Metropolitan Airports Commission

Metropolitan Airports Commission

Finance and Administration Committee

Agenda

Regular Monthly Meeting on Monday, March 03, 2014 at 9:30:00 AM

SEE ATTACHED SECURITY CHECKPOINT INFORMATION

Timothy Geisler, Chair Jim Deal

Tammy Mencel James Hamilton

Dan Boivin – Chairman Mike Landy – Chair M&O Paul Rehkamp – Chair PD&E

METROPOLITAN AIRPORTS COMMISSION NOTICE OF REGULAR MEETING

FINANCE AND ADMINISTRATION COMMITTEE Monday, March 3, 2014, 9:30 a.m. Room 3048A, Terminal 1-Lindbergh Minneapolis-St. Paul International Airport

AGENDA OPEN FORUM

The Open Forum is a portion of the Committee meeting where persons will be allowed to address the Committee on subjects which are not a part of the meeting agenda. Speakers are asked to limit their remarks to two minutes each. Persons wishing to speak must complete a sign-up card prior to the start of the meeting. The sign-up card should be given to any staff person. The Committee may take action or reply at the time of the statement or may give direction to staff at the end of the meeting regarding investigation of the concerns expressed.

CONSENT

1. REPORTS

a. Budget Variance Report - Preliminary December 2013 - January 2014

b. Accounts Receivable Summary Bob Schauer, Director - Finance

2. MAC CONTINUOUS AUDIT REPORT – 2013 4th QUARTER Mike Willis, Director – Internal Audit

DISCUSSION – ACTION

3. ANNUAL EQUIPMENT FINANCING AGREEMENTS Brad Johnson, Purchasing Manager

DISCUSSION – INFORMATION

Materials for this meeting are available at the following website:

http://www.metroairports.org/Airport-Authority/Metropolitan-Airports-Commission/Public-Meetings/Board-Meetings.aspx.

SECURITY CHECKPOINT INFORMATION

Stop by the information booth near the tram station on the Tram Level. At the information booth, you will be asked to complete a security checkpoint access form and show valid, government-issued photo identification, such as a driver’s license. Take your completed access form with you up two floors, to the Ticketing Level security checkpoints. Show your approved access form to security checkpoint personnel. You will then be screened just as if you were traveling. Access forms are only valid for the purpose of attending a public MAC meeting at a particular date and time.

Commission Chambers are located on the Mezzanine Level overlooking the airport’s central shopping area (above Chili’s Restaurant), past the main security checkpoints.

Allow yourself at least 30 minutes to park, complete the access form and get through the security checkpoint prior to the meeting.

Parking will be validated; please bring your parking ticket to the meeting.

Directions to the Tram Level Information Booth

From short-term parking: At the Lindbergh Terminal entrance, take the escalator or elevator down to the Tram Level. The information booth is straight ahead, in the center of the room.

From general parking: If you park in the Blue or Red ramps, take the elevator down to the tram, which will transport you directly to the Lindbergh Terminal’s Tram Level. When you exit the tram, the information booth is straight ahead, in the center of the room. If you park in the Green or Gold ramps, take the skyway to the Lindbergh Terminal’s Mezzanine Level. From there, take an elevator or escalator to Tram Level. The information booth is straight ahead, in the center of the room.

MEMORANDUM

ITEM 1a

TO:

FROM:

SUBJECT:

Budget Variance Report – Preliminary December 2013

DATE:

The Preliminary December Budget Variance Report is presented for your review with the first pages providing a summary of the year-to-date activity. These preliminary numbers could change upon completion of the accruals as calculated per the airline agreement and any adjustments proposed as part of the financial audit. Details for the variances are available in the report.

Operating Revenues are over budget $9.4 million or 3.4%. Greater than Budget

 Terminal 2 – Lobby Fees greater activity

 Terminal 2 – Other Cost/Passenger Fees additional aircraft parking

 Food & Beverage – Strong public spending

 Passenger Services – Wireless management concession

 Parking – Greater activity

 Ground Transportation – Greater activity

 Auto Rental – CFC’s– Greater activity

 Reliever Airports – Athletic field agreement and miscellaneous revenue

 GA/Airside Fees – Budget omission

 Other Revenues – T1 vacancy surcharge Lower than Budget

 Terminal 1-Lindbergh Terminal – Rentals –space allocations

 MSP Employee parking – Decrease in the number of parkers

 Other Concessions – Outdoor Advertising extended contract with lower minimums

Enplaned Passengers by Month -500 1,000 1,500 2,000 2,500 3,000

January February Marc h

April May _June Jul

y Augu st September Octobe r Nove mbe r December Pass eng ers =000 2011 2012 2013

Operating Expenses are over budget $3.8 million or 2.7%.

Greater than Budget

 Personnel – Overtime, Doubletime and Temps – Multiple ice and snow events and health insurance with greater claims

 Utilities – Greater Heating expenses (jet fuel – secondary source)

 Maintenance – Snow removal materials – Multiple ice and snow events

 Other – Bad debt expenses

Lower than Budget

 Operating Services – Lower Service Agreement expenses

Net Revenues Available for Designation total $45.8 million.

