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Audit Report - 2014 SA/WNAAfrort 4 - COMPREHENSIVE ANNUAL FINANCIAL REPORT ' of the SALINA AIRPORT AUTHORITY A Component Unit of the City of Salina,Kansas For the Fiscal Years Ended December 31,2014 and 2013 1 ' Prepared by the Management of the Salina Airport Authority www.salinaairport.com CUSIP#794760XXX t 3237 Arnold I Salina, KS 67401 I 785-827-3914 ' www.salinaairport.com I www.flysalina.com i 1 1 1 1 1 COMPREHENSIVE ANNUAL FINANCIAL REPORT of the SALINA AIRPORT AUTHORITY ' A Component Unit of the City of Salina,Kansas For the Fiscal Years Ended December 31,2014 and 2013 i 1 1 1 1 Prepared by the Management of the Salina Airport Authority www.salinaairport.com ' CUSIP#794760XXX 1 ' Sort SALINAAirport SALINAAirpor"t 1 I I I I I I 1 1 1 1 1 1 1 1 1 1 1 1 1 I I SALINA AIRPORT AUTHORITY ITABLE OF CONTENTS I COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Years Ended December 31, 2014 and 2013 1 INTRODUCTORY SECTION ILetter of Transmittal 1-7 Principal Officers 8 I Authority Staff Members 9 Organizational Chart 10 Certificate of Achievement 11 ISalina Regional Airport Aerial View 12 FINANCIAL SECTION IIndependent Auditors' Report 13-15 Management's Discussion and Analysis 17-24 I Basic Financial Statements Statements of Net Position 26-27 Statements of Revenues, Expenses and I Changes in Net Assets 28 Statements of Cash Flows (Direct Method) 29-30 Notes to Financial Statements 31-47 ISupplemental Information Schedules of Revenues, Expenses and Changes in Net Position 49-51 Capital Expenditures 52 IGeneral Obligation Improvement Bonds— Series 2005-A 53 General Obligation Improvement Bonds— Series 2007-A 54 General Obligation Improvement Bonds— Series 2009-A 55 IGeneral Obligation Improvement Bonds— Series 2009-B 56 General Obligation Improvement Bonds— Series 2011-A 57 General Obligation Improvement Bonds— Series 2011-B 58 I Special Assessment Debt-Street and Utility Improvement 59 Special Assessment Debt-Sanitary Sewer Extension 60 Financing Lease Payable 61 IInsurance in Force 62 I I Ii 1 I STATISTICAL SECTION Statistical Table of Contents 63 Total Annual Revenues, Expenses and Changes in Net Position History 64-65 Changes in Cash and Cash Equivalents History 66-67 Capital Expenditure History 68 General Obligation Debt Service Coverage 69 Local Government Mill Levy Rates, Direct and Overlapping 70 Principal Customers 71 Mill Levy Revenue 72 Air Traffic, Fuel Flowage, and Enplanement Trends 73 Principal Employers 74 Government Employees by Function 75 Saline County Population and Economic Statistics 76 Saline County Largest Taxpayers and Tax Collection Statistics 77 COMPLIANCE ' Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 79-80 1 I I i Introduction at ,; • • ( -As / ,40) . I/ 000 . P • • • . c Salina,Kan. (March 21,2014)-Damien,a Salina native,is mesmerized by the lights on a Salina Airport Authority Aircraft Rescue and Firefighting truck. The future aviator was there for a tour of the airport to celebrate his 5th birthday. Dozens of tours are given every year to local school children to familiarize them with local airport operations,and foster an interest in aviation at an early age. SALINAA1rP0rt . =11■11111■P 4 1 Chairman Vita Chairman Secretary Treasurer Past Chairman Michael 1.*mock Daran R.Neuschare� trey 1.'ancil Katfarine M.Flatten ]eff E.KM Executive D irect cTimothy r.Rogers.A.A.E. I Dir.of Administration 8 finance Mr_helle R Branson,C.M. Dl,.of facilities.Construction&Operations Kenny R.Bieber Mgr.of Public Affairs t Communications Melnu 1.McCoy office Manager Ka say L W+ndhorst Board Attorney Greg A.Bengtson July 15,2015 Salina Airport Authority Board of Directors 3237 Arnold Ave. ' Salina,KS 67401 To the Board of Directors of the Salina Airport Authority: The Comprehensive Annual Financial Report (CAFR) of the Salina Airport Authority(the "Authority") for the fiscal years ended December 31, 2014 and 2013 is hereby submitted in accordance with the Kansas Statutes Annotated (K.S.A. 27-324). As required by the statute, the City of Salina will be ' furnished copies of the Authority's 2014 CAFR. Responsibility for both the accuracy of the data presented and the completeness and fairness of the presentation, including all disclosures, rests with the Executive Director of the Authority. To the best of our knowledge and belief, the data as presented is ' accurate in all material aspects, is presented in a manner designed to fairly set forth the fiscal position and results of the operation of the Authority as measured by its financial activity, and all disclosures necessary to enable the reader to gain maximum understanding are included in the report. 