ATTACHMENT D RTAA Financial Update Presentation Fitch Ratings on May 29, 2015
Fitch Ratings Update May 29, 2015
Agenda RTAA Overview and Strategic Priorities Regional Economic Outlook FY 2015-16 RTAA Initiatives Air Service Market Update Financial Overview Revenue Operating Expense Property, Plant and Equipment Capital Improvement Projects Debt Service Key Financial Ratios and Measures 2
Created in 1977 by State Legislation Owners and Operators of Who We Are Reno-Tahoe Airport Authority Reno-Tahoe International Airport Reno-Stead Airport Governed by Board of Trustees appointed by: Cities of Reno and Sparks Washoe County Reno-Sparks Convention and Visitors Authority A City Unto Itself Operationally independent with in-house police and fire departments, human resources, accounting, etc. 3
Catchment Area The RNO Catchment Area Includes, the Reno/Sparks MSA, Lake Tahoe and Carson City (capital of Source: U.S. Census Bureau, 2010 Lake Tahoe Reno Nevada) Sparks RNO Carson City The RNO primary catchment area has a population of over 587,439 people 1.3M people in secondary catchment area Northern Nevada population grew 20% over the past decade RNO has limited competition from other airports (SMF 140 miles away, Bay Area over 200 miles) Las Vegas is 450 miles awayestimated drive of 7 hours 4
Gateway to Lake Tahoe Reno-Tahoe International Airport makes getting to Lake Tahoe a breeze It take over 2 hours to get to Lake Tahoe from SMF RNO Lake Tahoe During a regular week day, on average, car rentals at SMF cost 69% more than car rentals at RNO Source: Reno-Tahoe International Airport Car Rental Survey SMF Resort Reno-Tahoe International Sacramento Airport Additional time & miles from SMF Distance Driving Time Distance Driving Time Distance Driving Time Northstar California 42 miles 46 mins 116 miles 1:55 hr 74 miles 1:09 hr Squaw Valley 48 miles 53 mins 117 miles 1:57 hr 69 miles 1:04 hr Source: www.cheapflights.com, March 2011; Yahoo Maps 5 South Lake Tahoe 58 miles 1:13 hr 115 miles 2:05 hr 57 miles 46 mins 5 Heavenly Ski Resort 59 miles 1:16 hr 115 miles 2:06 hr 56 miles 50 mins
Gateway to the Region Airport is the Gateway to the Reno-Tahoe region $100M in terminal improvements in last five years Created an airport that provides a sense of place You know you are in Reno-Tahoe when you land 6
Strategic Plan (FY 2014-2018) RTAA Board and Staff established a vision for the future: Five Strategic Priorities Five-year plan with flexibility and forethought Serve as a compass for the future Public process Airport committees User groups Board and staff Public 7
Strategic Plan (FY 2014-2018) Work plans developed and resources identified Guiding Principles/Operating Practices Safety and Security Customer Service Financial Integrity Professionalism and Ethics Environmental Guiding Principles drive the day-to-day operations 8
Regional Economic Outlook 9
Economic Influences National and Regional Economic Factors Modest improvement next year, bright future Significantly lower unemployment rate Tesla Effect Technology / Data Centers Industrial Real Estate Market Unmanned Aircraft Systems Casino / Ski Resort Development Bowling Tournament Visitors 10
Improving Unemployment Rate 51% Reduction Since 2011 (14.0% to 6.9%) 11
Review of Key Economic Indicators M i l l i o n s 8.000 7.000 6.000 5.000 4.000 3.000 2.000 1.000 0.000 Washoe County Visitors, Passengers, Airline Seats Passengers Visitors Available Seats M i l l i o n s 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 Washoe County Taxable Gaming Revenue Washoe Co. Taxable Gaming Revenue $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 * Source: Reno-Tahoe International Airport and Reno-Sparks Convention and Visitor s Authority * Source: Nevada State Gaming Control Board Washoe County Median Home Sale Price Median Home Sale Price B i l l i o n s $9.000 $8.000 $7.000 $6.000 $5.000 $4.000 $3.000 $2.000 $1.000 $0.000 Washoe County Taxable Sales Washoe County Taxable Sales * Source: Reno/Sparks Association of Realtors * Source: State of Nevada Department of Taxation 12
Tesla Battery Gigafactory The Largest Deal In The U.S. Changes Reno-Sparks Brand Overnight 13 More Than Jobs Puts Us on The Radar: Manufacturing Business Entrepreneurs Creative Class Research & Development Investors...
