Year Metropolitan COMPREHENSIVE 2020 Knoxville Airport ANNUAL Authority FINANCIAL REPORT

An instrumentality of the City of Knoxville, Tennessee For the fiscal years ended June 30, 2020 and 2019 www.flyknoxville.com Prepared By: Accounting and Finance Department of Metropolitan Knoxville Airport Authority Metropolitan Knoxville Airport Authority An instrumentality of the City of Knoxville, TN For the Fiscal Years ended June 30, 2020 and 2019

2020 Comprehensive Annual Financial Report

Prepared By: Accounting and Finance Department of Metropolitan Knoxville Airport Authority

www.flyknoxville.com This page intentionally left blank INTRODUCTORY SECTION

This section contains the following subsections:

Table of Contents

Metropolitan Knoxville Airport Authority Officials

Letter of Transmittal and Exhibits

Organizational Chart

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2 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) TABLE OF CONTENTS

5. Long-TermIntroductory Debt (continued)section Metropolitan Knoxville Airport Authority Officials 5

Letter of transmittal and exhibits 7 Scheduled DebtOrganizational Service chartRequirements 16 As of June 30,Financial 2016, sectionscheduled debt service requirements of the variable-rate debt and net swap payments, assuming currentIndependent interest auditor’s rates report remain the same for their term are as follows. As rates vary, variable19 -rate bond interest paymentsManagement’s and net discussion swap payments and analysis will vary. 22 Financial statements:

Statements of net position 31 Year endingStatements of revenues,Variable expenses Rate and changes Bonds in net position Interest Rate 33 June 30 Statements of cashPrincipal flows Interest Swaps, net 34 Total Notes to financial statements 36 2017 Statistical section$ 4,590,000 (unaudited) $ 562,983 $ 985,043 $ 6,138,026 Schedule 1: Operating revenues and expenses—last ten fiscal years 52 2018 Schedule 2: Debt4,825,000 service coverage —last ten 522fiscal,361 years 830,113 53 6,177,474 2019 Schedule 3: Ratio5,075,000s of debt service and outstanding479,483 debt —last ten fiscal years667,315 54 6,221,798 2020 Schedule 4: McGhee5,335,000 Tyson Airport annual terminal434,090 rents and landing fees—496,213last ten fiscal years 55 6,265,303 2021 Schedule 5: Airline5,610,000 arrivals and departures—386,211last ten fiscal years 316,408 56 6,312,619 Schedule 6: Historical airline passenger activity—last ten fiscal years 57 2022-2026 Schedule 7: Distribution32,520,000 of airline passengers1,107,156—fiscal year ended June 30, 2019405,195 57 34,032,351 2027-2028 Schedule 8: Cargo12,680,000—last ten fiscal years 86,013 - 58 12,766,013 Schedule 9: Distribution of cargo—fiscal year ended June 30, 2019 58 Total Schedule 10: $Aircraft70,635,0 landed00 weights—last$3,578,297 ten fiscal years $3,700,287 59$77,913,584 Schedule 11: Aircraft landed weights—ten fiscal year trend history 60 6. Fair ValueSc hedule 12: Total passengers—ten fiscal year trend history 61 Schedule 13: Distribution of total cargo—ten fiscal year trend history 62 Schedule 14: Authority employees and demographic data—population 63 The Authority Schedulecategorizes 15: Demographic its fair value data —measurementsunemployment informationwithin the last fair ten value calendar hierarchy years established64 by generally accepted accountingSchedule principles. 16: Demographic The datahierarchy—per capita is based personal on income the valuation last ten calendar inputs years used to measure64 the fair value Schedule 17: Demographic data—total personal income last ten calendar years 64 of the assets. Schedule Level 1 18: inputs Demographic are quoted data—top prices employers in activein Knoxville markets area for for last identicalten calendar assets. years Level65 2 inputs are significant otherSchedule observable 19: Airlines inputs. serving Level McGhee 3 inputs Tyson Airportare significant unobservable inputs. 66 Schedule 20: Flight information 67 Schedule 21: Companies conducting business on airport property 68 Debt securitiesSchedule are valued 22: Use of based debt proceeds on the securities’ relationship to benchmark quoted prices.69 Derivative instruments areSchedule valued 23: using Insurance a market in force approach that considers benchmark interest rates. 70 Schedule 24: Major airport capital improvements completed 71 The following Schedule table sets25: Capital forth asset by information level, within the fair value hierarchy, the fair value of 72 the Authority’s Compliance section investments andSchedule interest of eratexpenditures swap liabilitiesof federal awardsas of ,June state financial30, 2016 assistance: and passenger facility charges collected and expended 74 Schedule of long-term debt principal andLevel interest 1 requirementsLevel 2 Level 3 78Total Investments: Schedule of changes in long-term debt by individual issue 79 Independent auditor’s report on internal control over financial reporting and on compliance Government debtand othersecurities matters based on an$ audit of financial– statements$ 39,998,469 performed $ – $ 39,998,469 in accordance with Governmental Auditing Standards 80 Interest rate swapIndependent liabilities auditor’s report on$ compliance for–each $major 4,502,609 federal program $ and the passenger– $ 4,502,609 facility charge program and on internal control over compliance in accordance with the Uniform Guidance 82 The following Schedule table setsof findings forth and by questioned level, within costs the fair value hierarchy, the fair value of 84 the Authority’s investments andCorrective derivative action investments plan and schedule as of of Juneprior year30, audit2015 find: ings 85

Level 1 Level 2 Level 3 Total Investments: 3 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

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4 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

OFFICIALS

5. Long-TermAs of June Debt 30, 2020 (continued)

Scheduled DebtBoard Service of Commissioners Requirements Position Term Expires As of June 30,Eddie 2016 Mannis, scheduled debt service requirementsChairman of the variable-rateJune debt 30, and 202 3net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsBrian M. and Simmons net swap payments will vary. Vice Chairman June 30, 2025 Charles R. Harr Secretary June 30, 2022 Year ending Variable Rate Bonds Interest Rate June 30Joseph M. DawsonPrincipal InterestAssistant Secretary Swaps,June net 30, 2023 Total Ursula Bailey June 30, 2026 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 Julia A. Bentley 4,825,000 522,361 830,113 June 30, 2024 6,177,474 2019 Maribel Koella 5,075,000 479,483 667,315 June 30, 2021 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 Jeff W. Smith 5,610,000 386,211 316,408 June 30, 2023 6,312,619 2022-202Howard6 Vogel 32,520,000 1,107,156 405,195 June 30, 2027 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 OFFICERS AND KEY STAFF MEMBERS 6. Fair ValuePatrick W. Wilson, A.A.E. President

The AuthorityNancy categorizes White, CPA ,its C.M. fair value measurementsVice within President the of fairFinance value hierarchy established by generally accepted accountingJames H. Evans, principles. Jr., C.M. The hierarchy is basedVice onPresident the valuation of Marketing inputs & Air used Service to Developmentmeasure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant otherTrevis observableD. Gardner, A.A.E. inputs. Level 3 inputs areVice significant President ofunobservable Airport Operations inputs. Bryan White, PE, C.M. Vice President of Engineering & Planning Debt securitiesWillie T. are Aiken valued based on the securities’Director relationship of Public Safety to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates. Becky Huckaby, APR, A.A.E. Vice President of Public Relations The followingYin Chen, table CPA sets forth by level, within theController fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: Treva H. Best, CAP, OM Senior Executive Assistant Mark Mamantov Level Legal1 Counsel,Level Bass, Berry2 & SimsLevel PLC 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 5 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

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6 M E T R O P O L I TA N KNOXVILLE AIRPORT AUTHORITY

December 9, 2020

To the Board of Commissioners of the Metropolitan Knoxville Airport Authority:

The Comprehensive Annual Financial Report of the Metropolitan Knoxville Airport Authority (the Authority) for the fiscal year ended June 30, 2020, is hereby submitted. The purpose of the report is to present fairly and disclose fully the Authority’s financial position and the results of its operations. The report consists of four sections: Introductory, Financial, Statistical and Compliance.

The financial statements were audited by Coulter & Justus, P.C., Certified Public Accountants, and the supplementary information was prepared by the Accounting and Finance Department. This report is published in accordance with the laws and/or regulations of the State of Tennessee. The audit was conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States and requirements prescribed by the Comptroller of the Treasury, State of Tennessee.

This report consists of management’s representations concerning the financial position of the Authority. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management of the Authority has established a comprehensive internal control framework that has been designed to both protect the Authority’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Authority’s financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Because the cost of internal controls should not outweigh their benefits, the Authority’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements. As management, we assert that, to the best of our knowledge and belief, this report is complete and reliable in all material respects.

The goal of the independent audit is to provide reasonable assurance that the financial statements of the Authority for the years ended June 30, 2020 and 2019, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and any significant estimates made by management and evaluating the overall financial statements presentation. The independent auditor concluded based upon their audit, that there was a reasonable basis for rendering an unmodified opinion and that the Authority’s financial statements for the years ended June 30, 2020 and 2019, are in conformity with GAAP. The independent auditor’s report is the first component of the financial section of this report.

The independent audit of the financial statements is part of the broader mandated provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, relative to federal financial awards received from the U.S. Government. It is also in conformity with the provisions of the September 2000 Audit Compliance and Reporting Guide for Public Agencies relative to the collection and use of Passenger Facility Charges.

7 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

The standards governing these provisions require the independent auditor not only to report on the 5. Long-Termfair presentation Debt (continued) of the financial statements, but also on the Authority’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal and state grant awards. See independent auditor’s reports presented in the Scheduled DebtCompliance Service Section. Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming currentGAAP interestrequires that rates management remain providethe same a narrative for their introduction, term are overview, as follows. and analysis As rates to accompany vary, variable the -rate bond interest paymentsfinancial and statements net swap in the payments form of willa Management vary. ’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A Year endingis in the financial sectionVariable immediately Rate following Bonds the independent auditor’sInterest report. Rate June 30REPORTING Principal ENTITY Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 The Metropolitan Knoxville Airport Authority was established in 1978 under Chapter No. 174, Public 2018 Acts of the State of4,825,000 Tennessee, 1969, and pursuant522 ,361 to Resolution No. R-63-78830,113 of the Council of the City 6,177,474 2019 of Knoxville, Tennessee.5,075,000 It was organized for479,483 and has as its sole purpose the667,315 ownership, management, 6,221,798 2020 operation and maintenance5,335,000 of McGhee Tyson434,090 Airport and other airports, 496,213 auxiliary fields and other 6,265,303 properties, either acquired by or placed under the control of the Authority as outlined in Chapter 174. 2021 The Authority currently5,610,000 operates two airports: 386,211McGhee Tyson Airport and Knoxville316,408 Downtown Island 6,312,619 2022-202Airport.6 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 The Authority is an instrumentality of the City of Knoxville, governed by a nine-member Board of TotalCommissioners $appointed70,635,0 by00 the Mayor of$ the3,578,297 City of Knoxville. Each Commissioner$3,700,287 is appointed for $a77,913,584 seven-year term and must be confirmed by the Knoxville City Council. Since the Authorit y was established, 6. Fair Valueit has been financially self-sufficient, with no local tax support. The Board employs a President, who is the chief administrative and executive officer of the Authority. The AuthorityThe categorizesPresident manages its fair the valueairports measurements under the Authori withinty’s contr theol withfair avalue staff of hierarchy 158 full-time established equivalent by generally employees. The staff is responsible for the day-to-day financial, administration, operational and personnel accepted accountingmatters pertaining principles. to the airportsThe hierarchy and the contractual is based arrangements on the valuation with various inputs aviation used and to non measure-aviation the fair value of the assets.businesses. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. An annual operating budget is prepared and approved by the Authority’s Board of Commissioners. All appropriations for operating expenditures lapse at the end of the fiscal year and must be reappropriated for Debt securitiesthe following are valued year. Separat basede accounts on the are securities’ maintained for relationship major capital toprojects, benchmark which are quotedclosed when prices. the Derivative instruments assetare valuedis placed using in service. a market Since there approach is no legal that requirement considers to benchmark report on the interestbudgetary rates. basis, no budget information is presented in the accompanying financial statements. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s McGhee Tyson Airport investmentsLocated and interest just 15 ratemiles swapfrom downtown liabilities Knoxville, as of June McGhee 30, 2016 Tyson: Airport lies in Blount County on 2,731 acres in the rolling foothills of the Great Smoky Mountains and provides employment for approximately 3,000 people. McGhee Tyson has two parallelLevel 9,000 1 -foot runwaysLevel, one is2 currently Levelunder construction 3 , andTotal is served by most major U.S. airlines and/or their regional partner. These airlines provide numerous non- Investments:stop flights to destinations throughout the United States for approximately 2 million passengers each year. GovernmentThe airport debt is securities also home to the Tennessee$ Air National– Guard’s$ 39,998,469 134th Air Refueling $ Wing. McGhee– Tyson$ 39,998,469 is classified by the Federal Aviation Administration (FAA) as a small air traffic hub airport. Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 8 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

Knoxville Downtown Island Airport 5. Long-TermKnoxville Debt Downtown (continued) Island Airport is a general aviation airport located less than three miles from down- town Knoxville and is base for more than one hundred and fifty private and corporate aircrafts. The airport Scheduled Debthas a 3,500Service-foot Requi runwayrementsand is served by three published instrument approaches: a localizer approach to As of June 30,Runway 2016 26,, ascheduled GPS-based approachdebt service to Runway requirements 26, and a VOR of circlingthe variable approach-rate procedure. debt and net swap payments, assuming currentECONOMIC interest ratesCONDITIONS remain the sameAND for OUTLOOK their term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary. The primary service area for McGhee Tyson Airport is the City of Knoxville and its Metropolitan Statistical Year endingArea (MSA) , which comprisesVariable the heart Rate of “ BondsTennessee's Resource ValleyInterest”. According Rate to the Bureau of the Census in 2019, the population of Knox County was 470,313 and the population for the City of Knoxville June 30was 187, 603. ThePrincipal estimated 201 9 population forInterest the Knoxville MSA was 8Swaps,69,046. net Total

2017 In addition, a broader$ 4,590,000 regional market is defined$ 562,983 as the Tennessee, Kentucky, $ 985,043 Virginia, North Carolina, $ 6,138,026 2018 South Carolina and 4,825,000Georgia counties lying within522 100,361 miles of McGhee Tyson Airport,830,113 which is the largest 6,177,474 2019 airport in the region.5,075,000 479,483 667,315 6,221,798 2020 Knox County is the5,335,000 principal Gateway to the Great434,090 Smoky Mountains National 496,213Park , which is the country’s 6,265,303 2021 most visited national5,610,000 park. The Great Smoky Mountains386,211 National Park had a record316,408 breaking number of 6,312,619 2022-202visitors6 in 201 9, reaching32,520,000 over 12.5 million. More1,107,156 than one -half of the nation’s 405,195population lives within 50034,032,351 miles of the park, which is located half in Tennessee and half in North Carolina. Part of the Appalachian 2027-2028Range, the Great Smoky12,680,000 Mountains National Park contains86,013 16 peaks higher than 6,000 feet,- the highest being12,766,013 TotalCling mans Dome. $70,635,000 $3,578,297 $3,700,287 $77,913,584

According to the Federal Aviation Administration’s (FAA) Aerospace Forecast FY2020-2040, 2019 6. Fair Valuemark ed the eleventh consecutive year of profitability for the U.S. airline industry. The FAA believes that U.S. airlines finally transformed from a capital intensive, cyclical industry to one with solid returns on capital and sustained profits. Fundamentally, over the medium and long term, demand for aviation is The Authoritydriven categorizes by economic its activity, fair value and ameasurements growing U.S. and within world economy the fair provides value hierarchy the basis for established aviation to by generally accepted accountinggrow over theprinciples. long run. TheThe FAA hierarchy forecast iscalls based for U.S. on carrier the valuation domestic passenger inputs usedgrowth to over measure the next the fair value of the assets.20 years Level to 1average inputs 2.0 arepercent quoted per year. prices However, in active aviation markets is particularly for identicalsusceptible assets.and sensitive Level to 2 inputs are significant othermany observablevariables that inputs.could impact Level this 3 forecast.inputs areThe significantrapid spread unobservableof the novel coronavirus inputs. that began in early 2020 now presents a new risk without clear historical precedent.

Debt securitiesOn March are valued12, 2020, basedthe World on Healththe securities’Organization relationship characterized the to novel benchmark coronavirus quoted (COVID prices.-19) Derivative instruments outbreakare valued as a globalusing pandemic.a market On approach March 13, that 2020, considers the President benchmark of the United interestStates of rates. America issued a Proclamation, declaring a national emergency due to the COVID-19 outbreak. This Proclamation initiated preventive and proactive measures to slow the spread of the virus, instituted quarantines and provided States The followingand local table governments sets forth the byability level, to manage within the theoutbreaks. fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: State and local governments in Tennessee issued executive orders for the public’s safety. These orders required people to stay home unless engaging in essential activities to limit exposure. Other state and local governments across the United States issuedLevel similar 1 orders. TheLevel pandemic 2 has hadLevel a significant 3 currentTotal Investments:impact on various industries in the U.S. and across the globe. One sector is aviation. There have been Governmentsignificant debtreductions securities in passenger flights$ and air service.– Long$ 39,998,469-term effects and when$ the aviation– industry$ 39,998,469 will return to pre-pandemic levels are still unknown. Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 9 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) AIRLINE INFORMATION During the year ended June 30, 2020, McGhee Tyson Airport’s five passenger airlines and/or their regional 5. Long-Termaffiliates Debt offered (continued) over 5,000 daily departing seats in 27 nonstop markets. In addition, two cargo airlines linked the airport with three major air cargo hubs. A complete listing of air carriers and destinations is as follows: Scheduled Debt Service Requirements As of June 30,Passenger 2016, Airlinesscheduled debt service requirements of the variable-rate debt and net swap payments, Allegiant Air assuming currentAmerican interest Airlines* rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsDelta Air and Lines* net swap payments will vary. Frontier Airlines Year endingUnited Airlines* Variable Rate Bonds Interest Rate June 30*some or all service offeredPrincipal through regional airline affiliates shownInterest below Swaps, net Total

2017 Regional Airline $ 4,590,000Affiliates $ 562,983 $ 985,043 $ 6,138,026 2018 Air Wisconsin Airlines,4,825,000 Inc./American Airlines 522,361 PSA Airlines Inc./American830,113 Airlines 6,177,474 CommutAir /United Airlines Republic Airlines/American Airlines 2019 Endeavor Air/Delta5,075,000 Air Lines 479,483Republic Airlines/United667,315 Airlines 6,221,798 2020 Envoy Airlines/American 5,335,000 Airlines 434,090 Skywest Airlines/American496,213 Airlines 6,265,303 2021 Express Jet / American5,610,000 Airlines 386,211 Skywest Airlines/Delta Air316,408 lines 6,312,619 ExpressJet/United Airlines Skywest Airlines/United Airlines 2022-202GoJet6 Airlines/United 32,520,000 Airlines 1,107,156 TransStates Airlines/United405,195 Airlines 34,032,351 2027-2028Mesa Airlines/American12,680,000 Airlines 86,013 - 12,766,013 TotalMesa Airlines/United $70,635,0 Airlines00 $3,578,297 $3,700,287 $77,913,584 Piedmont Airlines/American Airlines

6. Fair ValueCargo Airlines FedEx, Inc. UPS Airlines, Inc. The Authority categorizes its fair value measurements within the fair value hierarchy established by generally Passenger Airline Destinations (as of June 30, 2020) accepted accountingAtlanta, Austin, principles. Baltimore/Washington, The hierarchy Charlotte, is based Chicago on the-O’Hare, valuation Chicago inputs-Midway, used Dallas/Fort to measure Worth, the fair value of the assets.Denver, Level Destin/Fort 1 inputs Walton are quotedBeach, Detroit, prices Fort in Lauderdale, active markets Houston for-Bush, identical Houston -Hobby, assets. Las Level Vegas, 2 inputs are significant otherMiami, observable Minneapolis/St. inputs. Paul, Level Newark, 3 inputs New areYork- significantLaGuardia, unobservableOrlando-International inputs., Orlando -Sanford, Philadelphia, Punta Gorda/SW Florida, Sarasota, St. Petersburg/Tampa Bay, Washington-Dulles, Washington-National, and West Palm Beach Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Cargoare valued Airline using Destination a markets approach that considers benchmark interest rates. Indianapolis, Louisville and Memphis The followingAirline table Activity sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investmentsMcGhee and interest Tyson rateAirport’s swap five liabilities passenger asairlines of June and/or 30, their 2016 regional: affiliates operated approximately 130 daily (arrivals and departures) flights and served 1,952,143 passengers in FY2020, a decrease of 18 percent when compared to FY2019. Available airlines seats decreased 6.8 percent during the year. The FY2020 airport load factor (percentage of airline seats filled) wasLevel 72.5 percent, 1 downLevel from 80 2percent in FY2019.Level 3 Total Investments: GovernmentThere weredebt 83,936,760 securities pounds of freight$ and mail that– moved $ through39,998,469 the airport $ during FY2020,– an increase$ 39,998,469 of less than one percent compared to the previous year.

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 10 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) FINANCIAL INFORMATION

Long-term Financial Planning 5. Long-TermThe current Debt Airport (continued) Master Plan for McGhee Tyson Airport was adopted by the Board of Commissioners on November 15, 2006. A Facility Planning Study for the Knoxville Downtown Island Airport was prepared for

the Authority on November 19, 2008, as a guide for future development of that airport. The Authority is in the Scheduled Debtprocess Service of updating Requi therements McGhee Tyson Airport Master Plan and preparing an Airport Master Plan for the As of June 30,Knoxville 2016 Downtown, scheduled Island debt Airport. service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond The Airport Master Plan for McGhee Tyson defines a concept for development of the airport over the course interest paymentsof a 20 and-year netplanning swap periodpayments and iswill prepared vary. in collaboration with Federal and State agencies, local municipalities and interested airport users. The primary objective of the Airport Master Plan is to produce a Year endingcomprehensive planningVariable guide for Ratethe continued Bonds development of a safe,Interest efficient Rate and environmentally compatible aviation facility that meets the goals of the Authority. The plan incorporates a financial model that June 30evaluates the financialPrincipal impact of the capital projectsInterest identified for the 20-yearSwaps, planning net horizon, from 2005Total through 2024. 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 The Authority prepares4,825,000 an annual operating and 522capital,361 budget. The capital improvement830,113 program included in6,177,474 2019 the budget identifies5,075,000 funding sources for capital 479,483projects for planning horizons of667,315 five years . 6,221,798 2020 The Authority has a5,335,000 five year Airport Lease and434,090 Use Agreement with the airlines496,213 that serve McGhee Tyson6, 265,303 2021 Airport. The current5 ,610,000Agreement became effective386,211 on July 1, 2018, and expires on316,408 June 30, 2023. The Airport6,312,619 Lease and Use Agreement with the signatory airlines is a hybrid agreement. Airfield costs are recovered using 2022-202the6 residual method. 32,520,000 The Authority recovers the1,107,156 airfield cost by charging commercial405,195 aircraft a landing fee and34,032,351 2027-2028general aviation aircraft12,680,000 a fuel flowage fee. The military86,013 pays a joint use fee for their share- of the airfield costs.12,766,013 TotalAirline terminal rents$70,635,0 are calculated00 using a compensatory$3,578,297 method. The terminal$3,700,287 costs are calculated by adding$77,913,584 the operating and maintenance cost and the capital expense associated with the terminal complex and allocating the cost to the tenants. Passenger facility charge revenue is applied to the terminal debt service to fund the 6. Fair Valueeligible portions of the terminal capital expense. The applicable terminal rent is then calculated by dividing the total remaining cost by the total usable terminal square footage. The Agreement provides for a mid-year adjustment, if projections vary by more than ten percent, and a year-end settlement. If airline rentals, fees and The Authoritycharges categorizes paid during its the fair fiscal value year are measurements more than required, within the excess the willfair be value issued hierarchyas a credit to established the airlines. If by generally accepted accountingthey are less, principles. the airlines will The be hierarchyinvoiced the isdeficiency. based on the valuation inputs used to measure the fair value of the assets.Relevant Level Financial 1 inputs Policies are quoted prices in active markets for identical assets. Level 2 inputs are significant otherFinancial observable policies for inputs. the operation Level of 3 t heinputs two airports are significant are detailed unobservablein the Authority’s inputs.by-laws. The Authority also adopted a comprehensive set of financial policies in an effort to standardize the issuance and management of debt and provide additional guidance on cash reserves and capital improvements on April 18, 2001. Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Debtare valuedis to be usedusing only a tomarket finance approachcapital projects that and considers equipment, benchmark except in case interestof emergency. rates. The Authority has no commitments to issue any additional debt within the next fiscal year. The followingCash tablereserves sets are intended forth byto prot level,ect the within Authority the from fair unforeseen value hierarchy, increases in expenditures the fair value or reductions of the in Authority’s investmentsrevenues, and interest or both. rate Reserves swap are liabilities also to be as used of to June minimize 30, 2016borrowings,: provide funding to match grants from other entities, provide liquidity to fund operating expenses and used to generate interest income for the Authority. The Authority will maintain cash reserves at a minimum amount equal to normal cash requirements for operations and capital projects plus $10,000,000Level 1 or the outstandingLevel 2minimum Levelannual debt 3 service onTotal all Investments:exis ting debt, whichever is greater. The Authority currently holds $55,622,075 in unrestricted cash and Governmentinvestments. debt securities $ – $ 39,998,469 $ – $ 39,998,469 The Authority actively seeks grants or other contributions to offset capital costs and minimize borrowing for Interest rateprojects swap that liabilities are consistent with the Authority’s$ Capital– Improvement$ 4,502,609 Plan. $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 11 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) MAJOR INITIATIVES

