DEPARTMENT OF AVIATION Gulfstream Aerospace Corporation New Ground Lease Proposal at Love Field Briefing to the Economic Development and Housing Committee June 4, 2007 1 Gulfstream Gulfstream Aerospace Corporation Wholly owned subsidiary of General Dynamics General Dynamics revenues rose to $24 billion in 2006, a 14.7 percent increase over 2005* Gulfstream revenues rose 20 percent to $4.1 billion in 2006* Gulfstream designs, develops, manufactures, markets, services and supports advanced business-jet aircraft Delivered 113 “green” aircraft (w/o interior and paint) in 2006, a 27% increase* *General Dynamics 2006 Annual Shareholders Report 2 Gulfstream Gulfstream Aerospace Corporation Types of aircraft: G150, G200, G350, G450, G500, and G550 With seating capacities of 6-19 passengers Employment 7,900 employees at 7 major locations Dallas Love Field Facility Final Phase Manufacturing (interior and painting) 55 new aircraft projected for 2007, which is a 206% increase since 2003 (G150** and G200**) Provide customer services to over 2,000 aircraft annually that are currently in operation 757 employees currently at Dallas location $26 per hour - average employee wages **See pictures next two pages 3 Gulfstream G150 – Completed at Dallas Love Field Staff recommends approval of the Gulfstream proposal With approval of this lease Gulfstream’s capital commitment at Love Field will be $15 - $35 million Approval of this lease will convert a non-aviation use property into an aviation use property with airside access Approval of this lease will add approximately $85,300 annual revenue to the City NEXT STEPS June 4, 2007 - Economic Development and Housing Committee June 11, 2007 - Transportation and Environment Committee June 27, 2007 - Council Agenda 4 Gulfstream G200 – Completed at Dallas Love Field 5 History of Negotiations July 2006 - Local Gulfstream management and Aviation Dept staff exchanged proposals for new ground lease and hangar development. Jan 2007 - General Dynamics Real Estate Vice President accompanied local Gulfstream mgt in further discussions with Aviation Dept staff. Mar 2007 – Follow-up meeting resulted in General Dynamics proposed term sheet for lease and hangar development. May 2007 – Continued negotiations led to revised proposed term sheet and tentative acceptance by staff. 6 Proposal 3-bay paint hangar facility at the former 6.18 acre Ampco parking site Increase annual production from 55 to 65 new aircraft Related Jobs 2005-07 - 150 new jobs By 2008 - 150 additional new jobs We are competing with Appleton, WI for the hangers 7 DEPARTMENT OF AVIATION Development Issues for the Love Field Modernization Program June 11, 2007 Briefing to the Council Transportation and Environment Committee 1 Purpose of Briefing Love Field Modernization Program (LFMP) Background and Issues People Mover Project coordination Rates & Charges Study Capital funding Schedule Milestones 2 The Wright Amendment Reform Act of 2006 Airline gate capacity to be reduced to 20 gates Airline lease agreements to include options to 2028 Airline through-ticketing permitted upon enactment (10/13/06) Full repeal of the Wright Amendment phased out in 8 years, (10/13/14) 3 Post Reform Act Developments Pre-Act route system included 14 non- stop destinations from Love Field. Post-Act (4Q06) Southwest added 3 new destinations from Love Field using through-ticketing capability. 4 PRE-ACT July 2006 Schedule –Southwest/American/Continental 14 Destinations MCIMCI STLSTL TULTUL OKCOKC TULTUL AMAAMA ABQABQ LITLIT LBBLBB DALDAL ELPELP MAFMAF AUSAUS AUSAUS MSYMSY HOU/IAHHOU/IAH SATSAT 5 POST-ACT New Destination, 1-Stop: Tampa; Raleigh-Durham; Albany Existing Destination, addt’l service: Albuquerque; Kansas City; St. Louis; New Orleans ALBALB MCIMCI STLSTL ABQABQ RDURDU DALDALDAL MSYMSY TPATPA 6 Immediate Results of the Act Enplanements Increased 28% in 4Q06 vs 4Q05 Enplanements 1000 950 900 850 800 750 700 650 600 550 500 450 Thousands 400 Enplanements 350 300 250 200 150 100 50 0 4th Q 2005 4th Q 2006 7 Projected Results of the Act Southwest announced 41 new cities with through-ticketing starting in March, 2007. Airport-wide enplanements projected to increase by 1,000,000 by March 2008. FY 2008 total expected to exceed 4,000,000 enplanements. 