Fitch Ratings Update (05.29.2015) · 7/9/2015  · Review of Key Economic Indicators $0 $50,000...

ATTACHMENT D

RTAA Financial Update Presentation Fitch Ratings on May 29, 2015

Fitch Ratings UpdateMay 29, 2015

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Agenda• RTAA Overview and Strategic Priorities• Regional Economic Outlook• FY 2015-16 RTAA Initiatives• Air Service Market Update• Financial Overview

• Revenue • Operating Expense• Property, Plant and Equipment

• Capital Improvement Projects• Debt Service• Key Financial Ratios and Measures

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Who We AreReno-Tahoe Airport Authority

Created in 1977 by State Legislation

Owners and Operators of Reno-Tahoe International

Airport

Reno-Stead Airport

Governed by Board of Trustees appointed by: Cities of Reno and Sparks

Washoe County

Reno-Sparks Convention and Visitors Authority

A City Unto Itself…Operationally independent with

in-house police and fire departments, human resources,

accounting, etc.

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Catchment AreaThe RNO Catchment Area Includes, the Reno/Sparks MSA, Lake Tahoe and Carson City (capital of

Nevada)

Source: U.S. Census Bureau, 2010

RNO

SparksReno

Carson City

Lake Tahoe

• The RNO primary catchment area has a population of over 587,439 people

• 1.3M people in secondary catchment area

• Northern Nevada population grew 20% over the past decade

• RNO has limited competition from other airports (SMF 140 miles away, Bay Area over 200 miles)

• Las Vegas is 450 miles away-estimated drive of 7 hours

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Gateway to Lake Tahoe

Source: www.cheapflights.com, March 2011; Yahoo Maps

Lake Tahoe

RNO

SMF

Reno-Tahoe International Airport makes getting to Lake Tahoe a breezeIt take over 2 hours to get to Lake Tahoe from SMF

Distance Driving Time Distance Driving Time Distance Driving Time

Northstar California 42 miles 46 mins 116 miles 1:55 hr 74 miles 1:09 hr

Squaw Valley 48 miles 53 mins 117 miles 1:57 hr 69 miles 1:04 hr

South Lake Tahoe 58 miles 1:13 hr 115 miles 2:05 hr 57 miles 46 mins

Heavenly Ski Resort 59 miles 1:16 hr 115 miles 2:06 hr 56 miles 50 mins

Additional time & miles from SMFResort

Reno-Tahoe International Sacramento Airport

During a regular week day, on average, car rentals at

SMF cost 69% more than car rentals at RNO

Source: Reno-Tahoe International Airport Car Rental Survey

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Gateway to the Region Airport is the Gateway to the Reno-Tahoe region

$100M in terminal improvements in last five years Created an airport that provides a sense of place

You know you are in Reno-Tahoe when you land

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Strategic Plan (FY 2014-2018) RTAA Board and Staff established a vision for the future:

Five Strategic Priorities Five-year plan with flexibility and forethought Serve as a compass for the future Public process

• Airport committees• User groups• Board and staff• Public

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Strategic Plan (FY 2014-2018)

Work plans developed and resources identified Guiding Principles/Operating Practices Safety and Security ■Customer Service Financial Integrity ■ Professionalism and Ethics Environmental

Guiding Principles drive the day-to-day operations

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Regional Economic Outlook

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Economic InfluencesNational and Regional Economic Factors Modest improvement next year, bright future

Significantly lower unemployment rate

Tesla Effect

Technology / Data Centers

Industrial Real Estate Market

Unmanned Aircraft Systems

Casino / Ski Resort Development

Bowling Tournament Visitors

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Improving Unemployment Rate

51% Reduction Since 2011 (14.0% to 6.9%)

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Review of Key Economic Indicators

$0$50,000

$100,000$150,000$200,000$250,000$300,000$350,000$400,000

Washoe CountyMedian Home Sale Price

Median Home Sale Price

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

Millions

Washoe CountyVisitors, Passengers, Airline Seats

Passengers Available SeatsVisitors

0.0010.0020.0030.0040.0050.0060.0070.0080.0090.00

Millions

Washoe CountyTaxable Gaming Revenue

Washoe Co. Taxable Gaming Revenue

$0.000$1.000$2.000$3.000$4.000$5.000$6.000$7.000$8.000$9.000

Billions

Washoe County Taxable Sales

Washoe County Taxable Sales

* Source: Reno-Tahoe International Airport and Reno-Sparks Convention and Visitor’s Authority * Source: Nevada State Gaming Control Board

* Source: Reno/Sparks Association of Realtors * Source: State of Nevada Department of Taxation

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Tesla Battery Gigafactory

More Than JobsPuts Us on The Radar:

ManufacturingBusiness

EntrepreneursCreative Class

Research & Development Investors . . .