Tesla Only Part Of The Growth! Tesla Primary Tesla Secondary EDAWN Primary EDAWN Secondary Total Jobs 2013 0 0 3,460 4,360 7,820 2014 0 0 3,479 4,384 7,863 2015 700 1,148 4,000 5,040 10,888 2016 1,000 1,640 3,500 4,410 10,550 2017 3,000 4,920 3,000 3,780 14,700 2018 1,800 2,952 2,500 3,150 10,402 2019 0 0 2,000 2,520 4,520 5 Year Total 6,500 10,660 15,000 18,900 51,060 17,160 Total Projected Employment Growth 14 14
Explosive Growth Is Coming! 250,000 230,000 Tesla Projected Job Growth EDAWN Projected Job Growth Historic Employment 4.9% Growth 210,000 2.2% Growth 190,000 170,000 150,000 15 15
Transportation / Distribution Center Logistics and operations industry cluster - a natural target industry for Northern Nevada, Location and geographic advantages, strong existing infrastructure and cost and regulatory advantages One day truck distribution to the entire west coast Union Pacific Railroad s Class 1 Transcontinental rail line Network Access Point for internet traffic - State-of-the-art digital and fiber optic highway Internet fulfillment, bio-pharma, and hi-tech business World s Largest Industrial Park upon completion 16
Notable Reno-Tahoe Companies 17
Silicon Valley Support Datacenter / Distribution / Manufacturing 18
Entrepreneurial Development Success! Entrepreneur.com on NBCNews.com 3 Alternative Tech Startup Cities Three Western locales previously considered vacation destinations are now alternatives to 3 Alternative Tech Startup Cities With Less Traffic, More Housing (Infographic) Three Western locales previously considered vacation destinations Silicon Valley are now life alternatives at a much to more Silicon affordable Valley life at a much more affordable price. price. IEDC Award! 19 Reno, NV (DEC. 15, 2014) Next City will host its sixth annual Vanguard conference in Reno. Vanguard is an annual experiential urban leadership conference. 19
RNO Land Development In Process Home Gardens South 45 acres Mill & Rock/Northeast Quadrant 36 acres Airport South 4 acres Pending Market Demand Airport East (Brookside) 50 acres Southeast Quadrant 25 acres Southwest Quadrant 90 acres Airport Gateway Center 7.5 acres Home Gardens North/Airport West 25 acres 20
Reno-Stead - Concept Plan Vacant Properties owned by RTAA total 2,396 acres 37% of vacant industrial land in Washoe County * Source: Truckee Meadows Regional Planning Authority, 3 rd Quarter Industrial Inventory Report 21
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Northern Nevada UAS Partnerships 23
UAS Stead Test Range Concept 24
Aviation Taxes Competitive Disadvantage 25
Legislative Effort A partial abatement of taxes on aviation property and parts will lead to growth in the aviation industry in both the short and longer term. Nevada will experience significant gains in high-wage jobs and economic activity from existing Nevada-based businesses. The employment and economic benefits will begin to occur quickly, because of pent up demand. Moreover, the growth will generate tax revenues that exceed cost of the abatement. Supports designation as FAA testing site for Unmanned Aircraft Systems (UAS) 26
Air Service Market Overview 27
Air Service Market Update Strong Demand - Higher U.S. industry traffic of 2.5% Merger of American & US Airways Airline Profitability Respectable profit margins Significantly lower fuel prices Larger aircraft at bigger airports Airline perspective Why fix what is not broken? RNO More Competition - Full year impact - JetBlue and Volaris Continued existing service by current carriers 28
Passenger Traffic Update Enplaned Passenger forecast for FY 2014-15 reflects a decrease of 2.2% FY 2015-16 Budget is 2.9% higher than current year forecast and modestly up as compared to the adopted budget 29
New Air Service New York, NY (jetblue) Commenced on May 28, 2015 Airbus 320 with 150 Seats Daily Service to JFK Guadalajara, Mexico (Volaris) Started Dec 16, 2014 Airbus 320 with 174 Seats Twice Weekly Service Los Angeles, CA (American) Larger Aircraft on Sept 3, 2014 Four to Five Flights per Day To start June 5, 2015 San Jose, CA (Alaska) Service Schedule Change Business Traveler Convenience 30