Current Year Projects 5. Long-TermThe Airport Debt Authority (continued) has primarily been focused on the Airfield Modernization Program this year. The Airfield Modernization program is a multi-year program to improve the McGhee Tyson Airport runway and

taxiway systems at an estimated cost of $136,900,000 funded primarily with Federal and State grant funds. Scheduled DebtEutaw Service Construction Requi Companyrements was awarded a construction contract for $4,370,847 for Project 5 of the Runway As of June 30,5L/23R 2016 reconstruction, scheduled in FYEdebt June service 30, 2020. requirements This construction of the contract variable was subsequently-rate debt modifieand netd in swapFYE payments, assuming currentJune 30, interest 2021 to includerates remain an additional the sameaward forfor $6,288,883.64. their term areCHA as Consulting follows. was As awarded rates vary, a contract variable for -rate bond $875,041 for construction administration on the runway Project 5 in FYE June 30, 2020. This contract was interest paymentssubsequently and netmodified swap in payments FYE June 30, will 2021 vary. to include an additional award for $561,653. Project 5 will be funded with both 100 percent and 90 percent Federal grant funds, a combination of State grant funds and Year endingAirport Authority funds.Variable Eutaw Construction Rate Bonds Company was awarded an $8,564,637Interestcons Ratetruction contract for Project 6 of the Runway 5L/23R reconstruction in FYE June 30, 2020. CHA Consulting was awarded a contract June 30for $861,515 for constructionPrincipal administration onInterest the runway Project 6 in FYESwaps, June 30, net2020. Project 6 will beTotal funded 100 percent with Federal grant funds. 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 The Airport Authority4,825,000 expanded the Transportation522,361 Security Administration830,113 (TSA) checkpoint lanes at6,177,474 2019 McGhee Tyson Airport5,075,000. The airport had three TSA479,483 checkpoint lanes prior to expansion.667,315 The expansion brings6,221,798 the total TSA checkpoint lanes to four. The cost to expand was funded 100 percent with Authority funds. 2020 5,335,000 434,090 496,213 6,265,303 2021 The Knoxville Downtown5,610,000 Island Airport continued386,211 the programming of 316,408the Runway Rehabilitation6,312,619 project. The project is funded with a combination of Federal grant funds, State grant funds and 5 percent 2022-202Airport6 Authority 32,520,000funds. 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 TotalThe Airport Authority $70,635,0 continued00 the planning$3,578,297 on the Oak Ridge general aviation$3,700,287 airport. The Airport Layout$77,913,584 Plan (ALP) was sent to the FAA during FYE June 30, 2019. The FAA responded with a conditional approval and determined the ALP to be acceptable from a planning perspective. In August 2020, sponsorship of the 6. Fair ValueDevelopment of the Oak Ridge General Aviation Airport was transferred to the City of Oak Ridge. Future Year Projects The AuthorityThe categorizesAirport Authority its ifairs taking value a conservative measurements financial approachwithin the on capital fair value project hierarchy planning and established execution due by generally accepted accountingto the pandemic’s principles. effect on The the hierarchyair transportation is based industry. on the valuation inputs used to measure the fair value of the assets.McGhee Level Tyson 1 inputs Airport areis undergoing quoted a pricesterminal inmodernization active markets study. A for prior identical study indicated assets. that Levelthere is 2a inputs are significant otherneed forobservable a more extensive inputs. study Level. This 3study inputs will leadare tosignificant the planning unobservable and design of a solutioninputs. to address issues identified from the study. The cost will be funded 100 percent with Airport Authority funds. Debt securitiesThe McGhee are valued Tyson Airport based parking on the garage securities’ is in need of relationship maintenance. toDue benchmark to the reduction quoted in parking prices. needs Derivative instruments asare a result valued of the using pandemic, a market the Airport approach Authority that is considerstaking this opportunity benchmark to perform interest extensive rates. maintenance measures. The project cost is expected to be funded by some combination of State grant funds, Rental Car The followingCustomer table Facility sets Charge forth funds by level,and Airport within Authority the fair funds value. hierarchy, the fair value of the Authority’s investmentsAt and McGhee interest Tyson rate Airport, swap the liabilities replacement as of the June flight 30, information 2016: systems (FIDS) is under evaluation. This project will replace the current system and associated infrastructure, including baggage information display systems (BIDS), display units and equipment, gate equipment, terminal monitors, central processing units, paging stations, boarding pass readers, Levelticket counters 1 and digitaLevell signage 2 throughoutLevel the 3 airport. CostsTotal Investments:associated with this project and the funding plan are being developed in association with the evaluation. Government debt securities $ – $ 39,998,469 $ – $ 39,998,469 At the Knoxville Downtown Island Airport, the expected projects include the planning and programming of the secondary containment of mobile refuelers and a maintenance sealcoat and restripe of the existing aircraft Interest rateparking swap ramp. liabilities These projects are being$ funded by some– combination$ 4,502,609 of Federal $ and State –grant funds$ and 4,502,609 Airport Authority funds. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 12 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) The master plans for both airports are in the process of being updated. McGhee Tyson Airport’s Master Plan will be funded 100 percent with Airport Authority funds. Knoxville Downtown Island Airport is being funded 95 percent State grant funds and 5 percent Airport Authority funds. 5. Long-Term Debt (continued) CERTIFICATE OF ACHIEVEMENT Scheduled DebtThe Government Service Requi Financerements Officers Association of the United States and Canada (GFOA) awarded a As of June 30,Certificate 2016 ,of scheduled Achievement debt for Excellenceservice requirements in Financial Reporting of the to variable the Metropolitan-rate debt Knoxville and netAirport swap payments, assuming currentAuthority interest for its comprehensiverates remain annualthe same financial for reporttheir termfor the are fiscal as year follows. ended JuneAs rates 30, 201 vary,9. This variable was -rate bond the twenty-seventh consecutive year that the government has achieved this prestigious award. In interest paymentsorder to and be netawarded swap a Certificatepayments of will Achievement, vary. a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must s atisfy both generally Year endingaccepted accounting principlesVariable and Rateapplicable Bonds legal requirements. Interest Rate June 30 Principal Interest Swaps, net Total A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive 2017 annual financial report$ 4,590,000 continues to meet the$ Certificat562,983 e of Achievement Program’s$ 985,043 requirements, and we$ 6,138,026 are submitting it to the GFOA to determine its eligibility for another certificate. 2018 4,825,000 522,361 830,113 6,177,474 2019 ACKNOWLEDGEMENTS 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 The preparation of5 this,610,000 report could not have 386,211been accomplished without the316,408 professional assistance of 6,312,619 the entire Finance and Accounting staff and the cooperation of each department within the Metropolitan 2022-202Knoxville6 Airport 32,520,000 Authority. We also extend1,107,156 our ap preciation to the staff of 405,195Coulter & Justus, P.C. for34,032,351 2027-2028their technical assistance12,680,000 and guidance in the preparation86,013 of this report. - 12,766,013

TotalWe would also like$70,635,0 to thank00 the individual$ 3,578,297members of the Board of Commissioners$3,700,287 of Metropolitan$ 77,913,584 Knoxville Airport Authority for their interest, support, and leadership in planning and conducting the 6. Fair Valuefinancial operations of the Authority in a responsible and progressive manner. Respectfully submitted, The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are Patrick W. Wilson, A.A.E. significant otherPresident observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates. Nancy White, CPA, C.M. The followingVice tablePresident, sets Finance forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 13 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term Debt (continued)

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.

Year ending Variable Rate Bonds Interest Rate June 30 Principal Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 14 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term Debt (continued)

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.

Year ending Variable Rate Bonds Interest Rate June 30 Principal Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 TotalDESTINATIONS $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value Allegiant Air Delta/Delta Connection Fort Lauderdale Atlanta Orlando-Sanford Detroit The Authority categorizesSt. Petersburg/Tampa its fair value Bay measurements within theMinneapolis/St. fair value hierarchy Paul established by generally accepted accountingPunta principles. Gorda/SW The Florida hierarchy is based on the valuationNew York -inputsLaGuardia used to measure the fair value Baltimore/Washington* of the assets. LevelDestin/Fort 1 inputs Walton* are quoted prices in active marketsFrontier for identical assets. Level 2 inputs are significant other observableLas Vegas inputs. Level 3 inputs are significant Denverunobservable inputs. Newark Orlando-International* Denver* Debt securities areAustin* valued based on the securities’ relationshipUnited/United to benchmark Express quoted prices. Derivative instruments are valuedHouston using – Hobby a market Airport* approach that considers benchmark Chicago-O’Hare interest rates. Chicago-Midway Airport* Denver The following tableSarasota sets forth by level, within the fair value Washington hierarchy,-Dulles the fair value of the Authority’s West Palm Beach Houston-Bush investments and interest rate swap liabilities as of June 30, 2016: Newark American/American Eagle Airlines Chicago-O’Hare Level 1 Level 2 Level 3 Total Investments: Dallas/Fort Worth Charlotte Government debtPhiladelphia securities $ – $ 39,998,469 $ – $ 39,998,469 Washington-National Interest rate swapMiami liabilities $ – $ 4,502,609 $ – $ 4,502,609 New York-LaGuardia The following table*Denotes sets forthseasonal by service level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 15 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) ORGANIZATIONAL CHART

5. Long-Term Debt (continued) Board of Commissioners

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest payments and netLegal swap Counsel payments will vary. External Auditor

Year ending Variable Rate Bonds Interest Rate June 30 Principal Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483President 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Executive Total $70,635,000 $3,578,297 $3,700,287Assistant $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value Vice President Vice Vice President Vice President of Marketing & Vice President Director of President of of the assets. Level 1 inputs are quoted pricesof Airport in activeof marketsEngineering for identical assets. Level 2 inputs are Air Services of Finance Public Safety Public Operations & Planning significant otherDevelopment observable inputs. Level 3 inputs are significant unobservable inputs. Relations

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 16 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 FINANCIAL SECTION

This section contains the following subsections:

Independent Auditor’s Report

Management’s Discussion and Analysis

Financial Statements

17 This page intentionally left blank

18 Independent Auditor’s Report

Board of Commissioners Metropolitan Knoxville Airport Authority

Report on the Financial Statements

We have audited the accompanying financial statements of the Metropolitan Knoxville Airport Authority (the Authority), a component unit of the City of Knoxville, Tennessee as of and for the years ended June 30, 2020 and 2019, and the related notes to the financial statements, which collectively compromise the Authority’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

The Authority’s 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 audits. We conducted our audits 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 audits 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 Authority’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 Authority’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.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Metropolitan Knoxville Airport Authority as of June 30, 2020 and 2019, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

19 Board of Commissioners Metropolitan Knoxville Airport Authority

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 22 through 30 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, who 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 audits 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 an opinion or provide any assurance.

Other Information

Our audits were conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authority’s basic financial statements. The introductory section, Schedule of Long- Term Debt Principal and Interest Requirements, Schedule of Changes in Long-Term Debt by Individual Issue and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards, State Financial Assistance and Passenger Facility Charges Collected and Expended is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration, and is also not a required part of the basic financial statements.

The Schedule of Expenditures of Federal Awards, State Financial Assistance and Passenger Facility Charges Collected and Expended, the Schedule of Long-Term Debt Principal and Interest Requirements and the Schedule of Changes in Long-Term Debt by Individual Issue are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has 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 information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have 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 them.

20 Board of Commissioners Metropolitan Knoxville Airport Authority

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2020, on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely 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 effectiveness of the Authority’s 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. Coulter & Justus, P.C.

December 9, 2020 Knoxville, Tennessee

21 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

MANAGEMENT’S DISCUSSION AND ANALYSIS

5. Long-TermThe following Debt (continued)discussion and analysis of the Metropolitan Knoxville Airport Authority’s financial performance provides an overview of the financial activities of the McGhee Tyson Airport and the Knoxville Downtown Island Airport for the fiscal year ended June 30, 2020. Following this MD&A are the basic Scheduled Debtfinancial Service statements Requi of rementsthe Authority together with the notes thereto. As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming currentAirport interest activities rates highlights remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsThe details and of net major swap airport payments indicators will for vary.the fiscal years 2018-2020 are as follows:

2020 2019 2018 Year ending Enplanements Variable Rate Bonds 975,910 Interest1,191,198 Rate 1,057,578 June 30 % (decrease) increasePrincipal Interest (18.07)% Swaps,12.63% net 10.34% Total Aircraft operations 109,071 119,802 111,989 2017 % (decrease) increase$ 4,590,000 $ 562,983 (8.96)% $ 6.98%985,043 12.15% $ 6,138,026 Landed weight (thousand pound units) 1,498,459 1,648,257 1,511,615 2018 % (decrease) increase4,825,000 522,361 (9.09)% 9.04%830,113 7.41% 6,177,474 2019 Cargo (pounds)5,075,000 479,483 83,936,760 83,282,205667,315 82,377,022 6,221,798 2020 % (decrease) increase5,335,000 434,090 0.78% 1.10%496,213 (3.41)% 6,265,303 2021 During fiscal year 52020,610,000, McGhee Tyson Airport386,211 offered East Tennessee travelers316,408 2 7 nonstop airline6,312,619 2022-202destinations6 flown 32,520,000 by five airlines and their affiliates.1,107,156 Few other communities of this405,195 size provide such a broad34,032,351 2027-2028range of nonstop cities.12,680,000 86,013 - 12,766,013 TotalFinancial highlights$70,635,000 $3,578,297 $3,700,287 $77,913,584 The Airport Authority is an instrumentality of the City of Knoxville, Tennessee. The Authority issues a Comprehensive Annual Financial Report, which is incorporated in the City of Knoxville’s Comprehensive 6. Fair ValueAnnual Financial Report. The financial statements following this MD&A are comprised of the Statements of Net Position, the Statements of Revenues, Expenses and Changes in Net Position, the Statements of Cash Flows and the accompanying Notes to the Financial Statements. The financial information herein The Authorityis presented categorizes at a summarized its fair value level measurements for analysis purposes within only. the See fairNote value 1 to thehierarchy financial establishedstatements for by generally accepted accountingsignificant accountingprinciples. policies The relatedhierarchy to the is Authority. based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are 2019-2020: significant otherThe Airport observable Authorit inputs.y’s operating Level revenues 3 inputs decreased are significantby $4,022,482 unobservable or 11.90% from inputs. FY2019 to FY2020 and operating expenses decreased by $1,352,613 or 5.73% from FY2019 to FY2020. The decrease in revenues Debt securitiesand expenses are valued is primarily based due onto thethe COVID securities’-19 outbreak relationship as a global topandemic benchmark. Detail summary quotedof prices.activity Derivative instruments forare fiscal valued year using2020 and a market2019 are approachas follows: that considers benchmark interest rates. Aviation revenues decreased 10.08% and terminal area revenues decreased 10.73% primarily due to an The following18.07% table decr setsease in forth enplanements by level, and withina 17.81% the decrease fair in value passengers hierarchy, served. Air the cargo fair and value other ofproperty the Authority’s investmentsrevenues and interest decreased rate 20.92 swap% primarilyliabilities as aas result of June of COVID 30, 2016-19. : Aviation expenses decreased 6.32% and terminal area expenses decreased 11.04% primarily due to Airport Authority’s overall efforts to reduce costsLevel in response 1 to the COVIDLevel-19 2 impact. Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 22 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

The Authority’s net nonoperating income increased by $344,709. In FY2020, the Authority recognized revenue of $6,443,513 from the FAA and the Tennessee Department of Transportation through the 5. Long-TermCoronavirus Debt Aid, (continued) Relief, and Economic Security Act (CARES) Airport Grant. The Authority used these funds for reimbursement of operational and maintenance expenses and debt service payments. This is partially offset by a $5,523,680 gain in FY2019 resulting from a land condemnation action by the Tennessee Scheduled DebtDepartment Service of RequiTransportationrementsin FY2019. The proceeds are being used to partially offset Airport Authority As of June 30,expenses 2016 directly, scheduled related to debt the land service condemnation. requirements Interest expenseof the includedvariable in- therate net debt nonoperating and net income swap payments, assuming currentwas relatively interest flat rateswith a remain1.94% increase the same from forthe priortheir year. term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary. There was an increase of 15.52% in net position from $244,125,080 at the beginning of FY2020 to

$282,009,754 at the end of the fiscal year. The change in net position is an indication of whether the overall Year endingfiscal condition of theVariable Authority has Rate improved Bonds or worsened during theInterest year. W eRate feel the overall fiscal June 30condition of the AuthorityPrincipal remains strong. Interest Swaps, net Total

2018 – 2019: 2017 The Airport Authority’s$ 4,590,000 operating revenues $ increased 562,983 by $3,398,974 or 11.18%$ from985,043 FY2018 to FY2019 and$ 6,138,026 2018 operating expenses 4,825,000increased by $1,906,016 or 8.78%522,361 from FY2018 to FY2019. 830,113The increase in revenues and6,177,474 2019 expenses is primarily5,075,000 due to overall increased passenger479,483 traffic and air service667,315 growth. Detail summary of6,221,798 2020 activity for fiscal year5,335,000 2019 and 2018 are as follows:434,090 496,213 6,265,303 2021 Aviation revenues increased5,610,000 13.82% and terminal386,211 area revenues increased 11.49%316,408 primarily due to a 12.63%6,312,619 2022-202increase6 in enplanements 32,520,000 and a 12.64% increase1,107,156 in passengers served. Air cargo405,195 and other property revenues34,032,351 increased 6.02% primarily due to additional leased areas at McGhee Tyson Airport and additional rental 2027-2028income for the new12,680,000 T-Hangars at the Downtown86,013 Island that went into service in FY2018.- 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 Aviation expenses increased 13.14% and terminal area expenses increased 14.95% primarily due to the overall increase in passenger traffic and an increase in repairs and maintenance in the terminal area. 6. Fair Value The Authority’s net nonoperating income increased by $6,228,189 primarily due to a $5,523,680 gain resulting from a land condemnation action by the Tennessee Department of Transportation. The proceeds will be The Authorityused categorizes to partially offset its Airportfair value Authority measurements expenses directly within related the to thefair land value condemnation. hierarchy Interest established expense by generally accepted accountingincluded in principles.the net nonoperating The hierarchy income was is relativelybased on flat thewith valuation a 1.58% decrease inputs from used the toprior measure year. the fair value of the assets.There Level was 1an inputsincrease are of 18.3 quoted5% in pricesnet position in active from $206,273,988 markets for at identicalthe beginning assets. of FY2019 Level to 2 inputs are significant other$244,125,080 observable at the endinputs. of the Level fiscal year.3 inputs are significant unobservable inputs.

2017 – 2018: Debt securitiesThe Airport are valued Authority’s based operating on the revenues securities’ increased relationship by 4.51% from to benchmarkFY2017 to FY2018 quoted due prices.to the Derivative instruments following:are valued using a market approach that considers benchmark interest rates.

The followingAviation table and sets terminal forth area by revenues level, increased within 4.04% the fair and value4.65%, hierarchy,respectively, due the to fair a 10.34% value increase of the of Authority’s enplanements, a 3.06% increase in rental car revenue and a 4.17% increase in parking revenue received from investmentspassengers and interest leading rate to swap improved liabilities revenues as ofin theJune terminal 30, 2016 area.: Air cargo and other property revenues increased 4.42% primarily due to additional leased areas. Level 1 Level 2 Level 3 Total Operating expenses increased 1.78%. The relatively flat increase was a result of effective cost management. Investments: GovernmentThe Authority debt securities realized a 19.33% decrease$ in interest expense.– $ The39,998,469 decrease was primarily$ due– to the refinance$ 39,998,469 of the Authority’s Series II-D-1 bond to a lower interest rate note and a reduction in the principal balance. Interest rateThere swap was liabilities an increase in net position$ from $184,085,854– at$ the 4,502,609beginning of FY2018$ to $206,273,988– $ at the4,502,609 end of the fiscal year. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 23 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

Summary of revenues, expenses and changes in net position 5. Long-Term Debt (continued) Year ended June 30 Scheduled Debt Service Requirements 2020 2019 2018 As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, Operating revenues $ 29,779,276 $ 33,801,758 $ 30,402,784 assuming currentOperating interest expenses rates remain the same for their term(22,262,014) are as follows.(23,614,627) As rates vary,(21,708,611) variable -rate bond interest paymentsOperating and netrevenues swap in payments excess of operating will vary. expenses before depreciation and amortization 7,517,262 10,187,131 8,694,173 Year endingDepreciation and amortizationVariable Rate Bonds (10,055,598) Interest(9,912,669) Rate (9,499,946) Operating (loss) income (2,538,336) 274,462 (805,773) June 30 Net nonoperating Principal income Interest 10,385,206 Swaps,10,040,497 net 3,812,308 Total Income before capital contributions 7,846,870 2017 $ 4,590,000 $ 562,983 $ 10,314,959985,043 3,006,535 $ 6,138,026 2018 Capital contributions4,825,000 522,361 30,037,804 27,536,133830,113 19,181,599 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 Increase in net position5,335,000 434,090 37,884,674 37,851,092496,213 22,188,134 6,265,303 Net position at beginning of year 244,125,080 206,273,988 184,085,854 2021 Net position at5 end,610,000 of year 386,211 $282,009,754 $244,125,080316,408 $206,273,988 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028Financial summary12,680,000 86,013 - 12,766,013

Total $70,635,000 $3,578,297 Year$ ended3,700,287 June 30 $77,913,584 2020 2019 2018

6. Fair ValueUnrestricted current assets $ 70,870,042 $ 70,643,754 $ 60,925,770 Restricted current assets 3,570,406 2,400,645 1,937,806 The AuthorityCapital categorizes assets, net its fair value measurements within256,468,376 the fair value233,324,539 hierarchy established209,828,418 by generally Master plans and other plans, net 583,405 465,993 393,642 accepted accountingOther principles. The hierarchy is based on the valuation5,248 inputs465,227 used to measure512,713 the fair value of the assets. Total Level assets 1 inputs are quoted prices in active331,497,477 markets for 307,300,158 identical assets.273,598,349 Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. Deferred outflows of resources – deferred charge on debt refunding 916,666 1,069,444 1,222,222 Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments areTotal valued assets using and adeferred market outflows approach of resources that considers$332,414,143 benchmark$308,369,602 interest rates.$274,820,571

The followingCurrent table liabilities sets forth by level, within the fair $ value4,711,889 hierarchy,$ 12,374,043 the fair value$ 10,894,574 of the Authority’s Long-term debt, less current portion 45,640,000 51,465,000 57,045,000 investments andInvestment interest interest rate swap rate swap liabilities liability as of June 30, 2016: – 405,479 607,009 Unearned revenue 52,500 – – Total liabilities Level 1 50,404,389Level 2 64,244,522Level 3 68,546,583Total Investments: Net investment in capital assets 210,964,151 173,637,819 146,198,639 GovernmentRestricted debt securitiesnet position $ – $ 3,570,40639,998,469 2,400,645$ – 1,937,806$ 39,998,469 Unrestricted net position 67,475,197 68,086,616 58,137,543 Interest rate swapTotal netliabilities position $ – $282,009,754 4,502,609 244,125,080$ – 206,273,988$ 4,502,609 Total liabilities and net position $332,414,143 $308,369,602 $274,820,571 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 24 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

The largest portion of the Authority’s net position each year represents its investment in capital assets less the related indebtedness outstanding used to acquire those capital assets. The Authority uses these capital 5. Long-Termassets to Debt provide (continued) services to its passengers and visitors; consequently, these assets are not available for future spending. Scheduled Debt Service Requirements Although the Authority’s investment in its capital assets is reported net of related debt, the resources As of June 30,required 2016 to, repayscheduled this debt debt must service be provided requirements annually from of optheerations, variable since-rate it isdebt unlikely and the net capital swap payments, assuming currentassets themselvesinterest rates will be remain liquidated the to same pay liabilities.for their Another term are portion as follows. of net position As rates is restrictedvary, variable and -rate bond interest paymentsprimarily and represents net swap Passenger payments Facility will C hargesvary. (PFC) that are restricted by Federal regulations. The remaining portion of net position is externally unrestricted and may be used to meet any of the Authority’s Year endingongoing obligations. Variable Rate Bonds Interest Rate June 30Airline signatoryPrincipal rates and charges Interest Swaps, net Total The Authority and certain airlines negoti ated an agreement effective July 1, 2018, for five years, which 2017 established how $those 4,590,000 airlines would be assessed$ 562,983 annual rates and charged $for 985,043their use of the airport . $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 Terminal rates and landing fees are estimated at the beginning of the year with an annual year-end settlement 2019 calculation. The rates5,075,000 and charges for the signatory479,483 airlines were as follows: 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 Year ended316,408 June 30 6,312,619 2020 2019 2018 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028Landing fees (per12,680,000 1,000 lbs. MCLW) 86,013 $2.99 $3.14- $3.13 12,766,013 Total Terminal rates$ 70,635,0(per square00 foot) $3,578,297 $40.30 $3,700,287$48.84 $43.22 $77,913,584 Loading bridge rate per bridge $95,295 $40,574 $43,802 Apron charge per gate $84,802 $92,101 $86,085 6. Fair Value Cost per enplaned passenger Cost per enplaned passenger or airline cost per passenger is generally considered to be part of an airline’s The Authoritycost categorizes of doing business its fairat an valueairport. measurements Cost per enplaned within passenger the is definedfair value as all hierarchylanding fees, established airside usage by generally accepted accountingcharges, terminal principles. rents and The other hierarchy airline payments is based to airports on the divided valuation by enplaned inputs passengers. used to The measure cost per the fair value of the assets.enplaned Level passenger 1 inputs for McGhee are quoted Tyson pricesAirport were in activeas follows: markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant2020 unobservable2019 inputs. 2018

Debt securitiesCost are per valued enplaned based passenger on the securities’ relationship$8.31 to benchmark$7.26 quoted $7.20 prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 25 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

Financial details 5. Long-TermRevenues Debt (continued) The following schedule presents a summary of operating revenues and nonoperating income: Scheduled Debt Service Requirements Year ended June 30 As of June 30, 2016, scheduled debt service requirements of2020 the variable-2019rate debt and 2018 net swap payments, assuming currentOperating interest revenues: rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsAviation and area net swap payments will vary. $ 5,491,542 $ 6,107,314 $ 5,365,728 Terminal area 20,910,056 23,423,378 21,008,481 Year endingAir cargo and other Variableproperties Rate Bonds 3,377,678Interest 4,271,066 Rate 4,028,575 Total operating revenues 29,779,276 33,801,758 30,402,784 June 30 Principal Interest Swaps, net Total Nonoperating income and capital 2017 contributions: $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 Passenger facility4,825,000 charges, net 522,361 3,890,584 4,842,501830,113 4,291,948 6,177,474 Customer facility charges 512,816 – – 2019 Interest income 5,075,000 479,483 996,817667,315 984,796 449,928 6,221,798 2020 Change in fair value5,335,000 of investment interest rate434,090 swap 405,479496,213 201,530 584,247 6,265,303 2021 Federal and state5 ,610,000grants 386,211 6,437,350 316,408 30,007 99,733 6,312,619 Other nonoperating income 118,428 5,735,698 168,575 2022-2026 Capital contributions 32,520,000 – grant receipts from1,107,156 405,195 34,032,351 2027-2028 governmental12,680,000 agencies 86,013 30,037,804 27,536,133- 19,181,599 12,766,013 Total Net nonoperating $70,635,0 income00 and capital contributions$3,578,297 42,399,278 $39,330,6653,700,287 24,776,030$77,913,584 Total revenues and nonoperating income $72,178,554 $73,132,423 $55,178,814

6. Fair ValueThe following chart shows the operating revenues for the past three fiscal years.

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting35,000,000 principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are 30,000,000 significant other observable inputs. Level 3 inputs are significant unobservable inputs.

25,000,000 Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued20,000,000 using a market approach that considers benchmark interest rates.