Net Revenues Available for Designation Year-to-Date $-$20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Janu ary Feb ruary _March Apr il

May _June July

Augu st Sep tember _Octob er Novem ber December $=0 00 2012 2013

Metropolitan Airports Commission

December Preliminary 2013 Budget Variance Analysis Operating Revenue

($=000) 2012

Year to Date Dollar %

OPERATING REVENUES Airline Rates & Charges

Airline Agreement

Landing Fees $ 51,870 $ 55,417 $ 53,847 $ 1,570 2.9% Ramp Fees 6,092 6,784 6,014 770 12.8% Airline R & R 3,408 3,452 3,502 (50) -1.4% Terminal 1 - Lindbergh - Rentals 33,714 34,985 35,667 (683) -1.9% Terminal 1 - Lindbergh - Other Rentals 3,653 4,090 4,167 (78) -1.9% Concessions Rebate (9,597) (9,889) (9,577) (312) 3.3% Total Airline Agreement 89,139 94,838 93,622 1,216 1.3% Terminal 2 - HHH Lobby Fees 7,774 8,804 8,116 687 8.5% Terminal 2 - HHH Other Cost/Passenger Fees 1,525 1,748 1,528 220 14.4%

Total Airline Rates & Charges 98,437 105,390 103,267 2,123 2.1%

Concessions

Terminal/Other

Food & Beverage 13,808 14,743 13,946 797 5.7% News 3,487 3,495 3,450 45 1.3% Retail 5,120 4,994 4,817 177 3.7% Passenger Services 4,437 4,657 4,342 316 7.3% Total Terminal/Other 26,852 27,889 26,555 1,334 5.0% Parking/Ground Transportation Parking 72,621 76,569 74,417 2,152 2.9% Ground Transportation Fees 5,250 5,401 4,518 883 19.6% MSP Employee Parking 2,929 2,414 2,883 (469) -16.3% Auto Rental-On Airport 17,324 17,732 17,239 493 2.9% Total Parking/Ground Transportation 98,124 102,116 99,056 3,060 3.1% Other Concessions 1,423 1,316 1,547 (231) -14.9%

Total Concessions 126,399 131,321 127,158 4,163 3.3%

Rentals/Fees

Buildings & Facilities 7,129 6,926 7,104 (178) -2.5% Building Auto - CFC's 6,482 10,688 10,000 688 6.9% Ground Rentals 8,752 9,041 8,877 164 1.8% Reliever Airports 5,636 6,670 5,864 806 13.8%

Total Rentals/Fees 27,999 33,327 31,846 1,480 4.6%

Utilities and Other Revenue

Utilities 4,284 4,778 4,582 196 4.3% GA/Airside Fees 2,261 2,886 2,033 853 42.0% Consortium Fees 2,360 2,873 2,844 29 1.0% Other Revenues 1,656 1,741 1,446 295 20.4% Reimbursed Expense 3,021 3,102 2,800 302 10.8%

Total Utilities and Other Revenue 13,582 15,380 13,705 1,675 12.2%

Total Operating Revenue $ 266,418 $ 285,417 $ 275,975 $ 9,442 3.4%

Brackets ( ) Represent Revenue Items under Budget and Expense Items over Budget

2013 Year To Date

December Preliminary 2013 Budget Variance Analysis Operating Expenses

Non-Operating Revenues & Expenses

($=000) 2012

Year to Date Dollar %

Actual Actual Budget Variance Variance

Total Operating Revenue $ 266,418 $ 285,417 $ 275,975 $ 9,442 3.4%

OPERATING EXPENSE Personnel $ 68,145 $ 71,081 $ 68,705 $ (2,376) -3.5% Administrative 1,561 1,407 1,408 1 0.0% Professional Services 4,536 4,514 4,535 21 0.5% Utilities 16,288 18,633 17,804 (829) -4.7% Operating Services 17,379 18,932 19,264 331 1.7% Maintenance 26,052 29,308 28,548 (759) -2.7% Other 2,631 2,950 2,752 (198) -7.2%

Total Operating Expenses $ 136,593 $ 146,826 $ 143,017 $ (3,809) -2.7%

(excludes depreciation and noise amortization)

Net Operating Revenues $ 129,825 $ 138,591 $ 132,959 $ 5,633 4.2%

NON-OPERATING REVENUE (EXPENSES)

($=000) 2012

Year to Date Dollar %

Actual Actual Budget Variance Variance

Other Non-Operating Revenue

Interest Income $ 4,683 $ 4,512 $ 4,500 $ 12 0.3% Self-Liquidating Income 4,362 4,869 5,131 (262) -5.1%

9,045

9,381 9,631 (250) -2.6%

Debt Service

Short Term Financing (243) (255) (360) 105 -29.2% Equip. Financing Prinicipal/Interest Pymts (2,515) (2,614) (2,350) (264) 11.2% Gen. Airport Revenue Bond Requirement (82,276) (93,527) (93,900) 373 -0.4%

