Connecticut Airport Authority
Annual Report – Fiscal Year 2015
Bradley International Airport Kevin A. Dillon, A.A.E. [email protected] Terminal A, 3rd Floor Executive Director, CAA www.ctairports.org Administrative Offices p. (860) 292-2054 www.bradleyairport.com Windsor Locks, CT 06096 f. (860) 627-3594 Table of Contents
I. Executive Summary ...... 2 Highlights II. Activities of the Authority ...... 3 Fiscal Year 2015 Activities Fiscal Year 2016 Planned Activities III. Operating and Financial Update ...... 10 IV. Legislative Recommendations ...... 12 V. Appendix ...... 15 CAA Board of Directors CAA Advisory Committee Fiscal Year 2015 Audited Financial Statements Fiscal Year 2015 Federal Single Audit Fiscal Year 2015 Parking Facility Audit
Executive Summary
Effective July 1, 2011, Public Act 11-84 established the Connecticut Airport Authority (CAA) and vested in this quasi- public agency the responsibility for developing, improving, and operating Bradley Airport (BDL) and five of the state’s general aviation airports (Danielson, Groton-New London, Hartford- Brainard, Waterbury-Oxford, and Windham). The CAA is charged with serving as an economic driver in Connecticut, making the state’s airports more attractive to new routes, new commerce, and new companies that may be considering making Connecticut their home.
As part of Public Act 11-84, the CAA is required to report annually to the Governor and the joint standing Committees of the General Assembly having cognizance over matters relating to transportation and commerce. The required report shall include a summary of activities of the Authority, a complete operating and financial statement, and recommendations for legislation to promote the purposes of the Authority. The following report shall serve to meet the requirements of the statute.
Highlights Throughout FY 15, the CAA has focused on developing Bradley’s route structure, leading to the launch of new daily, nonstop service to Houston, TX (George Bush Intercontinental Airport). This added emphasis on route development, along with other CAA initiatives, resulted in the Authority’s second consecutive year of significant year-over-year passenger growth at Bradley. The Authority also managed a robust capital development plan to enhance all of its airport facilities and engaged in numerous initiatives to improve the customer experience at CAA airports. The CAA continued to strengthen its partnerships with state, regional, and local entities in an effort to promote economic development in surrounding areas, and the organization also exercised its role as the statewide authority over aeronautics by initiating a new statewide airport system plan.
Additionally, BDL financially outperformed its budget expectations while simultaneously generating a high level of debt service coverage, completing negotiations on a new airline operating and terminal lease agreement, and successfully implementing a new CAA financial management system. Bradley also maintained high credit ratings with the major reporting agencies.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 2 Activities of the Authority
Throughout FY 15, the CAA remained actively engaged in the development, promotion and operation of the state airport system. The CAA strives to provide first-class aviation facilities, operations, and services in a safe, secure, and customer-focused manner. The CAA is also working to link Connecticut to the global economy by developing, managing, and promoting the airport system as a catalyst and conduit for robust economic activity and growth in all regions of the state.
Fiscal Year 2015 Activities The CAA established a set of broad objectives to advance its mission. Some of the CAA’s major FY 15 accomplishments included the following:
1) Route Development The CAA continues to work with airlines, cargo operators, and other stakeholders to increase activity on existing routes and develop new domestic and international service. To help spur additional service development at Bradley, the CAA offers an Airline Incentive Program that provides marketing assistance and various fee waivers to airlines.
In FY 15, the CAA announced the addition of service between Bradley and Houston, TX. On October 6, 2014 United began offering new daily, nonstop service to George Bush Intercontinental Airport in Houston, TX. The new service has performed well since its inception, and the CAA is pleased to provide its passengers with direct connectivity into another major US business hub.
The CAA has also focused its attention on the reestablishment of direct transatlantic service at Bradley International Airport. This initiative has major regional economic implications, allowing area businesses to conveniently access European destinations and beyond without the need to drive to airports in New York or Boston. Throughout FY 15, the Authority held in-depth discussions with a number of airlines regarding potential service opportunities, and the CAA partnered with the State and regional businesses to make significant progress in these negotiations. Further information on the transatlantic service initiative is provided later in this report.
The addition of new service, in Bradley Passenger Growth conjunction with increased efforts to promote existing service in the 6,000,000 Fairfield County region, has 5,800,000 resulted in a year of notable 5,600,000 passenger growth at Bradley. In FY 14, passenger numbers 5,400,000 increased approximately 7.5% over 5,200,000 FY 13 figures. In FY 15, Bradley 5,000,000 passenger numbers increased 4,800,000 nearly 4.2% year-over-year. This FY 2013 FY 2014 FY 2015 continued growth is especially impressive when viewed in the Total Bradley Passengers context of last year’s tremendous passenger increases, as well as the
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 3 past year’s particularly disruptive winter weather. The enduring growth of Bradley’s passenger numbers shows the benefits of a renewed focus on strengthening relationships with the CAA’s airline partners and providing best-in-class customer service.
The CAA is also dedicating energy towards potential route development at one of its general aviation airports. A major initiative was launched in FY 15 to reestablish commercial passenger service at Groton-New London Airport. Some businesses in Eastern Connecticut currently travel to Rhode Island’s T.F. Green Airport, and the reestablishment of convenient commercial service at Groton- New London Airport would help curb Connecticut companies exporting segments of our economy over state borders. The CAA has started collaborating with companies and regional business organizations to understand their unique business travel needs and hone a pitch to potential airlines. While this initiative is difficult to achieve at a general aviation airport in the context of national airline cutbacks, the significant business base and substantial tourism industry in Eastern Connecticut make the region particularly attractive. The CAA is committed to furthering its partnerships with regional stakeholders to fully explore this potential opportunity.
In addition to the Groton-New London Airport endeavor, the CAA has also engaged a number of airlines regarding the potential for new scheduled charter service from various CAA general aviation airports.
2) Capital Development The CAA strives to develop and maintain best- in-class infrastructure at all of its airports, and the organization undertook an aggressive capital development plan in FY 15 to provide safe, convenient, and customer-friendly facilities. These advances will pave the way for the future of Bradley International Airport, and numerous steps were also taken to maximize the potential of each GA airport. Figure 1: Ground transportation center (l) and new Terminal B (r) renderings. Terminal B Demolition and Ensuing Projects. In August 2014, the CAA began the demolition of Terminal B (also known as the “Murphy Terminal”) at Bradley and initiated the first step in a multi-phase process of airport modernization. This complex undertaking is expected to be completed by the end of FY 16 Q3. After the demolition is complete, the CAA plans to realign the airport’s roadway system and begin construction on a new ground transportation center. The center will consolidate all of Bradley’s rental car facilities in one convenient location with direct, enclosed access to the existing terminal facilities. The center will also include hundreds of public parking spaces, as well as a transit component with bus docks providing regional bus service and high-frequency service to the Windsor Locks train station. The CAA also hopes to develop direct light rail connectivity from the New Haven – Hartford – Springfield rail line to Bradley’s ground transportation center as a long-term goal. Based on current passenger traffic projections, a new Terminal B facility will be needed in approximately 2025. Planning continued for both the ground transportation center and new Terminal B facility in FY 2015.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 4 Other Bradley Projects. The CAA has also started work on a number of other Bradley- related projects, including the study and design for new elevators in Terminal A. This development will help supplement the current elevators in a convenient, visible location for all passengers. Construction on the new elevators is expected to commence in FY 16. The CAA also initiated a major taxiway rehabilitation project to ensure the highest degree of safety at Bradley.
GA Airport Development. There has also been considerable development at the general aviation airports over the past year. At Windham Airport, the CAA completed a fuel farm project to provide aircraft owners with convenient access to jet fuel. The Authority also completed major taxiway rehabilitation at Waterbury-Oxford Airport and worked with a Figure 2: New Windham Airport fuel farm current tenant at Waterbury-Oxford Airport to progress significant hangar development at the airport, increase the airport’s capacity, and maximize profitability. The CAA has also continued issuing Requests for Interest (RFIs) for aviation-related facility development at the general aviation airports to take full advantage of their development potential.
3) Customer Service Enhancements The CAA made an effort in FY 15 to improve passenger amenities and achieve the highest level of customer satisfaction at all of the Authority’s airports. An example of these customer service improvements include:
Bradley Terminal Appearance. The CAA began a project in FY 15 to refresh Bradley’s branding. This comprehensive review will include an overhaul of terminal aesthetics, messaging, and marketing collateral to create a “sense of place” and a unique identity for Bradley International Airport. One related initiative calls for the creation of an art gallery within Terminal A to showcase Connecticut’s cultural offerings, state history, and history of the old Murphy Terminal. In addition to formulating the detailed, overarching branding plan, the Authority also took other interim steps to rejuvenate the airport’s appearance.
Bradley Amenities. The Authority regularly looks for new ways to add convenient passenger amenities that heighten the Bradley traveler experience. The CAA engaged the Transportation Security Administration (TSA) in FY 15 to propose the opening of a TSA PreCheck enrollment center in the baggage claim area. The project was completed in early FY 16, providing passengers with the ability to conveniently enroll for the timesaving security program directly in the terminal. New power poles and benches were installed at Bradley, and WiFi capacity upgrades have continued.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 5 Bradley Concessions. In FY 15, a number of new concessions were brought online at Bradley. Dunkin’ Donuts opened a new, full-service location outside of the main security checkpoint, adding a number of new offerings to the previously limited, self-service Dunkin’ Donuts that it replaced. Shades Sunglasses also opened a high-end sunglasses location near the Terminal A food court and Benefit Cosmetics installed a self-service kiosk in the east concourse.
Various GA Upgrades. A number of enhancements were made at the general aviation airports, including a new restaurant at Groton-New London Airport. The Beacon Bar and Grill restaurant opened in February 2015, and it has been a very successful addition. The CAA is also exploring the potential for the development of a U.S. Customs and Border Protection facility at Waterbury-Oxford Airport to help better accommodate international travelers.
4) Economic Development In order to spur economic activity throughout the state, the CAA has continued to partner with the Department of Economic and Community Development (DECD), the Bradley Development League, the MetroHartford Alliance, and other business and municipal partners to increase awareness for the airport development zone program, assist in business recruitment efforts, and promote available parcels both on and off airport property. The Authority has also maintained an educational effort to inform various constituencies of airport development plans.
In FY 15, the CAA Board of Directors approved new preliminary airport development zone applications for two companies within the Bradley Airport Development Zone and four companies within the Waterbury-Oxford Development Zone. These projects, if finalized, will bring approximately 40 new, full-time positions to the Bradley area and 52 new, full-time positions to the Waterbury-Oxford area. While administration of the airport development zone program was transferred to DECD during the 2015 legislative session, the CAA remains committed to promoting the zones and pursuing development at and around all of the Authority’s airports.
During FY 15, the CAA has also increased its involvement in both DECD and municipal business recruitment efforts by meeting with companies interested in opening Connecticut locations and providing information about the unique benefits of doing business near Bradley.
5) Planning for the Future In the organization’s capacity as the statewide aviation authority, the CAA began updating the Statewide Airport System Plan in FY 15. The latest plan was completed by the Connecticut Department of Transportation in 2006. The study analyzes the six CAA-owned, five municipally owned, and 12 privately owned public-use airports by focusing on each airport’s role, infrastructure, forecast, capacity, demand, and funding. The final product establishes a comprehensive vision for the state’s aviation system while taking into account user needs, system benefits, and proposed development requirements necessary to ensure that Connecticut airports remain adaptable to both incremental changes in activity and future scenarios that could present new opportunities and challenges. The Study Advisory Committee consists of representatives from various regional planning organizations, the CAA, DECD, and the Aircraft Owners and Pilots Association (AOPA). The System Plan is currently being finalized.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 6 In addition to the Statewide Airport System Plan update, the CAA initiated the process for a new organizational strategic plan and prepared to begin a new Bradley Master Plan. These initiatives will allow the CAA to identify future opportunities and challenges while proactively strategizing for the future of Connecticut’s aviation system.
6) Community Relations While airports provide a number of economic benefits to their surrounding communities, the CAA also recognizes the challenges that some nearby residents face as a result of their proximity to airport operations. As a result, the Authority monitors noise in areas surrounding Bradley and has enacted noise abatement procedures at its airports to help curb irritation to nearby residents. The CAA also holds regular advisory committee meetings with the communities surrounding some of its busiest GA airports in an effort to understand local concerns and strategize solutions.
Fiscal Year 2016 Planned Activities After a successful FY 15, the CAA plans to build on its progress in the following areas:
1) Route Development Between the completion of FY 15 and this report’s publication, the CAA announced new daily nonstop Aer Lingus service to Dublin beginning in September 2016. The re-establishment of transatlantic service at Bradley was one of the CAA’s top goals, and the new route will connect the region with the global economy and offer one-stop connectivity to major destinations in Europe and beyond. This development is a game-changer for Bradley and the region, securing Bradley’s status as a regional force and opening a host of new, convenient possibilities for area businesses and leisure travelers. The CAA will dedicate a significant amount of its focus marketing the route and engaging the business community to ensure that the Aer Lingus service is successful. The CAA will also continue engaging its current airline partners and new carriers to continue growing Bradley’s route structure, both at the international and domestic levels.
The CAA will also continue engaging airlines regarding the potential for commercial passenger service at Groton-New London Airport. The Authority will continue collaborating with area businesses to learn more about their travel needs and create a pitch to carriers for establishing new service.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 7 2) Capital Development FY 16 is projected to be an exciting year for CAA capital development. The demolition of Bradley’s Terminal B facility will be completed, and it is anticipated that work will begin on the roadway realignment project. This development will provide a more convenient, straight-forward way for visitors to access Bradley’s facilities, and it will enable the future ground transportation center project.
The Authority also plans to begin constructing the new Terminal A elevators over the next year. Various other capital development items will focus on the completion of further taxiway rehabilitation, airside maintenance, equipment procurement, and technology upgrades. Plans for a future Terminal B facility will progress as necessary to accommodate passenger traffic growth. Figure 3: New Terminal A elevators rendering Investments will continue in the CAA’s general aviation airports in FY 16, and noteworthy projects may include runway and ramp rehabilitation at Waterbury-Oxford Airport and the installation of wildlife fencing at Groton-New London and Hartford-Brainard Airports.
3) Customer Service Enhancements The CAA continually explores new developments in terminal amenities in an effort to keep airport facilities on the cutting edge. For example, the Authority is exploring potential spaces for the installation of one or more lactation stations to bolster Bradley’s standing as a convenient, family- friendly facility. The CAA also plans to continue investing in upgrades to the flight information display system (FIDS) at Bradley and pursuing various new concessions. The branding initiative and terminal enhancement efforts will continue to progress in FY 16, and the CAA is also exploring the potential for providing currency exchange services at Bradley, as well.
4) Economic Development Between working to seamlessly transition the airport development zone program to DECD and educating out-of-state businesses regarding the benefits of doing business with Bradley and the State of Connecticut, the CAA is committed to harnessing its strength as an economic engine. The Authority will also continue promoting both its on-airport developable parcels and those of surrounding municipalities at a variety of forums across the state and beyond.
During the 2015 legislative session, the state legislature voted to initiate a process to explore the establishment of a new casino gaming facility in the Greater Hartford area. As the organization in charge of maximizing the economic development potential of Bradley International Airport, the CAA plans to fully explore the business opportunity provided by the legislature. The authority feels that Bradley offers unique advantages due to its location, infrastructure capacity, and significant passenger traffic, and a casino facility on airport property could be a compelling amenity to offer to passengers. Various potential scenarios have been formulated, and the CAA plans to further explore with its state and municipal partners the development of a gaming facility at Bradley and the potential benefits that
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 8 could be derived for Bradley travelers, the Authority, the Town of Windsor Locks, and the state economy.
5) Planning for the Future The Statewide Airport System Plan will conclude in FY 16, and the CAA plans to finalize its organizational strategic plan as well. The Bradley Master Plan Update will commence in FY 16, with completion currently scheduled for FY 17. These studies will provide a solid foundation for the coming years as the CAA refreshes its vision for the state’s future.
6) Community Relations The CAA is committed to ongoing collaboration with municipalities and residents surrounding all of its airports, and the Authority will continue to work closely with the FAA regarding noise abatement developments. In addition to these efforts, the CAA has already taken a proactive stance towards noise abatement in FY 16, installing new signage on the runways and inside the facilities at Brainard Airport. While the CAA cannot legally dictate the routes that pilots utilize due to safety considerations, this signage suggests to pilots that they fly over the Connecticut River rather than over portions Figure 4: Brainard Airport noise abatement signage of Wethersfield in an effort to highlight a common concern that area residents have expressed. This signage has been installed in high-traffic areas for maximum exposure, and the Authority will continue exploring new ways to emphasize these sensitive issues to pilots utilizing CAA facilities. The Authority also plans to carry on with current outreach efforts by continuing with regular advisory committee meetings.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 9 Operating and Financial Update
The CAA engaged the CPA firm of Blum Shapiro to conduct an independent audit of the CAA’s financial statements for the year ended June 30th, 2015. The CAA received a clean, unqualified opinion on the financial statements including the Bradley Airport Enterprise Fund and the General Aviation Airports Enterprise Fund. The audited financial statements fulfill the financial reporting requirements of Connecticut General Statutes Section 15-120kk. A copy of the audit is included in the appendix of this report.
Two of the key financial successes achieved during the fiscal year included: 1.) Completing negotiations on a new airline operating & terminal lease agreement for all major air carriers at Bradley International Airport. Bradley Airport had previously been operating on a month-to-month basis under the terms of an expired air carrier operating agreement that was inherited from the Department of Transportation. Completing negotiations on a new air carrier operating & lease agreement with a five-year term provides the security of a long-term partnership with the airlines, and it has modernized the agreement to match industry standards.
2.) Successfully implementing a new financial management system for the CAA. The CAA previously operated on two separate financial systems, and this caused a number of redundancies. Implementing a new financial management system has allowed the CAA to become more efficient and self-sufficient by taking over full responsibility for various functions previously performed by the State. Some of these functions include fixed asset management, purchase order processing, and accounts payable processing.
Under the CAA’s governance, Bradley Total Operating Revenue Bradley Airport financially $65,000,000 outperformed budget expectations for FY 2015. Total $60,000,000 operating revenue was $1.3M (2.0%) greater than budget, while $55,000,000 operating and maintenance expenses were $3.0M (5.8%) $50,000,000 FY 2012 FY 2013 FY 2014 FY 2015 below budget. Year-over-year total operating revenue increased 3.5% to $64.5M while operating expenses before depreciation increased 4.5% to $49.2M. Compared to the prior year, income before depreciation increased 4.5% to $15.3M. Net non-operating activity resulted in ($872k) of net non-operating expenses compared with $6.1M of net non-operating revenues in the prior year. The decrease in non-operating activity was a result of expensed capital project costs related to the demolition of Terminal B at Bradley. The Airport generated debt service coverage of 271.6%, which is well above the 120.0% required by bond indenture. At year end, net position totaled $267.2M. Total assets increased by $5.8M, or 1.3%, and total liabilities increased by $47.2M, or 28.2%. The increase in liabilities is due entirely to the adoption of GASB 68 – Accounting and Financial Reporting by Pensions. GASB 68 required the CAA to record its proportional share of the State’s Net Pension Liability, which resulted in a $49.3M increase to Bradley’s liabilities. Bradley Airport maintained high ratings with both of its major credit reporting agencies throughout the year (Fitch: A Stable/S&P: A- Stable).
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 10
In early 2015, the CAA adopted the fiscal 2016 operating and capital budgets for Bradley Airport. The 2016 fiscal budget fully funds the airport’s management, operation and development under the jurisdiction and control of the CAA. Total fiscal 2016 budgeted operating revenues (both airline & non-airline) increased 9.4% over the prior year’s budget due mostly to changes in the new airline operating & lease agreement. Total fiscal 2016 budgeted operating expenses increased 4.9% compared with the fiscal 2015 budget due mostly to increases in the State’s employee fringe benefit costs and increases in air service incentive costs to promote new airline activity at the airport. Budget basis debt service coverage was 214.0% in the CAA’s fiscal 2016 budget, which is well above the minimum requirement of 120%.
GA Airports Enterprise Fund Total The General Aviation (GA) Airports Enterprise Fund, which $3,000,000 Operating Revenue includes the five CAA-owned GA airports, operated at a loss during $2,000,000 fiscal 2015, which is consistent with past years. The GA Airport $1,000,000 Fund operating loss before depreciation equaled ($3.2M). $0 FY 2012 FY 2013 FY 2014 FY 2015 The CAA continues to look for ways to reduce the State subsidy requirement. Exploring increases in GA Airport rates & charges and evaluating the allocation of administrative overhead charges between Bradley Airport and the GA Airports are examples of efforts in this regard. The CAA continues to make efforts to identify opportunities to consummate long- standing expansion and development initiatives at the GA airports in an effort to increase revenues and ultimately reduce the State subsidy. Fiscal 2015 GA airport operating revenues increased 7.3% compared with the prior year to $2.5M. The CAA adopted the fiscal 2016 operating budget for the GA Airports which provides for a 20.4% increase in operating revenues over the previous year’s budget. Despite predicted growth in revenues, the fiscal 2016 budget projects a ($4.3M) operating loss before depreciation for the GA Airport Fund. For fiscal 2016, the Department of Transportation allocated the funds appropriated during the biennial budget process to the CAA as stipulated in Connecticut General Statutes Section 15-120.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 11 Legislative Recommendations
The CAA, through collaboration with its legislative partners, made significant progress during the 2015 legislative session. Legislation was passed to transfer administration of the airport development zone program to the Department of Economic and Community Development in order to maintain compliance with FAA regulations, to allow for representation from Western Massachusetts on the CAA Advisory Committee, to reform rigid CAA Board of Directors expenditure approval requirements to achieve flexibility in emergency situations, and to clarify the Authority’s responsibility for and jurisdiction over aeronautics in the state.
The Authority is thankful for the support of its legislative and executive branch partners, and it maintains its commitment to work with these stakeholders to ensure that the CAA is empowered as an autonomous and nimble organization that can appropriately respond to rapidly changing business conditions. During the 2016 legislative session, the CAA plans to address the following topics:
Strategizing Long-Term Solutions to General Aviation Airport Funding Issues The CAA plans to continue discussions regarding the funding issues associated with the Authority’s general aviation (GA) airports (Danielson, Groton-New London, Hartford-Brainard, Waterbury- Oxford, and Windham). When the Authority was created, it inherited five GA airports from the State. Despite the CAA significantly increasing revenues from the five GA airports since assuming full control in July 2013, the General Aviation Enterprise Fund, which is entirely separate from the self- sustaining Bradley Enterprise Fund, still operates at a deficit. While the Authority has attempted to minimize costs in an effort to cut the deficit, the vast majority of expenses at these airports are fixed costs for personnel, insurance, utilities, and equipment. Furthermore, the interplay between FAA revenue diversion guidelines, the General Airport Revenue Bond indentures, and the current Airline Use and Lease Agreement currently prohibits the CAA from using Bradley revenues to cover the GA airport system deficit. As a result, the State has historically provided support for the continued operation of the five GA airports. The CAA is committed to working with the Appropriations Committee, the committee’s Transportation Subcommittee, and other interested parties in an effort to establish a long-term strategy for the sustainable operation of the Authority’s GA airports.
