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Home My WebLink About5/17/2017 - STAFF REPORTS - 5.F. Q AIM SA V N ♦ c e+' Cq<fFORN�P+ CITY COUNCIL STAFF REPORT DATE: May 17, 2017 NEW BUSINESS SUBJECT: PRELIMINARY OVERVIEW OF THE DEPARMENT OF AVIATION FISCAL YEAR 2017-2018 BUDGET FROM: David H. Ready, City Manager BY: Airport SUMMARY Staff is presenting to City Council a preliminary Fiscal Year 2017-2018 Airport Budget. Included are estimates for revenues and expenditures which include a recommendation for four new Police Officers to increase security, and increases to various revenue sources required to balance the budget. RECOMMENDATION: 1. Discussion of the Draft 2017-18 Airport Budget; direct the City Council Finance/ Budget Subcommittee, and City Staff as appropriate. STAFF ANALYSIS: The Airport projects an operating surplus of $372,060 at the end of the current fiscal year ending June 30, 2017, and a reserve cash balance of$3,843,430. The FY 2017-2018 proposed budget projects revenues of approximately $21,309,100 and expenditures of $21,287,000, resulting in an operating surplus of $21,100. The projected reserve cash balance is expected to be $3,495,812 (see Attachment A). The Airport Commission and Commission Finance Sub-Committee have been reviewing the proposed Budget over that past month and will formally vote on the final budget at the Airport Commission Meeting on May 17th — staff will report the outcome of their vote during the City Council Meeting. FY 2017 — 2018 Overview The information in this report represents the best estimates by Staff of both the Airport and Department of Finance and Treasury for revenues and expenditures based upon a ITEM NO. 5.�' Proposed BudgetTERNATIOI04 2017-2018 May97. 2017 • ''fir "_- `. . 40aw7 . } INTERNATIONAL AIRPORT Airport Summary of Operations FY 2016-17 FY 2016-17 FY 2017-18 Category Budget Projected Proposed Budget Beginning Reserve Fund Balance $ 4,474,227 $ 4,607,870 $ 3,843,430 Fund 415 General Airport Enterprise Funds Revenues $ 20,420,220 $ 20,012,950 $ 21,309,134 Expenditures $ (20,082,281) $ (19,640,890) $ (21,287,252) Operating Surplus I(Deficit) $ 337,939 $ 372,060 $ 21,882 Non-Operating Items: Interfund transfer to General Fund $ (287,500) $ (287,500) $ (287,500) Interfund transfer to Cap Prj Fund 416-Match $ (421,795) $ (264,000) $ (872,000) Interfund transfer to Cap Prj Fund 416-CP $ (1,395,000) $ (755,000) $ (710,000) Reduce Airline Incentive Funds $ 170,000 Reimbursement local AIP Grant matching funds $4.5 Million over 3 years AIP-New PFC Project Funds- (1st of three years) $ 1,500,000 Projected Reserve Fund Balance $ 2,707,871 $ 3,843,430 $ 3,495,812 * The Proposed Budget includes: >The cost of 4 Police Officers $740,000 >Other payroll and benefit increases $330,000 >Revenues from rental car lease space increase of 35% $ 345,000 > Increasing the daily public parking rate from $14 to$17 $ 425,000 > Increasing airline leased rates $ 300,000 Page 1 MATI ��RPORt � aniaN�noru� uaaoar Airport Summary of Operations FY 2016-17 FY 2016-17 FY 2017-18 Category Budget Projected Preliminary Project Ending Balance $2,707,871 $ 3,843,430 $ 3,495,812 Capital Projects Fund 416 Revenues AIP Grants $ 4,140,000 $ 2,640,000 $ 8,720,000 Local Special Capital Projects $ (1,395,000) $ (755,000) $ (1,035,000) Interfund transfer from Fund 415-Match $ 421,795 $ 264,000 $ 872,000 Interfund transfer from Fund 415-CP $ 