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Metropolitan Airport Authority of Rock Island County, Illinois and Combined Affiliate Metropolitan Airport Authority of Rock Island County, Illinois and Combined Affiliate Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2012 Prepared by: Finance Department Contents Introductory Section (unaudited) Table of contents i Letter of transmittal ii-v Organizational chart vi List of appointed officials vii GFOA certificate viii Financial Section Independent auditor's report 1-2 Management's discussion and analysis 3 - 11 Financial statements: Combined statements of net assets 12 - 13 Combined statements of revenues, expenses and changes in net assets 14 Combined statements of cash flows 15 - 16 Notes to basic combined financial statements 17 - 36 Required supplementary information: Illinois Municipal Retirement Plan 37 Metropolitan Airport Authority Health Benefit Plan 38 Supplementary information: Combining schedule of net assets 39 -40 Combining schedule of revenues, expenses and changes in net assets 41 Schedule of other expenses 42 Statistical Section (unaudited) Statistical section contents 43 Net assets and changes in net assets 44 -45 Principal revenue sources and revenues per enplaned passenger 46 -47 Changes in cash and cash equivalents 48 -49 Revenue rates 50 - 51 Ratios of outstanding debt, debt service and debt limits 52 - 53 Pledged revenue coverage 54 - 55 Population in the air trade area 56 - 57 Principal employers 58 Authority and combined affiliate employees 59 -60 Enplaned passengers 61 - 62 Takeoff and landing operations summary 63 Takeoff and landing operations by airline or cargo carrier 64 -65 Airline landed weights 66 -67 Primary origin and destination passenger markets 68 Capital asset information 69 METROPOLITAN AIRPORT AUTHORITY OF ROCK ISLAND COUNTY, ILLINOIS QUAD CITY INT'L AIRPORT P.O. BOX 9009 MOLINE, IL 61265-9009 309-764-9621 (309) 757-1515 FAX December 4, 2012 Commissioners, Citizens of Rock Island County and Other Interested Parties: State law requires that every general purpose local government publish within six months of the close of each fiscal year a complete set of audited financial statements. This report is published to fulfill that requirement for the fiscal year ended June 30, 2012. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. McGladrey LLP, Certified Public Accountants, have issued an unqualified ("clean") opinion on the Metropolitan Airport Authority of Rock Island County, Illinois' (Authority) financial statements for the year ended June 30, 2012. The independent auditor's report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. Profile of Government In 1910, a Rock River valley pasture, known as Franing Field, was selected for the first coast-to-coast flight by army planes. Three men leased 30 acres in this pasture and it officially became an airport. One- year later real estate had increased to 200 acres. In 1926, regular airmail service began. Operations were expanded in 1927 when Boeing Air Transport began flying between Chicago and San Francisco. Later that year, Boeing Air Transport, Valley Air Transport, Pacific Air Transport, and National merged to form United Airlines which provided passenger and mail service to the east and west coasts as well as to the southwestern United States. In 1935, the City of Moline, Illinois, took over the Airport as a municipal, tax supported airport. The second largest Work Projects Administration project in Illinois was underway at a cost to Moline of $165,000 and $365,000 to the federal government. A new terminal and hangar were built in 1939 with five scheduled air carrier flights per day and 24 private aircraft based on airport property. Rock Island County citizens voted in 1947 to buy the Airport creating the Metropolitan Airport Authority of Rock Island County, Illinois, as its owner and under the jurisdiction of the state of Illinois. Currently, seven townships in Rock Island County provide financial support to the Airport. They include Hampton, Moline, South Moline, Rock Island, South Rock Island, Blackhawk and Coal Valley. The mayors of Moline, Milan, East Moline, Rock Island, and Silvis each appoint one commissioner to the Authority's board, and the Chair of the Rock Island County Board aoooints three more with the consent of the Board. ii Ozark Air Lines began service at the Airport in 1950. In 1954, a terminal building was built to provide space for United and Ozark Airlines, as well as limousine service, car rentals, the Civil Aeronautics Administration, and the U. S. Weather Bureau. In March 1985, a new terminal, parking lot and roadway system were completed. Major improvements have been made since that time to the terminal and other public space, most notably a