agenda reno-tahoe airport authority finance & … · advertising/marketing support for new...

BOARD OF TRUSTEES PRESIDENT/CEO **** Shaun Carey, Chair Marily M. Mora, A.A.E.

** Lisa Gianoli, Vice Chair EXECUTIVE VICE PRESIDENT/COO **** Carol Chaplin, Secretary Dean E. Schultz, A.A.E.

∗ Jenifer Rose, Treasurer GENERAL COUNSEL Nat Carasali Ann Morgan, Fennemore Craig

*** Daniel Farahi CLERK OF THE BOARD *** Richard Jay Claire Johnson Jessica Sferrazza

Art Sperber * 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, February 6, 2018 9:00 a.m. LOCATION: Reno-Tahoe International Airport Administrative Offices, Conference Rooms A/B Reno, Nevada Items 2 and 5 are action items for the Committee to consider. The Committee may discuss a matter when it is brought up, but no action may be taken on it unless it has been specifically included on an agenda as an action item. AGENDA:

1. Roll Call

2. Approval of Meeting Minutes from January 9, 2018

3. Public Comment (Limited to 3 Minutes per Person)

4. Items Provided to the Finance & Business Development Committee for Information:

a. Investment Portfolio Report for the Quarter Ended December 2017 b. Review of Operating Results through December 2017 c. Review of Contracts and Professional Service Agreements through January 2018 d. Review of Legal Expenses through December 2017 e. Review of Board Budget through December 2017 f. Review of Legislative Consultants Budget through December 2017 g. Review of Budget Transfers (if any)

5. Items to be Presented to the Finance and Business Development Committee for

Review and Recommendation to the Board:

a. #18(02)-04 Authorization for the President/CEO to Award a Contract for the Purchase of One Dual Engine Four-Wheel Steer, 6,000 Ton Per

Finance & Business Development Committee Meeting Agenda February 6, 2018 of 3

Hour Snow Blower, to J.A. Larue, Inc., in the Amount of $559,948, and Purchase of an Extended Warranty for $8,100

b. #18(02)-05 Acceptance of the Comprehensive Annual Financial Report for Fiscal Year 2016-2017 as Amended by the Revised Statement on Auditing Standards 114 Communication Letter

c. #18(02)-06 Authorization for the President/CEO to Award a 16-Month

Extension of the Existing Warranty and Maintenance Services Agreement for the Parking Revenue Control and Ground Transportation Management Systems at Reno-Tahoe International Airport, with Scheidt & Bachmann USA, in the Amount of $376,588, Exempt from Competitive Bidding Pursuant to Nevada Revised Statute 332.115.1 (a, c)

d. #18(02)-11 Adoption of Resolution No. 535: Amending Resolution No. 524 -

A Resolution Adopting Policy No. 600-007 to Provide Financial Incentives/Inducements to Scheduled Passenger Airlines and/or Air Cargo Carriers, to Update the Policy to Increase the Advertising/Marketing Support for New Carriers and New Domestic and International Routes

6. Items to be Presented to the Finance & Business Development Committee for

Approval:

a. None.

7. Items to be Presented to the Finance & Business Development Committee for Discussion:

a. None.

8. General Member Comments, Questions and Items for Future Committee Meetings 9. Public Comment (Limited to 3 Minutes per Person)

10. 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, 89510 or 775-328-6410. 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 89510 or by calling (775) 328-6410 prior to the meeting date.

Finance & Business Development Committee Meeting Agenda February 6, 2018 of 3 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

*** These draft minutes have not yet been approved and are subject to revision at the next regularly scheduled meeting. ***

RENO-TAHOE AIRPORT AUTHORITY BOARD OF TRUSTEES FINANCE AND BUSINESS DEVELOPMENT COMMITTEE

Minutes from the Meeting January 9, 2018

9:00 a.m.

In Attendance: Jenifer Rose, Trustee* Lisa Gianoli, Trustee*

Richard Jay, Trustee* Daniel Farahi, Trustee* Carol Chaplin, Trustee** Ann Morgan, Fennemore Craig Marily Mora, President/CEO

Dean Schultz, Executive Vice President/COO Rick Gorman, Chief Financial Officer Tina Iftiger, Vice President of Airport Economic Development Leah Williams, Manager of Accounting

Holly Luna, Manager of Purchasing & Materials Management Lora Robb, Senior Manager of Properties Patrick North, Senior Internal Auditor

Ken Moen, Property Specialist II Audelia Esquivel, Administrative Assistant II Chris Lintag, Guardian Flight Nathan Ward, Guardian Flight Lauren Walson, Darktrace Christopher Coppock, Darktrace * Denotes Finance Committee member ** Denotes Finance Committee alternate

TOPICS DISCUSSED:

1. ROLL CALL

Roll was called.

2. APPROVAL OF MEETING MINUTES FROM DECEMBER 12, 2017 A motion was made by Trustee Jay, seconded by Trustee Gianoli, and the

Committee unanimously approved the minutes from December 12, 2017 Finance and Business Development Committee meeting.

3. PUBLIC COMMENT None.

RTAA Finance and Business Development Committee Minutes of January 9, 2017 Meeting Page 2 of 5

4. ITEMS PROVIDED TO THE FINANCE AND BUSINESS DEVELOPMENT COMMITTEE FOR INFORMATION

a. Review of Operating Results through November 2017

Staff presented an overview of the Operating Results through November 2017 Trustee Farahi inquired on the numbers for the first operating weeks of the newly opened Escape Lounge RNO. Staff stated that while no concession report is due yet, Escape Lounge management informed staff that the volume of guests was double the initial forecast. Staff also mentioned that Escape Lounge’s affiliation with American Express Platinum, visible signage, and the holiday season is helping to drive those numbers higher.

b. Review of Contracts and Professional Service Agreements through December 2017 c. Review of Legal Expenses through November 2017 d. Review of Board Budget through November 2017 e. Review of Legislative Consultants Budget through November 2017 f. Review of Budget Transfers (None)

The Committee had no questions regarding the remaining reports outlined above.

5. ITEMS PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT

COMMITTEE FOR REVIEW AND RECOMMENDATION TO THE BOARD a. #18(01)-01 AUTHORIZATION FOR THE PRESIDENT/CEO TO

NEGOTIATE FINAL TERMS AND EXECUTE A NEW 3-YEAR COMMERCIAL HANGAR LEASE AND ONE 2-YEAR OPTION TO EXTEND, LOCATED AT THE RENO-TAHOE INTERNATIONAL AIRPORT, BETWEEN GUARDIAN FLIGHT, LLC AND THE RENO-TAHOE AIRPORT AUTHORITY, FOR A MINIMUM CONTRACT VALUE OF $279,272.16 Staff gave a presentation recommending the Authorization for the President/CEO to Negotiate Final Terms and Execute a New 3-Year Commercial Hangar Lease and One 2-Year Option to Extend, Located at the Reno-Tahoe International Airport, Between Guardian Flight, LLC and the Reno-Tahoe Airport Authority, for a Minimum Contract Value of $279,272.16. Trustee Jay questioned what Consumer Price Index (CPI) is used to determine tenant rents. Staff stated that the All Urban CPI is utilized. Trustee Jay asked why that particular index is utilized and inquired whether the potential increase is capped at 3% annually. Staff stated that the All Urban CPI tends to be more balanced and less volatile than other CPI’s, i.e. the Bay Area. The lease does


include a 3% annual cap in order to provide tenants upward rent protection and stability as they operate their business. Trustee Gianoli mentioned that this approach is good for the RTAA and the tenants. A motion was made by Trustee Gianoli, seconded by Trustee Jay, and the Committee unanimously recommended this item [#18(01)-01] go to the Board for approval at the upcoming Board meeting.

b. #18(01)-02 AUTHORIZATION FOR THE PRESIDENT/CEO TO NEGOTIATE FINAL TERMS AND EXECUTE A NEW 5-YEAR NON-COMMERCIAL HANGAR LEASE AND ONE 5-YEAR OPTION TO EXTEND, LOCATED AT THE RENO-STEAD AIRPORT, BETWEEN TACTICAL AIR SUPPORT, INC. AND THE RENO-TAHOE AIRPORT AUTHORITY, FOR A MINIMUM CONTRACT VALUE OF $731,880

Staff gave a presentation recommending the Authorization for the President/CEO to Negotiate Final Terms and Execute a New 5-Year Non-Commercial Hangar Lease and One 5-Year Option to Extend, Located at the Reno-Stead Airport, Between Tactical Air Support, Inc. and the Reno-Tahoe Airport Authority, for a Minimum Contract Value of $731,880. The Committee had no questions regarding this item. A motion was made by Trustee Jay, seconded by Trustee Rose, and the Committee unanimously recommended this item [#18(01)-02] go to the Board for approval at the upcoming Board meeting.

c. #18(01)-03 AUTHORIZATION FOR THE PRESIDENT/CEO TO AWARD A CONTRACT FOR A SOFTWARE LICENSE AND COMPUTER EQUIPMENT LEASE, WITH DARKTRACE, IN THE AMOUNT OF $117,000, FOR THE ACQUISITION OF A CYBER-SECURITY INTRUSION DETECTION SYSTEM, EXEMPT FOR COMPETITIVE BIDDING PURSUANT TO NEVADA REVISED STATUTE 332.115.1 (g, h) Staff gave a presentation recommending the Authorization for the President/CEO to Award a Contract for a Software License and Computer Equipment Lease, with Darktrace, in the amount of $117,000, for the Acquisition of a Cyber-Security Intrusion Detection System, Exempt from Competitive Bidding Pursuant to Nevada Revised Statute 332.115.1 (g, h). Being that Darktrace is a relatively new company, Trustee Rose inquired about the company’s track record in dealing with major breaches and ability to protect clients from data breaches. Staff stated that while Darktrace is not able to share specific information on how their software works, their clients include the Cities


of Las Vegas and Irvine. Staff mentioned a recent incident within the RTAA, in which Darktrace software, installed on a trial basis, detected a threat received by emails and within a matter of seconds prevented the threat from spreading. Trustee Rose asked how long the City of Las Vegas has been a client of Darktrace. Christopher Coppock with Darktrace stated that the City of Las Vegas has been a client since 2015 and recently expanded their coverage to other aspects of the City’s business, such as their water purification system. Mr. Coppock also mentioned that the Cities of Irvine, CA and Auburn, CA, as well C-Trans Public Transit in the State of Washington are also clients. Trustee Jay questioned what the greatest threat is as far as cyber security is concerned. Staff stated that threats change according to trends at the time and mentioned that cyber extortion is on the rise. Staff mentioned that this type of extortion takes files hostage and holds the files in demand for money. In addition, other types of extortion are on the rise such as terror threats or threats based on shame or embarrassment. Trustee Rose inquired as to what type of security program the RTAA was using prior to using Darktrace. Staff stated that Darktrace is not replacing any other product; instead including Darktrace will provide additional protection. Trustee Gianoli mentioned that the persons behind cyber threats and phone scams are becoming increasingly believable. Staff stated that there are many call centers in existence with hundreds or thousands of employees ready to swindle people out of their money. Staff also stated that cyber threats and phone scams have become a $400 billion annual industry.

A motion was made by Trustee Farahi, seconded by Trustee Jay, and the Committee unanimously recommended this item [#18(01)-03] go to the Board for approval at the upcoming Board meeting.

6. ITEMS PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT COMMITTEE FOR APPROVAL

None. 7. ITEMS PRESENTED TO THE FINANCE AND BUSINESS DEVELOPMENT

COMMITTEE FOR DISCUSSION a. Fiscal Year 2018-2019 Insurance Renewal Process Review

Staff gave a presentation of the Fiscal Year 2018-2019 Insurance Renewal Process.


Trustees Rose and Gianoli mentioned that the proposed insurance renewal process sounded extremely reasonable and struck a good balance between the insurance brokers and the RTAA. Trustee Farahi questioned the stability of insurance costs over the last 5 to 10 years. Staff mentioned that the rates have remained relatively stable and that part of that stability may have to do with the fact that the RTAA has a low claims history. Therefore, the RTAA is viewed as a good insurance risk. Trustee Farahi asked if requesting bids annually on the plans that the RTAA is competitively bidding would result in locking in lower premiums. Staff stated it is unlikely the effort will result in lower premiums; however, the recommended approach will confirm this forecast and meet the requirements of the Local Government Purchasing Act.

8. GENERAL MEMBER COMMENTS, QUESTIONS AND ITEMS FOR FUTURE COMMITTEE MEETINGS

None.

9. PUBLIC COMMENT None.

10. ADJOURNMENT The meeting was called to order at 9:03 a.m. and was adjourned at 10:02 a.m.

JR: RG/ae

*** These draft minutes have not yet been approved and are subject to revision at the next regularly scheduled meeting. ***

Administrative Report Reno-Tahoe Airport Authority

Date: January 31, 2018 Administrative Report # 06-18 To: Finance and Business Development Committee Thru: Marily Mora, A.A.E., President/CEO From: Rick Gorman, Chief Financial Officer Leah Williams, Manager of Accounting Subject: INVESTMENT REPORT- EXECUTIVE SUMMARY FOR THE 2ND

QUARTER ENDED DECEMBER 31, 2017

BACKGROUND Pursuant to the Reno-Tahoe Airport Authority (RTAA) investment policy, a quarterly investment report is to be submitted to the Finance and Business Development Committee reporting on the current portfolio status in terms of composition, maturity and rates of return. DISCUSSION It is the policy of RTAA to invest funds in a manner that will provide market rates of return with high standards of safety and liquidity. While meeting the daily cash flow needs of the Authority, investments must conform to all Nevada Revised Statutes and the Authority’s investment policy governing the investment of public funds. The primary objectives, in order of priority are safety, liquidity, and yield. Attached is the Investment Report-Executive Summary prepared by Government Portfolio Advisors for the second quarter of Fiscal Year 2017-2018 ending December 31, 2017.

Executive Summary Quarter Ending 12/31/17

Prepared by: Government Portfolio Advisors [email protected]

(503) 248-9973

http://www.gpafixedincome.com/

￭￭￭￭

Quarter End Commentary ............................................................................................................................................................... 1 Account Summary ........................................................................................................................................................................... 2 Accrual Earnings and Activity Report .............................................................................................................................................. 3 Compliance Report ......................................................................................................................................................................... 4 Compliance Report ......................................................................................................................................................................... 5 Distribution Report .......................................................................................................................................................................... 6 RTAA Strategy ................................................................................................................................................................................ 7 Disclaimer .........................................................................................................................................................................................8

http://www.gpafixedincome.com/

GPA QUARTERLY OBSERVATIONS: ENDING DECEMBER 31, 2017

Market Commentary Market Outlook

Market Yields: Interest rates in the short end of the curve continued to

rise steadily during the fourth quarter of 2017. Continued strength in

the economy, jobs and the passage of a major tax reform bill have

paved the way to expected interest rate hikes in the future. The Dow

Jones gained 447 points in the quarter after gaining 1,742 points in the

previous quarter. The 2-year Treasury increased 39 basis points and 5-

year notes increased 26 basis points during the quarter. The 2-year to 5-

year spread flattened from 45 basis points to 32 basis points.

FOMC: As expected, the Fed raised rates by 25 basis points from the

range of 1% to 1.25% to a new Fed Funds target range of 1.25% to 1.50%.

This is the fifth tightening since December 2015. In addition to raising

the Fed Funds target level, they also raised their economic forecast for

2018 and reiterated their expectations for three additional hikes over

the next four quarters. There were two dissents to hiking the rate at

this quarter’s meeting. Regarding inflation, the Fed said that the

“near-term risks to the economic outlook appear roughly balanced, but

the Committee is monitoring inflation developments closely.” The Fed

Funds futures are currently pricing in an 82% chance of a rate hike at

the 3/21/18 meeting.