1,395,000 $ 755,000 $ 1,035,000 EndingCash $ 2,707,871 $ 3,843,430 $ 3,495,812 Fund 405 CFC(Customer Facility Charge-Rental Beginning Cash $ 13,843,486 $ 13,850,000 $ 15,820,250 Revenues $ 1,975,000 $ 1,970,250 $ 2,100,000 Expenditures $ (2,500,000) $ - $ (6,500,000) Ending Cash $ 13,318,486 1 $ 15,820,250 $ 11,420,250 Fund 410 PFC(Passenger Facility Charge) Beginning Cash $ 1,865,131 $ 1,817,031 $ 1,840,131 Revenues $ 3,940,000 $ 3,988,100 $ 3,940,000 Expenditures $ (3,640,000) $ (3,965,000) $ (3,640,000) Reimburse Prior Year Matching Funds $ (1,500,000) Ending Cash $ 2,165,131 $ 1,840,131 $ 640,131 Page 2 Airport Capital Outlay Budget not Funded by Grants FY 2017-18 SPECIAL CAPITAL PROJECTS 416-6501 CAPITAL BUDGET 2017.18 Department 6601 56000 Emergency Capital Programs $ 200,000 56xxx Aircraft Passenger Loading bridge parts and equipment(8 units) $ 220,000 56xxx AVI -Auto Vehicle Identification $ 200,000 56xxx Carpet Replacement $ 90,000 TOTAL SPECIAL CAPITAL PROJECTS $710,000 City of Palm Springs - FY 2017-18 Page 3 Airport Capital Outlay Budget FY 2017-2018 Airport Development FEDERAL GRANTS CAPITAL- Local Grant Match BUDGET 2017-18 Department 6401 56xxx AIP 56 Terminal and Airfield Improvements 395,000 56xxx AIP 57 Terminal Capacity Improvements 477,000 TOTAL CAPITAL 872,000 CAPITAL- FAA Grant Funding Department 6601 BUDGET 2017-18 56xxx AIP 56 Terminal and Airfield Improvements 3,950,000 56xxx AIP 57 Terminal Capacity Improvements 4,770,000 TOTAL AIP GRANT-CAPITAL 8,720,000 Federal Grant Totals 9,592,000 City of Palm Springs - FY 2017-18 Page 4 General Airport Revenue FY 2016-17 FY 2016-17 FY 2017-18 Category Budget Projection Preliminary %Change Fund 415 General Airport Scheduled Landing Fees 1,606,910 1,633,966 1,635,250 1.8% Land Rental 1,245,500 1,176,900 1,185,000 -4.9% Advertising 402,000 399,960 433,000 7.7% Leased Parking 3,150,000 3,165,000 3,590,000 14.0% Airline Leased Space& Hold Roon 2,273,200 2,181,400 2,275,000 0.1% On-Airport Rental Car 6,436,000 6,160,100 6,736,000 4.7% Term Non-Air Comm Rent 1,236,000 1,295,020 1,240,000 0.3% TSA LEO Grant 116,800 116,800 116,800 0.0% Concessions 495,000 546,125 520,000 5.1% Customs Fees 269,300 244,010 269.300 0.0% All Other General Rev. 3,189,510 3,093,679 3,308,784 3.7% TOTAL AIRPORT REVENUE 415 20,420,220 20,012,950 21,309,134 4.4% Airport Revenue Fund 415 Scheduled Landing Fees 8% Land Rental 6% All Other General Rev. Term Non-Air 16% Comm In 6% Leased Parking Concessi 17% 3% Advertising- TSA LEO Gra 2% Airline Leased Space 11 Rental Car 31% City of Palm Springs - FY 2017-18 Page 5 General Airport Appropriations FY 2016-17 FY 2016-17 FY 2017-2018 Category Budget Projection Preliminary % Change Fund 415 - Airport Operations AirportAdmin. 3,619,193 3,505,120 3,613,659 -0.2% Airport Security 1,508,050 1,498,760 2,300,824 52.6% Airside Ops 817,204 800,435 869,956 6.5% Air Rescue-Fire 2,986,766 2,854,880 3,045,867 2.0% Landside Ops 1,507,816 1,462,940 1,463.767 -2.9% Grounds Main. 510,728 505,185 498,730 -2.3% Terminal Bldg Ops 5,300,505 5,218,870 5,626,574 4.3% Control Ctr. Ops 3,616,238 3,584,620 3,749,383 3.7% Customs 215,781 210,080 218,492 1.3% TOTAL $20,082,281 $19,640,890 $21,287,252 6.0% Airport Departments Customs by Percentage 1% I nfo.Tech. 1% Control Ctr. Ops 18% Airport Security 7% Terminal Bldg Airside Ops Ops 4% 27% Grounds Maint. Landside Ops 2% 7% 16-17 Budget Projection 17-18 Preliminary