Achieving a Retirement Plan Exemption for CAA Managerial Staff This proposal would allow the CAA to give unclassified employees the right to opt-out of the State Retirement System. Top-level airport industry employees often will not commit to a 10-year employment term. As such, the cost burden and 10-year cliff vesting of the State Retirement System’s Tier III retirement plan limits the CAA’s ability to attract highly qualified candidates for crucial positions. In order to attract these employees, the CAA could be required to implement deferred compensation plans. The cost of the State Retirement System (which will provide no attraction to these employees), along with the cost of the deferred compensation plan, does not allow the CAA to offer competitive salaries and benefits. During the 2014 legislative session, the CAA was able to achieve a voluntary exemption from the State Retirement System for the executive director position. The Authority is seeking an extension of this voluntary exemption for all other managerial CAA staff, as well as ensuring that all future CAA managerial staff participate in the CAA’s alternative plan and benefit packages rather than the state system. This cost-saving measure also could play a major role in
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 12 the effort to reduce and ultimately eliminate the State’s ongoing support for the CAA’s general aviation airports.
Creating Efficiency by Exempting the CAA from DAS Hiring Procedures This proposal would exempt the CAA from complying with Department of Administrative Services (DAS) personnel policies and procedures with regard to approval for the creation of certain new positions, the number of such positions, the decision to fill such positions, or the time for filling such positions. The CAA is currently subject to DAS personnel policies and procedures with regard to classified positions, which can delay the hiring process by up to six months. These hiring process inefficiencies are amplified further when there are layoffs at other state agencies, which can lead to lengthy hiring moratoriums until it can be determined which state employees will need to be placed at other agencies. This proposal would allow the Authority to adequately staff itself in a timely manner to provide safe facilities and meet the needs of rapidly changing aviation business conditions. This proposal follows a precedent set by the Lottery Corporation statutes as they relate to this matter.
Ensuring Safe Unmanned Aerial Vehicle Operations This proposal would convey explicit authority to the CAA to establish procedures regarding unmanned aerial vehicles (also known as “drones”) in the State of Connecticut. Drone ownership and use is rapidly proliferating throughout the country for a wide variety of beneficial uses. However, significant safety issues remain regarding how to incorporate drones into the national airspace. Current state statute is inadequate in its consideration of drones, and it is clear that updates are needed. For example, the current statutory definition of “aircraft” is inclusive of unmanned aerial vehicles, and, therefore, current laws are in effect regarding the unlawful use of aircraft, restrictions against interfering with an airport, and prohibitions against flying carelessly, negligently, or recklessly. These sections are crucial to ensure that unmanned aerial vehicles are operating safely with regard to airport operations and other manned flights. However, the statutes are not clear if unmanned aerial vehicles are subject to aircraft registration requirements or aircraft accident investigations. Registration is a necessary component of any effective regulation because it allows the Authority to trace unlawfully operating drones to their owners. It is also important that the Authority is fully authorized to investigate accidents and identify offenders who are responsible for personal injury and property damage. This proposal would clarify that the CAA is authorized to establish procedures regarding unmanned aerial vehicle operations in the state while simultaneously affording the CAA the flexibility to adapt these procedures to the realities of an evolving industry and federal regulatory framework.
Reforming Ground Transportation Service at CAA Airports This proposal would provide the CAA with the ability to confer, through a concession agreement, the exclusive right to solicit and receive taxicab passengers at any or all CAA airports. The cost of ground transportation at Bradley is frequently cited as a major obstacle by business travelers and those attempting to draw conventions and conferences to Hartford and surrounding areas. A taxi trip from Bradley to Hartford costs approximately $50. The high cost of taxi and livery services also limits the airport’s competitiveness with surrounding airports. The shift towards a concession agreement approach would allow the CAA to better control the cost and quality of ground transportation services at CAA airports.
Furthermore, while the CAA understands that Uber and other transportation network companies provide popular services in the State, the Authority requests that future industry regulations assert that such companies be statutorily required to enter into operating agreements for the privilege of operating on CAA property. The CAA devotes a significant amount of resources and public funds for
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 13 the development of business, infrastructure, and activity levels at the airport. Federal case law supports the assertion that any company or driver benefitting from the airport’s infrastructure and passenger base should be required to register with the CAA and pay its fair share of airport operating and maintenance costs through an airport operating agreement. As it is explicitly stated in Connecticut statutes for taxi and livery companies, the CAA supports the inclusion of similar language in any future industry regulations for Uber and other transportation network companies. The CAA has already opened discussions with Uber regarding a potential operating agreement at Bradley.
Fire Marshal Proposal This proposal would allow the DAS Commissioner to designate a CAA employee as a state fire marshal. While the state’s airports fell under the jurisdiction of the Connecticut Department of Transportation, fire marshal powers were exercised by a designated Department of Transportation fire marshal. Since the CAA was formed as a separate quasi-public agency, there have been inconsistencies that have resulted from the state fire marshal’s office maintaining jurisdiction over certain tasks and handing over other functions to CAA certified fire marshals. In the interest of establishing clear and consistent procedures across all functions, this proposal would allow DAS to designate a CAA employee as a state fire marshal, allowing qualified airport employees to monitor and protect the unique facilities that are housed on CAA property.
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 14 Appendix
CAA Board of Directors
Name Location Appointing Authority Mary Ellen S. Jones, Chair Glastonbury Governor
Michael T. Long, Vice Chair Simsbury Governor
State Treasurer Denise L. Nappier Connecticut Office of the State Treasurer Ex-officio
Commissioner James P. Redeker Connecticut Department of Transportation Ex-officio
Commissioner Catherine H. Smith Connecticut Department of Economic and Community Development Ex-officio
Brett C. Browchuk Avon Governor
Charles R. Gray Stamford Governor
Karen M. Jarmoc Enfield Senate President Pro Tempore
Matthew J. Kelly Barkhamsted Speaker of the House
Robert J. Aaronson Greenwich Senate Minority Leader
J. Scott Guilmartin Suffield House Minority Leader
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 15 CAA Advisory Committee
Name Organization Appointing Authority Joseph R. Calsetta Roncari Associates Transportation Committee Co-Chairs
Gina M. Pastula Skyline Restaurant Transportation Committee Ranking Members
Richard K. Sullivan, Jr. The Economic Development Council of Western Massachusetts CAA Executive Director
Martin Seifert Nufern CAA Executive Director
Scott Pflueger The Hertz Corporation CAA Executive Director
James L. Brooks American Airlines CAA Executive Director
CONNECTICUT AIRPORT AUTHORITY - DECEMBER 2015 16
CONNECTICUT AIRPORT AUTHORITY (A COMPONENT UNIT OF THE STATE OF CONNECTICUT)
FINANCIAL STATEMENTS
JUNE 30, 2015
CONNECTICUT AIRPORT AUTHORITY CONTENTS
Independent Auditors’ Report 1-3
Management’s Discussion and Analysis 4-23
Basic Financial Statements:
Balance Sheet - June 30, 2015 24
Statement of Revenues, Expenses and Changes in Net Position for the Year Ended June 30, 2015 25
Statement of Cash Flows for the Year Ended June 30, 2015 26
Notes to Financial Statements 27-43
Required Supplemental Information:
Schedule of the Authority’s Proportionate Share of the Net Pension Liability - Connecticut State Employees Retirement System 44
Schedule of Employer Contributions - Last Ten Fiscal Years - Connecticut State Employees Retirement System 45
Combining and Individual Fund Statements and Schedules:
Comparative Balance Sheets - Bradley International Airport Fund - June 30, 2015 and 2014 46
Comparative Statements of Revenue, Expenses and Changes in Net Position - Bradley International Airport Fund for the Years Ended June 30, 2015 and 2014 47
Combining Balance Sheet - General Aviation Airports Fund - June 30, 2015 (with Comparative Totals for June 30, 2014) 48
Combining Statement of Revenues, Expenses and Changes in Net Position - General Aviation Airports Fund for the Year Ended June 30, 2015 (with Comparative Totals for the Year Ended June 30, 2014) 49
Other Supplementary Information:
Schedule of Passenger Facility Charge Expenditures - Bradley International Airport for the Quarters and Year Ended June 30, 2015 50
Schedule of Insurance Coverage - Bradley International Airport - June 30, 2015 51
Other Reports:
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 52-53
Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on the Passenger Facility Charge Program and on Internal Control over Compliance 54-55 29 South Main Street Tel 860.561.4000 P.O. Box 272000 Fax 860.521.9241 West Hartford, CT 06127-2000 blumshapiro.com
Independent Auditors’ Report
Ms. Mary Ellen S. Jones, Chair Connecticut Airport Authority Windsor Locks, Connecticut
Report on the Financial Statements
We have audited the accompanying financial statements of each major fund of the Connecticut Airport Authority (the Authority) (a component unit of the State of Connecticut), which comprise the balance sheet as of June 30, 2015 and the related statements of revenues, expenses and changes in net position and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
1 Blum, Shapiro & Company, P.C. An independent member of Baker Tilly International Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of June 30, 2015 and changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 23 and the schedules of net pension liability and contributions on pages 44 to 45 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express on opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the Authority’s basic financial statements taken as a whole. The comparative financial statements of the Bradley International Airport Fund and the combining financial statements of the General Aviation Airports Fund and the schedules of passenger facility charge expenditures and insurance coverage of Bradley International Airport are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The schedule of passenger facility charge expenditures - Bradley International Airport is presented for purposes of additional analysis as required by the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration. The schedule of insurance coverage is presented for purposes of additional analysis as required by the Bond Indenture. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The comparative statements of the Bradley International Airport fund, the combining statements of the General Aviation Airports Fund and the schedule of passenger facility charge expenditures - Bradley International Airport have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the comparative statements of the Bradley International Airport fund, combining statements of the General Aviation Airports Fund and schedule of passenger facility charge expenditures - Bradley International Airport are fairly stated in all material respects in relation to the basic financial statements as a whole.
The schedule of insurance coverage - Bradley International Airport has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, we do not express an opinion or provide any assurance on it.
2 We also previously audited, in accordance with auditing standards generally accepted in the United States of America, the basic financial statement of the Authority as of and for the year ended June 30, 2014 (not presented herein), and have issued our report thereon dated October 27, 2014, which contained unmodified opinions on the financial statements of each fund. The accompanying Bradley International Airport Fund and General Aviation Airports Fund balance sheets and statements of revenues, expenses and changes in net position as of and for the year ended June 30, 2014 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the 2014 financial statements. The accompanying Bradley International Airport Fund and General Aviation Airports Fund statements have been subjected to the auditing procedures applied in the audit of the 2014 basic financial statements and certain additional procedures including comparing and reconciling such information directly to the underlying accounting and other records used to prepare those financial statements or to those financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Bradley International Airport Fund and General Aviation Airports Fund statements are fairly stated in all material respects in relation to the basic financial statements as a whole for the year ended June 30, 2014.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, during the year ended June 30, 2015, the Authority adopted GASB Statement No. 68 - Accounting and Financial Reporting by Pensions - An Amendment of GASB Statement No. 27. The Authority’s net assets as of July 1, 2014 have been restated as required to implement this accounting standard as discussed in Note 15. Our opinion is not modified with respect to this matter.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued a report dated October 19, 2015 on our consideration of the Authority’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.
West Hartford, Connecticut October 19, 2015
3 CONNECTICUT AIRPORT AUTHORITY JUNE 30, 2015
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following Management’s Discussion and Analysis (MD&A) of the Connecticut Airport Authority’s (the Authority) financial performance provides an overview for the year ended June 30, 2015. Please read it in conjunction with the Authority’s financial statements that follow this section. The MD&A is intended to provide meaningful information to the reader for the current year, thereby enhancing the reader’s understanding of the Authority’s financial position and the results of its operations.
As discussed in Note 1 to the financial statements, the Authority was established on July 1, 2011 but had no significant transactions until July 1, 2013, at which time the assets and liabilities of Bradley International Airport (Bradley) and the State of Connecticut’s general aviation airports were contributed to the Authority. Bradley International Airport was previously reported as a stand-alone enterprise fund, and the General Aviation Airports were accounted for in the governmental funds of the Connecticut Department of Transportation. Public Act 11- 84 required the establishment of the Bradley International Airport fund to account for the operations of Bradley and the General Aviation Airports fund to account for the operations of the five general aviation airports under the control of the Authority.
Enterprise Fund Financial Statements
An enterprise fund is used to present governmental activities where a fee is charged to external customers for goods that are sold or services that are rendered. Usually these activities are financed by debt that is secured solely by a pledge of the operating revenues of that activity.
The Authority’s financial statements consist of a Balance Sheet, a Statement of Revenues, Expenses and Changes in Net Position and a Statement of Cash Flows. The financial statements utilize the economic resources measurement focus and the accrual basis of accounting, thus providing the foundation for generally accepted accounting principles that are used in private-sector business reporting. This means that all assets and liabilities associated with the operation of the Authority are included on the balance sheet, and that revenues and expenses are recognized when earned and incurred, respectively, on the statement of revenues, expenses and changes in net position.
Net position is presented in three components (i) net investment in capital assets, (ii) restricted, and (iii) unrestricted. Net position categorized as net investment in capital assets consists of all significant capital assets owned by the Authority, net of accumulated depreciation, and reduced by any outstanding balances of bonds or other debt related to the acquisition, construction or improvement of those assets. Capital assets include land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, infrastructure, and all other tangible or intangible assets that are used in operations that have an initial useful life beyond one year. Capital assets are depreciated over their useful lives and periodic depreciation expense is reported in the statement of revenues, expenses and changes in net position. Net position is reported as restricted when constraints are placed on those assets by creditors, grantors, laws or imposed by law through constitutional provisions or enabling legislation. The restrictions in place at Bradley originate from indentures of trust associated with the sale of its airport revenue bonds, and regulations associated with its use of Passenger Facility Charges (PFCs) and Customer Facility Charges (CFCs).
4 The Statement of Revenues, Expenses and Changes in Net Position reports the operating revenues and expenses and non-operating revenue and expenses of the Authority for the fiscal year with the difference - the net income or loss - being combined with any capital contributions to determine the change in net position. That change, combined with the prior year-end net position total, reconciles to the net position total at the end of the current fiscal year.
The Statement of Cash Flows reports cash activities for the fiscal year resulting from operating activities, capital and related financing activities and investing activities. The net result of these activities added to the beginning of the year cash balance reconciles to the cash balance at the end of the current fiscal year.
Notes to the Financial Statements
The notes to the financial statements provide additional information that is important to understanding the information included in the financial statements.
Supplemental Information
Supplemental information includes prior year comparative financial statements for both the Bradley International Airport fund and the General Aviation Airports fund, a Schedule of Passenger Facility Charge Expenditures and a Schedule of Insurance Coverage, which are required by the Federal Aviation Administration and Bond indentures respectively.
Required Additional Reports
Required additional reports include an Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards and an Independent Auditors’ Report on Compliance With Requirements That Could Have a Direct and Material Effect on the Passenger Facility Charge Program and on Internal Control Over Compliance.
5 FINANCIAL HIGHLIGHTS - BRADLEY INTERNATIONAL AIRPORT FUND Unless otherwise stated, all values presented in the following MD&A are in thousands with the exception of various per passenger ratios presented
In FY 2015, Bradley financially outperformed budget expectations. Total operating revenue was 2.0% greater than budget while operating & maintenance expenses excluding depreciation were 5.8% less than budget. Compared to FY 2014, total operating revenue increased 3.5% to $64.5 million while total operating expenses before depreciation increased 3.2% to $49.2 million. Income before depreciation increased 4.5% to $15.3 million. Net non-operating revenue (expense) experienced a 114.2% decrease in FY 2015. Total net position for Bradley decreased by $41.8 million primarily due to the implementation of GASB 68 - Accounting and Financial Reporting by Pensions. $45.5 million of the decrease in net position relates to a prior period adjustment to reflect implementing GASB 68. At year end, net position totaled $267.2 million, a 1.4% increase after taking into account the effect of the prior period adjustment. Total assets increased by $5.3 million or 1.1% and total liabilities increased by $45.5 million or 27.2% once again due to the implementation of GASB 68. Bradley generated debt service coverage of 271.6%, which is well above the 120.0% required by bond indenture.
An increase in passenger traffic was again realized in FY 2015 for the second straight year. These consecutive year passenger traffic increases are following a period of decline in passenger demand brought about by economic recession, rising jet fuel prices and declining airline capacity. In FY 2014, enplanements increased 7.2% over the prior year and in FY 15 enplanements increased an additional 4.4% compared to FY 2014. These positive trends in passenger activity are a result of the Authority’s efforts to grow new Airline routes as well as from an overall improvement in the economy.
As previously noted, the implementation of GASB Statement No. 68 - Accounting and Financial Reporting by Pensions, is an important change to the Authority’s financial statements. The standard requires reporting of the entire unfunded liability of defined benefit pension plans. As a component unit of the State of Connecticut, the Authority must represent its proportional share of Net Pension Liability on its financial statements. Net Pension Liability is defined as the actuarial present value of projected pension benefits attributable to past periods of employee service (total pension liability) net of the pension plan’s fiduciary net position. Implementation of the standard required a restatement of July 1, 2014 net position, as described in Note 15 to the financial statements. This prior period adjustment reduced Bradley’s starting net position by $45.5 million. In addition, Bradley Airport’s balance sheet now carries a $47.6 million Net Pension Liability as of June 30th, 2015. The recognition of this liability is a non-cash event and at this time it is not anticipated that the Authority will need to make any payments to the State of CT pension system to relieve this obligation. The implementation of GASB 68 is discussed further in the notes to the financial statements.
Net Position
The net position of Bradley is summarized in Table 1. Net position is a measurement of the financial condition of Bradley at one point in time. As indicated in Table 1, Bradley Airport’s net position increased by $3,692 in fiscal year 2015 (excluding the restatement driven by GASB 68 implementation). This is the result of an increase in total assets of $5,347 and an increase in total liabilities of $45,458. The increase in total liabilities was a result of recording $47.6 million of Net Pension Liability partially offset by reductions in long-term debt outstanding. Included in Table 1 pursuant to GASB reporting guidelines are the fair values at June 30, 2015 of Bradley’s interest rate swap agreements. These swap agreements have been determined to be effective hedges. See notes 1 and 6 in the Notes of Financial Statements.
Table 1 also indicates that Bradley’s assets exceeded its liabilities by $267,155 as of June 30, 2015. This net position includes $132,752 invested in capital assets net of related debt (a decrease of 5.6%), assets restricted for PFC and bond indenture purposes of $112,023 (an increase of 4.5%) and unrestricted assets of $22,380 (a decrease of 63.4%).
As of June 30, 2015, total revenue bonds payable less current maturities of $122,980 equate to $41.43 per enplaned passenger based on fiscal year 2015 enplaned passengers of 2,969, a 9.0% decrease from FY 2014 bonds payable of $45.50 per enplaned passenger.
6 TABLE 1 BALANCE SHEET JUNE 30, 2015 AND 2014 (In thousands) 2015 - 2014 2015 2014 Change ($) Change (% ) ASSETS Current and Other Assets$ 193,834 $ 178,997 $ 14,837 8.3% Net Capital Assets 266,314 275,325 (9,011) -3.3% TOTAL ASSETS 460,148 454,322 5,826 1.3%
DEFERRED OUTFLOWS OF RESOURCES Interest Rate Swap 19,290 19,646 (356) -1.8% Deferred Loss on Bond refunding 1,999 2,122 (123) -5.8% TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES$ 481,437 $ 476,090 $ 5,347 -7.6%
LIABILITIES Long-term Debt Outstanding 122,980 129,415 (6,435) -5.0% Other Liabilities 22,737 18,064 4,673 25.9% Interest Rate Swap 19,290 19,646 (356) -1.8% Net Pension Liability 47,576 - 47,576 100.0% TOTAL LIABILITIES 212,583 167,125 45,458 27.2%
DEFERRED INFLOWS OF RESOURCES Change in Projected Pension Investment Earnings 1,699 - 1,699 100.0% TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 214,282 167,125 47,157 28.2%
NET POSITION Net Investments in Capital Assets 132,752 140,623 (7,871) -5.6% Restricted 112,023 107,243 4,780 4.5% Unrestricted 22,380 61,099 (38,719) -63.4% Adjustment for Net Pension Obligation* - (45,502) 45,502 -100.0% Total Net Position 267,155 263,463 3,692 1.4% Total Liabilities and Net Position $ 481,437 $ 430,588 $ 50,849 11.8%
2015 - 2014 2015 2014 Change ($) Change (% ) Net Position at June 30 Net Investment in Capital Assets $ 132,752 $ 140,623 $ (7,871) -5.6% Restricted for Capital Projects 102,499 98,681 3,818 3.9% Restricted for Debt Service 7,424 6,449 975 15.1% Restricted for Bond Indenture 2,100 2,113 (13) -0.6% Unrestricted 22,380 61,099 (38,719) -63.4% Adjustment for Net Pension Obligation* - (45,502) 45,502 -100.0%
Total Net Position*$ 267,155 $ 263,463 $ 3,692 1.4%
* Fiscal year 2014 Net Position is restated in order to reflect the Authority's Net Pension Liability in conjunction with the implementation of GASB 68
7 $150,000 Bradley International Airport $125,000 Net Position at June 30 ($000) $100,000 $75,000 $50,000 $25,000 $‐ $(25,000) $(50,000) Adjustment Net Restricted for Restricted for Restricted for for Net Investment in Capital Bond Unrestricted Debt Service Pension Capital Assets Projects Indenture Obligation* 2015 $132,752 102,499 7,424 2,100 22,380 $‐ 2014 $140,623 98,681 6,449 2,113 61,099 $(45,502)
Changes in Net Position
The decrease in net position shown on Table 1 was generated from the change in net position shown on Table 2, Changes in Net Position for the Year Ended June 30, 2015. Changes in net position represent the results of operations of Bradley. The change in net position for FY 2015 is $3,692 compared to the restated change in net position in FY 2014 of $308,965 (excluding the prior period adjustment for GASB 68). The large difference between the two years is due to the transition of the Bradley Airport Enterprise Fund from the Department of Transportation to the Connecticut Airport Authority on July 1, 2013. $299,940 of the $308,965 was reflective of the contribution of the Enterprise Fund by the State to the Authority. Overall for FY 2015 total net position decreased by $41,810 or 13.5%. This decrease was largely due to the implementation of GASB Statement No. 68 as stated in Note 1.
The decrease in operating loss is attributed to an increase in operating revenue partially netted down by increases in operating expenses related to administrative and general, repairs and maintenance along with utilities. The decrease in depreciation and amortization is primarily related to the implementation of GASB Statement No. 65 in FY 2014, which resulted in major studies no longer being amortized but expensed. This also affected the net non-operating revenue. The net non-operating revenue (expense) reflects an increase of $4,989 in non-operating expenses, which is attributable to the implementation of GASB 65. Capital project costs for planning and studies that were previously amortized are now expensed.
