AGENDA RENO-TAHOE AIRPORT AUTHORITY FINANCE & BUSINESS DEVELOPMENT COMMITTEE MEETING

Transcription

1 BOARD OF TRUSTEES PRESIDENT/CEO Nat Carasali, Chair Marily M. Mora, A.A.E. *** Andy Wirth, Vice Chair EXECUTIVE VICE PRESIDENT/COO ** Rick Murdock, Secretary Dean E. Schultz, A.A.E. * Dr. Kosta Arger, Treasurer GENERAL COUNSEL Bill Eck Ann Morgan, Fennemore Craig Jones Vargas Jerry Hall CLERK OF THE BOARD *** Steve Katzmann Claire Johnson **** Bob Larkin **** Adam Mayberry * Chair of Finance and Business Development Committee ** Vice Chair of Finance & Business Development Committee *** Member of Finance and Business Development Committee **** Alternate on Finance and Business Development Committee AGENDA RENO-TAHOE AIRPORT AUTHORITY FINANCE & BUSINESS DEVELOPMENT COMMITTEE MEETING DATE & TIME: Tuesday, December 9, :00 a.m. LOCATION: Reno-Tahoe International Airport Administrative Offices, Conference Rooms A/B Reno, Nevada AGENDA: I. Approval of meeting minutes from November 18, 2014 II. Public Comment (limited to 3 minutes) III. Items to be presented to the Finance and Business Development Committee for review and recommendation to the Board: A. Authorization for the President/CEO to Negotiate and Execute a Five-Year Nonexclusive Advertising Program Concession License for Advertising Services with Clear Channel Airports IV. Items presented to the Finance & Business Development Committee for approval: A. Acceptance of the Comprehensive Annual Financial Report V. Items presented to the Finance & Business Development Committee for discussion: A. RTAA Land Development Update VI. Items presented to the Finance & Business Development Committee for information: A. Review of Operating Results through October 2014 B. Review of Budget Transfers (if any) C. Review of Contracts and Professional Service Agreements through November 2014 D. Review of Legal Expenses through October 2014 E. Review of Board Budget through October 2014 F. Review of Legislative Consultants Budget through October 2014

2 Reno-Tahoe Airport Authority December 9, 2014 Finance & Business Development Committee Page 2 VII. General member comments, questions and items for future Committee meetings VIII. Public Comment (limited to 3 minutes) IX. Adjournment Items will not necessarily be considered in the sequence listed. This meeting may be continued if all of the items are not covered in the time allowed. If the meeting is to be continued, the time and place will be announced at the end of the portion of the meeting to be continued. Supporting Material: The designated contact to obtain supporting material is Claire Johnson, Clerk of the Board, P.O. Box 12490, Reno, NV, or Supporting material is also available at the Reno-Tahoe Airport (Administrative Offices) and at the scheduled meeting. Members of the public who are disabled and require special accommodations or assistance at the meeting are requested to notify the Clerk of the Board in writing at P.O. Box 12490, Reno, Nevada or by calling (775) prior to the meeting date. THIS NOTICE HAS BEEN POSTED AT THE FOLLOWING LOCATIONS: 1. Airport Authority Administrative Offices 2001 E. Plumb Lane, Reno 3. Reno City Hall One East First Street, Reno 2. Washoe County Administrative Offices 1001 E. 9th Street, Reno 4. Sparks City Hall 431 Prater Way, Sparks

3 *** These draft minutes have not yet been approved and are subject to revision at the next regularly scheduled meeting. *** In Attendance: RENO-TAHOE AIRPORT AUTHORITY BOARD OF TRUSTEES FINANCE AND BUSINESS DEVELOPMENT COMMITTEE Minutes from the Meeting November 18, :00 a.m. Dr. Kosta Arger, Trustee* Steve Katzmann, Trustee* Rick Murdock, Trustee* Adam Mayberry, Trustee* Bob Larkin, Trustee* Jerry Hall, Trustee Bill Eck, Trustee Marily Mora, President/CEO Ann Morgan, Fennemore Craig Jones Vargas Rick Gorman, Chief Financial Officer James McCluskie, Vice President of Planning, Engineering & Environmental Management Leah Williams, Manager of Accounting Tony Osendorf, Manager of Budget & Finance Laurie Weeks, Manager of Concessions Joyce Humphrey, Manager of Purchasing & Materials Dave Lazo, Manager of Engineering & Construction Dan Bartholomew, Manager of Planning/GIS Patrick North, Senior Internal Auditor David Pittman, Director of Facilities & Maintenance Paula Murphy, Internal Auditor Chrissy Gonzales, Project Technician * Denotes Finance Committee member TOPICS DISCUSSED: I. REVIEW OF MEETING MINUTES FROM SEPTEMBER 9, 2014 A motion was made by Trustee Katzmann, Seconded by Trustee Murdock, and the Committee unanimously approved the minutes from the September 9, 2014 Finance and Business Development Committee meeting. II. PUBLIC COMMENT None Page 1 of 6

