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Home My WebLink About11/26/2002 - STAFF REPORTS (16) DATE: November 20, 2002 TO: City Council FROM: Executive Director—Airports AIRPORT FINANCIAL CONSULTANT- BOND REFINANCING RECOMMENDATION: It is recommended that City Council approve a professional services agreement with SI Partners to provide special financial consulting services for the refinancing of the Airport's 1992 Airport Revenue Bonds. SUMMARY: This action will allow for an in-depth financial feasibility study of the refinancing of the 1992 Airport Revenue Bonds and at the same time provide the Airport with a new baseline proforma for setting airline rates and charges. BACKGROUND: As part of the Airport's Post"9/11"financial recovery plan,there is a need to refinance the Airports' 1992 Airport Revenue Bonds. The current bond structure contains a coverage covenant which requires the Airport to raise rates to the airlines to provide "coverage" for the bond payment even when the Airport is collecting enough Passenger Facility Charge (PFC) revenue to cover all bond payments. This is very counterproductive to keeping charges down to the airlines so as to maintain a competitive edge over other airports. Suzanne Harrell and Stone&Youngberg are assisting the Airport in this refinancing endeavor. For an airport to sell or refinance bonds, the market expects to see an independent financial feasibility study. The last such report we had completed was in 1997 for the 1998 bonds and that was completed by Sue Luzar. Ms. Luzar has since established her own firm, SI Partners. Because of familiarity with our financial structure and previous excellent work, staff has solicited a proposal from her for this new assignment. The attached exhibits from the standard form professional agreement outline the scope of the analysis to be performed. The contract is on a time and materials basis not to exceed $82,200. When the assignment is completed, not only will the Airport have the required feasibility study, it will also have a new proforma in electronic format, which it can utilize to set rates and charges for the airlines. The existing proforma was last established in 1992 and is in desperate need of updating. / rr Airport Financial Consultant November 20, 2002 Page Two TheAirport Commission,at its November6,2002 meeting,reviewed the proposal and unanimously recommended City Council approval. Funds for this effort are available in the Airport's Retained Earnings and a Budget Resolution to appropriate $90,000 for this study and any other miscellaneous expenses concerning the bond refinancing, is attached for consideration. Also, a Minute Order approving the standard form professional services agreement is attached for consideration. ALLEN F. SMOOT, AAE THOMAS M. KANAFR Executive Director-Airports Director of Finance & Treasurer APPROVED_,: City Manager `. Attachments: 1. Resolution 2. Minute Order 3. Agreement Exhibits EXHIBIT"A" SCOPE OF SERVICES Consultant shall develop a Report to support the refinancing of the Airport's 1992 Airport Revenue Bonds. Said Report shall contain the following information and data: 1. Consultant's Letter 2. Introduction • Purpose and Scope of the Study • Airport Location & Background Air Service Area Airport Facilities • Airport Commission 3. Airport Cpital Improvement Program 4. Air Service Area and Economic Base for Air Transportation • Introduction • Air Service Area Population Income Employment • Economic Development 5. Air Traffic Analysis and Forecast • Historical Overview • Air Service Market • Projected Air Passenger Traffic • Factors Affecting Air Traffic Demand 6. Financial Analysis 1. Introduction 2. Airport's Financial Framework 3. Airport Revenues 4. Maintenance & Operating Expenses 5. Fund Accounts, Interest Income and PFCs 6. Projected Cash Flow and Airline Revenue Requirements List of Figures and Tables Figures 1. Palm Springs International Airport— Location Map 2. Coachella Valley Air Service Area 3. Top Ten O&D Passenger Markets 4. Airline Passenger Industry Operating Profit & Net Income 5. Application of Airport Revenues 6. Definition of Financial Terms H:\USERS\PamS\data\WP\SI Partners correct.agr.wpd November 1, 2001 -13- / 7403 Program Costs Table Economic Base for Air Transportation Tables 1. Historical Population for the Coachella Valley 2. Project Population for the Coachella Valley 3. Median Household Effective Buying Income (EBI) for the Top Ten Origination and Destination Markets for PSP 4. Historical Employment 5. Coachella Valley- Hotel Statistics Air Traffic Analysis and Forecast Tables 1. Historical and Forecasted Passenger Enplanements 2. Peak and Off-Peak Month enplanements 3. Airline Market Share of enplanements 4. % of Airline Market Share by Airline 5. Aircraft Operations 6. Peak and Off-Peak Month Total Landings 7. Historical Aircraft Landings and Landed