8 TABLE 2 CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2015 AND 2014 (In Thousands)
2015 - 2014 2015 2014 Change ($) Change (% ) OPERATING REVENUES Landing Fees $ 16,760 $ 15,759 $ 1,001 6.4% Airline Terminal Rent 10,021 9,938 83 0.8% Apron and Remote Aircraft Parking 3,814 3,672 142 3.9% Auto Parking 10,928 10,703 225 2.1% Rental Cars 8,783 8,695 88 1.0% Terminal Concessions 4,001 3,946 55 1.4% Land Rent 4,411 4,052 359 8.9% Other Concessions 3,272 3,271 1 0.0% Other Operating Revenue 2,510 2,304 206 8.9% TOTAL OPERATING REVENUES 64,500 62,340 2,160 3.5%
OPERATING EXPENSES Salaries and Related Expenses 19,981 20,221 (240) -1.2% Administrative and General 15,923 15,148 775 5.1% Repairs and Maintenance 7,388 6,738 650 9.6% Energy and utilities 5,875 5,554 321 5.8% OP ER EXP ENS E B EFORE DEP RECIATION 49,167 47,661 1,506 3.2% OPER INCOME BEFORE DEPRECIATION 15,333 14,679 654 4.5% Depreciation and Amortization 15,817 16,426 (609) -3.7% OPERATING LOSS (484) (1,747) 1,263 -72.3% NONOPERATING REVENUES(EXPENSES) Car Rental Facility Charge Revenue 5,515 5,191 324 6.2% Passenger Facility Charge Revenue 12,248 11,738 510 4.3% Investment Income 121 103 18 17.5% Revenue Bond Interest Expense (5,028) (5,930) 902 -15.2% Other Non-Operating Expenses (9,955) (4,966) (4,989) 100.5% Actuarial Pension Expense (3,773) - (3,773) -100.0%
NET NONOPERATING REVENUES (EXPENSE) (872) 6,136 (7,008) -114.2%
INCOME BEFORE CAPITAL CONTRIBUTIONS (1,356) 4,389 (5,745) -130.9% CAPITAL CONTRIBUTIONS 5,048 304,576 (299,528) -98.3% Change in Net Position 3,692 308,965 (305,273) -98.8% Total Net Position, Beginning of Year (as restated) 263,463 - 263,463 100.0% Total Net Position, End of Year 267,155$ 308,965$ $ (41,810) -13.5%
9 BRADLEY INCOME
As indicated on Table 2, Bradley generated operating income before depreciation of $15,333 and increased its net position by $3,692 in fiscal year 2015. The operating and non-operating revenues and expenditures associated with this income are addressed below.
Operating Revenues Operating revenues for fiscal year 2015 totaled $64,500, an increase of $2,160 or 3.5% from Total Operating Revenue fiscal year 2014. Operating revenues are $35,000 segregated between airline and non-airline $34,000 sources. Airline revenues were $30,595 or $33,000 47.4% of total operating revenue, and non- $32,000 airline revenues were $33,905 or 52.6% of total $31,000 operating revenue as shown at right and in $30,000 greater detail below. $29,000 $28,000 $27,000 Airline revenues increased by $1,226 or 4.2% 2015 2014 from FY 2014 to FY 2015. The airlines pay rates and charges based on budgeted Airline $30,595 $29,369 operating expenditures and debt service Non‐Airline $33,905 $32,971 allocated to airline cost centers including the landing area, terminal building and aircraft parking aprons. The FY 2015 operating expense budget of $52,183 reflected a 5.7% increase in operating expenses over the FY 2014 operating budget, which was appropriately reflected in budgeted airline rates and charges. There were also credits applied to the airline cost centers in the FY 2015 budget, made to compensate the airlines for prior budget to actual performance, which totaled $1,641. In addition to these annual adjustments, the Authority provided a one-time credit to airline cost centers in the amount of $2,020 intended to maintain competitive airline rates and charges at the Airport.
Airline Revenue ($000) $20,000
2015 $15,000 2014 $10,000
$5,000
$‐ Landing Fees Airline Aircraft Terminal Rent Parking
Deducting cargo airline landing fees of $3,266 from total airline revenue of $30,595 results in passenger airline revenue of $27,329. This equates to a fiscal year 2015 Cost per Enplaned Passenger (CPE) of $9.20 based on fiscal year 2015 enplaned passengers of 2,969, a 0.5% decrease from the FY 2014 CPE of $9.25.
10 Total non-airline revenues increased by $935 or 2.8% from FY 2014. Non-airline revenues are made up of the various concessions operating at the Airport, land rent and other operating revenue. Concession operations include auto parking, rental cars, terminal concessions and other concessions, which combine for total revenue of $26,984. The largest source of concession revenue is vehicle parking operations, which totaled $10,928. Terminal concessions include food and beverage, retail, advertising and miscellaneous services provided in the terminal. Other concessions include in-flight food catering, the Sheraton Hotel located in the terminal, ground transportation services and others.
Total concession revenue of $26,984 equates to $9.09 per enplaned passenger based on fiscal year 2015 enplaned passengers of 2,969, a 2.9% decrease from FY 2014 concession revenue per enplaned passenger of $9.36. The division of revenues per passenger among the various concessions is shown above.
Operating Expenses
Operating expenses in fiscal year 2015 totaled $64,984, an increase of $895 or 1.4% from fiscal year 2014. Operating expenses include salaries and related expenses, contractual services, energy and utilities, other operating expenses and depreciation. The distribution and comparison of fiscal year 2014 and 2015 operating expenses is shown in Table 3.
As indicated on Table 3, an increase in salaries and overtime along with increases in all other expense categories with the exception of payment in lieu of taxes are offset by decreases in other payroll, fringe benefit and indirect cost. In addition there is a decrease in depreciation and amortization. The overall decrease in the salary related classes is mainly due to the indirect cost allocation that was paid to the State in FY 2014 based on the amount expensed in salaries and wages. For FY 2015 the cost paid directly to the Department of Transportation for services provided was based on the actual expense incurred. This is now included within the administrative and general costs. In addition the Authority experienced a decrease in other payroll. This was due to the treatment of vacation and sick leave payout at retirement for those employees hired under the CAA. In the other expense category there were slight increases in all categories totaling $1,747. The majority of this increase was in security and repairs and maintenance. Depreciation and amortization decreased due to the implementation of GASB 65 where planning studies are no longer amortized but rather expensed as incurred.
11
TABLE 3 OPERATING EXPENSES JUNE 30, 2015 and 2014 (In thousands)
Change 2015 - 2014 Salaries & Related 2015 2014 Change ($) Change (%) Salaries $ 9,568 9,078$ 490$ 5.4% Overtime 1,392 1,108 284 25.6% Other Payroll (18) 554 (572) -103.2% Fringe Benefit 9,039 9,048 (9) -0.1% Indir. Cost Alloc. - 433 (433) -100.0% Salaries & Related 19,981 20,221 (240) -1.2% Other Expense Payment In Lieu of Tax 4,679 4,679 - 0.0% Security 7,188 6,574 614 9.3% Administrative & General Costs 4,057 3,858 199 5.2% Repairs and Maintenance 7,387 6,774 613 9.0% Energy/Utilities 5,875 5,554 321 5.8% Other Expense 29,186 27,439 1,747 6.4% Expenses Before Depreciation 49,167 47,660 1,507 3.2%
Depreciation & Amortization 15,817 16,426 (609) -3.7% Total Operating Expenses 64,984$ $ 64,086 $ 898 1.4%
12 Net Non-operating Revenue (Expense)
Non-operating revenues and (expenses) include Bradley’s Passenger Facility Charges (PFCs), customer facility charges (CFCs), investment income, revenue bond interest expense and other non-operating expenses. Other non-operating expenses are predominantly reflective of capital improvement project costs that must be expensed versus capitalized as an asset. Bradley is presently authorized by the FAA to assess a PFC of $4.50 per enplaned passenger. The revenue associated with this charge is restricted for approved capital projects, and currently supports debt service incurred for eligible components of the terminal expansion and improvement program as well as certain “pay as you go” projects. In fiscal year 2015, Bradley collected total PFCs (excluding PFC interest) of $12,142, an increase of 4.3% from FY 2014. This increase is reflective of the increase in passenger traffic at Bradley. Bradley is also presently authorized by contract with the rental car companies to assess a CFC of $3.50 per rental car transaction day. The revenue associated with this charge is recognized according to criteria established by bond indenture and subsequently transferred to a project account dedicated to design, engineering and construction of a consolidated rental car facility at Bradley. CFC collections commenced December 2009 and revenues for fiscal year 2015 totaled $5,478 (excluding interest), an increase of 6.1%. Investment income from all accounts totaled $266, a 17.4% increase from FY 2014 investment income of $224. Investments and invested balances are addressed in Note 2 to the financial statements. Investment earnings on certain accounts are restricted for the purposes of the account as discussed in the notes to financial statements. Revenue bond interest expense for FY 2015 totaled $5,028 a decrease of 15.2%. Other non-operating expense shows a 100.5% increase mainly due to the implementation of GASB 65 in FY 2014 in which planning and studies are no longer amortized as well as increased project costs for the demolition of Terminal B that must be expensed. Bradley had $9,955 of other non-operating expense. In addition, the actuarial pension expense mentioned earlier in regards to GASB 68 is included here. The addition of the actuarial pension expense along with non-operating expenses, changes in PFC revenue, CFC revenue, investment income and bond interest expense resulted in the $7,008 decrease in total net non-operating revenue (expense) as shown on Table 2. Net non-operating revenue of ($872) and the operating loss of $484 combined in FY 2015 for a net loss before capital contributions of ($1,356).
CAPITAL CONTRIBUTIONS
Total capital contributions in FY 2015 were $5,048, a significant decrease of $299,527 from FY 2014 capital contributions of $304,575. FY 2014 was significantly higher due to the transfer of the Bradley Enterprise Fund from the Department of Transportation to the Authority.
The primary source of FY 2015 contributed capital is from the Federal Aviation Administration’s (FAA) Airport Improvement Program (AIP). Under the AIP program, the FAA provides grants that are available for eligible, approved projects within the funding limitations of the program, which requires certain matching contributions to be made by the Airport. In FY 2015 additional contributed capital was made available through the US Department of Homeland Security for installation of Security equipment. Projects and capital contributions are summarized below.
2015 - 2014 Capital Contributions ($000) 2015 2014 Change ($) Change (% )
Terminal Demolition / Redevelopment$ 8 17$ (9)$ -52.9% Planning Studies 49 - 49 100.0% Sound Insulation Program 3 3,256 (3,253) -99.9% Land Acquisition / Bird Habitat 2,106 - 2,106 100.0% Taxiways 2,471 1,086 1,385 127.5% New Building 261 - 261 100.0% Security Equipment 12 276 (264) -95.7% Contribution From State 138 299,940 (299,802) -100.0% Total $ 5,048 $ 304,575 (299,527)$ -98.3%
13 BUDGET TO ACTUAL PERFORMANCE
Bradley’s annual operating budget for FY 2015 was developed pursuant to procedures established in applicable State regulations and the Short Term Lease and Operating Agreement between the State and the signatory airlines serving Bradley. These procedures provide for preparation of the budget, submission to and approval of the budget by the Authority’s Board of Directors and the airlines within a prescribed period prior to the beginning of each fiscal year, and for dispute resolution. The operating budget includes airline and non-airline revenues, passenger facility charges, operating and maintenance expenses, expenditure allocation to Bradley cost centers including the landing, apron, terminal and other cost centers, and development of the rates and charges that will be paid by the airlines during the ensuing fiscal year. As part of the rate development process, prior budget to actual cost allocations are analyzed and appropriate adjustments are made. Budget to actual performance for FY 2015 is shown in Table 4.
Airline revenues were slightly higher than budget. A positive variance was experienced in landing fees, FIS building revenue and airline addition revenue. Non-airline revenues were 3.9% greater than budget. As with airline revenues, a positive variance was experienced in all categories of non-airline revenues with the exception of auto parking, which was equal to budget. Overall, total operating revenue was 2.0% greater than budget. PFCs and related interest were 9.0% greater than budget due to higher than forecasted passenger demand. Total operating expenses before depreciation were 5.8% under budget with surpluses realized in all categories of expense except overtime and repairs & maintenance.
Table 4 FY 2015 Budget to Actual Performance ($000)
Variance Greater (Less) Than Budget Budget Actual ($000) Percent Airline Revenue$ 30,563 30,595$ 32$ 0.1% Non-Airline Revenue 32,645 33,905 1,260 3.9% Total Operating Revenue 63,208 64,500 1,292 2.0% Passenger Facility Charges & PFC Interest 11,236 12,248 1,012 9.0% Car Rental Facility Charge Revenue & CFC Interest 5,269 5,515 246 4.7% Operating & Maintenance Expenses before Depreciation 52,183 49,167 (3,016) -5.8%
14 CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
Bradley’s capital assets increased by $7 for the year ended June 30, 2015. This reflects the changes in building improvements, land improvements, machinery & equipment, land and construction in progress summarized in Table 5 below. The increase in land improvements is mostly due to increases in the reconstruction of T/W C and the improvements to the water system. The majority of the additions to building improvements are due to the new airfield lighting vault and the new security building along with terminal improvements to the unified terminal. Machinery and equipment increases were mainly a result of the new financial management system which is offset by the write off of the old computer system, the AS400, and several pieces of equipment that were retired or used as a trade in for new equipment. The decrease in construction in progress reflects the completion of Taxiway C North noted above and the completion of the airfield lighting vault and the new security building.
Table 5 Capital Assets as of June 30 ($000)
2015 - 2014 2015 2014 Additions Building Improvements $ 310,199 $ 298,397 $ 11,802 Land Improvements 231,561 231,166 395 Machinery and Equipment 30,818 29,245 1,573 Total Depreciable 572,578 558,808 13,770 Land 2,657 2,657 - Construction in Progress 6,120 13,332 (7,212) Total Non - Depreciable 8,777 15,989 (7,212)
Total $581,355 $574,797 $ 6,558
15 Debt
At year end, Bradley had $129,415 in General Airport Revenue Bonds outstanding versus $135,600 in FY 2014 - a decrease of $6,185 or 4.6%. Bradley had two outstanding series of bonds at June 30, 2015. These include the Series 2011 A and Series 2011 B issued to refund the bonds previously issued in support of Bradley’s terminal expansion and improvement program. Principal outstanding on these bonds as of June 30 is shown below:
2015-2014 Principal Outstanding 2015 2014 Change
Series 2011A $ 77,650 $ 81,360 $ 3,710 Series 2011B 51,765 54,240 2,475
Total Principal Outstanding* $129,415 $135,600 $ 6,185
* Less current maturities of $6,435 results in revenue bonds payable (Long Term Portion) of $122,980 as of June 30, 2015. For a more detailed description of long-term obligations see Note 5 in the accompanying financial statements.
In addition to the outstanding bonds, non-current liabilities now include $47.6 million for the net pension liability related to Bradley Airport. The net pension liability as of July 1, 2014 was recognized through a restatement of beginning net position. This is explained further in Note 15.
ECONOMIC FACTORS AND OUTLOOK
The financial health and stability of the airline industry nationally, regionally and at Bradley is the most significant economic factor with the potential to adversely affect Bradley. The industry has been challenged for years by economic recession, increased costs, extremely narrow margins and lower traffic resulting in multiple airline bankruptcies, consolidations and reorganizations, as well as deep cuts to air service capacity. These factors, a Enplaned Passenger Trends strong air service area and competitive 3,700 New England airport environment, have combined to produce periods of 3,500 (000) declining and rebounding enplaned passenger traffic at Bradley. However, 3,300 Bradley’s strong airline cost recovery structure and its non-airline revenue 3,100
structure have provided sound financial Passengers performance throughout this trend. 2,900
The airline mergers and consolidations 2,700 undertaken over the last several years Enplaned have affected the use and occupancy of 2,500 terminal facilities at Bradley. For example, Delta’s acquisition of Northwest Airlines ultimately led to the Fiscal Year vacating of Northwest Airline’s facilities at Bradley. The merger of United and Continental airlines ultimately resulted in the consolidation of two leaseholds at Bradley into one. Most recently in FY 2014, Bradley saw the merger of American Airline and US Airways. Bradley expects a reduction in leased terminal space in the future for these two airlines.
Management is responding to enplaned passenger trends and the impact of airline mergers and consolidations with continuance and strengthening of the air service incentive program discussed later in this section.
16 In FY 2015, Bradley enplaned 2.969 million passengers, a 4.4% increase from FY 2014. The year over year increase is the product of the Authority’s successful efforts to develop new airline routes as well as from a rebounding economy. In FY 2015, almost all carriers had increases in passenger traffic with the exception of United Airlines and American Airlines. Jet Blue increased the most with a 19.1% increase in passengers. Delta came in second at 9.9% increase in their passenger count for FY 2015. Southwest continues their trend of increasing their market share and have now become the largest carrier at Bradley with 28.7% of the market share. Following the American and US Airways merger in FY 2014, the combined entity’s enplanements have dropped slightly and the new American now represents the second largest carrier at 26.7% of the market share. Delta Airlines, is the third largest carrier with its market share increasing from 20.8% in FY 2014 to 21.9% in FY 2015. United’s market share continues to drop from 9.6% in FY 2014 to 8.7% in FY 2015. Enplaned Passengers FY 2015 Carrier Year Growth % of Total FY over Year Carrie r FY 2015 FY 2014 (Decline) 2015 Growth Growth Southwest 851,667 810,162 41,505 33.4% 5.1% American/US Airways 791,317 818,583 (27,266) -21.9% -3.3% Delta 648,628 590,316 58,312 46.9% 9.9% Jet Blue 395,508 332,144 63,364 51.0% 19.1% United Airlines 259,689 271,730 (12,041) -9.7% -4.4% Air Canada 21,729 21,295 434 0.3% 2.0% Total 2,968,538 2,844,230 124,308 100.0% 4.4%
These market shares reflect the activity of Bradley’s major (signatory) air carriers combined with the enplaned passengers of their affiliated or contracted regional commuter / express operators that have been carrying an increasing portion of the major carrier’s traffic. The market shares have also been grouped to reflect the merger of American Airlines and US Airways. As of June 2015, American, United, Delta, Southwest, Air Canada, Jet Blue and 19 additional regional commuter/express operators served Bradley. Bradley continues to offer a diverse mix of air carriers. Enplaned passenger traffic by carrier and market shares for FY 2014 and FY 2015 are shown below and in Table 6.
The Authority has worked hard with the carriers to attract additional flights in order to increase passenger traffic. Management will continue to work with the airlines and strengthened incentives in order to support the recapture of lost traffic and continue to grow the number of enplanements. Under the current program, open for the period July 1, 2015 through June 30, 2016, Bradley offers fixed rent discounts for the lease of presently vacant terminal facilities, landing fee discounts and cooperative air service marketing assistance to new entrant and incumbent air carriers establishing nonstop scheduled service, or restoring previous reductions to air service, to targeted domestic and international destinations. Fixed rent and landing fee discounts vary depending on the level of service offered. Marketing assistance available under the program provides that Bradley will fund concept, development and placement of advertising in local and destination point media announcing and supporting ongoing use of the flights eligible under the promotion. The level of assistance available varies and is dependent upon the routes served.
17 Table 6 Bradley International Airport Passenger Market Share Trends
2015 Enplaned Passengers 2014 Enplaned Passengers Regional / Regional / Express Express Carrie r Mainline Operations Total Mainline Operations Total Southwest 817,910 33,757 851,667 757,040 53,122 810,162 American/US Airways 410,971 380,346 791,317 488,310 330,273 818,583 Delta 547,191 101,437 648,628 446,241 144,075 590,316 Jet Blue 395,508 - 395,508 332,144 - 332,144 United Airlines 96,835 162,854 259,689 107,136 164,594 271,730
Air Canada - 21,729 21,729 2,416 18,879 21,295 Total 2,268,415 700,123 2,968,538 2,133,287 710,943 2,844,230
2015 Market Shares 2014 Market Shares Regional / Regional / Express Express Carrie r Mainline Operations Total Mainline Operations Total Southwest 27.6% 1.1% 28.7% 26.6% 1.9% 28.5% American/US Airways 13.8% 12.8% 26.7% 17.2% 11.6% 28.8% Delta 18.4% 3.4% 21.9% 15.7% 5.1% 20.8% Jet Blue 13.3% 0.0% 13.3% 11.7% 0.0% 11.7% United Airlines 3.3% 5.5% 8.7% 3.8% 5.8% 9.6% Air Canada 0.0% 0.7% 0.7% 0.1% 0.7% 0.7% Total 76.4% 23.6% 100.0% 75.0% 25.0% 100.0%
Bradley management will continue to monitor the airline industry, economic and regional market trends and the relevant potential impacts on Bradley traffic and financial performance with a view toward identifying and implementing appropriate response measures.
FINANCIAL HIGHLIGHTS - GENERAL AVIATION ENTERPRISE FUND
The General Aviation Airport Enterprise Fund consists of five general aviation airports located within the State of Connecticut. They include Groton/New London Airport, Hartford/Brainard Airport, Waterbury/Oxford Airport, Danielson Airport and Windham Airport. These airports are owned, operated and managed by the Connecticut Airport Authority.
On July 1, 2013 these airports were legally transferred to the Connecticut Airport Authority from the Department of Transportation. Prior to the transition, the airports were owned and operated by the Department of Transportation and the accounting for these five airports was based on the modified cash basis of governmental accounting. With this transition the airports became an Enterprise Fund. The assets and liabilities were transferred at book value and the accounting for these airports was changed to an accrual basis of accounting with separate and distinct financial statements. Fiscal year 2015 is the second year of full accrual based financial statements that will be completed for this Enterprise Fund.
18 The balance sheet for the General Aviation Airports shows total assets of $87,728, an increase of $8,376 or 10.6% from FY 2014. Total assets are broken down by current assets of $9,330 and noncurrent assets $78,398. Total liabilities equal $14,999 which is an increase of $12,479 from FY 2014. The majority of this increase is due to the recording of the net pension liability associated with the General Aviation Airports. Consistent with Bradley Airport, the General Aviation Airports must implement GASB 68 and record their proportional share of net pension liability. There are no other long term liabilities at this time. The total net position for the General Aviation Airports Enterprise Fund is $72,380. This is an increase of $4,904 or 7.3% over FY 2014. See Table 7 below.