Employment: The unemployment rate dipped to a 17 year low of 4.1%.

Total nonfarm payrolls were strong, with the only decrease in

September which was attributed to the effects of hurricanes Harvey and

Irma. The drop in September was followed by increases of 261,000 and

228,000 in October and November respectively.

GDP: Real GDP increased at an annual rate of 3.2% in the third

quarter, according to the “third” estimate. This is compared to the

second quarter of 2017 increase of 3.1%. GDP growth in the previous

year was 2.1%. The estimate for fourth quarter GDP growth is an

increase of 2.4% mainly due to weakness in consumer spending.

Fed Funds: Interest rate forecasts point to three more rate hikes

this year while the market has priced in two. Provided that the

economy continues to perform about as expected, most participants

anticipate that gradual increases in the Fed Funds rate will continue.

2 year: The 2 year Treasury note is forecasted by over 80 economists

contributing to Bloomberg to trade at 1.99%, 2.17%, 2.31%, and 2.44%

for the end of each of the next four quarters, higher expectations

than last quarter.

Oil: Crude oil began the quarter at 51.67 and finished at 60.42.

Portfolio Positioning: GPA is recommending that portfolios

maintain a defensive posture due to expectations of higher interest

rates. While higher rates will eventually result in more attractive

portfolio yields, we must be cautious of the timing and magnitude of

the expected moves in rates. As a result of our expectations for

higher rates, we are positioning portfolio durations to approximate

90% of their respective benchmark durations. This balance will help

capture higher portfolio yields due to higher interest rates while

reducing the negative impact to fixed income prices from higher

rates.

Quarterly Yield Change

3/31/17 6/30/17 9/30/17 12/31/17

3-month

bill

.75 1.01 1.05 1.38

2- year

note

1.26 1.38 1.49 1.88

5 -year

note

1.92 1.89 1.94 2.20

10- year

note

2.39 2.30 2.33 2.41

Sources: Bloomberg

Economist’s Survey Projections for RatesEconomist’s Survey Projections

Q1-18 Q2-18 Q3-18 Q4-18

Fed

Funds

1.65 1.90 2.05 2.20

2 Year 1.99 2.17 2.31 2.44

10 year 2.61 2.73 2.82 2.90

Q1-18 Q2-18 Q3-18 Q4-18

Real GDP 2.80 2.70 2.50 2.40

CPI (YOY%) 1.90 2.30 2.30 2.10

Unemployment 4.00 4.00 3.90 3.90

1

RTAA Total Funds US Dollar 12/31/2017 logo.jpg Account Summary - SetFixed Income Allocation

Security Type Market Value % Assets

US Agency (USD) 27,977,904.27 35.9

US Treasury (USD) 16,303,817.90 20.9

LGIP State Pool (USD) 10,000,870.71 12.8

Bank or Cash Deposit (USD) 17,452,388.44 22.4

County Pool (USD) 5,107,175.13 6.6

Commercial Paper (USD) 996,620.00 1.3

Fixed Income Total 77,838,776.45 100.0

Par Value 78,085,781

Market Value 77,838,776.45

Amortized Book Value 78,078,711.23

Unrealized Gain/Loss -239,934.78

Estimated Annual Cash Flow 951,142.94

Fixed Income Totals

Book Yield 1.28

Maturity 0.94

Coupon 1.22

Moody Aaa

S&P AA+

Weighted Averages

RTAA Total Funds

Account Summary12/31/2017

2

RTAA Total Funds

Accrual Earnings and Activity 12/31/2017

US Dollar

Cost Basis Summary Accrual Earnings SummaryQuarter to Date

Ending 12/31/2017

FiscalYear-to-Date6/30/2017

Beginning Amortized Cost 74,298,380.57 72,110,598.39

Investment Purchases 9,030,375.53 29,141,520.86

Investment Maturities/Sells/Calls (5,750,000.00) (12,748,000.00)

Amortization 6,411.95 10,565.60

Change in Cash Equivalents 493,543.18 (10,435,973.62)

Realized Gains / Losses 0.00 0.00

Ending Amortized Costs 78,078,711.23 78,078,711.23

Quarter to DateEnding

12/31/2017


Amortization/Accretion 6,411.95 10,565.60

Interest Earned 227,624.08 438,992.63

Realized Gain (Loss) 0.00 0.00

Total Income 234,036.03 449,558.23

Average Portfolio Balance 77,191,807.30 74,427,736.19

Earnings Yield 1.20% 1.20%

MarketValue Summary Interest Earnings SummaryAs of

12/31/2017Ending Market Value 77,838,776.45

Unrealized Gain/Loss (239,934.78)

Quarter to DateEnding

12/31/2017


Beginning Accrued Interest 108,837.14 74,520.04

Coupons Paid 225,670.70 446,124.69

Purchased Accrued Interest (35,823.82) (105,242.19)

Sold Accrued Interest 12,890.33 38,906.17

Ending Accrued Interest 133,724.01 133,724.01

Interest Earned 227,624.08 438,992.63

3

Compliance ReportPolicy 2017 | 12/31/2017

RTAA Total Funds

Investment Policy Compliance OverviewPolicy

Requirement

% of Total

Accumulated

Portfolio

Allocation Within Limits S&P Moodys

Under 30 days 10% 30% 23,706,492$ Yes Muni's AA Aa2 AA

Under 1 year 25% 62% 48,426,260$ Yes MMkt AA Aa2 AA

Under 5 years 100% 100% 77,838,776$ Yes C P A-1 P-1 F1

0% -$

Maximum Weighted Average Maturity 2 0.94 Yes

Maximum Callable Securities 25% 15% 11,418,982$ Yes

Maximum Single Maturity 5 Years 4.74 Yes

Asset Allocation DiversificationMaximum Policy

AllocationIssuer Constraint

Percentage of

PortfolioMarket Value

% Within

Limits

Ratings

Compliance

Issuer

Compliance

US Treasury Securities 100% 20.95% 16,303,818$ Yes

US Agency Primary Securities 100% 35.94% 27,977,904$ Yes

FHLB 35% 6.65% 5,174,614$ Yes

FNMA 35% 2.54% 1,975,330$ Yes

FHLMC 35% 22.17% 17,253,962$ Yes

FFCB 35% 4.59% 3,573,998$ Yes

US Agency Secondary Securities 10% 5% 0.00% -$

Municipal Bonds 30% 5% 0.00% -$

Certificates of Deposit 50% 10% 5.46% 4,246,654$ Yes Yes Yes

Commercial Paper 20% 5% 1.28% 996,620$ Yes Yes Yes

Bankers Acceptances 20% 5% 0.00% -$

Demand Deposit/Savings 50% 16.97% 13,205,735$ Yes Yes Yes

Money Market Mutual Funds 50% 25% 0.00% -$

Local Government Investment Pool 50% 12.85% 10,000,871$ Yes ** **

Washoe County Investment Pool 50% 6.56% 5,107,175$ Yes ** **

Total 100% 77,838,776$

* FDIC or collateralized

** Ratings & Issuer restrictions do not apply to pool funds

Policy states ONE rating meets requirement

4

Compliance ReportPolicy 2017 | 12/31/2017

RTAA Total Funds

Strategy Compliance Overview

Name Par AmountTotal Adjusted

CostMarket Value Unrealized Gain/Loss

Yield At

CostEff Dur Bench Dur Benchmark

RTAA-CFC 5,297,298$ 5,295,126$ 5,291,731$ (3,395)$ 1.10 0.37 1.00 BofA Merrill 0-2 Year Treasury

RTAA-Consent 1,026,305$ 1,026,305$ 1,026,581$ 277$ 1.34 0.22 1.00 BofA Merrill 0-2 Year Treasury

RTAA-Debt Service 2,013,506$ 2,012,166$ 2,010,929$ (1,237)$ 1.28 0.37 0.10 Cash

RTAA-Fuel Tax 182,152$ 182,152$ 182,152$ -$ 1.05 0.04 0.10 Cash

RTAA-General 27,972,645$ 27,955,329$ 27,837,649$ (117,680)$ 1.37 1.06 1.40 BofA Merrill 0-3 Treasury

RTAA-O&M Reserve 7,225,673$ 7,237,466$ 7,195,676$ (41,790)$ 1.56 1.84 2.15 BofA Merrill 0-5 Treasury

RTAA-PFC 14,688,718$ 14,695,610$ 14,645,353$ (50,257)$ 1.31 0.77 1.00 BofA Merrill 0-2 Year Treasury

RTAA-Revenue 12,149,989$ 12,149,989$ 12,148,035$ (1,954)$ 0.92 0.10 0.10 Cash

RTAA-R&R 786,924$ 787,594$ 782,326$ (5,268)$ 1.61 2.35 2.15 BofA Merrill 0-5 Treasury

RTAA-Special 6,742,572$ 6,736,974$ 6,718,345$ (18,630)$ 1.33 1.13 1.40 BofA Merrill 0-3 Treasury

0 -$ -$ -$ -$ 0.00 0.00 0.00 0.00

TOTAL PORTFOLIO 78,085,780$ 78,078,711$ 77,838,776$ (239,935)$ 1.28 0.87 1.13 0.00

5

RTAA Total Funds US Dollar 12/31/2017 logo.jpg Distribution Report - Set

Maturity Number Market Value% FI

HoldingsAverage

YTMAverageCoupon

AverageDuration

Under 1 Mth 6 23,706,492.15 30.5 1.0 0.986% 0.1

1 Mth - 12 Mths 37 24,719,768.00 31.8 1.6 1.090% 0.5

12 Mths - 24 Mths 19 18,057,777.97 23.2 1.9 1.435% 1.5

24 Mths - 36 Mths 6 8,679,346.53 11.2 1.9 1.556% 2.3

36 Mths - 60 Mths 5 2,675,391.80 3.4 2.1 1.887% 3.6

Duration Number Market Value% FI

HoldingsAverage

YTMAverageCoupon

AverageDuration

Under 1 Yr 43 48,426,260.15 62.2 1.3 1.039% 0.3

1 Yr - 2 Yrs 20 19,051,225.97 24.5 1.9 1.445% 1.5

2 Yrs - 3 Yrs 6 8,176,367.53 10.5 1.9 1.536% 2.3

3 Yrs - 5 Yrs 4 2,184,922.80 2.8 2.2 2.001% 3.8

Distribution by Maturity Distribution by Duration

S&P Rating Number Market Value% FI

HoldingsAverage

YTMAverageCoupon

AverageDuration

AA+ 50 44,281,722.17 56.9 1.8 1.323% 1.3

A-1+ 1 996,620.00 1.3 1.6 0.000% 0.2

N/A 22 32,560,434.28 41.8 1.1 1.112% 0.5

Moody Rating Number Market Value% FI

HoldingsAverage

YTMAverageCoupon

AverageDuration

Aaa 50 44,281,722.17 56.9 1.8 1.323% 1.3

P-1 1 996,620.00 1.3 1.6 0.000% 0.2

N/A 22 32,560,434.28 41.8 1.1 1.112% 0.5

Distribution by S&P Rating Distribution by Moody Rating

RTAA Total Funds

Distribution Report12/31/2017

6

9/30/2017 12/31/2017 9/30/2017 12/31/2017 Benchmark Portfolio

Market Value Market Value Difference Book Yield Book Yield Difference Benchmark Performance Performance Difference

RTAA-CFC 5,073,760 5,291,731 217,971 0.90 1.10 0.20 0-2 Year UST 0.02 0.19 0.17

RTAA-Consent 1,055,444 1,026,581 (28,863) 1.20 1.34 0.14 0-2 Year UST 0.02 .22 0.20

RTAA-Debt Service 2,005,765 2,010,929 5,164 0.90 1.28 0.38 Cash - - -

RTAA-Fuel Tax 155,606 182,152 26,546 0.80 1.05 0.25 Cash - - -

RTAA-General 29,533,031 27,837,649 (1,695,382) 1.26 1.37 0.11 0-3 Year UST -0.10 0.06 0.16

RTAA-O&M 7,213,377 7,195,676 (17,701) 1.49 1.56 0.07 0-5 Year UST -0.26 -0.14 0.12

RTAA-PFC 12,856,438 14,645,353 1,788,915 1.20 1.31 0.11 0-2 Year UST 0.02 0.08 0.06

RTAA-Revenue 8,494,142 12,148,035 3,653,893 0.63 0.92 0.29 Cash - - -

RTAA-R&R 783,487 782,326 (1,161) 1.59 1.61 0.02 0-5 Year UST -0.26 -0.15 0.11

RTAA-Special 7,046,020 6,718,345 (327,675) 1.28 1.33 0.05 0-3 Year UST -0.10 0.10 0.20

74,217,070 77,838,777 3,621,707 1.17 1.28 0.11

7

Disclaimer This material is based on information obtained from sources generally believed to be reliable and available to the public; however, GPA cannot guarantee its accuracy, completeness, or suitability. This material is for purposes of observations and oversight and is the opinion of the author and not necessarily of GPA, LLC. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this document is not an offer to purchase or sell any securities.

Definition and Terms Investment Report: Provides of summary asset allocation and maturity distribution. The activity and earnings summary provides a high level overview of the total funds.

Total Funds: This is the amount of the overall portfolio balances that are held in short term liquid investments to meet ongoing operational budgets and cash flows and investments held for longer periods. An annual assessment of the allocations to each component is evaluated through a cash flow process determining liquidity needs and District preferences, the Guideline Portfolio Strategy "GPS" is completed by Government Portfolio Advisors.

Compliance Report: Provides a comparison of the portfolio positions to the investment policy. This report includes a breakout of the specific funds and each allocation to the liquidity and investments.

Holdings Reports: Provides an overview by fund of portfolio distribution.

Security Type: Allocates the investment to a specific issuer type. Par Value: The total face value of the investment at maturity. Security Name: Lists the specific name of issuer. Book Yield or Yield at Cost: Is the earning yield on each security at the time of purchase. The total is a weighting based on investment value. Market Value: The current market value of the security based on a third party pricing source. This price represents the value if the securities were sold on the pricing date. The market value changes with interest rates. Total Adjusted Cost: This may be referred to as “book value” and represents the cost basis to date after amortization of premiums or discounts since the purchase date. Unrealized gain or loss: This represents the difference between the market value and the adjusted cost at the time of the report. % of Portfolio: Represents the percent allocation dedicated to each security type in the fund. Effective Duration: Represents the duration based on the time between the report date and the maturity of the bond. Duration is similar to average maturity and is used to measure the price sensitivity of the portfolio given interest rate changes.

8

1


Date: January 31, 2018 Administrative Report # 07-18 To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FINANCIAL REPORTING PACKAGE – DECEMBER 2017 EXECUTIVE SUMMARY Attached is the Fiscal Year 2017-18 Financial Reporting Package for the six month period ending December 31, 2017. In response to the Finance Committee’s request, this packet now includes a second Operating Statement page reflecting the comparison of actual results to the adopted budget for the month and year-to-date. Please see page 10. To enhance tracking of actual results as compared to budget, the revenue and expenditure budget now reflects the impact of predictable seasonal factors. For example, the months of July and August are historically the highest passenger and aircraft activity months. The year-to-date budget numbers reflect the impact of this higher activity on revenues such as landing fees, public parking, and concessions.

