Financial Proposal for Gwinnett County Airport Briscoe Field

Financial Proposal for Gwinnett County Airport Briscoe Field

Financial Proposal For the Lease, Operation and Improvement RP039-11 of GWINNETT COUNTY AIRPORT BRISCOE FIELD Presented To Gwinnett County Board of Commissioners And Gwinnett County Department of Transportation Presented By Propeller Airports Briscoe Field, Inc. February 8, 2012

Table of Contents Title Page...i Table of Contents...ii Financial Letter of Commitment...iii Financial Proposal Documentation Basis for Financial Proposal...1 Financial Proposal...1 Financial Offer...3 Financial Proposal by the Numbers...5 Gross Revenue Sharing Payment Schedule...6

February 8, 2012 Ms. Shelley McWhorter Purchasing Associate III Gwinnett County Purchasing Office 75 Langley Drive Lawrenceville, Georgia 30046 Re: Financial Proposal Cover Letter / RFP 039-11 Dear Ms. McWhorter: Enclosed herewith is the Propeller Airports Briscoe Field, Inc. Financial Proposal in response to the Gwinnett County Board of Commissioner s Request for Proposals for a Public Private Partnership (PPP) (RP039-11) for the Lease, Operation and Improvement of Gwinnett County Airport Briscoe Field for the Gwinnett County Department of Transportation. This Financial Proposal is presented in the format requested in and by the RFP. The foundation of our proposal is a $110 million capital investment to redevelop Briscoe Field into a state-of-the-art general aviation airport which allows for commercial service as outlined in our Operational Proposal. In addition to the $110 million capital investment, and since Propeller will be partnering with the community, our financial proposal includes a revenue sharing component. Taking into consideration only the initial investment in capital improvements and the revenue share over the life of the lease, and depending on how the County structures a final agreement, Propeller s offering represents $170 million dollars directly to the County. Taking direct airport concessions sales tax into consideration, the proposal to the County climbs to $268 million. In addition, Propeller will reimburse the County for services provided by the County directly to the airport. These numbers above do not take into account the associated economic impact that will inevitably take place as has been demonstrated at passenger airports around the world. The true value to the County of this Financial Proposal is in the total economic impact that a commercial airport in Gwinnett County will provide. That economic impact will come from three very distinct categories: Direct Impact economic activity directly related to the airport operation and the provision of aviation services; Indirect Impact expenditures made off airport as a result of the use of the services the airport provides; Induced Impact comes from both direct and indirect impacts and relates to the circulation through the local economy of every direct and indirect dollar that comes to the community through the airport. 885 Third Avenue, 20th floor, New York, NY 10022

We estimate that with 2.5 million enplanements, the positive economic impact to the County will be approximately $2 billion annually. Of this projected $2 billion annual impact the County will receive significant revenue and budgetary benefits through increased payroll and its sales tax base, ad valorem taxes, land use fees and higher utilization of other county services, amounting to approximately $50 million annually. This economic stimulus created by privatizing Briscoe Field with air carrier service could be the largest opportunity for significant economic growth that will be available to the County over the next several decades. While Propeller Airports Briscoe Field, Inc. stands behind our proposal as presented in the Operational Proposal and this Financial Proposal, we believe that both documents represent a starting point for negotiations leading to a final agreement and the FAA s authorization for the privatization of the airport and commencement of air carrier service at the airport. Direct Impacts Induced Impacts Total Economic Impacts Indirect Impacts We stand ready to begin meetings with the County to turn this opportunity into reality. I personally certify that as Chairman of the Board of Directors and CEO of Propeller Airports, Inc., and Propeller Airports Briscoe Field, Inc. that I am authorized to submit these proposals on behalf of the Corporation and our team. Sincerely, Brett Smith Chairman and CEO Sworn to and subscribed before me this day of, 2012. Notary:

Financial Proposal Documentation Basis for Financial Proposal Propeller Airports Briscoe Field, Inc. s Financial Proposal is based on our intent to lease and operate Gwinnett County Airport Briscoe Field under the terms and conditions outlined in our Operational Proposal as follows: In a manner general and subject to the negotiated terms of the final agreement, Propeller Airports Briscoe Field, Inc. (PABF) proposes to lease for fifty (50) year the entire airport property initially as a general aviation airport but with the specific authorization granted in the final agreement to immediately begin those studies and determinations as may be required by the FAA and GDOT to achieve air carrier certification. Air carrier service may be commenced upon the approval of the FAA without further approval by the County. Without the authority to immediately initiate the studies and determinations required for air carrier certification, Propeller Airports Briscoe Field, Inc. will not be able to proceed with this proposal process. ( Note: This proposal is submitted with the understanding that the Board of Commissioners may approve the seeking of passenger services at any time. Otherwise, Propeller Airports would not have submitted a proposal to privatize the general aviation airport only. See: Section Part III.b.iii., p.18 of the RFP.) Financial Proposal The following Financial Proposal is submitted consistent with the Operational Proposal as noted above and as per the items listed in the RFP. Item I The amount, if any, of up-front payments to the County upon execution of the lease. Due to the capital intensive nature of this project (over $110 million) that Propeller Airports Briscoe Field, Inc. has outlined in the Operational Proposal, we do not envision any upfront fees to the County. The County presently operates Briscoe Field at breakeven, or slightly better than breakeven, and any income that is made is obligated to the airport and cannot be redirected by the County for other purposes. During the airport development and build-out phase which is projected to take place over the initial three years of the lease, Propeller Airports will manage and operate the airport at our expense and we do not envision any substantial net income being derived from such operations. Additionally, we are seeking to defer all payments as outlined in Item II for the first 36 months while the airport development and build-out take place with the exception of any payments related to the services below: Payment for any and all county services rendered in providing information during the transition period and for the initial 36 months, any review of materials, participation in any and all meetings by county staff and / or Board of Commissioners (as may be required); Payment for police and fire services to the point of airport certification for air carrier service or 36 months whichever occurs first; 1

County furnished utilities will be paid as a utility expense; County permitting and inspections as per the requirements of the various permitting divisions. Item II The percentage rate of the Share of Gross Revenues, if any, from all airport operations and related businesses and the schedule of such payments, as well as any contingencies and exclusions from the Gross Revenue calculations (see item vi below). Following the certification and authorization to initiate commercial air carrier passenger service and the start of air carrier service, Propeller Airports will pay annually in arrears to Gwinnett County 5% (five) percent of audited gross operating revenues with an annual minimum guarantee of $500,000 (five hundred thousand). For avoidance of doubt, Audited Gross Operating Revenue does not include State grants, Federal grants, and Passenger Facility Charges. Each year an accounting firm mutually acceptable to the County and PABF will certify that the Audited Gross Operating Revenue amounts are accurate, true, and correct. These payments are to be considered in lieu of any ad valorem tax payments or any real estate taxes or any other County tolls, fees and charges on any facility or land under lease or controlled by Propeller Airports Briscoe Field, Inc. Additionally, said amounts will be in lieu of payments for Lease and use of the entire airport property and ownership of all aviation easements. A complete schedule of all projected payments is included as an appendix to the Financial Proposal. Item III The Fixed Lease Payments amount or Minimum Guaranteed Lease Payment to the County, including Payment Schedule and / or Escalation Formula. All lease payments will be covered through the Gross Revenue sharing disbursements identified in Item II above. Item IV The amount, if any, of regular and / or periodic payments to the County with respect to the fees or other payments for the provision of County and Municipal services to the airport. There will be no separate payments to the County outside of the percent of Gross Revenue sharing identified in Item II above with the following exceptions: Charges for County furnished utilities will be paid as a utility expense; Charges for County permitting and inspections as per the requirements of permitting divisions; Charges for police and fire services which will be under a separate agreement. Ad valorem taxes and property taxes on property owned by airport tenants. Sales tax revenue payable to the County from various concession revenues (Parking, Food & Beverage, Rental Car, and Retail) that will be a direct result of a commercialized Briscoe Field, as well as sales tax on Jet Fuel. 2