The Largest Deal In The U.S. Changes

Reno-Sparks Brand Overnight

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Tesla Only Part Of The Growth!Tesla

PrimaryTesla

SecondaryEDAWNPrimary

EDAWNSecondary

Total Jobs

2013 0 0 3,460 4,360 7,8202014 0 0 3,479 4,384 7,8632015 700 1,148 4,000 5,040 10,8882016 1,000 1,640 3,500 4,410 10,5502017 3,000 4,920 3,000 3,780 14,7002018 1,800 2,952 2,500 3,150 10,4022019 0 0 2,000 2,520 4,520

5 YearTotal 6,500 10,660 15,000 18,900 51,060

17,160

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Total Projected Employment Growth

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Explosive Growth Is Coming!

150,000

170,000

190,000

210,000

230,000

250,000Tesla Projected Job GrowthEDAWN Projected Job GrowthHistoric Employment

2.2% Growth

4.9% Growth

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Transportation / Distribution Center

World’s Largest Industrial Park upon completion

Logistics and operations industry cluster - “a natural target industry for Northern Nevada,”

Location and geographic advantages, strong existing infrastructure and cost and regulatory advantages

One day truck distribution to the entire west coast

Union Pacific Railroad’s Class 1 Transcontinental rail line

Network Access Point for internet traffic - State-of-the-art digital and fiber optic highway

Internet fulfillment, bio-pharma, and hi-tech business

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Notable Reno-Tahoe Companies

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Silicon Valley Support Datacenter / Distribution / Manufacturing

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Entrepreneurial Development Success!

Reno, NV (DEC. 15, 2014) Next City will host its sixth annual Vanguard conference in Reno.Vanguard is an annual experiential urban leadership conference.IEDC

Award!

Entrepreneur.com on NBCNews.com

3 Alternative Tech Startup Cities With Less Traffic, More Housing (Infographic)

Three Western locales previously considered vacation destinations are now alternatives to Silicon Valley life at a much more affordable price.

3 Alternative Tech Startup Cities Three Western locales previously considered vacation destinations are now alternatives to Silicon Valley life at a much more affordable price.

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RNO Land Development

In ProcessHome Gardens South

≈ 45 acresMill & Rock/Northeast Quadrant

≈ 36 acresAirport South

≈ 4 acres

Pending Market DemandAirport East (Brookside)

≈ 50 acres Southeast Quadrant

≈ 25 acres Southwest Quadrant

≈ 90 acresAirport Gateway Center

≈ 7.5 acresHome Gardens North/Airport West

≈ 25 acres

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Reno-Stead - Concept Plan

Vacant Properties owned by RTAA total 2,396 acres

37% of vacant industrial land in Washoe County

* Source: Truckee Meadows Regional Planning Authority, 3rd Quarter Industrial Inventory Report

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Northern Nevada UAS Partnerships

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UAS Stead Test Range Concept

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Aviation Taxes Competitive Disadvantage

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Legislative Effort A partial abatement of taxes on aviation property and parts

will lead to growth in the aviation industry in both the short and longer‐term.

Nevada will experience significant gains in high-wage jobs and economic activity from existing Nevada-based businesses.

The employment and economic benefits will begin to occur quickly, because of pent‐up demand.

Moreover, the growth will generate tax revenues that exceed cost of the abatement.

❖ Supports designation as FAA testing site for Unmanned Aircraft Systems (UAS)

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Air Service Market Overview

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Air Service Market Update Strong Demand - Higher U.S. industry traffic of 2.5%

Merger of American & US Airways

Airline Profitability Respectable profit margins Significantly lower fuel prices Larger aircraft at bigger airports

Airline perspective – “Why fix what is not broken?”