In addition, certain utility (i.e. electricity and natural gas) costs, which are driven by weather conditions (summer and winter), and special event sponsorships (National Championship Air

Y E A R T O D A T E as of December 31, 2017 (In Thousands)50.0% Of Fiscal Year

CURRENT PRIOR Y-T-DYEAR YEAR VARIANCE % BUDGET VARIANCE %

Operating Revenue Airline 8,306$ 8,153$ 153$ 1.9% 8,106$ 200$ 2.5% Non-Airline 18,814 16,992 1,821 10.7% 17,156 1,658 9.7%

Total Operating Revenue 27,120 25,145 1,975 7.9% 25,262 1,858 7.4%

Non-Operating Revenues 1,579 1,142 437 38.2% 1,122 458 40.8%

Total Revenue 28,699 26,288 2,412 9.2% 26,383 2,316 8.8%

Operating Expenses (19,996) (18,932) (1,065) 5.6% (21,273) 1,277 -6.0%

Net Revenue Available for Debt Service 8,703 7,356 1,347 18.3% 5,110 3,593 70.3%

Debt Service After PFCs (1,124) (1,788) 664 -37.2% (1,124) 0 0.0%

Net Available Cashflow 7,579 5,568 2,011 36.1% 3,986 3,593 90.1%

December 2017 Financial Summary Administrative Report # 07-18 January 31, 2018 Page 2 of 8

2

Races) will be reflected in the budget in the months of forecasted spending. The majority of budgeted operating expenses continue to assume one twelfth of the operating expense budget is spent each month due to the challenge of accurately predicting spending patterns for such items as fuel, maintenance, office supplies and travel. Based on actual results through December 31, 2017, net available cash flow, after funding debt service, is approximately $7.579 million, an increase of approximately $3.593 million above the adopted FY 2017-18 Budget and $2.011 million above last year’s results for the same period. TOTAL OPERATING REVENUE The RTAA’s total operating revenue of $27.120 million is approximately $1.858 million or 7.4% above budget due to higher non-airline revenues of $1.658 million and airline revenues of $200,300. This increase is primarily due to higher auto rental, parking and food and beverage revenues. The 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.


3

AIRLINE Landing Fees The RTAA executed a five-year agreement with the airlines effective July 1, 2015. 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. Landing fees were budgeted and are currently being collected at $2.99 per 1,000 lbs. of landed weight. For the six month period ending December 31, 2017, landing fee revenues registered $4.237 million, which is approximately 2.0% under the adopted budget. The decrease is primarily due to lower than anticipated landed weight by Fed Ex partially offset by increases by Southwest and United. The costs allocated to the Airfield Cost Center, or Net Requirement per the Airline Agreement, are 7.8% under budget based on actual results through December 31, 2017. 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 six months ending December 31, 2017, airline terminal rental revenue registered $4.069 million, which is approximately $288,600 or 7.6% above budget. This increase is primarily due to higher than anticipated non-preferential gate use fees and other non-signatory facility use fees resulting from the higher than anticipated passenger activity. The costs allocated to the Terminal Building Cost Center, or Net Requirement per the Airline Agreement, are 1.9% below the adopted budget based on actual results through December 31, 2017. In addition, the net revenue sharing of $2.573 million applied as an airline credit or rent reduction to terminal rents, is approximately $1.489 million above the adopted budget year-to-date. The budgeted average signatory rental rate is $54.95 per sq. ft. per annum. Due to lower terminal cost recovery and the forecasted increase in the airline revenue sharing credit, the average terminal rental rate is being decreased to $45.57 per sq. ft. per annum effective January 1, 2018. 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 RTAA to meet other operating costs and to generate internal funds for equipment and capital projects that do not directly benefit the airlines.


4

Non-airline operating revenues are primarily comprised of terminal and rental car concession revenues, public parking revenue, building/land rent, and reimbursement of RTAA provided services. The monthly budgets for concession revenues, public parking, and reimbursement of costs associated with the operation of baggage handling system reflect the seasonality of passenger traffic through RNO due to the direct correlation to passenger traffic. Overall, non-airline operating revenues registered $18.814 million, an increase of approximately $1.658 million or 9.7% over budget. The increase is primarily due to $637,000 or 17.2% in higher auto rental revenues, $376,200 or 6.9% higher revenue from parking operations, $107,200 or 19.5% in higher food and beverage revenue, and $60,700 in aircraft fees at RTS associated with BLM firefighting activity. Enplaned passenger traffic for the first six months of FY 2017-18 is 1,046,111, an increase of 5.8% above the seasonally forecasted budget and 9.7% above last year’s results. Further detail on passenger traffic results is provided in the Key Benchmarks section of this summary. NON-OPERATING REVENUE Non-Operating revenues of approximately $1.579 million, which are primarily comprised of interest income, aviation fuel tax, and rental car customer facility charges, are approximately $457,700 or 40.8% above budget. This increase is primarily due to higher interest income of $148,500, realized gain on sale of fixed assets of $146,700 and higher Customer Facility Charge fees of $139,900 associated with the rental car activity. OPERATING EXPENSES Operating expenses of $19.996 million for the six month period ending December 31, 2017 are 6.0% or approximately $1.277 million below budget and $1.065 million or 5.6% above last year’s results. The savings as compared to budget include approximately $385,400 in lower Personnel costs, $69,200 in lower Utility costs, $375,500 in lower Purchased Services, $77,300 in lower Materials and Supplies, and $369,500 in lower Administrative expenses.


5

DEBT SERVICE Net debt service payments of $1.124 million, net of the application of Passenger Facility Charges (PFC), matches the FY 2017-18 adopted budget. 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 (December 31, 2017 )50.0% Of Fiscal Year

CURRENT PRIOR Y-T-DKey Statistics / Benchmarks YEAR YEAR VARIANCE % BUDGET VARIANCE %

Enplaned Passengers 1,046,111 953,829 92,282 9.7% 988,358 57,753 5.8% Airline Cost Per Enplaned Passenger 4.97$ 5.96$ (0.99)$ -16.6% 7.12$ (2.15) -30.2% Non-Airline Revenues per EPAX (a) 16.69$ 16.49$ 0.20$ 1.2% 16.05$ 0.64 4.0% Operating Ratio 73.7% 75.3% -1.6% -2.1% 84.2% -10.5% -12.4% Debt Service Coverage Ratio 8.08 2.93 5.15 176.0% 5.46 2.61 47.8% Days Cash On Hand 476.5 430.0 46.5 10.8% 457.3 19.2 4.2%

(a) Excludes cost reimbursement for the Baggage Handing System (BHS) paid by the airlines.


6

Enplaned Passengers

Passenger Activity is a significant factor driving non-airline revenues such as terminal and rental car concessions and public parking. Based on actual results for the first six months of FY 2017-18 enplaned passengers were 1,046,111, a 5.8% increase compared to the budgeted passenger traffic and a 9.7% increase as compared to the same period last year. American, Delta, Frontier, JetBlue, Southwest, and United reported 103,254 more passengers in the current fiscal year than the same period last year. These increases in passenger traffic were partially offset by the lower results reported by Alaska, Allegiant, and Volaris of 9,826. The December 2017 Flight Schedule at the Reno-Tahoe International Airport provided 68 peak non-stop departures to 22 destinations with 208,770 total scheduled departing seats. In December 2017, the number of scheduled flights was up 0.1% compared to the December 2016 schedule. Monthly scheduled seat capacity is up 7.5% for the same period. A table and chart enclosed in this package provide a comparison of enplaned passenger traffic and market share by airlines for FY 2017-18 as compared to the previous year. 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 RTAA targets to maintain a reasonable cost structure for the airlines to attract and maintain air service to our community. Due to operating expenses being 6.0% below budget and a higher than anticipated revenue sharing credit, the airline cost per enplaned passenger is estimated to be $4.97 as compared to the FY 2017-18 budget of $7.12. 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. Based on actual results for the first six months of FY 2017-18, non-airline revenue per enplaned passenger registered $16.69, an increase of 1.2% above the $16.49 registered in the prior year and an increase of 4.0% above the FY 2017-18 Budget of $16.05. The most significant increase in revenue per enplaned passenger is in the rental car concession revenue.


7

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 2017-18 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. Based on actual results for the first six months of FY 2017-18, the ratio favorably registered 73.7% as compared to the prior year actual ratio of 75.3% and the adopted budget ratio of 84.2%. This result as compared to budget reflects primarily the lower operating expenses and higher operating revenues for the fiscal year. Days Cash on Hand Days Cash on Hand is calculated by identifying unrestricted cash and investments divided by the daily operating and maintenance expenditure budget (annual operating and maintenance budget divided by 365 days). The RTAA’s cash and liquidity position remains strong with 477 days of unrestricted cash on hand to meet budgeted operating and maintenance requirements. This is slightly higher than the forecasted year-end budget target of 457 days. The 2016 median average, as compiled by Moody’s Investor Services, is 615 for all airports and 563 for small hub airports. The current RTAA ratio, while very strong, is below this industry average for all airports and similarly sized airports. In addition, the rating agencies indicate a ratio lower than 300 days is viewed negatively and may result in a ratings downgrade for the reporting airport. A chart enclosed in this package provides a comparison of liquidity balances and Days Cash on Hand as of December 31, 2017 compared to FY 2016-17 year-end actual results and forecasted year-end cash balances in the adopted FY 2017-18 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 RTAA’s operations to generate sufficient funds to pay the annual debt service on both the senior lien bond and the subordinate notes. The RTAA targets to maintain net revenue after operating expenses equal to or greater than 1.5 times annual debt service. Under the bond indenture, the RTAA is required to maintain at least a ratio of 1.25. The RTAA’s debt service coverage ratio of 8.08X as of December 31, 2017 is strong with lender and bond holder protection higher than the FY 2017-18 Budget estimate of 5.46X and


8

significantly above the minimum level of 1.25X established under the RTAA’s Master Bond Indenture. The coverage ratio is significantly above budget primarily due to higher non-airline revenue and lower operating expenses resulting in net revenue available to pay debt service of $8.703 million, an increase of $3.593 million or 70.3% above budget. 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 bond 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 December 2017 as compared to the same period last year and the adopted FY 2017-18 Budget.

OPERATING STATEMENTRENO-TAHOE AIRPORT AUTHORITY

For the Six Months Ending December 31, 2017

C U R R E N T M O N T H For the Six Months Ending December 31, 2017

50.00% OF FISCAL YEAR

CURRENT PRIOR CURRENT PRIOR Y-T-D

YEAR YEAR VARIANCE % YEAR YEAR VARIANCE % BUDGET VARIANCE %

REVENUES Landing Fees 715,179$ 674,815$ 40,364$ 6.0% 4,236,695$ 3,862,766$ 373,929$ 9.7% 4,325,030$ (88,335)$ -2.0%

Terminal Rent, Airline 646,941 731,529 (84,588) -11.6% 4,069,367 4,289,967 (220,600) -5.1% 3,780,750 288,617 7.6%

Aircraft Fees 80,033 76,705 3,328 4.3% 575,447 515,556 59,891 11.6% 484,500 90,947 18.8%

Concession Revenue 367,619 369,470 (1,851) -0.5% 2,407,793 2,268,696 139,097 6.1% 2,216,191 191,602 8.6%

Auto Rental 498,253 440,019 58,234 13.2% 4,334,948 3,624,945 710,003 19.6% 3,697,909 637,039 17.2%

Parking & Ground Transportation 914,649 880,198 34,451 3.9% 6,014,448 5,607,411 407,037 7.3% 5,617,851 396,597 7.1%

Reno-Tahoe Building/ Land Rents 598,152 560,742 37,410 6.7% 3,663,081 3,351,254 311,827 9.3% 3,519,300 143,781 4.1%

Reno-Stead Rents 55,048 51,881 3,166 6.1% 347,186 333,790 13,396 4.0% 306,025 41,161 13.5%

Reimbursed Services 192,693 168,013 24,680 14.7% 1,353,811 1,259,443 94,368 7.5% 1,295,740 58,071 4.5%

Miscellaneous 92,003 2,298 89,705 3903.6% 117,070 31,288 85,782 274.2% 18,350 98,720 538.0%

OPERATING REVENUE 4,160,570$ 3,955,670$ 204,900$ 5.2% 27,119,846$ 25,145,118$ 1,974,728$ 7.9% 25,261,646$ 1,858,200$ 7.4%

EXPENSES

Personnel Services 2,754,803$ 2,498,738$ 256,065$ 10.2% 14,156,340$ 13,427,589$ 728,751$ 5.4% 14,541,708$ (385,368)$ -2.7%

Utilities and Communications 224,584 173,267 51,318 29.6% 1,339,652 1,202,599 137,053 11.4% 1,408,847 (69,195) -4.9%

Purchased Services 487,920 286,128 201,792 70.5% 2,490,264 2,218,899 271,364 12.2% 2,865,784 (375,520) -13.1%

Materials and Supplies 191,253 183,148 8,105 4.4% 897,608 752,892 144,716 19.2% 974,934 (77,326) -7.9%

Administrative Expense 161,941 184,835 (22,894) -12.4% 1,112,530 1,329,878 (217,348) -16.3% 1,482,071 (369,541) -24.9%

OPERATING EXPENSES 3,820,501$ 3,326,115$ 494,386$ 14.9% 19,996,394$ 18,931,857$ 1,064,537$ 5.6% 21,273,344$ (1,276,950)$ -6.0%

NET OPERATING INC. BEFORE DEPR. 340,069$ 629,555$ (289,486)$ -46.0% 7,123,452$ 6,213,261$ 910,192$ 14.6% 3,988,302$ 3,135,150$ 78.6%

Depreciation and Amortization 2,632,253 2,844,092 (211,839) -7.4% 15,895,202 17,087,492 (1,192,290) -7.0% 17,875,000 (1,979,798) -11.1%

OPERATING INCOME (2,292,185)$ (2,214,537)$ (77,648)$ -3.5% (8,771,750)$ (10,874,231)$ 2,102,481$ 19.3% (13,886,698)$ 5,114,948$ 36.8%

NON-OPERTING INCOME (EXPENSE)

Interest Income 67,981$ 41,417$ 26,564$ 64.1% 363,727$ 245,125$ 118,602$ 48.4% 241,750$ 121,977 50.5%

Passenger Facility Charge 605,153 831,659 (226,506) -27.2% 3,577,010 3,620,868 (43,858) -1.2% 3,675,700 (98,690) -2.7%

Customer Facility Charge 110,168 88,804 21,364 24.1% 908,234 762,249 145,986 19.2% 768,246 139,988 18.2%

Jet Fuel Tax Revenue 26,931 20,275 6,657 32.8% 160,691 156,477 4,214 2.7% 138,200 22,491 16.3%

G/L on Sale of Capital Assets 0 0 - n.a. 146,711 10,737 135,974 1266.4% - 146,711 n.a.

Other Non-Operating Revenue (Expense) 0 0 - n.a. 0 - - n.a. - 0 n.a.