(85,034)

(96,396) (96,610) 214 -0.2%

Equipment

Capital Expenditures (1,022) (781) (1,040) 259 -24.9% Equipment Purchases (6,631) (10,300) (12,176) 1,876 -15.4% 2012-2013 Carryover Equipment Purchases (1,136) (470) - (470)

Equipment Financing 2,184 6,585 8,550 (1,965) -23.0% (6,605)

(4,966) (4,666) (300) 6.4%

Other

2012-2014 Six Month Reserve Transfer (2,464) (1,677) (1,677) - 0.0% Interstate Settlement (3,000) - -

Interstate Payments 630 720 720 - 0.0% Grant Reimbursement 128 4 - 4

Easement Receipt 241 - - Gain (Loss) on Equipment & Other 114 105 - 105

(4,351)

(848) (957) 109 -11.4%

Total Non-Operating Revenues (Expenses) $ (86,945) $ (92,829) $ (92,602) $ (227) 0.2%

Net Revenues Available for Designation $ 42,880 $ 45,762 $ 40,357 $ 5,406 2013

Year To Date

2013 Year To Date

OPERATING REVENUE

Operating revenue for December year-to-date is $9.4 million or 3.4% over budget. The greatest variance exists in the following categories.

Airline Rates and Charges

A year-end estimate is included for Landing Fees, Ramp Fees and Terminal 1-Lindbergh Rentals in accordance with the Airline Use Agreement.

Landing Fees

Landing fees are based upon the expenses in the Field & Runway service center and are calculated on a residual (breakeven) basis in accordance with the Airline Use Agreement. The field and runway expenses are divided by total landed weight. Landing fees are over budget $1.6 million or 2.9% as a result of the abnormal weather (snow and ice events) in 2013. This resulted in an increase in maintenance labor (temps, doubletime) and materials (liquid anti-icer, snow removal contract equipment).

Ramp Fees

Ramp fees are over budget $769,599 or 12.8% and are calculated in accordance with the Airline Use Agreement. A change in ramp fees can occur as a result of changes in expense and linear footage. The increase in ramp fees is due to greater expenses primarily in maintenance labor costs and materials related to the abnormal winter weather events in 2013 and debt service on equipment.

Terminal 1-Lindbergh - Rentals

Terminal 1-Lindbergh rentals are determined by dividing Terminal 1 expenses by total Terminal 1 rentable square feet. The airlines pay for only the space they occupy. The revenue is under budget $682,642 as a result of lower mechanical building expenses (Automated People Mover).

Terminal 1-Lindbergh - Other Rentals

Lindbergh Terminal – Other Rentals are under budget $77,751 or 1.9% primarily due to the IAF (International Arrival Facility) fees. The agreement for this facility includes a fee calculation similar to the ramp and landing fees (residual.) Users of the facility are charged a passenger use fee based upon expenses. Lower building maintenance expenses can be attributed to the decrease.

Concession Rebate

The Concessions Rebate as calculated per the Airline Agreement is greater than budget due to the increase in Food & Beverage and Auto Rental Fees revenue.

Terminal 2-Humphrey – Lobby Fees

Terminal 2 Lobby Fees are over budget $687,235 due to greater activity than the budget anticipated for Spirit and Sun Country.

The following chart compares Lobby Fees and FIS (Federal Inspection Services) activity.

HHH Lobby Fees & FIS Fees

$-$250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Note: December includes Lobby fees & FIS fees for both November and December as the data is provided the following month. (January data is recorded in February.)

Terminal 2 – Other Costs/Passenger Fees

Terminal 2 - Other Costs/Passenger Fees are over budget $220,081 or 14.4% due to FIS (Federal Inspection Services) fees for international passenger activity along with aircraft parking greater than anticipated.

Concessions

Concessions year-to-date revenue is $4.2 million or 3.3% greater than budget. December 2013 Year-To-Date

Variance % Variance $ Passengers as of December (includes non

revenue -year over year) 2.2% n/a

Food & Beverage 5.7% $ 797,066

News 1.3% $ 44,737 Retail 3.7% $ 176,881 Passenger Services 7.3% $ 315,532 Parking 2.9% $ 2,152,442 Ground Transportation 19.6% $ 883,404 MSP Employee Parking -16.3% $ (468,753) Auto Rental - On Airport 2.9% $ 492,973 Other Concessions -14.9% $ (231,210) Total Variance 3.3% $ 4,163,072 Conc es s ion s

Total Concessions $0 $3,000,000 $6,000,000 $9,000,000 $12,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Food & Beverage

Food & Beverage year-to-date revenue is $797,066 or 5.7% greater than budget due to strong public spending at T1 and T2. Four new concessions in T2 have performed beyond projections.

Food & Beverage Revenue

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Note: May 2011 includes previous month adjustments. December includes key money. News

News revenue is greater than budget $44,737 or 1.3% due to strong public spending at T1

Retail

Retail revenue is greater than budget $176,881 or 3.7% due to strong public spending at

T1.