TABLE 7 BALANCE SHEET - GENERAL AVIATION AIRPORTS JUNE 30, 2015 (in thousands)
2015 - 2014 2015 2014 Change ($) Change (% ) ASSETS Current and other assets $ 9,330 $ 4,687 4,643$ 99.1% Net capital assets 78,398 74,665 3,733 5.0% TOTAL ASSETS 87,728 79,352 8,376 10.6% LIABILITIES Accounts Payable and Accrued Liabilities 3,067 684 2,383 348.4% Due to State 1,980 1,675 305 18.2% Deferred Revenue and Other 169 161 8 5.0% Net Pension Liability 9,783 - 9,783 100.0% TOTAL LIABILITIES 14,999 2,520 12,479 495.2%
DEFERRED INFLOWS OF RESOURCES Change in Projected Pension Investment Earnings 349 - 349 100.0% TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 15,348 2,520 12,828 509.0%
NET POSITION Net Investments in Capital Assets 78,398 74,665 3,733 5.0% Restricted - - - n/a Unrestricted (6,018) 2,168 (8,186) -377.6% Adjustment for Net Pension Obligation * - (9,357) 9,357 -100.0% TOTAL NET POSITION $ 72,380 $ 67,476 4,904 7.3% TOTAL LIABILITIES AND NET POSITION $ 87,728 $ 69,996 17,732$ 25.3%
2015 - 2014 2015 2014 Change ($) Change (% ) NET POSITION at JUNE 30 Invested in Capital Assets (net) $ 78,398 $ 74,665 3,733$ 5.0% Unrestricted (6,018) 2,168 (8,186) -377.6% Adjustment for Net Pension Obligation* $ - $ (9,357) 9,357 -100.0%
TOTAL NET POSITION* $ 72,380 $ 67,476 4,904$ 7.3%
* Fiscal year 2014 Net Position is restated in order to reflect the Authority's Net Pension Liability in conjunction with the implementation of GASB 68
19 Net Position
The General Aviation Airport Enterprise Fund receives operating subsidy from the State of Connecticut through the Department of Transportation. Requests are made during the State’s biennial budget process and the Department of Transportation submits the request on behalf of the Connecticut Airport Authority. Once funding is approved, it is appropriated to the Department of Transportation who then makes it available for the Enterprise Fund. Changes in Net Position - Table 8 displays the different categories used to calculate the change in net position. Net position at the beginning of the year for the General Aviation Enterprise Fund was $67,477. Net position for FY 2015 is $72,380, an increase of $4,903. Operating revenues total $2,492, an increase of $170 or 7.3% over FY 2014. Airline revenue was $289 and non-airline revenue was $2,203. The majority of the non-airline revenue is attributable to land rent and other operating revenue (the majority of which comes from fixed based operators). Operating expenses totaled $5,648 before depreciation an increase of $371 or 7.0% over FY 2014. Operating expenses include salaries and related expenses, administrative and general, repairs and maintenance, and energy and utilities. Depreciation expense for FY 2015 is $3,770 which is $217 or 5.4% lower than FY 2014. The net non-operating revenue for FY 2015 is $3,741. This is lower than FY 2014 by $573 or 13.3%. The non-operating revenue includes the State’s operating subsidy of $5,163 and investment income of $5 offset by non-operating expenses of $651 which is predominately made up of various capital projects (planning studies) that were expensed. In addition, the actuarial pension expense allocated to the general aviation airports is contributing to the change in net non-operating revenues. Income (loss) before capital contributions is ($3,185). Capital contributions of $8,088 consist of funding received from the State supported by State Bonds to fund capital improvements ($2,100), and funding from the Federal Aviation Administration for capital infrastructure at each of the General Aviation Airports ($5,988).
20 TABLE 8 CHANGES IN NET POSITION - GENERAL AVIATION AIRPORTS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)
2015 - 2014 2015 2014 Change ($) Change (%) OPERATING REVENUES Landing Fees $ 77 89$ $ (12) -13.5% Airline Terminal Rent 13 6 7 116.7% Apron and Remote Aircraft Parking 199 202 (3) -1.5% Rental Cars 125 85 40 47.1% Land Rent 1,113 1,082 31 2.9% Other Operating Revenue 965 858 107 12.5% TOTAL OPERATING REVENUES 2,492 2,322 170 7.3%
OPERATING EXPENS ES Salaries and Related Expenses 4,139 3,755 384 10.2% Administrative and General 548 584 (36) -6.2% Repairs and Maintenance 673 678 (5) -0.7% Energy and utilities 288 260 28 10.8% OPER EXP ENS ES B EFORE DEP RECIATION 5,648 5,277 371 7.0%
OPER LOSS BEFORE DEPRECIATION (3,156) (2,955) (201) 6.8% Depreciation and Amortization 3,770 3,987 (217) -5.4% OPERATING (LOSS) (6,926) (6,942) 16 -0.2% NON OPERATING REVENUES(EXPENSES) In ves tmen t inco me 5 2 3 212.5% Other Non operating expenses (651) (833) 182 -21.8% State Operating Subsidy 5,163 5,145 18 0.3% Actuarial Pension Expense (776) - (776) -100.0% NET NON OPERATING REVENUES (EXPENSE) 3,741 4,314 (573) -13.3%
INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS (3,185) (2,628) (557) 21.2% CAPITAL CONTRIBUTIONS 8,088 79,461 (71,373) -89.8% Change in Net Position 4,903 76,833 (71,930) -93.6% Total Net Position, Beginning of Year (as Restated) 67,477 - 67,477 100.0% Total Net Position, End of Year $ 72,380 $ 76,833 $ (4,453) -5.8%
Revenues
Revenues generated at the General Aviation Airports include several different sources. There are some that utilize rates outlined within State Regulations such as aircraft parking fees and aircraft landing fees while others are based upon negotiated lease terms within tenant operating agreements. Tenant operating agreements can include revenues derived from straight parcel rents as well as from various percentages paid on receipts they report based upon the different types of services they provide. The largest share of revenues for the General Aviation Airport Enterprise Fund is derived from land rent followed by other operating revenue.
21 Operating Expenses
Operating expenses in fiscal year 2015 totaled $9,418. Operating expenses include salaries and related expenses, security, administrative & general, repairs & maintenance, energy & utilities along with equipment and depreciation. The distribution of operating expenses for fiscal year 2015 is shown in Table 9.
As indicated earlier, the General Aviation Airports Enterprise Fund receives subsidy from the State of Connecticut for the operating expenses incurred. For FY 2015, the Authority received $5,163 from the State of Connecticut to fund operating expenses for all five general aviation airports and the general aviation administration. Operating expenses before depreciation equaled $5,648 which exceeded the operating subsidy received by $485. It is the intention of the Authority to work towards reducing the subsidy until such time that the Enterprise Fund can support operations by its own revenues. Table 9 below details the FY 2015 operating expenses by Airport by category.
TABLE 9 OPERATING EXPENSES - GENERAL AVIATION AIRPORTS FOR THE YEAR ENDED JUNE 30, 2015 (In thousands)
Total GA Airport Salaries & Related 2015 Administration Groton Brainard Danielson Oxford Windham Salaries $ 1,838 1,045 256 341 - 196 Overtime 420 48 119 118 - 135 Other Payroll 136 118 4 7 - 7 Fringe Benefit 1,745 861 286 360 - 238 Salaries & Related 4,139 2,072 665 826 - 576 -
Other Expense Security 32 - 10 - 4 11 7 Admininstrative & General Costs 516 84 267 51 33 53 28 Repairs and Maintenance 599 - 106 69 194 77 153 Energy/Utilities 288 - 127 65 16 60 20 Equipment 74 33 3 13 - 25 - Other Expense 1,509 117 513 198 247 226 208
Expenses Before Depreciation 5,648 2,189 1,178 1,024 247 802 208 Depreciation & Amortization 3,770 - 1,581 598 132 933 526 Total Operating Expenses $ 9,418 $ 2,189 $ 2,759 1,622$ $ 379 $ 1,735 $ 734
22 BUDGET TO ACTUAL PERFORMANCE
Comparing the budget to actual for the General Aviation Airport Enterprise Fund in FY 2015 would be a futile effort. The FY 2015 budget was presented and approved by the Board of Directors as per the Public Act. However, as explained earlier the State subsidy request for FY 2015 was made during the State’s biennial budget process. The amount of the actual subsidy was much less than the Board approved budget. The Authority has worked diligently to manage costs within the confines of the lower subsidy amounts instead of the original Board approved budget.
The Authority continues to look into ways to help reduce the State subsidy yet continue to operate the airports safely and maintain them in the same good condition in which they were transferred and their users have grown accustomed. The revenues are invested into the State of Connecticut Short Term Investment Fund in order to build a sufficient working capital balance for the Enterprise Fund. Expenses are closely monitored and the Authority is actively exploring new avenues of increasing revenue in an effort to reduce the subsidy and ultimately fund its own operations
REQUESTS FOR INFORMATION
This management’s discussion and analysis and the following financial statements are designed to be in conformance with generally accepted accounting principles (GAAP) for governmental units as promulgated by the Governmental Accounting Standards Board (GASB). We believe that this report presents fairly the financial position of the Airport and the results of its operations for the fiscal year ended June 30, 2015. The report is consistent with full disclosure so that the reader may gain a solid understanding of the Authority’s financial affairs.
This report was prepared in its entirety by the management of the Connecticut Airport Authority and we take full responsibility for the accuracy of the data and the completeness and fairness of the presentation.
23 CONNECTICUT AIRPORT AUTHORITY BALANCE SHEET JUNE 30, 2015
Bradley General Total International Aviation Connecticut Airport Airports Airport Fund Fund Authority ASSETS Current Assets Cash $ 12,288,149 $ 716,858 $ 13,005,007 Short-term investments 53,523,419 3,762,082 57,285,501 Accounts receivable, net 5,949,304 169,038 6,118,342 Grants receivable 5,396,921 3,249,091 8,646,012 Restricted investments, current portion 3,020,083 - 3,020,083 Due from State 4,534,453 1,339,094 5,873,547 Prepaid expenses and other 118,151 93,580 211,731 Total current assets 84,830,480 9,329,743 94,160,223
Noncurrent Assets Restricted assets: Car rental facility 27,787,871 - 27,787,871 Passenger facility 69,677,626 - 69,677,626 Bond indenture 11,537,002 - 11,537,002 Capital assets 266,314,476 78,398,242 344,712,718 Total noncurrent assets 375,316,975 78,398,242 453,715,217
Total assets 460,147,455 87,727,985 547,875,440
DEFERRED OUTFLOWS OF RESOURCES Interest rate swaps 19,290,583 - 19,290,583 Deferred loss on bond refunding 1,998,930 - 1,998,930 Total deferred outflows of resources 21,289,513 - 21,289,513
Total Assets and Deferred Outflows of Resources $ 481,436,968 $ 87,727,985 $ 569,164,953
LIABILITIES Current Liabilities Current maturities of revenue bonds $ 6,435,000 $ - $ 6,435,000 Accounts payable and accrued liabilities 12,462,098 3,067,064 15,529,162 Due to State 946,228 1,979,600 2,925,828 Revenue bond interest payable 1,284,106 - 1,284,106 Deferred revenue and other 1,609,621 169,132 1,778,753 Total current liabilities 22,737,053 5,215,796 27,952,849
Noncurrent Liabilities Revenue bonds payable, less current maturities 122,980,000 - 122,980,000 Interest rate swap 19,290,583 - 19,290,583 Net pension liability 47,575,674 9,782,981 57,358,655 Total noncurrent liabilities 189,846,257 9,782,981 199,629,238
Total liabilities 212,583,310 14,998,777 227,582,087
DEFERRED INFLOWS OF RESOURCES Changes in projected pension investment earnings 1,699,133 349,392 2,048,525
Total Liabilities and Deferred Inflows of Resources 214,282,443 15,348,169 229,630,612
NET POSITION Net investment in capital assets 132,752,036 78,398,242 211,150,278 Restricted for: Capital projects 102,498,662 - 102,498,662 Debt service 7,423,588 - 7,423,588 Bond indenture requirements 2,100,332 - 2,100,332 Unrestricted 22,379,907 (6,018,426) 16,361,481 Total net position 267,154,525 72,379,816 339,534,341
Total Liabilities, Deferred Inflows of Resources and Net Position $ 481,436,968 $ 87,727,985 $ 569,164,953
The accompanying notes are an integral part of the financial statements
24 CONNECTICUT AIRPORT AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2015
Bradley General Total International Aviation Connecticut Airport Airports Airport Fund Fund Authority Operating Revenues Airline revenue: Landing fees $ 16,760,104 $ 76,735 $ 16,836,839 Airline terminal rent 10,020,913 12,520 10,033,433 Apron and remote aircraft parking 3,813,858 199,359 4,013,217 Total airline revenue 30,594,875 288,614 30,883,489
Nonairline revenue: Auto parking 10,927,728 - 10,927,728 Rental cars 8,783,025 124,833 8,907,858 Terminal concessions 4,000,893 - 4,000,893 Land rent 4,411,262 1,113,517 5,524,779 Other concessions 3,271,916 - 3,271,916 Other operating revenue 2,510,680 965,151 3,475,831 Total nonairline revenue 33,905,504 2,203,501 36,109,005
Total operating revenues 64,500,379 2,492,115 66,992,494
Operating Expenses Salaries and related expense 19,980,965 4,139,117 24,120,082 Administrative and general 15,923,076 547,420 16,470,496 Energy and utilities 5,875,009 288,311 6,163,320 Repairs and maintenance 7,387,519 673,139 8,060,658 Depreciation and amortization 15,817,411 3,770,274 19,587,685 Total operating expenses 64,983,980 9,418,261 74,402,241
Operating Loss (483,601) (6,926,146) (7,409,747)
Nonoperating Revenues (Expense) Car rental facility charge revenue 5,514,522 - 5,514,522 Passenger facility charge revenue 12,247,888 - 12,247,888 Investment income 121,184 5,430 126,614 Bond interest expense (5,027,842) - (5,027,842) Other nonoperating expenses (9,955,279) (651,059) (10,606,338) State operating subsidies - 5,162,764 5,162,764 Actuarial pension expense (3,772,792) (775,799) (4,548,591) Net nonoperating revenues (expense) (872,319) 3,741,336 2,869,017
Income (Loss) Before Capital Contributions (1,355,920) (3,184,810) (4,540,730) Capital Contributions 5,047,883 8,087,702 13,135,585
Change in Net Position 3,691,963 4,902,892 8,594,855
Net Position - Beginning of Year, as Restated 263,462,562 67,476,924 330,939,486 Net Position - End of Year $ 267,154,525 $ 72,379,816 $ 339,534,341
The accompanying notes are an integral part of the financial statements
25 CONNECTICUT AIRPORT AUTHORITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2015
Bradley General Total International Aviation Connecticut Airport Airports Airport Fund Fund Authority
Cash Flows from Operating Activities Received from concessionaires $ 64,424,741 $ 2,324,311 $ 66,749,052 Payments to employees for services (19,980,965) (4,139,117) (24,120,082) Payments to suppliers for goods and services (23,658,908) (1,234,158) (24,893,066) Net cash provided by (used in) operating activities 20,784,868 (3,048,964) 17,735,904
Cash Flows from Capital and Related Financing Activities Car rental facility charge receipts 5,486,119 - 5,486,119 Passenger facility charge receipts 12,211,233 - 12,211,233 Capital contributions 1,136,158 6,252,207 7,388,365 Receipt of State operating subsidies - 5,162,764 5,162,764 Repayments from (advances to) State, net 8,633,547 (329,193) 8,304,354 Principal paid on capital debt (6,185,000) - (6,185,000) Interest paid on capital debt (5,275,041) - (5,275,041) Planning and studies outlays (9,955,279) (651,059) (10,606,338) Acquisition of capital assets (6,684,141) (5,386,138) (12,070,279) Net cash provided by (used in) capital and related financing activities (632,404) 5,048,581 4,416,177
Cash Flows from Investing Activities Net purchases of investments (8,879,843) (1,298,784) (10,178,627) Interest on investments 123,477 5,430 128,907 Net cash used in investing activities (8,756,366) (1,293,354) (10,049,720)
Net Increase in Cash 11,396,098 706,263 12,102,361
Cash - Beginning of Year 892,051 10,595 902,646
Cash - End of Year $ 12,288,149 $ 716,858 $ 13,005,007
Reconciliation of Operating Loss to Net Cash Provided by (Used in) Operating Activities Operating loss $ (483,601) $ (6,926,146) $ (7,409,747) Adjustments to reconcile operating loss to net cash provided by (used in) operating activities: Depreciation and amortization 15,817,411 3,770,274 19,587,685 (Increase) decrease in operating assets: Accounts receivable and prepaid expenses (75,638) (167,804) (243,442) Increase (decrease) in operating liabilities: Accounts payable and accrued liabilities 5,467,473 266,103 5,733,576 Deferred revenue and other 59,223 8,609 67,832
Net Cash Provided by (Used In) Operating Activities $ 20,784,868 $ (3,048,964) $ 17,735,904
The accompanying notes are an integral part of the financial statements
26 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of Connecticut Airport Authority (the Authority) have been prepared in conformity with accounting principles generally accepted in the United States of America as prescribed in pronouncements of the Governmental Accounting Standards Board (GASB). Following is a summary of significant accounting policies of the Authority.
Reporting Entity
The State of Connecticut established the Authority effective July 1, 2011, to operate Bradley International Airport as well as the other State-owned (general aviation) airports. The Authority is a component unit of the State of Connecticut.
Pursuant to Public Act No. 11-84 (the Act), effective July 1, 2013, the assets and liabilities of the Bradley International Airport enterprise fund as well as the general aviation airports were transferred from the Department of Transportation (ConnDOT) to the Authority. Bradley International Airport was previously accounted for in a separate enterprise fund of ConnDOT, while the general aviation airports were accounted for in governmental funds of ConnDOT. The Act requires establishment of the following funds within the Authority:
The Bradley International Airport Fund - to account for the operations of Bradley International Airport.
The General Aviation Airports Fund - to account for the operations of the following general aviation airports; Oxford Airport, Brainard Airport, Groton/New London Airport, Danielson Airport and Windham Airport.
The CAA Fund - to account for activities not included in the above funds. Currently this fund serves as a conduit for allocating common items to the Bradley International Airport Fund and the General Aviation Airports Fund and has no assets, liabilities, revenues or expenses. Therefore, it has not been presented as a fund in the basic financial statements.
The transfer of Bradley International Airport and the general aviation airports has been accounted for as a contribution from the state in accordance with GASB requirements. Assets and liabilities were transferred at their historical book values.
Effective June 10, 2015, ConnDOT completed the transfer of the premises constituting the parking garage and surface parking lots located at Bradley International Airport to the Authority, and assigned to the Authority all of its rights, title and interest including all of its obligations under the Operating Agreement dated March 31, 2000 and the Guaranty Agreement of Standard Parking Corporation (the operator) as of March 1, 2000. The term of the Operating Agreement expires April 6, 2025.
Under the Operating Agreement, the surface parking lots, parking garage and related bonds are required to be reported in a separate enterprise fund of the State of Connecticut Department of Transportation. Accordingly, these assets and liabilities are not reported in the Authority’s financial statements.
Basis of Presentation
The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows.
27 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
The Authority distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with the operation of the Airport. The principal operating revenues of the Authority are fees from carriers and other concessionaires for use of the airports. Operating expenses include the cost of maintaining the airports, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Authority’s policy to use restricted resources first, then unrestricted resources as they are needed.
Change in Accounting Principle
The Authority has implemented GASB Statement No. 68 - Accounting and Financial Reporting by Pensions - An Amendment of GASB Statement No. 27. The standard requires reporting of the entire unfunded liability of defined benefit pension plans. The net pension obligation under the new standard is discussed below. Implementation of the standard required a restatement of July 1, 2014 net assets, as described in Note 15.
Revenues
Revenue recognition policies are as follows:
Landing Fees - Landing fees are principally generated from scheduled airlines, cargo carriers and nonscheduled commercial aviation and are based on the landed weight of the aircraft. The estimated landing fee structure for Bradley International Airport is determined annually pursuant to State regulation and an agreement between the Airport and the signatory airlines based on the operating budget of the Airport. Landing fees are recognized as revenue as landings occur.
Terminal Rents and Concessions - Rental and concession fees are generated from airlines, food and beverage, retail, rental cars, hotel, advertising and other commercial tenants. Leases are for various terms and generally require rentals based on the space occupied and/or the volume of business, with specific minimum annual rental payments often required. Rental revenue is recognized over the term of the respective leases, and concession revenue is recognized based on reported concessionaire revenue.
Auto Parking - Auto parking fees are generated by Bradley International Airport from an agreement with a vendor to operate the Airport parking. Revenue is recognized based on a guaranteed fixed annual minimum amount per the agreement plus provisional profit sharing.
Passenger Facility Charges - Passenger facility charge revenue is recognized when the fee is collected by the airline from the passenger.
Other - All other types of revenues are recognized when earned.
Certain expenditures for airport capital improvements are significantly funded through the Airport Improvement Program of the Federal Aviation Administration, with certain matching funds provided by the Authority. Capital funding provided under government grants is considered earned as the related allowable expenditures are incurred.
Grants for capital asset acquisitions, facility development and rehabilitation and eligible long-term planning studies are reported in the statement of revenues, expenses and changes in net position after nonoperating revenues (expenses) as capital contributions.
28 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Investments
The Authority presents all investments at fair value except for nonparticipating investment contracts, which are recorded at accreted cost.
The fair value of investments traded on public markets is determined using quoted market prices. The State Treasurer’s Short-Term Investment Fund (STIF) is an investment pool managed by the State Treasurer’s Office. The fair value of the Authority’s position in the pool is the same as the value of the pool shares.
There were no significant investment gains or losses for the year ended June 30, 2015.
Capital Assets and Depreciation
Capital assets, which include property, equipment and infrastructure assets (runways, taxiways and aprons), are stated at cost, which includes applicable capitalized interest and expenditures of the Federal Aviation Administration and State contributions in support of construction. The Authority defines capital assets as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of one year.
Maintenance and repairs that do not add to the value of the asset or materially extend its life are charged to expense as incurred, while significant renewals and betterments are capitalized.
Depreciation is computed on a straight-line basis. The estimated useful lives of the major property, equipment and infrastructure classifications are as follows: land improvements, 20 to 50 years; buildings and improvements, 10 to 40 years; and machinery and equipment, 3 to 15 years. Depreciation expense relating to both purchased and contributed assets is charged against operations.
Deferred Outflows of Resources
In addition to assets, the balance sheet also reports a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period or periods and so will not be recognized as an outflow of resources (expense) until then. The Authority’s deferred outflows include the fair value of interest rate swaps and a deferred charge on the refunding of bonds. The deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt.
In addition to liabilities, the balance sheet also reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period or periods and, therefore, will not be recognized as an inflow of resources until that time. The Authority reports a deferred inflow of resources related to changes in projected investment earnings in the State Employees Retirement System. This amount is deferred and will be included as a reduction of pension expense ratably over the next four years.
Bond Premiums and Discounts
Long-term debt and other noncurrent obligations are reported as liabilities in the balance sheet. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed as incurred.
29 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Interest Rate Swaps
The Authority’s interest rate swap agreements have been determined to be effective hedges for accounting purposes. Accordingly, the fair value of the hedges and changes therein are recognized as deferred inflows or outflows under interest rate swaps on the balance sheet.
Compensated Absences
Employees of the Authority are considered State employees for purposes of employee benefits. Employees hired on or before June 30, 1977 and managers employed by the State before the transition to the Authority can accumulate up to a maximum of 120 vacation days. Employees hired after June 30, 1977 can accumulate up to a maximum of 60 days. Employees hired by the Authority can only accumulate one year’s worth of earned vacation time. Upon termination or death, the employee is entitled to be paid for the full amount of vacation days owed. No limit is placed on the number of sick days that an employee can accumulate. However, all union employees and nonunion employees who transitioned from ConnDOT are entitled to payment for accumulated sick time only upon retirement, or after 10 years of service upon death, for an amount equal to one-fourth of their accrued sick leave up to a maximum payment equivalent to 60 days. All vacation and sick pay that would be payable assuming termination at year end is accrued on the balance sheet. The related liability is based upon current compensation levels.
Net Pension Liability
The net pension liability is measured as the portion of the actuarial present value of projected benefits that is attributed to past periods of employee service (total pension liability), net of the pension plan’s fiduciary net position. The pension plan’s fiduciary net position is determined using the same valuation methods that are used by the pension plan for purposes of preparing its statement of fiduciary net position. The net pension liability is measured as of a date (measurement date) no earlier than the end of the employer’s prior fiscal year, consistently applied from period to period.