Weight 8. Historical Aircraft Landings by Aircraft Seating Cpacity 9. Air Cargo Freight 10. Market Share for the Airport's Top 20 Markets Financial Tables 1. Reconciliation of Historical Financial Results 2. Historical Financial Results 3. Historical Non-Airline Revenues 4. Project Non-Airline Revenues 5. Historical Maintenance and Operating Expenses -Airside Cost Center 6. Projected Maintenance and operating Expenses -Airside Cost Center 7. Historical Maintenance and Operating Expenses -Terminal Cost Center 8. Projected Maintenance and Operating expenses-Terminal Cost Center 9. Historical M&O Expenses - Landside 10. Projected M&O Expenses- Landside 11. Historical M&O Expenses- Indirect 12. Projected M&O Expenses - Indirect 13. Historical M&O Expenses-Total 14. Projected M&O Expenses -Total 15. Fund Accounts, Coverage & Interest Income 16. Calculation of PFC Revenues 17, PFC Revenues and Coverage Calculation 18. Projected Cash Flow and Airline Payment Requirements 19. Airline Cost per Enplaned Passenger 20. Debt Service Coverage Deliverables: Contractor shall provide eight (8) draft copies of the Consultant's report for review by City. Ten (10) bound copies of the Final Report shall be provided along with one (1) loose leaf copy H:\USERS\PamS\data\WP\SI Partners correct.agr.wpd November 1, 2001 -14- ta "/� l and one copy in electronic format. Electronic format shall allow City to update the data and run its own Final Reports. H:\USERS\PamS\data\WP\SI Partners correct.agr.wpd November 1, 2001 -15- / 74 4S7- EXHIBIT"B" SPECIAL REQUIREMENTS (1) Section 5.3 Performance Bond requirement is hereby deleted. H:\USERS\PamS\data\WP\SI Partners correct.agr.wpd November 1, 2001 -16- EXHIBIT "C" SCHEDULE OF COMPENSATION Contractor shall be compensated monthly based on the percentage of work completed in each of the following nine (9) task areas: (Note that the total of$82,200 is a "not to exceed" amount.) Labor Hours & Hourly Rate Task Principal Support No. Task $ 180 $ 100 Total Total $ 1 Consultant's Letter 16 4 20 $ 3,280 2 Introduction- Summary of Financing 8 4 12 1,840 3 Airport Capital Improvement Program 8 24 32 3,840 4 Air Service Area 24 40 5 Economic Base for Air Transportation 48 80 128 16,640 6 Air Traffic Analysis and Forecast 40 60 100 13.200 7 Financial Analysis 60 120 180 22,800 8 Financing Team Meetings 40 40 7,200 9 Rating Agencies/Insurance Company Meetings 40 - 40 7,200 Total Labor Hours & $ 284 332 552 $ 76,000 Misc. Expenses (1) $ 3,800 Travel Expenses (2) $ 2,400 Total Proposed Budgetl $ 82,200 1. 5% of labor costs; represents telephone, facsimile, copying, postage, printing,and other misc. direct expenses. 2. Represents 1 trip to New York by 2 principals for 2 days/trip @$1,200/trip/person -includr meals and ground transportation. All direct costs will be billed at"actual". H:\USERS\PamS\data\WP\SI Partners correct.agr.wpd November 1, 2001 -17- l'7 4} 7 EXHIBIT "D" SCHEDULE OF PERFORMANCE Contractor shall proceed within ten (10) days of the "Notice to Proceed." The Draft Report shall be completed within ninety(90) days of"Notice to Proceed." The Final Report shall be completed within 30 days of final review comment submittals from the City and its financial team members (Financial Analyst, Underwriter, and Bond Counsel). H\USERS\PamS\data\WP\SI Partners correct.agr.wpd November 1, 2001 -18- RESOLUTION NO. OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA,AMENDING THE BUDGET FOR THE 2002-03 FISCAL YEAR. WHEREAS Resolution 20357 approving the budget for the fiscal year 2002-03 was adopted on June 5, 2002; and WHEREAS the City Manager has recommended, and the City Council desires to approve, certain amendments to said budget; NOW THEREFORE BE IT RESOLVED that the Director of Finance is authorized to record inter-fund cash transfers as required in accordance with this Resolution, and that Resolution 20357, adopting the budget for the 2002-03 fiscal year is hereby amended as follows: SECTION 1. ADDITIONS Fund Activity Account Amount 415 Airport 6275 43200 $90,000 Series '92 Debt Svc Contractual Svc Purpose To provide funding for independent financial feasibility study for the refinancing of the 1992 Airport bonds. SECTION 2. SOURCE Fund Activity Account Amount 415 29302 $90,000 Airport Retained Earnings Adopted this day of 12002. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED AND APPROVED MINUTE ORDER NO. APPROVING A STANDARD FORM PROFESSIONAL SERVICES AGREEMENT WITH SI PARTNERS FOR SPECIAL FINANCIAL CONSULTING WORK RELATED TO THE AIRPORT'S 1992 REVENUE BOND REFINANCING, I HEREBY CERTIFY that this Minute Order, approving Standard Form Professional Services Agreement with SI Partners for Special Financial Consulting work related to the Airport's 1992 Revenue Bond Refinancing,was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 201" day of November 2002. PATRICIA A. SANDERS City Clerk