2019 COMPREHENSIVE ANNUAL FINANCIAL REPORT Years Ended September 30, 2019 and 2018 Tucson Airport Authority Tucson, Arizona 2019 TUCSON AIRPORT AUTHORITY COMPREHENSIVE ANNUAL FINANCIAL REPORT Prepared by the Finance Department Years Ended September 30, 2019 and 2018 Tucson, Arizona This page intentionally left blank. Mission Statement The mission of the Tucson Airport Authority is to promote aviation and foster economic development by strategically planning, developing and operating the most effective and efficient airport system for southern Arizona. i 2019 Board of Directors and Members BOARD OF DIRECTORS ACTIVE MEMBERS CHAIR Bruce I. Ash Tony Finley Dr. Taylor W. Lawrence * Christopher H. Sheafe Lisa Lovallo President Chief Financial Officer (Ret.) President President Vice President and Paul Ash Management Long Companies/ Raytheon Missile Systems C. Sheafe Company Market Manager Co., L.L.C. Long Realty Co. David Lyons David C. Smallhouse Cox Southern Arizona Henry K. Boice Michael W. Franks Executive Vice President Managing Partner VICE CHAIR (Ret.) President President Regional President Miramar Ventures, L.L.C. Northern Trust Company Seaver Franks Architects National Bank of Arizona Taunya Villicana Lucinda J. Smedley Co-Founder/CEO Larry Cesare David E. Hameroff Michael McGrath Publisher/Principal Affinity Wealth Owner/General Manager Attorney Partner TREND Report/Real Management Viscount Suite Hotel The Hameroff Law Mesch, Clark & Estate Consulting Group Firm, P.C. Rothschild P.C. SECRETARY Francis X. Chambers Michael Stilb Bruce L. Dusenberry Director Michael S. Hammond Dennis Minano President/ President AvPORTS President/CEO Strategic Consultant Managing Director Horizon Moving Group CBRE-MAS Thomas E. Chestnut Cushman & Wakefield DRM Strategies PICOR Commercial TREASURER Director Omar Mireles Phillip Swaim Real Estate Services Katherine R. Ward Southwest Gas Holdings, President President Principal Inc. Michael F. Hannley HSL Asset Management Swaim Associates, Ltd. GV Strategic Advisors Executive Vice President *Steven R. Cole Ned L. Norris, Jr. Richard K. Underwood Pacific Premier Bank DIRECTOR President Chairman President William R. Assenmacher Southwest Appraisal Steven Holmes Tohono O’odham Nation AAA Landscape Associates Superintendent CEO Tim J. Overton Izaro Urreiztieta Sunnyside Unified School CAID Industries, D. June Crawford Business Banking Area Senior Vice President & District Incorporated President Manager Manager Copygraphix, Inc. DIRECTOR K. La Monte Hunley Chase Tucson Commercial Owner Banking, BBVA Compass Robert L. Draper Richard Davis Steve Pagnucco Arizona Health, L.L.C. President Partner/Trial Lawyer Vice President, Operations Mercy A. Valencia Ed.D. O’Rielly Chevrolet, Inc. Mesch, Clark & * Lisa H. Israel Universal Avionics (Ret.) Assistant Vice President Rothschild P.C. President/CEO Real Estate Administration DIRECTOR R. Tony Penn La Posada at University of Arizona Judy Rich Michael J. Duran President/CEO Park Center, Inc. President and CEO (Ret.) Vice President & United Way of Tucson Ellen K. Wheeler, J.D. TMC HealthCare and Tucson Chief Development Officer Todd Jackson and Southern Arizona Retired Medical Center Tucson Medical Center Attorney Lea Márquez Peterson & TMC Foundation Jackson & Oden, P.C. DIRECTOR President/CEO Keri L. Silvyn Vance L. Falbaum Herb Kai Tucson Hispanic Chamber Partner Sr. Vice President & Manager of Commerce Financial Advisor Kai Family Entities Lazarus, Silvyn and Bangs, Ricardo Platt P.C. RBC Wealth Management Francine Katz Account Executive John L. Fendenheim IMMEDIATE PAST CHAIR, Senior Vice President Crest Insurance Owner Jewish Federation of EX-OFFICIO Stephen E. Quinlan Fendenheim Enterprises Southern Arizona Tony Finley Chairman Chief Financial Officer Sally G. Fernandez Gary Kippur Long Realty Company Long Companies/ President President Joaquin Ruiz Long Realty Co. Safety Dynamics, Inc. Tucson Iron & Metal Dean, College of Science Guillermo Figueroa Lee D. Lambert The University of Arizona Engineering Project Chancellor Ronald K. Sable Administrator Pima Community College President CenturyLink Larry M. Lang Concord Solutions Ltd. President Diversified Design & Construction, Inc. ii TUCSON AIRPORT AUTHORITY 2019 CAFR EMERITUS MEMBERS Judith K. Abrams Elizabeth Gonzalez James F. Ronstadt * Hal D. Adamson Dr. Thomas Grogan * Karl G. Ronstadt * Larry R. Adamson, Esq. Michael W. Hard Roberto C. Ruiz * Laura T. Almquist Barbara L. Harper Warren S. Rustand * Hal W. Ashton Edward D. Harrow * Rubin Salter, Jr. Edith Sayre Auslander Duff Hearon * James M. Sakrison Raymond Bernal Lawrence M. Hecker John P. Schaefer, Ph.D. * Edwin L. Biggers John L. Huerta S. L. Schorr * Elizabeth T. Bilby * Richard F. Imwalle * Ted Sitterley, Jr. * Fred