Comprehensive Annual Financial Report, 2003
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METROPOLITAN WASHINGTON AIRPORTS AUTHORITY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2003 BOARD OF DIRECTORS Norman M. Glasgow, Jr., Chairman Mame Reiley, Vice Chairman Robert Clarke Brown Honorable H.R. Crawford Anne Crossman Mamadi Diané Honorable John Paul Hammerschmidt William A. Hazel Weldon H. Latham David T. Ralston, Jr. Charles D. Snelling Honorable David G. Speck Jeffrey Earl Thompson EXECUTIVE STAFF James E. Bennett, President and Chief Executive Officer Margaret E. McKeough, Executive Vice President & Chief Operating Officer * Lynn Hampton, CPA, Vice President for Finance and Chief Financial Officer Anne M. Field, CPA, Controller * Effective April 1, 2004. Prepared by the Office of Finance METROPOLITAN WASHINGTON AIRPORTS AUTHORITY Comprehensive Annual Financial Report for the Year Ended December 31, 2003 TABLE OF CONTENTS Introductory Section Page Transmittal Letter ................................................................. 1 2002 Certificate of Achievement .................................................... 11 Organization Chart............................................................... 12 Financial Section Report of Independent Auditors..................................................... 13 Management’s Discussion and Analysis.............................................. 15 Financial Statements Statements of Net Assets ...................................................... 28 Statements of Revenues, Expenses and Changes in Net Assets ........................ 30 Statements of Cash Flows..................................................... 31 Notes to Financial Statements.................................................. 33 A. Summary of Significant Accounting Policies............................... 33 B. Deposits and Investments.............................................. 37 C. Interest Rate Swap.................................................... 41 D. Accounts Receivable .................................................. 41 E. Restricted Assets ..................................................... 42 F. Changes in Capital Assets .............................................. 43 G. Accounts Payable .................................................... 45 H. Pension Plans ....................................................... 45 I. Postemployment Benefits and Deferred Compensation Plans .................. 50 J. Capital Debt ........................................................ 51 K. Airport Use Agreement and Premises Lease ................................ 58 L. Net Assets .......................................................... 60 M. Lease Commitments .................................................. 61 N. Other Commitments and Contingencies................................... 63 O. Government Grants................................................... 63 P. Litigation ........................................................... 65 Q. Passenger Facility Charges ............................................. 65 R. Risk Management.................................................... 66 S. Fair Value of Financial Instruments ...................................... 66 T. Significant Policies................................................... 67 U. Subsequent Events ................................................... 67 i METROPOLITAN WASHINGTON AIRPORTS AUTHORITY Comprehensive Annual Financial Report for the Year Ended December 31, 2003 TABLE OF CONTENTS (continued) Statistical Section Exhibit Page S - 1 Operating Expenses by Function ........................................ 69 S - 2 Revenues by Source .................................................. 70 S - 3 Ronald Reagan Washington National Airport Revenues ...................... 71 S - 4 Washington Dulles International Airport Revenues.......................... 72 S - 5 Airports Authority Employee Strength.................................... 73 S - 6 Population Trends .................................................... 74 S - 7 Aircraft Operations by Airport .......................................... 75 S - 8 Landed Weights at Reagan National...................................... 76-77 S - 9 Landed Weights at Washington Dulles.................................... 78-79 S -10 Enplanements at Reagan National........................................ 80 S -11 Enplanements at Washington Dulles...................................... 81 S -12 Enplanement Market Share at Reagan National ............................. 82-83 S -13 Enplanement Market Share at Washington Dulles........................... 84-85 S -14 Cargo Market Share Enplaned at Reagan National........................... 86-87 S -15 Cargo Market Share Enplaned at Washington Dulles......................... 88-89 S - 16 Passenger Facility Charges ............................................. 90 S - 17 Revenue Bond Coverage ............................................... 91 S -18 Insurance Program for Operations ....................................... 92 S -19 Insurance Program for Construction...................................... 93 ii March 30, 2004 To the Board of Directors and The President and Chief Executive Officer of the Metropolitan Washington Airports Authority The Comprehensive Annual Financial Report (CAFR) of the Metropolitan Washington Airports Authority (the Authority) for the year ended December 31, 2003, is submitted herewith. The Office of Finance prepared this report. Responsibility for both the accuracy of the presented data and completeness and fairness of the presentation, including all disclosures, rests with the Authority. To the best of our knowledge and belief, this report fairly presents and fully discloses the Authority’s financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States of America. The report of the independent auditors on the financial statements is included on page 13. It includes disclosures necessary to enable the reader to gain an understanding of the Authority’s financial activities included within the CAFR. This report was prepared following the guidelines recommended by the Government Finance Officer’s Association of the United States and Canada (GFOA). The GFOA awards Certificates of Achievement to those governments whose annual financial reports are judged to conform substantially with the high standards of public financial reporting, including accounting principles generally accepted in the United States of America, promulgated by the Governmental Accounting Standards Board (GASB). The CAFR is divided into three sections. The Introductory Section contains this Transmittal Letter which includes a narrative of the Authority's history and background and an organization chart listing the principal staff of the Authority. The Financial Section begins with the Report of Independent Auditors and is followed by the required supplementary information, Management’s Discussion and Analysis (MD&A) of the financial condition of the Authority, followed by the Authority’s Financial Statements and Notes to the Financial Statements. The Statistical Section includes selected financial and operational information, generally presented on a multi-year basis. REPORTING ENTITY AND ITS SERVICES The Authority is a public body politic and corporate, created with the consent of the Congress of the United States by an Act of the District of Columbia and an Act of the Commonwealth of Virginia for the purpose of operating, maintaining, and improving Ronald Reagan Washington National Airport (Reagan National) and Washington Dulles International Airport (Washington Dulles)— collectively, the Airports. The Airports had historically been managed by the Federal Aviation Administration (FAA) of the United States Department of Transportation. Pursuant to an Agreement and Deed of Lease, effective June 7, 1987, the Airports were transferred by the U. S. Government to the Authority for an initial term of 50 years. On June 17, 2003 the Agreement and Deed of Lease was extended 30 years to June 6, 2067. Metropolitan Washington Airports Authority 2003 Comprehensive Annual Financial Report A 13-member Board of Directors presently governs the Authority. Five members are appointed by the Governor of Virginia, three are appointed by the Mayor of the District of Columbia subject to confirmation by the Council of the District of Columbia, two are appointed by the Governor of Maryland, and three are appointed by the President of the United States with the advice and consent of the Senate. Directors serve staggered, six-year overlapping terms without compensation. They establish the Authority’s policy and appoint the Chief Executive Officer. The Board annually elects a Chairman, Vice Chairman, and Secretary. James E. Bennett, became the President and Chief Executive Officer of the Authority on May 3, 2003. In this position Mr. Bennett plans and directs all programs and activities of the Authority, focusing on the future and the development of long-term business strategies. Mr. Bennett was formerly the Executive Vice President and Chief Operating Officer of the Authority. Christopher U. Browne is the Vice President and Airport Manager of National. National, which opened in 1941, is the oldest commercial airport serving the Washington, D.C. area and is located on 860 acres along the Potomac River in Arlington County, Virginia. Approximately three miles from downtown Washington, D.C., National is the Authority’s principal domestic airport served by 26 airlines. Keith W. Meurlin is the Vice President