1 This CAFR is presented in accordance with generally accepted accounting principles (GAAP) and pursuant to K.S.A. 27-324, an audit of the books, accounts and financial statements has been completed by the Authority's independent certified public accountants, Clubine and Rettele, Chartered. The independent audit is in accordance with the Kansas Municipal Audit and Accounting Guide. the Government Auditing Standards issued by the Comptroller General of the United States, and, if applicable, the provisions of the Office of Management and Budget Circular A-133, "Audits of States, 1 Local Governments and Nonprofit Organizations". GAAP requires that management provide an overview and analysis to accompany the financial statements in the form of a Management Discussion and Analysis(MD&A). It is recommended that this letter of transmittal be read in conjunction with the MD&A, which can be found immediately following the report of the independent auditor in the Financial Section of this report. REPORTING ENTITY LThe Salina Airport Authority is a body corporate and politic. The Authority was created by the City of Salina in April 1965 (Sec. 4-16, Salina City Code) pursuant to the authority granted by the City by the ' surplus property and public airport authority act of the State of Kansas (K.S.A. 27-315 et seq.) The Authority was created for the purpose of accepting as surplus property, portions of the former Schilling Air Force Base, which was closed by the United States Department of Defense in June 1965. By quitclaim deed the Authority received over 2,900 acres of land and numerous buildings for the purpose ' of operating and developing the Salina Regional Airport and the Salina Airport Industrial Center. The I I INTRODUCTORY FY 2014 Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. i The Board appoints the Executive Director, who is the chief executive officer of the Authority. The Executive Director hires the remaining employees of the Authority. The Executive Director and his staff of fourteen full-time and two part-time employees manage and operate the Salina Regional Airport and the Salina Airport Industrial Center. The Salina Regional Airport is the only commercial service airport serving Salina/Saline County and the I 24-county area, which comprises north central Kansas. The Airport also services the corporate, business,private aviation and flight training needs of industry,business and individuals in the area. The Airport is also used by Kansas State University at Salina (KSUS). The campus of KSUS is located adjacent to the Airport and is one of the nation's top five aviation programs. The college offers degrees in professional flight training, airframe and power plant maintenance, avionics technology and airport management. I The Salina Regional Airport and Airport Industrial Center is home for over 100 businesses and organizations. Fifty-three of the businesses and organizations are tenants of the Authority. One of the primary functions of the Authority is to facilitate the continued growth of jobs and payroll at the Airport and Airport Industrial Center. The Authority works in partnership with the City of Salina, Saline County and the Salina Area Chamber of Commerce for the retention of existing business and industry and the recruitment of new business and industry. ECONOMIC CONDITIONS AND OUTLOOK Local Economy The Salina/Saline County economy has continued to demonstrate economic strength, as compared to other regions of the state. In fact, Salina has long been considered the employment hub of North Central Kansas with nearly 5,000 employees commuting daily to Salina from outside the county. The hub draws from a large 13-county area having a total population of 200,452 and an available labor pool of 44,919 individuals. Even during these times of economic challenges, the area's unemployment rate has remained below the national average. At the end of 2014 the City's unemployment rate was 3.8%. Salina's visitor count is estimated at over 600,000 with lodging revenue reaching $24.3 million during the same year. Growth in the areas of manufacturing, transportation, finance, real estate, insurance, services and retail trade,confirm Salina's position as one of Kansas'strongest regional economic centers. Collectively, Salina retail sales pushed above 1 billion in 2014 reaching$1,122,168,000 in taxable retail sales. The City of Salina benefits from its location at the junction of Interstate Highways 70 and 135. This , convenient location has drawn numerous national and regional companies to open manufacturing or distribution centers in or adjacent to the City. Such companies include Schwan's Global Supply Chain, Inc., Salina Vortex, GeoProbe, Bergkamp, Kasa Industrial Controls, Premier Pneumatics, Great Plains Manufacturing, PKM Steel, Crestwood Cabinets, McShares, Inc., Pepsi Cola, ElDorado Bus, Exide Battery, Advance Auto Parts Distribution Center, and Philips Lighting. Currently, manufacturing, retail trade, and service industries rank as the three primary employers in the City. No single industry is , 2 INTRODUCTORY f ' . 