Allocation of Expenses
The financial statements include certain allocations of expenses incurred jointly by the Authority and the State, as follows:
Fringe benefits costs, which are incurred at the State level, are charged to the airports based on each employee’s actual benefit costs. Total fringe benefit charges to the Authority were $10,810,985 for the year ended June 30, 2015.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
30 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
NOTE 2 - CASH AND INVESTMENTS
Custodial Credit Risk - Deposits
In the case of deposits, this represents the risk that, in the event of a bank failure, the Authority’s deposits may not be returned to it. The Authority does not have a policy for custodial credit risk on deposits. As of June 30, 2015, $12,583,855 of the Authority’s bank balance was exposed to custodial credit risk because it was not covered under federal depository insurance or collateralized, as defined by GASB Statement No. 40. However, all bank deposits were in qualified public institutions as defined by State statute. Under this statute, any bank holding public deposits must, at all times, maintain, segregated from its other assets, eligible collateral in an amount equal to at least a certain percentage of its public deposits. The applicable percentage is determined based on the bank’s risk-based capital ratio. The amount of public deposit is determined based on either the public deposits reported on the most recent quarterly call report or the average of the public deposits reported on the four most recent quarterly call reports, whichever is greater. The collateral is kept in the custody of the trust department of either the pledging bank or another bank in the name of the pledging bank.
Investments
The following is a summary of investments at June 30, 2015:
Bradley General International Aviation Airport Fund Airports Fund Total
State Treasurer’s Short-Term Investment Fund $ 162,944,949 $ 3,762,082 $ 166,707,031
Total Investments $ 162,944,949 $ 3,762,082 $ 166,707,031
Interest Rate Risk
Because the Authority’s investments are comprised of the State Treasurer’s Short-Term Investment Fund, which is redeemable on demand, the Authority is not subject to declines in value due to interest rate risk.
Credit Risk
Connecticut General Statutes authorize the Authority to invest in obligations of the U.S. Treasury, including its agencies and instrumentalities, commercial paper, banker’s acceptance, repurchase agreements and the State Treasurer’s Short-Term Investment Fund.
Investment ratings for the Authority’s investments are as follows:
Standard & Poor’s
State Treasurer’s Short-Term Investment Fund AAAm
31 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Concentration of Credit Risk
The Authority’s investment policy does not limit the investment in any one investment vehicle. The State Treasurer’s Short-Term Investment Fund is an investment pool that is not subject to this disclosure.
Custodial Credit Risk - Investments
For an investment, this represents the risk that, in the event of the failure of the counterparty, the Authority will not be able to recover the value of the investment. The Authority does not have a policy for custodial credit risk on investments.
NOTE 3 - RESTRICTED ASSETS
Car Rental Facility Charges
Car rental facility charges are restricted for expenditure for a car rental facility at Bradley International Airport. Restricted assets are comprised of the following as of June 30, 2015:
Car rental facility charges receivable $ 551,880 Interest receivable 3,156 Investments 27,232,835
$ 27,787,871
Passenger Facility Charges
Passenger facility charges are restricted for expenditure for federally approved Bradley International Airport improvement projects or debt service of Bradley International Airport. Restricted assets are comprised of the following as of June 30, 2015:
Cash $ 512,182 Passenger facility charges receivable 1,525,389 Interest receivable 8,113 Investments 67,631,942
$ 69,677,626
Bond Indenture
The following assets are restricted for debt service as required under the Bond Indenture. Restricted assets are comprised of the following as of June 30, 2015:
Investments $ 14,556,753 Less current portion (3,020,083) 11,536,670 Interest receivable 332
$ 11,537,002
32 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
NOTE 4 - CAPITAL ASSETS
Changes in capital assets for the year ended June 30, 2015:
Reductions Balance and Balance July 1, 2014 Additions Reclassifications June 30, 2015
BRADLEY INTERNATIONAL AIRPORT Capital assets not being depreciated: Land $ 2,657,154 $ - $ - $ 2,657,154 Construction in progress 12,801,785 9,886,970 (16,568,908) 6,119,847 Total capital assets not being depreciated 15,458,939 9,886,970 (16,568,908) 8,777,001
Capital assets being depreciated: Land improvements 231,166,146 394,652 - 231,560,798 Buildings and improvements 298,950,422 11,272,663 - 310,223,085 Machinery and equipment 29,245,295 1,699,080 (126,759) 30,817,616 Total capital assets being depreciated 559,361,863 13,366,395 (126,759) 572,601,499
Less accumulated depreciation for: Land improvements (157,494,900) (6,580,296) - (164,075,196) Buildings and improvements (118,252,836) (7,669,698) - (125,922,534) Machinery and equipment (23,748,331) (1,444,406) 126,443 (25,066,294) Total accumulated depreciation (299,496,067) (15,694,400) 126,443 (315,064,024)
Total capital assets being depreciated, net 259,865,796 (2,328,005) (316) 257,537,475
Capital Assets, Net $ 275,324,735 $ 7,558,965 $ (16,569,224) $ 266,314,476
Reductions Balance and Balance July 1, 2014 Additions Reclassifications June 30, 2015
GENERAL AVIATION AIRPORTS Capital assets not being depreciated: Land $ 22,539,376 $ 3,796,111 $- $ 26,335,487 Construction in progress 16,504,228 8,134,912 (20,667,456) 3,971,684 Total capital assets not being depreciated 39,043,604 11,931,023 (20,667,456) 30,307,171
Capital assets being depreciated: Land improvements 75,310,547 11,122,129 - 86,432,676 Buildings and improvements 15,121,718 4,599,243 - 19,720,961 Machinery and equipment 8,456,097 518,381 - 8,974,478 Total capital assets being depreciated 98,888,362 16,239,753 - 115,128,115
Less accumulated depreciation for: Land improvements (44,220,466) (2,954,880) - (47,175,346) Buildings and improvements (12,084,609) (480,938) - (12,565,547) Machinery and equipment (6,961,695) (334,456) - (7,296,151) Total accumulated depreciation (63,266,770) (3,770,274) - (67,037,044)
Total capital assets being depreciated, net 35,621,592 12,469,479 - 48,091,071
Capital Assets, Net $ 74,665,196 $ 24,400,502 $ (20,667,456) $ 78,398,242
33 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM OBLIGATIONS
Changes in Long-Term Obligations
The following is a summary of changes in long-term obligations as of June 30, 2015:
Retirements Balance Issuances and and Other Balance July 1, 2014 Other Increases Decreases June 30, 2015
Revenue bonds payable $ 135,600,000 $ - $ 6,185,000 $ 129,415,000
Net pension liability 52,810,064 4,548,591 - 57,358,655
$ 188,410,064 $ 4,548,591 $ 6,185,000 $ 186,773,655
The net pension liability as of July 1, 2014 was recognized through a restatement of beginning net assets (see Note 15).
Bradley International Airport Fund Revenue Bonds
A summary of Bradley International Airport revenue bonds outstanding as of June 30, 2015 is as follows:
Description Interest Rates 2015
Series 2011A Variable - percent of one-month LIBOR $ 77,650,000 Series 2011B Variable - percent of one-month LIBOR 51,765,000 Principal outstanding 129,415,000 Less current maturities (6,435,000)
Long-Term Portion $ 122,980,000
Series 2011A and 2011B
On March 31, 2011, Bradley International Airport Revenue Refunding Bonds Series 2011A and 2011B were issued in the amount of $91,430,000 and $60,950,000, respectively, to retire $161,445,000 of outstanding 2001A bonds. The aggregate principal and interest payments of the Series 2011A and 2011B bonds total $228,421,866, replacing the aggregate principal and interest payments of $258,238,749 on the refunded bonds, generating an economic gain of $7,569,810. The transaction resulted in a deferred accounting loss of $30,753, which the Authority is amortizing over the life of the refunded debt.
The 2011 bonds are secured by and payable solely from the gross operating revenues generated by the Authority from the operation of Bradley International Airport and other receipts, funds or monies pledged in the bond indenture, including a portion of Bradley International Airport’s passenger facility charges revenue.
Debt Service Account
A debt service account has been established in accordance with the various bond indentures to provide for payment of principal at maturity and semiannual interest payments due on April 1 and October 1 of each year. The annual principal payments and interest on the variable rate Airport Revenue Refunding Bonds Series 2011 are disclosed in Note 6, along with the net receipt or payment arising from the Authority’s interest rate swaps. 34 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Bond covenants require that certain accounts be established and maintained in the custody of the Trustee into which bond proceeds, operating revenues and investment earnings are deposited. The disbursement of funds from these accounts for the cost of facilities and debt service are provided for in the various indentures. Amounts on deposit at June 30, 2015 are recognized as restricted assets in the accompanying balance sheet.
Guarantor
As discussed in Note 1, on June 10, 2015, ConnDOT transferred title to the surface parking lots and parking garage at Bradley International Airport and made the Authority guarantor of the related Bradley International Airport Special Obligation parking revenue Bonds, of which $33,010,000 was outstanding as of June 30, 2015.
NOTE 6 - INTEREST RATE SWAPS
Objective
As a means to lock in its future borrowing costs, two forward starting interest rate swaps were entered into in 2006. The swaps effectively changed the Bradley International Airport’s interest rate on the 2011 Series bonds from a variable interest rate to a synthetic fixed rate. The interest rate swaps are considered to be effective cash flow hedges for accounting purposes.
Terms
The notional amount of the swaps matches the principal amounts of the associated debt. The swap agreements contain scheduled reductions to outstanding notional amounts that are expected to follow anticipated reductions to the associated bond issue’s outstanding balance. Under the swaps, the Authority pays the counterparty a fixed interest rate payment and receives a variable interest rate payment based on the LIBOR rate. Only the net difference in interest payments will be actually exchanged between the parties. No cash was received or paid when the swap transactions were initiated.
Fair Value
The valuation of the two swaps changes with movements in interest rate levels; generally, as interest rates decrease, the fair values of the swaps decrease also. As of June 30, 2015, both swaps had negative fair values (representing a liability) as indicated below. The fair values were estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon bonds due on the date of each future net settlement on the swaps.
Credit Risk
As of June 30, 2015, the Authority had no exposure to credit risk on either of the swaps as both had negative fair values. The credit ratings of the swap counterparties are indicated below.
Both swaps contain collateral agreements with the counterparties. The swaps require collateralization of the fair value of the swap in cash or government securities should the counterparties’ credit rating fall below Aa3 as issued by Moody’s Investor Service or AA- as issued by Standard & Poor’s Ratings or Fitch Ratings. No collateral was required to be posted for either of the swaps as of June 30, 2015. The Authority is not required to post collateral for either of the swaps. 35 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Basis Risk
Bradley International Airport Fund variable-rate bond interest payments are reset weekly using a formula based on one-month LIBOR. The Bradley International Airport Fund receives a variable rate payment from the swap counterparties that are reset weekly using a formula based on three-month LIBOR. The fund is exposed to basis risk since both amounts are not calculated using the same formula.
Termination Risk
The Authority or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If either of the swaps is terminated, the associated variable rate bonds would no longer carry synthetic fixed interest rates. If at the time of the termination the swap has a negative fair value, the Authority would be liable to the counterparty for a payment approximately equal to the swap’s fair value. Under both swap agreements, the Authority has up to 270 days to fund any required termination payment.
The following is a summary of terms of the interest rate swaps held on June 30, 2015 by the Authority:
Counterparty Goldman Sachs Bank of America, N.A. Capital Markets, L.P.
Bond issue 2011A 2011B
Original notional amount $91,430,000 $60,950,000
Face amount of related bonds $91,430,000 $60,950,000
Current outstanding amount as of June 30, 2015 $77,650,000 $51,765,000
Effective date April 1, 2011 April 1, 2011
Maturity date October 1, 2031 October 1, 2031
Fixed rate paid 3.693% 3.683%
Variable rate received 60% of 3-month USD 60% of 3-month USD LIBOR plus 40 basis points LIBOR plus 40 basis points
Variable interest rate in effect under swap at June 30, 2015 0.568% 0.568%
Variable interest rate in effect on related bonds 0.831% 0.891%
Credit rating of counterparty: Moody’s Investors Service Aa2 A2 Standard & Poor’s AAA A
36 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
The following is a summary of the changes in fair value of the interest rate swaps for the year ended June 30, 2015, which are accounted for as changes in deferred outflows reported in the balance sheet:
Goldman Sachs Bank of America Total
Fair value - July 1, 2014 $ (11,796,441) $ (7,849,093) $ (19,645,534)
Change in fair value for the year ended June 30, 2015 212,794 142,157 354,951
Fair Value - June 30, 2015 $ (11,583,647) $ (7,706,936) $ (19,290,583)
Interest Rate Swap Payments and Hedged Debt
Aggregate debt service requirements of the Authority’s variable rate bonds and net receipt/payments on the associated interest rate swap agreements as of June 30, 2015 are presented below. These amounts assume that current rates on variable rate bonds and the current reference rates on the swaps will remain the same for their term. As these rates vary, interest payments on variable rate bonds and the net receipts/payments on the interest rate swaps will also vary.
Fiscal Year Variable Rate Bonds Interest Rate Ending June 30 Principal Interest Swaps, Net Total
2016 $ 6,435,000 $ 1,068,671 $ 3,901,221 $ 11,404,892 2017 6,690,000 1,012,185 3,694,965 11,397,150 2018 6,960,000 953,439 3,480,452 11,393,891 2019 7,225,000 892,410 3,257,604 11,375,014 2020 7,510,000 829,002 3,026,072 11,365,073 2021 - 2025 36,405,000 3,184,792 11,624,592 51,214,384 2026 - 2030 39,905,000 1,599,175 5,835,020 47,339,196 2031 - 2032 18,285,000 129,632 471,611 18,886,243
Total $ 129,415,000 $ 9,669,306 $ 35,291,537 $ 174,375,842
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following as of June 30, 2015:
Bradley General International Aviation Airport Fund Airports Fund Total
Accrued payroll $ 3,388,297 $ 758,262 $ 4,146,559 Accrued operating expenses 4,211,537 166,568 4,378,105 Accounts payable - projects 4,862,264 2,142,234 7,004,498
$ 12,462,098 $ 3,067,064 $ 15,529,162
37 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
NOTE 8 - RESTRICTED REVENUE
The following Bradley International Airport Fund car rental facility charge revenue is restricted for expenditures for a car rental facility at Bradley International Airport for the year ended June 30, 2015:
Car rental facility charge revenue $ 5,477,983 Interest income 36,539
$ 5,514,522
The following Bradley International Airport Fund passenger facility charge revenue and investment income earned thereon is restricted for expenditures for federally approved improvement projects at Bradley International Airport for the year ended June 30, 2015:
Passenger facility rental facility charge revenue $ 12,142,801 Interest income 105,087
$ 12,247,888
NOTE 9 - LEASES
Substantial amounts of real property are leased to various airlines and other tenants. The leases consist of month-to-month, cancelable space and use permits and noncancelable operating leases for land, buildings and terminal space. The leases expire over the next 41 years.
Bradley International Airport Fund
Future minimum rental income on noncancelable operating leases for the next five years based on forecasted space usage as negotiated with individual air carriers is as follows:
Year Ending June 30
2016 $ 37,497,881 2017 36,446,372 2018 29,737,580 2019 29,212,757 2020 29,036,417
$ 161,931,007
Future minimum rental income for fiscal years ending June 30, 2016 through June 30, 2020 are estimated using minimum guarantee payment schedules outlined in the leases, as well as estimated consumer price index adjustments.
38 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
General Aviation Airports Fund
Future minimum rental income on noncancelable operating leases for the next five years based on forecasted space usage as negotiated with individual air carriers is as follows:
Year Ending June 30
2016 $ 615,238 2017 589,808 2018 545,276 2019 503,405 2020 501,973
$ 2,755,700
Future minimum rental income for fiscal years ending June 30, 2016 through June 30, 2020 are estimated using minimum guarantee payment schedules outlined in the leases, as well as estimated consumer price index adjustments.
NOTE 10 - PENSION PLAN
Plan Description
Eligible employees of the Authority participate in the State Employees’ Retirement System (SERS). SERS is the single employer defined benefit pension plan of the State of Connecticut’s primary government and its component units, covering substantially all of the full-time employees who are not eligible for another state-sponsored retirement plan. The plan is administered by the State Employees’ Retirement Commission and governed by Sections 5-152 to 5-192 of the Connecticut General Statutes.
Benefits Provided
The Plan provides retirement, disability and death benefits. Employees are covered under one of four tiers, depending on when they were hired. Tier I employees who retire at or after age 65 with 10 years of credited service or at or after age 55 with 25 years of service are eligible for an annual retirement benefit payable monthly for life, in an amount of 2% of the annual average earnings (which are based on the three highest years of service), subject to adjustment on receipt on social security benefits. Employees at age 55 with 10 years but less than 25 years of service, or at age 70 with 5 years of service, are entitled to a reduced benefit.
Tier II and Tier IIA employees who retire at or after age 63 with 25 years of service, or at age 65 with 10 years of service, or at age 70 with 5 years of service, or at age 55 with 10 years of service with reduced benefits are entitled an annual retirement benefit payable monthly for life, in an amount of one and one- third percent of the average annual earnings plus one-half of one percent of the average annual earnings in excess of the salary breakpoint in the year of retirement for each year of credited service. In addition, any years of service over 35 would be at one and five-eighths percent.
For Tier III employees, full retirement benefits are attained at age 63 with 25 years of service, or at age 65 with 10 years of service and are payable monthly for life in an amount equal to one and one-third percent of the average annual earnings plus one-half of one percent of the average annual earnings in excess of the salary breakpoint in the year of retirement for each year of credited service. In addition, any years of service over 35 would be at one and five-eighths percent.
39 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Contributions
Tier I requires an employee contribution of either 2% or 5% of salary, depending on the plan. Tier II is a noncontributory plan. Tier IIA requires an employee contribution of 2% of salary. The Authority’s contribution is determined by applying a State-mandated percentage to eligible salaries and wages.
For the June 30, 2014 valuation, there were two changes in benefit terms:
The 2011 SEBAC Agreement changed the benefit multiplier for the portion of benefit below the breakpoint from 1.33% to 1.4%. This change was made effective for all active members who retire on or after July, 2013 in Tier II, IIA and III.
A one-time decision was granted to members not eligible to retire by July 1, 2022 to elect to maintain the same normal retirement eligibility applicable to members eligible to retire before July 1, 2022. Employees who elected by July 1, 2013 to maintain the eligibility are required to make additional employee contributions for the length of their remaining active service with the plan. The additional contribution was up to .72% of pensionable earnings.
As of June 30, 2015, the Authority reported a liability of $57,358,655 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Authority’s proportion of the net pension liability was based on a projection of the Authority’s long-term share of contributions to the plan relative to the projected contributions of all participating governmental units. The Authority’s proportion was .35817% as of June 30, 2014.
For the year ended June 30, 2015, the Authority recognized pension expense of $4,548,591. As of June 30, 2015, the Authority reported deferred inflows of resources related to pensions of $2,048,525 from the net difference between projected and actual investment earnings on pension plan investments. The deferred inflows of resources related to the plan will be recognized in pension expense as follows:
Year Ending June 30
2015 $ 512,129 2016 512,129 2017 512,129 2018 512,129
Actuarial Assumptions
The total pension liability was determined by an actuarial valuation as of June 30, 2014, using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation 2.75%
Salary increases 4.0% - 20% including inflation
Investment rate of return 8.0%, net of pension plan investment expense, including inflation
40 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Mortality rates were based on the RP-2000 Mortality Table for Annuitants and Non-Annuitants projected with scale AA, 15 years for men (set back 2 years) and 25 years for women (set back 1 year) for the period after service retirement and for dependent beneficiaries. For the period after disability retirement, 55% (men) and 80% (women) of the RP-2000 Disability Mortality Table is used.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period from July 1, 2007 through June 30, 2011.
The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetical real rates of return for each major asset class are summarized in the following table:
Long-Term Target Expected Real Asset Class Allocation Rate of return
Large Cap U.S. Equities 21.0% 5.8% Developed Non-U.S. Equities 18.0 6.6 Emerging Market (Non- U.S.) 9.0 8.3 Real Estate 7.0 5.1 Private Equity 11.0 7.6 Alternative Investments 8.0 4.1 Fixed Income (Core) 8.0 1.3 High Yield Bonds 5.0 3.9 Emerging Market Bonds 4.0 3.7 TIPS 5.0 1.0 Cash 4.0 .4
Discount Rate
The discount rate used to measure the total pension liability was 8%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from the participating governmental units will be made at the actuarially determined rates in future years. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term projected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total plan liability.
41 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
Sensitivity of the Authority’s Proportionate share of the net pension Liability to changes in the Discount Rate
The following presents the Authority’s proportionate share of the net pension liability calculated using the discount rate of 8%, as well as the what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percent point lower (7%) or higher (9%) than the current rate.
1% Discount 1% Decrease Rate Increase (7%) (8%) (9%)
Authority’s proportionate share of the net pension liability $ 68,424,637 $ 57,358,655 $ 48,052,524
Pension Plan Fiduciary Net Position
Detailed information about the plan’s fiduciary net position is available in the plan’s annual report, which is available at osc.ct.gov/rbsd/reports.
NOTE 11 - RELATED-PARTY TRANSACTIONS
The State of Connecticut is responsible for processing the Authority’s payroll, and certain capital asset transactions involving the general aviation airports. Funds are transferred to the State on a monthly basis for this purpose.
In addition, the Authority receives certain grants and revenues that reimburse project costs incurred by the State. Such amounts are remitted to the State on a regular basis. Amounts due to the State as presented in the balance sheet totaled $2,925,828 at June 30, 2015.
Amounts due from the State as presented in the balance sheet totaled $5,873,547 at June 30, 2015.
NOTE 12 - POSTRETIREMENT BENEFITS
As employees of the State of Connecticut, the Authority’s personnel are eligible to receive postretirement medical and life insurance coverage. The accounting for and funding of these benefits is done on a cash basis.
The costs of these benefits to the Authority for the year ended June 30, 2015 cannot be determined because postretirement benefits are paid by the State and not charged to the Authority.
NOTE 13 - RISK MANAGEMENT
The Authority is subject to normal risks associated with its operations, including property damage, personal injury and employee dishonesty. With the exception of certain vehicle-related liabilities for which the State retains some risk, all other risks are managed through the purchase of commercial insurance as required by the various bond indentures. There have been no losses exceeding insurance coverage during the last three years.
42 CONNECTICUT AIRPORT AUTHORITY NOTES TO FINANCIAL STATEMENTS
NOTE 14 - COMMITMENTS
In August 2014, the Authority entered into a contract with a third party for the demolition of Terminal B at Bradley International Airport. The project is expected to be completed during 2016, with an estimated cost of $19,627,000. Of the total cost, $17,853,000 is to be funded through passenger facility charges, with the remainder to be funded through operations of Bradley International Airport. As of June 30, 2015, cost totaling $5,252,935 have been incurred and funded through passenger facility charges and costs totaling $151,564 have been incurred and funded through operations of Bradley International Airport. Of the accumulated costs incurred through June 30, 2015, $5,404,499 was included within other nonoperating expenses on the statement of revenues, expenses and changes in net position for the year ended June 30, 2015.