Interest Expense (40,609) (51,365) 10,756 -20.9% (243,654) (308,189) 64,535 -20.9% (243,650) (4) 0.0%

Total 769,624$ 930,789$ (161,166)$ -17.3% 4,912,721$ 4,487,267$ 425,453$ 9.5% 4,580,246$ 332,474$ 7.3%

Net Income Before Capital Contributions (1,522,561)$ (1,283,747)$ (238,813)$ -18.6% (3,859,030)$ (6,386,964)$ 2,527,934$ 39.6% (9,306,451)$ 5,447,422$ 58.5%

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ANNUAL BUDGET

ANNUAL

BUDGET %

$ % $ % TO DATE

REVENUES Landing Fees 715,179$ 754,688$ (39,509)$ -5.2% 4,236,695$ 4,325,030$ (88,335)$ -2.0% 8,568,704$ 49%

Terminal Rent, Airline 646,941 630,125 16,816 2.7% 4,069,367 3,780,750 288,617 7.6% 7,561,500 54%

Aircraft Fees 80,033 80,750 (717) -0.9% 575,447 484,500 90,947 18.8% 969,000 59%

Concession Revenue 367,619 353,550 14,068 4.0% 2,407,793 2,216,191 191,602 8.6% 4,461,900 54%

Auto Rental 498,253 448,876 49,377 11.0% 4,334,948 3,697,909 637,039 17.2% 7,190,800 60%

Parking & Ground Transportation 914,649 884,057 30,592 3.5% 6,014,448 5,617,851 396,597 7.1% 11,330,900 53%

Reno-Tahoe Building/ Land Rents 598,152 586,550 11,602 2.0% 3,663,081 3,519,300 143,781 4.1% 7,038,600 52%

Reno-Stead Rents 55,048 51,004 4,044 7.9% 347,186 306,025 41,161 13.5% 612,050 57%

Reimbursed Services 192,693 206,249 (13,556) -6.6% 1,353,811 1,295,740 58,071 4.5% 2,592,581 52%

Miscellaneous 92,003 3,058 88,945 2908.3% 117,070 18,350 98,720 538.0% 36,700 0%

OPERATING REVENUE 4,160,570$ 3,998,908$ 161,661$ 4.0% 27,119,846$ 25,261,646$ 1,858,200$ 7.4% 50,362,735$ 54%

EXPENSES

Personnel Services 2,754,803$ 2,623,618$ 131,185$ 5.0% 14,156,340$ 14,541,708$ (385,368)$ -2.7% 28,843,415$ 49%

Utilities and Communications 224,584 244,563 (19,978) -8.2% 1,339,652 1,408,847 (69,195) -4.9% 2,741,145 49%

Purchased Services 487,920 477,631 10,289 2.2% 2,490,264 2,865,784 (375,520) -13.1% 5,731,568 43%

Materials and Supplies 191,253 162,489 28,764 17.7% 897,608 974,934 (77,326) -7.9% 1,949,869 46%

Administrative Expense 161,941 225,345 (63,404) -28.1% 1,112,530 1,482,071 (369,541) -24.9% 2,834,142 39%

OPERATING EXPENSES 3,820,501$ 3,733,645$ 86,855$ 2.3% 19,996,394$ 21,273,344$ (1,276,950)$ -6.0% 42,100,139$ 47%

NET OPERATING INC. BEFORE DEPR. 340,069$ 265,263$ 74,806$ 28.2% 7,123,452$ 3,988,302$ 3,135,150$ 78.6% 8,262,596$ 86%

Depreciation and Amortization 2,632,253 2,979,167 (346,913) -11.6% 15,895,202 17,875,000 (1,979,798) -11.1% 35,750,000 44%

OPERATING INCOME (2,292,185)$ (2,713,904)$ 421,719$ 15.5% (8,771,750)$ (13,886,698)$ 5,114,948$ 36.8% (27,487,404)$ 32%

NON-OPERTING INCOME (EXPENSE)

Interest Income 67,981$ 40,292$ 27,689$ 68.7% 363,727$ 241,750$ 121,977$ 50.5% 483,500 75%

Passenger Facility Charge 605,153 612,617 (7,464) -1.2% 3,577,010 3,675,700 (98,690) -2.7% 7,351,400 49%

Customer Facility Charge 110,168 93,255 16,913 18.1% 908,234 768,246 139,988 18.2% 1,493,900 61%

Jet Fuel Tax Revenue 26,931 23,033 3,898 16.9% 160,691 138,200 22,491 16.3% 276,400 58%

G/L on Sale of Capital Assets 0 0 - n.a. 146,711 - 146,711 n.a. 0 n.a.

Other Non-Operating Revenue (Expense) 0 0 - n.a. 0 - - n.a. 0 n.a.

Interest Expense (40,609) (40,608) (1) 0.0% (243,654) (243,650) (4) 0.0% (487,300) 50%

Total 769,624$ 728,588$ 41,036$ 5.6% 4,912,721$ 4,580,246$ 332,474$ 7.3% 9,117,900$ 54%

Net Income Before Capital Contributions (1,522,561)$ (1,985,316)$ 462,755$ 23.3% (3,859,030)$ (9,306,451)$ 5,447,422$ 58.5% (18,369,504)$ 21%

OPERATING STATEMENTRENO-TAHOE AIRPORT AUTHORITY


TOTAL

C U R R E N T M O N T H YEAR TO DATE

ACTUAL BUDGETVARIANCE

ACTUAL BUDGETVARIANCE

10

11

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

FY 2017 Revenue FY 2017 Expense FY 2018 Revenue FY 2018 Expense

Fiscal Year

Operating Revenue and ExpenseYTD through December 31, 2017

Landing fees Concession revenue

Parking and ground transportation Rentals

Reimbursements for services Other revenue

Employee wages and benefits Utilities and communications

Purchase of services Materials and supplies

Administrative expenses

SUMMARY OF NON-AIRLINE REVENUES

Over 12/30/2017 Over % of

12/30/2017 12/31/2016 (Under) % Year to Date (Under) % 2017-18 Annual

YTD Actual YTD Actual Prior Year Variance Budget Budget Variance Annual Budget Budget

Aircraft Fees - Reno 502,597$ 487,743$ 14,854$ 3.0% 472,350$ 30,247$ 6.4% 944,700$ 53.2%Aircraft Fees - Stead 72,849 27,813 45,037 161.9% 12,150 60,699 499.6% 24,300 299.8%

-

Gaming Concession 541,565 479,904 61,661 12.8% 481,364 60,201 12.5% 977,700 55.4%Food & Beverage 655,433 584,028 71,405 12.2% 548,276 107,157 19.5% 1,149,300 57.0%Retail/Merchandise 570,887 546,019 24,868 4.6% 574,601 (3,715) -0.6% 1,111,000 51.4%Advertising 359,206 332,876 26,330 7.9% 332,950 26,256 7.9% 665,900 53.9%Other Concessions 87,041 84,920 2,121 2.5% 88,550 (1,509) -1.7% 177,100 49.1%

FBO and Ground Handlers 181,886 232,139 (50,253) -21.6% 181,250 636 0.4% 362,500 50.2%Stead Concessions 11,775 8,810 2,965 33.7% 9,200 2,575 28.0% 18,400 64.0%

Auto Rental 4,334,948 3,624,945 710,003 19.6% 3,697,909 637,039 17.2% 7,190,800 60.3%

Ground Transportation 172,508 152,076 20,432 13.4% 152,150 20,357 13.4% 304,300 56.7%Auto Parking 5,841,940 5,455,335 386,605 7.1% 5,465,701 376,239 6.9% 11,026,600 53.0%

Other Terminal Rents 440,740 482,163 (41,423) -8.6% 415,800 24,940 6.0% 831,600 53.0%Reno-Tahoe Building Rents 1,603,644 1,467,583 136,062 9.3% 1,524,400 79,244 5.2% 3,048,800 52.6%Reno-Tahoe Land Rents 1,618,697 1,401,508 217,188 15.5% 1,579,100 39,597 2.5% 3,158,200 51.3%Reno-Stead Rents 347,186 333,790 13,396 4.0% 306,025 41,161 13.5% 612,050 56.7%

Reimbursed Services 1,353,811 1,259,443 94,368 7.5% 1,295,740 58,071 4.5% 2,592,581 52.2%

Miscellaneous 117,070 31,288 85,782 274.2% 18,350 98,720 538.0% 36,700 319.0%

Total Non-Airline Operating Revenue 18,813,784 16,992,384 1,821,400 10.7% 17,155,866 1,657,918 9.7% 34,232,531 55.0%-

Non Operating Revenue (a) 671,130 380,211 290,918 76.5% 353,450 317,680 89.9% 706,900 94.9%

TOTAL NON-AIRLINE REVENUE 19,484,914$ 17,372,596$ 2,112,318$ 12.2% 17,509,316$ 1,975,598$ 11.3% 34,939,431$ 55.8%

Year to Date Enplaned Passengers 1,046,111 953,829 988,358 1,948,002

Non-Airline Revenue Per EPAX (b) 16.69$ 16.49$ 16.05$ 16.24$

(a) Excludes PFC and CFC revenues

(b) Total Non-Airline Revenue less Reimbursed Services divided by enplaned passengers

Reno-Tahoe Airport Authority

12

NET REVENUE SHARING - YEAR TO DATEReno-Tahoe Airport Authority


Baggage Reno

Airfield Terminal System Landside Other Stead Total

Revenue Sharing

Airline Revenue 4,044,117 5,058,427 - - - - 9,102,544

Non Airline Revenue 509,813 3,088,189 872,692 10,397,198 4,112,020 431,810 19,411,722

Total Revenue 4,553,930 8,146,617 872,692 10,397,198 4,112,020 431,810 28,514,267

Budgeted Revenue 4,856,702 7,857,750 776,241 9,300,150 3,513,500 327,375 26,631,718

O&M Expense 4,234,331$ 8,793,763$ 818,340$ 3,113,414$ 1,947,221$ 808,114$ 19,715,183$

Debt Service - - - 1,123,650 - - 1,123,650

Pre Bond Loan - - - - - - -

O&M Reserve 32,122 64,245 5,332 25,098 16,593 7,408 150,798

Fixed Asset 96,625 133,479 - 48,162 47,487 8,969 334,723

Capital Project 191,200 172,500 - 38,388 534,300 52,000 988,388

Amort. Capital Items 337,601 30,919 26,667 278,432 57,884 153,696 885,199

Special Fund - 171,098 - - - - 171,098

2016-17 Carry-Over -

Total Requirement 4,891,879 9,366,004 850,339 4,627,144 2,603,486 1,030,187 23,369,038

Budgeted Requirement 5,197,418 9,589,152 776,241 4,825,680 2,770,084 1,305,760 24,464,335

Net Revenues (337,948) (1,219,387) 22,353 5,770,054 1,508,534 (598,377) 5,145,228

Budgeted Net Revenues (340,716) (1,731,402) - 4,474,470 743,416 (978,385) 2,167,383

Months 6 Airport Share 2,572,614$

Airline Share 2,572,614$

13

SUMMARY OF ENPLANED PASSENGERS BY AIRLINEReno-Tahoe International Airport

Month Year-to-date

Percent YTD YTD Percent

Enplaned passengers by Airline Dec-17 Dec-16 change 2017-18 2016-17 change

Major/national carriers (Signatory)

Alaska 13,893 17,374 -20.0% 107,326 113,302 -5.3%

American 30,453 27,598 10.3% 196,937 193,459 1.8%Delta 12,911 11,124 16.1% 75,799 67,186 12.8%Southwest 68,749 62,402 10.2% 459,238 405,137 13.4%United 19,416 16,647 16.6% 140,857 110,742 27.2%

Total 145,422 135,145 7.6% 980,157 889,826 10.2%

Non-Signatory and Charter

Allegiant Air 2,869 2,438 17.7% 13,032 15,254 -14.6%Frontier 2,023 0 n.a. 2,789 0 n.a.JetBlue 6,077 6,554 -7.3% 40,054 35,896 11.6%

Volaris 2,414 2,483 -2.8% 9,063 10,691 -15.2%Other Charters 262 121 116.5% 1,016 2,162 -53.0%

Total13,645 11,596 17.7% 65,954 64,003 3.0%

Total enplaned passengers 159,067 146,741 8.4% 1,046,111 953,829 9.7%

Alaska

10.3%American

18.8%

Delta

7.2%

Southwest

43.9%

United

13.5%Allegiant Air

1.2%

Frontier

0.1%

JetBlue

3.8%

Volaris

0.9%

Enplaned Passenger Market Share

Year to Date - December 2017

14

15

382

483 457

476

-

100

200

300

400

500

600

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

RTAA Liquidity Position

Unrestricted Cash Restricted Cash Days Cash on Hand

DEBT SERVICE COVERAGERENO-TAHOE AIRPORT AUTHORITY



50.00% OF FISCAL YEAR

CURRENT PRIOR Y-T-D

YEAR YEAR VARIANCE % BUDGET VARIANCE %

NET OPERATING INCOME 5,260,876$ 4,609,391$ 651,486$ 14.1% 3,988,302$ 1,272,574$ 31.9%

OTHER INCOME (EXPENSE)

Rate Base Interest Income 363,727$ 212,997$ 150,730$ 70.8% 215,250$ 148,477$ 69.0%

Other Revenue 1,215,637$ 929,463$ 286,174 30.8% 906,446 309,190 34.1%

1,579,364 1,142,460 436,904 38.2% 1,121,696 457,668 40.8%

Transfers

Airline Revenue Sharing 2,572,614$ 1,407,082$ 1,165,532$ 82.8% 1,083,691$ 1,488,923$ 137.4%

Gain/Loss on Sale of Assets (146,711) (10,737) (135,974) (925,000) 778,289 -84.1%

35% of gaming revenue (189,548) (167,966) (21,581) 12.8% (168,478) (21,070) 12.5%

Net Income Available for Debt Service 9,076,595$ 6,980,229$ 2,096,366$ 30.0% 5,100,212$ 3,976,384$ 78.0%

Debt Service (Senior) Parking Garage (a) 1,123,650$ 1,124,732$ (1,082)$ -0.1% 1,123,650$ -$ 0.0%

Pledged PFC Revenues - - - 0.0% - - 0.0%

1,123,650 1,124,732 (1,082) -0.1% 1,123,650 - 0.0%

Debt Service (Subordinate) -$ 1,569,697$ (1,569,697)$ -100.0% -$ -$ 0.0%

Pledged PFC Revenues - (906,395) 906,395 -100.0% - - 0.0%

- 663,302 (663,302) -100.0% - - 0.0%

Debt Service After PFC Revenue 1,123,650$ 1,788,033$ (664,383)$ -37.2% 1,123,650$ -$ 0.0%

Debt Service Coverage Ratio 8.08 2.93 4.54

Safety Margin 31.49% 22.06% 15.74%

(a) The senior lien debt was issued to fund constructed 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 cost recovery

associated with airline cost centers.

$6,980

$5,100

$9,077

$1,125 $1,124 $1,124 $663

$- $-

2.93

4.54

8.08

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

FY 2016-17 YTD Actual FY 2017-18 YTD Budget FY 2017-18 YTD Actual

Debt Service CoverageIn Thousands

Net Income Available Senior Lien Debt Service -Parking

Subordinate Lien Debt Service Debt Service Coverage

16


Date: January 31, 2018 Administrative Report # 08-18 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 JANUARY 2018 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 services 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 services agreement (PSA) when the estimated amount to perform the work is $50,000 or less, and approve an amendment to a professional services 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 services 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 January 2018. MMM/hdl/cj

JANUARY 2018

Date Name of Company Dollar Amount Description Funding Source Department/Division

01/02/18 Brady Industries $35,510.60 Blanket PO #9395 for annual paper products and can liners procured on an as ordered, as needed basis. This contract is the result of a formal bid with award being made to the lowest, and most responsive and responsible bidder.

FY 2017-18 Operations and Maintenance Budget (Trash Can Liners) (Janitorial Paper)

Facilities Maintenance

01/02/18 Central Sanitation $36,237.00 Blanket PO #9394 for annual paper products procured on an as ordered, as needed basis. This contract is the result of a formal bid with award being made to the lowest, and most responsive and responsible bidder.

FY 2017-18 Operations and Maintenance Budget (Janitorial Paper)

Facilities Maintenance

01/09/18 Q&D Construction, Inc.

$0.00 Change Order No. 1 – this CO has no monetary value, but was written to provide for necessary changes in the Contract related to NRS 338.515 General Provisions changing retention from 5% to 2.5% after 50% of project completion.

FAA AIP Grant 03-32-0018-37 and the Special Fund

Engineering & Construction

Key to abbreviations: PO = Purchase Order CO = Change Order PSA = Professional Service Agreement AIP = Airport Improvement Project PFC = Passenger Facility Charge Program NTE = Not to Exceed *Contract signed by authorized designee – Executive Vice President/COO


Date: January 31, 2018 Administrative Report # 09-18 To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FISCAL YEAR 2017-2018 GENERAL COUNSEL’S BUDGET The following is a summary of the General Counsel’s budget for the 2017-2018 fiscal year. The summary shows the amounts “budgeted’’ compared to “actual” by the major account classifications. While December represents 50.0% of the budget year, actual costs are 29.5% of the total budget.