'n i dominant. The government sector and wholesale trade industries make up the second tier of Salina 1 employers. The City serves as a 24-county regional trade center for north central Kansas. Many individuals and businesses within a 70-mile radius travel to the City to purchase consumer goods and services. This designation as a regional trade center is supported by the fact that the City had the third highest "trade pull factor" of all Kansas first class cities in a report published in December 2014 by the Kansas Department of Revenue Office of Policy and Research. City trade pull factor is computed by dividing the per capita sales tax of a city by the statewide per capita sales tax. Saline County is located in the center of one of the most productive agricultural areas in the United ' States. In 2012, 674 farms were located on 364,468 acres. Farm crops and livestock sales reached $84.4 million in 2012 According to the Kansas Department of Agriculture, the total economic impact of agriculture food and food processing sectors on the Saline County economy is over $1 billion annually. Salina is a city centered more on industry than agriculture. Currently, there are approximately 100 ' manufacturing and processing companies located in the City. The City, Saline County, the Chamber of Commerce, and the Salina Airport Authority have developed several economic incentives which can be offered as inducements to opening industrial facilities. These include property tax abatement for basic ' industry, the waiving of building permit and inspection fees, refunding of sales tax paid on machinery and equipment and providing training for employees through the Salina Area Technical College and the Kansas State University at Salina. Additionally, a "build-to-suit-tenant" agreement is available on sites ' in the Airport Industrial Center that can provide 100%financing for land and building costs. Several major commercial projects have been completed or are currently under construction in Salina. Dillon Companies, Inc., a subsidiary of Kroger Company, recently completed and opened a 77,000 square foot facility. Dick's Sporting Goods opened a facility formerly occupied by Sutherland Lumber Company. New clothing retailers include Marshalls and Shoe Carnival. In addition, several new restaurants have opened including Buffalo Wild Wings, Cox Bros. Barbecue, and Burger Theory located in a new Holiday Inn Express. During 2014, ground was broken on the new $3.5 million Bulk Solids Research Center. This research and development facility is slated to open in 2015 and provide an estimated new 31 jobs to the community. ' The community has 1,200 acres of industrial sites available in North Salina,the South Industrial District, and the Airport Industrial Center. Sites range in size from 1-to 240 acres, and are available for aviation, manufacturing and distribution and warehouse businesses. 1 3 1 I INTRODUCTORY FY 2014 Economic Condition of the Airport and Airport Industrial Center As of December 31, 2014, over 100 businesses and organizations at the Salina Regional Airport and Airport Industrial Center employed over 3,700 employees with a combined payroll of nearly $140 million. During 2014, one of the leading employers at the Airport Industrial Center, Salina Vortex, completed a 64,000 sq. ft. expansion to their facility allowing them to accommodate their more than 40% increase in employment since they first occupied the facility in 2006. Vortex has provided material handling solutions to a global network of Original Equipment Manufacturers, Fortune 500 companies and process firms for 35 years. ' Also during 2014,Veris Technologies constructed and opened a new factory, research and development and office complex at the Airport Industrial Center. Veris produces the world's leading on-the-go soil sensors for the agriculture industry. Future Economic Outlook The future economic outlook for both Salina and the Authority continues to look favorable. Continued growth in service,retail and manufacturing