NOTE 15 - PRIOR PERIOD ADJUSTMENT
Net assets as of July 1, 2014 have been adjusted in order to recognize the Authority’s portion of the net pension obligation and related items of the Connecticut State Employees Retirement System as required by GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27, as follows:
As Originally As Net Assets Reported Adjustment Restated
Bradley International Airport $ 308,964,577 $ (45,502,015) $ 263,462,562
General Aviation Airports: Oxford Airport 31,516,664 - 31,516,664 Brainard Airport 7,983,752 - 7,983,752 Groton/New London Airport 30,801,714 - 30,801,714 Danielson Airport 1,440,589 - 1,440,589 Windham Airport 5,511,167 - 5,511,167 GA Airport Administration (420,388) (9,356,574) (9,776,962)
$ 385,798,075 $ 54,858,589 $ 330,939,486
43 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF THE AUTHORITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY CONNECTICUT STATE EMPLOYEES RETIREMENT SYSTEM LAST FISCAL YEAR*
Authority's proportion of the net pension liability 0.35817%
Authority's proportionate share of the net pension liability $ 57,358,655
Authority's covered - employee payroll $ 12,017,000
Plan fiduciary net position as a percentage of the total pension liability 39.54%
* The amounts presented were determined as of June 30, 2014
44 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF EMPLOYER CONTRIBUTIONS - LAST TEN FISCAL YEARS* CONNECTICUT STATE EMPLOYEES RETIREMENT SYSTEM JUNE 30, 2015
Actuarially required contribution $ 4,544,829
Amount contributed in relation to actuarially required contribution 4,544,829
Contribution deficiency $ -
Authority's covered payroll $ 12,017,000
Contributions as a percentage of covered employer payroll 37.82%
*Note: Information presented is as of June 30, 2014, no information prior to that is available.
45 CONNECTICUT AIRPORT AUTHORITY BRADLEY INTERNATIONAL AIRPORT FUND BALANCE SHEETS JUNE 30, 2015 AND 2014
2015 2014 ASSETS Current Assets Cash $ 12,288,149 $ 892,051 Short-term investments 53,523,419 49,370,867 Accounts receivable, net 5,949,304 5,916,587 Grants receivable 5,396,921 1,485,196 Restricted investments, current portion 3,020,083 2,933,524 Due from State 4,534,453 14,024,882 Prepaid expenses and other 118,151 64,799 Total current assets 84,830,480 74,687,906
Noncurrent Assets Restricted assets: Car rental facility 27,787,871 22,535,930 Passenger facility 69,677,626 72,389,827 Bond indenture 11,537,002 9,383,676 Capital assets 266,314,476 275,324,735 Total noncurrent assets 375,316,975 379,634,168
Total assets 460,147,455 454,322,074
DEFERRED OUTFLOWS OF RESOURCES Interest rate swaps 19,290,583 19,645,534 Deferred loss on bond refunding 1,998,930 2,121,941 Total deferred outflows of resources 21,289,513 21,767,475
Total Assets and Deferred Outflows of Resources $ 481,436,968 $ 476,089,549
LIABILITIES Current Liabilities Current maturities of revenue bonds $ 6,435,000 $ 6,185,000 Accounts payable and accrued liabilities 12,462,098 6,994,625 Due to State 946,228 1,803,110 Revenue bond interest payable 1,284,106 1,531,305 Deferred revenue and other 1,609,621 1,550,398 Total current liabilities 22,737,053 18,064,438
Noncurrent Liabilities Revenue bonds payable, less current maturities 122,980,000 129,415,000 Interest rate swap 19,290,583 19,645,534 Net pension liability 47,575,674 - Total noncurrent liabilities 189,846,257 149,060,534
Total liabilities 212,583,310 167,124,972
DEFERRED INFLOWS OF RESOURCES Changes in projected pension investment earnings 1,699,133 -
Total Liabilities and Deferred Inflows of Resources 214,282,443 167,124,972
NET POSITION Net investment in capital assets 132,752,036 140,622,655 Restricted for: Capital projects 102,498,662 98,681,125 Debt service 7,423,588 6,449,098 Bond indenture requirements 2,100,332 2,112,734 Unrestricted 22,379,907 61,098,965 Total net position 267,154,525 308,964,577
Total Liabilities, Deferred Inflows of Resources and Net Position $ 481,436,968 $ 476,089,549
46 CONNECTICUT AIRPORT AUTHORITY BRADLEY INTERNATIONAL AIRPORT FUND STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
2015 2014 Operating Revenues Airline revenue: Landing fees $ 16,760,104 $ 15,759,127 Airline terminal rent 10,020,913 9,937,716 Apron and remote aircraft parking 3,813,858 3,672,452 Total airline revenue 30,594,875 29,369,295
Nonairline revenue: Auto parking 10,927,728 10,702,968 Rental cars 8,783,025 8,694,763 Terminal concessions 4,000,893 3,945,782 Land rent 4,411,262 4,052,077 Other concessions 3,271,916 3,270,891 Other operating revenue 2,510,680 2,303,853 Total nonairline revenue 33,905,504 32,970,334
Total operating revenues 64,500,379 62,339,629
Operating Expenses Salaries and related expense 19,980,965 19,795,988 Administrative and general 15,923,076 15,026,067 Energy and utilities 5,875,009 5,450,255 Repairs and maintenance 7,387,519 7,390,869 Depreciation and amortization 15,817,411 16,426,077 Total operating expenses 64,983,980 64,089,256
Operating Loss (483,601) (1,749,627)
Nonoperating Revenues (Expense) Car rental facility charge revenue 5,514,522 5,191,426 Passenger facility charge revenue 12,247,888 11,737,745 Investment income 121,184 103,018 Bond interest expense (5,027,842) (5,930,308) Other nonoperating expenses (9,955,279) (4,962,796) Actuarial pension expense (3,772,792) - Net nonoperating revenues (expense) (872,319) 6,139,085
Income (Loss) Before Capital Contributions (1,355,920) 4,389,458
Contribution of Airports by the State - 299,940,038
Other Capital Contributions 5,047,883 4,635,081
Change in Net Position 3,691,963 308,964,577
Net Position - Beginning of Year, as Restated 263,462,562 -
Net Position - End of Year $ 267,154,525 $ 308,964,577
47 CONNECTICUT AIRPORT AUTHORITY COMBINING BALANCE SHEET - GENERAL AVIATION AIRPORTS FUND JUNE 30, 2015 (With Comparative Totals for 2014)
2015 2014 Total Total Groton General General Oxford Brainard New London Danielson Windham GA Airport Interfund Aviation Aviation Airport Airport Airport Airport Airport Administration Eliminations Airports Fund Airports Fund ASSETS Current Assets Cash $ 577 $ 240 $ 1,372 $ 2,824 $ 165 $ 711,680 $ - $ 716,858 $ 10,595 Short-term investments 30,500 14,500 54,811 19,950 5,000 3,637,321 - 3,762,082 2,463,298 Accounts receivable, net 68,820 51,697 36,632 4,303 7,586 - - 169,038 94,814 Grants receivable 2,543,104 203,012 175,524 - 177,492 149,959 - 3,249,091 1,413,596 Due from State 664,382 53,136 551,601 - 69,975 - - 1,339,094 705,000 Prepaid expenses and other - - - - - 93,580 - 93,580 - Interfund receivables 1,943,247 790,279 846,108 237,896 55,799 - (3,873,329) - - Total current assets 5,250,630 1,112,864 1,666,048 264,973 316,017 4,592,540 (3,873,329) 9,329,743 4,687,303
Noncurrent Assets Capital assets 35,185,087 7,201,496 28,931,838 1,240,391 5,669,703 169,727 - 78,398,242 74,665,196 Total noncurrent assets 35,185,087 7,201,496 28,931,838 1,240,391 5,669,703 169,727 - 78,398,242 74,665,196
Total Assets $ 40,435,717 $ 8,314,360 $ 30,597,886 $ 1,505,364 $ 5,985,720 $ 4,762,267 $ (3,873,329) $ 87,727,985 $ 79,352,499
LIABILITIES Current Liabilities Accounts payable and accrued liabilities $ 1,743,343 $ 241,387 $ 294,847 $ 35,486 $ 163,543 $ 588,458 $ - $ 3,067,064 $ 683,779 Due to State 929,312 203,011 - 132,321 9,446 705,510 - 1,979,600 1,674,699 Deferred revenue and other 41,020 15,927 76,698 20,060 5,784 9,643 - 169,132 160,523 Interfund payables - - - - - 3,873,329 (3,873,329) - - Total current liabilities 2,713,675 460,325 371,545 187,867 178,773 5,176,940 (3,873,329) 5,215,796 2,519,001
Noncurrent Liabilities Net pension liability - - - - - 9,782,981 - 9,782,981
Total liabilities 2,713,675 460,325 371,545 187,867 178,773 14,959,921 (3,873,329) 14,998,777 2,519,001
DEFERRED INFLOWS OF RESOURCES Changes in projected pension investment earnings - - - - - 349,392 - 349,392 -
Total Liabilities and Deferred Inflows of Resources 2,713,675 460,325 371,545 187,867 178,773 15,309,313 (3,873,329) 15,348,169 2,519,001
NET POSITION Net investment in capital assets 35,185,087 7,201,496 28,931,838 1,240,391 5,669,703 169,727 - 78,398,242 74,665,196 Restricted for: Capital projects ------Debt service ------Bond indenture requirements ------Unrestricted 2,536,955 652,539 1,294,503 77,106 137,244 (10,716,773) - (6,018,426) 2,168,302 Total net position 37,722,042 7,854,035 30,226,341 1,317,497 5,806,947 (10,547,046) - 72,379,816 76,833,498
Total Liabilities, Deferred Inflows of Resources and Net Position $ 40,435,717 $ 8,314,360 $ 30,597,886 $ 1,505,364 $ 5,985,720 $ 4,762,267 (3,873,329) $ 87,727,985 $ 79,352,499
48 CONNECTICUT AIRPORT AUTHORITY COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - GENERAL AVIATION AIRPORTS FUND FOR THE YEAR ENDED JUNE 30, 2015 (With Comparative Totals for 2014)
2015 2014 Total Total Groton General General Oxford Brainard New London Danielson Windham GA Airport Aviation Aviation Airport Airport Airport Airport Airport Administration Airports Fund Airports Fund Operating Revenues Airline revenue: Landing fees $ 54,481 $ 7,065 $ 15,189 $ - $ - $ - $ 76,735 $ 88,683 Airline terminal rent - - 12,520 - - - 12,520 6,082 Apron and remote aircraft parking 70,099 60,390 24,930 13,510 30,430 - 199,359 201,797 Total airline revenue 124,580 67,455 52,639 13,510 30,430 - 288,614 296,562
Nonairline revenue: Rental cars 41,489 - 83,344 - - - 124,833 85,246 Land rent 345,849 369,317 307,464 35,879 55,008 - 1,113,517 1,081,918 Other operating revenue 580,714 36,010 222,701 116,042 6,234 3,450 965,151 858,175 Total nonairline revenue 968,052 405,327 613,509 151,921 61,242 3,450 2,203,501 2,025,339
Total operating revenues 1,092,632 472,782 666,148 165,431 91,672 3,450 2,492,115 2,321,901
Operating Expenses Salaries and related expense 575,776 826,459 664,815 - - 2,072,067 4,139,117 3,754,743 Administrative and general 63,183 51,186 278,940 33,604 29,268 91,239 547,420 584,091 Energy and utilities 59,963 64,797 126,729 15,713 20,659 450 288,311 259,798 Repairs and maintenance 102,478 81,861 107,784 194,170 153,486 33,360 673,139 677,795 Depreciation and amortization 932,803 597,852 1,580,714 132,028 526,487 390 3,770,274 3,986,997 Total operating expenses 1,734,203 1,622,155 2,758,982 375,515 729,900 2,197,506 9,418,261 9,263,424
Operating Loss (641,571) (1,149,373) (2,092,834) (210,084) (638,228) (2,194,056) (6,926,146) (6,941,523)
Nonoperating Revenues (Expense) Investment income - - - - - 5,430 5,430 1,612 Other nonoperating expenses (141,100) (16,374) (3,011) (2,897) (140,104) (347,573) (651,059) (832,138) State operating subsidies 971,093 783,229 1,085,154 89,889 191,872 2,041,527 5,162,764 5,144,738 Actuarial pension expense - - - - - (775,799) (775,799) - Net nonoperating revenues 829,993 766,855 1,082,143 86,992 51,768 923,585 3,741,336 4,314,212
Income (Loss) Before Capital Contributions 188,422 (382,518) (1,010,691) (123,092) (586,460) (1,270,471) (3,184,810) (2,627,311)
Contribution of Airports by the State ------71,244,126
Other Capital Contributions 6,016,956 252,801 435,318 - 882,240 500,387 8,087,702 8,216,683
Change in Net Position 6,205,378 (129,717) (575,373) (123,092) 295,780 (770,084) 4,902,892 76,833,498
Net Position - Beginning of Year, as Restated 31,516,664 7,983,752 30,801,714 1,440,589 5,511,167 (9,776,962) 67,476,924 -
Net Position - End of Year $ 37,722,042 $ 7,854,035 $ 30,226,341 $ 1,317,497 $ 5,806,947 $ (10,547,046) $ 72,379,816 $ 76,833,498
49 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF PASSENGER FACILITY CHARGE EXPENDITURES - BRADLEY INTERNATIONAL AIRPORT FOR THE QUARTERS ENDED SEPTEMBER 30, 2014, DECEMBER 31, 2014, MARCH 31, 2015 AND JUNE 30, 2015
Cumulative Cumulative Expenditures Net Expenditures for the Quarter Ended Expenditures through September 30, December 31, March 31, June 30, through Approved Project Description June 30, 2014 2014 2014 2015 2015 June 30, 2015 Amount
Terminal building and concourse $ 11,601,050 $ - $ - $ - $ - $ 11,601,050 a $ 207,373,251 Purchase and install jetways ------b 23,750,895 Terminal building apron ------c 18,645,121 Terminal roadways and glycol piping ------d 7,765,140 Debt service payments 78,140,809 4,794,675 - 1,878,564 - 84,814,048 *** 89,741,859 4,794,675 - 1,878,564 - 96,415,098 257,534,407 Construction of taxiway 1,043,000 - - - - 1,043,000 1,043,000 Equipment acquisition 3,263,971 - - - - 3,263,971 3,263,971 Glycol collection facility 14,659,913 - - - - 14,659,913 14,659,913 Surface monitoring system 45,914 - - - - 45,914 45,914 New aircraft ramps 1,226,394 - - - - 1,226,394 1,226,394 Terminal B roadway system 3,036,483 - - - - 3,036,483 3,036,483 Peak mountain lights 715,438 - - - - 715,438 715,438 Design of glycol collection system 1,807,806 - - - - 1,807,806 1,808,894 Snow removal equipment 1,848,891 - - - - 1,848,891 1,848,891 Security fencing 306,448 - - - - 306,448 306,448 New firehouse 378,950 - - - - 378,950 378,950 Remote ramp lights 471,174 - - - - 471,174 471,174 New maintenance garage 6,257,923 - - - - 6,257,923 6,257,923 Taxiway S East 4,557,853 - - - - 4,557,853 4,557,854 ARFF 300 Gal 1,049,896 - - - - 1,049,896 1,102,000 Security improvements and training system 3,027,775 - - - - 3,027,775 3,050,000 Reconstruction T/W E&T and relocate R/W1 1,399,312 - - - - 1,399,312 1,399,531 Reconstruct L, T and M 965,858 - - - - 965,858 975,043 Reconstruction of Runway 6-24 3,685,046 - - - - 3,685,046 3,967,768 Construction of Taxiway W off RW 15 715,286 - - - - 715,286 715,288 Purchase of two mobile Glycol Collection Units 762,256 - - - - 762,256 762,256 Pilot Noise Insulation Program 556,919 - - - - 556,919 633,406 Residential Sound Insulation Program-Pkg 1 2B 265,479 - - - - 265,479 270,644 Residential Sound Insulation Program-Pkg 2 2B 242,260 - - - - 242,260 261,723 Residential Sound Installation Program ------284,227 Purchase Two ARFF Trucks 1,444,871 - - - - 1,444,871 1,475,000 Design of Airfield Lighting Vault 750,000 - - - - 750,000 1,100,000 Installation of Co-Gen Engine 2,520,000 - - - - 2,520,000 2,664,965 Residential Sound Installation Program (165-450NP) 2C 346,586 - - - - 346,586 347,848 Residential Sound Installation Program (165-450NC) 2C 277,152 - - - - 277,152 277,152 Relocate Airfield Lighting Vault 2,971,439 - 150,649 - - 3,122,088 3,500,000 New Term Dev Schematic PE Study and Des 657,152 - - - - 657,152 698,181 Replace Two 1997 Snow Blower Attachments ------220,000 Replace Two 1997 Snow Broom Attachments ------200,000 Residential Sound Installation Program - (165-450NC) 2C 605,207 - - - - 605,207 706,892 Residential Sound Installation Program ------168,108 Purchase Land for Bird Mitigation - - - - 1,271,519 1,271,519 1,271,519 Rehabilitate Taxiway C North Design 83,903 - - - - 83,903 238,702 Installation of Emergency Power for Security 13,319 - - - - 13,319 24,500 Replace Upper and Lower Level Vestibule Doors ------150,000 Refurbish Two Outbound Conveyors ------25,000 Installation of Barriers in Front of Terminal ------50,000 Terminal Demolition Design- - - 1,210,772 224,458 1,435,230 1,435,230 New Roadway System Design- - 228,029 120,657 354,153 702,839 1,057,556 Rehabilitate Taxiway C North - - 154,799 1,094,739 - 1,249,538 1,333,441 FIDS Monitor Replacement - - - 172,000 - 172,000 179,000 Install 4 Microphone Systems for Audio Paging System - - - 20,000 - 20,000 20,000 Residential Sound Installation Program ------240,000 Rehabilitate Taxiways S West, U & J - - - 9,090 - 9,090 2,500,000 Design for the Rehabilitate Taxiways E & F (165-002) - - 3,498 - 225,580 229,078 350,000 Demolition of Term B - - - 907,924 1,502,460 2,410,385 16,028,238 Purchase of Structural Pumper - - 636,523 - - 636,523 835,569 Purchase of 4 Snow Removal Equipment Vehicles ------3,200,000 Purchase 9-ton Truck ------155,000 $ 151,701,733 $ 4,794,675 $ 1,173,498 $ 5,413,746 $ 3,578,171 $ 166,661,822 $ 351,029,441
*** Represents the debt service on items a, b, c and d, which are being funded with the proceeds of the $194,000,000 Series 2001A Bonds
50 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF INSURANCE COVERAGE - BRADLEY INTERNATIONAL AIRPORT JUNE 30, 2015 (Unaudited )
Type of Insurance Property Covered Amount of Coverage
Comprehensive Crime Policy Employee theft; ERISA; forgery or alteration $2,000,000 limit, computer crime, funds transfer, claim expense $25,000 claims expense $15,000 deductible
Kidnap & Ransom Kidnap and ransom, extortion, detention and hijack, in-transit delivery, additional expense and legal liability $1,000,000 - $0 deductible Personal accident $250,000 limit Rest and Rehab expenses $50,000 limit
Fiduciary Limit of Liability $1,000,000 - $0 deductible Settlement program limit, HIPAA, 502 © penalties limit $100,000 Limit
Paramedic Professional $1,000,000 limit of liability $3,000,000 aggregate limit $250,000 abuse molestation limits
Police Professional $1,000,000 maximum limit of liability - each claimant/each claim $1,000,000 aggregate limit $25,000 deductible
Public Official $10,000,000 limit of liability each claim/aggregate $100,000 deductible for A.2; B: C
Pollution Pollution legal liability, onsite/offsite clean up costs, non-owned disposal site, inbound and outbound contingent transpiration $20,000,000 limit and aggregate limit Contracting service pollution liability $1,000,000 limit and aggregate limit On site cleanup costs for biohazards $50,000/$100,000 Business interruption or Contingent Bus $5,000,000 Retention poll legal liability, clean up costs contracting service pollution liability and non- owned disposal site, Contingent transpiration $50,000 deductible Business interruption or Contingent Bus 3 days
Automobile Policy Comprehensive and Collision coverage $1,000,000 Liability limit for CAA automobiles $5,000 medical payments $1,000,000 uninsured motorist $1,000,000 underinsured motorist $1,000 deductible - collision and comprehensive
Equipment Blanket schedule coverage $20,965,512 max limit any one occurrence Maximum any one item $1,200,000 Property lease or rented from others $500,000 value of any one not exceed Rental expense $25,000 limit Unschedule equipment $50,000 limit $100,000 deductible - Groton only (flood only) $25,000 deductible - Hartford only (flood only) $2,500 deductible all other locations and perils
Property Earthquake-runways, aprons & T/W's, flood runways, aprons, & /T/W's, utilities services direct damage an time element (including boiler and machinery, airport runways, aprons and T/W per endorsement #1 - GA's $10,000,000 limit Airport runway, apron & T/W - BDL $50,000,000 limit Earthquake, flood zone B, X and X-500 $25,000,000 limit Building and Personal Property total insured value $724,836,322 - $500,000,000 limit Boiler and machinery insured loc only $250,000,000 limit Flood zone A $2,500,000 limit Earthquake, flood zone A, airport runway, apron & T/W, windstorm Groton $250,000 deductible Boiler and machinery any one accident, utility services $100,000 deductible Soft costs 24 hours
Airport Liability All airports $200,000,000 each occurrence limit $1,000,000 damage to premises rented to you limit $10,000 medical expenses/any one person $50,000,000 personal & advertising injury aggregate limit $200,000,000 products completed operations aggregate limit $200,000,000 Hangar keepers lime/each aircraft limit/each loss limit $50,000,000 xs $1,000,000 excess auto liability/employers liability $50,000 deductible per occurrence/aggregate
Excess Flood (Groton only) Policies related to Flood Insurance for $1,250,000 per occ p/o $2,500,000 x/s $2,500,000 Groton New London Airport $1,500,000 per occ p/o $5,000,000 x/s $5,000,000 $3,500,000 per occ p/o $5,000,000 x/s $5,000,000 deductible: $500,00 real property per building $500,000 personal property - per building $250,000 time element - per occurrence Tower Ave - building and contents coverage $500,000 ea - deductible $1,250 ea.
51 - 29 South Main Street Tel 860.561.4000 P.O. Box 272000 Fax 860.521.9241 West Hartford, CT 06127-2000 blumshapiro.com
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
Ms. Mary Ellen S. Jones, Chair Connecticut Airport Authority Windsor Locks, Connecticut
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of each fund of the Connecticut Airport Authority (the Authority) (a component unit of the State of Connecticut), which comprise the balance sheet as of June 30, 2015 and the related statements of revenues, expenses and changes in net position and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated October 19, 2015.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified a deficiency in internal control over financial reporting that we consider to be a significant deficiency in internal control over financial reporting, described below. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
52 Blum, Shapiro & Company, P.C. An independent member of Baker Tilly International
Accounting for Federal Grant Revenue
Criteria For cost reimbursement grants, grant revenue is recognized to the extent that allowable expenditures have been incurred.