Account Classification YTD Actual

YTD Budget

Over (Under) Budget

% Variance

2017-18 Annual Budget

% of Annual Budget

Purchased Services Fennemore Craig, PC $ 122,642 $ 212,500 $ (89,858) -42.3% $ 425,000 28.9%

Specialty Area, Legal 8,125 7,500 625 8.3% 15,000 54.2% Other Purchased Services 258 125 133 106.4% 250 103.2% Administrative Expense

Books 0 300 (300) -100.0% 600 0.0% Conference Registration 0 900 (900) -100.0% 1,800 0.0% Travel Expense

0 850 (850) -100.0% 1,700 0.0%

Total General Counsel $ 131,025 $ 222,175 $ (91,150) -41.0% $ 444,350 29.5% MMM/lw/cj


Date: January 31, 2018 Administrative Report # 10-18 To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FISCAL YEAR 2017-2018 BOARD OF TRUSTEE’S BUDGET The following is a summary of the Board of Trustee’s budget for the 2017-2018 fiscal year. The summary shows the amounts “budgeted’’ compared to “actual” by the major account classifications. While December represents 50.0% of the budget year, actual costs are 42.0% of the total budget.


YTD Budget

Over (Under) Budget

% Variance


% of Annual Budget

Personnel Services Trustee Stipend $ 30,800 $ 30,240 $ 560 1.9% $ 60,480 50.9% Personnel Services 23,100 23,250 (150) -0.6% 46,500 49.7% Purchased Services 12,512 19,725 (7,213) -36.6% 39,450 31.7% Materials and Supplies 1,421 900 521 57.9% 1,800 78.9% Administrative Expense

Conference Registration & Training 0 2,850 (2,850) -100.0% 5,700 0.0%

Meeting Expenses 4,557 4,200 357 8.5% 8,400 54.3% Travel and Reimbursed

Expense 0 5,000 (5,000) -100.0% 10,000 0.0% Total Board $ 72,390 $ 86,165 $ (13,775) -16.0% $ 172,330 42.0%

MMM/lw/cj


Date: January 31, 2018 Administrative Report # 11-18 To: Chairman & Board Members From: Marily M. Mora, A.A.E., President/CEO Subject: FY 2017-2018 LEGISLATIVE CONSULTANT’S BUDGET The following is a summary of the Legislative consultant’s budget for the 2017-2018 fiscal year. The summary shows the amounts “budgeted’’ compared to “actual” by the major account classifications. While December represents 50.0% of the budget year, actual costs are 35.3% of the total budget.


YTD Budget

Over (Under) Budget

% Variance


% of Annual Budget

State and Local Governmental Relations $ 18,000 $ 37,500 $ (19,500) -52.0% $ 75,000 24.0% Legislative Consultant Washington, D.C. 42,000 47,500 (5,500) -11.6% 95,000 44.2%

Total Governmental Relations $ 60,000 $ 85,000 $ (25,000) -29.4% $ 170,000 35.3% Note: The contract for State and Local Governmental Relations expired September 2017. MMM/lw/cj

Board Memorandum Reno-Tahoe Airport Authority

Date: January 31, 2018 Memo: # 18(02)-04 To: Chairman & Board Members For: February 8, 2018 Board Meeting From: Marily M. Mora, A.A.E., President/CEO Subject: AUTHORIZATION FOR THE PRESIDENT/CEO TO AWARD A

CONTRACT FOR THE PURCHASE OF ONE DUAL ENGINE, FOUR-WHEEL STEER 6,000 TON PER HOUR SNOW BLOWER, TO J.A. LARUE, INC., IN THE AMOUNT OF $559,948, AND PURCHASE OF AN EXTENDED WARRANTY FOR $8,100

STAFF RECOMMENDATION Staff recommends that the Board authorize the President/CEO to award a contract for the purchase of one dual engine, four-wheel steer, 6,000 ton per hour Snow Blower, with J.A. Larue, Inc., in the amount of $559,948 and purchase of an extended warranty for $8,100. PURPOSE The purpose of this action is to authorize the award of contract for the purchase on one (1) dual engine, four-wheel steer, 6,000 ton per hour snow blower that will be utilized for snow removal operations at the Reno-Tahoe International Airport (RNO). This action is in support of the Reno-Tahoe Airport Authority (RTAA) Strategic Priority # 5 – Provide a Positive Environment and Experience for All, and the Guiding Principle of Safety and Security, as adopted in the Fiscal Year (FY) 2014-2018 Comprehensive Strategic Plan. BACKGROUND In September of 2005, the Federal Aviation Administration (FAA) Certification Inspector recommended that the snow removal fleet be programmed for replacement because of age and condition. Based on actual fleet condition and the FAA’s recommendation, the RTAA applied and was approved for Passenger Facility Charge (PFC) collections for snow removal equipment replacement. Due to the number of pieces of equipment and the cost, it was decided to program the replacements in two separate PFC applications. The first phase included seven (7) pieces of equipment that were procured in the approved PFC #10 application. Six pieces of snow removal equipment are scheduled to be replaced and/or added to the current snow removal fleet in this second phase as part of the PFC #12 application, approved by the FAA on April 24, 2015, for a total replacement amount of $4,058,000. The equipment to be purchased in the PFC # 12 application is as follows: three (3) high-speed self-propelled 22-foot rotary runway broom sweeper(s); one (1) wheel loader with articulating snow blade; one (1) snow plow cab with chassis and bed with friction enhancing component(s); and one (1) 6,000 ton per hour high-speed runway rotary snow blower.

Snow Blower Purchase # 18(02)-04 February 8, 2018 Board Meeting Page 2 of 4 The purchase of this dual engine, four-wheel drive snow blower will be the fourth piece of equipment to be purchased from the PFC #12 application. The other pieces of snow equipment previously purchased are:

• Three (3) 2017 Self-Propelled Rotary Runway Snow Sweepers in the amount of

$1,408,536

The 2017 Snow Sweepers were awarded by the Board of Trustees on March 29, 2017 and were delivered by the vendor on January 3, 2018. DISCUSSION The equipment recommended for procurement is a state-of-the-art four-wheel drive, four-wheel steer snow blower. The snow blower has a cutting width of 112 inches with a throwing distance of over 75 feet, and is powered by two diesel engines with a combined rating of 1,250 horsepower. The primary function for this highly specialized piece of equipment will be snow removal on the Airport Operations Area (AOA), specifically the runways, taxiways, and terminal ramp areas at RNO. Snow removal on AOA surfaces is critical for safe aircraft operation, as the presence of snow, ice, slush, and standing water degrade the coefficient of friction, reduce braking and directional control, and impede aircraft acceleration. This equipment is specifically designed for the rigors of airport snow removal and will be a key component of the airside snow removal operations. It will be designated as primary response equipment. Significant advancements have been made in airfield snow removal equipment technology, and this new equipment has the capability to move more than double the quantity of snow at a much higher rate of speed. The increased capability of the new equipment will allow for more efficient snow removal operations on the AOA. Modern airport snow removal equipment is also much more environmentally friendly as a result of their having the latest emissions technology integrated in current diesel engines. The Invitation to Bid #17/18-08 was issued on November 22, 2017 and advertised in the Reno Gazette-Journal. To supplement legal advertising, staff posted the bid document on the RTAA’s website, as well as emailed the solicitation directly to four prospective bidders for this type of equipment. The bid was also posted on the Nevada Government eMarketplace website and reviewed by sixteen (16) companies.

Three bids were received in good order and opened on December 21, 2017 as follows:

Bidder Bid Amount J. A. Larue, Incorporated $559,948 Kodiak America $575,600 M-B Companies $665,268

Snow Blower Purchase # 18(02)-04 February 8, 2018 Board Meeting Page 3 of 4 Staff evaluated the bids received for conformance to terms, conditions, and specifications. Following this review, staff recommends the award of Bid #17/18-08 in the amount of $559,948 to J.A. Larue, Inc. as the low, responsive, and responsible bidder. The purchase price includes freight costs to the Reno-Tahoe International Airport and delivery of this equipment is expected in 330 calendar days after order placement. A three-year warranty applies to the snow blower. Although not part of the Bid and not eligible for PFC funding as it is a repair and maintenance item, the RTAA has the opportunity to purchase for $8,100 an extended warranty on the engines and transmission to cover the fourth and fifth year of use. Staff recommends the purchase of the extended warranty as a cost effective measure and in the best interest of the RTAA. COMPANY BACKGROUND J.A. Larue was incorporated in 1973 and is a manufacturer of snow removal equipment and a distributor of paving equipment. They are based in Quebec, Canada. The company was founded by Andre Larue and is currently operated by his sons. They specialize in manufacturing snow blowers and have in excess of 40 years of experience in the field. FISCAL IMPACT This equipment is funded by Passenger Facility Charge Program (PFC) #12 approved by the FAA on April 24, 2015. The PFC program amount budgeted for snow removal equipment is in the amount of $4,058,000. The equipment authorized by the FAA to be purchased is as follows:

Equipment to be replaced/added with PFC 12 Funds

Quantity

Purchase Amount

Approved for Purchase

Self-Propelled Rotary Runway Snow Sweepers 3 $1,408,536 3/29/17 High-Speed Runway Rotary Snow Blower * 1 $559,948 Multi-function Snow Plow Truck with sander/spreader 1 Front End Loader with Box Snow Plow 1 Funds Expended to Date $1,408,536 Total PFC #12 Budget Amount 6 $4,058,000 PFC Remaining Funding Available $2,649,464 * Recommended for procurement approval herein If the Board of Trustees approves this purchase, there will be two pieces left to procure under this PFC application as noted in the above table. With the use of PFC funding, this purchase will have no impact on airline rates and charges. COMMITTEE COORDINATION This item is scheduled to be presented at the February 6, 2018 Finance and Business Development Committee Meeting.

Snow Blower Purchase # 18(02)-04 February 8, 2018 Board Meeting Page 4 of 4 RECOMMENDATION It is hereby recommended that the Board adopt the following motion: “It is hereby moved that the Board authorizes the President/CEO to award a contract for the purchase of one dual engine, four-wheel steer, 6,000 ton per hour Snow Blower, with J.A. Larue, Inc., in the amount of $559,948, and purchase of an extended warranty for $8,100, and authorizes the President/CEO, or her designee, to sign.”

MMM/dgp/cj


Date: January 31, 2018 Memo: # 18(02)-05 To: Chairman & Board Members For: February 8, 2018 Board Meeting From: Marily Mora, A.A.E., President/CEO Subject: ACCEPTANCE OF THE COMPREHENSIVE ANNUAL FINANCIAL

REPORT FOR FISCAL YEAR 2016-2017 AS AMENDED BY THE REVISED STATEMENT ON AUDITING STANDARDS 114 COMMUNICATION LETTER

STAFF RECOMMENDATION Staff recommends that the Board accept the Comprehensive Annual Financial Report for Fiscal Year (FY) 2016-2017 as amended by the revised Statement on Auditing Standards (SAS) 114 communication letter. PURPOSE The purpose of this memo is to inform the Board of revisions in the SAS 114 audit letter to report an immaterial, uncorrected misstatement in the recently completed Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2017. This action is in support of the Reno-Tahoe Airport Authority (RTAA) Guiding Principle of Financial Integrity as adopted in the FY 2014-2018 Comprehensive Strategic Plan. BACKGROUND The RTAA’s CAFR is prepared on the accrual basis of accounting in accordance with generally accepted accounting principles (GAAP) in the United States of America as applicable to governmental units. GAAP is established by the Governmental Accounting Standards Board (GASB), an independent, private-sector organization that establishes accounting and financial reporting standards for U.S. state and local governments. The RTAA has recently adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. These statements are applicable to the RTAA since it contributes to the Public Employees Retirement System (PERS) of the State of Nevada (System), a cost sharing, multiple employer, defined benefit plan. PERS provides retirement benefits, disability benefits, and death benefits, including annual cost of living adjustments, to plan members and their beneficiaries. Under GASB 68 and 71, the RTAA has recorded a net pension liability for its proportionate share of the difference between the total pension liabilities and the fiduciary net positions of PERS of the State of Nevada (System). For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of PERS, additions to / deductions from the PERS fiduciary net position have been determined on the same basis as reported by the System.

FY 2016-2017 CAFR with Amended Audit Letter #18(02)-05 February 8, 2018 Board Meeting Page 2 of 3 The RTAA’s retirement system reporting is based on a “Schedule of Employer Allocations, Schedule of Pension Amounts by Employer and Related Notes” provided by PERS. This report includes the net pension liability, total deferred outflow of resources, deferred inflow of resources, and pension expense. As a reminder, benefits for plan members are funded using one of two methods: (1) the employer pay contribution plan or (2) the employer/employee paid contribution plan. All RTAA employees are under the “employer pay contribution” plan with both the employer and employee contributions funded 100% by the RTAA. Chapter 286 of the Nevada Revised Statutes (NRS) establishes the contribution requirements, and the funding mechanism and benefits may only be amended through legislation. DISCUSSION In March 2016, GASB issued Statement No. 82, Pension Issues. The primary impact of this amendment is to provide clarification of the accounting treatment of payments made by an employer to satisfy member contributions. Under the RTAA’s employer paid contribution plan, employee contributions paid by the employer are fifty percent (50%) of the payments to PERS annually. The purpose of GASB 82 is to require this portion be recognized as expense in the period for which the contribution to PERS is assessed and classified in the same manner as similar compensation other than pensions (for example, as salaries and wages). Previously, this contribution was shown as a deferred outflow / expense of resources in a future period on the State of Net Position (balance sheet). GASB 82 is effective for reporting periods beginning June 15, 2016 with an exception permitted if the pension liability is measured as of a date other than the employer’s most recent year-end. This one-year exception is available to PERS and the report provided to all Nevada local governments and used by the RTAA to complete its FY 2016-2017 CAFR reflected this delayed implementation. In addition, the RTAA is required under NRS 354.624 to complete its annual audit no later than five months following the close of the fiscal year or November 30, 2017. Within 30 days after the report is delivered to the local government, along with the recommendations to the governing body, it must be immediately filed as public record. The RTAA complied with this requirement. On January 10, 2018, PERS notified local governments, through the State of Nevada’s Department of Taxation, of PERS early adoption of GASB 82 and issued a revised “Schedule of Employer Allocations, Schedule of Pension Amounts and Related Notes” as of June 30, 2016. This extremely late notification was the result of a communication breakdown between the State of Nevada and PERS identified in December 2017. No notification was provided by PERS prior to the RTAA completing its audit and acceptance of the CAFR by the Board of Trustees on December 14, 2017. Upon analysis and review of the fiscal impact, RTAA Finance staff, in consultation and approval of our external auditors (Crowe Horwath), has determined the financial impact is immaterial and the implementing of GASB 82 will be completed in FY 2017-2018.