4 III. ITEMS TO BE PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT COMMITTEE FOR REVIEW AND RECOMMENDATION TO THE BOARD: A. #14(11)-56 AUTHORIZATION TO AMEND THE PRESIDENT/CEO AUTHORITY TO ENTER INTO CONTRACTS FOR THE DESIGN AND CONSTRUCTION OF THE FEDERAL INSPECTION SERVICES (FIS) FACILITY IMPROVEMENTS, EXEMPT FROM COMPETITIVE BIDDING PURSUANT TO NRS (EMERGENCY CONTRACTS), FROM AN AMOUNT NOT TO EXCEED $631,000 TO $3,750,000, WHICH SUM INCLUDES EQUIPMENT REQUIRED TO FACILITATE INTERNATIONAL AIR SERVICE OPERATIONS Staff gave a presentation requesting authorization to amend the President/CEO Authority to enter into contracts for the design and construction of the Federal Inspection Services (FIS) Facility Improvements, exempt from competitive bidding pursuant to NRS (Emergency Contracts), from an amount not to exceed $631,000 to $3,750,000, which sum includes equipment required to facilitate international air service operations. Trustee Arger inquired about the weapons cleaning and storage room, and its use by Customs and Border Protection (CBP). Staff stated that the weapons cleaning and storage room is required by the 2012 CBP technical standards, which requires all officers to be able to maintain and store their weapons in a secure safe. Trustee Arger also asked if the Reno-Tahoe Airport Authority (RTAA) is required to have a weapons cleaning and storage room. Staff stated a weapons cleaning and storage room is provided to the Airport Police. Trustee Katzmann asked whether the Federal Aviation Administration (FAA) would disapprove increasing the level of Passenger Facility Charge (PFC) funding due to the significant increase in project costs. The RTAA is asking for six (6) times the amount from the first request. Staff stated that the difference in project scope and costs are due to CBP s unwillingness to waive some of its technical standards. The FAA, who has its own technical requirements, will likely understand that the RTAA is being held to these standards and approve PFC funding for eligible project scope. Trustee Arger asked for clarification as to what would happen if the Airlines disagree with this project after consultation required due to the size of the project cost increase. Staff stated that if the airlines disagree with a project, then RTAA will be required to address the airline s concerns and the level of FAA review becomes more extensive. While the airlines don t have the ability to stop the project, the RTAA will need to make its case about why this investment will improve the safety, security, and capacity of the Reno-Tahoe International Airport (RTIA). Page 2 of 6

5 Trustee Murdock asked for clarification regarding whether the FIS construction project will be completed and the facility up and running by December 16, In addition, he requested the status of CBP approval of the landing rights for Volaris Airlines (Volaris). Staff stated that the building will be ready December 16, President/CEO Marily Mora stated that as of today, the CBP has not approved the landing rights for Volaris. Trustee Larkin asked for clarification as to why there is a difference between the $1,500,000 to $2,000,000 cost estimate presented at the Board Retreat held on October 28, 2014, and the $3,750,000 presented today. Staff stated that on October 22, 2014, the CBP finally issued its approval of the floor plan. In anticipation of the Board Retreat, the RTAA worked with the contractor to get a preliminary cost estimate based on what was known at that time. Only once the floor plan was approved could the contractor finalize their cost estimate. At the time of the Retreat, the RTAA was still negotiating with the CBP on what the final configuration of the facility would be, and what components would be part of it. For example, one of the major components unknown at the time was the requirement for emergency backup power, and the full extent of the security and Closed-Circuit Television Camera (CCTV) items. Trustee Katzmann inquired as to whether the RTAA has looked into the return investment of the $3,750,000. President/CEO Marily Mora stated that the RTAA had InterVISTAS study the economic impact of new air service on four different routes, one of them being Guadalajara. The study determined the economic impact of twice weekly air service to the local community would be $20 million per year. A motion was made by Trustee Katzmann; Seconded by Trustee Murdock and the Committee unanimously recommended this item [#14(11)-56] to the Board for information, discussion, and possible action at the upcoming Board meeting. B. #14(11)-57 APPROVAL OF REVISED PASSENGER FACILITY CHARGE (PFC) APPLICATION C-00-RNO IN THE AMOUNT OF $9,787,990 TO CONSTRUCT/ACQUIRE VARIOUS CAPITAL ASSETS FOR THE RENO-TAHOE INTERNATIONAL AIRPORT Staff gave a presentation requesting the approval of revised Passenger Facility Charge (PFC) Application C-00-RNO in the amount of $9,787,990 to construct/acquire various capital assets for the Reno-Tahoe International Airport (RTIA). Trustee Arger asked for clarification on the FAA rule that if an approved PFC project increases by more than 25%, then the Reno-Tahoe Airport Authority (RTAA) would have to reapply. Staff responded that if a project is already in an approved application, the process to obtain additional funding requires an airline consultation and a formal amendment. This process is less extensive than a new application. In regards to the Sand Storage Building, the project does not meet the 25% increase threshold going from $310,000 to $380,000, an increase of 22.6%. Page 3 of 6

6 The reason this previous approved project was required to be included in the new PFC Application #12 was the changes in work scope from new construction to remodeling an existing building at a different location. The magnitude of change was determined by the FAA to be sufficient to treat the project as a new effort, instead of amending the previously approved project. A motion was made by Trustee Murdock; Seconded by Trustee Katzmann and the Committee unanimously recommended this item [#14(11)-57] to the Board for information, discussion, and possible action at the upcoming Board meeting. IV. ITEMS PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT COMMITTEE FOR APPROVAL None V. ITEMS PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT COMMITTEE FOR DISCUSSION A. THE YOUNGER AGENCY AUDIT TRUE-UP Staff gave a presentation on The Younger Agency Audit True-up. Trustee Katzmann asked for clarification as to whether the audit findings were consistent with previous financial information provided to the Board of Trustees. Staff stated the audit did not identify any changes to financial results, and the audit confirmed the numbers provided by The Younger Agency. Trustee Arger inquired as to whether the audit was done by the RTAA s current external auditor, the previous external auditor, or by the RTAA Internal Auditor. Staff stated that the audit was done by the RTAA Internal Auditor. VI. ITEMS PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT COMMITTEE FOR INFORMATION A. INVESTMENT PORTFOLIO REPORT FOR THE QUARTER ENDED SEPTEMBER 2014 Staff reported on the Investment Portfolio Report for the Quarter Ended September B. REVIEW OF OPERATING RESULTS THROUGH SEPTEMBER 2014 Staff reported on the Operating Results through September Trustee Mayberry inquired as to whether the RTAA was collecting any revenue from ride sharing companies such as Uber. Staff stated that as of today, there is no contract signed with Uber. Page 4 of 6