The following table15,000,000 sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: 10,000,000 Level 1 Level 2 Level 3 Total 5,000,000 Investments:

Government debt 0securities $ – $ 39,998,469 $ – $ 39,998,469 2020 2019 Interest rate swap liabilities $ 2018 – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 26 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

The sources and the percentage of operating revenue for fiscal year ended June 30, 2020, are shown below.

5. Long-Term Debt (continued)

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary. Aviation area 19%

Year ending Variable Rate Bonds Air Cargo andInterest Rate other properties June 30 Principal Interest 11% Swaps, net Total Terminal area 2017 $ 4,590,000 70%$ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-202Expenses6 32,520,000 1,107,156 405,195 34,032,351 2027-2028The following schedule12,680,000 presents a summary of operating86,013 and nonoperating expenses: - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 Year ended June 30 2020 2019 2018 6. Fair ValueOperating expenses: Aviation area $ 2,472,712 $ 2,639,540 $ 2,332,940 Terminal area 5,980,383 6,722,177 5,847,724 The Authority categorizesAir cargo and itsother fair properties value measurements within1,452,443 the fair value 1,595,465 hierarchy established 1,530,434 by generally accepted accountingSafety principles. The hierarchy is based on the5,060,627 valuation inputs 4,908,770 used to 4,628,650measure the fair value of the assets. LevelAdministration 1 inputs are quoted prices in active 7,295,849 markets for identical 7,748,675 assets. 7,368,863 Level 2 inputs are Total operating expenses 22,262,014 23,614,627 21,708,611 significant other observable inputs. Level 3 inputs are significant unobservable inputs. Depreciation and amortization 10,055,598 9,912,669 9,499,946 Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments areInterest valued expense using a market approach that considers1,787,977 benchmark 1,754,035 interest rates. 1,782,123 Other nonoperating expense 188,291 – – Total expenses $34,293,880 $35,281,331 $32,990,680 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 27 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

The following chart shows the operating expenses for the past three fiscal years.

5. Long-Term Debt (continued)

25,000,000 Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates20,000,000 remain the same for their term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.

Year ending 15,000,000Variable Rate Bonds Interest Rate June 30 Principal Interest Swaps, net Total 10,000,000 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,0005,000,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303

2021 5,610,0000 386,211 316,408 6,312,619 2022-2026 32,520,000 2020 1,107,156 405,195 34,032,351 2019 2027-2028 12,680,000 86,013 2018 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair ValueThe sources and the percentage of operating expense for fiscal year ended June 30, 2020, are shown below.

The Authority categorizes its fair value measurementsAviation Area within the fair value hierarchy established by generally accepted accounting principles. The hierarchy11% is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationshipAdministration to benchmark quoted prices. Derivative instruments are valued using a market approachTerminal Area that considers benchmark33% interest rates. 27% The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Safety 23%Level 2 Level 3 Total Investments: Air Cargo and Government debt securitiesother properties $ – $ 39,998,469 $ – $ 39,998,469 6%

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 28 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

Summary of cash flow activities 5. Long-Term Debt (continued) Year ended June 30 2020 2019 2018 Scheduled Debt Service Requirements As of June 30,Operating 2016, scheduled activities debt service requirements$ of8,160,920 the variable$ 8,209,523-rate debt and$ 8,894,883 net swap payments, Investing activities 30,971,586 (4,050,439) 6,183,959 assuming currentNoncapital interest financing rates remain activities the same for their term6,566,451 are as follows.169,040 As rates vary, 268,308 variable-rate bond interest paymentsCapital and and net related swap financing payments activities will vary. (17,067,703) (801,772) (13,394,004) Net increase in cash and equivalents 28,631,254 3,526,352 1,953,146 Year endingCash and cash equivalentsVariable at beginning Rate of Bonds year 21,709,787Interest 18,183,435 Rate 16,230,289 June 30 Principal Interest Swaps, net Total Cash and cash equivalents at end of year $50,341,041 $21,709,787 $18,183,435

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 Financial statements 2018 The Authority’s financial4,825,000 statements are prepared522,361 on an accrual basis in accordance830,113 with accounting 6,177,474 2019 principles generally 5,075,000accepted in the United States479,483 of America promulgated by the667,315 Governmental Accounting 6,221,798 2020 Standards Board. The5,335,000 Authority is structured as434,090 a single enterprise fund with496,213 revenue recognized when 6,265,303 earned, not when received. Expenses are recognized when incurred, not when they are paid. Capital assets 2021 are capitalized (except5,610,000 land and construction 386,211in progress) and are depreciated316,408 over their useful lives. 6,312,619 2022-202Amounts6 are restricted32,520,000 for debt service and, where1,107,156 applicable, for construction405,195 purposes. See the notes to34,032,351 2027-2028the financial statements12,680,000 for a summary of the Authority’s86,013 significant accounting policies.- 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 Capital acquisitions and construction activities During fiscal year ended June 30, 2020, the Authority expended $36,158,929 on capital activities. This 6. Fair Valueincluded land acquisitions and major construction projects. During fiscal year ended June 30, 2020, completed projects totaling $2,970,260 were closed from The Authorityconstruction categorizes-in-progress its fair to valuetheir respective measurements capital accounts. within the fair value hierarchy established by generally accepted accountingProperty and principles. equipment Theacquisitions hierarchy are capitalizedis based aton cost. the Acquisitionsvaluation inputsare funded used using to ameasure variety of the fair value of the assets.financing Level techniques, 1 inputs including are quoted federal prices grants, instate active grants, markets debt issuances, for identical and airport assets. revenues. Level See 2 inputs are significant otherNote 4observable in the notes toinputs. the financial Level statements 3 inputs for are more significant detailed information unobservable on capital inputs. asset activity.

Long-term debt Debt securitiesThe outstanding are valued long based-term debt on ofthe the Authority securities’ is $ relationship45,640,000 at June to 30 benchmark, 2020, which consists quoted of prices.Notes Derivative instruments Payableare valued. using a market approach that considers benchmark interest rates.

The followingThe Authority’s table sets most forth recent by issuance level, withinof debt was the the fair Airport value Revenue hierarchy, Refunding the Note, fair Series value 2019A, of thein Authority’s the amount of $39,570,000. The note is secured by and payable solely from the net revenues derived from investmentsthe and operations interest of rate the swapairport liabilitiesby the Authority as of as Junedefin 30,ed in 2016 the Master: Plan Resolution. The Series 2019A Note was issued to refund a portion of the Authority’s Series V-A-1 Bonds and to terminate the variable interest rate. The refunding did not extendLevel the maturity 1 date ofLevel the bonds 2 but fixedLevel the interest 3 rate for theTotal remaining term due. Maturities range from 2022 to 2028. The principal and interest payable on the debt is Investments:paid from airport revenues. Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 29 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-TermThe latest Debt series (continued) of Local Government Public Improvement Revenue Bonds issued by the Authority is the Series V-A-1 Bonds issued in December 2008. As stated above, a portion of the bonds was refunded in Scheduled DebtJune 2019.Service The Requi remainingrements V-A-1 bonds totaling $8,880,000 was paid off during fiscal year 2020. As of June 30,The Authority2016, scheduled also has an Airportdebt service Revenue requirementsRefunding Note Seriesof the 2017A variable issued- rateMay 2017debt with and a remaining net swap payments, assuming currentbalance interest of $6,070,000 rates. Maturities remain therange same from 202for2 theirto 2026. termThe areprincipal as follows. and interest As payablerates vary, on the variable debt -rate bond interest paymentsis paid fromand airportnet swap revenues. payments will vary.

The notes payable are secured by and payable solely from the net revenues derived from the operations of Year endingthe airport by the AuthorityVariable as defined Rate in the Bonds Master Plan Resolution. DetailedInterest information Rate on long-term June 30debt activity can bePrincipal found in Note 5 of the notesInterest to the financial statements.Swaps, net Total

2017 Passenger facility$ 4,590,000 charges $ 562,983 $ 985,043 $ 6,138,026 2018 On October 6, 1993,4,825,000 the Metropolitan Knoxville522 Airport,361 Authority received 830,113approval from the Federal 6,177,474 Aviation Administration (FAA) to collect a $3.00 PFC on each passenger enplaning at McGhee Tyson 2019 Airport. On September5,075,000 16, 2003, the FAA approved479,483 an increase in the Authority’s667,315 PFC rate to $4.50 per 6,221,798 2020 enplaning passenger.5,335,000 The FAA determined that434,090 the earliest effective date for the496,213 new rate was October 1, 6,265,303 2021 2003. The collection 5 ,610,000authority has been extended386,211 to July 1, 2022. As of June 30,316,408 2020, the Authority had 6,312,619 collected $79,370,523 of PFC revenue and expended $76,923,361 on approved projects. The FAA has 2022-202authorized6 $103, 771,92132,520,000PFC collection by the1,107,156 Airport Authority as of June 30,405,195 2020. 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 TotalCustomer f acility$70,635,0 charges00 $3,578,297 $3,700,287 $77,913,584 On February 1, 2020, the Authority began collecting a $4.00 per day transaction fee, known as a customer facility charge (CFC), from rental car operators serving McGhee Tyson Airport. Fees collected are to fund the 6. Fair Valueplanning, design/engineering, construction of new car rental facilities, and/or improvements to the existing car rental facilities, including any associated infrastructure costs or payments of any Authority debt service incurred to finance these costs or ongoing maintenance of rental car facilities. As of June 30, 2020, the Authority has The Authority$512,816 categorizes of CFCs availableits fair forvalue authorized measurements use. within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets.Request Level for 1 information inputs are quoted prices in active markets for identical assets. Level 2 inputs are The financial report is designed to provide a general overview of the Authority’s finances for all those significant otherinterested. observable Questions inputs. concerning Level any 3of inputs the information are significant provided unobservable in this report or inputs.request for additional information should be addressed in writing to the Vice President of Finance or the Controller, Metropolitan Debt securitiesKnoxville are Airport valued Authority, based P. onO. Boxthe 15600, securities’ Knoxville, relationship TN 37901 or by to email benchmark to [email protected] quoted prices.or to Derivative instruments [email protected] valued using. a market approach that considers benchmark interest rates. Respectfully submitted, The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: GovernmentNancy White,debt securitiesCPA, C.M. $ – Yin$ 39,998,469Chen, CPA $ – $ 39,998,469 Vice President, Finance Controller

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 30 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

STATEMENTS OF NET POSITION 5. Long-Term Debt (continued)

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rateJune debt 30 and net swap payments, assuming current interest rates remain the same for their term are as follows.2020 As rates vary,2019 variable-rate bond interest paymentsAssets and net swap payments will vary. Unrestricted current assets: Year endingCash and cash equivalentsVariable Rate Bonds $ Interest 47,210,695 Rate$ 20,232,142 June 30 Investments Principal Interest Swaps, 8,411,380 net 38,394,976 Total Receivables: 2017 Trade $ 4,590,000 $ 562,983 $1,397,448 985,043 940,626 $ 6,138,026 2018 Government agencies4,825,000 522,361 11,081,742830,113 8,354,367 6,177,474 2019 Other receivables5,075,000 479,483 1,220,248667,315 1,212,519 6,221,798 2020 Interest 5,335,000 434,090 46,637496,213 58,994 6,265,303 2021 Prepaid expenses 5 and,610,000 other current assets 386,211 1,501,892316,408 1,450,130 6,312,619 2022-202Total6 unrestricted 32,520,000 current assets 1,107,156 70,870,042405,195 70,643,75434,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total Restricted current $70,635,0 assets: 00 $3,578,297 $3,700,287 $77,913,584 Cash and cash equivalents 3,130,346 1,477,645 6. Fair ValueReceivables 440,060 923,000 Total restricted current assets 3,570,406 2,400,645 Total current assets 74,440,448 73,044,399 The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accountingNoncurrent principles. assets: The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Capital Level assets, 1 inputs net of accumulated are quoted depreciation prices in active markets for 256,468,376 identical assets.233,324,539 Level 2 inputs are significant otherMaster observable plans and otherinputs. plans, Level net of 3 accumulated inputs are significant unobservable inputs. amortization 583,405 465,993 Debt securitiesOther are valued based on the securities’ relationship to benchmark 5,248 quoted465,227 prices. Derivative instruments Totalare valued noncurrent using assets a market approach that considers benchmark 257,057,029 interest rates. 234,255,759

The followingTotal table assets sets forth by level, within the fair value hierarchy, 331,497,477 the fair value 307,300,158 of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: Deferred outflows of resources Deferred charge on debt refunding Level 1 Level 2 916,666Level 3 1,069,444Total Investments:Total assets and deferred outflows of resources $ 332,414,143 $ 308,369,602 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 31 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

STATEMENTS OF NET POSITION (continued) 5. Long-Term Debt (continued)

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rateJune debt 30 and net swap payments, assuming current interest rates remain the same for their term are as follows.2020 As rates vary,2019 variable-rate bond interest paymentsLiabilities and and net net swap position payments will vary. Current liabilities: Year endingAccounts payable - non-constructionVariable Rate Bonds $ Interest 1,649,195 Rate$ 988,628 June 30 Accounts payablePrincipal - construction Interest Swaps, 1,364,296 net 4,177,157 Total Accrued payroll and other expenses 1,604,399 1,617,474 2017 Accrued interest $ 4,590,000 $ 562,983 $ 93,999985,043 10,784 $ 6,138,026 2018 Current portion of4,825,000 long-term debt 522,361 830,113 - 5,580,000 6,177,474 2019 Total current liabilities5,075,000 479,483 4,711,889667,315 12,374,043 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 Long-term liabilities:5,610,000 386,211 316,408 6,312,619 2022-2026Long-term debt,32,520,000 less current portion 1,107,156 45,640,000405,195 51,465,000 34,032,351 2027-2028Investment interest12,680,000 rate swap liability 86,013 - - 405,479 12,766,013 Total Unearned revenue$70,635,000 $3,578,297 $ 3,700,287 52,500 $- 77,913,584 Total long-term liabilities 45,692,500 51,870,479 Total liabilities 50,404,389 64,244,522 6. Fair Value Net position: The AuthorityNet categorizes investment inits capital fair valueassets measurements within the fair value210,964,151 hierarchy established173,637,819 by generally accepted accountingRestricted principles. - expendable: The hierarchy is based on the valuation inputs used to measure the fair value of the assets. LevelPassenger 1 facility inputs charges are quoted prices in active markets for 2,635,162 identical assets. 1,939,544 Level 2 inputs are significant otherLaw observable enforcement inputs. Level 3 inputs are significant unobservable 422,428 inputs. 461,101 Customer facility charges 512,816 - Debt securitiesUnrestricted are valued based on the securities’ relationship to benchmark67,475,197 quoted 68,086,616 prices. Derivative instruments Totalare valued net position using a market approach that considers benchmark 282,009,754 interest rates.244,125,080

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments:Total liabilities and net position $ 332,414,143 $ 308,369,602 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609 See accompanying Notes to Financial Statements.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 32 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

STATEMENTS OF REVENUES, EXPENSES 5. Long-Term Debt (continued)AND CHANGES IN NET POSITION

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variableYear- rateended debt June and 30 net swap payments, assuming current interest rates remain the same for their term are as follows.2020 As rates 2019vary, variable-rate bond interest paymentsOperating and revenues: net swap payments will vary. Aviation area $ 5,491,542 $ 6,107,314 Year endingTerminal area Variable Rate Bonds Interest20,910,056 Rate 23,423,378 June 30 Air cargo and otherPrincipal properties Interest 3,377,678Swaps, net 4,271,066 Total Total operating revenues 29,779,276 33,801,758 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 Operating expenses:4,825,000 522,361 830,113 6,177,474 2019 Aviation area 5,075,000 479,483 2,472,712667,315 2,639,540 6,221,798 2020 Terminal area 5,335,000 434,090 5,980,383496,213 6,722,177 6,265,303 Air cargo and other properties 1,452,443 1,595,465 2021 General area: 5,610,000 386,211 316,408 6,312,619 2022-2026 Safety 32,520,000 1,107,156 5,060,627405,195 4,908,770 34,032,351 2027-2028 Administration12,680,000 86,013 7,295,849 - 7,748,675 12,766,013 Total Total operating $ 70,635,0expenses 00 $3,578,297 22,262,014$3,700,287 23,614,627 $77,913,584 Operating revenues in excess of operating expenses 6. Fair Valuebefore depreciation and amortization 7,517,262 10,187,131 Depreciation and amortization (10,055,598) (9,912,669) The AuthorityOperating categorizes (loss) incomeits fair value measurements within the fair value(2,538,336) hierarchy established 274,462 by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets.Nonoperating Level 1 inputs income are(expense): quoted prices in active markets for identical assets. Level 2 inputs are significant otherPassenger observable facility charges,inputs. net Level 3 inputs are significant unobservable 3,890,584 inputs. 4,842,501 Customer facility charges 512,816 -

Interest income 996,817 984,796 Debt securitiesChange are in valued fair value based of investment on the interest securities’ rate swap relationship to benchmark 405,479 quoted 201,530 prices. Derivative instruments areInterest valued expense using a market approach that considers benchmark (1,787,977) interest rates. (1,754,035) Federal and state grants 6,437,350 30,007 The followingOther table nonoperating, sets forth net by level, within the fair value hierarchy, (69,863) the fair value 5,735,698 of the Authority’s investments Netand nonoperating interest rate income swap liabilities as of June 30, 2016: 10,385,206 10,040,497 Income before capital contributions 7,846,870 10,314,959 Level 1 Level 2 Level 3 Total Investments:Capital contributions 30,037,804 27,536,133 GovernmentIncrease debt in netsecurities position $ – $ 39,998,469 37,884,674 $ – 37,851,092$ 39,998,469

Interest rateNet swap position liabilities at beginning of year $ – $ 4,502,609 244,125,080 $ –206,273,988 $ 4,502,609

Net position at end of year $ 282,009,754 $ 244,125,080 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments Seeand accompanying derivative Notes investments to Financial Statements. as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 33 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

STATEMENTS OF CASH FLOWS 5. Long-Term Debt (continued)

Scheduled Debt Service Requirements Year ended June 30 As of June 30, 2016, scheduled debt service requirements of the variable2020-rate debt and2019 net swap payments, assuming currentOperating interest activities rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsOperating and cash net received swap frompayments customers will vary. $ 29,367,225 $ 32,505,440 Cash payments to suppliers of goods and services (7,508,692) (10,926,896) Year endingCash payments to employeesVariable for services Rate Bonds Interest (13,697,613) Rate (13,369,021) June 30Net cash providedPrincipal by operating activities Interest Swaps, 8,160,920 net 8,209,523 Total

2017 Investing activities $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 Interest received 4,825,000 522,361 1,009,174830,113 992,518 6,177,474 2019 Purchases of investments5,075,000 479,483 (35,387,588)667,315 (23,080,545) 6,221,798 2020 Proceeds from maturities5,335,000 of investments 434,090 65,350,000496,213 18,037,588 6,265,303 2021 Net cash provided 5 ,610,000by (used in) investing activities386,211 30,971,586316,408 (4,050,439) 6,312,619 2022-202Noncapital6 financing32,520,000 activities 1,107,156 405,195 34,032,351 2027-2028Receipts from governmental12,680,000 agencies and other financing86,013 activities 6,566,451- 169,04012,766,013 Total Net cash provided $70,635,0 by noncapital00 financing$3,578,297 activities $ 3,700,287 6,566,451 169,040$77,913,584

Capital and related financing activities 6. Fair ValueInterest paid (1,551,984) (1,751,921) Note proceeds - 39,570,000 The AuthorityPayment categorizes for redemption its fair of valuerefunded measurements bonds within the fair value hierarchy - established (39,570,000) by generally accepted accountingRepayments principles. on debt The hierarchy is based on the valuation inputs (11,405,000) used to measure(5,350,000) the fair value of the assets.Debt Level issuance 1 costs inputs are quoted prices in active markets for identical - assets. (120,000) Level 2 inputs are significant otherPurchases observable of capital inputs.assets Level 3 inputs are significant unobservable (36,158,929) inputs. (33,428,508) Proceeds from sale of capital assets 39,732 6,951,584 Debt securitiesReceipts are of valued passenger based facility charges on the securities’ relationship to benchmark 4,625,584 quoted 4,739,501 prices. Derivative instruments Receiptsare valued of customer using afacility market charges approach that considers benchmark interest 260,756 rates. - Grant receipts from governmental agencies 27,310,429 28,157,572 Termination of investment interest rate swap (188,291) - The followingNet tablecash used sets in forth capital by and level, related within financing the activities fair value hierarchy, (17,067,703) the fair value (801,772) of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: Net increase in cash and cash equivalents 28,631,254 3,526,352 Cash and cash equivalents at beginning ofLevel year 1 Level 2 21,709,787Level 3 18,183,435Total Investments:Cash and cash equivalents at end of year $ 50,341,041 $ 21,709,787 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469 Cash and cash equivalents are classfied as: Interest rate Unrestrictedswap liabilities current assets $ – $ 4,502,609$ 47,210,695$ $– 20,232,142$ 4,502,609 Restricted current assets 3,130,346 1,477,645 Total cash and cash equivalents at end of year $ 50,341,041 $ 21,709,787 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments Continuedand derivative on next page investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 34 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term Debt (continued)STATEMENTS OF CASH FLOWS (continued)

Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variableYear-rate ended debt andJune net30 swap payments, assuming current interest rates remain the same for their term are as follows.2020 As rates vary,2019 variable-rate bond Reconciliation of operating (loss) income to net cash interest paymentsprovided and bynet operating swap payments activities: will vary.

Operating (loss) income $ (2,538,336) $ 274,462 Year endingAdjustments to reconcileVariable operating Rate (loss) Bonds income to net cash Interest Rate June 30 provided byPrincipal operating activities: Interest Swaps, net Total Depreciation and amortization 10,055,598 9,912,669 2017 Changes $in 4,590,000operating assets and liabilities: $ 562,983 $ 985,043 $ 6,138,026 2018 Receivables—trade4,825,000 522,361 830,113(464,551) (1,296,318) 6,177,474 2019 Prepaid expenses5,075,000 and other assets 479,483 667,315 408,217 (602,131) 6,221,798 2020 Accounts5,335,000 payable—non-construction 434,090 496,213 660,567 (333,299) 6,265,303 2021 Accrued payroll5,610,000 and other expenses 386,211 316,408 (13,075) 254,140 6,312,619 2022-2026 Unearned 32,520,000 revenue 1,107,156 405,195 52,500 - 34,032,351 2027-2028Net cash provided12,680,000 by operating activities 86,013 $ 8,160,920- $ 8,209,523 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 Noncash and related financing transactions 6. Fair ValuePayables related to the purchase of capital assets totaled $2,812,861 and $1,326,514 as of June 30, 2020 and 2019, respectively. The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accountingNoncash andprinciples. related investing The hierarchy transactions is based on the valuation inputs used to measure the fair value Changes in fair value of investment interest rate swaps totaled $405,479 and $201,530 for the years ended of the assets.June Level 30, 2020 1 and inputs 2019, arerespectively. quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Seeare accompanying valued using Notes ato marketFinancial Statements.approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 35 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS

5. Long-Term1. Significant Debt Accounting(continued) Policies

Scheduled DebtOrganization Service Requiand Reportingrements Entity The Metropolitan Knoxville Airport Authority (the Authority) is an instrumentality of the City of Knoxville, As of June 30,Tennessee 2016 ,(the scheduled City), governed debt byservice a nine- memberrequirements Board of ofCommissioners the variable appointed-rate debt by the and Mayor net ofswap the payments, assuming currentCity and interest confirmed rates by membersremain theof City same Council. for their A Master term Resolution are as follows. was adopted As ratesin 2000 vary, whereby variable the -rate bond interest paymentsAuthority and issues net its swap own revenuepayments obligations. will vary.

Year endingThe reporting entity, asVariable an instrumentality Rate of Bonds the City, includes the accountsInterest of McGhee Rate Tyson Airport and Knoxville Downtown Island Airport. There are no agencies, departments or funds subordinate to the June 30Authority, which mightPrincipal be considered for inclusiIntereston in the reporting entity. Swaps, net Total

2017 The Authority operates$ 4,590,000 under, and pursuant $ to,562,983 the authority granted by the$ Metropolitan 985,043 Airport Authority $ 6,138,026 2018 Act of 1969 (Tennessee4,825,000 Code Annotated Section522 42-4-,361 101, et seq.). 830,113 6,177,474

2019 Basis of Accounting5,075,000 479,483 667,315 6,221,798 2020 The Authority repor5,335,000ts as a Busine ss Type Activity.434,090 Business Type Activities are496,213 those that are financed in6, 265,303 2021 whole or in part by 5fees,610,000 charged to external parties386,211 for goods or services. 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 The Authority’s activities are accounted for similar to those often found in the private sector using the flow 2027-2028of economic resources12,680,000 measurement focus and 86,013the accrual basis of accounting. All assets,- liabilities, net12,766,013 Totalposition, revenues $70,635,0 and expenses00 are accounted$3,578,297 for through a single enterprise$3,700,287 fund with revenues recorded$77,913,584 when earned and expenses recorded at the time liabiliti es are incurred. Current assets include cash and amounts convertible to cash during the next normal operating cycle or one year. Current liabilities include 6. Fair Valuethose obligations to be liquidated with current assets.

Revenues from airlines, concessions, rental cars and parking are reported as operating revenues. Capital, The Authoritygrants, categorizes financing or its investing fair value related measurements transactions are rep withinorted as the nonoperating fair value revenues. hierarchyAll expenses established related by generally accepted accountingto operating principles. the Authority The are hierarchy reported as is operating based onexpenses. the valuation Interest expense inputs andused financing to measure costs are the fair value of the assets.reported Level as nonoperating 1 inputs are expenses quoted. prices in active markets for identical assets. Level 2 inputs are significant otherFiscal observable Year-End inputs. Level 3 inputs are significant unobservable inputs. The Authority operates on a fiscal year ending June 30. All references in these notes refer to the fiscal year- Debt securitiesend unless are otherwise valued basedspecified. on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the The followingUnited table States sets of forthAmerica by requires level, management within the to fairmake value estimates hierarchy, and assumptions the fair that value affect of certain the Authority’s investmentsreported and interest amounts rate and swap disclosures. liabilities Accordingly, as of actJuneual results30, 2016 could: differ from those estimates.