FY 2016-2017 CAFR with Amended Audit Letter #18(02)-05 February 8, 2018 Board Meeting Page 3 of 3 With this approach, Crowe Horwath is required to revise its SAS 114 communication letter to the Board of Trustee’s as highlighted on page 3 under “Uncorrected Misstatements”. The revised letter is attached for your review and use. The impact of this approach will be that the FY 2017-2018 CAFR will reflect an updated PERS actuarial study as of June 30, 2017 (one year later than the current available) and the financial impact of GASB 82 will be reflected in the current year. Therefore, the FY 2016-2017 CAFR will not be revised and no entries recorded in FY 2017-2018 using the revised “Schedule of Employer Allocation” report received in January 2018 from PERS. FISCAL IMPACT The fiscal impact of the early adoption of GASB 82 would have been the following: 1. A decrease to deferred outflows of resources on the Statements of Net Position (Balance

Sheet) in 2017 by approximately $3,256,000. 2. A decrease to the beginning net position on the Statement of Net Position of approximately

$476,000. 3. An increase to FY 2016-2017 pension expense as reported as Employee Wages and Benefits

in the Operating Expense section of the Statement of Revenues, Expenses and Changes of Net Position of approximately $2,780,000. This adjustment would have reduced operating income and increased the Change in Net Position at June 30, 2017 by the same amount.

The following adjustments would have had no impact on the FY 2016-2017 Airline Rates and Charges Settlement and will not affect the FY 2017-2018 Airline Rates and Charges. The RTAA only includes the actual cash paid directly to PERS annually in the airline cost recovery formula and does not use the pension expense estimate generated by PERS to meet the GASB reporting requirements. COMMITTEE COORDINATION This item is scheduled to be presented at the February 6, 2018 Finance and Business Development Committee Meeting. RECOMMENDATION It is hereby recommended that the Board adopt the following motion: “It is hereby moved that the Board accepts the Comprehensive Annual Financial Report for Fiscal Year 2016-2017 as amended by the revised Statement on Auditing Standards 114 Communication Letter.” MMM/rg/cj

Crowe Horwath Crowe Horwath LLP Independent Member Crowe Horwath International

Board of Trustees Reno-Tahoe Airport Authority Reno, Nevada

Professional standards require that we communicate certain matters to keep you adequately informed about matters related to the financial statement audit that are, in our professional judgment, significant and relevant to your responsibilities in overseeing the financial reporting process. We communicate such matters in this report.

AUDITOR'S RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA

Our responsibility is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America. The audit of the financial statements does not relieve you of your responsibilities and does not relieve management of their responsibilities. Refer to our engagement letter with the Reno-Tahoe Airport Authority ("RTAA") for further information on the responsibilities of management and of Crowe Horwath LLP.

AUDITOR'S RESPONSIBILITY UNDER GOVERNMENT AUDITING STANDARDS

As part of obtaining reasonable assurance about whether RTAA's financial statements are free of material misstatement, we performed tests of RTAA's compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts or disclosures. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

PLANNED SCOPE AND TIMING OF THE AUDIT

We are to communicate an overview of the planned scope and timing of the audit. Accordingly, the following matters regarding the planned scope and timing of the audit were discussed with you.

• How we proposed to address the significant risks of material misstatement, whether due to fraud or error.

• Our approach to internal control relevant to the audit.

• The concept of materiality in planning and executing the audit, focusing on the factors considered rather than on specific thresholds or amounts.

• Where the RTAA has an internal audit function, the extent to which the auditor will use the work of internal audit, and how the external and internal auditors can best work together.

• Your views and knowledge of matters you consider warrant our attention during the audit, as well as your views on:

o The allocation of responsibilities between you and management.

The RTAA's objectives and strategies, and the related business risks that may result in material misstatements.

Significant communications with regulators.

Other matters you believe are relevant to the audit of the financial statements.

SIGNIFICANT ACCOUNTING POLICIES AND MANAGEMENT JUDGMENTS AND ACCOUNTING ESTIMATES

Significant Accounting Policies: Those charged with governance should be informed of the initial selection of and changes in significant accounting policies or their application. Also, those charged with governance should be aware of methods used to account for significant unusual transactions and the effect of significant accounting policies in controversial or emerging areas where there is a lack of authoritative consensus. We believe management has the primary responsibility to inform those charged with governance about such matters. There were no such accounting changes or significant policies requiring communication.

Management Judgments and Accounting Estimates: Further, accounting estimates are an integral part of the financial statements prepared by management and are based upon management's current judgments. These judgments are based upon knowledge and experience about past and current events and assumptions about future events. Certain estimates are particularly sensitive because of their significance and because of the possibility that future events affecting them may differ markedly from management's current judgments and may be subject to significant change in the near term.

The following describes the significant accounting estimates reflected in RTAA's year-end financial statements, the process used by management in formulating these particularly sensitive accounting estimates and the primary basis for our conclusions regarding the reasonableness of those estimates.

Significant Accounting Estimate Process Used by Management Basis for Our Conclusions

J Fair Values of Investment Securities and Other Financial Instruments

The disclosure of fair values of securities and other financial instruments requires management to use certain assumptions and estimates pertaining to the fair values of its financial assets and financial liabilities.

We tested the propriety of information underlying management's estimates.

Useful Lives of Fixed Assets

Management has determined the economic useful lives of fixed assets based on past history of similar types of assets, future plans as to their use, and other factors that impact their economic value to RTAA.

We tested the propriety of information underlying management's estimates.

Pension and Postretirement Obligations

Amounts reported for pension and postretirement obligations require management to use estimates that may be subject to significant change in the near term. These estimates are based on projection of the weighted average discount rate, rate of increase in future compensation levels, and weighted average expected long-term rate of return on pension assets.

We reviewed the reasonableness of these estimates and assumptions.

AUDITOR'S JUDGMENTS ABOUT QUALITATIVE ASPECTS OF SIGNIFICANT ACCOUNTING PRACTICES

We are to discuss with you our comments about the following matters related to RTAA's accounting policies and financial statement disclosures. Accordingly, these matters will be discussed during our meeting with you.

• The appropriateness of the accounting policies to the particular circumstances of the RTAA, considering the need to balance the cost of providing information with the likely benefit to users of the RTAA's financial statements.

• The overall neutrality, consistency, and clarity of the disclosures in the financial statements.

• The effect of the timing of transactions in relation to the period in which they are recorded.

• The potential effect on the financial statements of significant risks and exposures, and uncertainties that are disclosed in the financial statements.

• The extent to which the financial statements are affected by unusual transactions including nonrecurring amounts recognized during the period, and the extent to which such transactions are separately disclosed in the financial statements.

• The issues involved, and related judgments made, in formulating particularly sensitive financial statement disclosures.

• The factors affecting asset and liability carrying values, including the RTAA's basis for determining useful lives assigned to tangible and intangible assets.

• The selective correction of misstatements, for example, correcting misstatements with the effect of increasing reported earnings, but not those that have the effect of decreasing reported earnings.

CORRECTED AND UNCORRECTED MISSTATEMENTS

Corrected Misstatements: We are to inform you of material corrected misstatements that were brought to the attention of management as a result of our audit procedures.

There were no such misstatements.

Uncorrected Misstatements: We are to inform you of uncorrected misstatements that were aggregated by us during the current engagement and pertaining to the latest and prior period(s) determined by management to be immaterial, both individually and in the aggregate, to the financial statements taken as a whole. For your consideration, we have distinguished misstatements between known misstatements and likely misstatements.

• In January 2018, the Public Employees' Retirement System of Nevada (PERS) issued a revised fiscal year 2016 GASB 68 schedule that included the impact of the early implementation of GASB Statement No. 82. The previous version of the schedule, issued in July 2017, was utilized by RTAA management to adjust their financial statements for the year ended June 30, 2017. Management elected to waive the impact of the entry from the revised schedule as of June 30, 2017. The effect of the entry would have been a decrease to deferred outflows of resources by approximately $3,256,000, a decrease to beginning net position of approximately $476,000, and an increase to pension expense of approximately $2,780,000 which would decrease the change in net position at June 30, 2017 by the same amount.

OTHER COMMUNICATIONS

Communication Item Results Other Information In Documents Containing Audited Financial Statements Information may be prepared by management that accompanies the financial statements. To assist your consideration of this information, you should know that we are required by audit standards to read such information and consider whether such information, or the manner of its presentation, is materially inconsistent with information in the financial statements. If we consider the information materially inconsistent based on this reading, we are to seek a resolution of the matter.

We read the following items and noted no material inconsistencies or misstatement of facts in such information based on our reading thereof.

• Introductory Section

• Management's Discussion and Analysis

• Required Supplementary Information

• Supplementary Information

• Statistical Section

Significant Difficulties Encountered During the Audit We are to inform you of any significant difficulties encountered in dealing with management related to the performance of the audit.

There were no significant difficulties encountered in dealing with management related to the performance of the audit.

Disagreements With Management We are to discuss with you any disagreements with management, whether or not satisfactorily resolved, about matters that individually or in the aggregate could be significant to RTAA's financial statements or the auditor's report.

During our audit, there were no such disagreements with management.

Consultations With Other Accountants If management consulted with other accountants about auditing and accounting matters, we are to inform you of such consultation, if we are aware of it, and provide our views on the significant matters that were the subject of such consultation.

We are not aware of any instances where management consulted with other accountants about auditing or accounting matters since no other accountants contacted us, which they are required to do by Statement on Auditing Standards No. 50, before they provide written or oral advice.

Representations The Auditor Is Requesting From Management We are to provide you with a copy of management's requested written representations to us.

We direct your attention to a copy of the letter of management's representation to us provided separately.

Significant Issues Discussed, or Subject to Correspondence, With Management We are to communicate to you any significant issues that were discussed or were the subject of correspondence with management.

There were no such significant issues discussed, or subject to correspondence, with management.

Significant Related Party Findings and Issues We are to communicate to you significant findings and issues arising during the audit in connection with RTAA's related parties.

There were no such findings or issues that are, in our judgment, significant and relevant to you regarding your oversight of the financial reporting process.

Other Findings or Issues We Find Relevant or Significant We are to communicate to you other findings or issues, if any, arising from the audit that are, in our professional judgment, significant and relevant to you regarding your oversight of the financial reporting process.

There were no such other findings or issues that are, in our judgment, significant and relevant to you regarding your oversight of the financial reporting process.

We are pleased to serve RTAA as its independent auditors and look forward to our continued relationship. We provide the above information to assist you in performing your oversight responsibilities, and would be pleased to discuss this letter or any matters further, should you desire. This letter is intended solely for the information and use of the Board of Trustees and, if appropriate, management, and is not intended to be and should not be used by anyone other than these specified parties.

&wtkPe. ‘1>vvy ft- LC Crowe Horwath LLP

Indianapolis, Indiana January 19, 2018


Date: January 31, 2018 Memo: # 18(02)-06 To: Chairman and Board Members For: February 8, 2018 Board Meeting From: Marily Mora, A.A.E., President/CEO Subject: AUTHORIZATION FOR THE PRESIDENT/CEO TO AWARD A 16-

MONTH EXTENSION OF THE EXISTING WARRANTY AND MAINTENANCE SERVICES AGREEMENT FOR THE PARKING REVENUE CONTROL AND GROUND TRANSPORTATION MANAGEMENT SYSTEMS AT RENO-TAHOE INTERNATIONAL AIRPORT, WITH SCHEIDT & BACHMANN USA, IN THE AMOUNT OF $376,588, EXEMPT FROM COMPETITIVE BIDDING PURSUANT TO NEVADA REVISED STATUTE 332.115.1 (a, c)

STAFF RECOMMENDATION Staff recommends that the Board authorize the President/CEO to award a 16-month extension of the existing Warranty and Maintenance Services Agreement for the Parking Revenue Control and Ground Transportation Management Systems at Reno-Tahoe International Airport, with Scheidt & Bachmann USA, in the amount of $376,588, Exempt from Competitive Bidding Pursuant to Nevada Revised Statute 332.115.1 (a, c). PURPOSE The purpose of this action is to extend the existing Warranty and Maintenance Services agreement for the Parking Access Revenue Control System (PARCS) and Ground Transportation Management System (GTMS) at Reno-Tahoe International Airport (RNO), with Scheidt and Bachmann USA (S&B). The extended period of the Warranty and Maintenance Services Agreement represents a total cost of $376,588 over 16 months, with the first four months’ payments occurring in fiscal year 2017-2018 in the amount of $94,148 and a total of $282,440 to be paid in Fiscal Year (FY) 2018-2019. The contract extension will provide a manufacturer’s warranty, software license fees, and on-going maintenance services for the PARCS and GTMS systems from S&B until the end of the 2018-2019 fiscal year. This action is in support of the Reno-Tahoe Airport Authority (RTAA) Strategic Priority # 4 – Facilitate Economic Development at Both Airports, Strategic Priority # 5 – Provide a Positive Environment and Experience for All, and the Guiding Principle of Financial Integrity, as adopted in the RTAA FY 2014-2018 Comprehensive Strategic Plan. BACKGROUND S&B completed the installation of the PARCS and the GTMS systems in August 2006 at a cost of approximately $3.074 million. In March 2013, RNO entered into a five (5) year agreement with S&B to provide an extended warranty and maintenance services agreement. This extended agreement is set to expire on February 28, 2018. These systems are responsible for the collection of approximately $11 million in annual revenue. The PARCS and GTMS systems have been maintained by S&B technicians since the installation in 2006.

PARCS Contract Extension # 18(02)-06 February 8, 2018 Board Meeting Page 2 of 3 The PARCS system is comprised of hardware and software used to monitor and control public parking revenue in the parking garage and long term surface parking lot, as well as to provide access control for airport employee parking areas. This system includes equipment and software that supports (1) access at the parking entry plaza, (2) license plate recognition for fraud protection, (3) credit card processing, (4) pay on foot cash/credit pay stations, (5) exit plaza cashier facilities, and (6) system computer servers and related equipment. The GTMS system is an Automated Vehicle Identification (AVI) System used to track usage and bill hotel and resort shuttles, limousines and busses. Ground Transportation providers, other than taxi cabs, are billed either a monthly fixed fee or a per trip fee for access to the ground transportation area which is used exclusively for the loading of passengers. Taxi cabs operate on a positive cash balance and are debited for each trip through the ground transportation area when picking up passengers. GTMS cannot process credit card payments and, therefore, PARCS is used for credit card payments. Due to the nature of the business model, Transportation Network Companies (TNC’s) do not use GTMS as there is not yet a viable way to track individual vehicles in these systems. Instead, a separate system from the same vendor that provides our GTMS system is used to provide geo-spacial tracking and accounting of drop-offs and pick-ups conducted by TNCs. Passenger pick-up fees, the same as for taxicabs, are remitted by TNCs monthly based on this tracking system and data provided by the TNCs. DISCUSSION Manufacturer Warranty and Maintenance Services This maintenance agreement will provide for the following services:

• 24 Hour a Day / Seven days a week/ 365 Day Coverage, • Priority Response, • Four (4) Hour Maximum Response Time, • Dedicated On-site Factory Trained Technician, and • Additional Backup from the western region, if needed.

This dedicated maintenance agreement is critical due to the potential loss-of-revenue exposure should the public parking system breakdown. On average, RNO averages approximately $30,000 revenue per day through the Parking and Ground Transportation systems. With the nature of these systems being proprietary to S&B, it requires a highly specialized support team to continually upgrade, monitor and maintain the system software and provide training needed to maintain the associated hardware. Nevada Revised Statute (NRS) 332.115.1(a) and (c) provide exemptions to competitive bidding requirements in that it allows local government entities to contract for “items that may only be contracted from a sole source” as well as for “additions to and repairs and maintenance of equipment which may be more efficiently added to, repaired or maintained by a certain person”, without having to comply with the requirements of a competitive bid. Accordingly, staff is

PARCS Contract Extension # 18(02)-06 February 8, 2018 Board Meeting Page 3 of 3 recommending this action be exempt from competitive bidding as permitted by NRS 332.115.1 (a) and (c). Due to the critical and proprietary nature of these systems, the use of vendor-provided support from S&B is considered a requirement as an outside vendor providing such maintenance is not a viable option. Appropriate funding for the annual warranty and maintenance has been provided each year in the Operations and Maintenance (O&M) Budget. Additionally, the extension of the Warranty and Maintenance Agreement will allow additional time for RTAA management staff to implement options for a PARCS upgrade. As stated above, the PARCS system was installed over ten years ago and the existing hardware has aged to a point where replacement parts are difficult to find. It is anticipated that management will be recommending an upgrade option to the Board before the end of the 2017-2018 Fiscal Year as a part of the Budget Process. FISCAL IMPACT The PARCS and GTMS extended Warranty and Maintenance Agreement of $376,588 will be funded from the Authority’s General Purpose Fund. The total annual cost for the extension of the agreement through FY 2018-2019 is as follows; - FY 2017-2018 - $94,148 from March 1, 2018 to June 30, 2018. ($188,296 is already

committed through February 28, 2018 per the terms of the existing agreement.) The total amount of $282,440 was included in the budget for this fiscal year.