News and Retail Revenue

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Passenger Services

Passenger Services revenue is $315,532 or 7.3% greater than budget due to contract reconciliations related to the wireless management contract.

Parking

Parking year-to-date revenue is $2.2 million or 2.9% greater than budget due to a gain in hours parked in MSP Value and General Parking.

Parking Revenue 12/31/2013

Actual Budget Variance

1st Qtr $ 20,590,568 $ 20,337,879 $ 252,689 2nd Qtr $ 19,215,653 $ 18,379,996 $ 835,657 3rd Qtr $ 17,658,226 $ 17,329,785 $ 328,441 October $ 7,207,718 $ 7,105,014 $ 102,704 November $ 6,202,400 $ 5,813,112 $ 389,288 December * $ 5,694,387 $ 5,450,724 $ 243,663 Total $ 76,568,952 $ 74,416,510 $ 2,152,442

Parking Revenue $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Note: A rate increase was implemented in January 2012.

Ground Transportation

Ground Transportation is greater than budget $883,404 or 19.6% due to increased taxi activity (dwell fees, trip fees, eTrip and off-airport parking recovery plus fees) which is higher than the budget anticipated.

MSP Employee Parking

MSP Employee Parking is lower than budget $468,753 as a result of a reduction in Endeavor (Pinnacle) and Delta Global Services employee parking. These companies will be utilizing the Building C parking lot rather than T-2 parking ramps.

Auto Rental – On Airport

Auto Rental – On Airport is over budget $492,973 or 2.9% primarily as a result of activity greater than the budget anticipated for all of the car rental companies during July through October. Year-to-date transactions increased 1.5% over 2012 levels. On a year-to-date basis, gross sales were over 0.4% greater in 2013 than 2012.

Auto Rental Revenue $-$500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Other Concessions

Other Concessions are lower than budget $231,210 or 14.9% due to Outdoor Advertising. The CBS contract expired on July 1, 2013 and MAC agreed to a 6-month extension with a lower minimum monthly guaranteed rent that the budget did not anticipate.

Rentals/Fees

Building & Facilities

Building & Facilities is under budget $178,089 primarily due to a rental rate change for the auto rental facilities during construction of the expanded facilities and leases which were terminated or changed after completion of the budget which were partially offset by a bankruptcy settlement for Sun Country airlines of $142,946.

Building Auto – CFC’s

Building Auto – CFC’s were greater than budget $688,083 or 6.9% due to greater activity than the budget anticipated.

Reliever Airports

Reliever Airports are over budget $806,352 or 13.8%. Due to the economic conditions at the time of budget preparation, a very conservative budget was completed. As the economy continues to improve, revenue increased. In addition, unbudgeted miscellaneous revenue, including $100,000 related to an agreement for athletic fields with the City of Blaine for the years 2012 and 2013, was excluded from the budget as the lease was not finalized at the time the budget was completed.

Utilities and Other Revenue

Utilities

Utilities is over budget $195,936 or 4.3% due to greater usage for Ground Power. GA/Airside Fees

GA/Airside fees are greater than budget by 42.0% or $853,402 as a result of fuel flowage fees approved by the Commission in August 2012. These fees were inadvertently omitted from the 2013 budget. In addition, airside fees are greater than budget due to services provided to general aviation for the increased frequency of winter snow and ice events. Other Revenue

Other Revenue is $294,893 or 20.4% greater than budget due to a vacancy surcharge charged for certain airlines in T1, as per a 2011 amendment to the Airline Agreement. In addition, significant projects resulted in permit fees greater than the budget anticipated. Reimbursed Expense

Reimbursed expense is greater than budget $301,760 or 10.8% due to greater P-card rebates, police aid and canine reimbursements.

OPERATING EXPENSE

Operating Expenses are over budget $3.8 million or 2.7%. Personnel

Personnel expenses are over budget $2.4 million comprised of the following:

Under

 Lower FTE positions than the budget anticipated for wages

 Painters are under budget in Temps $105,287 due to expenses included in the operating budget that were related to a capital project

Over

 Costs associated with snow removal operations (overtime, doubletime and temps) are over budget $890,574 due to the extended winter season in the second quarter and December 2013 for Maintenance personnel.

 Airside Operations is over budget $55,219 related to winter events and minimum staffing for training and certifications

 Reliever Airports are $171,864 over budget for overtime, doubletime and temps primarily as a result of weather related events

 Fire is over budget $64,278 to maintain minimum staffing levels related to employee turnover and FLMA

 Employee Medical insurance is over budget $1.4 million due to extraordinary claims (the stop loss provision did apply) along with an inflation factor greater than anticipated in the budget

Professional Services

Professional Services are under budget $21,244 or 0.5% due to a combination of the following:

Under

 Relievers consultant expense related to survey work, land valuation and development is $33,590 under budget due to limited opportunities in 2013.

