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

Mid-Year Adjustment of Terminal Rentals and Landing Fees. The Commission may also increase terminal
rental rates and/or landing fees at any time during the Fiscal Year if the actual expenses (including debt service) in
one or more applicable cost centers are projected to exceed by 10% or more the actual revenues from such cost
center. Prior to increasing terminal rental rates and/or landing fees, as applicable, the Commission must use its best
efforts to reduce expenses and to satisfy any remaining deficit from other available funds. The Commission is also
required to provide 60 days’ notice to, and consult with, the Signatory Airlines. The Signatory Airlines are required
under the Lease Agreements to pay such increased terminal rentals and/or landing fees for the remaining months of
the then-current Fiscal Year. The last time a mid-year adjustment was made was in Fiscal Year 2000-01.
Landing Fees. Landing fees, consisting of minimum fees for fixed-wing and rotary aircraft and a rate based
on landed weight, are imposed primarily with respect to Airfield Area and Airport Support Area net costs. Each
Signatory Airline and other airlines and airfield users are required to pay landing fees, the principal component of
which is based upon landed weight, that are established by the Commission to fully recover all Airfield and Airport
Support Area net costs. However, if a Signatory Airline were to cease or substantially reduce its operations at the
Airport, it would still remain liable for certain terminal rentals (with respect to Terminal Area and Groundside Area
net costs), calculated each year on a residual basis as provided in the Lease Agreements. Any shortfall in landing
fees payable to the Commission by the Signatory Airlines and other airlines and airfield users in any Fiscal Year as a
result of actual landed weights being less than those projected would be made up either from a mid-year rate
adjustment, or from adjustments to landing fee rates in the succeeding Fiscal Years pursuant to the formulas set forth
in the Lease Agreements.
Airline Review of Capital Improvements. Under the Lease Agreements, the Commission agrees, subject to
the limited exception described below, to use its best efforts to finance all capital improvements through the
issuance of Airport revenue bonds. A “capital improvement” is defined as any item of expenditure with a cost
(including design and planning costs) exceeding $100,000 in 1981 dollars ($212,005 in 2010 dollars based on the
Implicit Price Deflator, and approximately $241,239 in 2010 dollars based on the Consumer Price Index) and a
useful life of more than three years. Proposed capital improvements with a cost in excess of $300,000 in 1981
dollars ($636,016 in 2010 dollars based on the Implicit Price Deflator, and $723,718 in 2010 dollars based on the
Consumer Price Index) are subject to certain review procedures established under the Lease Agreements. A
Majority-In-Interest of the Signatory Airlines (defined as more than 50% of the Signatory Airlines, which on the
date of calculation represent more than 50% of the landed weight of such Signatory Airlines during the immediately
preceding Fiscal Year) may require the Commission to defer a proposed capital improvement for up to six months in
order for the airlines to present their views with respect to such capital improvement, after which time the
Commission may proceed with the capital improvement.
Additionally, the Airport may annually budget and spend without airline approval up to $2,000,000 in
1981 dollars ($4,240,105 in 2010 dollars based on the Implicit Price Deflator, and $4,824,786 in 2010 dollars based
on the Consumer Price Index) or a greater amount approved by a Majority-In-Interest, from current revenues for
capital improvements. Also, capital improvements that are required by (i) a federal or state agency having
jurisdiction over Airport operations, or (ii) an emergency which, if the improvements are not made, would result in
the closing of the Airport within 48 hours, are not subject to the airline review procedures.
ITC Joint Use Space. Under the Original Agreements, the Commission can require the Signatory Airlines
to make a limited accommodation of new air carriers in the domestic terminals. Subject to a written agreement
between the Signatory Airline and the new air carrier, each Signatory Airline must make its passenger holdrooms
and loading bridges available on a temporary basis, when such facilities are not needed for the Signatory Airline’s
own operations or those of its sublessees, to permit the new air carrier to load and unload passengers on scheduled
flights. With respect to the ITC, the Amended Agreements provide that all ITC gates, holdrooms, ticket counters
and baggage systems are to be used on a joint use basis in accordance with management protocols which allocate the
facilities for use among the various airlines according to need during the day. This arrangement facilitates the
efficient use of the ITC facilities and enables the Airport to easily accommodate new domestic or international
carriers or other market changes within the industry.
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