Condition The Authority accrued construction costs on projects funded by federal grants, but did not accrue the resulting additional grant revenue and receivables.
Context The auditor initiated an entry to accrue federal grant revenue totaling $4,322,155.
Effect The effect is grant revenue and receivables were understated, before the correcting entry was posted.
Cause Management did not believe that the Authority was entitled to grant revenue until the allowable costs were paid.
Recommendation We recommend that grant revenue be accrued on the basis of allowable costs incurred going forward.
Management Management appreciates the clarification and will accrue grant revenue based Response and on allowable costs incurred in the future. Planned Corrective Action
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Authority’s Response to Findings
The Authority’s response to the findings identified in our audit is described above. The Authority’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
West Hartford, Connecticut October 19, 2015
53 29 South Main Street Tel 860.561.4000 P.O. Box 272000 Fax 860.521.9241 West Hartford, CT 06127-2000 blumshapiro.com
Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on the Passenger Facility Charge Program and on Internal Control over Compliance
Ms. Mary Ellen S. Jones, Chair Connecticut Airport Authority Windsor Locks, Connecticut
Report on Compliance
We have audited the compliance of Connecticut Airport Authority (the Authority) (a component unit of the State of Connecticut) with the types of compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (the Guide), that could have a direct and material effect on its passenger facility charge program for the year ended June 30, 2015.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws and regulations applicable to its passenger facility charge program.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Authority’s compliance based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the Authority’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the passenger facility charge program. However, our audit does not provide a legal determination of the Authority’s compliance.
Opinion on Passenger Facility Charge Program
In our opinion, the Authority complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its passenger facility charge program for the year ended June 30, 2015.
54 Blum, Shapiro & Company, P.C. An independent member of Baker Tilly International
Report on Internal Control over Compliance
Management of the Authority is responsible for establishing and maintaining effective internal control over compliance with the requirements referred to above. In planning and performing our audit of compliance, we considered the Authority’s internal control over compliance with the requirements that could have a direct and material effect on its passenger facility charge program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with the Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of the passenger facility charge program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of the passenger facility charge program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of the passenger facility charge program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Guide. Accordingly, this report is not suitable for any other purpose.
West Hartford, Connecticut October 19, 2015
55
CONNECTICUT AIRPORT AUTHORITY (A COMPONENT UNIT OF THE STATE OF CONNECTICUT)
FEDERAL SINGLE AUDIT REPORT
JUNE 30, 2015
CONNECTICUT AIRPORT AUTHORITY FEDERAL SINGLE AUDIT REPORT JUNE 30, 2015 TABLE OF CONTENTS
Independent Auditors’ Report on Compliance for Each Major Federal Program; Report on Internal Control over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 1-3
Schedule of Expenditures of Federal Awards 4
Notes to Schedule of Expenditures of Federal Awards 5
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 6-7
Schedule of Findings and Questioned Costs 8-9
29 South Main Street Tel 860.561.4000 P.O. Box 272000 Fax 860.521.9241 West Hartford, CT 06127-2000 blumshapiro.com
Independent Auditors’ Report on Compliance for Each Major Federal Program; Report on Internal Control over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-133
Ms. Mary Ellen S. Jones, Chair Connecticut Airport Authority Windsor Locks, Connecticut
Report on Compliance for the Major Federal Program
We have audited the Connecticut Airport Authority’s (the Authority) (a component unit of the State of Connecticut) compliance with the types of compliance requirements described in the OMB Circular A- 133 Compliance Supplement that could have a direct and material effect on the Authority’s major federal program for the year ended June 30, 2015. The Authority’s major federal program is identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for the Authority’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Authority’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Authority’s compliance.
1 Blum, Shapiro & Company, P.C. An independent member of Baker Tilly International Opinion on the Major Federal Program
In our opinion, the Authority complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2015.
Report on Internal Control over Compliance
Management of the Authority is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Authority’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
2 Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133
We have audited the financial statements of each fund of the Authority as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements. We issued our report thereon dated October 19, 2015, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
West Hartford, Connecticut October 19, 2015
3 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015
CFDA Federal Grantor/Program Title/Program Description Grant Number Number Expenditures
U.S. Department of Transportation Airport Improvement Program: Preliminary Engineering Study and Schematic Design 3-09-0022-048 20.106 $ 8,921 Construct and Equip New Airfield Vault 3-09-0022-051 20.106 260,612 Reconstruct, Mark and Light Taxiway "C" 3-09-0022-054 20.106 343,268 Residential Sound Installation 3-09-0022-056 20.106 3,887 Design of Taxiway S, U and J 3-09-0022-055 20.106 837 Pavement Condition Plan 3-09-0022-059 20.106 39,039 Land Acquisition for Bird Habitat Mitigation 3-09-0022-052 20.106 2,105,679 Environmental Assessment for Obstruction Analysis 3-09-0022-058 20.106 10,078 Rehabilitation of Taxiway S (West) 3-09-0022-057 20.106 2,126,461 Brainard Master Plan Update 3-09-0010-015 20.106 15,372 Construct 2 Bay Snow Removal Building 3-09-0010-016 20.106 98,850 Land Acquisition for Noise Compatibility 3-09-0017-020 20.106 1,964,154 Windham Airport Master Plan Update 3-09-0021-011 20.106 141,154 Crack Sealing for General Aviation Airports 3-09-0900-006 20.106 36,877 Land Acquisition for Noise Compatibility 3-09-0017-022 20.106 2,121,382 Rehabilitate Taxiway B 3-09-0017-023 20.106 1,258,205 Wildlife Assessment 3-09-0017-021 20.106 30,933 Pavement Condition Study 3-09-0900-009 20.106 79,811 Environmental Assessment 3-09-0900-010 20.106 64,813
Total Expenditures of Federal Awards $ 10,710,333
The accompanying notes are an integral part of this schedule
4 CONNECTICUT AIRPORT AUTHORITY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015
1. BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of the Connecticut Airport Authority (the Authority), under programs of the federal government for the year ended June 30, 2015. The information in the Schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
Because the Schedule presents only a selected portion of the operations of the Authority, it is not intended to, and does not, present the financial position, changes in fund balance, changes in net position or cash flows of the Authority.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expenditures reported on the Schedule are reported using the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
5
29 South Main Street Tel 860.561.4000 P.O. Box 272000 Fax 860.521.9241 West Hartford, CT 06127-2000 blumshapiro.com
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
Ms. Mary Ellen S. Jones, Chair Connecticut Airport Authority Windsor Locks, Connecticut
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of each fund of the Connecticut Airport Authority (the Authority) (a component unit of the State of Connecticut), which comprise the balance sheet as of June 30, 2015 and the related statements of revenues, expenses and changes in net position and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated October 19, 2015.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency in internal control over financial reporting, described in the accompanying schedule of findings and questioned costs as item 2015-001. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
6 Blum, Shapiro & Company, P.C. An independent member of Baker Tilly International
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Authority’s Response to Findings
The Authority’s response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. The Authority’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
West Hartford, Connecticut October 19, 2015
7 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2015
I. SUMMARY OF AUDITORS’ RESULTS
Financial Statements
Type of auditors’ report issued: Unmodified
Internal control over financial reporting: • Material weakness(es) identified? yes X no • Significant deficiency(ies) identified? X yes none reported Noncompliance material to financial statements noted? yes X no
Federal Awards
Internal control over major programs: • Material weakness(es) identified? yes X no • Significant deficiency(ies) identified? yes X none reported
Type of auditors’ report issued on compliance for major programs: Unmodified
Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? yes X no
Identification of major programs:
CFDA # Name of Federal Program or Cluster
20.106 Airport Improvement Program
Dollar threshold used to distinguish between type A and type B programs: $ 321,310
Auditee qualified as low-risk auditee? yes X no
8 CONNECTICUT AIRPORT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2015
II. FINANCIAL STATEMENT FINDINGS
2015-001 Accounting for Federal Grant Revenue
Criteria For cost reimbursement grants, grant revenue is recognized to the extent that allowable expenditures have been incurred.
Condition The Authority accrued construction costs on projects funded by federal grants, but did not accrue the resulting additional grant revenue and receivables.
Context The auditor initiated an entry to accrue federal grant revenue totaling $4,322,155.
Effect The effect is grant revenue and receivables were understated, before the correcting entry was posted.
Cause Management did not believe that the Authority was entitled to grant revenue until the allowable costs were paid.
Recommendation We recommend that grant revenue be accrued on the basis of allowable costs incurred going forward.
Management Management appreciates the clarification and will accrue grant revenue based Response and on allowable costs incurred in the future. Planned Corrective Action
III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
9 Bradley International Airport Parking Facility
Financial Statements and Supplemental Information with Independent Auditor’s Reports
Fiscal Year Ended June 30, 2015 Bradley International Airport Parking Facility
Financial Statements and Supplemental Information
Fiscal Year Ended June 30, 2015
Contents
Independent Auditor’s Report ...... 1
Financial Statements
Balance Sheet ...... 3 Statement of Operations and Accumulated Deficit ...... 4 Statement of Cash Flows ...... 6 Notes to Financial Statements ...... 7
Supplemental Information
Independent Auditor’s Report on Supplemental Information ...... 19 Statement of Operations and Accumulated Deficit ...... 20 Statement of Cash Flows ...... 23 Statement of Outstanding Guarantor Payments (Unaudited) ...... 24 Statement of Outstanding State and Developer Payments (Unaudited) ...... 25 Computation of Additional Payments Due (Unaudited) ...... 26 Statement of Fixed Assets Purchased (Unaudited) ...... 27 Statement of Surface Parking Major Maintenance and Capital Improvement Fund (Unaudited) ...... 28 Statement of Garage Parking Major Maintenance and Capital Improvement Fund (Unaudited) ...... 29 Computation of the Garage Coverage Ratio (Unaudited) ...... 30 Schedule of Surface Operating Advances Receivable From ABPC (Unaudited) ...... 31 Schedule of Garage Operating Advances Receivable From ABPC (Unaudited) ...... 32 Supplementary Schedule of Cash and Cash Equivalents (Unaudited) ...... 33 Independent Auditor’s Report
The Connecticut Airport Authority and the Board of Directors of APCOA Bradley Parking Company, LLC
Report on the Financial Statements
We have audited the accompanying financial statements of Bradley International Airport Parking Facility (the Company), which comprise the balance sheet as of June 30, 2015, and the related statements of operations and accumulated deficit, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The Connecticut Airport Authority and the Board of Directors of APCOA Bradley Parking Company, LLC
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
This report is intended solely for the use of the Connecticut Airport Authority and the Board of Directors of APCOA Bradley Parking Company, LLC and is not intended to be, and should not be, used by anyone other than these specified parties.
Cleveland, Ohio October 15, 2015
2 Bradley International Airport Parking Facility
Balance Sheet
June 30, 2015
Assets Cash and cash equivalents $ 14,415,234 Monthly parking receivable 23,927 Credit card receivable 239,837 Bond issuance costs, net 438,034 Property, plant, and equipment, net 26,987,969 Total assets $ 42,105,001
Liabilities and accumulated deficit Bonds payable $ 33,010,000 Accrued interest payable 1,083,990 State minimum guarantee payable 910,644 Operating advances payable to ABPC 325,935 Sales tax payable 131,140 Accrued audit fees payable 52,000 Keycard deposits and other payables 29,201 Unearned revenue 19,750 Guarantor loan principal, premium, and interest payable 15,963,930 Shuttle costs payable to R&G Services 196,266 Shuttle costs payable to ABPC 593,374 Shuttle costs payable due to Connecticut Airport Authority 100,000 State and developer payments payable 15,232,877 Accumulated deficit ( 25,544,106) Total liabilities and accumulated deficit $ 42,105,001
See accompanying notes.
3 Bradley International Airport Parking Facility
Statement of Operations and Accumulated Deficit
Fiscal Year Ended June 30, 2015
Net receipts: Gross collections $ 27,182,212 Sales tax ( 1,622,773) Net receipts 25,559,439
Operating expenses: Payroll 1,502,008 Payroll taxes 382,396 Pension 14,867 Life and hospital insurance 264,849 Uniforms and laundry 5,140 Supplies and small tools 43,628 Ticket expense 19,764 Stationery and office supplies 15,369 Repairs and maintenance 414,501 Snow removal 257,800 Gas and oil 34,271 Personal property tax 2,979 Sales and use tax 3,955 License and fees 1,207 General insurance and bonds 736,591 Rental machinery and equipment 41,741 Shuttle service 2,565,308 Utilities: Gas and fuel 8,622 Electric 363,866 Water 2,044 Advertising and publicity 33,296 Associate incentive award 1,054 Postage and freight 327 Telephone 64,614 Meals and entertainment 9
4 Bradley International Airport Parking Facility
Statement of Operations and Accumulated Deficit (continued)
Operating expenses (continued): Other fees $ 16,195 Legal fees 44,303 Security services 10,706 Recruiting 5,025 Miscellaneous 8,077 Auto damage claims 1,815 Payment in lieu of real estate taxes 189,524 Credit card processing fees and discounts 592,400 General and administrative cost recovery 463,500 Cash receipt shortage (297) Operating expenses before depreciation and amortization 8,111,454 Depreciation and amortization 1,143,063 Total operating expenses 9,254,517 Operating income 16,304,922
Other expenses (income): State minimum guarantee payments 10,927,728 State and developer payments 1,000,000 Trustee and custodial fees 40,815 Accounting and audit fees 60,969 Interest income (18,515) Interest expense 2,683,683 Net income 1,610,242
Accumulated deficit at beginning of year ( 27,154,348) Accumulated deficit at end of year $ ( 25,544,106)
See accompanying notes.
5 Bradley International Airport Parking Facility
Statement of Cash Flows
Fiscal Year Ended June 30, 2015
Operating activities Net income$ 1,610,242 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,143,063 Noncash interest and premium, net 515,702 Change in operating assets and liabilities: Monthly parking receivable 33,285 Credit card receivable 48,801 State minimum guarantee payable 18,730 Interest payable (73,612) Unearned revenue (79,000) Sales tax payable (107) Accrued audit fees payable and other payables (1,150) State and developer payments payable 1,000,000 Net cash provided by operating activities 4,215,954
Investing activities Purchase of equipment ( 139,267) Net cash used in investing activities ( 139,267)
Financing activities Guarantor payments received 38,344 Guarantor principal repayments ( 1,109,109) Guarantor premium, interest repayments ( 870,193) Payment on bonds ( 2,265,000) Advances payable to ABPC 827,629 Net cash used in financing activities ( 3,378,329)
Net increase in cash and cash equivalents 698,358 Cash and cash equivalents at beginning of year 13,716,876 Cash and cash equivalents at end of year $ 14,415,234
Supplemental disclosure of cash flow information Cash paid during the year for interest $ 3,111,786
See accompanying notes.
6 Bradley International Airport Parking Facility
Notes to Financial Statements
June 30, 2015
1. Nature of Operations
On March 1, 2000, the State of Connecticut Department of Transportation and APCOA Bradley Parking Company, LLC (ABPC), a wholly owned subsidiary of SP Plus Corporation (formerly known as Standard Parking Corporation), entered into a Construction, Financing, and Operating Special Facility Lease Agreement (the Operating Agreement), under which ABPC agreed to operate the surface parking facilities and to construct and operate the garage parking facilities at the Bradley International Airport Parking Facility (the Company) in Windsor Locks, Connecticut. Capitalized terms used herein are defined pursuant to the Operating Agreement. The term of the Operating Agreement expires on April 6, 2025. ABPC has the option to make an offer to extend the term of the Operating Agreement for up to two additional five-year terms.
On April 6, 2000, the State of Connecticut issued Bradley International Airport Special Obligation Parking Revenue Bonds (the Bonds) to provide funds to finance the cost of the acquisition and construction of the garage parking facilities. Effective March 1, 2000, the State of Connecticut and a financial institution (the Trustee) entered into a Trust Indenture and First Supplemental Trust Indenture (the Trust Indenture), which, among other things, provides the terms for repayment of the Bonds and security for repayment of the Bonds.
Effective June 10, 2015, the State of Connecticut Department of Transportation completed the transfer of the premises constituting the parking garage and surface parking lots located at the Bradley International Airport to the Connecticut Airport Authority (the “State”), and the State of Connecticut Department of Transportation has assigned all of its right, title and interest including all of its obligations in, to and under the Operating Agreement dated March 1, 2000 and that certain Guaranty Agreement of Standard Parking Corporation dated as of March 1, 2000 (as further described in Note 6) to the Connecticut Airport Authority.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared on the accrual basis of accounting under U.S. generally accepted accounting principles (GAAP), whereby all revenue is recorded when realized or realizable and earned, and all expenses are recorded when the Company has a legal or contractual obligation to pay.
The assets and liabilities included in these financial statements are owned by and are the obligations of the State as the owner of the facility subject to the conditions and limitations set
7 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued) forth in the Operating Agreement and Trust Indenture. These financial statements include the assets and liabilities used only in the operations of the Company.
The airport parking facility is designed to generate cash flows from operations that, after operating and maintenance expenses, are sufficient to service debt and make State and developer payments (as further described in Note 10), as well as to provide a return to the State of minimum guarantee payments (as further described in Note 8), both of which are reflected as expenses in the accompanying statement of operations and accumulated deficit. To the extent that the Company’s cash flows are not sufficient to make certain payments, SP Plus Corporation has guaranteed to pay the Trustee funds sufficient to make such payments (the Guaranty Agreement). Advances received pursuant to SP Plus Corporation’s guarantee are reflected as guarantor loan principal, premium, and interest payable in the accompanying balance sheet. SP Plus Corporation has not guaranteed the bonds outstanding, as described in Note 11.
Cash and Cash Equivalents
The Company considers investments with maturities of three months or less at the time of purchase to be cash equivalents for financial reporting purposes. Cash equivalents include amounts invested in a money market fund that holds short-term U.S. Treasury Securities.
Property, Plant, and Equipment
Property, plant, and equipment are stated at book value less accumulated depreciation.
Depreciation on property, plant, and equipment is recognized on the straight-line method over the estimated useful lives of the assets. The following table summarizes the estimated useful lives of plant and equipment:
Years
Parking garage and administration building 40 Furniture and fixtures 8 or 10 Lot and station equipment 5 or 10 Service vehicles 5 Computer equipment 5
8 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Bond Issuance Costs
The cost incurred that related to the issuance of the Bonds is being amortized over the life of the Bonds. Amortization related to the Bond issuance costs was $74,667 for the year ended June 30, 2015.
General and Administrative Cost Recovery
Under the terms of the Operating Agreement, ABPC is permitted to recover a portion of its office overhead expenses, as defined, and direct costs related to the operation of the parking facilities. The current year’s allocated cost recovery, as calculated by applying the agreed-to formula, did not meet the required “reasonableness test” as stipulated in the Operating Agreement. As such, the allocated cost recovery due to ABPC recognized as operating expense in the accompanying statement of operations equals the prior year’s allocated cost recovery amount adjusted for the change in the Consumer Price Index. The recovery recognized as general and administrative costs for the fiscal year ended June 30, 2015, was $463,500.
Unearned Revenue
The Company may receive one-time advances of cash payments for leasing its property for billboard advertising. The Company recognizes the revenue on a straight-line basis over the life of the agreements. At June 30, 2015, the Company had one outstanding agreement for which it is deferring revenue, which expires on September 30, 2015. At June 30, 2015, the short-term portion of unearned revenue was $19,750.
9 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Fair Value Measurement
The carrying value of cash and cash equivalents approximated fair value as of June 30, 2015, due to their short-term nature. Cash and cash equivalents included $14,246,747 invested in the State of Connecticut short-term investment fund, comprised of overnight bank deposit instruments and U.S. federal agency securities. The fair value measurement of these securities is based on quoted prices in active markets for identical assets, which are defined as “Level 1” of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Accounting Standards Codification. The carrying value of the bonds payable approximated fair value at June 30, 2015, based on the current par value at that date.
Revenue Recognition
Parking revenues from transient parking are recognized when the customer exits the facility and the fee is collected and determined to be collectible. Monthly parking revenues are recognized over the month in which the customer has the right to park in the facilities at Bradley International Airport Parking Facility. Monthly parker accounts receivable and credit card accounts receivable are recognized on a cost basis.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Income Taxes
As described above, the financial statements present the operations of the parking facilities and specific funds and accounts established pursuant to the Operating Agreement and the Trust Indenture. Accordingly, no provision for income tax has been made in the financial statements because the Company is tax-exempt and is not required to pay any state or federal income tax.
10 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 requires an entity to recognize revenue for the amount of consideration to which it expects to be entitled for the transfer of promised goods or services to customers. Additionally, ASU No. 2014-09 requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The standard will replace most existing revenue recognition guidance when it becomes effective. ASU No. 2014-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2017 and interim periods within those years. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date which deferred the effective date of ASU No. 2014- 09 by one year, making the guidance effective for fiscal years beginning after December 15, 2018. The impact from adoption of the new requirements of ASU No. 2014-09 on the Company’s financial position or results of operations has not yet been determined.
3. Funds and Accounts
In addition to two separate depository accounts used to deposit daily gross receipts of the garage and surface parking operations, the following funds and accounts are currently established by the Trust Indenture. Each fund is to be maintained in the custody of the Trustee as a separate fund. For clarity, the following table sets forth the actual fund/account name established by the Trustee versus the name used for financial reporting purposes.
Name Established by Trustee Financial Reporting Account Name
• Surface Parking Receipts Account • Surface Parking Receipt Fund • Special Obligation Parking Revenue Bonds • Garage Parking Receipt Fund Receipts Account • Surface Parking Surplus Fund • Surface Parking Surplus Fund • 1999 Special Obligation Parking Revenue • Garage Parking Surplus Fund Bonds Surplus Account • Surface Parking Maintenance & Capital • Surface Parking Major Maintenance Improvement Fund & Capital Improvement Fund • 1999 Special Obligation Parking Revenue • Garage Parking Major Maintenance Bonds Maintenance Fund & Capital Improvement Fund
11 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
3. Funds and Accounts (continued)
Name Established by Trustee Financial Reporting Account Name
• Surface Parking State Payment Fund • State Payment Fund • Special Obligation Parking Revenue Bonds • Debt Service Series A Reserve Fund Debt Service Reserve Fund • 2000 Special Obligation Parking Revenue • Debt Service Series A Interest Fund Bonds Debt Service A Interest • 2000 Special Obligation Parking Revenue • Debt Service Series A Principal Fund Bonds Debt Service A Principal • 1999 Rebate Fund • Rebate Fund
4. Shuttle Costs Payable
In 2001, the State, ABPC, and R&G Services (the Shuttle Service Provider) entered into a Memorandum of Agreement to resolve all outstanding Bradley International Airport parking shuttle service issues with respect to fiscal years 2000 and 2001 and to establish a framework that will govern parking shuttle service at Bradley International Airport for the balance of the term.
In 2006, ABPC and R&G Services entered into a Revised Bradley Airport Shuttle Bus Service Agreement (the Revised Shuttle Bus Agreement), which establishes the framework that governs parking shuttle service at Bradley International Airport for the balance of the term ending on April 6, 2025. Under the terms of the agreement, the Company is required to repay the State, ABPC, and R&G Services for past services from any surplus funds following the payment of all guarantor payments as more fully described in Note 6. The following table sets forth the net amount payable by the Company to each party at June 30, 2015:
ABPC $ 593,374 R&G Services 196,266 Connecticut Airport Authority 100,000 $ 889,640
12 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
5. Flow of Funds
Gross receipts are deposited into one of the gross receipts funds established pursuant to the terms of the Operating Agreement.
