Official Statement Airport Commission City and County of San ...
Official Statement Airport Commission City and County of San ...
Official Statement Airport Commission City and County of San ...
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Settlement Agreement<br />
Under the Settlement Agreement, the <strong>Commission</strong> makes payments from <strong>Airport</strong> net revenues to the <strong>City</strong><br />
consisting <strong>of</strong> an “Annual Service Payment” <strong>and</strong> certain additional payments for direct services provided by the <strong>City</strong><br />
to the <strong>Commission</strong>. Each Fiscal Year through Fiscal Year 2010-11, the <strong>Commission</strong> is required to make an Annual<br />
Service Payment from the <strong>Airport</strong> Revenue Fund to the General Fund <strong>of</strong> the <strong>City</strong>. The Annual Service Payment<br />
constitutes full satisfaction <strong>of</strong> all obligations <strong>of</strong> the <strong>Airport</strong>, the <strong>Commission</strong>, <strong>and</strong> the Signatory Airlines for all<br />
indirect services provided by the <strong>City</strong>, for debt service, if any, on certain <strong>City</strong> airport general obligation bonds, <strong>and</strong><br />
for an investment return to the <strong>City</strong>.<br />
The Settlement Agreement prohibits the <strong>Commission</strong> <strong>and</strong> the <strong>City</strong> from taking any action to cause payment<br />
to the <strong>City</strong>, directly or indirectly, <strong>of</strong> any additional <strong>Airport</strong> revenues or from the airlines, except as permitted under<br />
the Lease Agreements. The Lease Agreements permit payments to the <strong>City</strong> for certain direct services provided by<br />
the <strong>City</strong> to the <strong>Commission</strong>, including services provided by the Police Department, the Fire Department, the <strong>City</strong><br />
Attorney, the <strong>City</strong> Controller, the Water Department, the Department <strong>of</strong> Public Works <strong>and</strong> the Purchasing<br />
Department. See “AIRPORT’S FINANCIAL AND RELATED INFORMATION–Payments to the <strong>City</strong>.”<br />
The Settlement Agreement also provides that, except as provided in the Lease Agreements, no surcharge,<br />
special assessment or other charge, rental or fee to the airlines may be made for the funding <strong>of</strong> <strong>Airport</strong> capital<br />
improvements from current revenues. Under the Lease Agreements, capital improvements are required to be<br />
financed primarily through the issuance <strong>of</strong> <strong>Airport</strong> revenue bonds.<br />
Lease Agreements<br />
Each Lease Agreement expires on June 30, 2011. The <strong>Commission</strong> may terminate a Signatory Airline’s<br />
Lease Agreement only upon the occurrence <strong>of</strong> certain events, including, but not limited to, such airline’s filing for<br />
federal bankruptcy protection or its voluntary cessation <strong>of</strong> service to the <strong>Airport</strong> for more than 30 days.<br />
Residual Methodology. The Lease Agreements govern the use <strong>of</strong> exclusive-use <strong>and</strong> common-use ramp,<br />
terminal, baggage claim, ticketing <strong>and</strong> gate areas. Under the Lease Agreements, the Signatory Airlines pay terminal<br />
rents <strong>and</strong> l<strong>and</strong>ing fees under a residual rate-setting methodology tied to six cost centers. This methodology is<br />
designed to provide revenues to the <strong>Commission</strong> sufficient to pay operating expenses <strong>and</strong> debt service costs. Under<br />
this residual rate-setting methodology, l<strong>and</strong>ing fees <strong>and</strong> terminal rentals are established each year to produce<br />
projected revenues from the airlines (“airline payments”) equal to the difference between (i) the <strong>Airport</strong>’s<br />
non-airline revenues <strong>and</strong> (ii) the <strong>Airport</strong>’s total costs, including without limitation operating expenses <strong>and</strong> debt<br />
service costs (“net costs”). In other words, rates <strong>and</strong> charges are established each year to produce projected airline<br />
payments equal to projected net costs. Thus, increases in non-airline revenues, such as parking <strong>and</strong> concession<br />
revenues, generally result in decreases in airline l<strong>and</strong>ing fees <strong>and</strong> terminal rental rates, <strong>and</strong> vice versa. In Fiscal<br />
Year 2008-09, airline l<strong>and</strong>ing fees <strong>and</strong> terminal rental payments under the Lease Agreements represented<br />
approximately 44.2% <strong>of</strong> the <strong>Commission</strong>’s operating revenues.<br />
Differences between receipts <strong>and</strong> expenditures in any Fiscal Year may result in adjustments <strong>of</strong> terminal<br />
rental rates <strong>and</strong> l<strong>and</strong>ing fees in subsequent Fiscal Years. The <strong>Commission</strong>’s financial statements reflect such<br />
differences in the Fiscal Year in which they occur, with overcharges being recorded as liabilities (accounts payable)<br />
<strong>and</strong> undercharges as assets (accounts receivable). Although the Lease Agreements apply only to the Signatory<br />
Airlines, the <strong>Commission</strong> charges the same rental rates <strong>and</strong> l<strong>and</strong>ing fees to the non-signatory airlines that operate<br />
under operating permits. Non-signatory airlines that use the <strong>Airport</strong> on an itinerant basis pay higher rates <strong>and</strong> fees.<br />
Annual Adjustment <strong>of</strong> Terminal Rentals <strong>and</strong> L<strong>and</strong>ing Fees. In accordance with the Lease Agreements, the<br />
<strong>Commission</strong> may adjust terminal rental rates <strong>and</strong> l<strong>and</strong>ing fees each year for the next Fiscal Year based on each<br />
Signatory Airline’s proposed changes to its leased space, additions <strong>of</strong> new terminal space for lease, the forecast<br />
l<strong>and</strong>ed weight for the next Fiscal Year, <strong>and</strong> the <strong>Commission</strong>’s budgetary forecast <strong>of</strong> attributed operating expenses<br />
<strong>and</strong> debt service costs for the various <strong>Airport</strong> cost centers.<br />
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