Item V Any other source of payment to the County, if any. As has been identified in the Operational Proposal, Propeller Airports Briscoe Field, Inc. has proposed to lease the entire holdings of the airport for a period of 50 (fifty) years, and develop the airport as an air carrier passenger airport. The investment costs of development are currently estimated at $110 million from which the County will receive substantial economic benefit. In addition to the Gross Revenue sharing reflected in Item II the County will get, at no cost to the County, a new state-of-the-art passenger terminal, a parking facility, fuel farm, stronger repaved runways, taxiways, and a parking apron. A complete schedule of revenue streams to the County is located the appendix to this Financial Proposal. Item VI Any conditions attached to the fixed or variable rates and amounts of payments previously specified. The conditions applicable to the payments as previously specified are as follows: Propeller Airports must have full authority to convert Briscoe Field into a FAA FAR Part 139 commercially serviced airport; Gross Revenue Payments or the Minimum Guarantee as specified in Item II will not begin until commercial air service begins or year four (4) of the lease, whichever comes first. Financial Offer: Note: For all Present Value calculations shown in this section a 4% discount rate is utilized. Inflation is assumed to be at zero. a). The estimated Net Present Value to the County of the proposed monthly lease payments and/ or any other fixed payments, taking into consideration any contingencies or conditions in the Financial Offer, and/or apparent risks that may affect the ultimate value to the County of the Financial Offer, if any. Per Item III above, Propeller Airports is offering an annual 5% Gross Revenue Share Payment in lieu of any lease payments or other fixed payment. NPV values for this revenue stream are shown in (b) below. b). Potential and likely net present value to the County of the proposed share of gross revenues, if any. Per Item II of the Financial Proposal, Propeller Airports is offering an annual 5% (five percent) Gross Revenue Share Payment paid annually, in arrears, with an annual minimum guarantee of $500,000 (five hundred thousand). This payment will begin upon commencement of commercial air service at Briscoe Field, or year four of the land lease, whichever comes first. The projected total Gross Revenue Share Payments the County would receive directly from Propeller Airports over the life of the 50-year lease is $59,960,000. The NPV projected value of the Gross Revenue Share Payments is $23,236,037. 3

The County is guaranteed with an annual $500,000 (five hundred thousand) minimum payment as outlined in item ii. The projected total value of receiving only the minimum guarantee over the life of the 50-year lease is $23,500,000. The NPV value of the minimum guarantee is $9,353, 547. c). The likely economic value of the Proposal to the County and the State of any taxes and other fees for services that may be derived from the Airport and other Airport related businesses, if any, as a result of the implementation of the Respondent s proposal. As stated in both the Operational and herein the Financial Proposal, the positive economic impact generated by a commercialized Briscoe Field is enormous. it is expected that the direct impact of our proposal will generate substantial tax revenue for both the County of Gwinnett as well as the State of Georgia. The tax revenue potential for airport services and concessions are shown below. Concessionary spending brought on from commercial service over the life of the lease is forecasted to be approximately $4.9 Billion which equates to Sales Tax Revenue for the County of $98 Million and for the State $196 Million. A redeveloped, commercially served Briscoe Field will also generate fuel sales, both for commercial and general aviation aircraft, of more than $4.5 Billion, providing approximately $183 Million of additional tax revenue to the State. With the improved and upgraded facilities at Briscoe Field, and Propellers general aviation marketingplan, it is reasonable to expect an increase in private and business general aviation aircraft who will call Briscoe Field and Gwinnett County home. This expansion would have the effect of increasing the annual ad valorem tax base for the County as the chart below shows. Aircraft Aircraft Value Ad Valorem Global 5000 $45M $576,000 Challenger $24M $307,200 Pilatus PC-12 $4M $51,200 GwiNNeTT RFP: BRiSCOe FieLD 4

Financial Proposal by the Numbers To the County: Total Investment/Revenue Total PV of Rev Redeveloped Briscoe Field Gross Revenue Share From Propeller Airport Concession Sales Tax Total Benefit to County (Airport Only) $ 110,000,000 $ 110,000,000 $ 59,960,000 $ 23,236,037 $ 98,045,404 $ 38,184,712 $ 268,005,404 $ 171,420,748 To the State: Total Investment/Revenue Total PV of Rev Airport Concession Sales Tax Aviation Fuel Sales Tax Total Benefit to State (Airport Only) $ 196,090,808 $ 76,369,424 $ 182,993,292 $ 72,013,406 $ 379,084,100 $ 148,382,829 5