Budgets Under the by-laws of the Authority, managementLevel 1must submitLevel an annual 2 operatingLevel budget 3 to the BoardTotal of Investments:Commissioners for approval. In addition, management must submit to the Board of Commissioners annually Governmenta capital debt-improvements securities budget covering$ a period of five– years.$ 39,998,469 $ – $ 39,998,469

The Authority is not required to demonstrate statutory compliance with its annual operating or capital- Interest rateimprovements swap liabilities budget. Accordingly, budgetary$ data is –not included$ 4,502,609 in the financial $ statements. – All budgets$ are4,502,609 prepared in accordance with bond covenants. Unexpended appropriations lapse at year-end. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 36 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term1. Significant Debt (continued) Accounting Policies (continued)

Scheduled DebtCash Service and Cash Requi Equivalentsrements As of June 30,Cash 2016 and cash, scheduled equivalents debt include service cash on requirements hand, demand deposits, of the moneyvariable market-rate accounts debt and and shortnet -swapterm payments, assuming currentinvestments interest with originalrates remain maturities the of samethree months for their or less term from are the asdate follows. of acquisition. As rates vary, variable-rate bond interest paymentsInvestments and net swap payments will vary. The Authority’s investments are reported at fair value using quoted market price or the best available estimate Year endingthereof. Fair value is definedVariable as the amountRate Bondsat which a financial instrumentInterest could be Rateexchanged in a current June 30transaction with willingPrincipal parties, other than in aInterest forced or liquidation sale. Swaps,All investment net income, including Total changes in the fair value of investments, is reported as nonoperating income in the accompanying statements

2017 of revenues, expenses$ 4,590,000 and changes in net position.$ 562,983 $ 985,043 $ 6,138,026 2018 Amounts Due from4,825,000 Governmental Agencies522,361 830,113 6,177,474 2019 Certain expenditures5,075,000 for airport capital improvements479,483 are significantly funded667,315 through the Airport6,221,798 2020 Improvement Program5,335,000 (AIP) of the Federal Aviation434,090 Administration (FAA) and496,213 the National Guard Bureau,6, 265,303 with certain matching funds provided by the State of Tennessee (State) and the Authority, or from various 2021 state allocations or 5grant,610,000 programs. Capital funding386,211 provided under government316,408 grants is considered earned6,312,619 2022-202when6 the related allowable32,520,000 expenditures are incurred1,107,156 and the funds are available.405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Restricted Assets TotalRestricted assets $ are70,635,0 held to00 satisfy bond principal$3,578,297 an d interest sinking fund$3,700,287 requirements or are otherwise$77,913,584 held for certain capital improvement and certain other restricted expenditures. For expenditures for which both restricted and unrestricted net positions are available, the Authority first applies restricted assets when 6. Fair Valuesuch expenditures are incurred.

The AuthorityCapital categorizes Assets its fair value measurements within the fair value hierarchy established by generally Capital assets are stated at cost and defined by the Authority as assets with an initial cost greater than $5,000. accepted accountingDonated capital principles. assets, ifThe any, hierarchyare reported is atbased acquisition on the value. valuation Maintena inputsnce and usedrepairs to are measure charged tothe fair value of the assets.expense Level as incurred, 1 inputs and arerenewals quoted and betterments prices in are active capitalized. marketsThe cost for and identical accumulated assets. depreciation Level on 2 inputs are significant otherretired observable assets are removed inputs. from Level the books 3 inputs and the are gain significant or loss, if any, unobservable is reflected in nonoperating inputs. activities.

Depreciable capital assets are depreciated using the straight-line method over the following estimated useful Debt securitieslives: are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates. Land improvements 5 – 20 years The following tableBuildings sets and forth building by level,improvements within the fair 5 value – 30 years hierarchy, the fair value of the Authority’s Equipment, furniture and fixtures 3 – 10 years investments and interest rate swap liabilities as of June 30, 2016: Master Plans Master plans are stated at cost. AmortizationLevel is 1computed usingLevel the straight2 -lineLevel method 3 over the plans’Total Investments:estimated useful lives of five years. Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 37 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term1. Significant Debt Accounting(continued) Policies (continued)

Scheduled DebtDeferred Service Outflows Requi ofrements Resources As of June 30,In addition 2016, toscheduled assets, the debtstatement service of net requirements position will sometimes of the variablereport a -separaterate debt section and for net deferred swap payments, outflows of resources. Deferred outflows of resources represent a consumption of net position that applies to assuming currenta future interest period and rates will notremain be recognized the same as anfor outflow their ofterm resources are as (expense) follows. until As then. rates The vary, Authority variable has -rate bond interest paymentsone item and that net qualifies swap fpaymentsor reporting willin this vary. category. The deferred charge on debt refunding results from the difference in the carrying value of refunded debt and its reacquisition price. The amount is deferred and Year endingamortized over the shorterVariable of the life Rate of the refundedBonds or refunding debt. Interest Rate June 30 Principal Interest Swaps, net Total Compensated Absences Compensated absences are accrued as payable when earned and are cumulative from one fiscal year to the 2017 next. The liability $ is4,590,000 included with accrued $payroll 562,983 in the financial statements. $ The985,043 Authority does not have$ 6,138,026 2018 any long -term liabilities4,825,000 for compensated absences.522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 Net position 5,335,000 434,090 496,213 6,265,303 2021 Net position is classified5,610,000 in the following categories:386,211 316,408 6,312,619 2022-2026 Net investment 32,520,000 in capital assets: Capital1,107,156 assets, net of accumulated depreciation405,195 , plus capital-related34,032,351 2027-2028 deferred outflows12,680,000 of resources, less outstanding86,013 principal of debt attributable -to the acquisition,12,766,013 construction or improvement of those assets. Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 Restricted: Nonexpendable – Net position subject to externally imposed stipulations that the Authority maintains 6. Fair Value them permanently. As of June 30, 2020 and 2019, the Authority does not have nonexpendable net position. The Authority categorizesExpendable its– Net fair position value onmeasurements which use by the within Authority the is subjectfair value to externally hierarchy imposed established stipulations by generally that can be fulfilled by actions of the Authority pursuant to those stipulations or that expire by the accepted accountingpassage principles. of time. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant otherUnre observablestricted: Net inputs. position Level that is 3not inputs subject are to externally significant imposed unobservable stipulations. Unrestrictedinputs. net position may be designated for specific purposes by action of management or the Board of Commissioners or may otherwise be limited by contractual agreements with outside parties. Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Operatingare valued Revenues using a market and Expenses approach that considers benchmark interest rates. Aviation area revenues are those revenues received from the use of the airfield such as landing fees, fuel The followingflowage table fees, sets airfield forth site leases by level,and military within joint theuse agreement fair values. hierarchy, the fair value of the Authority’s investmentsTerminal and interest area revenues rate swap are those liabilities revenues as received of June from 30, space 2016 rentals: paid by airlines conducting operations in the terminal and revenues received from public parking, rental car concessions and other businesses operating in the terminal. Level 1 Level 2 Level 3 Total Investments: Air cargo revenues are those revenues received from space leases in the cargo building and the air cargo Governmentcomplex. debt Revenues securities from other properties$ are those revenues– $ 39,998,469received from the $hotel lease –and nonaviation$ 39,998,469 property leases. Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609 All expenses related to operating the Airport are reported as operating expenses. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 38 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term1. Significant Debt Accounting(continued) Policies (continued)

Scheduled DebtRisk ServiceManagement Requirements As of June 30,The 2016Authority, scheduled is subject debtto risks service that include requirements personal injury, of the property variable damage,-rate employee debt and bodily net injury,swap payments, employee theft, employee medical, cyber security, public officials and employee conduct and workers’ assuming currentcompensation. interest The rates Authority remain has the purchased same forinsurance their termpolicies are that as transfer follows. these As risks, rates subject vary, to variable policy -rate bond interest paymentslimits. Settlements and net swap have not payments exceeded insurancewill vary. coverage in any of the past three fiscal years.

Year endingRecently Issued AccountingVariable Pronouncements Rate Bonds Interest Rate June 30In June 2017, the PrincipalGASB, issued Statement No. Interest87, Leases. This Statement requiresSwaps, recognition net of certain leaseTotal assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of

resources or outflows of resources based on the payme nt provisions of the contract. Unde r this Statement, a 2017 lessor is required $ to 4,590,000 recognize a lease receivable $ 562,983 and a deferred inflow of resources,$ 985,043 with certain exceptions $ 6,138,026 2018 for leases subject 4,825,000to external laws, regulations,522 or,361 legal rulings, thereby enhancing830,113 the relevance and6,177,474 2019 consistency of inform5,075,000ation about governments’479,483 leasing activities. Statement No.667,315 87 is effective for periods6,221,798 2020 beginning after June5,335,000 15, 2021. The Authority has434,090 elected not to adopt this standard496,213 early and is in the process6, 265,303 of evaluating the impact of this statement on its financial statements. 2021 5,610,000 386,211 316,408 6,312,619 2022-202Reclassifications6 32,520,000 1,107,156 405,195 34,032,351 2027-2028Certain amounts in12,680,000 prior year have been reclassified86,013 to conform with 2020 classifications. - 12,766,013 Total2. Deposits and$70,635,0 Investments00 $3,578,297 $3,700,287 $77,913,584

Deposits 6. Fair ValueDeposits are included in the Authority’s financial statements as “cash and cash equivalents” and “restricted cash and cash equivalents.” As of June 30, 2020 and 2019, all bank balances in excess of federal insurance The Authoritylimits categorizes were covered its by fair the valuebank collateral measurements pool administered within theby the fair Treasurer value hierarchyof the State establishedof Tennessee. by generally Banks participating in the pool report the aggregate balance of their public fund accounts to the State. accepted accountingCollateral to principles. secure these The deposits hierarchy must be ispledged based to on the the State valuation Treasurer oninputs behalf used of the to bank measure collateral the fair value of the assets.pool. Level The securities 1 inputs pledged are quotedto protect prices these accounts in active are marketspledged in foraggregate identical rather assets.than against Level ea ch 2 inputs are significant otherindividual observable account. Public inputs. fund Level accounts 3 inputs covered are by thesignificant pool are considered unobservable entirely insuredinputs. or collateralized. Investments Debt securitiesThe Authority are valued’s investment based policy on the follows securities’ the City of relationship Knoxville and to Knox benchmark County’s investment quoted policies. prices. Derivative instruments Theseare valued policies usingauthorize a market the Authority approachto invest that idle considersfunds in direct benchmark obligations ofinterest the United rates. States Treasury, its agencies and instrumentalities, money market funds, the state local treasurer’s investment pool (Tennessee Local Government Investment Pool), prime commercial paper, bankers’ acceptance notes, certificates of The followingdeposit, table corporate sets forthbonds, equity by level, funds, withinshort-term the bonds fair and value debt securities. hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: Interest Rate Risk: To limit the Authority’s exposure to fair value losses arising from changing interest rates, the Authority’s investment policy prohibits more than 20% of investments (as defined) to be invested with maturities of greater than two years fromLevel the acquisition 1 date.Level Also, investment 2 maturitiesLevel 3may not exceedTotal Investments:five years from the acquisition date. Investments with maturities of greater than two years require approval of Governmentthe finance debt committee. securities $ – $ 39,998,469 $ – $ 39,998,469

Credit Risk: The Authority’s investment policy allows only investments rated in the highest category by two Interest ratenationally swap liabilitiesrecognized rating services. $As of June 30, –2020, $all the4,502,609 Authority’s investments$ in– debt securities$ 4,502,609 were rated at least Aaa by Moody’s Investor Services or AA+ by Standard & Poor’s rating services. All of the The followingAuthority’s table setsinvestments forth at by June level, 30, 2020 within are debt the securities fair value of U.S. hierarchy, Government the Sponsored fair value Enterprises of the Authority’s investmentswhich and derivativehave an implied investments but not explicit as backingof June of 30, the 2015United: States government.

Level 1 Level 2 Level 3 Total Investments: 39 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term2. Deposits Debt and (continued) Investments (continued)

Investments (continued) Scheduled Debt Service Requirements As of June 30,Custodial 2016 Credit, scheduled Risk: For andebt investment, service custodial requirements credit risk of is thethe risk variable that, in- ratethe event debt of and a failure net ofswap the payments, assuming currentcustodian, interest the Authority rates remain will not bethe able same to recover for their the valueterm of are the as investments follows. orAs collateral rates vary, securities variable that -rate bond interest paymentsare in andthe pnetossession swap ofpayments an outside will party. vary. The Authority’s investments are typically uninsured and unregistered investments for which the securities are held by the custodian’s trust department or agent in the

Authority’s name. Year ending Variable Rate Bonds Interest Rate June 30As of June 30, 2020Principal, the Authority had the followingInterest investments: Swaps, net Total

2017 $ 4,590,000 $ Weighted562,983 Average $ 985,043 Interest Maturity$ 6,138,026 2018 4,825,000 Maturity522,361 (Months) Fair Value830,113 Rates Dates6,177,474 2019 Federal Farm Credit5,075,000 Bank 479,483 13.51 $ 8,411,380667,315 1.50%- 1.53% 02/24/20216,221,798- 2020 5,335,000 434,090 496,213 02/10/20226,265,303 2021 Total investments 5,610,000 386,211 $ 8,411,380316,408 6,312,619 2022-202Portfolio6 weighted 32,520,000 average maturity 1,107,156 13.5 1 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total3. Leases $70,635,000 $3,578,297 $3,700,287 $77,913,584 The Authority, as lessor, leases certain capital assets under operating leases expiring in various years through 6. Fair Value2054. As of June 30, 2020, minimum future base rentals to be received on noncancelable leases are as follows: 2021 $ 5,219,825 The Authority202 categorizes2 its fair value measurements within the fair4,734,849 value hierarchy established by generally accepted accounting2023 principles. The hierarchy is based on the valuation4,739,535 inputs used to measure the fair value of the assets.202 Level4 1 inputs are quoted prices in active markets 3,982,547 for identical assets. Level 2 inputs are 2025 775,729 significant otherThereafter observable inputs. Level 3 inputs are significant unobservable14,577,671 inputs. Total minimum future base rentals $34,030,156 Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Contingentare valued rentals, using which a market consist approach primarily thatof airline considers terminal, benchmark rental car concessions interest rates. and other similar revenues, amounted to $5,648,201 in 2020 and $6,877,647 in 2019. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 40 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term Debt (continued) 4. Capital Assets Scheduled Debt Service Requirements As of June 30,Capital 2016 asset, scheduled activity, including debt master service plans, requirements for the years ended of theJune variable30, 2020 and-rate 2019, debt is as and follows: net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond Beginning Ending interest paymentsYear ended and netJune swap 30, 2020 payments will vary.Balance Increases Decreases Balance

Year endingNondepreciable capitalVariable assets: Rate Bonds Interest Rate June 30 Land Principal $ 38,629,436Interest $ 134,014 Swaps,$ (76,946) net $ 38,686,504 Total Land easements 625,903 - - 625,903

2017 Construction in$ progress4,590,000 $ 96,558,646562,983 32,726,869 $ (2,970,260)985,043 126,315,255 $ 6,138,026 2018 Total nondepreciable 4,825,000 capital assets 135,813,985522,361 32,860,883 (3,047,206)830,113 165,627,662 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 Depreciable capital5,335,000 assets: 434,090 496,213 6,265,303 2021 Land improvements 5,610,000 120,851,163386,211 1,742,389 316,408 - 122,593,552 6,312,619 2022-2026Buildings and building32,520,000 1,107,156 405,195 34,032,351 2027-2028 improvements12,680,000 172,674,93486,013 894,085 - 173,569,019 12,766,013 Equipment, furniture and Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 fixtures 23,474,891 775,587 (71,699) 24,178,779 Total depreciable capital assets 317,000,988 3,412,061 (71,699) 320,341,350 6. Fair ValueLess accumulated depreciation: Land improvements (94,731,119) (3,233,668) - (97,964,787) The AuthorityBuildings categorizes and building its fair value measurements within the fair value hierarchy established by generally accepted accountingimprovements principles. The hierarchy is (113,376,996) based on the (5,453,621) valuation inputs used - to (118,830,617) measure the fair value Equipment, furniture and of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are fixtures (11,382,319) (1,365,391) 42,478 (12,705,232) significant other observable inputs. Level 3 inputs are significant unobservable inputs. Total accumulated depreciation (219,490,434) (10,052,680) 42,478 (229,500,636) Net depreciable capital assets 97,510,554 (6,640,619) (29,221) 90,840,714 Debt securitiesTotal are capital valued assets, based net of on the securities’ relationship to benchmark quoted prices. Derivative instruments areaccumulated valued using depreciation a market approach$ 233,324,539that considers$ 26,220,264 benchmark$ (3,076,427)interest rates.$ 256,468,376

The followingOther table capital sets assets: forth by level, within the fair value hierarchy, the fair value of the Authority’s investments andMaster interest plans andrate other swap plans liabilities as$ of 10,386,209 June 30, 2016$ :120,330 $ - $ 10,506,539 Accumulated amortization (9,920,216) (2,918) - (9,923,134) Net other capital assets Level$ 465,9931 $ Level 117,412 2 $ Level - $3 583,405Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 41 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term Debt (continued) NOTES TO FINANCIAL STATEMENTS (continued) Scheduled Debt Service Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current4. Capital interest Assets rates (continued) remain the same for their term are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.Beginning Ending

Year ended June 30, 2019 Balance Increases Decreases Balance Year ending Variable Rate Bonds Interest Rate June 30Nondepreciable Principal capital assets: Interest Swaps, net Total Land $ 39,194,515 $ 803,075 $ (1,368,154) $ 38,629,436

2017 Land easements $ 4,590,000 $ 562,983625,903 - $ 985,043 - 625,903 $ 6,138,026 2018 Construction in progress4,825,000 74,299,232522,361 33,360,044 (11,100,630)830,113 96,558,646 6,177,474 2019 Total nondepreciable 5,075,000 capital assets 114,119,650479,483 34,163,119 (12,468,784)667,315 135,813,985 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 Depreciable capital5,610,000 assets: 386,211 316,408 6,312,619 2022-2026Land improvements 32,520,000 1,107,156119,124,106 1,997,958 405,195 (270,901) 120,851,163 34,032,351 2027-2028Buildings and building12,680,000 86,013 - 12,766,013 improvements 171,666,530 1,008,404 - 172,674,934 Total Equipment, furniture$70,635,0 and 00 $3,578,297 $3,700,287 $77,913,584 fixtures 15,135,396 8,594,274 (254,779) 23,474,891 6. Fair ValueTotal depreciable capital assets 305,926,032 11,600,636 (525,680) 317,000,988 Less accumulated depreciation: The AuthorityLand categorizes improvements its fair value measurements (91,898,235) within (3,073,806)the fair value hierarchy240,922 established(94,731,119) by generally accepted accountingBuildings principles. and building The hierarchy is based on the valuation inputs used to measure the fair value improvements of the assets. Level 1 inputs are quoted prices (107,914,675) in active markets (5,462,321) for identical - assets. (113,376,996) Level 2 inputs are Equipment, furniture and significant otherfixtures observable inputs. Level 3 inputs (10,404,354) are significant (1,204,218) unobservable 226,253 inputs. (11,382,319) Total accumulated depreciation (210,217,264) (9,740,345) 467,175 (219,490,434) Debt securitiesNet depreciable are valued capital based assets on the securities’ 95,708,768 relationship 1,860,291 to benchmark (58,505) quoted 97,510,554 prices. Derivative instruments Totalare valued capital using assets, a net market of approach that considers benchmark interest rates. accumulated depreciation $ 209,828,418 $ 36,023,410 $ (12,527,289) $ 233,324,539 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments Otherand interest capital assets: rate swap liabilities as of June 30, 2016: Master plans and other plans $ 10,294,312 $ 91,897 $ - $ 10,386,209 Accumulated amortization Level (9,900,670) 1 Level (19,546) 2 Level - 3 (9,920,216)Total Investments:Net other capital assets $ 393,642 $ 72,351 $ - $ 465,993 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469 The Authority is contractually obligated to expend an additional $29,000,000 for various projects. Interest rateEstimated swap liabilitiescosts to complete construction$ in progress–for these$ projects4,502,609total approximately$ –$30,400,000 $ as 4,502,609 of June 30, 2020. The work will be funded through proceeds from Federal and State grants and other Authority funds. The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 42 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term4. Capital Debt Assets (continued) (continued)

In October 2018, the State of Tennessee (the State) brought four condemnation actions against the Authority Scheduled Debtunder Serviceeminent domainRequi rementslaws to acquire certain parcels of real property owned by the Authority in connection As of June 30,with 2016the Alcoa, scheduled Highway Relocationdebt service Project requirements. The State alleges of theit owes variable the Authority-rate debt $6,530,005 and net for swap these payments, assuming currentparcels. interestThe Authority rates assertsremain the the amount same assessed for their by the term State are does as not follows. reflect the As current rates fairvary, value variable of the -rate bond interest paymentsparcels and seeks net swapa jury trialpayments as to the willamount vary. of just compensation to be paid by the State. The lawsuits are currently in the discovery phase of litigation and no trial date has been set at this time. Year endingDuring 2019, the AuthorityVariable received Rate approximately Bonds $5,340,000 with the Interestremaining $1,190,000 Rate recorded as a June 30receivable at June Principal30, 2020. A gain of approximatelyInterest$5,520,000 has been recognizedSwaps, related net to this transaction Total in 2019. 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 5. Long -Term Debt4,825,000 522,361 830,113 6,177,474 2019 Long-term debt includes5,075,000 the following Airport 479,483Revenue Obligations payable from667,315 operating revenues for the6,221,798 2020 years ended June 30,5,335,000 2020 and 2019 : 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000Beginning 1,107,156 405,195 Ending34,032,351 Balance Additions Payments Refundings Balance 2027-2028Year ended June 30,12,680,000 2020 86,013 - 12,766,013 TotalBonds payable: $70,635,000 $3,578,297 $3,700,287 $77,913,584 Series V-A-1 $ 8,880,000 $ – $ 8,880,000 $ – $ – Notes payable: 6. Fair ValueSeries 2017A 8,595,000 – 2,525,000 – 6,070,000 Series 2019A 39,570,000 – – – 39,570,000 Total notes payable 48,165,000 – 2,525,000 – 45,640,000 The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accountingTotal long-term principles. debt The 57,045,000 hierarchy is$ based –on the$11,405,000 valuation inputs$ used – to measure45,640,000 the fair value of the assets.Less bonds Level payable, 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are current portion 4,335,000 – significant Lessother notes observable payable, inputs. Level 3 inputs are significant unobservable inputs. current portion 1,245,000 – Debt securitiesLong-term are portion valued based$51,465,000 on the securities’ relationship to benchmark quoted $ prices.45,640,000 Derivative instruments are valued using a market approach that considers benchmark interest rates. Year ended June 30, 2019 Bonds payable: The followingSeries tableV-A-1 sets forth by$52,580,000 level, within$ the fair – value $ 4,130,000 hierarchy, $39,570,000 the fair value of$8,880,000 the Authority’s investmentsNotes and payable: interest rate swap liabilities as of June 30, 2016: Series 2017A 9,815,000 – 1,220,000 – 8,595,000 Series 2019A – 39,570,000 – – 39,570,000 Total notes payable 9,815,000 Level 39,570,000 1 Level 1,220,000 2 Level– 3 48,165,000Total Investments: GovernmentTotal long debt-term securities debt 62,395,000$ $39,570,000– $ $39,998,4695,350,000 $39,570,000$ – 57,045,000$ 39,998,469 Less bonds payable, current portion 4,130,000 4,335,000 Interest rateLess swapnotes payable,liabilities $ – $ 4,502,609 $ – $ 4,502,609 current portion 1,220,000 1,245,000 The followingLong - tableterm portion sets forth by$57,045,000 level, within the fair value hierarchy, the fair value of$51,465,000 the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 43 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENT S (continued)

5. Long-Term5. Long Debt-Term (continued) Debt (continued)

Scheduled DebtDuring Service 2000, the Requi Authority’srements Board of Commissioners adopted a Master Resolution allowing the Authority to issue Airport Revenue Obligations. The Authority has pledged revenues, as defined in the Master Resolution, As of June 30,to repay 2016 the, longscheduled-term debt debt issued service under t herequirements Master Resolution of thefor the variable term of- ratethe debt. debt For and the yearnet endedswap payments, assuming currentJune 30, interest 2020, debt rates service remain on all debtthe issuessame was for approximately their term 57are% asof thefollows. pledged As revenues. rates vary, variable-rate bond interest payments and net swap payments will vary. Under this resolution, the Authority is required to establish certain funds, accounts and subaccounts to Year endingdeposit funds to be heldVariable in trust by theRate Authority Bonds in order to meet the requirementsInterest ofRate the resolution. These funds include: June 30 Principal Interest Swaps, net Total Revenue Fund, including accounts for General Revenue and PFC Revenue into which the Authority is to 2017 deposit all such$ 4,590,000 revenues. $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 Sinking Fund, including a payments account and a debt service reserve account, into which the Authority 2019 will deposit funds5,075,000 from the Revenue Fund, as479,483 needed , to pay revenue obligations667,315 as they come due. 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 Renewal and Extension5,610,000 Fund, into which the386,211 Authority may deposit any monies316,408 or securities held in the6,312,619 2022-2026 Revenue Fund32,520,000 (excluding PFC funds) in excess1,107,156 of 45 days’ estimated expenses.405,195 34,032,351 2027-2028 Project Fund, 12,680,000into which proceeds from issuance86,013 of revenue obligations will be deposited- to fund project12,766,013 Total costs. $70,635,000 $3,578,297 $3,700,287 $77,913,584 Outstanding debt during fiscal year 2020, consists of the following: 6. Fair Value Series V-A-1 – $84,645,000 of Local Government Public Improvement Bonds issued by the Public Building Authority of Sevier County on December 1, 2008. During 2019, the Authority issued Series The Authority categorizes2019A to provide its fundsfair value to retire measurements the 2022 through within2028 maturitie the fairs and value convert hierarchy from variable established rate debt to by generally accepted accountingfixed rate principles. debt to limit The exposure hierarchy to fluctuating is based interest on the rates valuation. Remaining inputs $8,880,000 used was to paidmeasure in full inthe fair value of the assets. Level2020. 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant otherSeries observable 2017A – $11,000,000inputs. LevelAirport 3 inputsRevenue are Refunding significant Note issuedunobservable on May 25, inputs. 2017, bears interest at a fixed rate of 1.95%. Remaining annual installments range from $650,000 to $1,400,000 through June Debt securities2026. are Interest valued is paid based annually on . the securities’ relationship to benchmark quoted prices. Derivative instruments areSeries valued 2019A using – $39,570,000 a market Airport approach Revenue that Refunding considers Note benchmark issued on June interest 27, 2019, rates. bears interest at a fixed rate of 2.54%. Remaining annual installments range from $5,275,000 to $6,000,000 through June The following 2028. table Interest sets forthis paid semi by annually. level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: All outstanding notes payable and bonds payable contain a provision that in an event of default, outstanding amounts may be declared due by the lender if the Authority is unable to make payment. Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 44 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term5. Long Debt-Term (continued) Debt (continu ed)