sectors is expected. The Salina Area Chamber of Commerce forecasts that approximately 700 net, new jobs per year will be added to the economy over the next two to three years. Salina Regional Airport businesses including Kansas State University at Salina continue to work on ' facility expansion plans. Salina Airport Industrial Center businesses including Schwan's Food Manufacturing Inc. and the Kansas Army National Guard at Salina, also continue to work on facility expansions. Recently six new businesses began operations in the Airport Industrial Center; Universal 1 Forest Products, Tischlerie--Fine Woodworking, LLC., Wichita Winwater, Hangar Indoor Complex Veris Technologies and Kansas Erosion Products. Collectively, these expansions have resulted in additional jobs and payroll. ' Salina Regional Airport continues to thrive as a forward operating location for aviation businesses, military and special operation missions. In 2014 Bombardier Learjet signed a lease agreement with the Authority for nearly 30,000 sq. ft. of hangar space for aircraft storage and flight test operations. With its close proximity to the Smoky Hill Air National Guard Bombing Range, the Airport continues to host military units from around the country for training purposes. New aviation businesses such as Schilling Aviation Services and TDM Aerotek have made significant progress in filling a need for aircraft maintenance, repair, flight instruction and aircraft rental at the Airport. The Salina Airport Authority in partnership with the Salina Area Chamber of Commerce, the City of Salina and Saline County, continues to execute an economic development strategic plan that includes ' specific goals and tasks intended to result in job growth, increased primary jobs payroll, new capital investment and the leasing of available space at the Airport Industrial Center. The Airport Authority contracts the services of Newmark Grubb Zimmer, for national and international recruitment of aerospace business to locate at the SLN Aviation Service Center. 4 INTRODUCTORY FY 2014 ' FINANCIAL CONTROLS The Authority follows generally accepted accounting principles applicable to governmental unit ' enterprise funds. Accordingly, the financial statements are prepared on the accrual basis. Management of the Authority is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Authority are protected from loss, theft, or misuse and 1 to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of ' reasonable assurance recognizes that: (1)the cost of a control should not exceed the benefits likely to be derived;and(2)the valuation of costs and benefits requires estimates and judgments by management. LONG-TERM FINANCIAL PLANNING ' Increasing the Authority's unreserved,undesignated fund balance has been a priority of the organization. The Authority Board of Directors has a stated plan of establishing the Authority's cash reserve fund equal to six month's operating expenses or $1.2 million. Having sufficient liquidity has allowed the ' Authority to respond to opportunities that arise quickly such as the preparation of Hangar 959 for leasing by Bombardier Learjet. ' Also,as part of the strategic plan of recruiting business and industry to fill available facilities vacated by three principal customers since 2012, the Authority has developed a systematic method of evaluating projects including definitive trigger points, lease pro-forma requirements, lease calculation methodology and other qualitative measures prior to capital improvement projects. INITIATIVES AND DEVELOPMENT ' The top initiative will be the continued leasing of facilities vacated as a result of Hawker Beechcraft Corporation (HBC) closing its Salina division in 2012. HBC had been a principal customer of the ' Authority for decades and leased nearly 500,000 sq. ft. of the Authority's 1.2 million total sq. ft. In addition, the Authority is working to fill facilities vacated by two other principal customers that combined with lost revenue from HBC, represented nearly $850,000 or 35% of the Authority's annual ' operating revenue. As of December 31, 2014, the Salina Airport Authority had already leased over 140,000 sq. ft. of the space vacated since 2012 and over 177,000 by mid 2015. Of the $850,000 revenue to be replaced, the post-2012 new leasing activity now represents $402,000 in annual income. In addition, leasing the remaining balance of the facilities will help replace the jobs and payroll lost by the Salina community. It will also mean maintaining and replacing the lease revenue stream to the Airport Authority's operating budget. This is vital in