 Legal and Legislative-National expenses are under budget $281,065 as expenses are budgeted based upon prior year averages.

 Recruiting expenses are under budget $72,289 due to less employee turnover and retirements than anticipated in the budget

 Software consulting is under budget $118,406 due to funding from various CIP projects (rather than the operating budget) along with deferred projects

Over

 Concept Development is over budget $97,958 due to the Auto Rental RFP (Request for Proposal) primarily relating to the facility allocations between T1 and T2. This cost was originally part of the Terminal 2-Humphrey RAC (Rental Auto Companies) project. However, later it was determined this type of expense was not a capital expenditure. The expenses for this work will be paid for by the RAC through CFCs (Customer Facility Charge).

 Planning expenses are over budget $73,546. Fees for the Solar Project and Sponsorship work exceeded the anticipated dollars due to the complexity of the project. The Marketing/Sponsorship dollars that will begin in 2014 will significantly offset the added costs. In addition, complications with the Reliever Long term Comp Plans (LTCP) associated with more stringent FAA Runway Protection Zone (RPZ) requirements have increased the cost of the Reliever LTCP work.

 Engineering fees are over budget $301,456 due to the write-off of CIP for project costs that have become inactive.

 Public Information Services is over budget $52,192 due to more costs than anticipated in completion of the new MAC website (metroairports.org)

 Insurance consultants costs are over budget $41,670 due to expenses associated with the Affordable Health Care Act.

 Consulting expenses related to the parking process improvement study are over budget $30,045.

Utilities

Utilities are over budget $828,827. Electricity is over budget $340,827 and natural gas is over $214,709 due to increases in rates and usage (including the newly completed data center). In addition, upon Centerpoint’s request, the Energy Management Center switches to jet fuel and MAC receives a rate break. The jet fuel budget was based on prior year history. However, due to the abnormal frequency of weather related events (cold temperatures, snow and ice), jet fuel expenses are above recent history and results in $180,912 over budget.

Operating Services

Operating Services is under budget $331,188 due to a combination of the following:

Under

 Parking management fees are under budget $80,988 due to less wages and benefits due to employee turnover than anticipated in the management contract.

.

 Security Services Checkpoint is under budget $97,543 due to a contract cancellation for “bin runners”. The TSA is now performing this function.

 Service Agreements-Computer are under budget $252,217 due to consolidating license renewals and cost savings through attrition and removal of unused products.

 Service Agreements–Radios are under budget $56,851. Since the budget development, the actual annual renewal resulted in a decrease.

Over

 $113,400 over budget for environmental costs associated with the Anoka Reliever airport clean-up project.

 GISW (Glycol Impacted Storm Water) is over budget $87,405 due to greater than average snowfall. Storm water monitoring is budgeted for average weather conditions.

 Other expenses are over budget such as bank fees over budget $28,576 related to an increase in parking transactions, porter service fees over $36,556 (a new service in 2013) and parking equipment service agreement over $31,677.

Maintenance

Maintenance expenses are over budget $759,151 or 2.7% due to a combination of the following:

Under

 Building – Mechanical areas (People mover, escalators, elevators, etc.) are under budget $712,917 due to less repairs and materials than budgeted.

Over

 Field maintenance is over budget $1.2 million related to the abnormal frequency of wet snow and ice events in the first half of 2013 and December resulting in above average use of anti-icing and de-icing chemicals, snow removal and materials. Budgeted expenses are based on average 5-year snowfall, which has been in the 50-52” inch range. However, snowfall during 2013 was just under 70”.

 Maintenance equipment, parts and gas are over budget $371,464 primarily related to weather events in 2013.

 Energy Management Center is over budget $23,180 for cooling tower repairs in Terminal 1-Lindbergh.

 Minor projects expense is over budget $34,109 related to the water/mold clean-up project at the GO.

Other

Other expenses are over budget $198,075 as bad debt expenses are greater than anticipated in the budget.

NON-OPERATING REVENUE AND EXPENSE

Non-Operating Revenue and Expense is over budget $227,000. Equipment/technology purchases (due to the length of time required to complete these projects) is a carryover from the 2012 budget resulting in additional expenses of $470,000. However, the airport revenue bond requirement is lower than the budget anticipated due to higher interest earnings on the Debt Service Reserve Fund investment agreement.

MEMORANDUM

ITEM 1a

TO:

FROM:

SUBJECT:

Budget Variance Report – January 2014

DATE:

The January Budget Variance Report is presented for your review with the first pages providing a summary of the year-to-date activity. Details for the variances are available in the report.

Operating Revenues are over budget $280,566 or 1.4%. Greater than Budget

 Parking – Greater activity

Enplaned Passengers by Month

-500 1,000 1,500 2,000 2,500 3,000

January _February Marc h

April May June Jul

y Augu st September Octobe r Nove mbe r December Pass eng ers =000 2012 2013 2014

Operating Expenses are over budget $574,253 or 4.9%. Greater than Budget

 Personnel – Overtime, Doubletime and Temps related to winter weather events

 Utilities – Natural Gas – Heating – Jet Fuel

Non-Operating Revenues and Expenses are lower than budget $17,000 or .06%. Lower than Budget

 Interest Rate – Lower than budget

Net Revenues Available for Designation total $4.6 million.