8 Southwest Route System from Love Field March, 2007 SEASEA GEGGEG PDXPDX BOIBOI ALBALB DTWDTW BUFBUF MHTMHT MDWMDW CLECLE PVDPVD OMAOMA BDLBDL SLCSLC PITPIT BDLBDL ISPISPISP RNORNO DENDEN INDINDIND BWBWIBW I I ISPISPISP MCIMCI CMHCMH PHLPHL SMFSMF STLSTL SDFSDF IADIADIAD OAKOAK SJCSJC ORFORF AMAAMA OKCOKC TULTUL BNABNA LASLAS ABQABQ AMAAMA OKCOKC TULTUL BNABNA RDURDU ONTONT BURBUR ONTONT LITLIT LAXLAX PHXPHX BHMBHM LAXLAX SNASNA LBBLBB DALDAL BHMBHM JANJAN SANSAN TUSTUS ELPELP MAFMAF MSYMSY JAXJAX AUSAUS MSYMSY SATSAT AUSAUS HOU/IAHHOU/IAH MCOMCO CRPCRP TPATPA RSWRSW HRLHRL RSWRSW FLLFLL 9 Projected Effects on Enplanements This year will mark the recovery of enplanements from the effects of 9/11 5 4 3 Millions Enplanements 2 1 0 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Fiscal Year FY 2007/2008 Based on Projections Enplanements Projected Enplanements 10 Actual/Projected Effect on Parking/Car Rental/Concession Revenue These are the revenues most closely tied to enplanements 25 20 Actuals Projected Millions Revenue City to 15 10 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Fiscal Y ear FY 2007/2008 Based on Projections Parking/RACs/Concessions 11 Historical and Projected Cash Balances Revenues, Expenses and Cash 80,000,000 70,000,000 60,000,000 50,000,000 Revenues 40,000,000 Expenses 30,000,000 Cash 20,000,000 10,000,000 - FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 Est. 2007 Est. 2008 Prop. Notes: Total Revenues include all Operating Fund revenue sources including concessions, rental, landing fees etc. Total Expenses include all direct operating fund expenses plus capital transfers and debt service obligations. Total Cash includes Operating Fund, Reserves, Debt service and Capital Improvement Fund and Balances FY 06, 07 and 08 expected to contribute over $4 million to Cash Balance. 12 Capital Improvements LFMP (Love Field Modernization Program) Reduction of airline gate capacity from 32 gates to 20. Accommodate passenger growth to planned levels. Meet schedule specified in Act for phase out of Wright Amendment . People Mover Connecting Terminal to new DART Station. 13 Capital Funding and Feasibility Estimated Capital Requirement: LFMP (estimated) $150-200 mil People Mover (estimated) $150 mil Total Capital (estimated) $300-350 mil 14 Capital Funding and Feasibility Anticipated Funding: People Mover Requirement (est.) $150 m Regional Transp. Council grant ($60 m) DART Contribution ($20 m) People Mover Net Requirement (est.) $ 70 m LFMP $200 m FAA Grant Funding (est.) ($50 m) LFMP Net Requirement (est.) $150 m Total Net Requirement (est.) $220 m NOTE: Airfield Safety/Security CIP funded through Capital Improvement Fund and FAA grants 15 Capital Funding and Feasibility Net Funding Requirement: $220 m Sources of Funding: Bonded Debt Serviced by Airline Rates & Charges, annual PFC (Passenger Facility Charge) collections Accumulated PFC Revenues Project Feasibility: Master planning effort will include consultation with Rates & Charges Study consultant to recommend financing strategy. 16 PFC Funding as Part of a Financing Strategy Typical sources of airport capital funding and their uses: Airport operating reserves – use for any airport purpose. FAA AIP Entitlement grants – eligible public, non-revenue generating infrastructure. FAA AIP Discretionary grants – same as entitlements, but competitive and based on project merit and FAA priority. Revenue bonds – any specified capital improvement, preferably with a revenue stream to fund debt service. PFC funds – eligible projects, used on a “pay-as-you-go” basis (collections spent directly on capital projects) or “leveraged” where PFC revenue is used to pay debt service on bonds. Financing Strategy: Each of the 5 funding sources has its own set of restrictions and limitations. A financing strategy must match the funding source with the appropriate use of funds in order to optimize funding for the lowest project cost. The option of using PFC funds will enable the greatest flexibility in devising an optimal strategy. 17 PFC Funding and the Effect on FAA Entitlement Grants PFCs can be approved at levels of $3.00 and $4.50 per enplaned passenger. The Bush Administration has proposed increasing the level to $6.00 in FY 2008. FAA Entitlement Grants are reduced by 50% for $3.00 PFCs, and by 75% for $4.50 PFCs. The proposed $6.00 PFC would eliminate FAA Entitlement Grants, however, FAA Discretionary Grants would remain available. 18 Comparison of Annual Capital Funding Potential at various PFC Authorization Levels PFC LEVEL ENPLANEMENT LEVEL ENPLANEMENT LEVEL 3 Million 4 Million No PFC $0 $0 Entitlement Funds $3,015,000 $3,515,000 Total Funds $3,015,000 $3,515,000 $3.00 PFC $9,000,000 $12,000,000 Entitlement Funds (Reduced 50%) $1,507,500 $1,757,500 Total Funds $10,507,500 $13,757,500 $4.50 PFC $13,500,000 $18,000,000 Entitlement Funds (Reduced 75%) $753,750 $878,750 Total Funds $14,253,750 $18,878,750 Proposed FY 2008 ($6.00 PFC) $18,000,000 $24,000,000 Entitlement Funds $0 $0 Total Funds $18,000,000 $24,000,000 19 The Process of Developing the Capital Improvements $350 million of LFMP and People Mover Improvements Requires determination of size and operational criteria for the