Gross Revenue Sharing Payment Schedule: Total GRS to County $ 59,960,000 Total PV of GRS to County $ 23,236,037 Total GRS Min Guar to County $ 23,500,000 Total PV of GRS Min Guar to County $ 9,353,547 Lease Year Year GRS PV of GRS GRS Min Guar 0 2012 1 2013 2 2014 3 2015 4 2016 625,000 534,253 500,000 5 2017 880,000 723,296 500,000 6 2018 1,135,000 897,007 500,000 7 2019 1,265,000 961,296 500,000 8 2020 1,285,000 938,937 500,000 9 2021 1,285,000 902,824 500,000 10 2022 1,285,000 868,100 500,000 11 2023 1,290,000 837,959 500,000 12 2024 1,290,000 805,730 500,000 13 2025 1,290,000 774,741 500,000 14 2026 1,290,000 744,943 500,000 15 2027 1,295,000 719,068 500,000 16 2028 1,295,000 691,411 500,000 17 2029 1,295,000 664,818 500,000 18 2030 1,295,000 639,248 500,000 19 2031 1,300,000 617,035 500,000 20 2032 1,300,000 593,303 500,000 21 2033 1,300,000 570,484 500,000 22 2034 1,300,000 548,542 500,000 23 2035 1,305,000 529,473 500,000 24 2036 1,305,000 509,109 500,000 25 2037 1,305,000 489,527 500,000 26 2038 1,305,000 470,699 500,000 27 2039 1,310,000 454,330 500,000 28 2040 1,310,000 436,855 500,000 29 2041 1,310,000 420,053 500,000 30 2042 1,310,000 403,897 500,000 31 2043 1,310,000 388,363 500,000 32 2044 1,310,000 373,426 500,000 33 2045 1,310,000 359,063 500,000 34 2046 1,310,000 345,253 500,000 35 2047 1,310,000 331,974 500,000 36 2048 1,310,000 319,206 500,000 37 2049 1,310,000 306,929 500,000 38 2050 1,310,000 295,124 500,000 39 2051 1,310,000 283,773 500,000 40 2052 1,310,000 272,859 500,000 41 2053 1,310,000 262,364 500,000 42 2054 1,310,000 252,273 500,000 43 2055 1,310,000 242,570 500,000 44 2056 1,310,000 233,241 500,000 45 2057 1,310,000 224,270 500,000 46 2058 1,310,000 215,644 500,000 47 2059 1,310,000 207,350 500,000 48 2060 1,310,000 199,375 500,000 49 2061 1,310,000 191,707 500,000 50 2062 1,310,000 184,334 500,000 6

Gross Revenue Sharing Payment Schedule: Total STR to County $ 98,045,404 Total PV of STR to County $ 38,184,712 Total STR to State $ 196,090,808 Total PV of STR to State $ 76,369,424 PV Min Guar Lease Year Year County STR PV of County STR State STR 0 2012 1 2013 2 2014 3 2015 427,402 4 2016 1,063,399 908,998 2,126,798 410,964 5 2017 1,488,759 1,223,651 2,977,518 395,157 6 2018 1,914,119 1,512,756 3,828,237 379,959 7 2019 2,126,798 1,616,192 4,253,597 365,345 8 2020 2,126,798 1,554,031 4,253,597 351,293 9 2021 2,126,798 1,494,260 4,253,597 337,782 10 2022 2,126,798 1,436,789 4,253,597 324,790 11 2023 2,126,798 1,381,528 4,253,597 312,299 12 2024 2,126,798 1,328,392 4,253,597 300,287 13 2025 2,126,798 1,277,300 4,253,597 288,738 14 2026 2,126,798 1,228,173 4,253,597 277,632 15 2027 2,126,798 1,180,936 4,253,597 266,954 16 2028 2,126,798 1,135,515 4,253,597 256,687 17 2029 2,126,798 1,091,841 4,253,597 246,814 18 2030 2,126,798 1,049,847 4,253,597 237,321 19 2031 2,126,798 1,009,469 4,253,597 228,193 20 2032 2,126,798 970,643 4,253,597 219,417 21 2033 2,126,798 933,311 4,253,597 210,978 22 2034 2,126,798 897,414 4,253,597 202,863 23 2035 2,126,798 862,898 4,253,597 195,061 24 2036 2,126,798 829,710 4,253,597 187,558 25 2037 2,126,798 797,798 4,253,597 180,345 26 2038 2,126,798 767,113 4,253,597 173,408 27 2039 2,126,798 737,609 4,253,597 166,739 28 2040 2,126,798 709,239 4,253,597 160,326 29 2041 2,126,798 681,961 4,253,597 154,159 30 2042 2,126,798 655,732 4,253,597 148,230 31 2043 2,126,798 630,511 4,253,597 142,529 32 2044 2,126,798 606,261 4,253,597 137,047 33 2045 2,126,798 582,943 4,253,597 131,776 34 2046 2,126,798 560,522 4,253,597 126,708 35 2047 2,126,798 538,964 4,253,597 121,834 36 2048 2,126,798 518,234 4,253,597 117,148 37 2049 2,126,798 498,302 4,253,597 112,643 38 2050 2,126,798 479,137 4,253,597 108,310 39 2051 2,126,798 460,708 4,253,597 104,145 40 2052 2,126,798 442,989 4,253,597 100,139 41 2053 2,126,798 425,951 4,253,597 96,287 42 2054 2,126,798 409,568 4,253,597 92,584 43 2055 2,126,798 393,815 4,253,597 89,023 44 2056 2,126,798 378,669 4,253,597 85,599 45 2057 2,126,798 364,105 4,253,597 82,307 46 2058 2,126,798 350,100 4,253,597 79,141 47 2059 2,126,798 336,635 4,253,597 76,097 48 2060 2,126,798 323,688 4,253,597 73,171 49 2061 2,126,798 311,238 4,253,597 70,356 50 2062 2,126,798 299,267 4,253,597 7