order for the Airport Authority to continue to provide the services necessary to operate a world-class airport and airport industrial center. ' The completion of capital improvements to existing facilities and the Airport Industrial Center are also a top priority. There is a Capital Improvement Program in place that details more than $60 million worth Iof projects to take place within the next five to ten years. These improvements will aid the Airport 5 I INTRODUCTORY FY 2014 Authority in filling unused space and continue to offer the superior services and facilities the aviation community has come to expect from Salina. Other major initiatives include: $ Rehabilitation of the Airport's Taxiway E and B. This project was 90% designed by the end , of 2014. $ Continuation of commercial air service development program and activities. $ Maintain momentum in recruiting aviation and aerospace businesses to the Salina Regional Airport and targeted manufacturing jobs to the Salina Airport Industrial Center. $ Work with the City of Salina and environmental contractor to continue the remedial investigation/feasibility study through the entry of a Corrective Action Decision (CAD) by the KS Department of Health and Environment related to the environmental contamination caused by military operations at the former Schilling Air Force Base. $ Completion of concept design and feasibility work for the Wings Over Salina Air Museum. $ Continuation of support for K-State Salina Aviation and Airport Management degree track programs. $ Support of the Fort Riley Installation Transportation Office with Salina Regional Airport as an Aerial Port of Embarkation (APOE)and an Aerial Port of Debarkation (APOD). $ Support continued growth and development of the Kansas National Guard Great Plains Joint Training Center. $ Upgrades to the Airport's 300,000 gallon underground storage tank fuel farm including enhanced metering and monitoring systems, fuel filtering system and water separators. GFOA CERTIFICATE OF ACHIEVEMENT The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Salina Airport Authority for its comprehensive annual financial report for the fiscal year ended December 31, 2013. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. ACKNOWLEDGEMENTS ' The support of the Authority's Board of Directors and Audit Committee has been instrumental in the preparation of this report. The Board has been actively involved in the preparation and review of this report and is committed to responsible and progressive financial reporting. Also acknowledged is the assistance of the Authority's auditor, Clubine and Rettele, Chartered, the Authority's accounting advisor, Larry Harris, Woods & Durham, Chartered., Saline County Clerk's 6 INTRODUCTORY FY 2014 Office, the Salina Area Chamber of Commerce, Rod Franz, Director of Finance for the City of Salina, ' and the University of Kansas Institute for Public Policy and Business Research and the Kansas Department of Human Resources Labor Market Information Services, in the preparation of this report. Respectfully submitted, 1 7":"..-11Y4 ' Timothy F. Rogers,A.A.E. Michelle R. Swanson,C.M. Executive Director Director of Administration and Finance Salina Airport Authority Salina Airport Authority ' cc: The City of Salina Board of Commissioners 1 I 1 1 I INIROI)t ClOIZI I 'Hl 1 SALINA AIRPORT AUTHORITY 1 PRINCIPAL OFFICERS AS OF DECEMBER 31, 2014 I i ` _ ... .. ) . , :, . 4 NI i,..,.....•,, i 4 1 1 1 Pictured from left to right: I Dr.Randy Hassler,Treasurer;Mike Hoppock,Vice Chairman;Timothy F.Rogers,Executive Director;Angie Coble,Secretary;Greg Bengtson,General Counsel; Baran Neuschafer,Past Chairman;and Jeff Maes,Chairman AUTHORITY'S COUNSEL ' Greg A. Bengtson Clark,Mize&Linville,Chartered Salina,Kansas I AUTHORITY'S BOND COUNSEL Gilmore&Bell 1 Kansas City,Missouri AUTHORITY'S FINANCIAL ADVISOR George K. Baum&Company Kansas City,Missouri I AUTHORITY'S AUDITOR Leslie M. Corbett,C.P.A. 1 Clubine&Rettele,Chartered Salina,Kansas I I 8 i ' INTRODUCTORY FY 2014 SALINA AIRPORT AUTHORITY Staff Members as of December 31,2014 ADMINISTRATIVE STAFF ' Timothy F. Rogers, A.A.E. Executive Director Michelle R. Swanson, C.M. Director of Administration and Finance Kenny Bieker Director of Facilities and Operations Melissa L. McCoy Manager of Public Affairs and Communications Donald C. Kneubuhl Manager of Special Projects Kasey L. Windhorst Office Manager 111 Kristie Moore Administrative Assistant FACILITY MAINTENANCE and OPERATIONS ' David Sorell—Supervisor Ron Boyd Alan Anderson Kim Colby Dale Mattison AIRCRAFT RESCUE AND FIREFIGHTING and SAFETY and SECURITY Alan Mason Cody Williams ' Kyle Moyer Ryan Zrubek 1 9 U) 'It O I co a N 0 a N a N N NQ N 0:5 , c Om@ Omo Of0E Q1 ' QT3c p 0 tl U� <L U� L o !L UN L U I U @ N LLG) C LLO ) LL 0 LLOc LL0@ '01),, Y Q Q X O ,_ a 0 I C 0 N as m N 0 y� ON « t N 5 I U 0 0 CO @ c a0 LC p Y --E )) > C N C 7 , = C Cy, CO a C N C 00 5 N0 >, N@.o y@N v@ @ .r I U mo. @ 0-50 a5-6 aUt . 