RNO More Competition - Full year impact - JetBlue and Volaris

Continued existing service by current carriers

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Passenger Traffic Update• Enplaned Passenger forecast for FY 2014-15 reflects a decrease of 2.2%

• FY 2015-16 Budget is 2.9% higher than current year forecast and modestly up as compared to the adopted budget

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New Air Service New York, NY (jetBlue) Commenced on May 28, 2015 Airbus 320 with 150 Seats Daily Service to JFK

Guadalajara, Mexico (Volaris) Started Dec 16, 2014 Airbus 320 with 174 Seats Twice Weekly Service

Los Angeles, CA (American) Larger Aircraft on Sept 3, 2014 Four to Five Flights per Day To start June 5, 2015

San Jose, CA (Alaska) Service Schedule Change Business Traveler Convenience

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MAP

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Passenger Traffic Market Share Southwest market

share is projected to drop from 54% in FY 2012-13 to 42% in FY 2015-16

Merger between US Airways and American. Combined market share is forecast to be 24% in FY 2015-16

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Strategic Priority –Cargo Development

In 2014, RNO Handled over 125 Million Pounds of Air Cargo, Representing the Best Cargo Year During the Last Seven Years. 

120 million

102 million

109 million 111 million 112 million

117 million

125 million

CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014

December 2014 was recorded as the best month ever in regards to cargo handling at RNOSource: Airline Activity Report, RNO

6.8%

A New Approach –Air Service Development

❖ The most important strategic priority for the RTIA

❖ The catalyst for economic recovery and growth within our region

❖ Has changed drastically in the past 24 months

❖ Requires resources and a team approach

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Air Service Development

Temporarily waive or discount airport fees and authorize marketing/advertising support for a maximum of 365 days to a scheduled passenger airline(s), cargo carrier(s), and seasonal and scheduled charter service to a new destination

Marketing Support - $25,000 in target marketing support both in and out of the market

Airports are limited on what they can provide per FAA Guidelines

Expanded in 2014 to build a coalition of casinos, ski resorts, local businesses, community groups, and local governmentato create a unique synergy

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Air Service Development- FY 2015

Air Service Development

Market Analysis

Airline Meetings

Leverage Resources

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Strategy Review

Strategy to Develop Resources

Tourism

Expand Financial Base

Valuation of In-Kind Support

Government

City

County

State

Business

Business Advisory Council

RNO Business Lounge

In-Kind Support

Community

Awareness Campaign

RNO Business Services

Airline Program Enrollments

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Third Party Valuation - In-Kind Support Regional Air Service Corporation (RASC) offers a

marketing resource that no other community can offer

RASC is consortium that spreads across industries (tourism, hotel, gaming, ski, etc.)

Marketing support that RASC brings provides unbeatable air service leverage. Combined Database Size Overall Social Media Reach Total Website Visitations PR outreach Other

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Route-based messaging

Timing to maximize efficiency/effectiveness

Based on “Strategic Partnerships”

Multiple Media In-Terminal

PR/Social

Print

Online

TV

Radio

Outdoor

RTAA Marketing Support of New Routes

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Financial Results

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Airline Agreement Five (5) Year Term - Effective July 1, 2015 through June 30,

2020 Opportunity to Extend – Additional five (5) years with Board

approval Retain existing rate-setting methodology “Hybrid” approach

Airfield and Baggage Handling System – Cost Center Residual

Terminal Building – Commercial Compensatory

50/50 net revenue sharing component Enforceable Lease – Five Year Financial Commitment Extraordinary Coverage Protection

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Signatory Airlines

Non-Signatory Airlines Allegiant Air JetBlue Airlines Volaris Airlines

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Fiscal Impact Projected airline revenue of $17 million per year or $85

million over the five (5) year term Forecasted airline cost per enplaned passenger to remain

less than $9.00

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Revenue Summary• Total Revenue of $46.417 million – 2.3% above last year’s budget

• Higher airline revenue of $411,450

• Airline Cost per Enplaned Passenger of $8.39

• Non-Airline Revenue is forecasted to be 2.3% above the current year budget reflecting improved FY 2014-15 actual results

FY 2014-15 Budget

FY 2015-16 Budget

Dollar Change

% Change

Airline Revenue $14,980,252 $15,391,702 $411,450 2.7%

Non-Airline Revenue 28,747,526 29,394,923 647,397 2.3%

Total Operating Revenue 43,727,778 44,786,625 1,058,847 2.4%

Non-Operating Revenue 1,637,600 1,630,300 (7,300) (0.4%)

Total Revenue $45,365,378 $46,416,925 $1,051,547 2.3%

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Airline Cost Per EPAX Trend

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Airline Cost per Enplaned PassengerBy Benchmark Airports