Fund 416 -Airport Capital Projects Federal Grant Match 421,795 420,200 872,000 106.74% Special Cap. Projects 1,395,000 855,000 1.035,000 -25.81% TOTAL $ 1,816,795 $ 1,275,200 $ 1,907,000 4.97% City of Palm Springs - FY 2017-18 Page 6 Restricted Airport Funds FY 2016-17 FY 2017-18 Preliminary Budget Category Budget Preliminary Budget % Change Fund 405 - Customer Facility Charge Revenue Prior Year Carryover 13,843,486 15,820,250 14.28% CFC 1,925,000 2,100,000 9.09% Total Revenue 15,768,486 17,920,250 13.65% Appropriations Rental Car Improvement Design 2,500,000 Rental Car Design and Enabling Projects 6,500,000 Total Appropriations 2,500,000 6,500,000 160.00% Surplus/(Deficit) $13,268 486 $11 420 250 FY 2016-17 FY 2017-18 Category Bud et Prelimina Bud et % Change Fund 410 - Passenger Facility Charge Revenue Carryover from prior year 1,431,715 1,817,031 26.91% Interest Income 7,500 7,500 0.00% Interest Income Fiscal Agent 40,000 40,000 0.00% Passenger Facility Charge 3,940,600 3,915,600 -0.63% Total Revenue 5,419,815 5,780,131 6.65% Appropriations Series 1998 PFC Debt Service 1,790,506 1,800,000 0.53% Series 2006 Debt Service 1,080,278 1,095,000 1.36% Series 2008 Debt Service 732,000 745,000 1,78% Total Appropriations 3,602,784 3,640,000 1.03% Reimburse Prior Year Marching Funds 1,500,000 Surplus I(Deficit) $0 640,131 City of Palm Springs - FY 2017-18 Page 7 City Council Staff Report May 17, 2017-- Page 2 Department of Aviation Fiscal Year 2017-2018 Budget Preliminary Overview 'carry-over' budget, including personnel-related cost adjustments (e.g., CalPERS retirement, health care, etc.), four new Police Officer positions, and nominal increases in supplies, utilities, and materials and supplies. The budget also includes increases in revenues from lease rates for car rental space, daily rates for public parking, and adjusting the airline lease rates. The resulting budget is essentially balanced, with a small surplus of$21,882 in the Airport's Fund 415. Fund 415 — General Airport Enterprise Fund Expenditures The largest increase to expenditures is related to personnel costs ($330,000) and the addition of four new Police Officer positions ($740,000), these include increases to employee compensation and benefits as a result of the negotiated salary agreements approved in FY 2014-15. Additionally, employee pension costs paid to CalPERS will increase next fiscal year (as discussed in the Staff Report of April 19, 2017, regarding the City's Preliminary FY 2017-18 Budget). Other contractually-driven cost increases which are included in the budget relate to health care costs, retiree health care costs, and workers' compensation. The Chief of Police recommends adding the additional officer positions to increase security at the Airport - increasing law enforcement coverage at the Airport to a minimum of two officers on each shift, 24 hours per day, and seven days a week. Also, beginning in FY 2018-19, CalPERS retirement costs will begin increasing more significantly as new investment earnings assumptions, known as 'the discount rate' (or PERS anticipated 20-year average rate of return on investments), are being implemented system wide resulting in several years of much higher required employer contributions. The following illustrates CalPERS projections for the Airport, which indicate annual required contributions will almost, double over a seven-year period: 16-17 17-18 