7 C. REVIEW OF BUDGET TRANSFERS Staff reported on the following two (2) budget transfers: (1) increase of $2,161 to replace the transformer in Hangar Six (6) at the Reno-Stead Airport; and (2) an increase of $2,706 to install a roll up door at the old tower base building. Identified savings will be the source of funding for these transfers. D. REVIEW OF CONTRACTS AND PROFESSIONAL SERVICES AGREEMENTS THROUGH OCTOBER 2014 Staff reviewed the Administrative Award of Contracts pursuant to Resolution #462 through the month of October Trustee Katzmann asked for clarification as to whether the $11,648 for Black Rock Construction is part of the $86,000 capital project approved in the FY budget to improve seven hangars and associated pavement at General Aviation (GA) West. Staff stated that is correct. Trustee Katzmann also asked for clarification on the purpose of the $27,851 to Moody Weiske Contractors for installation of a vehicle roll up door in the old tower base building. Staff stated that the RTAA will be relocating the airfield electrician maintenance shop into that building, and the roll up door is to allow large equipment to move in and out of the building. E. REVIEW OF LEGAL EXPENSES THROUGH SEPTEMBER 2014 Staff reported the Legal Budget was 17.1% expended with 25% of the budget year expired. F. REVIEW OF BOARD BUDGET THROUGH SEPTEMBER 2014 Staff reported the Board of Trustee s budget was 17.6% expended with 25% of the budget year expired. G. REVIEW OF LEGISLATIVE CONSULTANTS BUDGET THROUGH SEPTEMBER 2014 Staff reported the Legislative Consultants Budget was 24.5% expended with 25% of the budget year expired. Trustee Arger asked for clarification as to whether this budget report includes both the federal and state lobbyist. Staff stated yes it includes both efforts. Trustee Arger also inquired as to whether the federal lobbyist has been working with the CBP. President/CEO Marily Mora stated yes, that Porter Gordon Silver Page 5 of 6

8 Communication, the federal lobbyist, has been working with the CBP. Ms. Mora also stated that at the December 2014 Board meeting there will be a report from both lobbying firms. VIII. GENERAL MEMBER COMMENTS, QUESTIONS AND ITEMS FOR FUTURE COMMITTEE MEETINGS None IX. PUBLIC COMMENT None X. ADJOURNMENT The meeting was called to order at 9:02 a.m. and was adjourned at 11:00 a.m. KA: RG/cg *** These draft minutes have not yet been approved and are subject to revision at the next regularly scheduled meeting. *** Page 6 of 6

9 Board Memorandum Reno-Tahoe Airport Authority Date: December 3, 2014 Memo # 14(12) - 58 To: Chairman & Board Members For: December 11, 2014 Board Meeting From: Marily Mora, A.A.E., President/CEO Subject: AUTHORIZATION FOR THE PRESIDENT/CEO TO NEGOTIATE AND EXECUTE A FIVE-YEAR NONEXCLUSIVE ADVERTISING PROGRAM CONCESSION LICENSE FOR ADVERTISING SERVICES WITH CLEAR CHANNEL AIRPORTS STAFF RECOMMENDATION Staff recommends that the Board of Trustees (Board) authorize the President/CEO to negotiate and execute a five-year Nonexclusive Advertising Program Concession License for advertising services including two (2) two-year options with Clear Channel Airports. PURPOSE The purpose of this action is to obtain Board of Trustees approval and authorization for the President/CEO to negotiate and execute a five-year nonexclusive advertising program concession license for advertising services with Clear Channel Airports. This action is in support of the Reno-Tahoe Airport Authority (RTAA) Strategic Priority # 4 Facilitate Economic Development at Both Airports, as identified in the RTAA Fiscal Year (FY) Comprehensive Strategic Plan, and to ensure its financial growth and stability as a self-sustaining entity by maximizing non-airline revenue. BACKGROUND A Request for Proposals (RFP) was issued on August 11, 2014 seeking the services of a highlyqualified advertising agency to develop, implement and maintain the advertising program for the RTAA. The solicitation was published on the RTAA s website and a legal ad for this solicitation was published in the Reno Gazette Journal as well as the searchable classified databases of and To supplement the legal advertising outreach, staff also ran advertising in the American Association of Airport Executives (AAAE) newsletter, and mailed a notice of solicitation directly to those firms who had requested to be included in the RTAA s Advertising Interested Parties List, in order to be assured of direct notification of any upcoming advertising RFPs. It also appeared in the two electronic issues of Aviation News Today during the week of August 18, A mandatory Pre-Proposal meeting and facility tour was held on August 25, 2014 to explain the requirements of the RFP, and to answer any questions from interested parties. In attendance at that meeting were the following firms: All Star Media, Alliance Airport Advertising, the Bauserman Group, Clear Channel Airports and the Reno-Gazette Journal Media Group.

