, freight or property, intrastate operation of
pipelines for oil or natural or artificial gas, and intrastate operation of private
car lines.
REVENUE CATEGORY DEFINITIONS
PAGE 14