18-19 19-20 20-21 21-22 22-23 Total PERS Costs BEFORE Change Discount Rate @ 7.5% $2.1 $2.3 $2.6 $2.9 $3.1 $3.3 $3.5 Total PERS Costs AFTER Change $2.1 $2.3 $2.6 $3.0 $3.5 $3.8 $4.1 New Discount Rate 7.375% 7.25% 7.0% 7.0% 7.0% 02 City Council Staff Report May 17, 2017-- Page 3 Department of Aviation Fiscal Year 2017-2018 Budget Preliminary Overview Revenues In order to produce a balanced budget, rate increases to several revenue sources are proposed to cover the additional expenses, as shown in the following table: Re�enue'Source N. _ '�: Pro ose'sIncrease `Am6urti Rental Car Lease Space Increase of 35% $345,000 Daily Automobile Public Parking Rate Increase from $14/da to $17/da $425000 Airline Lease Rate Increase 10% $300:000 In calendar year 2016, eight car rental companies collectively paid the Airport $5,823,324, based primarily from 10% of the gross revenue generated from rental transactions. In addition, they collectively paid the Airport $845,500 for space they leased. The proposed 35% increase will apply only to the space the car rental company's lease. The increase will be effective July 2017. The current daily rate for public parking at the Airport is $14/day, which went into effect September 1, 2016. The proposed increase of $3, to a new daily rate of $17, will become effective on July 1 , 2017. The new proposed rate is comparable to rates at other Southern California airports, including Ontario International Airport (ONT), which increased some of its parking rates effective May 2017. ONT will charge $24/day in two small parking lots immediately in front of both of its terminals, and $18/day in the two larger lots also immediately in front of the terminals. The 10% increase to the airline lease rate was necessary to cover the remaining balance following the increase to the car rentals lease spaces and parking rates. These new rates are anticipated to go into effect January 1, 2018, consistent with the provisions in the current Airline Use and Lease Agreements. Non-Operating Items The proposed budget identifies three inter-fund transfers totaling $1,869,500. These transfers are required to cover a financial obligation to the City's General Fund, pay for capital projects, and to pay the Airport's matching portion for FAA grant-funded projects. Capital Projects There are three capital projects programmed for FY 2017-18 and an emergency reserve for a total of $710,000: maintenance and/or replacement of passenger boarding bridges, installed in 1999; needed replacement of the Automatic Vehicle Identification system (AVI), which tracks all permitted commercial ground transportation vehicles (e.g., taxis, limousines) and is the primary tool used by airport staff to charge and collect revenue; and replacement of carpet in and around the baggage claim area. The $200,000 identified as 'Emergency Capital Programs' provides capital funds for unforeseen projects and repairs that occur throughout the fiscal year. 03 City Council Staff Report May 17, 2017-- Page 4 Department of Aviation Fiscal Year 2017-2018 Budget Preliminary Overview Fund 405 — Customer Facility Charge (CFC) — Rental Car The Airport projects $2,100,000 in revenues and $6,500,000 in expenditures. Expenditures will be used to initiate the planning and design for a new car rental facility, and will likely include costs associated with enabling projects required prior to actual demolition and construction