capital project expanding the terminal and concourses to nearly 160,000 square feet in 2001 and redesign of the public parking lot to accommodate over 2,000 vehicles in both 1999 and 2009 in anticipation of increased utilization of the state-of-the-art facility. Many customer service elements have continued to be added in recent years, providing further conveniences for today's traveler. The Authority has contracted for customer care services and curbside (skycap) assistance. Wheelchair and electric golf cart services, as well as skycap services assist travelers of all ages as needed for arriving and departing flights. Technological advances with the airport's website and complimentary wi-fi connectivity in the terminal add to the conveniences for the business traveler. The Metropolitan Airport Authority owns and operates over $100 million in assets on the more than 2,000- acre campus. Some of those assets include a four-bay public safety building, impressive airfield maintenance facility, and other structures that serve a variety of needs on Airport property. An air freight complex opened in 1992. Additionally, various hangars for private and corporate aircraft along with an industrial park complement the landscape on the south side of the property. The longest runway extends just over 10,000 feet, and improvement projects are continuously underway to further enhance safety and efficiency for aircraft at the Quad City International Airport. Federal and state dollars are used to support most projects that are related to the airfield. Local Economy The Quad Cities metropolitan area is located along the Mississippi River in eastern Iowa and western Illinois, approximately 165 miles west of Chicago and midway between Minneapolis to the north and St. Louis to the south. The Quad City region has a population of approximately 422,000. The following are the top 10 employers in the area: Company Employees Type of Business Rock Island Arsenal 8,500 Defense Manufacturing Deere & Company 7,300 Agiculture OEM Genesis Health System 4,900 Health Care System Trinity Regional Health System 2,900 Health Care System Tyson Fresh Meats 2,400 Food Processsing Alcoa, Inc. 2,250 Aerospace & Defense Aluminum Hy-Vee Food Stores 1,622 Supermarket and Other Grocery Kraft Foods/Oscar Mayer 1,500 Food Processsing XPAC 1,195 Supply Chain Management Logistics Wal-Marl Super Centers 1,066 Warehouse Clubs and Supercenters The area boasts a healthy variety of tourism and recreational opportunities including hiking & biking trails, dozens of area golf and disc golf courses, ice skating and sporting facilities, arts and cultural festivals and events and much more-all along the banks of the Mighty Mississippi River. Long- Term Financial Planning Federal and state funding for capital improvements is extremely important to the Authority. Airfield work is largely paid for by federal funds. Historically for the Airport, 95 percent of the costs of these projects has come from federal sources. Due to budget cuts by Congress, the federal percentage of Airport Improvement Project costs for the Airport dropped to 90 percent for grants awarded in 2012. Passenger facility charge (PFC) dollars also playa large role in funding airfield construction and purchasing equipment essential to the airfield and terminal. iii The Authority issued over $24 million in bonds, mostly secured by PFC revenue, on July 1, 2010. This money refinanced existing PFC debt and was used to purchase snow removal equipment in 2011 and round out the funding of the airfield rehabilitation project of Runway 9/27 in 2011 and 2012. The proceeds will also be used to purchase five new loading bridges in fiscal year 2013. For an Airport Authority, passengers drive discretionary revenue. Dollars spent by passengers on parking, eating and shopping is money available to the Authority for special projects and building cash reserves. Those reserves are earmarked for debt service and special projects outlined in the Major Initiatives section. Fiscal year 2012 brought in 409,795 passengers to the Quad City International Airport. This was about an 11 percent decrease over fiscal year 2011. Passengers cannot patronize an airport without air service, so the Authority Board has included in its strategic plan a commitment to control costs that it passes on to its tenants. The Board has opted to subsidize airline landing fees to remain price competitive with other airports in the area. In addition, it is a goal of the Authority to provide services to its airlines such as fueling and ground handling, at a more affordable rate than they can do it themselves or purchase from a third party vendor. The Board has established certain levels of cash reserves for this purpose.
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