Scheduled DebtScheduled Service Debt Requi Servicerements Requirements As of June 30,All scheduled 2016, scheduled principal payments debt service for fiscal requirements year 2021 were prepaidof the in variable fiscal year-rate 2020. debt As of and June net 30, 2020swap, payments, scheduled debt service requirements of all outstanding debt are as follows. assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsYear and endingnet swap payments will vary. June 30 Principal Interest Total Year ending Variable Rate Bonds Interest Rate 2021 $ – $1,123,443 $ 1,123,443 June 30 2022 Principal 6,585,000Interest 1,110,768 Swaps,7,695,768 net Total 2023 6,750,000 950,919 7,700,919 2017 2024 $ 4,590,000 6,915,000 $ 562,983 787,056 $ 985,0437,702,056 $ 6,138,026 2018 2025 4,825,000 7,090,000 522,361 619,159 830,1137,709,159 6,177,474 2019 Thereafter 5,075,000 18,300,000 479,483 879,019 19,179,019667,315 6,221,798 2020 Total 5,335,000$ 45,640,000434,090 $5,470,364 $51,110,364496,213 6,265,303 2021 Derivative Instruments 5,610,000 386,211 316,408 6,312,619 2022-202In6 order to protect 32,520,000 against the potential of rising1,107,156 interest rates and to balance its 405,195mixture of variable and fixed34,032,351 2027-2028rate debt, the Authority12,680,000 entered into an interest rate86,013 swap agreement (the swap). The intention- of the swap12,766,013 was to effectively change the Authority’s variable interest rate on the Series V-A-1 bonds to a synthetic fixed Totalrate . The swap had$70,635,0 an effective00 date of June$3,578,297 28, 2001 with a fixed rate paid$3,700,287 of 4.355% and a variable rate$77,913,584 received of 62.5% of 5 Year LIBOR. The swap was terminated in 2020 in consideration of $188,291. 6. Fair ValueThe fair value of the interest rate swap as of June 30, 2019 was determined by an independent third-party advisory firm from a model that calculates the future net settlement payments required by the swap, assuming The Authoritythat categorizesthe current forward its fair rates value implied measurements by the yield curve within correctly the anticipate fair value future hierarchy spot interest establishedrates. These by generally payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero- accepted accountingcoupon bonds principles. due on the The date hierarchy of each future is based net settlement on the on valuation the swap. inputsImplied useddiscount to ratesmeasure are then the fair value of the assets.adjusted Level for 1non inputs-performance are quotedrisk using pricesmarket -observed in active credit markets spreads. for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. The notional amounts of the swap match principal amounts of the associated debt. The notional amount of the swap was $8,880,000 as of June 30, 2019. Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Theare valuedAuthority using’s swap a marketassociated approach with the Series that considers V-A-1 bond benchmarkwas considered interest an investment rates. derivative. Accordingly, the $405,479 decrease in the fair value in fiscal year 2020, is reported as a change in fair value of investment interest rate swap in the nonoperating income portion of the Statements of Revenues, Expenses The followingand Changes table sets in Net forth Position. by The level, estimated within fair the value fair of $ value405,479 hierarchy,at June 30, 2019, the ha fairs been value reported of theas a Authority’s investmentslong and-term interest liability rate. swap liabilities as of June 30, 2016:

6. Fair Value Level 1 Level 2 Level 3 Total Investments:The Authority categorizes its fair value measurements within the fair value hierarchy established by generally Governmentaccepted debt accounting securities principles. The hierarchy$ is based– on the$ valuation39,998,469 inputs used$ to measure– the fair$ value 39,998,469 of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are Interest ratesignificant swap liabilities other observable inputs. Level$ 3 inputs are –significant $ 4,502,609unobservable inputs.$ – $ 4,502,609 Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative The followinginstruments table setsare valued forth using by a market level, approach within that the considers fair value benchmark hierarchy, interest t herates. fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 45 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term6. Fair DebtValue (continued)(continued)

Scheduled DebtThe proceeding Service Requi methodsrements described may produce a fair value calculation that may not be indicative of net As of June 30,realizable 2016 value, scheduled or reflective debt of future service fair values.requirements Furthermore, of thealthough variable management-rate debt believes and the net valuation swap payments, methods are appropriate and consistent with other market participants, the use of different methodologies or assuming currentassumptions interest to determine rates remain the fair the value same of certain for theirfinancial term instruments are as follows. could result As in rates a different vary, fair variable value -rate bond interest paymentsmeasurement and netat the swap reporting payments date. will vary.

Year endingThe following table summarizesVariable fair valueRate disclosures Bonds and measurements atInterest June 30, 2020 Rateand June 30, 2019: June 30 Principal LevelInterest 1 Level 2 Swaps,Level 3 net Total Total June 30, 2020 2017 Investments: $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 Government debt4,825,000 securities $ 522,361 – $ 8,411,380 $ 830,113 – $ 8,411,380 6,177,474 2019 June 30, 2019 5,075,000 479,483 667,315 6,221,798 2020 Investments: 5,335,000 434,090 496,213 6,265,303 2021 Government debt5 ,610,000securities $ 386,211 – $38,394,976 $ 316,408 – $38,394,976 6,312,619 2022-202 6 Interest rate swap32,520,000 liability $ 1,107,156 – $ 405,479 $ 405,195 – $ 405,479 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total7. Deferred Compensation$70,635,000 Plan $3,578,297 $3,700,287 $77,913,584

The Authority offers its employees a deferred compensation plan created in accordance with Internal 6. Fair ValueRevenue Code Section 457 and is administered by International City Management Association Retirement Corporation. The plan, available to all Authority employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, The Authoritydeath categorizes, or unforeseeable its fair emergency. value measurementsEmployee contributions within to the Plan fair were value $131,345 hierarchyin 2020 establishedand $107,144 by generally accepted accountingin 2019. Separate principles. audited financialThe hierarchy reports are is not based available on forthe this valuation plan. inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other8. Retirement observable Plan inputs. Level 3 inputs are significant unobservable inputs. The Authority provides retirement benefits for all of its full-time employees through a defined contribution Debt securitiesplan (Metropolitan are valued Knoxville based onAirport the Authority securities’ Plan) relationshipwhich was established to benchmark and can be amended quoted under prices. the Derivative instruments authorityare valued of the using Board a ofmarket Commissioners approach and thatis administered considers by benchmark International Cityinterest Management rates. Association Retirement Corporation. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All full-time employees are eligible to participate from the date of The followingemployment. table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016: The Authority’s contributions for each employee (and investment income allocated to the employees’ account) are vested after one year of employment. Under the terms of the plan, employer contributions are determined annually by the Board ofLevel Commissioners. 1 ThereLevel are 2 no minimumLevel required 3 employerTotal Investments:contributions under the terms of the plan and there is no outstanding employer liability as of June 30, 2020 Governmentand 2019 debt. Employee securities contributions are$ optional. Employer– contribution$ 39,998,469 expense totaled$ $991,835– in 2020$ 39,998,469and $966,892 in 2019. There were minimal forfeitures during 2020 and 2019 . Separate audited financial reports are not available for this plan. Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 46 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term9. Passenger Debt Facility(continued) Charges

Scheduled DebtPassenger Service Facility Requi Chargesrements (PFC) are fees imposed on enplaning passengers by airports to finance eligible As of June 30,airport 2016-related, scheduled projects that debt preserve service or enhance requirements the safety, securityof the orvariable capacity;- ratereduce debt noise; and or increasenet swap air payments, carrier competition. Since September 2003, the air carriers have been collecting a $4.50 PFC on qualifying assuming currentpassengers interest at McGhee rates Tyson remain Airp theort onsame behalf for of theirthe Authority. term areBoth as thefollows. fee and Asits intended rates vary, projects variable must -rate bond interest paymentsbe reviewed and andnet approvedswap payments by the FAA. willPFCs, vary. along with related interest earnings, are recorded as deferred revenues until authorized to use for construction and related debt services payments under FAA approved Year endingApplication to Use. OnceVariable authorized Rate to use, Bonds the PFC receipts are recognizedInterest and recorded Rate as nonoperating income in the year collected by the air carriers. PFC revenues totaled $3,890,584 in 2020 and $4,842,501 in June 302019 . All PFCs werePrincipal authorized for use, and noInterest deferred revenues were recorded.Swaps, net Total

2017 The Authority has$ received4,590,000 approval to collect $ $562,98395,800,334 on currently approved$ 985,043 projects through July 2022$ ,6,138,026 2018 unless extended . Cumulative4,825,000 expenditures to date522 on ,361 these approved PFC projects830,113 total $68,951,775 . 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 As of June 30, 2020 and 2019, the Authority has $2,635,162 and $1,939,544, respectively, of PFCs available 2020 and authorized for use.5,335,000This amount is included 434,090in restricted net position on the 496,213balance sheet (see Note 12). 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-20210.6 Customer Facility32,520,000 Charges 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 On February 1, 2020, the Authority began collecting Customer Facility Charges (CFC) fees from rental car Totaloperators serving $ 70,635,0McGhee 00Tyson Airport.$ 3,578,297Fees collected are to fund the$3,700,287 planning, design/engineering, $77,913,584 construction of new car rental facilities and/or improvements to the existing car rental facilities, including any associated infrastructure costs or payment of any Authority debt service incurred to finance these costs or 6. Fair Valueongoing maintenance of rental car facilities. The CFC is a $4.00 per transaction day fee collected by rental car companies from each of their customers and subsequently remitted to the Authority. CFC receipts are The Authorityrecognized categorizes and recorded its fair as nonoperatingvalue measurements income. within the fair value hierarchy established by generally accepted accountingAs of June 30,principles. 2020, the AuthorityThe hierarchy has $512,8 is16 based of CFCs on available the valuation for authorized inputs use. used No expenditures to measure were the fair value of the assets.incurred Level during 1 inputs the year areand the quoted amount prices collected in isactive included markets in restricted for net identical position on assets. the statements Level of 2 inputs are significant othernet position. observable inputs. Level 3 inputs are significant unobservable inputs. 11. Business Concentrations Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments Theare Authorityvalued using is dependent a market to aapproach large extent that on considersfive major airlines benchmark and their interest regional rates. affiliates in that a significant portion of aviation area revenues are generated by these airlines. These airlines accounted for aviation area revenues totaling $4,797,346 in 2020 and $5,352,462 in 2019 and maintenance facility rent from The followinga regional table affiliate sets accounted forth by for level, $706,521 within of air thecargo fair revenue value in 2020 hierarchy, and $1,099,780 the fairin 2019. value In addition, of the a Authority’s investmentssignificant and interest portion rate of swapterminal liabilities area revenue as of is Junedirectly 30, and 2016 indirectly: generated from four of these airlines’ passengers, which accounted for approximately 97% of total passengers in 2020 and 2019. As of June 30, 2020 and 2019, 97% and 94%, respectively,Level 1 of trade accountsLevel and 2 restrictedLevel receivable 3 s are due fromTotal these major airlines. Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 47 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term Debt (continued) 12. Net Position

Scheduled Debt Service Requirements Net position consists of the following as of June 30: As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, 2020 2019 assuming currentNet investment interest ratesin capital remain assets the same for their term are as follows. As rates vary, variable-rate bond interest paymentsNoncurrent and net assets: swap payments will vary.

Capital assets, net $ 256,468,376 $ 233,324,539 Year endingMaster plans and otherVariable plans, net Rate Bonds Interest583,405 Rate 465,993 June 30 Total noncurrentPrincipal assets Interest 257,051,781Swaps, net 233,790,532 Total

2017 Deferred outflows$ 4,590,000 - deferred charge on$ debt562,983 refundings $ 916,666985,043 1,069,444 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 Less related liabilities:5,075,000 479,483 667,315 6,221,798 2020 Accounts payable5,335,000 - construction 434,090 1,364,296496,213 4,177,157 6,265,303 2021 Long-term debt5,610,000 386,211 45,640,000316,408 57,045,000 6,312,619 2022-2026Total related liabilities32,520,000 1,107,156 47,004,296405,195 61,222,15734,032,351 2027-2028Net investment 12,680,000in capital assets 86,013 $ 210,964,151 -$ 173,637,81912,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 Restricted net position: Cash and cash equivalents - passenger facility charges $ 2,447,162 $ 1,016,544 6. Fair ValueCash and cash equivalents - law enforcement 422,428 461,101 Cash and cash equivalents - customer facility charges 260,756 - The AuthorityReceivables categorizes - passenger its fair facility value charges measurements within the fair value188,000 hierarchy established 923,000 by generally accepted accountingReceivables principles. - customer Thefacility hierarchy charges is based on the valuation inputs252,060 used to measure - the fair value of the assets.Restricted Level 1net inputs position are quoted prices in active markets$ for 3,570,406 identical $ assets. 2,400,645 Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. Unrestricted net position (all other items on statements Debt securitiesof net are position valued not based reflected on above): the securities’ relationship to benchmark quoted prices. Derivative instruments areAssets: valued using a market approach that considers benchmark interest rates. Cash and cash equivalents $ 47,210,695 $ 20,232,142

Investments 8,411,380 38,394,976 The following Receivables table sets forth by level, within the fair value hierarchy,13,746,075 the fair value 10,566,506 of the Authority’s investments andPrepaid interest expenses rate swapand other liabilities current assetsas of June 30, 2016: 1,501,892 1,450,130 Other noncurrent assets 5,248 465,227 Total unrestricted assets Level 1 Level 2 70,875,290Level 3 71,108,981Total Investments:Less liabilities: GovernmentAccounts debt securities payable - non-construction $ – $ 39,998,469 1,649,195$ – 988,628$ 39,998,469 Accrued payroll and other expenses 1,604,399 1,617,474 Interest rate swapAccrued liabilities interest $ – $ 4,502,609 93,999$ – 10,784$ 4,502,609 Investment interest rate swap liability - 405,479 Unearned revenue 52,500 - The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s Total liabilities 3,400,093 3,022,365 investments Unrestrictedand derivative net positioninvestments as of June 30, 2015: $ 67,475,197 $ 68,086,616

Level 1 Level 2 Level 3 Total Investments: 48 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term13. Division Debt Information (continued)

Scheduled DebtThe Metropolitan Service RequiKnoxvillerementsAirport Authority provides services through two divisions - McGhee Tyson Airport and As of June 30,Knoxville 2016Downtown, scheduledIsland debtAirport. serviceKey financial requirementsdata as of and offor thethe yearsvariableended-Junerate30, debt 2020 and 2019 netfor swapthe payments, two divisions is as follows: assuming current interest rates remain the same for theirMcGhee term are Tyson as follows. AsDowntown rates vary, Island variable-rate bond interest payments and net swap payments will vary. 2020 2019 2020 2019

Year endingUnrestricted current assetsVariable Rate Bonds$ 70,728,374 $ 70,426,046Interest$ Rate 141,668 $ 217,708 June 30Restricted current assetsPrincipal Interest 3,570,406 2,400,645Swaps, net - - Total Capital assets, net 252,189,574 228,933,512 4,862,207 4,857,020 2017 Other assets, net $ 4,590,000 $ 562,983 - 447,206$ 985,043 5,248 18,021$ 6,138,026 2018 Intercompany receivable4,825,000 522 ,361 4,091,044 4,313,479 830,113 - - 6,177,474 2019 Deferred outflows of5,075,000 resources 479,483 916,666 1,069,444 667,315 - - 6,221,798 Total assets and deferred outflows of resources $ 331,496,064 $ 307,590,332 $ 5,009,123 $ 5,092,749 2020 5,335,000 434,090 496,213 6,265,303 2021 Current liabilities 5,610,000 386,211$ 4,686,444 $ 12,354,971 316,408 $ 25,445 $ 19,072 6,312,619 2022-202Intercompany6 payable32,520,000 1,107,156 - - 405,195 4,091,044 4,313,47934,032,351 2027-2028Long-term debt, less12,680,000 current portion 86,013 45,460,807 51,165,956 179,193- 299,04412,766,013 Investment interest rate swap liability - 401,599 - 3,880 Total Unearned revenue$70,635,000 $3,578,297 52,500 $ 3,700,287 - - $ - 77,913,584 Total liabilities $ 50,199,751 $ 63,922,526 $ 4,295,682 $ 4,635,475 6. Fair Value Net position: Net investment in capital assets $ 206,281,137 $ 169,079,843 $ 4,683,014 $ 4,557,976 The AuthorityRestricted categorizes its fair value measurements 3,570,406within the fair 2,400,645 value hierarchy - established - by generally accepted accountingUnrestricted principles. The hierarchy is based 71,444,770 on the valuation 72,187,318 inputs (3,969,573) used to measure (4,100,702) the fair value of the assets.Total Level net position 1 inputs are quoted prices in$ 281,296,313 active markets$ 243,667,806 for identical$ 713,441 assets.$ Level457,274 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. Operating revenues $ 28,490,253 $ 32,382,757 $ 1,289,023 $ 1,419,001 Debt securitiesOperating are expenses valued based on the securities’ (20,958,144) relationship (22,180,365) to benchmark (1,303,870) quoted (1,434,262) prices. Derivative Depreciation and amortization (9,807,589) (9,623,906) (248,009) (288,763) instruments Operatingare valued (loss) using income a market approach that considers (2,275,480) benchmark 578,486 interest (262,856) rates. (304,024) Net nonoperating income (expense) 10,322,830 10,044,677 62,376 (4,180) The followingCapital table contributions sets forth by level, within the fair29,581,157 value hierarchy, 26,819,102 the fair456,647 value of717,031 the Authority’s investments Increaseand interest in net positionrate swap liabilities as of June$ 37,628,507 30, 2016:$ 37,442,265 $ 256,167 $ 408,827

Cash flows: Level 1 Level 2 Level 3 Total Investments:Operating activities $ 8,142,786 $ 8,270,011 $ 18,134 $ (60,488) Investing activities 30,971,586 (4,050,439) - - GovernmentNoncapital debt financingsecurities activities $ – 6,719,886 $ 39,998,469 536,295 $ (153,435)– (367,255)$ 39,998,469 Capital and related financing activities (17,203,050) (1,229,515) 135,347 427,743 Interest rateNet swap change liabilities in cash and cash equivalents $ –28,631,208 $ 4,502,609 3,526,352 $ 46– $ 4,502,609- Cash and cash equivalents at beginning of the year 21,709,387 18,183,035 400 400 The followingCash tableand cash sets equivalents forth at byend level,of the year within the $ 50,340,595 fair value $ hierarchy, 21,709,387 t he$ fair 446 value $ of 400 the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 49 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) NOTES TO FINANCIAL STATEMENTS (continued)

5. Long-Term14. Risks Debt and (continued)Uncertainties

Scheduled DebtDuring Service March 2020,Requi a globalrements pandemic was declared related to the rapidly growing outbreak of a novel strain As of June 30,of coronavirus 2016, scheduled (COVID- 19).debt The service pandemic requirements has significantly of impacted the variable the econ-rateomic debt conditions and netacross swap the payments, nation as federal, state, and local governments react to the public health crisis, creating significant assuming currentuncertainties interest in the rates economy. remain Demand the same for air fortravel their has beenterm significantly are as follows. reduced Assince rates the beginning vary, variable of the -rate bond interest paymentspandemic. and This net situation swap payments is rapidly changing,will vary. and additional impacts may arise. While the disruption is currently expected to be temporary, there is uncertainty around its duration. The ultimate future impact of the Year endingpandemic on results ofVariable operations, Ratefinancial Bonds position, liquidity or capitalInterest resources Rate cannot be reasonably June 30estimated at this time.Principal Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 50 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 STATISTICAL SECTION

This part of the Metropolitan Knoxville Airport Authority’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the airport’s overall financial health.

Contents

Financial Trends These schedules contain trend information to help the reader understand how the airport’s financial performance and well- being have changed over time.

Debt Capacity These schedules present information to help the reader assess the affordability of the airport’s current levels of outstanding debt and the airport’s ability to issue additional debt in the future.

Revenue Capacity These schedules contain information to help the reader assess the airport’s most significant local revenue sources.

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the airport’s financial activities take place.

Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the airport’s financial report relates of the services the airport provides and activities it performs.

51 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 1: NOTES TO FINANCIALOperating revenues and expenses - last STATEMENTS ten fiscal years (unaudited) (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Operating revenues: Aviation area $ 5,491,542 $ 6,107,314 $ 5,365,728 $ 5,157,606 $ 5,133,877 $ 5,038,282 $ 4,693,762 $ 4,453,779 $ 4,559,117 $ 4,600,042 Terminal area 20,910,056 23,423,378 21,008,481 20,075,555 18,848,009 18,625,307 17,922,026 16,327,587 16,909,768 15,942,418 Air cargo and other properties 5. Long-Term Debt (continued) 3,377,678 4,271,066 4,028,575 3,858,125 3,710,606 3,810,517 3,693,140 3,759,280 3,650,100 3,747,735 Total operating revenues 29,779,276 33,801,758 30,402,784 29,091,286 27,692,492 27,474,106 26,308,928 24,540,646 25,118,985 24,290,195

Operating expenses: ScheduledAviation area Debt Service Requirements 2,472,712 2,639,540 2,332,940 2,203,523 2,326,391 2,241,790 2,190,390 2,031,595 2,060,220 2,052,420 Terminal area 5,980,383 6,722,177 5,847,724 5,874,317 5,506,569 5,579,811 5,273,861 5,328,985 5,479,501 5,488,460 As ofAir Junecargo and other30, properties 2016, scheduled debt 1,452,443 service 1,595,465 requirements 1,530,434 1,453,788 of the1,529,873 variable 1,621,939 - rate 1,673,103 debt 1,and644,636 net 1, 536,805swap payments, 1,430,679 General area: assumingSafety current interest rates remain 5,060,627 the 4,908,770 same 4,for628,650 their 4,609,726 term are 4,394,476 as follows. 4,536,099 As 4,599,895 rates 4, 282,979vary, variable 4,087,663 - rate4,021,409 bond interestAdministration payments and net swap payments 7,295,849 7,748,675 will vary. 7,368,863 7,187,377 6,434,369 5,631,927 5,047,911 5,114,112 5,423,518 4,679,484 Total operating expenses 22,262,014 23,614,627 21,708,611 21,328,731 20,191,678 19,611,566 18,785,160 18,402,307 18,587,707 17,672,452 YearOperating ending income before adjustments Variable 7,517,262 10,187,131 Rate Bonds 8,694,173 7,762,555 7,500,814 Interest 7,862,540 7,523,768 Rate 6,138,339 6,531,278 6,617,743 JuneDepreciation 30and amortization (a) Principal (10,055,598) (9,912,669) (9,499,946)Interest (9,539,399) (9,912,070) (10,717,072)Swaps, (11,004,758) net (11,387,084) (12,269,546) Total (13,194,950) Operating (loss) income (2,538,336) 274,462 (805,773) (1,776,844) (2,411,256) (2,854,532) (3,480,990) (5,248,745) (5,738,268) (6,577,207) Net2017 nonoperating income (deductions) (a) $ 4,590,000 10,385,206 10,040,497 $ 3,812,308562,983 2,620,125 2,599,725 1,933,972$ 985,043 1,345,107 (2,650,537) 358,$676 6,138,026 604,526 Income2018 (loss) before capital contributions 4,825,000 7,846,870 10,314,959 3,006,535522 ,361 843, 281 188,469 (920,560) 830,113 (2,135,883) (7,899,282) (5,379,592) 6,177,474 (5,972,681) Capital contributions - grant receipts from governmental2019 agencies 5,075,000 30,037,804 27,536,133 19,181,599479,483 31,685,691 14,834,999 9,437,726 667,315 4,547,269 14,463,193 5,598,693 6,221,798 6, 929,117

Increase2020 in net position 5,335,000 37,884,674 37,851,092 22,188,134434,090 32,528,972 15,023,468 8,517,166 496,213 2,411,386 6,563,911 219,101 6, 265,303 956,436

Net202 position1 at beginning of year, as 5,610,000 244,125,080 206,273,988 184,085,854386,211 151,556,882 136,533,414 128,016,248 316,408 125,604,862 119,040,951 118,821,850 6,312,619 120, 241,621 previously reported 20Restatement22-202 of beginning6 net position for 32,520,000 1,107,156 405,195 34,032,351 adoption of new accounting guidance (a) ------(2,376,207) 202Net position7-2028 at end of year 12,680,000$ 282,009,754 $ 244,125,080 $ 206,273,98886,013$ 184,085,854 $ 151,556,882 $ 136,533,414 $ 128,016,248 - $ 125,604,862 $ 1 19,040,95112,766,013$ 118,821,850

NetTotal position at end of year: $70,635,000 $3,578,297 $3,700,287 $77,913,584 Net investment in capital assets $ 210,964,151 $ 173,637,819 $ 146,198,639 $ 123,577,195 $ 91,628,740 $ 81,407,805 $ 75,967,891 $ 82,343,430 $ 75,944,810 $ 74,579,458 Restricted-expendable 3,570,406 2,400,645 1,937,806 1,924,721 2,029,096 1,704,693 1,532,747 1,411,832 1,358,687 1, 050,744 Unrestricted 67,475,197 68,086,616 58,137,543 58,583,938 57,899,046 53,420,916 50,515,610 41,849,600 41,737,454 43,191,648

6. FairNet position Value at end of year $ 282,009,754 $ 244,125,080 $ 206,273,988 $ 184,085,854 $ 151,556,882 $ 136,533,414 $ 128,016,248 $ 125,604,862 $ 119,040,951 $ 118,821,850

Source: Audited Financial Statements, 2011-2020 (a) The Authority adopted GASB Statement No. 65 in 2013, which requires bond issuance costs be expensed in the period incurred. Accordingly, fiscal years 2012 and 2011 have been restated to reflect the elimination of both unamoritized bond issuance costs and deferred loss on The Authoritybond refunding. categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based52 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 2: NOTES TO FINANCIALDebt service coverage - last ten fiscalSTATEMENTS years (unaudited) (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Operating revenues: Aviation area $ 5,491,542 $ 6,107,314 $ 5,365,728 $ 5,157,606 $ 5,133,877 $ 5,038,282 $ 4,693,762 $ 4,453,779 $ 4,559,117 $ 4,600,042 Terminal area 20,910,056 23,423,378 21,008,481 20,075,555 18,848,009 18,625,307 17,922,026 16,327,587 16,909,768 15,942,418 5. LongAir cargo -andTerm other properties Debt (continued) 3,377,678 4,271,066 4, 028,575 3, 858,125 3, 710,606 3,810,517 3, 693,140 3, 759,280 3, 650,100 3, 747,735