Gross Revenue Sharing Payment Schedule: Total STR to State $ 182,993,292 Total PV of STR to State $ 72,013,406 PV of State STR Lease Year Year State STR PV of State STR 0 2012 1 2013 418,746 402,640 2 2014 431,308 398,769 3 2015 444,248 394,934 1,817,996 4 2016 2,146,105 1,834,499 2,447,303 5 2017 2,835,244 2,330,364 3,025,511 6 2018 3,524,795 2,785,697 3,232,384 7 2019 3,877,064 2,946,250 3,108,061 8 2020 3,892,065 2,843,893 2,988,521 9 2021 3,907,515 2,745,368 2,873,578 10 2022 3,923,428 2,650,528 2,763,055 11 2023 3,939,819 2,559,232 2,656,784 12 2024 3,939,819 2,460,800 2,554,600 13 2025 3,939,819 2,366,153 2,456,346 14 2026 3,939,819 2,275,148 2,361,871 15 2027 3,939,819 2,187,642 2,271,030 16 2028 3,939,819 2,103,502 2,183,683 17 2029 3,939,819 2,022,598 2,099,695 18 2030 3,939,819 1,944,806 2,018,937 19 2031 3,939,819 1,870,005 1,941,286 20 2032 3,939,819 1,798,082 1,866,621 21 2033 3,939,819 1,728,925 1,794,828 22 2034 3,939,819 1,662,428 1,725,796 23 2035 3,939,819 1,598,488 1,659,419 24 2036 3,939,819 1,537,008 1,595,596 25 2037 3,939,819 1,477,892 1,534,227 26 2038 3,939,819 1,421,050 1,475,218 27 2039 3,939,819 1,366,395 1,418,479 28 2040 3,939,819 1,313,841 1,363,922 29 2041 3,939,819 1,263,309 1,311,463 30 2042 3,939,819 1,214,720 1,261,022 31 2043 3,939,819 1,168,000 1,212,522 32 2044 3,939,819 1,123,077 1,165,886 33 2045 3,939,819 1,079,882 1,121,044 34 2046 3,939,819 1,038,348 1,077,927 35 2047 3,939,819 998,411 1,036,468 36 2048 3,939,819 960,011 996,604 37 2049 3,939,819 923,087 958,273 38 2050 3,939,819 887,584 921,417 39 2051 3,939,819 853,446 885,978 40 2052 3,939,819 820,621 851,902 41 2053 3,939,819 789,059 819,136 42 2054 3,939,819 758,710 787,631 43 2055 3,939,819 729,529 757,337 44 2056 3,939,819 701,470 728,209 45 2057 3,939,819 674,491 700,201 46 2058 3,939,819 648,549 673,270 47 2059 3,939,819 623,605 647,375 48 2060 3,939,819 599,620 622,476 49 2061 3,939,819 576,558 598,535 50 2062 3,939,819 554,382 8

Commercial operations at Briscoe make sense. It would create more jobs, more economic growth and greater choice of travel. There is no question that this would be good for Gwinnett. - Hollis Harris, Former President, Delta Air Lines new york - atlanta - dublin