MAP 31
Passenger Traffic Market Share Southwest market share is projected to drop from 54% in FY 2012-13 to 42% in FY 2015-16 Merger between US Airways and American. Combined market share is forecast to be 24% in FY 2015-16 32
Strategic Priority Cargo Development In 2014, RNO Handled over 125 Million Pounds of Air Cargo, Representing the Best Cargo Year During the Last Seven Years. 120 million 109 million 111 million 112 million 117 million 6.8% 125 million 102 million CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 December 2014 was recorded as the best month ever in regards to cargo handling at RNO Source: Airline Activity Report, RNO 33
A New Approach Air Service Development The most important strategic priority for the RTIA The catalyst for economic recovery and growth within our region Has changed drastically in the past 24 months Requires resources and a team approach
Air Service Development Temporarily waive or discount airport fees and authorize marketing/advertising support for a maximum of 365 days to a scheduled passenger airline(s), cargo carrier(s), and seasonal and scheduled charter service to a new destination Marketing Support - $25,000 in target marketing support both in and out of the market Airports are limited on what they can provide per FAA Guidelines Expanded in 2014 to build a coalition of casinos, ski resorts, local businesses, community groups, and local governmenta to create a unique synergy 35
Air Service Development- FY 2015 Market Analysis Air Service Development Leverage Resources Airline Meetings 36
Strategy Review Strategy to Develop Resources Tourism Government Business Community Expand Financial Base City Business Advisory Council Awareness Campaign Valuation of In- Kind Support County RNO Business Lounge RNO Business Services State In-Kind Support Airline Program Enrollments 37
Third Party Valuation - In-Kind Support Regional Air Service Corporation (RASC) offers a marketing resource that no other community can offer RASC is consortium that spreads across industries (tourism, hotel, gaming, ski, etc.) Marketing support that RASC brings provides unbeatable air service leverage. Combined Database Size Overall Social Media Reach Total Website Visitations PR outreach Other 38
RTAA Marketing Support of New Routes Route-based messaging Timing to maximize efficiency/effectiveness Based on Strategic Partnerships Multiple Media In-Terminal PR/Social Print Online TV Radio Outdoor 39
Financial Results 40
Airline Agreement Five (5) Year Term - Effective July 1, 2015 through June 30, 2020 Opportunity to Extend Additional five (5) years with Board approval Retain existing rate-setting methodology Hybrid approach Airfield and Baggage Handling System Cost Center Residual Terminal Building Commercial Compensatory 50/50 net revenue sharing component Enforceable Lease Five Year Financial Commitment Extraordinary Coverage Protection 41
Signatory Airlines Non-Signatory Airlines Allegiant Air JetBlue Airlines Volaris Airlines 42
Fiscal Impact Projected airline revenue of $17 million per year or $85 million over the five (5) year term Forecasted airline cost per enplaned passenger to remain less than $9.00 43
Revenue Summary Total Revenue of $46.417 million 2.3% above last year s budget Higher airline revenue of $411,450 Airline Cost per Enplaned Passenger of $8.39 Non-Airline Revenue is forecasted to be 2.3% above the current year budget reflecting improved FY 2014-15 actual results FY 2014-15 Budget FY 2015-16 Budget Dollar Change % Change Airline Revenue $14,980,252 $15,391,702 $411,450 2.7% Non-Airline Revenue 28,747,526 29,394,923 647,397 2.3% Total Operating Revenue 43,727,778 44,786,625 1,058,847 2.4% Non-Operating Revenue 1,637,600 1,630,300 (7,300) (0.4%) Total Revenue $45,365,378 $46,416,925 $1,051,547 2.3% 44
Airline Cost Per EPAX Trend 45