Net Revenues Available for Designation Year-to-Date $-$20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Janu ary Feb ruary _March Apr il

May _June July

Augu st Sep tember _Octob er Novem ber December $=0 00 2013 2014

Metropolitan Airports Commission

January 2014 Budget Variance Analysis Operating Revenue

($=000) 2013

Year to Date Dollar % Total 2014

Actual Actual Budget Variance Variance Budget

OPERATING REVENUES Airline Rates & Charges

Airline Agreement

Landing Fees $ 4,188 $ 4,409 $ 4,329 $ 80 1.8% $ 56,222 Ramp Fees 514 569 556 13 2.4% 6,671 Airline R & R 249 255 256 (1) -0.3% 3,586 Terminal 1-Lindbergh - Rentals 2,533 2,623 2,624 (1) 0.0% 36,983 Terminal 1-Lindbergh - Other Rentals 35 35 36 (1) -3.6% 5,129 Concessions Rebate - - - - (9,840) Total Airline Agreement 7,519 7,891 7,800 90 1.2% 98,750 Terminal 2-Humphrey Lobby Fees - - - - 0.0% 9,010 Terminal 2-Humphrey Other/Passenger Fees 47 41 41 0 0.1% 1,551

Total Airline Rates & Charges 7,567 7,931 7,841 90 1.2% 109,311

Concessions

Terminal/Other

Food & Beverage 817 898 877 21 2.4% 14,635 News 198 198 197 0 0.0% 3,739 Retail 370 361 358 3 0.7% 4,728 Passenger Services 256 296 298 (2) -0.5% 4,527 Total Terminal/Other 1,642 1,753 1,730 22 1.3% 27,629 Parking/Ground Transportation Parking 5,746 6,141 5,961 180 3.0% 77,926 Ground Transportation Fees 375 440 426 14 3.3% 5,347 MSP Employee Parking 216 256 270 (14) -5.1% 2,629 Auto Rental-On Airport 1,240 1,240 1,240 (0) 0.0% 17,801 Total Parking/Ground Transportation 7,577 8,076 7,897 180 2.3% 103,703 Other Concessions 111 31 41 (10) -25.2% 1,878

Total Concessions 9,330 9,859 9,668 192 2.0% 133,210

Rentals/Fees

Buildings & Facilities 541 554 554 (1) -0.1% 7,228 Building Auto - CFC's - - - - 0.0% 10,100 Ground Rentals 774 695 750 (55) -7.4% 8,593 Reliever Airports 261 411 358 53 14.8% 6,154

Total Rentals/Fees 1,576 1,660 1,663 (3) -0.2% 32,075

Utilities and Other Revenue

Utilities 130 133 132 1 0.9% 4,405 GA/Airside Fees 21 25 29 (4) -14.2% 2,376 Consortium Fees - - - - 2,857 Other Revenues 87 103 95 9 9.1% 1,544 Reimbursed Expense 94 89 92 (4) -4.2% 2,800

Total Utilities and Other Revenue 332 350 348 1,868 0.5% 13,981

Total Operating Revenue $ 18,805 $ 19,800 $ 19,520 $ 281 1.4% $ 288,577

2014 Year To Date

January 2014 Budget Variance Analysis Operating Expenses

Non-Operating Revenues & Expenses

($=000) 2013

Year to Date Dollar % Total 2014

Actual Actual Budget Variance Variance Budget

Total Operating Revenue $ 18,805 $ 19,800 $ 19,520 $ 281 1.4% $ 288,577

OPERATING EXPENSE Personnel $ 4,825 $ 7,977 $ 7,533 $ (444) -5.9% $ 71,375 Administrative 40 57 58 1 1.7% 1,527 Professional Services 100 28 38 10 26.4% 4,849 Utilities 294 639 556 (83) -15.0% 18,565 Operating Services 283 373 373 0 0.0% 19,405 Maintenance 1,931 2,676 2,617 (59) -2.3% 29,971 Other 998 558 559 1 0.2% 3,103

Total Operating Expenses $ 8,469 $ 12,307 $ 11,733 $ (574) -4.9% $ 148,794 (excludes depreciation and noise amortization)

Net Operating Revenues $ 10,335 $ 7,493 $ 7,786 $ (294) -3.8% $ 139,782

NON-OPERATING REVENUE (EXPENSES)

($=000) 2013

Year to Date Dollar % Total 2014

Actual Actual Budget Variance Variance Budget

Other Non-Operating Revenue

Interest Income $ 351 $ 376 $ 417 $ (41) -9.8% $ 5,000 Self-Liquidating Income 383 429 429 - 0.0% 5,486