Total operating revenues 29,779,276 33,801,758 30,402,784 29,091,286 27,692,492 27,474,106 26,308,928 24,540,646 25,118,985 24,290,195 Scheduled Debt Service Requirements Operating expenses: As ofAviation June area 30, 2016, scheduled 2,472,712 debt service2,639,540 requirements2, 332,940 2, 203,523 of 2, 326,391the variable 2,241,790 - rate 2, 190,390 debt 2, 031,595and net 2, 060,220 swap 2, 052,420payments, Terminal area 5,980,383 6,722,177 5, 847,724 5, 874,317 5, 506,569 5,579,811 5, 273,861 5, 328,985 5, 479,501 5, 488,460 assumingAir cargo currentand other properties interest rates 1,452,443remain 1,595,465 the same 1, 530,434 for their 1, 453,788 term 1, 529,873are as 1,follows.621,939 1, 673,103As rates 1, 644,636 vary, 1, variable536,805 1, -430,679rate bond General area: interestSafety payments and net swap 5,060,627 payments 4,908,770 will 4, vary.628,650 4, 609,726 4, 394,476 4,536,099 4, 599,895 4, 282,979 4, 087,663 4, 021,409 Administration 7,295,849 7,748,675 7, 368,863 7, 187,377 6, 434,369 5,631,927 5, 047,911 5, 114,112 5, 423,518 4, 679,484

YearTotal ending operating expenses 22,262,014Variable 23,614,627 Rate 21 ,708,611Bonds 21,328,731 20,191,678 19,611,566Interest 18,785,160 Rate 18,402,307 18,587,707 17,672,452 June 30 Principal Interest Swaps, net Total Operating income before other income and other expenses 7,517,262 10,187,131 8,694,173 7, 762,555 7, 500,814 7,862,540 7, 523,768 6, 138,339 6, 531,278 6, 617,743 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 Other2018 income 4,825,000 41,527,252 33,678,402 24,194,735522 35,833,765,361 19,289,065 13,082,418 830,113 8,318,110 18,127,924 9, 742,814 6,177,474 10,976,093 Net2019 revenues 5,075,000 49,044,514 43,865,533 32,888,908479,483 43,596,320 26,789,879 20,944,958 667,315 15,841,878 24,266,263 16,274,092 6,221,798 17,593,836 Less capital contributions - grant receipts from2020 government agencies included 5,335,000 434,090 496,213 6,265,303 in202 other 1income 5,610,000 (30,037,804) (27,536,133) (19,181,599) 386,211 ( 31,685,691) ( 14,834,999) (9,437,726) 316,408 (4,547,269) ( 14,463,193) (5,598,693) 6,312,619 (6,929,117) 20Net2 revenues2-202 less6 grant receipts from 32,520,000 1,107,156 405,195 34,032,351 202government7-2028 agencies in other income 12,680,000$ 19,006,710 $ 16,329,400 $ 13,707,309 86,013$ 11,910,629 $ 11,954,880 $ 11,507,232 $ 11,294,609 $- 9,803,070 $ 10,675,399 12,766,013$ 10,664,719 Debt service on airport revenue Totalgeneral obligation debt $70,635,0$ 7,367,97700$ 7,104,035 $ 6,$907,1233,578,297$ 6, 799,043 $ 6,476,919 $ 6,366,528$3,700,287$ 6,377,790 $ 6,645,106 $ 6,862,478$77,913,584$ 6,998,949

Coverage ratio - airport revenue 6. Fairgeneral Value obligation debt 258.0% 229.9% 198.5% 175.2% 184.6% 180.7% 177.1% 147.5% 155.6% 152.4% Source: Audited Financial Statements, 2011-2020 Note: Revenues, as defined in the Master Resolutions, are pledged for payments. The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based53 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 3: NOTES TO RatiosFINANCIAL of debt service and outstanding debt STATEMENTS- last ten fiscal years (unaudited) (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Principal (a) $ 5,580,000 $ 5,350,000 $ 5,125,000 $ 4,590,000 $ 4,365,000 $ 4,155,000 $ 3,950,000 $ 3,755,000 $ 3,575,000 $ 3,400,000 5. LongInterest -Term Debt (continued) 1,787,977 1,754,035 1,782,123 2,209,043 2,111,919 2,211,528 2,427,790 2,890,106 3,287,478 3,598,949 Total debt service $ 7,367,977 $ 7,104,035 $ 6,907,123 $ 6,799,043 $ 6,476,919 $ 6,366,528 $ 6,377,790 $ 6,645,106 $ 6,862,478 $ 6,998,949

ScheduledTotal expenses Debt Service Requi$ 34,293,880rements$ 35,281,331 $ 32,990,680 $ 33,077,173 $ 32,215,667 $ 32,540,166 $ 32,217,708 $ 32,679,497 $ 34,144,731 $ 34,528,903 As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, Less depreciation and amortization (b) (10,055,598) (9,912,669) (9,449,946) (9,539,399) (9,912,070) (10,717,072) (11,004,758) (11,387,084) (12,269,546) (13,257,502) assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interestAdd principalpayments (a) and net swap 5,580,000 payments 5,350,000 will 5,125,000 vary. 4,590,000 4,365,000 4,155,000 3,950,000 3,755,000 3,575,000 3,400,000 Total general expenditures $ 29,818,282 $ 30,718,662 $ 28,665,734 $ 28,127,774 $ 26,668,597 $ 25,978,094 $ 25,162,950 $ 25,047,413 $ 25,450,185 $ 24,671,401 YearRatio endingof debt service to expenditures Variable24.7% 23.1% Rate 24.1%Bonds24.2% 24.3% 24.5%Interest25.3% Rate 26.5% 27.0% 28.4%

JuneOutstanding 30 debt (c) Principal$ 45,640,000 $ 57,045,000 $ 62,395,000Interest$ 67,520,000 $ 70,635,000 $ 75,000,000Swaps,$ 79,155,000 net$ 79,850,000 $ 80,505,000 $ Total 89,151,626

Total number of passengers 1,952,143 2,375,059 2,108,507 1,906,795 1,790,247 1,739,183 1,717,690 1,694,217 1,812,404 1,716,477 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 Outstanding2018 debt per passenger $4,825,000 23.38 $ 24.02 $ 29.59 522$ ,361 35.41 $ 39.46 $ 43.12 $ 830,113 46.08 $ 47.13 $ 44.42 $ 6,177,474 51.94 Debt2019 service per passenger $5,075,000 3.77 $ 2.99 $ 3.28 479,483$ 3.57 $ 3.62 $ 3.66 $ 667,315 3.71 $ 3.92 $ 3.79 $ 6,221,798 4.08 Source:2020 Audited Financial Statements, 2011-2020 5,335,000 434,090 496,213 6,265,303 (a) Amounts based on scheduled principal payments. (b) The202 Authority1 adopted GASB Statement No. 65 in 2013,5,610,000 which requires bond issuance costs be expensed in the period386,211 incurred. Accordingly, fiscal years 2012 and 2011 have been restated316,408 to reflect the elimination of both unamoritized bond issuance6,312,619 costs and deferred loss on bond refunding. 20(c) 2Outstanding2-202 debt is6 for Airport Revenue Obligations, 32,520,000payable from general airport revenue. 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based54 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 4: NOTES TO McGheeFINANCIAL Tyson Airport annual terminal STATEMENTS rents and landing fees (continued) last ten fiscal years (unaudited)

2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Terminal rent: 5. LongTicket counter-Term (per linear Debt foot) (continued)$40.30 $48.84 $43.22 $42.01 $38.76 $38.62 $37.69 $38.90 $39.33 $39.45 Ticket queuing (per square foot) (a) $40.30 $48.84 $43.22 $42.01 $38.76 $38.62 $37.69 $38.90 $39.33 $39.45 Scheduled Debt Service Requirements Office space (per square foot) $40.30 $48.84 $43.22 $42.01 $38.76 $38.62 $37.69 $38.90 $39.33 $39.45 As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assumingOutbound current baggage space interest (per square foot) rates remain$40.30 the$48.84 same$43.22 for their$42.01 term$38.76 are as$38.62 follows.$37.69 As rates$38.90 vary,$39.33 variable$39.45-rate bond interestOperations payments space (per square and foot) net swap $40.30payments$48.84 will $43.22vary. $42.01 $38.76 $38.62 $37.69 $38.90 $39.33 $39.45

Baggage service office (per square foot) $40.30 $48.84 $43.22 $42.01 $38.76 $38.62 $37.69 $38.90 $39.33 $39.45 Year ending Variable Rate Bonds Interest Rate Holdroom area (per square foot) June 30 Principal$40.30 $48.84 $43.22Interest$42.01 $38.76 $38.62Swaps,$37.69 net$38.90 $39.33 $39.45Total Baggage claim (per square foot) $40.30 $48.84 $43.22 $42.01 $38.76 $38.62 $37.69 $38.90 $39.33 $39.45 Apron2017 charge (per gate) (a) $ 4,590,000$84,802.00 $92,101.00 $86,085.00$ 562,983$82,788.00 $81,934.00 $77,624.00 $ $75,751.00985,043 $70,476.00 $67,492.00 $$68,396.00 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 Loading bridge rent (per bridge) (a) $95,295.00 $40,574.00 $43,802.00 $45,176.00 $45,436.00 $51,378.00 $45,955.00 $47,828.00 $43,557.00 $46,324.00 2019 5,075,000 479,483 667,315 6,221,798 Landing2020 fee (per 1,000 pounds) 5,335,000$2.99 $3.14 $3.13 434,090$3.23 $3.50 $3.43 496,213$3.28 $3.09 $2.82 $2.806,265,303 2021 5,610,000 386,211 316,408 6,312,619 (a) Fees and rental charges became effective with beginning of fiscal year for which amounts are shown. 20Notes:22 The-202 revenue 6bases to which these rates are applied32,520,000 and their principal payers can be found in schedules1,107,156 7, 9 and 11. 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based55 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 5: (continued) Airline arrivals and departures - last ten fiscal years (unaudited)

5. Long-TermFiscal Debt (continued) General Year Air carrier Air taxi aviation Military Total Scheduled Debt Service Requirements As of June 30,2011 2016, scheduled9,259 debt service41,473 requirements of42,691 the variable-18,123rate debt and111,546 net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond 2012 8,650 37,446 38,076 22,225 106,397 interest payments and net swap payments will vary.

Year ending2013 7,381Variable Rate36,012 Bonds 33,273 Interest25,685 Rate 102,351 June 30 2014 Principal10,562 31,672Interest 33,636 Swaps,25,485 net 101,355 Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2015 10,778 30,812 32,645 23,874 98,109 2018 4,825,000 522,361 830,113 6,177,474 2019 2016 5,075,00012,460 28,823479,483 33,882 667,31519,211 94,376 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 2017 5,610,00017,115 25,120386,211 38,631 316,40818,993 99,859 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 2018 12,680,00023,417 20,204 86,013 47,532 20,836 - 111,989 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 2019 23,613 26,037 50,895 19,257 119,802

6. Fair Value2020 23,254 20,960 49,785 15,072 109,071

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted Source:accounting McGhee Tyson principles. Airport F.A.A. The Control hierarchy Tower is based on the valuation inputs used to measure the fair value Note: Air carriers are passenger, charter, and cargo aircraft certified by the F.A. A. to carry 60 or more passengers. Air taxis include regional, of the assets.charter, and Level cargo aircraft 1 inputs that are certified are to quoted carry less than prices 60 passengers. in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 56 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 6: (continued) Historical airline passenger activity - last ten fiscal years (unaudited)

5. Long-TermFiscal Debt (continued)Passengers Passengers Total Year enplaned deplaned passengers Scheduled Debt Service Requirements 2011 863,640 852,837 1,716,477 As of June 30, 20122016, scheduled905,888 debt service requirements906,516 of the variable1,812,404-rate debt and net swap payments, assuming current2013 interest rates850,304 remain the same for843,913 their term are as1,694,217 follows. As rates vary, variable-rate bond interest payments2014 and net swap862,706 payments will vary.854,984 1,717,690 2015 872,849 866,334 1,739,183 Year ending2016 Variable898,671 Rate Bonds891,576 1,790,247Interest Rate June 30 2017 Principal958,429 Interest948,366 1,906,795Swaps, net Total 2018 1,057,578 1,050,929 2,108,507 2017 2019 $ 4,590,0001,191,198 $ 1,183,861562,983 2,375,059 $ 985,043 $ 6,138,026 2018 2020 4,825,000975,910 976,233522,361 1,952,143 830,113 6,177,474

2019Source: Metropolitan Knoxville5,075,000 Airport Authority, Annual Aviation479,483 Statistics Report 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 SCHEDULE86,013 7: - 12,766,013 Total $70,635,0Distribution00 of airline passengers$3,578,297 - fiscal year ended June 30, 2020$ (unaudited)3,700,287 $77,913,584

Enplaned Deplaned Total Percentage 6. Fair ValueAirline passengers passengers passengers of passengers United 159,178 159,564 318,742 16.33% The AuthorityAllegiant categorizes Air its fair200,778 value measurements199,904 within the fair400,682 value hierarchy established20.53% by generally accepted Americanaccounting principles.315,802 The hierarchy is based320,460 on the valuation636,262 inputs used to32.59% measure the fair value of the assets.Delta Level 1 inputs 272,150 are quoted prices269,454 in active markets541,604 for identical assets.27.74% Level 2 inputs are significantFrontier other observable inputs.23,694 Level 3 inputs22,641 are significant unobservable46,335 inputs. 2.37% Other 4,308 4,210 8,518 0.44% Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative Total 100.00% instruments are valued using a 975,910market approach that976,233 considers benchmark1,952,143 interest rates. Source: Metropolitan Knoxville Airport Authority, Annual Aviation Statistics Report The followingNote: The Authority table setshas elected forth not to report by level,a ten-year withinhistory of passengers the fair by airline value because hierarchy, history has shown the when fair a particular value airline of withdraws the Aut hority’s from the market, another airline enters the market or an existing airline expands their flights. investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 57 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 8: (continued) Cargo - last ten fiscal years (in pounds) (unaudited) Fiscal Freight Total 5. Long-TermYear Debt (continued)Enplaned Deplaned cargo

Scheduled Debt2011 Service Requi49,531,901rements 43,903,240 93,435,141 As of June 30,2012 2016, scheduled50,319,694 debt service requirements42,420,949 of the variable92,740,643-rate debt and net swap payments, assuming current2013 interest rates45,918,957 remain the same for their41,562,216 term are as87,481,173 follows. As rates vary, variable-rate bond interest payments2014 and net swap38,941,638 payments will vary. 38,898,639 77,840,277 2015 36,351,492 39,459,681 75,811,173 Year ending2016 37,089,237Variable Rate Bonds43,381,695 80,470,932Interest Rate June 30 2017 Principal37,210,403 Interest48,076,612 85,287,015Swaps, net Total 2018 35,725,317 46,651,705 82,377,022 2017 2019 $ 4,590,00036,427,469 $ 562,98346,854,736 83,282,205$ 985,043 $ 6,138,026 2018 2020 4,825,00034,383,758 52249,553,002,361 83,936,760830,113 6,177,474 2019Source: Metropolitan Knoxville Airport5,075,000 Authority, Annual Aviation479,483 Statistics Report 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 SCHEDULE86,013 9: - 12,766,013 Total $70,635,0Distribution00 of cargo - fiscal $year3,578,297 ended June 30, 2020 (in pounds)$ (unaudited)3,700,287 $77,913,584 Freight 6. Fair ValueAirline Enplaned Deplaned Total Percentage

Major: The AuthorityDelta categorizes its fair101,790 value measurements 155,123within the fair value256,913 hierarchy established0.31% by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets.Regional: Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant otherPSA observable inputs.12,685 Level 3 inputs are significant37,387 unobservable50,072 inputs. 0.06% Cargo: Debt securitiesFedEx are valued based24,419,518 on the securities’33,413,459 relationship to57,832,977 benchmark quoted68.90% prices. Derivative instruments UPSare valued using a 9,752,695market approach that considers15,932,971 benchmark25,685,666 interest rates. 30.60%

The followingOther table Freight sets forth 97,070 by level, within the fair14,062 value hierarchy,111,132 the fair value0.13% of the Authority’s investments Totaland interest rate swap34,383,758 liabilities as of June49,553,002 30, 2016: 83,936,760 100.00%

Source: Metropolitan Knoxville Airport Authority, Annual AviationLevel Statistics 1 Report Level 2 Level 3 Total Investments:Note: The Authority has elected not to report a ten-year history of cargo by airline because history has shown when a particular airline withdraws from the Governmentmarket, another debtairline enterssecurities the market or an existing $airline expands their– flights. $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 58 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 10: (continued) Aircraft landed weights - last ten fiscal years (in thousand pound units) (unaudited)

5. Long-TermFiscal Debt (continued)Major passenger Regional Cargo Year airlines airlines airlines Total Scheduled Debt Service Requirements As of June 30,2011 2016, scheduled debt63,727 service requirements1,039,047 of the variable313,522-rate debt and1,416,296 net swap payments, assuming current2012 interest rates remain177,779 the same for their856,394 term are as follows.320,413 As rates vary,1,354,586 variable-rate bond interest payments2013 and net swap payments178,710 will vary. 773,701 301,345 1,253,756 2014 214,245 764,217 293,983 1,272,445 Year ending2015 Variable255,671 Rate Bonds736,629 Interest280,670 Rate 1,272,970 June 30 2016 Principal259,716 Interest747,191 274,808Swaps, net 1,281,715 Total 2017 329,063 787,276 290,938 1,407,277

2017 2018 $ 4,590,000381,683 $ 562,983855,278 274,653$ 985,043 1,511,614 $ 6,138,026 2018 2019 4,825,000395,936 522965,645,361 286,676830,113 1,648,257 6,177,474 2020 330,481 882,742 285,236 1,498,459 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 202Source:1 Metropolitan Knoxville 5Airport,610,000 Authority, Annual Aviation386,211 Statistics Report 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 59 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 11: Aircraft landed weights - ten fiscal year trend history (in thousand pound units) (unaudited) NOTES TO FINANCIAL STATEMENTS (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Airline Number % Number % Number % Number % Number % Number % Number % Number % Number % Number % PSA 174,050 12% 197,355 12% 209,086 14% 220,844 16% 214,497 17% 209,479 17% 218,022 17% 214,335 17% 209,437 16% 223,051 16% FedEx 214,658 14% 217,120 13% 207,785 14% 217,078 15% 204,158 16% 191,071 15% 205,937 16% 219,837 18% 260,064 19% 253,427 18% Pinnacle 261,075 17% 275,618 17% 219,571 14% 177,725 13% 164,518 13% 158,198 13% 150,428 12% 153,315 12% 168,394 12% 138,620 10% Allegiant Air 209,124 14% 228,065 14% 180,899 12% 153,689 11% 108,627 8% 102,409 8% 98,940 8% 94,158 8% 101,260 8% 97,622 7% 5. LongExpressJet-Term 71,800 Debt5% (continued) 123,750 8% 134,215 9% 185,213 13% 213,080 17% 212,354 17% 208,936 16% 193,054 16% 145,580 11% 95,293 7% Delta 83,682 6% 121,759 7% 131,656 9% 137,379 10% 135,749 11% 135,471 11% 101,819 8% 66,746 5% 42,673 3% 35,356 3% Skywest 72,467 5% 125,649 8% 122,505 8% 22,180 2% 13,627 1% 1,081 0% - 0% - 0% 2,000 0% 48,885 3% UPS 70,088 5% 68,774 4% 65,366 4% 72,533 5% 69,146 5% 87,911 7% 86,369 7% 79,585 6% 58,346 4% 56,702 4% ScheduledASA Debt Service - 0% Requi 11,122 rements1% 28,564 2% 60,625 4% 50,382 4% 36,900 3% 50,999 4% 96,417 8% 114,008 9% 122,756 9% United - 0% 20,225 1% 43,387 2% - 0% - 0% - 0% - 0% - 0% - 0% - 0% As ofRepublic June 30, 2016 69,600 ,5% scheduled - 0% debt - service0% requirements - 0% - 0% of the - 0%variable - -0%rate debt - 0% and net - 0% swap -payments,0% Mesa 43,713 3% 45,153 3% 28,827 2% 14,017 1% - 0% - 0% 3,747 0% - 0% 368 0% 1,243 0% assumingTrans States current 24,577 interest2% 34,956 rates2% remain 27,444 the2% same 35,160 2%for their 50,646 4%term 17,210 are 1%as follows. - 0% As rates - 0% vary, 4,127 variable0% 7,701-rate1% bond GO Jets 2,775 0% 1,943 0% 30,083 2% 19,430 1% 9,330 1% - 0% - 0% - 0% - 0% - 0% interestAmerican payments Eagle 78,416 and5% net 64,854 swap4% payments 11,022 1% will 21,326 vary.2% 13,737 1% 77,507 6% 95,644 8% 105,611 9% 120,324 9% 144,434 10% Frontier 21,692 1% 25,886 1% 25,741 2% 20,079 1% 15,340 1% 17,792 1% 13,314 1% 17,476 1% 33,846 3% 1,883 0% Air Wisconsin 49,585 3% 53,204 3% 33,417 2% 23,422 2% 15,416 1% 13,066 1% 10,575 1% 611 0% 940 0% 94 0% AmeriFlight - 0% 740 0% 1,255 0% 1,193 0% 1,376 0% 1,415 0% 1,588 0% 1,604 0% 1,614 0% 1,463 0% YearPiedmont ending 46,356 3% 22,611 Variable1% 2,095 0% Rate - Bonds0% - 0% - 0% Interest 2,163 0% Rate 4,216 0% 2,197 0% 5,278 0% Mountain Air 481 0% 17 0% 214 0% 100 0% 103 0% 217 0% 36 0% 128 0% 253 0% 45 0% JuneShuttle America 30 - 0% Principal - 0% - 0% - 0%Interest 1,957 0% 638 0% Swaps, - 0% net - 0% - 0% Total 1,840 0% Chatauqua - 0% - 0% - 0% - 0% - 0% 5,067 0% 20,519 2% 3,021 0% 1,702 0% 14,799 1% Air Net - 0% - 0% - 0% - 0% - 0% 56 0% 54 0% 190 0% 136 0% 1,885 0% Compass2017 - 0% $ 4,590,000 - 0% - 0% $ - 0%562,983 - 0% - 0% 3,073$ 985,0430% 3,074 0% 5,022 0% $ 6,138,026 - 0% Continental Express - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% 51,532 4% 88,480 6% AirTran Airways - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% 23,760 2% 26,488 2% Comair2018 - 0% 4,825,000 - 0% - 0% - 0%522 ,361 - 0% - 0% - 830,1130% 47 0% 4,324 0% 25,2396,177,474 2% Mesaba - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% 75 0% 14,775 1% Vision2019 Airlines - 0% 5,075,000 - 0% - 0% - 0%479,483 - 0% - 0% - 667,3150% - 0% 2,604 0% 6,221,7985,108 0% Freedom - 0% - 0% - 0% - 0% - 0% 5,119 0% - 0% - 0% - 0% 3,657 0% Other2020 4,320 0% 9,456 5,335,0001% 8,482 1% 25,284 2%434,090 26 0% 9 0% 282 496,2130% 331 0% - 0% 6, 172265,303 0%

Total202 1 1,498,459 100% 1,648,257 5,610,000100% 1,511,614 100% 1,407,277 100%386,211 1,281,715 100% 1,272,970 100% 1,272,445 100%316,408 1,253,756 100% 1,354,586 100% 1,416,296 6,312,619 100% 20Source:22 Metropolitan-202 Knoxville6 Airport Authority, Annual Aviation32,520,000 Statistics Report 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based60 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 12: Total Passengers - ten fiscal year trend history (unaudited) NOTES TO FINANCIAL STATEMENTS (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Airline Number % Number % Number % Number % Number % Number % Number % Number % Number % Number % Delta 541,604 28% 679,504 29% 592,892 28% 528,295 28% 522,892 29% 225,241 13% 170,569 10% 111,521 7% 73, 405 4% 52,635 3% Allegiant Air 400,682 21% 442,824 19% 364,125 17% 300,796 16% 221,807 13% 218,386 13% 211,208 12% 192,626 11% 200,789 11% 194,329 11% PSA 245,357 13% 309,303 13% 328,538 16% 345,775 18% 344,727 19% 343,334 20% 351,352 21% 351,521 21% 338,243 19% 316,018 18% American Eagle 270,167 14% 264,231 11% 240,147 11% 201,287 11% 226,015 13% 170,642 10% 214,523 13% 208,868 12% 214,741 12% 212,081 12% 5. LongExpressJet-Term 113,192 Debt6% (continued) 193,928 8% 143,002 7% 188,560 10% 188,712 11% 281,754 16% 324,689 19% 328,276 19% 252,579 14% 141,325 8% ASA - 0% 21,298 1% 47,720 2% 105,245 6% 93, 217 5% 66, 769 4% 92, 635 5% 176,697 10% 211,136 12% 219,143 13% United 6,975 0% 31,627 1% 62,791 3% - 0% - 0% - 0% - 0% - 0% - 0% - 0% Mesa 61,672 3% 77,706 3% 43,117 2% 21,227 1% - 0% - 0% 5,113 0% - 0% 673 0% 1,237 0% ScheduledTrans States Debt Service 47,423 2% Requi 69,904 rements3% 47,375 2% 64,306 3% 92, 648 5% 30, 523 2% - 0% - 0% 6,919 0% 10,527 1% Go Jets 2,887 0% 3,031 0% 48,229 2% 32,603 2% 16, 443 1% - 0% - 0% - 0% - 0% - 0% As ofSkywest June 30, 2016 35,698 , 2%scheduled 67,784 3% debt 54,610 service3% 23, 546requirements1% 24, 891 1% of the 1,704 0%variable - -rate0% debt - 0%and 3,net379 0%swap 60, 272payments,4% Frontier 46,335 2% 56,495 2% 51,815 2% 39,243 2% 30, 242 2% 43, 348 2% 25, 528 2% 28, 677 2% 49, 355 3% 3, 635 0% assumingAir Wisconsin current 83,818interest4% rates 91,902 4%remain 54,865 the3% same 15,465 for1% their 20, 375 term1% 15,are 695 as1% follows. 13, 938 1% As rates 950 0% vary, 1,762 variable0% - 74rate0% bond Commute Air 5,387 0% 1,402 0% 14,916 1% 10,287 0% - 0% - 0% - 0% - 0% - 0% - 0% interestShuttle payments America and - 0%net swap 44,447 2% payments 3, 822 0% will vary. - 0% - 0% - 0% 3,811 0% 8,558 1% 3,853 0% 8, 950 1% Chautauqua - 0% - 0% - 0% - 0% 3,828 0% 1,175 0% - 0% - 0% - 0% 2,069 0% Piedmont 82,428 4% - 0% - 0% - 0% - 0% 66, 955 4% 34, 038 2% 4,744 0% 3,578 0% 24,050 1% Endeavor Air - 0% - 0% - 0% - 0% - 0% 269,189 15% 257,707 15% 266,344 16% 292,178 16% 214,646 13% YearCompass ending - 0% - Variable0% - 0% Rate - Bonds0% - 0% - 0% Interest 4,778 0% Rate 5,388 0% 8,321 1% - 0% Continental Express - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% 86, 317 5% 127,860 7% JuneAirTran Airways 30 - 0% Principal - 0% - 0% - 0%Interest - 0% - 0% Swaps, - 0% net - 0% 41, 882 2% Total 47,859 3% Comair - 0% - 0% - 0% - 0% - 0% - 0% - 0% 95 0% 7,893 0% 35,706 2% Vision Airlines - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% 3,534 0% 8, 265 1% Mesaba - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% - 0% 17, 466 1% Freedom2017 Airlines - 0% $ 4,590,000 - 0% - 0% $ - 0%562,983 - 0% - 0% $ - 985,0430% - 0% - 0% $ 6,138,026 5, 655 0% Other 8,518 1% 19,673 1% 10,543 1% 30, 160 1% 4,450 0% 4,468 0% 7,801 0% 9,952 1% 11, 867 1% 12,675 1% Total2018 1,952,143 100% 2,375,059 4,825,000100% 2,108,507 100% 1,906,795 100%522 1,790,247 ,361 100% 1,739,183 100% 1,717,690 830,113100% 1,694,217 100% 1,812,404 100% 1,716,477 6,177,474 100%