10 Award of Advertising Concession License #14(12) - 58 December 11, 2014 Board Meeting Page 2 of 4 Proposers were required to meet the minimum requirements established in the RFP, including the prerequisite that the proposer must have managed a commercial advertising program that included digital and hi-tech displays, and generated at least $600,000 in annual gross revenue in at least one airport within the past five (5) years. The RTAA further requested a minimum capital investment of $75,000 to develop advertising displays for the Security Checkpoint queuing area, and to expand the functionality of the direct-line hotel reservation board in Baggage Claim. Written questions from proposers were addressed by two Addenda to the RFP and, based on one proposer s request, all prospective proposers were provided the opportunity to submit an alternative fee structure to that which was published in the RFP, which included a $650,000 Minimum Annual Guarantee (MAG) and a Concession Fee of 65% of revenue generated beyond the monthly MAG. The following proposals were received and opened on October 24, 2014: 1. Alliance Airport Advertising (Alliance) 2. Clear Channel Airports (Clear Channel) Prior to receipt of the proposals, a Selection Committee was established comprised of seven members, including Trustee Hall, CEO Mora and RTAA staff members from Marketing and Public Relations, Finance, Facilities and Maintenance, as well as Airport Economic Development to ensure diversity of opinions and perspectives. DISCUSSION The primary scope of advertising services requested in the RFP includes the following: Produce and promote new growth from national, regional and local advertisers Identify, develop and implement new advertising opportunities as well as enhance existing advertising displays and retain existing advertisers Include new "state-of-the-art" multi-media advertising concepts such as video walls, interactive devices, multi-media devices etc., or those that represent new methods of generating advertising revenues Maintain a commitment to the Airport's Lake Tahoe/Alpine Lodge theme through coherent and complementary advertising that is aesthetically consistent with the design and architecture of the terminal building Provide a business plan that effectively serves advertisers with maximum messaging exposure to the demographics they desire while providing maximum revenues for the Airport After the Selection Committee individually reviewed the written qualifications and analyzed the proposals, the Committee met as a group on November 6, Upon review, the business terms proposed by Alliance indicated they were uncertain if they could generate enough sales to meet the minimum MAG and still generate a profit for themselves. Accordingly, Alliance suggested a

11 Award of Advertising Concession License #14(12) - 58 December 11, 2014 Board Meeting Page 3 of 4 delayed or gradual transition to implement the required $650,000 MAG; or alternatively, payment of a straight 65% of gross revenues and no MAG for an undetermined amount of time. The business terms proposed by Clear Channel were more positive, with a proposed MAG of $660,000 which exceeded the minimum by $10,000 (a difference of $50,000 over the 5-year term), and a 10% lower Concession Fee of 55%. Clear Channel s business terms project a net revenue yield of more than 30% over their proposed MAG by the end of year 5. Clearly, the differences in the commitment levels between the two agency proposals are quite substantial. While both of the proposers met the minimum requirements, Alliance provided little detail on its sales and marketing strategy, and none to support the minimum required $75,000 capital investment. Clear Channel s proposal went into significant detail and outlined a new direction for a comprehensive new airport advertising program. Clear Channel did not just meet the minimum requirements, they exceeded the goals and scope of work outlined in the RFP, with a capital investment commitment over the course of the term (including the extension options) of $895,000 vs. the minimum required investment of $75,000. Again, the difference in the commitment levels between the two agencies is substantial. Clear Channel s investment includes state-of-the-art digital equipment to elevate the advertising program to a new level of sophistication and customer amenity. Specifics of the capital investment include the following: Iconic Digital Assets two, large format, seamless LED video walls Comprehensive, terminal-wide 75-inch LCD network Large-format, energy efficient tension fabric displays 80-inch LCD digital passenger information/hotel reservation center in Baggage Claim Passenger workstations/charging stations one on each concourse RNO-TV, 15-screen airline gate hold room entertainment network FlySmart TM mobile travel app, customizable to RTAA Themed elements to tie new media into the look and feel of the Terminal The Committee expressed a desire to meet the local Clear Channel account team who would be working directly with the RTAA, and subsequently met with them on November 19, Considering the details of the proposal and the follow-up meeting with the local team, the Selection Committee reached a unanimous decision to recommend Clear Channel Airports to the Board for award of the Nonexclusive Advertising Program Concession License based on the following factors: Qualifications and Experience Annual Revenue to RTAA Sales Performance Indicators Technology, Equipment, and Capital Investment Commitment Transition Plan and Implementation Innovative Sales and Marketing Plan Customer Service Team/Relationship Representative

12 Award of Advertising Concession License #14(12) - 58 December 11, 2014 Board Meeting Page 4 of 4 The new Advertising License term will commence on January 1, 2015, and Clear Channel anticipates it will complete its transition and installation of new digital assets over the course of fifteen (15) weeks, bringing the fully-expanded advertising program online in mid-april CLEAR CHANNEL AIRPORTS BACKGROUND Clear Channel Airports has more than 40 years of airport experience and is partnered with 273 airports worldwide. They currently handle advertising programs for 27 of the top 50 airports in the United States, including Atlanta, Chicago, Dallas-Fort Worth and Denver. The company generates nearly $200 million in sales annually across its airport portfolios. Clear Channel has its corporate headquarters in Allentown, PA as well as 15 regional offices which include Los Angeles, San Francisco, Seattle and Denver. The local Clear Channel office has a staff of 15 with over 120 years of combined airport advertising experience. In addition, Clear Channel has partnered with Valerie Glenn of The Glenn Group to help build rapport between Clear Channel and key decision makers in the Reno-Sparks, and Lake Tahoe markets, as well as to publicize the new Airport advertising program as it unfolds. FISCAL IMPACT The following table provides the projected net advertising concession revenue to the RTAA through fiscal year as proposed by Clear Channel Airports: Fiscal Year Net Advertising Concession Revenue Paid to RTAA FY $718,276 FY $803,701 FY $827,812 FY $848,507 FY $869,720 Total $4,068,016 COMMITTEE COORDINATION This item is scheduled to be presented at the December 9, 2014 Finance and Business Development Committee meeting. RECOMMENDED MOTION It is Recommended that the Board Authorize the President/CEO to Negotiate and Execute a Five- Year Nonexclusive Advertising Program Concession License with Two (2) Two-Year Extensions for Advertising Services Provided by Clear Channel Airports. MMM/lo/cj