Raleigh-Durham International Nashville International William B Hobby - Houston Fresno Yosemite International San Antonio International Jacksonville Aviation Authority Tucson International Reno-Tahoe International Austin-Bergstrom Port Columbus International John Wayne Airport- Orange County Anchorage International Indianapolis International Cincinnati/Northern Kentucky Oakland International San Jose International Lambert-St. Louis International Sacramento County Pittsburgh International Airline Cost per Enplaned Passenger By Benchmark Airports 2014 ACI-NA Benchmarking Survey Reflecting 2013 Results FY 2015-16 CPE of $8.39 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 46
Non-Airline Revenue 47
Non-Airline revenues of $29.394 million, an increase of $647,397 or 2.3% Improvement in revenues per transaction - public parking and rental car Significantly higher Box Hangar occupancy Offset by lower Net Win percentage - gaming Lower cost recovery in Reimbursed Servicesdisposal fees Lower UAS Testing revenue offset by lower expenses RTAA Non-Airline Revenue NON-AIRLINE REVENUE FY 2014-15 Budget FY 2015-16 Budget Dollar Change Parking & Ground Trans $8,504,900 $8,975,800 $ 470,900 Auto Rental 5,879,900 6,267,600 387,700 Non-Terminal Rent 5,059,800 5,347,700 287,900 Baggage Handling System 1,720,826 1,644,603 (76,223) Gaming 1,125,400 1,014,800 (110,600) Retail 1,035,400 1,003,200 (32,200) Food and Beverage 885,800 885,800 --- Other Reimbursed Svc. 910,100 820,520 (89,580) Aircraft Fees-Reno 810,600 820,000 9,400 Terminal Rents, Other 831,700 785,100 (46,600) Advertising 662,900 660,000 (2,900) Stead 795,200 598,200 (197,000) Other Concessions 485,700 548,700 63,000 Miscellaneous 39,300 22,900 (16,400) GRAND TOTAL $28,747,526 $29,394,923 $647,397 48
FY 2015-2016 Expenditure Budget Proposed budget of $39.144 million is 1.5% higher than the prior year budget Proposed budget is 2.1% above the updated FY 2014-15 forecast Increase of $516,000 or 2.0% in Personnel Services BUDGET 2014-15 UPDATED FORECAST 2014-15 BUDGET 2015-16 DOLLAR CHANGE BUDGET FORECAST A B C C -A C - B Personnel Services $25,771,165 $25,496,524 $26,286,995 $515,830 $790,471 Utilities & Communications 2,862,700 2,885,317 2,919,063 56,363 33,746 Purchased Services 5,627,235 5,607,861 5,592,574 (34,661) (15,287) Materials & Supplies 1,905,619 1,884,327 1,909,125 3,506 24,798 Administrative Expenses 2,403,054 2,457,220 2,436,631 33,577 (20,589) Total $38,569,773 $38,331,249 $39,144,387 $574,614 $813,139 49
Outstanding Senior Debt and Ratios Outstanding Debt (as of 3/31/2015) Series: 2005 Principal Outstanding: $23.4 million Total Remaining Debt Service: $29.7 million Final Maturity: July 1, 2026 Annual Debt Service: $2.5 million Key Ratios - FY 2015 Debt per Enplaned Passenger: $18 Debt Service Coverage: 2.98x Only one series of senior lien bonds remain outstanding (Series 2005) Debt service is primarily paid for through parking revenues With a first call date of July 1, 2015, RTAA is looking to refinance through a direct loan/ private placement 50 50
Debt Service Overview In 2014-15, partial repayment of Subordinate Lien Notes of $2.913 million Direct Loan/ Private Placement Refinance of 2005 Bonds Estimate savings of $184,000 or $3.2 million over next 11 years Existing 2005 Debt Service 51
Debt Service Coverage Ratio Net revenues including pledged Passenger Facility Charges, as defined in an airports bond ordinance, divided by principal and interest requirements for the fiscal year. 52
FY 2015-16 Proposed Budget Key Benchmarks Financial Measurements FY 2014-15 Budget FY 2015-16 Proposed Budget Landing Fee per 1,000 lbs. units $2.93 $3.09 Average Terminal Rental Rate $62.45 $62.39 Net Revenue Available for Sharing * $178,700 $565,600 Airline Cost Per EPAX $8.15 $8.34 Net Cash Flow to RTAA Discretionary * $2.47 million $3.02 million Days Cash on Hand 344 Days 361 Days * Details of Net Revenue Available for Sharing and Net Cash Flow to RTAA contained in Appendix 53