734

805 846 (41) 10,486

Debt Service

Short Term Financing (49) (10) (10) - 0.0% (703) Equip. Financing Prinicipal/Interest Pymts (19) (31) (31) - 0.0% (3,137) Gen. Airport Revenue Bond Requirement - - - - 0.0% (96,203)

(68)

(41) (41) - (100,043)

Equipment

Capital Expenditures (80) (61) (74) 13 -17.6% (1,020) Equipment Purchases - (413) (413) - 0.0% (7,847) 2012 Carryover Equipment Purchases (56) - - - Equipment Financing - - - - 0.0% 4,138

(136)

(474) (487) 13 (4,729)

Other

2013-2014 Six Month Reserve Transfer (1,677) (3,298) (3,298) - 0.0% (3,300) Interstate Payments 60 60 60 - 720 Gain (Loss) on Equipment & Other 7 11 - 11 0.0%

-(1,610)

(3,227) (3,238) 11 (2,580)

Total Non-Operating Revenues (Expenses) $ (1,080) $ (2,937) $ (2,920) $ (17) 0.6% $ (96,866)

Net Revenues Available for Designation $ 9,255 $ 4,556 $ 4,866 $ (311) $ 42,916 2014

Year To Date 2014 Year To Date

OPERATING REVENUE

Operating revenue for January is $280,566 or 1.4% over budget. The greatest variance exists in the following categories.

Airline Rates and Charges

Landing Fees

Landing Fees are $79,768 or 1.8% greater than budget and is related directly to landed weight reported by the carriers being more than anticipated in the budget.

Landed Weight 1/31/2014

(one thousand pound units)

Actual Budget Variance

January 1,663,736 1,636,250 27,486 Total 1,663,736 1,636,250 27,486 Landed Weight 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 2012 2013 2014 `

Concessions

January 2014

Variance % Variance $

Passengers n/a _n/a

Food & Beverage 2.4% $ 21,159

News 0.0% $ 79 Retail 0.7% $ 2,643 Passenger Services -0.5% $ (1,619) Parking 3.0% $ 179,606 Ground Transportation 3.3% $ 13,982 MSP Employee Parking -5.1% $ (13,724) Auto Rental 0.0% $ (115) Other Concessions -25.2% $ (10,311) Total Variance 2.0% $ 191,700 Conc es s ion s Total Concessions $0 $3,000,000 $6,000,000 $9,000,000 $12,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 2012 2013 2014

Parking

Parking year-to-date revenue is $179,606 or 3.0% greater than budget due to greater transactions and hours of parking than the budget anticipated.

Parking Revenue 1/31/2014

Actual Budget Variance

January $ 6,140,929 $ 5,961,323 $ 179,606

Parking Revenue $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 2012 2013 2014

Note: A rate increase was implemented in January 2012.

OPERATING EXPENSE

Operating expenses are over budget $574,253 or 4.9%. Personnel

Personnel expenses are over budget $444,030 or 5.9% as a result of Doubletime, Overtime and Temps associated with winter related weather events.

Utilities

Utilities are over budget $83,370 or 15.0% directly related to jet fuel. At Centerpoint’s request, the Energy Management Center switches to Natural Gas – Jet Fuel and MAC receives a rate break. The jet fuel budget was based on prior year history. However, due to the abnormal frequency of weather related events (cold temperatures, snow and ice), jet fuel expenses are above budget.

Maintenance

Maintenance expenses are $59,065 or 2.3% above budget related to snow removal equipment expenses.

NON-OPERATING REVENUE AND EXPENSE

Non-Operating Revenue and Expense is under budget due to lower interest rates earned than what was anticipated in the budget.

COMMITTEE ACTION REQUESTED:

RECOMMEND TO THE FULL COMMISSION APPROVAL OF THE BUDGET VARIANCE REPORT AND AUTHORIZE EXPENDITURES IN THESE CATEGORIES UP TO THE BUDGETED OR FORECASTED BUDGET AMOUNTS.

MEMORANDUM

ITEM 2

TO:

FROM:

SUBJECT:

DATE:

A continuous audit process has been implemented by the MAC Internal Audit Department in accordance with the MAC Internal Audit Annual Plan.

The attached report contains an overview of the current continuous audit process including risk areas considered, associated audit testing and a summary of results for the fourth quarter of 2013. Similar reports will be issued going forward on a quarterly basis.

COMMITTEE ACTION REQUESTED:

RECOMMEND TO THE FULL COMMISSION ACCEPTANCE OF THE MAC INTERNAL AUDIT DEPARTMENT CONTINUOUS AUDIT REPORT – 2013 4th _{QUARTER RESULTS.}

MEMORANDUM

ITEM 3

TO:

FROM:

SUBJECT:

DATE:

When the 2014 budget was approved in December 2013, it included a list of capital assets (“Equipment”) to be acquired. As presented in the 2014 budget process, the Equipment will be acquired using either MAC funds or financing through a third party lender. The purpose of this memorandum is to award the bids for third party financing and authorize staff to proceed with acquiring the Equipment. The list of Equipment to be acquired and financed is found in Attachment A.