Source:2019 Metropolitan Knoxville Airport Authority, Annual Aviation5,075,000 Statistics Report 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based61 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 13: Distribution of total cargo - ten fiscal year trend history (in pounds)(unaudited) NOTES TO FINANCIAL STATEMENTS (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Airline Number % Number % Number % Number % Number % Number % Number % Number % Number % Number % Passenger: Delta 256,913 0% 354,524 1% 379,315 1% 353,740 1% 302,992 1% 394,091 1% 366,515% 1 %296,038 0 %221,316 0 %149,452 0 PSA 50,072 0% 82,438 0% 107,971 0% 80,491 0% 146,212 0% 175,714 0% 135,896% 0 %235,463 0 %233,820 0 %108,893 0 American Eagle 25,148 0% 25,823 0% 7,862 0% 26,849 0% 2,551 0% 10,058 0% -% 0 %- 0 %2,374 0 -% 0 5. LongSkywest -Term Debt 525 0% (continued) 10,828 0% 6,569 0% 998 0% - 0% - 0% -% 0 %- 0 %- 0 %- 0 ASA - 0% - 0% - 0% - 0% - 0% - 0% -% 0 %3,159 0 32,579% 0 %37,193 0 Pinnacle - 0% - 0% - 0% - 0% - 0% - 0% -% 0 %5,730 0 10,159% 0 %6,772 0 ScheduledComair Debt Service - 0% Requi - rements0% - 0% - 0% - 0% - 0% -% 0 %- 0 486% 0 %48,546 0 Chautauqua 1,568 0% 5 0% - 0% - 0% - 0% - 0% -% 0 %- 0 %- 0 188% 0 As of OtherJune 30, 2016 236, scheduled0% 3 0% debt 1,316 service 0% 2,576 requirements 0% - 0% of the 162 0%variable -% -0rate debt %8 0 and net %8 0 swap 84% payments,0 Cargo: assumingFedEx current 57,832,977 interest 69% 60,799,647rates 73%remain 61,790,777 the75% same 64,672,651 for76% 58,126,733their term72% 52,408,255 are 69%as follows. 55,543,110 71% As 65,927,562 rates76% vary, 72,737,084 variable79% 76,942,249 -rate83% bond UPS 25,685,666 31% 21,905,421 26% 19,899,283 24% 19,956,038 23% 21,666,452 27% 22,597,174 30% 21,574,987 28% 20,734,712 24% 19,206,871 21% 15,652,500 17% interestAmeriFlight payments and - 0%net swap 96,641 0% payments 150,231 0% will 177,325 vary. 0% 211,133 0% 219,152 0% 202,459% 0 %235,291 0 %251,478 0 %244,677 0 Mountain Air 83,565 0% 1,480 0% 28,582 0% 8,513 0% 9,677 0% - 0% -% 0 %- 0 25,179% 0 %7,260 0 Air Net - 0% - 0% - 0% - 0% - 0% - 0% 759% 0 %21,170 0 %19,289 0 %237,327 0 Other 90 0% 5,395 0% 5,116 0% 7,834 0% 5,182 0% 6,567 0% 16,551% 0 %22,040 0 %- 0 %- 0 YearTotal ending 83,936,760 100% 83,282,205 Variable100% 82,377,022 100% Rate85,287,015 Bonds100% 80,470,932 100% 75,811,173 100% 77,840,277Interest100% 87,481,173 Rate100% 92,740,643 100% 93,435,141 100%

JuneSource: Metropolitan 30 Knoxville Airport Authority, Annual AviationPrincipal Statistics Report Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based62 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 14: (continued) Authority employees and demographic data - population (unaudited) Full-time equivalent employees as of fiscal year-end 5. Long-Term Debt (continued) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Administration 12.0 12.05 11.0 12.0 13.5 12.5 12.5 12.5 12.5 12. Scheduled Debt Service Requirements As of JuneMarketing/Public 30, 2016, scheduled Relations debt service 9.0 requirements 9.5 8.5 9.0 of the 9.0 variable 7.0 - rate 7.0 debt 8.0 and 7.5net swap 10.0 payments, assuming currentEngineering interest & Planning rates remain the 6.0 same 6.0 for their 6.0 term 7.0 are 7.0 as follows. 7.0 6.0As rates 6.0 vary, 6.0 variable 5.5 -rate bond interest paymentsSafety (Police and & Fire) net swap payments 58.0 will 58.0 vary. 56.0 49.0 47.0 45.0 42.0 45.0 45.0 46.0

Year endingOperations Administration Variable 12.5 Rate 11.5 Bonds 12.0 12.0 13.0 Interest 12.0 10.5 Rate 9.5 10.0 9.5 JuneBuilding 30 Maintenance Principal 8.0 7.5 Interest 7.5 9.0 10.5 8.0Swaps, 9.5 net 9.0 10.0 11.0Total Airfield Maintenance 20.5 21.0 20.5 20.0 22.0 22.0 21.5 21.5 24.0 24.0 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018Building Services (Custodial)4,825,000 25.5 26.0 522 26.5,361 28.0 29.0 29.0 830,113 28.5 28.5 31.0 30.06,177,474 2019Knoxville Downtown Island5,075,000 Airport 6.5 6.5 479,483 6.0 7.0 7.0 7.0 667,315 06.5 7. 9.0 7.56,221,798 2020Total Employees 5,335,000 158.0 158.0 434,090 154.5 153.0 157.5 149.5 496,213 144.0 147.0 155.0 156.06,265,303

202Notes:1 A full-time employee is scheduled5,610,000 to work 2,080 hours per year (including vacation386,211 and sick leave). Full-time equivalent employment316,408 is calculated by dividing total labor 6,312,619 2022-202hours by6 2,080. 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 Demographic$3,578,297 data - population (unaudited) $3,700,287 $77,913,584 Metropolitan Actual City County area (b) 6. Fair Value 1960 111,827 250,563 424,586

The Authority categorizes1970 its fair value measurements174,587 (a) within the276,293 fair value hierarchy461,876 established by generally accepted accounting principles.1980 The hierarchy 175,045is based on the valuation319,694 inputs used546,488 to measure the fair value of the assets. Level 11990 inputs are quoted prices165,121 in active markets335,749 for identical assets.585,926 Level 2 inputs are significant other observable2000 inputs. Level 3 inputs173,890 are significant unobservable382,032 inputs.687,249

Debt securities are valued2010 based on the securities’178,874 relationship432,226 to benchmark quoted787,919 prices. Derivative instrumentsSource: are Bureau valued of the Census using a market approach that considers benchmark interest rates. (a) Large increase in population due to annexation. (b) Knoxville's Metropolitan Statistical Area (MSA) includes Anderson, Blount, Knox, Loudon, Sevier, and Union counties. Prior to 1983, statistics were gathered only for The following Anderson, tableBlount, Knox, sets and Union forth counties. by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 63 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 15: (continued) Demographic data - unemployment information last ten calendar years (unaudited) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 National 9.1% 8.9% 8.1% 6.7% 6.2% 5.0% 4.9% 4.1% 3.9% 3.5% 5. LongTennessee-Term Debt (continued)9.4 9.2 8.2 7.7 6.7 5.8 5.1 3.3 3.3 3.3

ScheduledMajor Debt Tennessee Service Requirements metropolitan areas: As of JuneChattanooga 30, 2016, scheduled 8.8debt service8.3 requirements7.5 6.7 of6.5 the variable5.1 -rate4.9 debt3.3 and 3.1net swap3.2 payments, assuming Knoxvillecurrent (a) interest rates remain7.9 the7.3 same6.7 for their6.0 term5.8 are as5.0 follows.4.7 As rates2.9 vary,2.8 variable2.9 -rate bond interest paymentsMemphis and net swap payments10.3 9.9 will vary.9.1 8.5 7.6 6.1 5.3 3.7 3.7 3.8 Nashville 8.7 8.0 6.8 5.5 5.2 4.2 3.8 2.4 2.3 2.3

Year endingSource: Tennessee Department of Labor Variableand Workforce Development Rate Bonds Interest Rate June(a) 30Knoxville's Metropolitan StatisticalPrincipal Area (MSA) includes Anderson, Blount,Interest Knox, Loudon, Sevier, and Union Counties.Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 SCHEDULE522,361 16: 830,113 6,177,474 2019 Demographic5,075,000 data - per capita personal479,483 income last ten calendar years 667,315(unaudited) 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 Calendar Year Tennessee United States 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 2010 32,520,000 35,6531,107,156 40,277 405,195 34,032,351 2011 37,452 42,453 2027-2028 2012 12,680,000 38,77186,013 44,267 - 12,766,013 Total 2013 $70,635,000 38,806$3,578,297 44,462$3,700,287 $77,913,584 2014 40,233 46,414 2015 42,094 48,112 6. Fair Value 2016 43,380 49,255 2017 45,517 51,631 The Authority categorizes2018 its fair value measurements46,900 within the fair 54,420 value hierarchy established by generally accepted accounting2019 principles. The hierarchy48,684 is based on the valuation 56,469 inputs used to measure the fair value of the assets.Source: U.S. Level Department 1 of inputsCommerce Bureau are of quotedEconomic Analysis prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approachSCHEDULE that considers 17: benchmark interest rates. Demographic data - total personal income last ten calendar years (thousands of dollars) (unaudited)

The followingCalendar table setsYear forth by level, withinTennessee the fair valueUnited hierarchy, States the fair value of the Authority’s investments and interest2010 rate swap liabilities226,633,982 as of June 30, 201612,459,613,000: 2011 239,633,734 13,233,436,000 2012 250,285,838Level 1 Level13,904,485,000 2 Level 3 Total 2013 252,091,031 14,068,960,000 Investments: 2014 263,437,186 14,801,624,000 Government debt2015 securities $277,832,327 – $ 39,998,46915,463,981,000 $ – $ 39,998,469 2016 288,531,063 15,912,777,000 Interest rate swap2017 liabilities $297,292,992 – $ 4,502,60916,413,551,000 $ – $ 4,502,609 2018 319,400,765 17,572,929,097 2019 332,472,653 18,542,262,000 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investmentsSource: and U.S. Departmentderivative of Commerce investments Bureau of Economic as Analysis of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 64 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

SCHEDULE 18 Demographic data - top employers in Knoxville area for the last ten calendar years (unaudited) NOTES TO FINANCIAL STATEMENTS (continued) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Employees % Employees % Employees % Employees % Employees % Employees % Employees % Employees % Employees % Employees % Major Employers: U.S. Department of Energy Oak Ridge Operations 15,862 4% 12,387 3% 12,618 3% 11,750 3% 11,986 3% 11,637 3% 11,877 4% 12,947 3% 13,082 4% 13,925 4% Covenant Health 9,792 2% 10,419 2% 10,419 3% 10,119 3% 10,304 3% 10,458 3% 9,122 3% 6,771 2% 9,494 3% 9,000 2% 5. LongKnox County-Term Schools Debt 7,949 (continued) 2% 8,082 2% 7,881 2% 8,146 2% 7,241 2% 6,804 2% 7,066 2% 6,409 2% 6,891 2% 6,945 2% The University of Tennessee Knoxville 9,384 2% 6,689 2% 6,689 2% 6,646 2% 6,609 2% 6,660 2% 6,550 2% 9,328 2% 6,400 2% 9,326 3% Wal-Mart Stores, Inc. 6,863 2% 5,998 1% 5,881 1% 6,206 2% 5,951 2% 6,006 2% 5,776 2% 4,613 1% 4,668 1% 4,336 1% ScheduledMcGhee Tyson Debt Service Requirements Air National Guard Base 1,609 0% 1,728 0% 1,728 0% 1,728 0% 1,717 0% 1,717 0% 4,897 1% 2,174 0% n/a 0% n/a 0% As of UniversityJune Health 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, Systems 5,458 1% 5,547 1% 5,316 1% 5,144 1% 4,941 1% 4,224 1% 4,061 1% 3,986 1% 3,942 1% 3,802 1% assumingThe Dollywood current Co. interest 4,500 rates1% remain 4,000 1% the 4,000 same1% 4,000for their1% term 3,000 1% are 2,521as follows.1% 2,521 1%As rates 2,558 1% vary, 2,534 variable1% 2,467 -rate1% bond K-VA-T Food Stores 3,104 1% 3,487 1% 3,328 1% 3,545 1% 3,913 1% 4,078 1% 3,857 1% 3,537 0% n/a 0% n/a 0% interestDenso payments Manufacturing and net swap payments will vary. Tennessee 5,350 1% 5,000 1% 4,439 1% 3,900 1% 3,800 1% 3,500 1% 3,400 1% 2,184 1% 2,346 1% 2,700 1% Clayton Homes 4,883 1% 3,662 1% 3,188 1% 3,139 1% 2,883 1% 2,784 1% 2,631 1% 2,829 1% n/a 0% n/a 0% Year ending Variable Rate Bonds Interest Rate Source: Knoxville Area Chamber Partnership JuneNotes: Percentages 30 reported above are based upon total employmentPrincipal in Knoxville and its Metropolitan Statistical Area (MSA) Interest Swaps, net Total n/a = not available 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based65 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 19: (continued) Airlines serving McGhee Tyson Airport (unaudited)

June 30, 2020

5. Long-TermMajor/domestic Debt (continued) passenger airlines Allegiant Air Scheduled DebtAmerican Service Airlines* Requirements As of June 30,Delta 2016 Air ,Lines* scheduled debt service requirements of the variable-rate debt and net swap payments, assuming currentFrontier interest Airlines rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsUnited and Airlines* net swap payments will vary. *Some or all service offered through regional airline affiliates shown below. Year ending Variable Rate Bonds Interest Rate June 30Regional AirlinePrincipal Affiliates Interest Swaps, net Total Air Wisconsin Airlines/American Airlines 2017 CommutAir /United$ 4,590,000 Airlines $ 562,983 $ 985,043 $ 6,138,026 2018 Endeavor Air /Delta4,825,000 Air Lines 522,361 830,113 6,177,474 Envoy Airlines/American Airlines 2019 ExpressJet/American5,075,000 Airlines 479,483 667,315 6,221,798 2020 ExpressJet/United 5,335,000 Airlines 434,090 496,213 6,265,303 2021 GoJet Airlines/United 5,610,000 Airlines 386,211 316,408 6,312,619 2022-2026Mesa Airlines/American 32,520,000 Airlines 1,107,156 405,195 34,032,351 2027-2028Mesa Airlines/United12,680,000 Airlines 86,013 - 12,766,013 Piedmont Airlines/American Airlines Total PSA Airlines/American $70,635,0 Airlines00 $3,578,297 $3,700,287 $77,913,584 Republic Airlines/American Airlines 6. Fair ValueRepublic Airlines/United Airlines Skywest Airlines/Delta Air Lines Skywest Airlines/American Airlines The AuthoritySkywest categorizes Airlines/United its fair Airlines value measurements within the fair value hierarchy established by generally accepted accountingTransStates principles. Airlines/United The Airlines hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant otherCargo observable airlines inputs. Level 3 inputs are significant unobservable inputs. FedEx, Inc. UPS Airlines, Inc. Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 66 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 20: (continued) Flight information (unaudited)

June 30, 2020

5. LongPassenger-Term Debt (continued) Daily Daily Weekly Weekly Airlines Destination flights seats flights seats Aircraft ScheduledAllegiant Debt ServiceAir RequiSt. Petersburg/Tamparements Bay 4 708 A320 As of June 30, 2016, scheduledFort Lauderdale debt service requirements of the variable5 -rate 885debt and netA320 swap payments, assuming current interest ratesOrlando-Sanford remain the same for their term are as follows.5 As885 rates vary, A320variable-rate bond interest payments and net swapPunta Gorda/SW payments Florida will vary. 4 708 A320 Baltimore/Washington 2 354 A320

Destin/Fort Walton 2 354 A320 Year ending Las VegasVariable Rate Bonds Interest2 354Rate A320 June 30 PrincipalNewark Interest Swaps,2 354 net A320 Total Chicago-Midway 2 354 A320 2017 $Denver 4,590,000 $ 562,983 2$ 985,043 354 A320$ 6,138,026 2018 Houston-Hobby4,825,000 522,361 2 830,113 354 A320 6,177,474 2019 Austin5,075,000 479,483 2 667,315 354 A320 6,221,798 2020 Sarasota5,335,000 434,090 2 496,213 354 A320 6,265,303 West Palm Beach 2 354 A320 2021 5,610,000 386,211 316,408 6,312,619 2022-202American6 Airlines 32,520,000Dallas/Fort Worth 1,107,156 5 430 405,195 A319/RJ34,032,351 2027-2028 12,680,000Chicago-O'Hare 86,013 4 238 - RJ 12,766,013 Total $70,635,0Philadelphia00 $3,578,297 3 150 $3,700,287 RJ $77,913,584 Charlotte 7 500 A319/RJ Washington-National 3 150 RJ 6. Fair Value Miami 2 152 RJ New York-LaGuardia 2 141 RJ The AuthorityDelta Air categorizes Lines Atlantaits fair value measurements within9 the860 fair value hierarchy establishedRJ/MD90 by generally accepted accounting principles.New York-LaGuardia The hierarchy is based on the3 valuation195 inputs used to measureRJ the fair value of the assets. Level 1 inputsDetroit are quoted prices in active4 markets222 for identical assets. LevelRJ 2 inputs are significant other observableMinneapolis/St. inputs. Level Paul 3 inputs are significant1 unobservable76 inputs. RJ

Debt securitiesFrontier Airlines are valuedDenver based on the securities’ relationship to benchmark4 744 quoted A320 prices. Derivative Orlando-International 2 372 A320 instruments are valued using a market approach that considers benchmark interest rates. United Airlines Chicago-O'Hare 5 263 RJ The following table sets Denver forth by level, within the fair value2 hierarchy,120 the fair value ofRJ the Authority’s investments and interest rateWashington-Dulles swap liabilities as of June 30, 20164 : 191 RJ Houston-Bush 3 168 RJ Newark Level 1 1 Level50 2 Level 3 RJ Total Investments:Totals 58 3,906 44 7,842 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469 Cargo Daily Daily Interest Airlinesrate swap liabilitiesDestination $ flights– $ seats4,502,609 $ – Aircraft$ 4,502,609 FedEx, Inc Indianapolis 1 N/A A310 Memphis 2 N/A A310 The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investmentsUPS and Airlines derivativeLouisville investments as of June 30, 20151 : N/A B757

Level 1 Level 2 Level 3 Total Investments: 67 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 21: (continued) Companies conducting business on airport property (unaudited)

June 30, 2020 5. LongAviation-Term service Debt operators (continued) Rental car companies Aircraft Technicians, Inc. Alamo Rent A Car ScheduledAvflight Debt ServicesService Corporation Requirements Avis Car Rental As of JuneConsolidated 30, 2016 Aviation, scheduled debt service requirements of theBudget variable Car Rental-rate debt and net swap payments, assumingG2 current Secure Staff,interest LLC rates remain the same for their term areDollar as follows.Rent-a-Car As rates vary, variable-rate bond interest paymentsGrande Aviation, and net LLC swap payments will vary. Enterprise Rent-A-Car Horizon Avionics, Inc. Hertz Rent-a-Car Year endingJetstar Aviation, LLC Variable Rate Bonds NationalInterest Car Rental Rate Knoxville Flight Training Center, Inc. Payless Car Rental JuneMaxAir 30 Charters dba PrincipalFlight Choice Interest Thrifty Rent-a-CarSwaps, net Total Standard Aero Alliance 2017TAC Air $ 4,590,000 $ 562,983 Other $ 985,043 $ 6,138,026 2018The Jet Shop, LLC 4,825,000 522,361 Airport Office 830,113Partners, LLC 6,177,474 2019Xpress Aircraft Maintenance,5,075,000 LLC 479,483 ARINC 667,315 6,221,798 2020United Ground Express5,335,000 434,090 Atmos Energy496,213 6,265,303 2021 5,610,000 386,211 CNN Network316,408 6,312,619 U.S. government agencies Cirrus Design Corp dba Cirrus Aviation 2022-Federal2026 Aviation Administration32,520,000 1,107,156 Delta Cargo, Inc.405,195 34,032,351 2027-Knox2028 County Sheriff's12,680,000 Dept. 86,013 G2 Secure Staff - 12,766,013 TotalTennessee Air National $70,635,0 Guard 00 $3,578,297 GAT Security$3,700,287 Services, Inc. $77,913,584 Tennessee Army National Guard Lyft Transportation Security Administration Massey Properties, LLC 6. Fair Value National Safe Skies Alliance Airline maintenance R Squared Construction The AuthorityExpressJet categorizes its fair value measurements within theRemote fair Areavalue Medical hierarchy established by generally Endeavor Air (Delta Connection) Republic Parking System accepted accounting principles. The hierarchy is based on the valuationSITA inputs used to measure the fair value of the assets.Bank ATMs Level 1 inputs are quoted prices in active marketsUber for identical assets. Level 2 inputs are significantFirst other Tennessee observable Bank inputs. Level 3 inputs are significant unobservable inputs. Regions Bank Debt securitiesSuntrust Bank are valued based on the securities’ relationship to benchmark quoted prices. Derivative instrumentsTN Stateare valuedBank using a market approach that considers benchmark interest rates.

Concessionaires The followingClassic Shine table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investmentsFive andStar Foodinterest Service rate swap liabilities as of June 30, 2016: HMS Host Corporation Knoxville Airport Hotel Company dba Level 1 Level 2 Level 3 Total Investments:Knoxville Airport Hilton GovernmentKnoxville Coca-Coladebt securities Co. $ – $ 39,998,469 $ – $ 39,998,469 Rick McGill Toyota Ruby Tuesday, Inc. InterestSmarte rate swap Carte, liabilities Inc. $ – $ 4,502,609 $ – $ 4,502,609 Paradies-Knoxville, LLC The followingSecurity tablePoint Media, sets forthLLC by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 68 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) SCHEDULE 22: Use of debt proceeds (unaudited) 5. Long-Term DebtDescriptions (continued) of the uses of proceeds from the Authority's debt are summarized below.

Scheduled DebtAirport Service revenue Requi refundingrements note Series 2019A - $39,570,000 As of June 30,Proceeds 2016 from, scheduled this debt issuance debt was service used to partially requirements refund the series of 2008the Vvariable-A-1 bonds- rateand to debtterminate and the associatednet swap payments, assuming currentvariable interest interest. rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsSeries and 2017A net - swap$11,000,000 payments will vary. Proceeds from this debt issuance was used to refund the series 2000 II-D-1 bonds and to terminate the associated interest Year endingrate swap. Variable Rate Bonds Interest Rate June 30 Local governmentPrincipal public improvement revenuesInterest bonds Swaps, net Total Series 2008 V-A-1—$84,645,000 (retired ) 2017 Proceeds from this$ bond4,590,000 issue were used to refund $ the562,983 Series III -A outstanding bonds$ in 985,043advance of their maturity. $ 6,138,026 2018 Special purpose revenue4,825,000 bonds Series 522,361 830,113 6,177,474 2019 2002— $8,500,0005,075,000(retired) 479,483 667,315 6,221,798 The Authority issued these bonds on behalf of Northwest Airlines, Inc., now Delta Air Lines, to construct a regional jet 2020 maintenance hangar5,335,000 for their affiliate airline, Pinnacle434,090 Airlines, Inc., in the West Aviation496,213 Area. The Authority is not at 6,265,303 2021 risk for these bonds5. ,610,000 386,211 316,408 6,312,619 2022-2026Local government 32,520,000 public improvement revenue1,107,156 bonds 405,195 34,032,351 2027-2028Series 2000 II-D-1—12,680,000$18,500,000 (retired) 86,013 - 12,766,013 Proceeds from this bond issue were used to finance a regional jet maintenance facility for ExpressJet, formerly Total Continental Express,$70,635,0 Inc., and00 for the West Aviation$3,578,297 Area at McGhee Tyson Airport.$ 3,700,287These were the first bonds issued$77,913,584 under the new Master Bond Resolution. 6. Fair ValueSeries 2001 III-A—$ 95,000,000 (retired) Proceeds from this bond issue were used for repayment of all outstanding General Obligation bonds, including Series E-1, E-2, II-G-2, III-B-1, III-G-2, and IV-A-1. They were also used for completion of the renovation and expansion of The Authoritythe categorizes terminal building its at fairMcGhee value Tyson measurements Airport, for the West within Aviation the Area, fair and fovaluer land hierarchyacquisition. established by generally accepted accountingSeries 1999 principles. IV-A-1— The$20,300,000 hierarchy (retired) is based on the valuation inputs used to measure the fair value of the assets.Proceeds Level from 1 inputsthis bond areissue quotedwere used to prices finance inthe renovation active markets and expansion for of identicalthe terminal building assets. at LevelMcGhee 2 inputs are Tyson Airport, construct a 750-space public parking lot, and refinance the outstanding Airport Revenue-General Obligation significant otherSeries observable G and H bonds. inputs. Level 3 inputs are significant unobservable inputs.

