1. ARIZONA DEPARTMENT OF REVENUE
ECONOMIC TRENDS
Georganna Meyer
Chief Economist
Office of Economic Research & Analysis
Arizona Department of Revenue

4. Office of Economic Research & Analysis
Elaine Smith
Karen Jacobs
Darlene Teller
Karshannon Gene
Oxana Gandolph
Nick Buta

5. Ways We Reach Out and Touch You
Economic Estimates Commission – expenditure limitations (Karshannon)
Property Tax Oversight Commission – property tax levy limits, truth in taxation (Darlene)
Bonded Indebtedness – annual reporting (Darlene, Elaine)

6. Ways We Reach Out and Touch You
City payment journals/County payment journals (Elaine)
Transaction privilege tax and urban revenue sharing – distribution and forecast of distribution (Elaine, Karshannon)
Statistics – related to transaction privilege tax and individual income tax (Elaine, Karen)

7. The following slides are courtesy of Elliott D. Pollack & Company

8. United States Real Gross Domestic Product. Annual Growth 1970 - 2014
United States Real Gross Domestic Product* Annual Growth ** Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators
* Based on chained 2005 dollars.
** 2013 and 2014 are a forecast from the Blue Chip Economic Indicators, March 2013
Recession Periods 8 8 8

9. Real Disposable Personal Income Percent Change Year Ago 2000 – 2013
Real Disposable Personal Income Percent Change Year Ago 2000 – 2013* Source: The Federal Reserve Bank of St. Louis
Recession Periods
*Data through first quarter 2013

10. US Non-Farm Employment Change from Prior Month (S/A) June 2010 – April 2013 Source: Bureau Labor of Statistics 10

11. Consumer Summary: Jobs are being created at a slow rate.
Those that have jobs are spending a little more but will remain cautious.
Unemployment to remain high, but should trend lower.
Wealth levels are improving.
Will the additional uncertainty translate into reduced consumer spending? 11 11

12. Business Summary: Businesses are in better shape.
Spending on equipment to continue to grow.
Spending on plant will lag until capacity utilization goes higher…getting close.
Employment to continue to grow. 12 12

13. NATIONAL SUMMARY Consumers still restructuring
Confidence low, but spending will continue to grow
Business in good shape but not confident because of:
Low capacity utilization
Cost of Obama Care
Fiscal Cliff
Federal government, no leadership whatsoever.

14. Arizona & US Move Together (Non-farm Emp
Arizona & US Move Together (Non-farm Emp. Percent Change 1980 – June 2013)
Recession Periods 24 14

16. Job Growth 2013
YTD April 2013 vs YTD April 2012
Source: US BLS 16

17. Why are population flows slow?
Slow job growth
High unemployment
Delayed retirement
Difficulty in selling home
Difficulty in qualifying for a loan

18. Phoenix-Mesa Employment Growth (Ranking among all metro areas greater than 1,000,000) Source: Arizona State University, U.S. Bureau of Labor Statistics
Year
Rank
# MSA’s
1991 4 19
1992
1993 2
1994 1
1995 20
1996 21
1997 22
1998 23
1999 3 24
2000 9 25
Year
Rank
# MSA’s
2001 7 26
2002 5 25
2003 3
2004
2005 1
2006 27
2007 9 28
2008 24
2009
2010
2011 14
2012 6
2013*
*Year-to-date, April 2013 18 18 18 18

19. Maricopa County Population Source: U. S
Maricopa County Population Source: U.S. Bureau of Census; Arizona Department of Economic Security; University of Arizona Forecasting Project
Annual
Year Population Rate
,770
, %
, %
,509, %
,122, %
,072, %
,817, %
2020(forecast) 4,569, %
??? 24 19

20. It’s hard not to be optimistic about HOUSING

21. Total Pending Foreclosures Greater Phoenix Source: Information Market

22. Greater Phoenix Median Sales Price New and Resale Single Family Source: Cromford Report

23. Greater Phoenix Single Family Permits Source: RL Brown
Year
Permits
% chg
2004
60,872
27.6%
2005
63,570
4.4%
2006
42,423
-33.3%
2007
31,172
-26.5%
2008
12,582
-59.6%
2009
8,027
-36.2%
2010
6,822
-15.0%
2011
6,794
-0.4%
2012
11,615
71.0%
2013*
4,449
20.9%
*Data through YTD Apr v. Apr. 2012

24. Phoenix New Homes: 30.8% Resale Homes: 26.8%
Growth in Single Family Home Median Prices March 2013 / March 2012 Source: Cromford Report
Phoenix
New Homes: 30.8%
Resale Homes: 26.8%
NOTE: Resale includes normal and distressed single family home prices (MLS)

25. Percent of 25-34 Year Olds Living With Parents vs
Percent of Year Olds Living With Parents vs. Homeownership Rate, Under 35 Years Old U.S.: – Source: US Census Bureau 25

26. Retail Space Vacancy Rates Maricopa County 1985–2014* Source: CBRE**
Recession Periods
* are forecasts from GPBC
** Data prior to 1992 is from Grubb & Ellis 24 26 26

27. The rest of the presentation is courtesy of the Office of Economic Research & Analysis at the Arizona Department of Revenue.