- FY 2018-2019 - $282,440 to cover the entire fiscal year. The 2018-2019 budget will include

the proposed contractual amount for the fiscal year. It is important to note that there has been no cost increase for this extension as it is being offered at the same cost of the final full year of the original 5-year Agreement. COMMITTEE COORDINATION This item is scheduled to be presented at the February 6, 2018 Finance and Business Development Committee meeting. RECOMMENDED MOTION It is hereby recommended that the Board adopt the following motion: “It is hereby moved that the Board authorizes the President/CEO to award a 16-month extension of the existing Warranty and Maintenance Services Agreement for the Parking Revenue Control and Ground Transportation Management Systems at Reno-Tahoe International Airport, with Scheidt and Bachmann USA, in the total amount of $376,588, Exempt from Competitive Bidding Pursuant to Nevada Revised Statute 332.115.1 (a, c).” MMM/bc/cj


Date: January 31, 2018 Memo: # 18(02)-11 To: Chairman & Board Members For: February 8, 2018 Board Meeting From: Marily Mora, A.A.E., President/CEO Subject: ADOPTION OF RESOLUTION NO. 535: AMENDING RESOLUTION NO.

524 - A RESOLUTION ADOPTING POLICY NO. 600-007 TO PROVIDE FINANCIAL INCENTIVES/INDUCEMENTS TO SCHEDULED PASSENGER AIRLINES AND/OR AIR CARGO CARRIERS, TO UPDATE THE POLICY TO INCREASE THE ADVERTISING/MARKETING SUPPORT FOR NEW CARRIERS AND NEW DOMESTIC AND INTERNATIONAL ROUTES

STAFF RECOMMENDATION Staff recommends that the Board adopt Resolution No. 535: Amending Resolution No. 524 - A Resolution adopting Policy No. 600-007 to provide financial incentives/inducements to Scheduled Passenger Airlines and/or Air Cargo Carriers, to update the policy to increase the amounts of in and out of market advertising/marketing support for New Carriers and New Domestic and International Routes. PURPOSE The purpose of this action is to adopt Resolution No. 535, and update Policy No. 600-007 regarding financial incentives/inducements for Scheduled Passenger Airlines and/or Air Cargo Carriers to now increase market adverstising/marketing support for new carriers and new routes at Reno-Tahoe International Airport (RTIA). This action is in support of the Reno-Tahoe Airport Authority (RTAA) Strategic Priority # 1 – Increase Air Service and Strategic Priority # 3 – Expand Cargo Development and Service, as identified in the RTAA Fiscal Year (FY) 2014-2018 Comprehensive Strategic Plan. The approval of this action will assist the Airport Authority with efforts to market regionally, nationally and globally. BACKGROUND The RTAA, like most airports in the United States, has found it necessary to create incentive/inducement programs in order to increase air services by both passenger airlines and air cargo carriers. These incentives are in compliance with the Federal Aviation Administration’s (FAA’s) Air Carrier Incentive Guidelines. Beginning in May 2001 the following occurred: In May 2001, the Board approved Resolution No. 416 and Policy No. 600-007 – a Resolution

adopting a policy to provide financial incentives/inducements to Scheduled Passenger Airlines to increase air service to RTIA by authorizing the President/CEO to waive or discount airport fees and authorize marketing/advertising support for up to 90 days.

In May 2004, the Board approved Resolution No. 445 which amended Resolution No. 416 and

updated Policy No. 600-007 by authorizing the President/CEO to: 1. Waive or discount airport fees and authorize marketing/advertising support for up to 365

days. 2. Offer airline incentives for a minimum of one flight per week. 3. Offer airline incentives for new destinations with no nonstop air service, or less than two

scheduled flights per week.

Resolution No. 535 - Airline Carrier and Air Cargo Incentives #18(02)-11 February 8, 2018 Board Meeting Page 2 of 3 In February 2010, the Board approved Resolution No. 500, which amended Resolution No. 445

and updated Policy No. 600-007 authorizing the President/CEO to: 1. Incentives may be offered to airlines providing one-stop direct, same plane air service to a

new desitnation with no existing nonstop air service..

In February 2014, the Board approved Resolution No. 516, which amended Resolution No. 500 and updated Policy No. 600-007 authorizing President/CEO to: 1. Include financial incentives for Air Cargo Carriers. 2. Eliminate language pertaining to incentives for one-stop direct or same plane air service.

In January 2015, the Board approved Resolution No. 524, which amended Resolution No. 516

and updated Policy No. 600-007 authorizing the President/CEO to: 1. Include in and out of market advertising/marketing support since all previous Resolutions

regarding marketing support only applied to in market (Reno/Tahoe area) for passenger airlines and/or Air Cargo Carriers.

2. Allow for incentives for service offered on a seasonal basis or a scheduled charter flight. DISCUSSION The proposed amendment to the current Resolution (No. 524), and update to Policy No. 600-007, governing financial incentives offered to Passenger Airlines and/or Air Cargo Carriers would increase the incentive amounts for in and out of market Advertising/Marketing support for new airlines and new domestic and international routes as follows: Increase in targeted marketing support for new passenger airlines commencing service from

RNO from $25,000 to $50,000

Increase in targeted marketing support for passenger airlines commencing new non-stop service from RNO to domestic destinations without existing non-stop service from $25,000 to $50,000

Increase in targeted marketing support for passenger airlines commencing new non-stop

service from RNO to international destinations without existing non-stop service from $25,000 to $75,000

The $25,000 in targeted marketing support for new dedicated all-cargo air carriers commencing service from RNO remains the same. With Board approval of this action, staff would have an improved tool to attract future opportunities for new airlines and new air service, and allow RNO to be more competitive. The necessity to market in and out of market exists to support new market launches both domestically and internationally, and support the success of new routes. Therefore, Resolution No. 535 has been created to update Policy 600-007 and authorize the President/CEO to offer these new incentives. FISCAL IMPACT The change will increase the amount of advertising/marketing support authorized in the Fiscal Year (FY) 2017-2018 Adopted Budget. The Adopted Budget for FY 2017-2018 anticipated funding from fuel tax revenue to cover $172,500 in air service marketing costs. Should this resolution be adopted, there would be the potential need for $65,000 in additional funding in the

Resolution No. 535 - Airline Carrier and Air Cargo Incentives #18(02)-11 February 8, 2018 Board Meeting Page 3 of 3 current fiscal year, for a total of $237,500, specifically as it relates to the Air Service Incentive Program. Advertising/marketing support, to the extent available, is funded using aviation fuel tax revenue derived from a one cent tax on jet or turbine powered aircraft fuel at RTIA. This source of funding, authorized under Nevada Revised Statutes (NRS) 365.545, may be used to promote the use of an airport including increasing the number and availability of flights. Should fuel tax be insufficient, the RTAA will supplement this program using internal funding generated by Airport operations. The cost of this program does not impact other carriers’ rates and charges at RTIA. COMMITTEE COORDINATION This item is scheduled to be presented at the February 6, 2018 Finance and Business Development Committee meeting. RECOMMENDATION It is hereby recommended that the Board adopt the following motion: “It is hereby moved that the Board adopts Resolution No. 535: Amending Resolution No. 524 - A Resolution Adopting Policy No. 600-007 to Provide Financial Incentives/Inducements to Scheduled Passenger Airlines and/or Air Cargo Carriers, to Update the Policy to Increase the Advertising/Marketing Support for New Carriers and New Domestic and International Routes.” MMM/tt/cj

RESOLUTION NO. 535:

A RESOLUTION AMENDING RESOLUTION NO. 524: A RESOLUTION ADOPTING POLICY NO. 600-007 TO PROVIDE IN AND OUT OF MARKET ADVERTISING/MARKETING SUPPORT TO SCHEDULED PASSENGER AIRLINES AND AIR CARGO CARRIERS TO THE RENO-TAHOE INTERNATIONAL AIRPORT

WHEREAS, the Reno-Tahoe Airport Authority’s Strategic Priority # 1 is to Increase Air Service and Strategic Priority # 3 is to Expand Cargo Development and Service as identified in the FY 2014-2018 Comprehensive Strategic Plan; and WHEREAS, increased air service and cargo service is vital to the economy of the Reno-Tahoe region; and WHEREAS, the Federal Aviation Administration permits airport revenue to be used for the full costs of activities directed toward promoting competition at an airport, new air service, and in and out of market Advertising/Marketing support; and WHEREAS, the Reno-Tahoe International Airport is competing for increased passenger/cargo traffic with communities and airports that are offering financial incentives; and WHEREAS, the President/CEO has the authority to negotiate financial incentive/inducements, to temporarily waive or discount airport fees, and to authorize in and out of market Advertising/Marketing support for a maximum of 365 days to a scheduled passenger airline and/or air cargo carrier to a new destination from the Reno-Tahoe International Airport; and

WHEREAS, a minimum of one scheduled flight per week is required to qualify for these incentives and may be offered in new destinations with either no existing nonstop service or less than two scheduled flights per week; and

WHEREAS, this service can also be on a seasonal basis or be a scheduled charter

flight; and WHEREAS, this service can also be on new international routes; and

WHEREAS, the Reno-Tahoe Airport Authority desires to establish a competitive policy to establish financial incentives/inducements that may be offered by the Airport Authority to a new or existing scheduled passenger airline and/or new air cargo carrier; and WHEREAS, a copy of Policy No. 600-007 referred to herein is attached hereto and made a part hereof.

Resolution No. 535 – Adopting Updated Policy No. 600-007 Page 2 of 2

NOW, THEREFORE, BE IT RESOLVED by the members of the Board of Trustees of the Reno-Tahoe Airport Authority that this Resolution on incentives/inducements updates Policy No. 600-007. On motion by Trustee _________, second by Trustee _________, the foregoing Resolution was passed and adopted this 8th day of February, 2018, by the following vote of the Board: AYES:

NAYS:

ABSENT: ABSTAIN: ___________________________________ Chairman Shaun Carey ATTEST: __________________________ Secretary, Carol Chaplin

Reno-Tahoe Airport Authority Airline Business Development Department Policy and Procedures Manual

February 2018

Page 1 of 3

INCENTIVE POLICY FOR NEW SCHEDULED PASSENGER AIRLINE AND AIR CARGO SERVICE

Policy Number 600-007 PURPOSE The purpose of this policy is to establish specific guidelines for INCENTIVES that may be offered by the Reno-Tahoe Airport Authority (RTAA) to any new or existing Passenger Airline(s) and/or Air Cargo Carrier(s) entering the Reno-Tahoe International Airport market place, providing it meets the established criteria defined below. This policy specifically addresses and is limited to meaningful (minimum of one flight per week), scheduled and public service under one of the following conditions:

• Existing Passenger Airline which provides non-stop service to/from a destination(s) that has no existing non-stop air service;

• A new Passenger Airline which provides non-stop service to/from a new or existing destination(s) from RNO;

• A new dedicated all-cargo carrier which provides non-stop service to/from a cargo market that has no existing service.

• Service can also be seasonal passenger service or be a scheduled charter service This policy details the RTAA Board of Trustees’ approved guidelines, limitations, and authority delegation to the President/CEO to waive or discount specific Airport Rental Fees, Landing Fees and Security Bond requirements described in the Airline Lease and Operating Agreement. The policy also addresses specific marketing programs that may be undertaken by RTAA to support non-stop passenger or air cargo air service to a new destination with no existing nonstop air service. AUTHORITY/ REFERENCE The President/CEO and/or his/her designee are responsible for administering this policy. This policy and action is permitted under Federal Register/Vol. 64 No. 30/Tuesday, February 16, 1999, Section V and VI (copy attached). This policy supports RTAA Resolution No. 535, “A Resolution Adopting a Policy to Provide Financial Incentives/Inducements to Scheduled Passenger Airlines and/or Air Cargo Carriers to Increase Air Service and Cargo Development to the Reno-Tahoe International Airport,” dated February 8, 2018.


February 2018

Page 2 of 3

POLICY The decision to offer Incentive Options (defined under Procedures) will be considered on a case-by-case basis at the discretion of the President/CEO. RTAA incentives are to be based on the size and value of the destination being considered (Origin and Destination numbers, long haul or short haul, population of the destination, the tourism and/or business travel value to the community) and/or air cargo target markets. The Airport Rental Rates, Landing Fees, and advertising values considered in this policy are to be based on the specific rates for the fiscal year in which the incentive(s) is being considered. It is understood that the total value of various Incentives would vary based on the specific level of air service being considered (number of flights, type of aircraft being flown, length of haul, etc.). New carriers and destinations are defined as those without 12 months prior service from RNO. Carriers are not eligible for incentives based on mergers or acquisitions of prior RNO carriers or destinations. The incentives/inducements listed in this policy are at the maximum level under the authority of the President/CEO. Under special circumstances, it may be necessary to increase incentives/inducements to airlines to secure flights for RNO (for example, for flights to major destination or cargo markets). If this occurs, the President/CEO will request authority from the Board of Trustees to increase incentives/inducements. PROCEDURES 1. The procedures for this policy include waiving airport fees for a maximum of 365

days and providing in and out of market Advertising/Marketing support for up to 365 days. Incentives may be offered to any new or existing passenger or air cargo airline provided the airline meets the conditions outlined in the purpose section. A. AIRPORT RENTAL FEES Terminal counter space Office space Holdroom space or per turn charge

B. AIRPORT LANDING FEE RATES

Waive for a maximum of two (2) flights per day for a maximum of 365 days

C. SECURITY BOND

Postponed for a maximum of 90 days


February 2018

Page 3 of 3

D. MARKETING SUPPORT – Consisting of one or more of the following: $50,000 in targeted marketing support for new passenger airlines

commencing service from RNO $50,000 in targeted marketing support for passenger airlines commencing

new non-stop domestic service from RNO to destinations without existing non-stop service

$75,000 in targeted marketing support for passenger airlines commencing a new international route from RNO

$25,000 in targeted marketing support for new dedicated all-cargo air carriers commencing service from RNO

2. The above incentives are at the maximum level of the President/CEO’s authority.

Under special circumstances, it may be necessary to increase these incentives. When that occurs, the President/CEO will request authorization from the Board of Trustees to increase incentives.

Marily M. Mora, A.A.E., President/CEO Date

7718 Federal Register /Vol. 64, No. 30 /Tuesday, February 16, 1999/Notices

reimbursement as described in subparagraph (a) after the date specified in that subparagraph shall be considered to be an illegal diversion of airport revenues that is subject to subsection (n).

3.49 U.S.C. §40116(d) (2) (A) provides, among other things, that a State, political subdivision of a State or authority acting for a State or a political subdivision may not: "(iv) levy or collect a tax, fee or charge, first taking effect after August 23, 1994, exclusively upon any business located at a commercial service airport or operating as a permittee of such an airport other than a tax, fee or charge wholly utilized for airport or aeronautical purposes."

E. Passenger Facility Charges and Revenue Diversion

The Aviation Safety and Capacity Expansion Act of 1990 authorized the imposition of a passenger facility charge (PFC) with the approval of the Secretary.