T. Boice * Charles Jackson George Steele * Susan G. Boswell Daisy M. Jenkins * Jacob F. Struble John H. Bremond Robert Johnston Steven Thu Archibald M. Brown, Jr. Darryl O. Jones Steven D. Touché Chanda S. Budhabhatti Al Kivel Richard S. Walden James J. Burns Rosemary J. Koberlein Jonathan D. Walker Jack C. Camper Dr. Henry Koffler Michael R. Wattis * John L. Carter Meg Olson Lee Paul Weitman Paul W. Cella Jan Lesher David T.C. Wright Joseph R. Cesare Dr. Peter Likins * Thomas A. Zlaket Stephen W. Christy Humberto S. Lopez Ginny L. Clements David M. Lovitt, Jr. Jim H. Click, Jr. Richard Lukso Jack D. Davis S. James Manilla, Ph.D. Patty Doar Sharon B. Megdal, Ph.D. * Darryl B. Dobras Octavio A. Molera * Katie Dusenberry Chris Monson Stephen Eggen, Jr. Rebecca R. Montaño * Arnold R. Elias * Gary M. Munsinger, Ph.D. * Robert A. Elliott Rick T. Myers, Jr. George Favela James E. Neihart Steven D. Fell * R. B. O’Rielly Dr. Roy Flores Richard D. Parlett Louise L. Francesconi Judy Patrick Edward S. Frohling * Mary Levy Peachin Peter V. Gallo Charles M. Pettis Jaime Esteban Gibbons Gregory A. Pivirotto David Goldstein * Ernesto V. Portillo Arthur L. Gonzales * Timothy J. Prouty * Past President / Chairman iii Table of Contents INTRODUCTION SECTION Transmittal Letter Organization 1 Economic Conditions and Outlook 2 2019 Air Travel Industry Recap 2 2020 Air Travel Industry Outlook 2 State and Local Economic Outlook 2 Financial Impact of Reduced Travel Related to COVID-19 3 Air Service at Tucson International Airport 3 Major Initiatives 4 Capital Improvement Program 4 Major Maintenance Program 5 Federal and State Funding 6 Passenger Facility Charge Program 6 Leasing, Business Development and Concession Activity 7 Financial Policies and Practices 7 Budgetary Controls 7 Long-Term Financial Planning 9 Capital Financing and Debt Management 9 Other Information 9 Community Involvement 9 Arts and Culture 9 Requests For Information 10 Awards and Acknowledgements 10 Certificate of Achievement 11 Organizational Structure 12 Airlines and Tenants 13 FINANCIAL SECTION Independent Auditors’ Report 15 Management’s Discussion and Analysis 17 Statements of Net Position 32 Statements of Revenues, Expenses and Changes in Net Position 35 Statements of Cash Flows 36 Notes to Financial Statements Note 1 Organization and Reporting Entity 38 Note 2 Summary of Significant Accounting Policies 38 Note 3 Cash, Cash Equivalents and Investments 43 Note 4 Inventories 47 Note 5 Capital Assets 47 Note 6 Unearned Revenues 49 iv TUCSON AIRPORT AUTHORITY 2019 CAFR FINANCIAL SECTION (continued) Note 7 Long-Term Debt 49 Note 8 Pension and Other Post Employment Benefit (OPEB) Plans 52 Note 9 Operating Leases with Lessees 69 Note 10 Concentration of Operating Revenues 69 Note 11 Passenger Facility Charges 69 Note 12 Risk Management 69 Note 13 Commitments 70 Note 14 Environmental Matters, Litigation, and Contingencies 70 Note 15 Restricted Net Position 72 Note 16 Change in Method of Accounting for Pensions 73 Required Supplementary Information Schedule of the Authority’s Proportionate Share of the Net Pension Liability - Cost Sharing Plan (ASRS) 76 Schedule of the Authority’s Proportionate Share of the Net OPEB Liability - Cost Sharing Plan (ASRS) 78 Multiyear Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Agent Retirement (PSPRS) - Fire Department 80 Multiyear Schedule of Changes in Net OPEB Liability (Asset) and Related Ratios Agent Retirement (PSPRS) - Fire Department 82 Multiyear Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Agent Retirement (PSPRS) - Police Department 84 Multiyear Schedule of Changes in Net OPEB Liability (Asset) and Related Ratios Agent Retirement (PSPRS) - Police Department 86 STATISTICAL SECTION Financial Trends Net Position and Changes in Net Position 90 Revenue Capacity Principal Revenue Sources 92 Principal Revenue Source Ratios 94 Rates and Charges 94 Debt Capacity Ratios of Outstanding Debt, Debt Service and Debt Limits 96 Airport Revenue Bond Coverage Per Bond Resolutions 98 Demographic and Economic Information Population in the Air Service Area 100 Unemployment Rates in the Air Service Area 100 Major Employers in the Air Service Area 102 Operating Information Authority Employees 104 Airport Information – Tucson International Airport 106 Airport Information – Ryan Airfield 108 Passenger, Cargo and Mail Summary 110 Aircraft Operations Summary 112 Enplaned Passengers By Scheduled Carrier 112 Scheduled Carrier Landed Weights 114 Scheduled Air Service Information 116 v This page intentionally left blank. INTRODUCTION May 31, 2020 Board of Directors Tucson Airport Authority 7250 S. Tucson Blvd, Suite 300 Tucson, Arizona 85756 Ladies and Gentlemen: It is our pleasure to present the Comprehensive Annual Financial