$0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20

Pittsburgh InternationalSacramento County

Lambert-St. Louis InternationalSan Jose InternationalOakland International

Cincinnati/Northern KentuckyIndianapolis InternationalAnchorage International

John Wayne Airport- Orange CountyPort Columbus International

Austin-BergstromReno-Tahoe International

Tucson InternationalJacksonville Aviation Authority

San Antonio InternationalFresno Yosemite International

William B Hobby - HoustonNashville International

Raleigh-Durham International

FY 2015-16 CPE of $8.39

2014 ACI-NA Benchmarking Survey

Reflecting 2013 Results

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Non-Airline Revenue

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• Non-Airline revenues of $29.394 million, an increase of $647,397 or 2.3%

• Improvement in revenues per transaction - public parking and rental car

• Significantly higher Box Hangar occupancy

• Offset by lower Net Win percentage - gaming

• Lower cost recovery in Reimbursed Services-disposal fees

• Lower UAS Testing revenue offset by lower expenses

NON-AIRLINE REVENUE FY 2014-15 Budget

FY 2015-16 Budget

Dollar Change

Parking & Ground Trans $8,504,900 $8,975,800 $ 470,900

Auto Rental 5,879,900 6,267,600 387,700

Non-Terminal Rent 5,059,800 5,347,700 287,900

Baggage Handling System 1,720,826 1,644,603 (76,223)

Gaming 1,125,400 1,014,800 (110,600)

Retail 1,035,400 1,003,200 (32,200)

Food and Beverage 885,800 885,800 ---

Other Reimbursed Svc. 910,100 820,520 (89,580)

Aircraft Fees-Reno 810,600 820,000 9,400

Terminal Rents, Other 831,700 785,100 (46,600)

Advertising 662,900 660,000 (2,900)

Stead 795,200 598,200 (197,000)

Other Concessions 485,700 548,700 63,000

Miscellaneous 39,300 22,900 (16,400)

GRAND TOTAL $28,747,526 $29,394,923 $647,397

RTAA Non-Airline Revenue

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FY 2015-2016 Expenditure Budget• Proposed budget of $39.144 million is 1.5% higher than the prior year budget

• Proposed budget is 2.1% above the updated FY 2014-15 forecast

• Increase of $516,000 or 2.0% in Personnel Services

BUDGET2014-15

UPDATED FORECAST

2014-15BUDGET2015-16

DOLLAR CHANGEBUDGET FORECAST

A B C C - A C - B

Personnel Services $25,771,165 $25,496,524 $26,286,995 $515,830 $790,471

Utilities & Communications 2,862,700 2,885,317 2,919,063 56,363 33,746

Purchased Services 5,627,235 5,607,861 5,592,574 (34,661) (15,287)

Materials & Supplies 1,905,619 1,884,327 1,909,125 3,506 24,798

Administrative Expenses 2,403,054 2,457,220 2,436,631 33,577 (20,589)

Total $38,569,773 $38,331,249 $39,144,387 $574,614 $813,139

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Outstanding Senior Debt and RatiosOutstanding Debt(as of 3/31/2015)

Series: 2005Principal Outstanding: $23.4 million

Total Remaining Debt Service: $29.7 million

Final Maturity: July 1, 2026Annual Debt Service: $2.5 million

Key Ratios - FY 2015Debt perEnplaned Passenger: $18

Debt ServiceCoverage: 2.98x

Only one series of senior lien bonds remain outstanding (Series 2005) Debt service is primarily paid for through parking revenues With a first call date of July 1, 2015, RTAA is looking to refinance

through a direct loan/ private placement

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Debt Service Overview In 2014-15, partial repayment of Subordinate Lien Notes of $2.913 million

Direct Loan/ Private Placement – Refinance of 2005 Bonds

Estimate savings of $184,000 or $3.2 million over next 11 years

Existing 2005 Debt Service

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Debt Service Coverage RatioNet revenues including pledged Passenger Facility Charges, as defined in an airports bond ordinance, divided by principal and interest requirements for the fiscal year.

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FY 2015-16 Proposed BudgetKey Benchmarks

Financial Measurements FY 2014-15Budget

FY 2015-16 Proposed Budget

Landing Fee per 1,000 lbs. units $2.93 $3.09

Average Terminal Rental Rate $62.45 $62.39

Net Revenue Available for Sharing * $178,700 $565,600

Airline Cost Per EPAX $8.15 $8.34

Net Cash Flow to RTAA – Discretionary * $2.47 million $3.02 million

Days Cash on Hand 344 Days 361 Days

* Details of Net Revenue Available for Sharing and Net Cash Flow to RTAA contained in Appendix

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Days Cash on Hand• Unrestricted cash and investments divided by annual operating and maintenance

expenditures and multiplied by 365.