Series 1999 III-G-2—$5,500,000 (retired) Debt securitiesProceeds are from valued this bond based issue were on usedthe to securities’ finance the renovation relationship and expansion to benchmarkof the terminal building quoted at McGhee prices. Derivative instruments areTyson valued Airport. using a market approach that considers benchmark interest rates. Series 1998 III-B-1—$36,500,000 (retired) The followingProceeds table from sets this forth bond issue by were level, used withinto finance thethe renovation fair value and expansion hierarchy, of the theterminal fair building value at McGhee of the Authority’s investments andTyson interest Airport. rate swap liabilities as of June 30, 2016: Series 1997 II-G-2—$ 8,000,000 (retired) Proceeds from this bond issue were used to finance the renovation and expansion of the terminal building at McGhee Tyson Airport. Level 1 Level 2 Level 3 Total Investments: Series 1996 E-2—$5,350,000 (retired) GovernmentProceeds debt from securities this bond issue were used$ to finance the construction– $ 39,998,469 of improvements to$ the air cargo– facilities$ at the39,998,469 McGhee Tyson Airport and aircraft T-hangars at the Knoxville Downtown Island Airport. They were also used to Interest rate refinanceswap liabilities the outstanding Airport Revenue$ -General Obligation– Bonds,$ 4,502,609 Series F. $ – $ 4,502,609 Series 1996 E-1—$7,150,000 (retired) Proceeds from this bond issue were used to expand the public garage in front of the terminal building from 1,394 to 2,811 The followingspaces. table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 69 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 23: (continued) Insurance in force (unaudited) June 30, 2020 5. Long-Term Debt (continued) Expiration Policy Type of policy Policy insurer date limit Risk Coverage Scheduled Debt Service Requirements Airport Liability (a) ACE USA July 12, 2021 $200,000,000 Personal injury and As of June 30, 2016, scheduled debt service requirements of the variableaggregate limit-rate debtproperty and damage net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest Commercialpayments Property and net swap Travelerspayments will vary. June 30, 2021 $238,658,720 Buildings - Fire and (Includes Terrorism) Insurance other perils (includes Boiler & Machinery contents, rental income Year ending Variable Rate Bonds Interest Rateand extra expense) June 30 Principal Interest Swaps, net Total Cybersecurity Insurance Chubb July 1, 2021 $3,000,000 Cyber liability and security 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026

2018Public Officials and 4,825,000Chubb December522,361 18, 2020 $10,000,000830,113 Commissioners and 6,177,474 2019Employer Liability 5,075,000 479,483 667,315 employee professional 6,221,798 2020 5,335,000 434,090 496,213 liability 6,265,303

202Public1 Employee 5,610,000Cincinnati Insurance 386,211July 27, 2021 $500,000316,408 Employee dishonesty 6,312,619 2022Dishonesty-2026 Bond 32,520,000 Company 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Automobile Liability Cincinnati Insurance July 1, 2021 $1,000,000 Automobile liability Total $70,635,0 Company00 $3,578,297 $3,700,287 $77,913,584

Physical Damage - Two National Hangar November 29, 2020 $1,433,250 Property damage - 6. Fair FireValue Trucks Insurance Co. two fire trucks

The AuthorityPhysical Damage categorizes - Refueler its fairNational value Hangar measurementsNovember within 29, 2020 the fair$140,000 value hierarchyProperty established damage- by generally Trucks Insurance Co. refueler trucks accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets.Liability Only Level - Two 1 inputs areNational quoted Hangar pricesNovember in active 29, 2020 markets $150,000 for identicalLiability assets. Only - Level two old 2 inputs are significant Fireother Trucks observable inputs. Insurance Level Co. 3 inputs are significant unobservable inputs.trucks

Workers' Compensation AIG June 30, 2021 By Law Employer's liability - Debt securities are valued based on the securities’ relationship to benchmarkemployee quoted bodily prices.injury Derivative instruments are valued using a market approach that considers benchmark interest rates. Employee Health, Vision CIGNA Health Care May 31, 2021 Employee medical, vision and Dental and dental The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investmentsEmployee and Long-Term interest rate swapUnum liabilities as of JuneMay 31,30, 2021 2016: Employee earnings Disability after 90 days disability Level 1 Level 2 Level 3 Total Investments:Employee AD&D Unum May 31, 2021 $70,000/Employee Accidental death and Government debt securities $ – $ 39,998,469$5,000/Spouse $ dismemberment– $ 39,998,469 $1,000/Child InterestEmployee rate swap and Dependent liabilities Unum $ May– 31, 2021$ 4,502,609$70,000/Employee $ Life and– dependent$ life 4,502,609 Life $5,000/Spouse $1,000/Child The following(a) Includes terrorism table and war sets risk coverage forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 70 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) SCHEDULE 24: Major Airport Capital Improvements Completed (unaudited) As of June 30, 2020 5. Long-Term Debt (continued) Year ScheduledCompleted Debt Service RequiDescriptionrements Cost As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current1989 interest Parkingrates remain Garage Phase the same I (775 forspaces) their term are as follows. As rates vary,$5.7 millionvariable-rate bond interest payments1991 and netAir swap Cargo payments Complex (FedEx will vary. and UPS) $12 million 1993 Runway 5R/23L 3,000 foot extension $14 million Year ending1995 ParkingVariable Garage Phase Rate II (619 Bonds spaces) Interest Rate $3.2 million June 301998 ParkingPrincipal Garage Phase III (1,417Interest spaces) Swaps, net $8.2 million Total 2000 Passenger Terminal Building Renovation and Expansion $72 million 2017 2000 $Express 4,590,000 Jet Maintenance Facility$ 562,983 $ 985,043 $13.7 million$ 6,138,026 2018 2002 Delta4,825,000 Air Lines Maintenance Facility522,361 830,113 $8.5 million 6,177,474 2019 2008 Airport5,075,000 Rescue and Fire Fighting479,483 Facility 667,315 $11.6 million6,221,798 2020 2009 West5,335,000 Aviation Area 434,090 496,213 $53 million 6,265,303 2021 2010 Taxiway5,610,000 B Reconstruction 386,211 316,408 $5.4 million 6,312,619 2013 Airfield Maintenance Complex $18.7 million 2022-20220156 Land32,520,000 acquisition in Runway 23R1,107,156 Runway Protection Zone 405,195 $6.1 million34,032,351 2027-20282016 Aircraft12,680,000 Storage Hangar for Cirrus86,013 Design Corp. - $2.3 million12,766,013 Total 2017 $Air70,635,0 Cargo Building00 (Delta) $3,578,297 $3,700,287 $2.0 million$77,913,584 2018 Knoxville Downtown Island Airport T-Hangars, Taxiway & Apron $2.7 million 6. Fair Value2019 Passenger Boarding Bridges (12) $8.4 million

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 71 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIALSCHEDULE STATEMENTS 25: (continued) Capital Asset Information (unaudited) As of June 30, 2020

5. LongAirport-Term Code: Debt (continued)TYS DKX

ScheduledLocation: Debt Service RequiAlcoa,rements TN Knoxville, TN As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assumingCoordinates: current interest ratesN35° remain 48.66' the same for their term are as follows.N35° As 57' rates 49.8" vary, variable-rate bond interest payments and net swapW83° payments 59.64' will vary. W83° 52' 25.2" Elevation: 979 feet 833.2 feet Year ending Variable Rate Bonds Interest Rate JuneTower: 30 Principal24/7 121.2 Interest Swaps,None net Total Total acreage: 2,731 acres 179.5 acres 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018Runways: 4,825,000RWY 05L-23R 522,361 Under construction RWY830,113 08-26 3499 x 6,177,47475 ft 2019 5,075,000RWY 05R-23L 479,483 9,000 x 150 ft. 667,315 6,221,798 2020Apron area-sq ft: 5,335,000Cargo Airlines 434,090 314,284 496,213 6,265,303 2021 5,610,000Fixed Base Operator 386,211 1,985,064 316,408 6,312,619 202Terminal2-2026 Complex 32,520,000Number of passenger gates1,107,156 12 405,195 34,032,351 2027-2028 12,680,000Number of loading bridges 86,013 12 - 12,766,013 Total $70,635,0Total area00 - sq ft $3,578,297 258,871 $3,700,287 $77,913,584 Useable space - sq ft 227,624 Leasable space - sq ft 98,222 6. Fair Value Mechanical - sq ft 31,247

The AuthorityParking spaces, categorizes number: its Garage:fair value measurements within the fair value hierarchy established by generally accepted accounting principles.Short-term The hierarchy is based on the valuation 575 inputs used to measure the fair value of the assets. Level 1 inputs Long-term are quoted prices in active markets 1,779 for identical assets. Level 2 inputs are significant other observable inputs.Rental Level Cars 3 inputs are significant unobservable 435 inputs. Total Garage 2,789

Debt securities are valued basedSurface: on the securities’ relationship to benchmark quoted prices. Derivative Short-term 45 instruments are valued using a marketLong-term approach that considers benchmark690 interest rates. Economy 789 The following table sets forthRental by level,Cars and within Taxi the fair value hierarchy,51 the fair value of the Authority’s investments and interest rate swapEmployees liabilities as of June 30, 2016: 935 West Terminal Service Area 23 Total Surface Level 1 Level2,533 2 Level 3 Total Investments: Total Parking 5,322 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469 Fixed Base Operator TAC Air Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609 Source: Metropolitan Knoxville Airport Authority Engineering and Planning department The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 72 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 COMPLIANCE SECTION

This section contains the following items:

Schedule of Expenditures of Federal Awards, State Financial Assistance and Passenger Facility Charges Collected and Expended

Schedule of Long-Term Debt Principal and Interest Requirements

Schedule of Changes in Long-Term Debt by Individual Issue

Independent Auditor’s Reports

Schedule of Findings and Questioned Costs

Corrective Action Plan and Schedule of Prior Year Audit Findings

73 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, STATE FINANCIAL ASSISTANCE AND PASSENGER FACILITY CHARGES COLLECTED AND EXPENDED 5. Long-Term Debt (continued) Year ended June 30, 2020

CFDA Contract ScheduledFederal Debt Grantor Service / Pass-Through Requi Grantorrements Program Title Number Number Expenditures As of JuneFederal 30, Awards 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, U.S. Department of Transportation Airport Improvement Program 20.106 N/A $ 18,253,092 assuming current interest rates remain theCOVID-19 same - Aiport for Improvement their term Program are as follows.20.106 As 3-47-0037-076-2020 rates vary, variable 6,374,513 -rate bond interest paymentsPassed Through and Tennessee net Department swap of payments will vary. Transportation- Aeronautics Division Airport Improvement Program 20.106 47-555-0581-19 157,032 COVID-19 - Aiport Improvement Program 20.106 47-555-0191-21 69,000 Year ending Variable Rate Bonds InterestTotal RateProgram 20.106* 24,853,637 JuneU.S. 30 Department of Defense Principal National Guard MilitaryInterest Construction Program Swaps,12.400 W912L7-13-2-2101 net 133,227Total 12.400 W912L7-18-2-2102 4,743,758 12.400 W912L7-19-2-2101 4,995,523 2017 $ 4,590,000 $ 562,983 $ 985,043 Total Program 12.400* 9,872,508$ 6,138,026 2018Executive Office of the President4,825,000 522,361 830,113 6,177,474 Passed Through the Office of National Drug 2019 Control Policy 5,075,000 High Intensity Drug479,483 Trafficking Area 95.001667,315 G19AP0001A 5,4456,221,798 95.001 G20AP0001A 8,240 2020 5,335,000 434,090 496,213 Total Program 95.001 13,6856, 265,303

202U.S.1 Department of Justice 5,610,000 Equitable Sharing Program386,211 16.922316,408 TN0050700 67,7436,312,619

2022-202U.S. Department6 of Treasury 32,520,000 Equitable Sharing1,107,156 Program 21.016405,195 TN0050700 13,06834,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Appalachian Regional Commission Appalachian Area Development 23.002 N/A 13,163 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584 TOTAL FEDERAL AWARDS 34,833,804 *Major federal financial assistance program. 6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based74 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, STATE FINANCIAL ASSISTANCE AND PASSENGER FACILITY CHARGES COLLECTED AND EXPENDED 5. Long-Term Debt (continued) Year ended June 30, 2020

CFDA Contract ScheduledFederal Debt Grantor Service / Pass-Through Requi Grantorrements Program Title Number Number Expenditures As of JuneState Financial30, 2016 Assistance, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming currentTennessee Department interest of Transportation rates remain theAirport same Improvements for their – McGhee term Tyson Airport are as follows.N/A As47-555-0763-04 rates vary, $ variable 4,331 -rate bond Tennessee Department of Transportation Airport Improvements – McGhee Tyson Airport N/A 47-555-0766-04 15,327 interest paymentsTennessee Department and of net Transportation swap paymentsAirport will Improvements vary. – McGhee Tyson Airport N/A 47-555-0167-04 14,350 Tennessee Department of Transportation Airport Improvements – McGhee Tyson Airport N/A 47-555-0768-16 (120,041) Tennessee Department of Transportation Airport Improvements – McGhee Tyson Airport N/A 47-555-0778-18 356,289 Year endingTennessee Department of TransportationVariable RateAirport Improvements Bonds – McGhee Tyson Airport InterestN/A 47-555-0784-20Rate 818,223 Tennessee Department of Transportation Airport Improvements – McGhee Tyson Airport N/A 47-555-0783-19 56,071 JuneTennessee 30 Department of TransportationPrincipal Airport ImprovementsInterest – McGhee Tyson Airport Swaps,N/A 47-555-0786-20 net 79,203Total Tennessee Department of Transportation Airport Improvements – McGhee Tyson Airport N/A 47-555-0787-20 109,053 Tennessee Department of Transportation Airport Improvements – McGhee Tyson Airport N/A 47-555-0788-20 31,921 2017Tennessee Department of Transportation$ 4,590,000 Airport Improvements$ 562,983 – McGhee Tyson Airport $N/A 985,043 47-555-0789-20 77,665$ 6,138,026 Tennessee Department of Transportation Airport Improvements – Downtown Island Airport N/A 47-555-0761-04 2,552 2018Tennessee Department of Transportation4,825,000 Airport Improvements522 –,361 Downtown Island Airport N/A830,113 47-555-0764-04 3,3476,177,474 Tennessee Department of Transportation Airport Improvements – Downtown Island Airport N/A 47-555-0780-19 8,282 2019Tennessee Department of Transportation5,075,000 Airport Improvements479,483 – Downtown Island Airport N/A667,31547-555-0581-19 84,4736,221,798 2020Tennessee Department of Transportation5,335,000 Airport Improvements434,090 – Downtown Island Airport N/A496,213 47-555-0179-18 40,6116, 265,303 Tennessee Department of Transportation Airport Improvements – Downtown Island Airport N/A 47-555-0782-19 145,350 202Tennessee1 Department of Transportation5,610,000 Airport Improvements386,211 – Downtown Island Airport N/A316,408 47-555-0785-20 15,0006,312,619 2022-TOTAL2026 STATE AWARDS 32,520,000 1,107,156 405,195 1,742,00734,032,351 2027-TOTAL2028 FEDERAL AND STATE12,680,000 AWARDS 86,013 - $ 36,575,81112,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based75 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, STATE FINANCIAL ASSISTANCE AND PASSENGER FACILITY CHARGES COLLECTED AND EXPENDED 5. Long-Term Debt (continued) Year ended June 30, 2020

Passenger Facility Charges Scheduled Debt Service Requirements Available at July 1, 2019 $ 1,939,544 As of JuneCharges 30, collected2016, scheduled debt service requirements of the variable-rate debt and net 3,875,332swap payments, Interest earned, net of service charges 15,252 assuming currentTotal available interest rates remain the same for their term are as follows. As rates vary, variable 5,830,128 -rate bond Expended (3,194,966) interest paymentsAvailable at June and 30, 2020 net swap payments will vary. $ 2,635,162

Year ending Variable Rate Bonds Interest Rate June 30 Principal Interest Swaps, net Total

2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 4,825,000 522,361 830,113 6,177,474 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based76 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, STATE FINANCIAL ASSISTANCE AND 5. Long-Term PASSENGERDebt (continued) FACILITY CHARGES COLLECTED AND EXPENDED

Scheduled Debt1. Basis Service of Presentation Requirements As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming currentThe above interest Schedule rates of remainExpenditures the sameof Federal for Awardstheir term, State areFinancial as follows. Assistance, As andrates Passenger vary, variable Facility -rate bond Charges Collected and Expended (the Schedule) summarizes the federal and state expenditures of the interest paymentsMetropolitan and netKnoxville swap paymentsAirport Authori will tyvary. (the Authority) under programs of the federal and state government for the year ended June 30, 2020 and Passenger Facility Charges (PFCs) collected and expended Year endingfor the year ended JuneVariable30, 2020. These Rate amounts Bonds were obtained from the InterestAuthority’s generalRate ledger, which is June 30prepared on the accrualPrincipal basis. Because the ScheduleInterest presents only a selectedSwaps, portion of net the operations of theTotal Authority, it is not intended to and does not present the financial position, change in net position, and current

2017 revenues and expenditures$ 4,590,000 of the Authority. $ 562,983 $ 985,043 $ 6,138,026 2018 For purposes of the4,825,000 Schedule, federal awards 522include,361 federal financial assistance830,113 received directly from a6,177,474 2019 federal awarding agency5,075,000 or indirectly from a 479,483pass -through entity. The awards667,315 are classified into major6,221,798 program categories in accordance with the provisions of Title 2 U.S. Code of Federal Regulations Part 200, 2020 Uniform Administrative5,335,000 Requirements, Cost Principles,434,090 and Audit Requirements for Federal496,213 Awards (Uniform Guidance).6,265,303 2021 The Authority did not5,610,000 elect to apply the 10% de386,211 minimis indirect cost rate. 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-20282. Passenger Facil12,680,000ity Charge Program 86,013 - 12,766,013 TotalThe objective of $the70,635,0 Passenger00 Facility Charge$3,578,297 program is to authorize public$ agencies3,700,287 controlling commercial$77,913,584 service airports to impose a charge of $1 to $4.50 per enplaned passenger. The proceeds from such PFCs are to be used to finance approved, eligible airport-related projects that preserve or enhance safety, capacity, or 6. Fair Valuesecurity; reduce noise; or increase air carrier competition. PFCs are not considered to be federal financial assistance defined by the Uniform Guidance. The Authority3. Summary categorizes of Significant its fair valueAccounting measurements Policies within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets.For Levelpurposes 1 of inputs the Schedule, are quoted expenditures prices for federal in active assistance markets programs for and identical PFCs are assets.recognized Level on t he 2 inputs are significant otheraccrual observable basis of accounting. inputs. FederalLevel 3expenditures inputs are are significant primarily for unobservable administering an inputs. Airport Improvement Program for the Authority.

Debt securitiesThe Authority are valued uses PFCs based for onvarious the improvement securities’ project relationship expansions to of the benchmark airport facilities quoted and payments prices. Derivative instruments forare debt valued service using on bonds a market incurred approach to carry out that such considers projects. benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 77 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued)

SCHEDULE OF LONG-TERM DEBT PRINCIPAL 5. Long-Term Debt (continued) AND INTEREST REQUIREMENTS

Scheduled Debt Service Requirements June 30, 2020 As of June 30, 2016, scheduled debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same for their term are as follows. As rates vary, variable-rate bond interest paymentsAirport and Revenue net Refundingswap payments Note, Series will 2017A, vary. fixed rate of 1.95%:

Year ending Variable Rate Bonds Interest Rate June 30 Year endingPrincipal Interest Swaps, net Total June 30: Principal Interest Total 2017 $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 2018 2021 4,825,000 $ 522 ,361 - $ 118,365830,113 $ 118,365 6,177,474 2019 2022 5,075,000 1,310,000479,483 116,335667,315 1,426,335 6,221,798 2020 2023 5,335,000 1,340,000434,090 90,744496,213 1,430,744 6,265,303 2021 2024 5,610,000 1,370,000386,211 64,567316,408 1,434,567 6,312,619 2022-2026 2025 32,520,000 1,107,156 1,400,000 37,806405,195 1,437,806 34,032,351 2026 650,000 11,668 661,668 2027-2028 12,680,000 86,013 - 12,766,013 Total Total $ 70,635,000 $ $ 3,578,297 6,070,000 $ 439,485$3,700,287 $ 6,509,485$77,913,584

6. Fair Value Airport Revenue Refunding Note, Series 2019A, fixed rate of 2.54%: The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accountingYear principles. ending The hierarchy is based on the valuation inputs used to measure the fair value of the assets. LevelJune 1 inputs30: are quoted pricesPrincipal in active marketsInterest for identical assets.Total Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. 2021 $ - $ 1,005,078 $ 1,005,078 Debt securities are valued2022 based on the securities’ 5,275,000 relationship to 994,433 benchmark quoted 6,269,433 prices. Derivative instruments are valued2023 using a market approach that5,410,000 considers benchmark 860,175 interest rates. 6,270,175 2024 5,545,000 722,489 6,267,489 The following table 2025 sets forth by level, within 5,690,000 the fair value hierarchy, 581,353 the fair value 6,271,353 of the Authority’s investments and interest2026 rate swap liabilities as of 5,750,000 June 30, 2016: 436,706 6,186,706 2027 5,900,000 290,353 6,190,353 2028 Level 6,000,000 1 Level 2 140,292 Level 3 6,140,292Total Investments: Total $ 39,570,000 $ 5,030,879 $ 44,600,879 Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: 78 Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 METROPOLITAN KNOXVILLE AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS (continued) SCHEDULE OF CHANGES IN LONG-TERM DEBT BY INDIVIDUAL ISSUE

5. Long-Term Debt (continued) June 30, 2020

Scheduled Debt Service Requirements Paid and/or As of June 30, 2016, scheduledOriginal debt service requirementsLast of the Issuedvariable -Maturedrate debt Refunded and net swap payments, assuming currentDescription interest of Amount rates of remainInterest theDate same of Maturity for their Outstanding term are Duringas follows. During As ratesDuring vary, variableOutstanding-rate bond interest paymentsIndebtedness and netIssue swap paymentsRate Issue will vary.Date 7/1/2019 Period Period Period 6/30/2020 NOTES PAYABLE Year endingSeries 2017A $ 11,000,000Variable1.95% 5/25/2017 Rate Bonds6/1/2026 $ 8,595,000 $ Interest - $ 2,525,000 Rate$ - $ 6,070,000 Series 2019A 39,570,000 2.54% 6/27/2019 6/1/2028 39,570,000 - - - 39,570,000 JuneTotal 30 Notes Payable Principal Interest$ 48,165,000 $ Swaps,- $ 2,525,000 net$ - $ 45,640,000Total

2017BONDS PAYABLE $ 4,590,000 $ 562,983 $ 985,043 $ 6,138,026 Series V-A-I $ 84,645,000 Variable 12/1/2008 6/1/2020 $ 8,880,000 $ - $ 8,880,000 $ - $ - 2018Total Bonds Payable 4,825,000 522,361 $ 8,880,000 $ - $ 830,1138,880,000 $ - $ 6,177,474 - 2019 5,075,000 479,483 667,315 6,221,798 2020 5,335,000 434,090 496,213 6,265,303 2021 5,610,000 386,211 316,408 6,312,619 2022-2026 32,520,000 1,107,156 405,195 34,032,351 2027-2028 12,680,000 86,013 - 12,766,013 Total $70,635,000 $3,578,297 $3,700,287 $77,913,584

6. Fair Value

The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based79 on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Debt securities are valued based on the securities’ relationship to benchmark quoted prices. Derivative instruments are valued using a market approach that considers benchmark interest rates.

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and interest rate swap liabilities as of June 30, 2016:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 39,998,469 $ – $ 39,998,469

Interest rate swap liabilities $ – $ 4,502,609 $ – $ 4,502,609

The following table sets forth by level, within the fair value hierarchy, the fair value of the Authority’s investments and derivative investments as of June 30, 2015:

Level 1 Level 2 Level 3 Total Investments: Government debt securities $ – $ 40,071,930 $ – $ 40,071,930 Derivative instruments: Interest rate swaps $ – $ 4,883,863 $ – $ 4,883,863

45 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 Independent Auditor’s Report

Board of Commissioners Metropolitan Knoxville Airport Authority

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 the Metropolitan Knoxville Airport Authority (the Authority), a component unit of the City of Knoxville, Tennessee, as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated December 9, 2020.

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) as a basis for designing 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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Authority’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a 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.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

80 Board of Commissioners Metropolitan Knoxville Airport Authority

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 financial statements. 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 matter that is required to be reported under Government Auditing Standards.

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 results 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. Coulter & Justus, P.C.

December 9, 2020 Knoxville, Tennessee

81 Report on Compliance for Each Major Federal Program and the Passenger Facility Charge Program and on Internal Control Over Compliance in Accordance with the Uniform Guidance

Independent Auditor’s Report

Board of Commissioners Metropolitan Knoxville Airport Authority

Report on Compliance for Each Major Federal Program and Passenger Facility Charge Program

We have audited compliance of the Metropolitan Knoxville Airport Authority (the Authority), a component unit of the City of Knoxville, Tennessee, with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Authority’s major federal programs and the compliance requirements of the Passenger Facility Charge (PFC) program as described in the Passenger Facility Charge Audit Compliance and Reporting Guide for Public Agencies for the year ended June 30, 2020. The Authority’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs and the PFC program.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the Authority’s major federal programs and PFC 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; the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); and the Passenger Facility Charge Audit Compliance and Reporting Guide for Public Agencies (PFC Guidance), issued by the Federal Aviation Administration. Those standards and the Uniform Guidance 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 the major federal programs or the PFC 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 and PFC program. However, our audit does not provide a legal determination of the Authority’s compliance.

82 Board of Commissioners Metropolitan Knoxville Airport Authority

Opinion on Each Major Federal Program and the PFC 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 programs and the PFC program for the year ended June 30, 2020.

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 or the PFC 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 the PFC program and to test and report on internal control over compliance in accordance with the Uniform Guidance, 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 a 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 the Uniform Guidance and PFC Guidance. Accordingly, this report is not suitable for any other purpose. Coulter & Justus, P.C. December 9, 2020 Knoxville, Tennessee

83 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended June 30, 2020

Section I - Summary of Auditors’ Results

Financial Statements

Type of auditors’ report issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified

Internal control over financial reporting: Material weakness(es) identified? None reported

Significant deficiency(s) identified? None reported

Noncompliance material to financial statements noted? No

Federal Awards

Type of auditors’ report issued on compliance for major federal program: Unmodified

Internal control over major federal program: Material weakness(es) identified? None reported

Significant deficiency(s) identified? None reported

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? None reported

Identification of major programs: CFDA Number Name of Program 20.106 Airport Improvement Program 12.400 National Guard Military Construction Program

Dollar threshold used to distinguish between Type A and Type B programs: $1,045,014

Auditee qualified as low-risk auditee? Yes

Section II – Financial Statement Audit Findings

None reported.

Section III – Single Audit Findings

None reported.

84 CORRECTIVE ACTION PLAN AND SCHEDULE OF PRIOR YEAR AUDIT FINDINGS Year ended June 30, 2020

Section IV – Corrective Action Plan

Not applicable as there were no 2020 findings reported.

Section V – Schedule of Prior Year Audit Findings

Not applicable as there were no 2019 findings reported.

85

McGhee Tyson Airport P.O. Box 15600 Knoxville, TN 37901

865/342-3000 * Fax 865/342-3050 Email: [email protected]