13 Administrative Report Reno-Tahoe Airport Authority Date: December 3, 2014 Administrative Report # To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FINANCIAL REPORTING PACKAGE OCTOBER 2014 EXECUTIVE SUMMARY Attached is the Fiscal Year Financial Reporting Package for the four months ending October 31, The budget amounts mentioned below assume one twelfth of the revenue budget is received and one twelfth of the operating expense budget is spent each month. This approach in the early months of the new fiscal year typically results in above budget operating revenues due to high summer passenger traffic in the months of July and August. These seasonal factors are typically offset once summer is over and lower passenger traffic typical of the fall months is incorporated into the year-to-date results. Based on actual results through October 31, 2014, net available cash flow, after funding debt service, is approximately $3.190 million, an increase of approximately $2.437 million above the adopted FY Budget and $525,000 below last year. Y E A R T O D A T E as of October 31, 2014 (In Thousands) 33.3% Of Fiscal Year CURRENT PRIOR Y-T-D YEAR YEAR VARIANCE % BUDGET VARIANCE % Operating Revenue Airline $ 5,176 $ 4,900 $ % $ 4,993 $ % Non-Airline 10,781 10, % 9,583 1, % Total Operating Revenue 15,957 15, % 14,576 1, % Non-Operating Revenues % % Total Revenue 16,683 16, % 15,133 1, % Operating Expenses (12,231) (11,759) (473) 4.0% (13,119) % Net Revenue Available for Debt Service 4,451 4, % 2,014 2, % Debt Service After PFCs (1,262) (1,596) % (1,262) 0 0.0% Net Available Cashflow 3,190 2, % 752 2, % 1

14 October 2014 Financial Summary Administrative Report # December 3, 2014 TOTAL REVENUE The Authority s total operating revenue of $ million is approximately $1.381 million or 9.5% above budget due to higher airline revenues of approximately $182,000 and higher non-airline revenues of $1.199 million, which primarily reflects higher auto rental and public parking revenues. The Authority s revenue results are discussed in more detail later in this report. The chart below reflects actual operating revenues for the fiscal year as compared to the budget amount. AIRLINE Landing Fees The RTAA executed a five-year agreement with the airlines effective July 1, The formula for calculating landing fees consists of almost 100% cost recovery of airfield related operating and capital improvement expenses offset by other airfield derived revenues. 2

15 October 2014 Financial Summary Administrative Report # December 3, 2014 Landing fees are budgeted and currently being collected at $2.93 per 1,000 lbs. of landed weight. For the four months ending October 31, 2014, landing fee revenues registered $2.405 million, which is approximately $47,000 or 2.0% above the adopted budget. The costs allocated to the Airfield Cost Center, or Net Requirement per the Airline Agreement, are 4.8% under budget based on actual results through October 31, Landed weight is 1.0% under budget for the first four months of Fiscal Year Airline Terminal Rents Airline terminal rents reflect cost recovery of terminal costs allocated to airline occupied facilities (commercial compensatory basis) with total facility costs divided by rentable terminal square footage. For the four months ending October 31, 2014, airline terminal rental revenue registered $2.771 million, which is approximately $136,000 or 5.2% above budget. The budgeted average signatory rental rate is $62.45 per sq. ft. per annum. The costs allocated to the Terminal Building Cost Center, or Net Requirement, are 3.6% below the adopted budget based on actual results through October 31, NON-AIRLINE REVENUE With airline revenues derived from cost recovery formulas and no net profit resulting directly from their operations, non-airline revenues are critical for the Authority to meet other operating costs and to generate internal funds for equipment and capital projects that do not directly benefit the airlines. Non-airline operating revenues are primarily comprised of terminal and rental car concession revenues, public parking revenue, building/land rent, and reimbursement of Authority provided services. Overall, non-airline operating revenues registered $ million. This represents an increase of approximately $1.199 million or 12.5% over budget. The increase is primarily due to $645,000 in higher than budgeted revenue from auto rental concessions. In addition, the Authority received $335,000 in higher parking revenues and $101,000 in higher gaming concession revenues. Non-airline operating revenues have increased 3.0% from the same period of FY primarily due to the higher revenues in rental car concessions, public parking, and RTIA building rent. Enplaned passenger traffic for the first four months of FY is 604,158, an increase of 8.7% above the straight-line budget and virtually identical to last year s numbers. Further detail on passenger traffic results is provided in the Key Benchmarks section of this summary. 3

16 October 2014 Financial Summary Administrative Report # December 3, 2014 NON-OPERATING REVENUE Non-Operating revenues of approximately $726,000, which are primarily comprised of interest income, aviation fuel tax, and rental car customer facility charges, are approximately $168,000 or 30.2% above budget. This increase is primarily due to higher Customer Facility Charge fees associated with higher than budgeted rental car activity. OPERATING EXPENSES Operating expenses of $ million for the four months ending October 31, 2014 are 6.8% or approximately $888,000 below budget. The savings include approximately $303,000 in lower than budgeted Personnel costs, $105,000 in lower Utility costs, $314,000 in lower Purchased Services, $120,000 in lower Materials and Supplies expenses, and $46,000 in lower Administrative expenses. The chart below is based on the actual operating expenses for the four months ending October 31, 2014 as compared to the year-to-date budget amount. DEBT SERVICE Net debt service payments, after the application of Passenger Facility Charges, of $1.262 million effectively matches the FY adopted budget forecast. 4