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Capital Improvement Update

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Project Name Estimated Cost Funding

RNO Taxiway C and Connectors Reconstruction $9,123,874 93.75% FAA Grants; 6.25% General Purpose

RTS Taxiway C Reconstruction & Edge Lighting 2,144,667 93.75% FAA Grants; 6.25% Special Fund

RNO Digital Radio System Upgrade 1,526,440 42% PFC68% General Purpose

RNO Central Disposal Facility 1,500,000 Passenger Facility Charge

RNO Airport Communication Center System 1,495,800 Passenger Facility Charge

RNO FIDS and Terminal Paging Replacement 1,266,750 Passenger Facility Charge

RNO Airfield Pavement Maintenance 829,100 General Purpose

RNO Landside Pavement Maintenance 593,000 General Purpose

RTS Nevada Army Guard Access Road, Ph. 1 531,150 Special Fund

RNO Deicing Materials Storage Facility 380,000 Passenger Facility Charge

RNO RAC Asphalt Rehabilitation - 1551 National Guard Way (Hertz)

360,000 Customer Facility Charge

RNO RAC Asphalt Rehabilitation - 2555 Aviation Way 250,000 Customer Facility Charge

RTS Building 7003 (FBO Office) Roof Replacement 160,000 Special Fund

Grand Total $20,160,781

FY 2015-16 Capital Improvements

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Future Development Beyond FY 2015-16

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Reno-Tahoe - Airside FundingAirfield Pavement Maintenance RTAA

ARFF Vehicles FAA Grant/ PFC

Runway 16R Keel Section FAA Grant

Southwest Cargo Apron FAA Grant/ PFC BackedBonds

Snow Removal Equipment PFC

Terminal Apron, Phase 18 FAA Grant

Reno-Tahoe – Landside & Terminal

Funding

Jet Bridge Replacement PFCLandside Pavement Maintenance RTAAPassenger Sterile Area Exit Lane FAA GrantRental Car Facility Renewal CFCTerminal Elevator Replacement PFCThird Party Cargo Facilities PrivateThird Party GA East Hangars Private

Reno-Stead Airport FundingConcrete Apron FAA Grant

Runway 8/26 Rehabilitation FAA Grant

Land Infrastructure Private

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RTAA prudently manages its operations despite passenger traffic challenges

Non-Airline Revenue is budgeted to increase and remain at two-thirds of total operating revenue

Regional Economy and Land Development Opportunities – Significant upswing

CIP remains modest and does not require additional GARBs

Airline CPE remains stable and at competitive levels

RTAA continues to control operating costs and prudently manage its debt structure

Senior Lien debt service coverage remains very strong at or above 2.9x coverage

Liquidity is strong. Recent decrease due to prudent decisions to partially pre-pay $2.9 million of Subordinate Lien Notes and to keep Airline CPE at competitive levels.

Summary and Conclusion

Questions?

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Appendix

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Financial Overview(In Thousands) FY 2013-14

ActualFY 2014-15

BudgetFY 2015-16

BudgetVariance

Forecast to Budget

Operating Revenue

Airline (Before Profit Sharing) $ 14,699 $ 15,159 $ 15,838 $ 679

Non-Airline 29,188 28,748 29,395 647

Non-Operating Revenue 1,697 1,638 1,630 (7)

Total Revenue 45,586 45,545 46,863 1,319

O&M Expenditures (36,147) (38,570) (39,144) (575)

Net Available for Debt Service 9,439 6,975 7,802 827

Debt Service after PFCs (4,583) (3,785) (3,663) 122

Net Revenue After Debt Service $ 4,856 $ 3,190 $ 4,055 $ 866

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Financial Overview(In Thousands) FY 2013-14

ActualFY 2014-15

BudgetFY 2015-16

BudgetVarianceBudget

To Budget

Net Revenue After Debt Service A $4,856 $3,190 $4,055 $866Profit Sharing Calculation

Gaming Revenue- 35% (463) (394) (355) 39Capital Asset Repayment (1,864) (2,210) (2,729) (518)Profit Sharing Adjustments (762) (228) (79) 148

Net Revenue Available-Sharing 1,767 358 892 534Airline Share 50% 50% 50%

Airline Profit Sharing B 884 179 446 267Net Revenue to RTAA A-B 3,973 3,011 3,609 599Funds Committed to Rental Car (939) (545) (590) (44)Net Revenue to RTAA $ 3,033 $ 2,466 $ 3,019 $ 554

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FY 2015-16 Budget by Division Operations/Public Safety and Maintenance represent 61% of the Budget

Questions?