28. June 2006

29. June 2007

30. June 2008

32. June 2009

33. June 2010

34. June 2011

40. Transaction Privilege Tax Collections with % Change

41. Transaction Privilege Tax Taxable Sales

42. Transaction Privilege Tax Taxable Sales Mix

43. Transaction Privilege Tax Taxable Sales Mix

44. TPT - % of Total Taxable Sales by Type
FY97
FY00
FY01
FY05
FY07
FY08
FY09
FY10
FY13
utilities
7.8
7.3
7.6
7.5
8.2
9.6
10.7
10.1
Communications
2.8
3.4
3.8
3.1
3.0
3.3
4.1
Restaurants & bars
8.0
8.3
8.5
8.6
9.4
10.3
Amusements
1.0
1.1
0.9
1.2
Personal prop rental
4.3
4.7
4.8
3.5
3.6
3.7
Contracting
13.0
14.9
14.8
17.2
19.4
17.9
15.4
10.6
Retail
47.4
50.1
50.3
49.7
47.6
46.8
47.9
49.0
52.1
Mining/timber sev
1.8 .7 .2
1.5
1.6
0.8
1.3
Hotel/motel
2.6
2.5
2.2
2.1
2.3
Use
4.0
5.1
5.6
5.3
6.1
6.2
All other
7.2
1.7
0.7
0.6

45. Utilities

46. Communications

48. Restaurants & Bars

49. Amusements

50. Personal Property Rentals

51. Contracting

52. Retail

53. Components of Retail Taxable Sales for FY13

54. Components of Retail Taxable Sales for FY05

55. Mining/Timber Severance

56. Hotel/Motel

57. Net Corporate Income Tax Collections with % Change

58. Net Individual Income Tax Collections with % Change

59. Federal Adjusted Gross Income in Arizona from Resident Tax Returns (Billion$)

60. Resident FAGI plus Nonresident and Part-Year Resident FAGI (Billions$)

61. Personal Income Estimates Compared to FAGI on Tax Returns (Bill$)

62. Average Federal Adjusted Gross Income (Resident)

64. Average Federal Adjusted Gross Income in Cochise County

65. Average Federal Adjusted Gross Income in Coconino County

66. Average Federal Adjusted Gross Income in Gila County

67. Average Federal Adjusted Gross Income in Greenlee County

68. Average Federal Adjusted Gross Income in La Paz County

69. Average Federal Adjusted Gross Income in Maricopa County

70. Average Federal Adjusted Gross Income in Mohave County

71. Average Federal Adjusted Gross Income in Navajo County

72. Average Federal Adjusted Gross Income in Pima County

73. Average Federal Adjusted Gross Income in Pinal County

74. Average Federal Adjusted Gross Income in Santa Cruz County

75. Average Federal Adjusted Gross Income in Yavapai County

76. Average Federal Adjusted Gross Income in Yuma County

78. Average FAGI by County, 1990 vs. 2010

79. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Apache Junction
$21,083 62
$44,704 31
Avondale
$18,857 69
$43,651 36
Benson
$24,249
$41,616 46
Bisbee
$21,576 56
$37,819 63
Buckeye
$25,698 30
$46,224 28
Bullhead City
$26,543 22
$33,094 76
Camp Verde
$20,811 64
$36,334 67
Carefree
$72,938 1
$143,321
Casa Grande
$23,214 41
$41,217 51
Cave Creek
$37,005 4
$86,026 3
Chandler
$32,830 7
$64,145

80. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Chino Valley
$20,980 63
$39,315 58
Clarkdale
$22,547 45
$44,358 33
Clifton
$22,440 47
$43,171 37
Colorado City
$12,163 80
$24,024 85
Coolidge
$21,469
$35,003 70
Cottonwood
$22,240 51
$35,736 68
Dewey Humboldt $
---
$42,128 41
Douglas
$17,827 73
$28,872 82
Duncan
$22,849 43
$40,345 54
Eagar
$26,331 27
$45,560 29
El Mirage
$14,124 79
$35,485 69

81. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Eloy
$14,480 78
$30,832 80
Flagstaff
$26,704 21
$51,246 17
Florence
$21,540 57
$44,618 32
Fountain Hills $
---
$77,149 4
Fredonia
$21,591 55
$32,303
Gila Bend
$17,795 74
$31,645 79
Gilbert
$36,957 5
$66,893
Glendale
$30,228 10
$46,737 26
Globe
$24,851
$41,679 44
Goodyear
$28,098 15
$59,614 8
Hayden
$22,379 49
$38,119 61

82. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Holbrook
$19,957 68
$36,912 65
Huachuca City
$21,459 59
$42,542 38
Jerome
$18,312 71
$34,176
Kearny
$26,207 28
$44,053 34
Kingman
$24,395
$39,855 56
Lake Havasu City
$27,035 20
$41,558 47
Litchfield Park
$45,157 3
$66,439 6
Mammoth
$23,372 40
$32,922 77
Marana
$20,555 66
$58,425 10
Maricopa $
---
$48,631 21
Mesa
$27,781 17
$46,435 27

83. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Miami
$22,154 52
$38,999 59
Nogales
$18,313 70
$33,688 75
Page
$30,201 11
$44,044 35
Parker
$22,437 48
$36,641 66
Patagonia
$22,990 42
$40,008 55
Payson/Star Valley
$22,718 44
$41,627 45
Peoria
$31,870 8
$57,194
Phoenix
$28,682 13
$48,585 22
Pima
$17,503 76
$42,247 40
Pinetop-Lakeside
$25,249 31
$47,529 25
Prescott
$28,537 14
$54,925 15

84. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Prescott Valley
$20,566 65
$37,478 64
Quartzsite
$18,288 72
$27,569 83
Queen Creek
$23,522 38
$52,612 16
Safford
$24,292 35
$41,402 49
Sahuarita $
---
$56,422 12
St. Johns
$26,347 26
$41,302 50
San Luis
$8,931 81
$19,594 86
Scottsdale/Paradise Valley
$46,789 2
$101,466
Sedona
$33,652 6
$54,990 14
Show Low
$22,474 46
$41,540 48
Sierra Vista
$29,621
$55,529 13

85. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Snowflake
$25,833 29
$40,475 53
Somerton
$14,659 77
$28,874 81
Springerville
$24,664 33
$41,738 43
Superior
$21,683 54
$38,724 60
Surprise/Sun City
$27,672 19
$48,360 23
Taylor
$26,414 25
$42,005 42
Tempe/Guadalupe
$31,090 9
$50,230 18
Thatcher
$23,664 37
$50,029
Tolleson
$21,940
$59,031
Tombstone
$20,023 67
$33,911 73
Tucson/So. Tucson/ Oro Valley
$27,888 16
$47,741 24

86. Average FAGI by City/Town, 1990 vs. 2010
1990 Avg FAGI
1990 Rank
2010 Avg FAGI
2010 Rank
Tusayan $
---
$39,690 57
Wellton
$26,541 23
$42,394 39
Wickenburg
$27,731 18
$49,987 20
Willcox
$21,093 61
$27,002 84
Williams
$21,367 60
$37,886 62
Winkelman
$23,465
$41,161 52
Winslow
$22,241 50
$33,779 74
Youngtown
$17,556 75
$34,073 72
Yuma
$26,506 24
$44,981 30

87. DISTORTIONS

89. Corporate Income Tax Changes Between 1986 and 2013
Arizona Corporate Tax Rate
1986 – mostly 10.5%
2013 – 6.968%
2017 – 4.9%
Apportionment Formula
Factor (property, payroll, sales) evenly-weighted formula
2013 – choice between double-weighted sales factor and 80% weight on sales
2017 – choice between double-weighted sales factor and 100% weight on sales

91. Individual Income Tax Changes Between 1986 and 2013
Individual income tax rates
1986 – maximum rate of 8% at $10,000 taxable income
2012 – maximum rate of 4.54% at $150,000 taxable income
Personal exemption
$2000/$4000
$2100/$4200/$6300
Standard Deduction
$3500/$7000
$4833/$9665

92. Number of Corporate and Individual Income Tax Credits

93. Net Individual Collections plus Liability Offset by Tax Credits

94. Net Corporate Collections plus Liability Offset by Tax Credits

95. TPT Reform
On June 25, 2013, Governor Brewer signed HB2111, the TPT Reform Bill. The bill includes changes to TPT taxation of contracting, audits and the collection of local taxes. It becomes effective on January 1, The Governor is holding a kick-off meeting with the stakeholders on Monday. The Department’s implementation is in progress. The process will include input from the existing non-program cities, taxpayers, special interest groups and practitioners.
Folks from the Department would be happy to come back in the future to provide a status report.

97. Thank You!