of the new facility. The fund balance is projected to be $11.4 million at the end of FY 2017-18. Fund 410 PFC — Passenger Facility Charge The Airport projects $3,940,000 in revenues and $3,640,000 in expenditures. Expenditures will be used to service the current bond debt. Additionally, there will be a $1,500,000 transfer to Fund 415 to reimburse the General Airport Enterprise Fund for previous FAA grant funded projects. Fund 416 —Airport Capital Projects The Airport anticipates receiving $8,720,000 in AIP Grant funds and two transfers from Fund 415 (as identified above) in the amount of $1,582,000. The Airport also plans to spend $710,000 for capital improves as described above. Thomas olan David H. Ready, E D. Executive Director, Airport City Manager 04 ATTACHMENT A I o,tvt �Vf-iI INTERNATIONAL AIRPORT Airport Summary of Operations FY 2016-17 FY 2016-17 FY 2017-18 Category Budget Projected Proposed Budget Beginning Reserve Fund Balance $ 4,474,227 $ 4,607,870 $ 3,843,430 Fund 415 General Airport Enterprise Funds Revenues $ 20,420,220 $ 20,012,950 $ 21,309,134 Expenditures $ (20,082,281) $ (19,640,890) $ (21,287,252) Operating Surplus/ (Deficit) $ 337,939 $ 372,060 $ 21,882 Non-Operating Items: Interfund transfer to General Fund $ (287,500) $ (287,500) $ (287,500) Interfund transfer to Cap Prj Fund 416-Match $ (421,795) $ (264,000) $ (872,000) Interfund transferto Cap Prj Fund 416-CP $ (1,395,000) $ (755,000) $ (710,000) Reduce Airline Incentive Funds $ 170,000 Reimbursement local AIP Grant matching funds $4.5 Million over 3 years AIP-New PFC Project Funds - (1st of three years) $ 1,500,000 Projected Reserve Fund Balance $ 2,707,871 $ 3,843,430 $ 3,495,812 * The Proposed Budget includes: >The cost of 4 Police Officers $740,000 >Other payroll and benefit increases $330,000 >Revenues from rental car lease space increase of 35% $ 345,000 >Increasing the daily public parking rate from $14 to $17 $ 425,000 > Increasing airline leased rates $ 300,000 it 5 IMiOlUTONLL MOOT Airport Summary of Operations FY 2016-17 FY 2016-17 FY 2017-18 Category Budget Projected Preliminary Project Ending Balance $2,707,871 $ 3,843,430 $ 3,496,812 Capital Projects Fund 416 Revenues AIP Grants $ 4,140,000 $ 2,640,000 $ 8,720,000 Local Special Capital Projects $ (1,395,000) $ (755.000) $ (1,035,000) Interfund transfer from Fund 415-Mate $ 421,795 $ 264,000 $ 872,000 Interfund transfer from Fund 415-CP $ 1,395,000 1 $ 755,0001 $ 1,035,000 Ending Cash $ 2,707,871 1 $ 3,843,430 $ 3,496,812 Fund 405 CFC (Customer Facility Charge -Rent Beginning Cash $ 13,843,486 $ 13,850,000 $ 15,820,260 Revenues $ 1,975,000 $ 1,970,250 $ 2,100,000 Expenditures $ (2,500,000) $ - $ (6,500,000) Ending Cash $ 13,318,486 i $ 15,820,250 $ 11,420,250 Fund 410 PFC (Passenger Facility Charge) Beginning Cash $ 1,865,131 $ 1,817,031 $ 1,840,131 Revenues $ 3,940,000 $ 3,988,100 $ 3,940,000 Expenditures $ (3,640,000) $ (3,965,000) $ (3,640,000) Reimburse Prior Year Matching Funds $ (1,500,000) Ending Cash $2,165,131 1 $ 1,840,131 $ 640,131 U6 Airport Capital Outlay Budget not Funded by Grant FY 2017-18 SPECIAL CAPITAL PROJECTS 416-6501 CAPITAL BUDGEr 2017-18 Department 6501 56000 Emergency Capital Programs $ 200,000 56xxx Aircraft Passenger Loading bridge parts and equipment(8 units) $ 220,000 56xxx AVI -Auto Vehicle Identification $ 200,000 56xxx Carpet Replacement $ 90,000 TOTAL SPECIAL CAPITAL PROJECTS $710,000 131