17 October 2014 Financial Summary Administrative Report # December 3, 2014 KEY BENCHMARKS The following are key benchmarks and ratios used to measure financial activities and monitor the financial health and condition of the Authority: Y E A R T O D A T E (October 31, 2014 ) 33.3% Of Fiscal Year CURRENT PRIOR Y-T-D Key Statistics / Benchmarks YEAR YEAR VARIANCE % BUDGET VARIANCE % Enplaned Passengers 604, ,319 (161) 0.0% 555,763 48, % Airline Cost Per Enplaned Passenger $ 6.17 $ 7.56 $ (1.39) -18.3% $ 8.15 (1.98) -24.3% Non-Airline Revenues per EPAX (a) $ $ $ % $ % Operating Ratio 76.7% 76.5% 0.1% 0.2% 90.0% -13.4% -14.8% Debt Service Coverage Ratio % % Days Cash On Hand (66.5) -14.6% % (a) Excludes cost reimbursement for the Baggage Handing System (BHS) paid by the airlines. Enplaned Passengers Passenger Activity is a significant factor driving non-airline revenues such as terminal concessions, public parking, and gaming. For the four month period ending October 31, 2014, enplaned passengers were 604,158, an 8.7% increase compared to the budgeted annual passenger traffic of 1,667,290 divided by 12 months. This result is virtually unchanged from the passenger traffic levels posted last year for the same period. The significantly higher passenger traffic as compared to the straight line budget reflects high summer passenger traffic in the months of July and August. These seasonal factors are typically offset once summer is over and lower passenger traffic typical of the fall months is incorporated into the year-to-date results. The October 2014 Flight Schedule at the Reno-Tahoe International Airport provides 52 peak non-stop departures to 15 destinations with 169,982 total scheduled departing seats. The number of flights is flat as compared to the October 2013 schedule, while the seat capacity has decreased (3.8%). The level passenger traffic represents lower results by Allegiant, Delta, and Southwest Airlines of 40,288 fewer enplaned passengers in the current fiscal year than last year. This reduction reflects the termination by Southwest of non-stop service to Portland and Seattle. Offsetting this decrease are increases registered by Alaska, American, United and US Airways of 39,900 combined total enplaned passengers. 5

18 October 2014 Financial Summary Administrative Report # December 3, 2014 A table and chart enclosed in this package provides a comparison of enplaned passenger traffic and market share by airlines for the fiscal year as compared to the previous year s results. Airline Cost per Enplaned Passenger This ratio represents airline payments for use of airport facilities (landing fees and terminal rents) in accordance with adopted rates and charges methodology as outlined in the lease agreement between the airport and airlines. The Authority targets to maintain a reasonable cost structure for the airlines to attract and maintain air service to our community. Due to operating expenses being 6.8% below budget and a higher than anticipated revenue sharing credit, the airline cost per enplaned passenger is estimated to be $6.17 as compared to budgeted cost per enplaned passenger of $8.15. As the Authority enters into the slower traffic months in Fall and Winter, the significantly lower than budgeted cost per enplanement will increase closer to the budget estimate. Non-Airline Revenue per Enplaned Passenger This ratio represents operating revenues derived from sources other than the airlines divided by enplaned passengers for the fiscal year. This financial ratio measures the Authority s ability to generate terminal and rental car concession fees, public parking, land and building rents from non-airline facilities, interest income, and aviation fuel tax at both the Reno- Tahoe and the Reno-Stead airports. Revenues under this calculation exclude cost recovery collected from the airlines for use of the baggage handling system. For the four month period ending October 31, 2014, non-airline revenue per enplaned passenger registered $16.35, an increase of 3.6% from the $15.78 registered in the prior year and 4.4% higher than the FY Budget of $ These results primarily are due to an increase in sales per transaction from rental car and the public parking operation as compared to last year. Food and Beverage, Merchandise, and Gaming concessions for the four months ending October 31, 2014, registered sales per enplaned passenger very similar to the same period last year. Advertising remains the exception with lower gross sales per enplanement for both the month and year to date as compared to October With the likely award of a new advertising concession agreement starting in early 2015, staff anticipates improvement as the new firm begins to aggressively market the program. 6