Background

In 2006, the Airline Agreement’s calculation of rates and charges for tenants (airlines) was changed from charging depreciation and interest to charging for debt service. The change and use of the equipment financing mechanism allows MAC to recover some of the costs for the Equipment through rates and charges. For example, the Commission can recover up to 88% of the costs associated with purchasing some of the field maintenance equipment. If the equipment was purchased outright with MAC’s available cash, there would be no recovery.

Bid Process and Results

In January 2014, staff advertised a Request for Bids on the MAC website and the State of Minnesota solicitation page. Twenty eight (28) vendors reviewed the solicitation and five (5) vendors submitted bids. The Bid Tabulation is found in Attachment B and reflects the pricing submitted by the five bidders and the low bid for each term.

In the two year lease bid, BMO Harris submitted the lowest bid. After further investigation, staff found that the bid was non-responsive because it did not meet the terms of the bid. BMO Harris failed to identify a required balloon payment at the end of the lease. As a result, BMO Harris did not submit the lowest responsive bid. Therefore, staff recommends that BMO Harris’s bid be rejected.

Staff is recommending award of the two bids as follows: Lakeview Leasing for the two (2) year lease and SunTrust Equipment Finance & Leasing Corp. for the ten (10) year financing. Equipment Acquisition

Once financial agreements are signed, the dollar amounts of the leases described in Attachment A will be placed in escrow accounts from which MAC will access over a period of months to pay for the Equipment. Staff will order and acquire the Equipment through competitive open bidding, the State of Minnesota Cooperative Purchasing Venture or a

similar purchasing cooperative in which MAC participates. The Equipment prices will not exceed the dollar amounts available in the equipment leases.

COMMITTEE ACTION REQUESTED:

RECOMMEND TO THE FULL COMMISSION:

1. REJECTION OF THE BMO HARRIS BID FOR THE TWO YEAR LEASES; 2. ACCEPTANCE OF THE LOWEST RESPONSIBLE BIDS FROM:

(A) LAKEVIEW LEASING FOR A 2 YEAR FINANCING LEASE OF $40,137 FOR 4 SEMI-ANNUAL PAYMENTS;

(B) SUNTRUST EQUIPMENT FINANCE & LEASING, CORP. FOR THE 10 YEAR FINANCING OF $433,311.29 FOR 10 ANNUAL PAYMENTS;

3. AUTHORIZE STAFF TO ACQUIRE THE EQUIPMENT IDENTIFIED AS CAPITAL ASSETS IN THE BUDGET, CONSISTENT WITH THE ABOVE FINANCING;

4. THAT THE EXECUTIVE DIRECTOR/CEO OR DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

Two attachments:

ATTACHMENT A Equipment List ATTACHMENT B Bid Tabulation

Attachment A

Equipment List

Quantity

Total Amount

Financed Description of Equipment

Finance Period

MAC Owns at End of Lease

1 $ 52,000 Airside Operations-Duel Fuel SUV 10 yrs Yes 1 $ 925,000 ARFF 3000 Gallon* 10 yrs Yes 2 $ 62,400 F-150 4X4 Super Cab PU

w/access.

10 yrs Yes 1 $ 38,000 1 ton Crew Cab PU 2 Wheel Drive 10 yrs Yes 1 $ 34,800 4X4 Pickup Truck 10 yrs Yes 1 $ 25,000 Four-post Lift 10 yrs Yes 1 $ 910,000 HSMF Snow Removal* 10 yrs Yes 1 $ 52,000 Small Roller 10 yrs Yes 1 $ 86,000 Flat-bed Truck w/Attenuator 10 yrs Yes 2 $ 564,000 Airfield Sander/Liquid Deicer 10 yrs Yes

1 $ 44,000 Skidsteer 10 yrs Yes

1 $ 225,000 Heavy-duty Road Truck 10 yrs Yes 1 $ 95,000 Small Sander/Deicer 10 yrs Yes 1 $ 845,000 High Speed Runway Snowblower 10 yrs Yes

Sub-total $3,958,200

1 $ 180,000 Sweeper Lease 2 yrs No

Sub-total $ 180,000

Total $4,138,200

*ARFF = Aircraft Rescue Fire Fighting Truck

Attachment B

Bid Tabulation

BIDDER NAME

2 YEAR SWEEPER LEASE

BMO Harris

Bid Rejected

PNC Equipment Finance

$7,721.98 X 24 = $185,327.52

SunTrust

$45,633.19 X 4 = $182,532.76

Lakeview Leasing

$40,137.00 X 4 = $160,548.00

Low Bid shown in Bold

.

BIDDER NAME

10 YEAR FINANCING TO OWN

BMO Harris

$223,301.18 X 20 = $4,466,023.60

Capital One

$37,584.51 X 120 = $4,510,141.20

PNC Equipment Finance

$37,885.59 X 120 = $4,546,270.80

SunTrust

$433,311.29 X 10 = $4,333,112.90

Lakeview Leasing

$39,563.41 X 120 = $4,747,609.20