Mammoth, Superior “Inappropriately” Loaned, Used Excise Tax Monies

The Arizona Auditor General’s office has found that the towns of Mammoth and Superior inappropriately loaned and used excise tax monies. According to the Auditor General, transportation excise tax money is statutorily restricted to street and highway purposes or transportation projects.

The Auditor General’s office recommends both towns “should take steps to repay any inappropriately loaned or used excise tax monies and ensure excise tax monies are used only for street and highway purposes or transportation projects in the future.”

The Auditor General’s notes in the Performance Audit of the Pinal County Transportation Excise Tax, transmitted to the Governor on June 28, 2016, that Pinal County residents authorized the current transportation excise tax in 2005. During fiscal years 2011 through 2015, the audit period, the excise tax generated $67.5 million for Pinal County and its ten incorporated cities and towns.

The Auditor General found that Pinal County and most of its cities and towns spent excise tax monies appropriately during fiscal years 2011 through 2015. “In addition, the County and most cities and towns were able to demonstrate the impact of their use of excise tax monies. However, the Towns of Mammoth and Superior should improve their planning processes to help identify and prioritize projects and develop and implement policies and procedures detailing appropriate recordkeeping to help them demonstrate the excise tax monies’ impact in addressing transportation issues,” reads the report in part.

Excise tax recipients, distributions, population, and lane miles maintained 2011 through 2015 through 2015

¹Apache Junction and Queen Creek are located in both Maricopa and Pinal Counties. The lane miles listed in this table are for Pinal County only.

Report highlights:

The Towns of Mammoth and Superior inappropriately loaned excise tax or Road Fund monies to other funds during the audit period. As of June 30, 2013, the Town of Mammoth had an outstanding loan balance of more than $1.1 million, and as of June 30, 2013, the Town of Superior had an outstanding loan balance of more than $2.7 million. Both Towns loaned monies to cover cash deficits in other funds. As of this audit, it is unknown whether Mammoth’s or Superior’s loan balance has increased or decreased because they have not yet completed their financial audits for fiscal years 2014 and 2015. Similar issues were identified in the previous audit.

During fiscal year 2016, as recommended in the previous audit, the Town of Mammoth began making regular payments of $500 per month to repay its loan. The Town of Superior has not implemented a repayment plan.

In addition to inappropriate loans, the Towns of Mammoth and Superior recorded excise tax expenditures for purposes other than streets and highways or transportation projects.

For example, the Town of Mammoth recorded an expenditure of $15,254 for a water tank in its Road Fund. However, the water tank expenditure should have been recorded in the Water Fund.

Recommendations

••Mammoth should continue to repay its inappropriately loaned excise tax monies and Superior should implement a plan to repay its inappropriately loaned excise tax monies.

••If necessary, after our 6- and 18-month followups, the State should withhold excise tax monies from Mammoth if it does not continue to repay its loans.

••Mammoth and Superior should examine excise tax expenditures recorded during fiscal years 2011 through 2015 to identify inappropriately spent monies. The Towns should repay any inappropriate expenditures.

••Mammoth and Superior should develop and implement policies and procedures governing the use of excise tax monies and train personnel on them.

During the audit period, Pinal County used its excise tax revenues to improve congestion, driver safety, pollution, and road conditions. For example, the County is working on a project to widen 9.6 miles of Hunt Highway, the main
thoroughfare connecting northern Pinal County and the Metropolitan Phoenix Southeast Valley. The project is being completed in five phases with the final phase expected to be complete in June 2019.

Most cities and towns can also demonstrate the impact of their use of excise tax monies, using excise tax monies for road maintenance, new road construction, dust abatement, and equipment to maintain and repair roads. For example, the City of Apache Junction completed an overlay and drainage project in its Superstition Villa subdivision.

Two towns can improve planning and recordkeeping procedures—The Towns of Mammoth and Superior can improve their planning and recordkeeping by implementing procedures similar to those used in other cities and towns. For example, the Town of Mammoth should consider completing a study to evaluate its road systems similar to one completed by the City of Apache Junction. The Town of Superior is in the process of completing a similar study.

Also, the Towns of Mammoth and Superior should develop and implement a formalized planning process to prioritize transportation projects and create project lists. The process should consider transportation studies, town needs, public works analysis, and public concerns.

Finally, the Towns of Mammoth and Superior should document recordkeeping policies to help them demonstrate the impact of transportation excise tax revenues in addressing transportation issues.

Recommendations

••The Town of Mammoth should consider conducting a transportation study to evaluate its road systems.

••The Towns of Mammoth and Superior should develop and implement a planning process to help identify and prioritize projects and implement policies and procedures detailing appropriate recordkeeping for the use of Road Fund monies.