Gross receipts are used to fund the following expenditures in order of priority (Guaranteed Payments):
A. Garage Parking Receipts Fund: 1. Garage operating expenses 2. Required debt service payments 3. Fund deficiencies in the Debt Service Series A Reserve Fund 4. Required deposits to the Rebate Fund 5. Garage trustee expenses 6. Required deposits to the Garage Parking Major Maintenance and Capital Improvement Fund 7. State minimum guarantee B. Surface Parking Receipts Fund: 1. Surface parking operating expenses 2. Surface parking custodian expenses 3. Required deposits to the Surface Parking Major Maintenance and Capital Improvement Fund 4. State minimum guarantee C. Garage Parking Surplus Fund & Surface Parking Surplus Fund: 1. Repayment of outstanding guarantor payments 2. Distribution of additional payments to ABPC and the State
6. Guarantor Payments
Pursuant to the Guaranty Agreement, SP Plus Corporation will guarantee to pay the Trustee funds sufficient to make, on a timely basis, the deposits and payments described under Note 5 – Flow of Funds. SP Plus Corporation’s obligations under the Guaranty Agreement will arise only to the extent that the Trustee has insufficient funds on deposit in the appropriate funds to make the required payment on the scheduled payment date after application of amounts available in the Garage Parking Receipts Fund, the Garage Parking Surplus Fund, or with respect to deposits into the Surface Parking Gross Receipts Fund or Surface Parking Surplus Fund. Demand for payment under the Guaranty Agreement will occur prior to any withdrawal of amounts on deposit in the Debt Service Series A Reserve Fund.
13 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
6. Guarantor Payments (continued)
A failure by SP Plus Corporation to make any Guarantor Payment when due will be a default under the Guaranty Agreement. However, SP Plus Corporation will not be obligated to make any guarantor payment or any portion thereof to the extent that the need for such guarantor payment or portion thereof was solely caused by the failure of the State to perform its obligations under the Operating Agreement, as provided.
Guarantor payments made, if any, accrue interest at the applicable prime rate, or the actual borrowing rate of SP Plus Corporation, if SP Plus Corporation borrowed funds to make such payments, plus a premium not to exceed 10%. During the year ended June 30, 2015, SP Plus Corporation advanced $38,344 in guarantor payments and was repaid $101,254 in premium, $768,939 in interest, and $1,109,109 in principal. At June 30, 2015, $15,963,930 remains outstanding for guarantor loan principal, premium, and interest payable.
7. Property, Plant, and Equipment
At June 30, 2015, property, plant, and equipment are summarized as follows:
Building and Lot and station equipment $ 44,098,007 Computer equipment 31,183 Furniture and fixtures 28,674 Service vehicles 86,273 44,244,137 Less accumulated depreciation (17,256,168) $ 26,987,969
14 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
8. State Minimum Guarantee Payments
Under the terms of the Operating Agreement, the Company is required to make minimum payments to the State. Total future State minimum guarantee payments as of June 30, 2015, are as follows:
2016 $ 11,157,210 2017 11,391,512 2018 11,630,734 2019 11,874,979 2020 12,124,354 Thereafter 61,416,909 $ 119,595,698
The State was entitled to $10,927,728 for the year ended June 30, 2015, of which $910,644 is payable at June 30, 2015.
9. Major Maintenance and Capital Improvement Funds
Under the terms of the Operating Agreement, separate unrestricted interest-bearing accounts are to be established for the benefit of the garage and surface parking facilities for major maintenance and capital improvements. These accounts are to be funded monthly based upon a specified schedule for the surface parking facility and the garage parking facility within the Operating Agreement, which can be amended upon mutual agreement of ABPC and the State.
15 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
10. State and Developer Payments
Under the terms of the Operating Agreement, ABPC and the State are to receive payments in the priority and percentages listed below for surplus funds that exist at the end of each lease year, provided, however, that there will be no accumulation and reimbursement of annual shortfalls for State and developer additional payments and State and developer percentage payments. For financial reporting purposes, the developer payment, the State and developer additional payments, and the State and developer percentage payments are collectively referred to as the State and Developer Payments. The State and Developer Payments will not be made until (i) surplus funds exist for such purposes, (ii) all guaranteed payments are made for the completed lease year, (iii) the annual audit is received and accepted for the completed lease year, and (iv) the liability associated with the Revised Shuttle Bus Agreement (see Note 4) is fully repaid. At June 30, 2015, $15,232,877 remains outstanding for the State and Developer Payments.
Under the terms of the Operating Agreement, surplus funds available are to be applied in the following percentages and order of priority:
A. First $1,000,000 to ABPC
B. Next $2,000,000 equally between ABPC and the State
C. Remaining balance, 85% to the State and 15% to ABPC
11. Bonds Payable
On April 6, 2000, the State issued $47,665,000 State of Connecticut Bradley International Airport Special Obligation Parking Revenue Bonds, Series 2000 A (Series A Bonds) and $6,135,000 State of Connecticut Bradley International Airport Special Obligation Parking Revenue Bonds, Taxable Series 2000 B (Series B Bonds). On July 1, 2007, the final principal payment of the Series B Bonds was made, and the Series B Bonds were retired. Under the Trust Indenture, among other sources, the State pledged as security the garage parking receipts, held in various funds held by the Trustee. The principal and interest related to the Series A Bonds will be paid as set forth in Note 5 – Flow of Funds. SP Plus Corporation, pursuant to its obligation in Note 6 – Guarantor Payments, may be required to make payments to the Trustee, which could be used to pay the principal and interest of the Series A Bonds. Repayment of Series A Bonds is guaranteed by a third-party insurance company.
16 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
11. Bonds Payable (continued)
Outstanding bonds payable at June 30, 2015, are as follows:
6.500% Series A Bonds, due July 1, 2015; semiannual interest payments $ 2,415,000 6.500% Series A Bonds, due July 1, 2016; semiannual interest payments 2,580,000 6.500% Series A Bonds, due July 1, 2017; semiannual interest payments 2,750,000 6.500% Series A Bonds, due July 1, 2018; semiannual interest payments 2,935,000 6.500% Series A Bonds, due July 1, 2019; semiannual interest payments 3,135,000 6.600% Series A Bonds, due July 1, 2024, subject to mandatory annual sinking fund redemptions commencing in 2019; semiannual interest payments 19,195,000 $ 33,010,000
In addition, the Series A Bonds are subject to redemption prior to maturity at the option of the State in minimum increments of $5,000, at 100% of the face amount.
Maturities of the Bonds payable after June 30, 2015, are as follows:
2016 $ 2,415,000 2017 2,580,000 2018 2,750,000 2019 2,935,000 2020 3,135,000 Thereafter 19,195,000 Total Bonds payable as of June 30, 2015 $ 33,010,000
On July 1, 2015, $2,415,000 of Series A Bonds outlined in the table above were paid in full as required.
17 Bradley International Airport Parking Facility
Notes to Financial Statements (continued)
12. Related Parties
A significant portion of the Company’s operations are with related parties. In accordance with the Operating Agreement, the Company has operating advances payable of $325,935 as of June 30, 2015 from ABPC, the operator of the garage and surface lots.
Guarantor loan, principal, premium, and interest payable to SP Plus Corporation, the parent of ABPC and guarantor of the Trustee funds under the Guaranty Agreement, amounted to $15,963,930 as discussed in Note 6.
The Company recorded expenses associated with minimum guarantee payments of $10,927,728 to the State during the year ended June 30, 2015, as discussed in Note 8. In addition, the Company recorded expenses associated with State and Developer Payments of $1,000,000 to ABPC and the State, as discussed in Note 10, for the year ended June 30, 2015.
As discussed in Note 4, the Company is required to repay the State $100,000 and ABPC $593,374 from any surplus funds following the payment of all Guarantor payments under the Memorandum of Agreement to resolve all outstanding Bradley International Airport parking shuttle service issues with respect to fiscal years 2000 and 2001.
13. Subsequent Events
We have evaluated subsequent events through October 15, 2015, the date these financial statements were available to be issued.
18 Supplemental Information Independent Auditor’s Report on Supplemental Information
The Connecticut Airport Authority and the Board of Directors of APCOA Bradley Parking Company, LLC
We have audited the financial statements of Bradley International Airport Parking Facility as of and for the year ended June 30, 2015, and our report thereon dated October 15, 2015 which expressed an unmodified opinion on those financial statements, appears on pages 1 and 2. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental information, which is the responsibility of management, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information, except for the portion marked “unaudited,” was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, that information is fairly stated in all material respects in relation to the financial statements as a whole. The information marked “unaudited” has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we do not express an opinion or provide any assurance on it.
This report is intended solely for the use of the Connecticut Airport Authority and the Board of Directors of APCOA Bradley Parking Company, LLC and is not intended to be, and should not be, used by anyone other than these specified parties. Cleveland, Ohio October 15, 2015
19 Bradley International Airport Parking Facility
Statement of Operations and Accumulated Deficit
Fiscal Year Ended June 30, 2015
Surface Garage Parking Parking Facility Facility Total (Unaudited) (Unaudited) Net receipts: Garage long-term $ – $ 16,917,143 $ 16,917,143 Garage short-term – 3,795,854 3,795,854 Lot B 963,538 – 963,538 Lot 1 1,569,999 – 1,569,999 Lot 3 1,666,378 – 1,666,378 Lot 4 1,238,206 – 1,238,206 Lot 5A 44,100 – 44,100 Lot 5B 164,167 – 164,167 Lot 5C 744,060 – 744,060 Miscellaneous parking expense – (83) (83) Billboard 79,000 – 79,000 Not sufficient funds and customer refunds (150) – (150) Total gross collections 6,469,298 20,712,914 27,182,212 Sales tax (384,950) (1,237,823) (1,622,773) Net receipts 6,084,348 19,475,091 25,559,439
Operating expenses: Payroll 946,265 555,743 1,502,008 Payroll taxes 240,910 141,486 382,396 Pension 9,366 5,501 14,867 Life and hospital insurance 166,855 97,994 264,849 Uniforms and laundry 1,195 3,945 5,140 Supplies and small tools 4,118 39,510 43,628 Ticket expense 5,093 14,671 19,764 Stationery and office supplies 3,623 11,746 15,369 Repairs and maintenance 130,398 284,103 414,501 Snow removal 46,986 210,814 257,800 Gas and oil 9,021 25,250 34,271
20 Bradley International Airport Parking Facility
Statement of Operations and Accumulated Deficit (continued)
Surface Garage Parking Parking Facility Facility Total (Unaudited) (Unaudited) Operating expenses (continued): Personal property tax $ 706 $ 2,273 $ 2,979 Sales and use tax 389 3,566 3,955 License and fees 282 925 1,207 General insurance and bonds 241,516 495,075 736,591 Rental machinery and equipment 9,529 32,212 41,741 Shuttle service 2,565,308 – 2,565,308 Utilities: Gas and fuel 8,243 379 8,622 Electric 97,198 266,668 363,866 Water 423 1,621 2,044 Advertising and publicity 131 33,165 33,296 Associate incentive award 255 799 1,054 Postage and freight 67 260 327 Telephone 15,210 49,404 64,614 Meals and entertainment 2 7 9 Other fees 7,720 8,475 16,195 Legal fees – 44,303 44,303 Security services 2,525 8,181 10,706 Recruiting 1,159 3,866 5,025 Miscellaneous 1,130 6,947 8,077 Auto damage claims 1,590 225 1,815 Payment in lieu of taxes 40,230 149,294 189,524 Credit card processing fees and discounts 125,921 466,479 592,400 General and administrative cost recovery 139,224 324,276 463,500 Cash receipt shortage 66 (363) (297) Operating expenses before depreciation and amortization 4,822,654 3,288,800 8,111,454 Depreciation and amortization 19,040 1,124,023 1,143,063 Total operating expenses 4,841,694 4,412,823 9,254,517 Operating income 1,242,654 15,062,268 16,304,922
21 Bradley International Airport Parking Facility
Statement of Operations and Accumulated Deficit (continued)
Surface Garage Parking Parking Facility Facility Total (Unaudited) (Unaudited) Other expenses (income): State minimum guarantee payments $ 1,635,383 $ 9,292,345 $ 10,927,728 State and developer payments 149,667 850,333 1,000,000 Trustee and custodial fees 10,338 30,477 40,815 Accounting and audit fees 28,978 31,991 60,969 Interest income (5,317) (13,198) (18,515) Interest expense 20,086 2,663,597 2,683,683 Net income (loss) (596,481) 2,206,723 1,610,242
Accumulated deficit at beginning of year (7,514,000) (19,640,348) (27,154,348) Accumulated deficit at end of year $ (8,110,481) $(17,433,625) $ (25,544,106)
22 Bradley International Airport Parking Facility
Statement of Cash Flows
Fiscal Year Ended June 30, 2015
Surface Garage Parking Parking Facility Facility Total (Unaudited) (Unaudited) Operating activities Net income (loss) $ (596,481) $ 2,206,723 $ 1,610,242 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 19,040 1,124,023 1,143,063 Noncash interest and premium, net (14,205) 529,907 515,702 Monthly parking receivable 33,285 – 33,285 Credit card receivable 48,801 – 48,801 State minimum guarantee payable 167,621 (148,891) 18,730 Interest Payable – (73,612) (73,612) Unearned revenue (79,000) – (79,000) Sales tax payable (224) 117 (107) Accrued audit fees payable and other payables (1,150) – (1,150) State and developer payments payable 149,666 850,334 1,000,000 Net cash provided by (used in) operating activities (272,647) 4,488,601 4,215,954
Investing activities Purchase of equipment (20,042) (119,225) (139,267) Net cash used in investing activities (20,042) (119,225) (139,267)
Financing activities Guarantor payments received – 38,344 38,344 Guarantor principal repayments – (1,109,109) (1,109,109) Guarantor premium, interest repayments – (870,193) (870,193) Payments on bonds – (2,265,000) (2,265,000) Advances payable to (from) ABPC, net 362,378 465,251 827,629 Advances to (from) surface/garage 40,557 (40,557) – Net cash provided by (used in) financing activities 402,935 (3,781,264) (3,378,329)
Net increase in cash and cash equivalents 110,246 588,112 698,358 Cash and cash equivalents at beginning of year 3,507,457 10,209,419 13,716,876 Cash and cash equivalents at end of year $ 3,617,703 $ 10,797,531 $ 14,415,234
Supplemental disclosure of cash flow information Cash paid during the year for interest $ – $ 3,111,786 $ 3,111,786
23 Bradley International Airport Parking Facility
Statement of Outstanding Guarantor Payments (Unaudited)
Fiscal Year Ended June 30, 2015
Premium Interest Principal Total
Balance, June 30, 2014 $ 1,375,803 $ 2,488,500 $ 13,599,551 $ 17,463,854 Plus: Loans received February 11, 2015 – – 28,228 28,228 Loans received March 10, 2015 – – 10,116 10,116 Plus (less) accrued premium and interest (14,205) 455,239 – 441,034 Less: Repayments made July 15, 2014 – – 24,228 24,228 Repayments made August 15, 2014 – 56,038 – 56,038 Repayments made September 15, 2014 – 77,624 – 77,624 Repayments made October 15, 2014 – 126,735 – 126,735 Repayments made November 16, 2014 11,811 252,896 115,322 380,029 Repayments made December 16, 2014 10,473 – 132,526 142,999 Repayments made January 15, 2015 7,715 42,826 42,590 93,131 Repayments made April 15, 2015 41,583 – 497,695 539,278 Repayments made May 15, 2015 29,672 – 244,002 273,674 Repayments made June 15, 2015 – 212,820 52,746 265,566 Balance, June 30, 2015 $ 1,260,344 $ 2,174,800 $ 12,528,786 $ 15,963,930
24 Bradley International Airport Parking Facility
Statement of Outstanding State and Developer Payments (Unaudited)
Fiscal Year Ended June 30, 2015
Payments due June 30, 2014: Developer total $ 14,232,877 State total – Total $ 14,232,877
Payments earned during the year ended June 30, 2015: Developer payments $ 1,000,000 Developer additional payments 777,438 State additional payments 777,438 Less: Elimination related to unavailable Surplus Moneys ( 1,554,876) Total $ 1,000,000
Total outstanding: Developer total $ 15,232,877 State total –
Total due June 30, 2015$ 15,232,877
25 Bradley International Airport Parking Facility
Computation of Additional Payments Due (Unaudited)
Fiscal Year Ended June 30, 2015
Surface Garage Parking Parking Facility Facility Total
Total gross receipts$ 6,469,298 $ 20,712,914 $ 27,182,212 Interest expense, net (a) (17,425) (2,653,949) (2,671,374) Total adjusted gross revenues 6,451,873 18,058,965 24,510,838
Operating expenses 4,822,654 3,288,800 8,111,454 Debt service principal – 2,265,000 2,265,000 Trustee, custodial, and audit fees 39,316 62,468 101,784 Major maintenance and capital improvement fund deposits – 549,996 549,996 State minimum guarantee 1,635,383 9,292,345 10,927,728 Total payments 6,497,353 15,458,609 21,955,962 Surplus (deficit)$ (45,480) $ 2,600,356 $ 2,554,876
Priority of payments earned:
First $1,000,000: APCOA Bradley Parking Company, LLC $ 1,000,000
Next $2,000,000: APCOA Bradley Parking Company, LLC $ 777,438
Connecticut Airport Authority 777,438 $ 1,554,876
(a) Interest expense, net, excludes interest income of $2,656 and $3,550 earned on the Surface Parking Major Maintenance and Capital Improvement Fund and Garage Parking Major Maintenance and Capital Improvement Fund, respectively.
26 Bradley International Airport Parking Facility
Statement of Fixed Assets Purchased (Unaudited)
Fiscal Year Ended June 30, 2015
Surface Garage Parking Parking Facility Facility Total Building and lot and station equipment $ 14,894 $ 114,076 $ 128,970 Service vehicles 5,148 5,149 10,297 Total assets purchased during the year ended June 30, 2015$ 20,042 $ 119,225 $ 139,267
27 Bradley International Airport Parking Facility
Statement of Surface Parking Major Maintenance and Capital Improvement Fund (Unaudited)
Fiscal Year Ended June 30, 2015
Balance, June 30, 2014 $ 1,765,902 Deposits - Interest earnings 2,656 Disbursements (19,287) Balance, June 30, 2015$ 1,749,271
Cost Expenditure by project Repair AVI readers - Lot 5C $ 4,930 Crack sealing and curb repairs 14,357 Total disbursements $ 19,287
28 Bradley International Airport Parking Facility
Statement of Garage Parking Major Maintenance and Capital Improvement Fund (Unaudited)
Fiscal Year Ended June 30, 2015
Balance, June 30, 2014 $ 2,160,768 Deposits 549,996 Interest earnings 3,550 Disbursements (63,624) Balance, June 30, 2015$ 2,650,690
Cost Expenditure by project Repair AVI readers - garage $ 4,929 Repair weatherproof electrical boxes, wiring 50,053 Repair DVR for security cameras 2,329 Relocate AVI readers - frequent flyers 6,313 Total disbursements $ 63,624
29 Bradley International Airport Parking Facility
Computation of the Garage Coverage Ratio (Unaudited)
Fiscal Year Ended June 30, 2015
Actual Pledged revenues: Garage gross receipts – long-term $ 16,917,143 Garage gross receipts – short-term 3,795,854 Interest earnings on pledged funds 2,818 Total pledged revenues 20,715,815 Garage operating expenses 3,288,800 Net income, as defined, subject to calculation $ 17,427,015
Coverage Coverage Net Debt Service Ratio Net Debt Service Ratio
FY2015 – $ 4,506,593 3.87 FY2021 – $ 4,506,320 3.87 FY2016 – $ 4,504,493 3.87 FY2022 – $ 4,507,630 3.87 FY2017 – $ 4,507,155 3.87 FY2023 – $ 4,503,430 3.87 FY2018 – $ 4,503,930 3.87 FY2024 – $ 4,507,565 3.87 FY2019 – $ 4,504,168 3.87 FY2025 – $ 4,503,880 3.87 FY2020 – $ 4,505,325 3.87
30 Bradley International Airport Parking Facility
Schedule of Surface Operating Advances Receivable From ABPC (Unaudited)
Fiscal Year Ended June 30, 2015
Surface parking facility Surface parking facility expenses $ 4,822,654
Plus: Key card and customer refunds 8,824 Accounting and auditing fees paid to C&P and Ernst & Young by ABPC 30,485 Capital purchases 20,042
Less: Garage allocation $ 2,874 Credit card discounts 125,921 Sales and use tax payments made by Trustee 389 Cash Shortage66 Capital improvements reimb. from maintenance accounts 19,287 148,537 4,733,468 Advance from surface parking receipt fund to ABPC ( 4,378,584)
Current year amount due to ABPC (surface parking receipt fund) 354,884
FY2014 cumulative amount due from ABPC (surface parking receipt fund) ( 132,972)
FY2015 cumulative amount due from ABPC (surface parking receipt fund) 221,912
Less advances received in 2015 for the year ending June 30, 2016 ( 364,152)
Total amount due from ABPC (surface parking receipt fund) at June 30, 2015 $ ( 142,240)
31 Bradley International Airport Parking Facility
Schedule of Garage Operating Advances Receivable From ABPC (Unaudited)
Fiscal Year Ended June 30, 2015
Garage parking facility Garage parking facility expenses $ 3,288,800
Plus: Key card and customer refunds 17,731 Accounting and auditing fees paid to C&P and Ernst & Young by ABPC 30,485 Capital purchases 119,225 Surface allocation 2,874 Cash overage 363
Less: Credit card discounts $ 466,479 Sales and use tax payments made by Trustee 3,566 Reimbursement from garage maintenance account 63,624 533,669 2,925,809 Advance from garage parking receipt fund (2,477,388)
Current year amount due from ABPC (garage parking receipt fund) 448,421
FY2014 cumulative amount due to ABPC (garage parking receipt fund) 225,790 . FY2015 cumulative amount due to ABPC (garage parking receipt fund) 674,211
Less advances received in 2015 for the year ending June 30, 2016 (206,036)
Total amount due to ABPC (garage parking receipt fund) at June 30, 2015$ 468,175
32 Bradley International Airport Parking Facility
Supplementary Schedule of Cash and Cash Equivalents (Unaudited)
Fiscal Year Ended June 30, 2015
Surface Garage Parking Parking Facility Facility Total
Surface parking gross receipt account $ 144,757 $ – $ 144,757 Surface parking receipt fund 1,723,675 1,723,675 Surface parking major maintenance and capital improvement fund 1,749,271 1,749,271 Garage parking gross receipt account 23,730 23,730 Garage parking receipt fund 116,491 116,491 Debt service Series A interest fund 1,083,990 1,083,990 Debt service Series A principal fund 2,415,000 2,415,000 Garage parking major maintenance and capital improvement fund 2,650,690 2,650,690 Debt service Series A reserve fund 4,507,630 4,507,630 Total cash and cash equivalents $ 3,617,703 $ 10,797,531 $ 14,415,234
33