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The Town of Superior was just informed that its HURF funds would be withheld.
Don Jones, Town of Mammoth Mayor
Copper Area News
Charges by the Arizona Office of Auditor General (OAG) that the towns of Superior and Mammoth misdirected funds targeted for road, bridge and transportation projects to other municipal uses could soon result in the state withholding further highway funds to both communities. Without such funding, local construction and maintenance of streets and bridges could grind to a halt.
Both towns, plagued by declining populations and tax bases, reportedly loaned these highway funds to cover shortfalls in the budgets of other municipal projects. But because of the economic downturn in late 2008 the two towns were unable to immediately pay the monies back into the highway fund.
OAG uncovered the loans in a 2011 audit, declared them outside the scope set by Arizona law, and has ordered the towns to restore the redirected funds. But due to continued revenue shortfalls, Superior and Mammoth have been unable to restore these funds, prompting OAG to ask the Arizona Treasurer’s Office to suspend sending further highway funds, which are derived from state and local taxes, until the lost monies are repaid.
For Superior, the loss of highway funding would put an $18,000 per month hole in the town budget.
With such funds, Superior maintains 46 miles of road and Mammoth 36 miles of road in Pinal County (out of 4,229 miles total).
Part of the highway targeted funds comes from a 0.5-cent addition to the local sales tax, which under Arizona statutes can be authorized by voters in individual counties to provide additional funding for road, bridge and transportation projects. Pinal County voters approved this tax increase in 1986 and again in 2005. The current increase is in place until December 31, 2026.
Additional revenues for road projects come from the Highway User Revenue Fund (HURF) are derived from transportation taxes and fees, such as the motor fuel taxes, and the title, registration and driver licenses fees. These are distributed by the Arizona Treasurer’s Office to all counties based on population.
But the statute (28-6392) limits the use of transportation excise tax revenues and HURF funds to street and highways purposes and for transportation projects. These can include right-of-way acquisitions, and the construction, reconstruction, maintenance and repair of roads, streets and bridges; and for roadside development. Excise revenues also can be used to pay principal and interest on highway and street bonds and personal costs, including salaries and benefits for employees working directly or indirectly on transportation projects.
To assure that these revenues are spent properly, auditors regularly review financial statements and a sample of excise tax expenditures from Pinal County’s 10 incorporated municipalities.
During a 2011 audit, OAG found most excise tax monies in Pinal County were used for authorized purposes. However, it was determined that the towns of Superior, Mammoth and Kearny has inappropriately loaned excise tax and/or HURF monies to other municipal funds and were ordered to repay them.
Kearny, which had in fiscal 2006 loaned $207,000 to maintain ongoing operations of its Utilities Fund, has since repaid these funds. However, Superior and Mammoth have not repaid loans to other agencies within its government.
According to the 2011 audit, Superior owed $1.5 million to the various highway funds which it had used to pay for excess grant expenditures that it made over grant reimbursement monies it received. This sum has since grown to $2.6 million, though the exact amount is uncertain as Superior has yet to complete annual financial statements for 2009 and 2010, OAG said.
Mammoth likewise was cited by OAG in 2011 of owing $389,000 on highway-targeted funds the town loaned itself to cover cash deficits in its general and grant funds. The owed amount has since grown to $646,795, OAG said.
Both Superior and Mammoth struck deals to repay the inappropriately used highway funds on monthly installments. Mammoth agreed to repay at $500 a month, while Superior offered to repay at the rate of $100 a month.
But both towns have fallen behind in these payments.
The latest OAG report said Superior has not made a repayment since September 2013. Interim Town Manager Margaret Gaston said that Superior has had significant financial issues that has not allowed it to make such payments.
Mammoth Town Manager Patsy Large reportedly told OAG that the town doesn’t have monies specifically dedicated to repayment.
The extent of both town’s adherence to the law on highway fund usage since 2011 also is not known as neither town has completed its annual financial statements to OAG from 2011 to 2014.
Both towns were warned that they could be cut off from further excise tax and HURF funds in a letter sent September 29 by Dale Chapman, director of the OAG Performance Audit Division.
For Superior, the other shoe dropped on Nov. 26 when John S. Halikowski, director of ADOT, sent a letter to the Arizona Treasurer notifying the office to withhold transportation excise tax revenue to the town for inappropriately spending earlier revenues.
On hearing of the ADOT letter, Gaston called the whole situation “a complicated issue. The town currently cannot justify how the highway revenues were spent until we complete those back financial statements. Only then can we prove if the funds were spent right or wrong.”
As for paying back $2.6 million, Gaston added that Superior currently has significant revenue issues and cannot pay such an amount at this time. However the sum could be changed once the financial statements are finished and accepted by OAG.
If Superior is denied highways funds from the excise tax and HURF, it will lose $18,000 a month for road improvement and other projects.
It is not known if a similar letter was sent to Mammoth. The town is still getting settled after recent recall elections and neither new mayor Don Jones or Town Manager Patsy Large were available for comment.
James J. Hodl is a career journalist who has worked for newspapers, magazines and trade journals. A graduate of Southern Illinois University with a Bachelor of Science degree in Journalism, Hodl began his career as a reporter with the Palatine (IL) Herald and the Morton Grove (IL) Review before becoming editor of the trade publication Appliance Service News. In recent years, Hodl has had articles published in Consumers Digest, Good Housekeeping, Home Remodeling, Kitchens & Baths and Salute; and has contributed to trade publications serving the home furnishings, restaurant and casino markets. A native of Chicago, Hodl relocated to San Tan Valley in 2013.
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