19 October 2014 Financial Summary Administrative Report # December 3, 2014 Operating Ratio The Operating Ratio is calculated by taking operating and maintenance expenses and dividing by total operating revenues. This ratio indicates whether that level of operating expense as a proportion of operating revenues are consistent and tracking with the approved expenditures and revenues adopted in the FY Budget. Generally, a lower ratio of expenses to revenues is positive since it reflects an improvement in the net operating revenue available to pay debt service and generate additional cash flow. For the four month period ending October , the ratio favorably registered 76.7% as compared to the adopted budget ratio of 90.0%. This result reflects both significantly higher revenues and lower operating expenses for the first four months of the fiscal year. Days Cash on Hand Days Cash on Hand is calculated by identifying unrestricted cash and investments divided by annual operating and maintenance expenditures multiplied by 365 days. The Authority s cash and liquidity position is very strong with 390 days of unrestricted cash on hand to meet the Authority s budgeted operating and maintenance requirements. This compares favorably to the year-end budget estimate of 344 days. The 2013 median average for airports nationwide according to Fitch Ratings was 408 and according to Moody s Investor Services was 551. Per the rating agencies, a ratio lower than 300 days significantly increases the likelihood of a ratings downgrade A chart enclosed in this package provides a comparison of liquidity balances and Days Cash on Hand as of October 31, 2014 compared to FY year-end results and forecasted year-end cash balances in the adopted FY Budget. Debt Service Coverage Ratio The Debt Service Coverage Ratio is the net revenue available for debt service (Operating Revenue less Operating Expenses) divided by annual debt service. This benchmark measures the ability of the Authority s operations to generate sufficient funds to pay the annual debt service on both the senior lien bonds and the subordinate notes. The Authority targets to maintain net revenue after operating expenses equal to or greater than 1.5 times annual debt service. Under the bond indenture, the Authority is required to maintain at least a ratio of The Authority s debt service coverage ratio of 2.97X is strong with lender and bond holder protection higher than the FY Budget estimate of 1.48X and significantly above the minimum level of 1.25X established under the Authority s Master Bond Indenture. 7

20 October 2014 Financial Summary Administrative Report # December 3, 2014 This ratio is significantly above budget due to significantly higher operating revenues by approximately $1.381 million or 9.5% and lower operating expenses by approximately $888,000 or 6.8% as outlined above. The senior lien debt was issued to fund construction of the Parking Garage and the connector bridge. Public parking revenues are assigned to the payment of this debt. No debt service for either the Senior Bonds or the Subordinate Lien Notes is included in the cost recovery assigned to Airline Cost Centers. A table and chart are included in this package to outline the financial inputs used to calculate this ratio for October 2014 as compared to the same period last year and the adopted FY Budget. MMM/ak/cj 8

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28 Administrative Report Reno-Tahoe Airport Authority Date: December 3, 2014 Administrative Report # To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: Administrative Award of Contracts Pursuant to Resolution No. 462 for the month of November 2014 BACKGROUND At the January 19, 2006 meeting of the Board of Trustees of the Reno-Tahoe Airport Authority, the Board approved Resolution No. 462 authorizing the President/CEO to award contracts for budgeted goods, services (other than professional service agreements exceeding $50,000), materials, and supplies when the estimated amount to perform the contract is $100,000 or less, approve a contract change order (CO) on construction projects where the total net cost of a single change order does not increase the contract sum by more than $100,000, contract for a professional service agreement (PSA) when the estimated amount to perform the work is $50,000 or less, and approve an amendment to a professional service agreement where the total net cost of a single amendment does not increase the agreement amount by more than $50,000. DISCUSSION Resolution No. 462 requires that the President/CEO provide the Board of Trustees with an administrative report setting forth a list of contracts, professional service agreements, change orders, and amendments approved administratively as a result of the resolution to be given to the Board on a monthly basis. Appended hereto is the list for the month of November MMM/jah/cj

29 Date Name of Company 10/30/14 Intermountain Electric 11/12/14 Crop Production Services NOVEMBER 2014 Dollar Amount Description Funding Source Department/Division $43,161 Blanket PO 6215 for the replacement of FY Capital Reno Stead Airport four transformers identified as potential Improvement Budget energy savings opportunities during an energy assessment. The current units are years beyond their useful life expectancy. This contract is the result of an informal bid with award being made to the low, responsive, and responsible bidder. $29,855 Blanket PO 6226 for annual herbicides FY O&M Airfield Maintenance and fertilizers procured on an as Operating Budget Reno Stead Airport ordered, as needed basis. This contract is the result of a formal bid with award being made to the low, responsive, and responsible bidder. 11/12/14 Wilber-Ellis $35,499 Blanket PO 6227 for annual herbicides and fertilizers procured on an as ordered, as needed basis. This contract is the result of a formal bid with award being made to the low, responsive, and responsible bidder. FY O&M Operating Budget Airfield Maintenance Reno Stead Airport Key to abbreviations: PO = Purchase Order CO = Change Order PSA = Professional Service Agreement PFC = Passenger Facility Charge Program AIP = Airport Improvement Project *Contract signed by authorized designee Executive Vice President/COO # 70-14

30 Administrative Report Reno-Tahoe Airport Authority Date: December 3, 2014 Administrative Report # To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FY GENERAL COUNSEL S BUDGET The following is a summary of the General Counsel s budget for the four months of the fiscal year. The summary shows the amounts budgeted compared to actual by the major account classifications. While October represents 33% of the budget year, actual costs are 21.7% of the total budget. Account Classification Purchased Services Fennemore Craig Jones Vargas YTD Actual YTD Budget Over (Under) Budget % Variance Annual Budget % of Annual Budget $ 82,148 $ 116,000 $ (33,852) -29.2% $ 348, % Specialty Area, Legal 9,021 17,333 (8,312) -48.0% 52, % Other Purchased Services 0 5,083 (5,083) % 15, % Administrative Expense Books & Subscriptions (200) % % Conference Registration (567) % 1, % Travel Expense (667) % 2, % Total General Counsel $ 91,169 $139,850 $ (48,681) -34.8% $ 419, % MMM/lw/cj