Days Cash on Hand Unrestricted cash and investments divided by annual operating and maintenance expenditures and multiplied by 365. 54
Capital Improvement Update 55
FY 2015-16 Capital Improvements Project Name Estimated Cost Funding RNO Taxiway C and Connectors Reconstruction $9,123,874 93.75% FAA Grants; 6.25% General Purpose RTS Taxiway C Reconstruction & Edge Lighting 2,144,667 93.75% FAA Grants; 6.25% Special Fund RNO Digital Radio System Upgrade 1,526,440 42% PFC 68% General Purpose RNO Central Disposal Facility 1,500,000 Passenger Facility Charge RNO Airport Communication Center System 1,495,800 Passenger Facility Charge RNO FIDS and Terminal Paging Replacement 1,266,750 Passenger Facility Charge RNO Airfield Pavement Maintenance 829,100 General Purpose RNO Landside Pavement Maintenance 593,000 General Purpose RTS Nevada Army Guard Access Road, Ph. 1 531,150 Special Fund RNO Deicing Materials Storage Facility 380,000 Passenger Facility Charge RNO RAC Asphalt Rehabilitation - 1551 National 360,000 Customer Facility Charge Guard Way (Hertz) RNO RAC Asphalt Rehabilitation - 2555 Aviation Way 250,000 Customer Facility Charge RTS Building 7003 (FBO Office) Roof Replacement 160,000 Special Fund Grand Total $20,160,781 56
Future Development Beyond FY 2015-16 Reno-Tahoe - Airside Airfield Pavement Maintenance ARFF Vehicles Runway 16R Keel Section Southwest Cargo Apron Snow Removal Equipment Terminal Apron, Phase 18 Funding RTAA FAA Grant/ PFC FAA Grant FAA Grant/ PFC Backed Bonds PFC FAA Grant Reno-Tahoe Landside & Terminal Jet Bridge Replacement Landside Pavement Maintenance Passenger Sterile Area Exit Lane Rental Car Facility Renewal Terminal Elevator Replacement Third Party Cargo Facilities Third Party GA East Hangars Funding PFC RTAA FAA Grant CFC PFC Private Private Reno-Stead Airport Funding Concrete Apron FAA Grant Runway 8/26 Rehabilitation FAA Grant Land Infrastructure Private 57 57
Summary and Conclusion RTAA prudently manages its operations despite passenger traffic challenges Non-Airline Revenue is budgeted to increase and remain at two-thirds of total operating revenue Regional Economy and Land Development Opportunities Significant upswing CIP remains modest and does not require additional GARBs Airline CPE remains stable and at competitive levels RTAA continues to control operating costs and prudently manage its debt structure Senior Lien debt service coverage remains very strong at or above 2.9x coverage Liquidity is strong. Recent decrease due to prudent decisions to partially pre-pay $2.9 million of Subordinate Lien Notes and to keep Airline CPE at competitive levels. 58
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Appendix 60
Financial Overview (In Thousands) FY 2013-14 Actual FY 2014-15 Budget FY 2015-16 Budget Variance Forecast to Budget Operating Revenue Airline (Before Profit Sharing) $ 14,699 $ 15,159 $ 15,838 $ 679 Non-Airline 29,188 28,748 29,395 647 Non-Operating Revenue 1,697 1,638 1,630 (7) Total Revenue 45,586 45,545 46,863 1,319 O&M Expenditures (36,147) (38,570) (39,144) (575) Net Available for Debt Service 9,439 6,975 7,802 827 Debt Service after PFCs (4,583) (3,785) (3,663) 122 Net Revenue After Debt Service $ 4,856 $ 3,190 $ 4,055 $ 866 61
Financial Overview (In Thousands) FY 2013-14 Actual FY 2014-15 Budget FY 2015-16 Budget Variance Budget To Budget Net Revenue After Debt Service A $4,856 $3,190 $4,055 $866 Profit Sharing Calculation Gaming Revenue- 35% (463) (394) (355) 39 Capital Asset Repayment (1,864) (2,210) (2,729) (518) Profit Sharing Adjustments (762) (228) (79) 148 Net Revenue Available-Sharing 1,767 358 892 534 Airline Share 50% 50% 50% Airline Profit Sharing B 884 179 446 267 Net Revenue to RTAA A-B 3,973 3,011 3,609 599 Funds Committed to Rental Car (939) (545) (590) (44) Net Revenue to RTAA $ 3,033 $ 2,466 $ 3,019 $ 554 62
FY 2015-16 Budget by Division Operations/Public Safety and Maintenance represent 61% of the Budget 63
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