Official Statement Airport Commission City and County of San ...

The City and the Commission agree in the Settlement Agreement not to establish any sinking funds
pertaining to general obligation or revenue bonds previously issued or to be issued for the purpose of providing
capital improvements for the Airport, other than sinking funds required by covenants in resolutions or indentures
relating to such bonds.
Bond Financing of Capital Improvements
Except as provided in the Lease and Use Agreements, no surcharge, special assessment or other charge,
rental or fee to the airlines may be made for the funding of Airport capital improvements from current revenues.
West of Bayshore Lands
The Settlement Agreement deals with the potential development of certain Airport property west of the
Bayshore Freeway. Maintenance costs of the property in its current undeveloped state are an obligation of the
Commission and are included in calculations to determine landing fee rates. Provision is made for any future
development of such property solely with non-Airport revenues. Except as may be provided in the Settlement
Agreement and the Lease and Use Agreements, the airlines disclaim the right to any revenues from the area.
The Settlement Agreement expires by its terms on June 30, 2011.
Lease and Use Agreements
All of the airlines which were involved in the litigation (see “Settlement Agreement”, above) and are
presently serving the Airport are signatories to the Lease and Use Agreements, with the exception of British
Airways. Each of the Agreements applicable to domestic airlines has an original term commencing from July 1,
1981 and ending June 30, 2011. Certain foreign flag carriers opted for a shorter ten-year term commencing July 1,
1981, and are currently operating at the Airport pursuant to monthly permits. The Lease and Use Agreements
include a number of provisions which resulted in a substantial restructuring of the financial operations of the Airport
in the three major areas described below:
Airport Cost Centers and Areas Categories
The definitional portions of the Lease and Use Agreements include the description of the functional areas
to be used in accounting for revenues, expenses and debt service. These functional areas are divided into six general
areas: the Airfield Area, Airport Support Area, Terminal Area, Groundside Area, Utilities Area and West of
Bayshore Area. Direct and indirect expenses are recorded and allocated to the appropriate cost centers. Article II of
the Lease and Use Agreements describes various categories of space in the Terminal Area, including ticket counters,
ticket counter back offices, administrative and operation offices, inbound/outbound baggage handling areas, and
unenclosed or covered areas.
Rentals and Landing Fees and their Adjustment
The Lease and Use Agreements provide for matching revenues each year to the Commission’s expenditures
by adjusting aviation revenues. Differences between actual receipts and expenditures result in adjustment of
Terminal Area rentals and landing fees in subsequent years. The Commission’s financial statements reflect such
adjustments in the year in which the difference occurs.
The Lease and Use Agreements provide the methodology for the computation of the landing fee rate and
Terminal Area rental rates. Such methodology is generally directed at ensuring that revenues equal expenditures.
Although the Lease and Use Agreements apply only to the airlines that have signed a Lease and Use Agreement, the
City currently charges the same landing fees and rentals to non-signatory airlines which operate under permit.
Landing fees and Terminal Area rental rates are adjusted annually. Not fewer than 90 days before the end
of each fiscal year, each signatory airline is required to submit to the City its landed weight forecast and notice of
any proposed additions to the space in the Terminal Area it leases, for the next fiscal year. Concurrently, the City
submits to the airlines its budgetary forecast for the various cost centers for the next fiscal year. The City then
computes and forwards to the signatory airlines not fewer than 60 days before the end of the fiscal year its
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