31 Administrative Report Reno-Tahoe Airport Authority Date: December 3, 2014 Administrative Report # To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FY BOARD OF TRUSTEE S BUDGET The following is a summary of the Board of Trustee s budget for the four months of the fiscal year. The summary shows the amounts budgeted compared to actual by the major account classifications. While October represents 33% of the budget year, actual costs are 25.5% of the total budget. Account Classification YTD Actual YTD Budget Over (Under) Budget % Variance Annual Budget % of Annual Budget Personnel Services Trustee Stipend $ 20,160 $ 20,160 $ 0 0% $ 60, % Personnel Services 11,164 15,200 (4,036) -26.6% 45, % Purchased Services 1, % 2, % Materials and Supplies (499) -50.8% 2, % Administrative Expense Membership Dues (167) % % Conference Registration & Training 0 1,867 (1,867) % 5, % Meeting Expenses 795 3,333 (2,538) -76.2% 10, % Travel and Reimbursed Expense 1,220 3,333 (2,113) -63.4% 10, % Total Board $ 35,065 $ 45,876 $ (10,811) -23.6% $ 137, % MMM/lw/cj

32 Administrative Report Reno-Tahoe Airport Authority Date: December 3, 2014 Administrative Report # To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FY LEGISLATIVE CONSULTANT S BUDGET The following is a summary of the Legislative consultant s budget for the four months of the fiscal year. The summary shows the amounts budgeted compared to actual by the major account classifications. While October represents 33% of the budget year, actual costs are 32.5% of the total budget. Account Classification YTD Actual YTD Budget Over (Under) Budget % Variance Annual Budget % of Annual Budget State and Local Governmental Relations $ 27,263 $ 25,000 $ 2, % $ 75, % Legislative Consultant Washington, D.C. 28,000 31,667 (3,667) -11.6% 95, % Total Governmental Relations $ 55,263 $ 56,667 $ (1,404) -2.5% $ 170, % MMM/lw/cj

33 Administrative Report Reno-Tahoe Airport Authority Date: December 3, 2014 Administrative Report # To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: HANGAR LEASE EXECUTION STATUS BACKGROUND Resolution No. 502, authorizes the President/CEO to approve and execute Reno-Tahoe Airport Authority (Authority) General Aviation (GA) aircraft hangar lease agreements where the estimated total revenue amount is $100,000 or less over the hangar lease term, including any extension year. This Resolution further requires that the President/CEO provide the Board of Trustees with an Administrative Report setting forth a list of hangar lease agreements executed as a result of this Resolution. This Administrative Report shall be given to the Board on a monthly basis. At the May 17, 2012 meeting of the Board of Trustees, the Board approved the phased release of twenty-three (23) additional T-Hangars at GA West, based on market demand, ultimately bringing the total GA West inventory to thirty-one (31) T-Hangars. In the first release phase, eight (8) additional T-Hangars were made available for lease. Effective October 18, 2012, the Reno-Tahoe Airport Authority transferred the management of the T-Hangars to the Reno-Tahoe International Airport s (RNO) Fixed Base Operator, Atlantic Aviation, which is now the point of contact for the RNO T-Hangar tenants, including leasing, maintenance and repair, and fueling services. Atlantic Aviation is responsible for management and marketing of the vacant T-Hangars at both GA West and GA East. At the February 14, 2013 Board meeting, the Board voted to waive the monthly $102 Pavement Rehabilitation Fee previously approved for all GA West T-Hangar tenants. This became effective March 1, The Board further agreed to place a hold on additional expenditures for Pavement Rehabilitation until hangar demand is evident. At the March 2014 meeting of the Board of Trustees, the Board voted to table the release of an additional eight (8) GA West T-Hangars and supporting capital improvements, in order to explore alternative release and improvement options. At the July 2014 Board meeting, staff brought options forward and recommended the release of seven (7) GA West T-Hangars. The Board again voted to table the release of these seven (7) T- Hangars and associated capital improvements until the occupancy rate of the existing available T-Hangars was higher.

34 Hangar Lease Execution Status December 2014 # Page 2 of 3 At the September 2014 Board meeting, the Board voted to release the seven (7) eligible T- Hangars that were previously tabled at the July 2014 Board meeting. Staff is currently implementing a plan to move the Airport Operations Area (AOA) fence, improve the pavement area and conduct T-Hangar repairs. Upon completion, the space will be suitable for lease by the first quarter of LEASING STATUS: T-HANGARS As of December 1, 2014, a total of fourteen (14) T-hangars at GA West are leased and two (2) are currently available for lease. To date, forty-nine (49) T-Hangars at GA East are leased and eight (8) are available for lease. One is not available for lease due to a nonfunctional hangar door. There is an estimate in hand for repairs and it is anticipated that this T-Hangar will be available for lease by the first quarter of In summary, of the eighty-eight (88) T-Hangars owned by the Authority located at both the East and West General Aviation facilities, sixty-three (63) T-Hangars are currently leased and ten (10) are vacant. Of the fifteen (15) T-hangars at GA West that were pending Board directed release, seven (7) have been approved for release by the Board and are expected to be available for lease in the first quarter of The RTAA currently has three (3) potential new T-Hangar tenants and two (2) transfer requests on a waiting list. The table below shows aircraft T-Hangar leasing and vacancy status as of December 1, Airport Location Occupied Vacant Available Pending Board Directive Total T- Hangars (East & West) General Aviation West * 31 General Aviation East 49 8 n/a 57 Total T-Hangars * 88 * This number includes the seven (7) T-Hangars approved for release but not yet available for lease. LEASING STATUS: COMMERCIAL & BOX HANGARS Airport Authority staff continues to administer commercial and noncommercial hangar leases. GA West inventory consists of five (5) commercial/noncommercial hangars and one (1) Fixed Base Operator (FBO) office. All commercial/noncommercial hangars at GA West are leased. However, the noncommercial hangar tenant in Hangar #7 has informed staff that they have purchased a new aircraft that may not fit into the hangar due to the height of the door. The tenant is exploring the possibility of raising the hangar door.