1. While PFC revenue is not characterized as "airport revenue" for purposes of this Policy Statement, specific statutory and regulatory guidelines govern the use of PFC revenue, as set forth at 49 U.S.C. 40117, "Passenger Facility Fees," and 14 CFR Part 158, "Passenger Facility Charges." (For purposes of this policy, the terms "passenger facility fees" and "passenger facility charges" are synonymous.) These provisions are more restrictive than the requirements for the use of airport revenue in 49 U.S.C. 47107(b), in that the PFC requirements provide that PFC collections may only be used to finance the allowable costs of approved projects. The PFC regulation specifies the kinds of projects that can be funded by PFC revenue and the objectives these projects must achieve to receive FAA approval for use of PFC revenue.

2. The statute and regulations prohibit expenditure of PFC revenue for other than approved projects, or collection of PFC revenue in excess of approved amounts.

3. As explained more fully below under enforcement policies and procedures in Section IX, "Monitoring and Compliance," a final FAA determination that a public agency has violated the revenue-use provision prevents the FAA from approving new authority to impose a PFC until corrective action is taken.

Section V—Permitted Uses of Airport Revenue

A. Permitted Uses of Airport Revenue Airport revenue may be used for: 1. The capital or operating costs of the

airport, the local airport system, or other

local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. Such costs may include reimbursements to a state or local agency for the costs of services actually received and documented, subject to the terms of this policy statement. Operating costs for an airport may be both direct and indirect and may include all of the expenses and costs that are recognized under the generally accepted accounting principles and practices that apply to the airport enterprise funds of state and local government entities.

2. The full costs of activities directed toward promoting competition at an airport, public and industry awareness of airport facilities and services, new air service and competition at the airport (other than direct subsidy of air carrier operations prohibited by paragraph VI.B.12 of this policy), and salary and expenses of employees engaged in efforts to promote air service at the airport, subject to the terms of this policy statement. Other permissible expenditures include cooperative advertising, where the airport advertises new services with or without matching funds, and advertising of general or specific airline services to the airport. Examples of permitted expenditures in this category include: (a) a Superbowl hospitality tent for corporate aircraft crews at a sponsor-owned general aviation terminal intended to promote the use of that airport by corporate aircraft; and (b) the cost of promotional items bearing airport logos distributed at various aviation industry events.

3. A share of promotional expenses, which may include marketing efforts, advertising, and related activities designed to increase travel using the airport, to the extent the airport share of the promotional materials or efforts meets the requirements of V.A.2. above and includes specific information about the airport.

4. The repayment of the airport owner or sponsor of funds contributed by such owner or sponsor for capital and operating costs of the airport and not heretofore reimbursed. An airport owner or operator can seek reimbursement of contributed funds only if the request is made within 6 years of the date the contribution took place. 49 U.S.C. 47107(1).

a. If the contribution was a loan to the airport, and clearly documented as an interest-bearing loan at the time it was made, the sponsor may repay the loan principal and interest from airport funds. Interest should not exceed a rate which the sponsor received for other investments for that period of time.

b. For other contributions to the airport, the airport owner or operator may seek reimbursement of interest only if the FAA determines that the airport owes the sponsor funds as a result of activities conducted by the sponsor or expenditures by the sponsor for the benefit of the airport. Interest shall be determined in the manner provided in 49 U.S.C. 47107(o), but may be assessed only from the date of the FAA's determination.

5. Lobbying fees and attorney fees to the extent these fees are for services in support of any activity or project for which airport revenues may be used under this Policy Statement. See Section VI: Prohibited Uses of Airport Revenue.

6. Costs incurred by government officials, such as city council members, to the extent that such costs are for services to the airport actually received and documented. An example of such costs would be the costs of travel for city council members to meet with FAA officials regarding AIP funding for an airport project.

7. A portion of the general costs of government, including executive offices and the legislative branches, may be allocated to the airport indirectly under a cost allocation plan in accordance with V.B.3. of this Policy Statement.

8. Expenditure of airport funds for support of community activities, participation in community events, or support of community-purpose uses of airport property if such expenditures are directly and substantially related to the operation of the airport. Examples of permitted expenditures in this category include: (a) the purchase of tickets for an annual community luncheon at which the Airport director delivers a speech reviewing the state of the airport; and (b) contribution to a golf tournament sponsored by a "friends of the airport" committee. The FAA recognizes that contributions for community or charitable purposes can provide a direct benefit to the airport through enhanced community acceptance, but that a benefit of that nature is intangible and not quantifiable. Where the amount of contribution is minimal, the value of the benefit will not be questioned as long as there is a reasonable connection between the recipient organization and the benefit of local community acceptance for the airport. An example of a permitted expenditure in this category was participation in a local school fair with a booth focusing on operation of the airport and career opportunities in aviation. The expenditure in this example was $250.

9. Airport revenue may be used for the capital or operating costs of those

Federal Register / Vol. 64, No. 30 / Tuesday, February 16, 1999 / Notices 7719

portions of an airport ground access project that can be considered an airport capital project, or of that part of a local facility that is owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property, including use by airport visitors and employees. The FAA has approved the use of airport revenue for the actual costs incurred for structures and equipment associated with an airport terminal building station and a rail connector between the airport station and the nearest mass transit rail line, where the structures and equipment were (1) located entirely on airport property, and (2) designed and intended exclusively for the use of airport passengers.

B. Allocation of Indirect Costs

1. Indirect costs of sponsor services may be allocated to the airport in accordance with this policy, but the allocation must result in an allocation to the airport only of those costs that would otherwise be allowable under 49 U.S.C. §47107(b). In addition, the documentation for the costs must meet the standards of documentation stated in this policy.

2. The costs must be allocated under a cost allocation plan that meets the following requirements:

a. The cost is allocated under a cost allocation plan that is consistent with Attachment A to OMB Circular A-87, except that the phrase "airport revenue" should be substituted for the phrase "grant award," wherever the latter phrase occurs in Attachment A;

b. The allocation method does not result in a disproportionate allocation of general government costs to the airport in consideration of the benefits received by the airport;

c. Costs allocated indirectly under the cost allocation plan are not billed directly to the airport; and

d. Costs billed to the airport under the cost allocation plan must be similarly billed to other comparable units of the airport owner or operator.

3. A portion of the general costs of government, such as the costs of the legislative branch and executive offices, may be allocated to the airport as an indirect cost under a cost allocation plan satisfying the requirements set forth above. However, the allocation of these costs may require special scrutiny to assure that the airport is not paying a disproportionate share of these costs.

4. Central service costs, such as accounting, budgeting, data processing, procurement, legal services, disbursing and payroll services, may also be allocated to the airport as indirect costs

under a cost allocation plan satisfying the requirements set forth above. However, the allocation of these costs may require special scrutiny to assure that the airport is not paying a disproportionate share of these costs.

C. Standard of Documentation for the Reimbursement to Government Entities of Costs of Services and Contributions Provided to Airports

1. Reimbursements for capital and operating costs of the airport made by a government entity, both direct and indirect, must be supported by adequate documentary evidence. Documentary evidence includes, but is not limited to:

a. Underlying accounting data such as general and specialized journals, ledgers, manuals, and supporting worksheets and other analyses; and corroborating evidence such as invoices, vouchers and indirect cost allocation plans, or

b. Audited financial statements which show the specific expenditures to be reimbursed by the airport. Such expenditures should be clearly identifiable on the audited financial statements as being consistent with section VIII of this policy statement.

2. Documentary evidence to support direct and indirect charges to the airport must show that the amounts claimed were actually expended. Budget estimates are not sufficient to establish a claim for reimbursement. Indirect cost allocation plans, however, may use budget estimates to establish pre-determined indirect cost allocation rates. Such estimated rates should, however, be adjusted to actual expenses in the subsequent accounting period.

D. Expenditures of Airport Revenue by Grandfathered Airports

1. Airport revenue may be used for purposes other than capital and operating costs of the airport, the local airport system, or other local facilities owned or operated by the sponsor and directly and substantially related to the air transportation of passengers or property, if the "grandfather" provisions of 49 U.S.C. §47107(b)(2) are applicable to the sponsor and the particular use. Based on previous DOT interpretations, examples of grandfathered airport sponsors may include, but are not limited to the following:

a. A port authority or state department of transportation which owns or operates other transportation facilities in addition to airports, and which have pre-September 3, 1982, debt obligations or legislation governing financing and providing for use of airport revenue for non-airport purposes. Such sponsors may have obtained legal opinions from

their counsel to support a claim of grandfathering. Previous DOT interpretations have found the following examples of pre-AAIA legislation to provide for the grandfather exception:

b. Bond obligations and city ordinances requiring a five percent "gross receipts" fee from airport revenues. The payments were instituted in 1954 and continued in 1968.

c. A 1955 state statute for the assessing of a five percent surcharge on all receipts and deposits in an airport revenue fund to defray central service expenses of the state.

d. City legislation authorizing the transfer of a percentage of airport revenues, permitting an airport-air carrier settlement agreement providing for annual payments to the city of 15 percent of the airport concession revenues.

e. A 1957 state statutory transportation program governing the financing and operations of a multi-modal transportation authority, including airport, highway, port, rail and transit facilities, wherein state revenues, including airport revenues, support the state's transportation-related, and other, facilities. The funds flow from the airports to a state transportation trust fund, composed of all "taxes, fees, charges, and revenues" collected or received by the state department of transportation.

f. A port authority's 1956 enabling act provisions specifically permitting it to use port revenue, which includes airport revenue, to satisfy debt obligations and to use revenues from each project for the expenses of the authority. The act also exempts the authority from property taxes but requires annual payments in lieu of taxes to several local governments and gives it other corporate powers. A 1978 trust agreement recognizes the use of the authority's revenue for debt servicing, facilities of the authority, its expenses, reserves, and the payment in lieu of taxes fund.

2. Under the authority of 49 U.S.C. §47115(1), the FAA considers as a factor militating against the approval of an application for AIP discretionary funds, the fact that a sponsor has exercised its rights to use airport revenue for nonairport purposes under the grandfather clause, when in the airport's fiscal year preceding the date of application for discretionary funds, the FAA finds that the amount of airport revenues used for nonairport purposes exceeds the amount used for such purposes in the airport's first fiscal year ending after August 23, 1994, adjusted by the Secretary for changes in the Consumer Price Index of All Urban

7720 Federal Register /Vol. 64, No. 30 /Tuesday, February 16, 1999 /Notices

Consumers published by the Bureau of Labor Statistics of the Department of Labor.

Section VI—Prohibited Uses of Airport Revenue

A. Lawful and Unlawful Revenue Diversion

Revenue diversion is the use of airport revenue for purposes other than the capital or operating costs of the airport, the local airport system, or other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property, unless that use is grandfathered under 49 U.S.C. §47107(b)(2) and the use does not exceed the limits of the 'grandfather' clause. When such use is so grandfathered, it is known as lawful revenue diversion. Unless the revenue diversion is grandfathered, the diversion is unlawful and prohibited by the revenue-use restrictions.

B. Prohibited Uses of Airport Revenue Prohibited uses of airport revenue

include but are not limited to: 1. Direct or indirect payments that

exceed the fair and reasonable value of those services and facilities provided to the airport. The FAA generally considers the cost of providing the services or facilities to the airport as a reliable indicator of value.

2. Direct or indirect payments that are based on a cost allocation formula that is not consistent with this policy statement or that is not calculated consistently for the airport and other comparable units or cost centers of government.

3. Use of airport revenues for general economic development.

4. Marketing and promotional activities unrelated to airports or airport systems. Examples of prohibited expenses in this category include participation in program to provide hospitality training to taxi drivers and funding an airport operator's float containing no reference to the airport, in a New Years Day parade.

5. Payments in lieu of taxes, or other assessments, that exceed the value of services provided or are not based on a reasonable, transparent cost allocation formula calculated consistently for other comparable units or cost centers of government;

6. Payments to compensate non-sponsoring governmental bodies for lost tax revenues to the extent the payments exceed the stated tax rates applicable to the airport;

7. Loans to or investment of airport funds in a state or local agency at less than the prevailing rate of interest.

8. Land rental to, or use of land by, the sponsor for nonaeronautical

purposes at less than fair rental/market value, except to the extent permitted by SectionVILD of this policy.

9. Use of land by the sponsor for aeronautical purposes rent-free or for nominal rental rates, except to the extent permitted by Section VILE of this policy.

10. Impact fees assessed by any governmental body that exceed the value of services or facilities provided to the airport. However, airport revenue may be used where airport development requires a sponsoring agency to take an action, such as undertaking environmental mitigation measures contained in an FAA record of decision approving funding for an airport development project, or constructing a ground access facility that would otherwise be eligible for the use of airport revenue. Payments of impact fees must meet the general requirement that airport revenue be expended only for actual documented costs of items eligible for use of airport revenue under this Policy Statement. In determining appropriate corrective action for an impact fee payment that is not consistent with this policy, the FAA will consider whether the impact fee was imposed by a non-sponsoring governmental entity and the sponsor's ability under local law to avoid paying the fee.

11. Expenditure of airport funds for support of community activities and participation in community events, or for support of community-purpose uses of airport property except to the extent permitted by this policy. See Section V, Uses of Airport Revenue. Examples of prohibited expenditures in this category include expenditure of $50,000 to sponsor a local film society's annual film festival; and contribution of $6,000 to a community cultural heritage festival.

12. Direct subsidy of air carrier operations. Direct subsidies are considered to be payments of airport funds to carriers for air service. Prohibited direct subsidies do not include waivers of fees or discounted landing or other fees during a promotional period. Any fee waiver or discount must be offered to all users of the airport, and provided to all users that are willing to provide the same type and level of new services consistent with the promotional offering. Likewise prohibited direct subsidies do not include support for airline advertising or marketing of new services to the extent permitted by Section V of this Policy Statement.

Section WI—Policies Regarding Requirement for a Self-Sustaining Airport Rate Structure

A. Statutory Requirements 49 U.S.C. §47107(a) (13) requires

airport operators to maintain a schedule of charges for use of the airport: "(A) that will make the airport as self-sustaining as possible under the circumstances existing at the airport, including volume of traffic and economy of collection."

The requirement is generally referred to as the "self-sustaining assurance."

B. General Policies Governing the Self-Sustaining Rate Structure Assurance

1. Airport proprietors must maintain a fee and rental structure that in the circumstances of the airport makes the airport as financially self-sustaining as possible. In considering whether a particular contract or lease is consistent with this requirement, the FAA and the Office of the Inspector General (OIG) generally evaluate the individual contract or lease to determine whether the fee or rate charged generates sufficient income for the airport property or service provided, rather than looking at the financial status of the entire airport.

2. If market conditions or demand for air service do not permit the airport to be financially self-sustaining, the airport proprietor should establish long-term goals and targets to make the airport as financially self-sustaining as possible.

3. At some airports, market conditions may not permit an airport proprietor to establish fees that are sufficiently high to recover aeronautical costs and sufficiently low to attract and retain commercial aeronautical services. In such circumstances, an airport proprietor's decision to charge rates that are below those needed to achieve a self-sustaining income in order to assure that services are provided to the public is not inherently inconsistent with the obligation to make the airport as self-sustaining as possible in the circumstances.

4. Airport proprietors are encouraged, when entering into new or revised agreements or otherwise establishing rates, charges, and fees, to undertake reasonable efforts to make their particular airports as self sustaining as possible in the circumstances existing at such airports.

5. Under 49 U.S.C. 5 47107(a) (1) and the implementing grant assurance, charges to aeronautical users must be reasonable and not unjustly discriminatory. Because of the limiting effect of the reasonableness requirement, the FAA does not consider the self-sustaining requirement to require airport sponsors