5 (1) a'U C Ym OEM of Oc2 oQ ' nw I7 0 0 < Q ii),_ co C p 0 ,_ kiiii 1, i._ g 0rn C WC 1 O 9 °>'i LQ .^ N o>= 0 a E o I L w 0 ,. a s o p) 02 cu O — V — Oxo`m — C10 N Ili N U m o m 2 ,„ <-6 O U C Q X L U - 4 W E O �p (A�ao E > a o J U) ctl■I ;Q 0 1 tin ! � .E. I c_U 72. @ LLC � p CO 015 j N 0 N uicu 00 c ,5 c c Q 0 -00 I 2." 0 Q LL 0 J �''Y« w CO U a - N o I 0 E w w N cC oj, ;? O@ t c c Y .0 a V Q I 0 E w C I Co C Co 2 t a i Q I I 1 1 GO 1 Government Finance Officers Association I i Certificate of Achievement I for Excellence I in Financial i Reporting IPresented to Salina Airport Authority I Kansas 1 For its Comprehensive Annual I Financial Report for the Fiscal Year Ended 1 December 31, 2013 I *4,-,009,-, IExecutive Director/CEO I I 11 1 I INTRODI!('TORY FY 2014 1 SALINAAIrP0rt r I r s \ ®t" �' r ,rye '0.. I; : W' ' • = IP -h U '� �� 1 i � � le T if I / Aviation I Resatwasi SLNAirort SL N C n ere CA LINAAir opt I I I 12 u 1 1 1 1 • Financial __- - 11111!I!" - w - - Salina, Kan. (April 1, 2014) —Avflight Salina helped get 2014 off to a good start for the Salina Regional Airport.Avflight is a welcomed addition to the KSLN flightline. Avflight Salina's fixed base operator services are second-to-none. Avflight's commitment to customer service only enhances KSLN's reputation as"America's Fuel Stop." I I I I I I I I I I I I 1 1 1 1 1 1 1 I CLUBINE& INDEPENDENT AUDITORS' REPORT RETTELE To the Board of Directors Certified Pubitc ACC0untants Salina Airport Authority We have audited the accompanying financial statements of the business-type ' activities of the Salina Airport Authority, a component unit of the City of Salina, Kansas, as of and for the years ended December 31, 2014 and 2013, and the related notes to the financial statements, which collectively comprise the basic financial statements as listed in the table of contents. Robert I Clubine, CPA Management's Responsibility for the Financial Statements David A Rettele,CPA Jay D Langley,CPA,CGMA Management is responsible for the preparation of these financial statements in Jon K. Bell, CPA Leslie M Corbett,CPA, CGMA accordance with accounting principles generally accepted in the United States of Stacy J.Osner,CPA America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements Marci K. Fox, CPA that are free from material misstatement, whether due to fraud or error. Linda A. Suelter,CPA Valerie K. Linenberger, CPA Johnna R.Vosseller, CPA Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the Kansas Municipal Audit and Accounting Guide prescribed by the Director of Accounts and Reports, Department of Administration of the State of Kansas. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the entity's 218 South Santa Fe and fair presentation of the financial statements in order to design audit P.O. Box 2267 preparation p g Salina, Kansas procedures that are appropriate in the circumstances, but not for the purpose of 67402-2267 expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant Salina accounting estimates made by management, as well as evaluating the overall 785/825-5479 Salina Fax presentation of the financial statements. 785/825-2446 We believe that the audit evidence we have obtained is sufficient and appropriate to Ellsworth 785/472-3915 provide a basis for our audit opinions. Ellsworth Fax 785/472-5478 I 13 I 1 Opinion ' In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the Salina Airport Authority, as of December 31, 2014 and 2013, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters t Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 17 through 24 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively ' comprise the Salina Airport Authority's basic financial statements. The introductory section, the supplemental information in the financial section and the statistical section as listed in table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. ' The supplemental information in the financial section is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion,the supplemental information in the financial section is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections as listed in the table of contents have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 14,2015, on our consideration of Salina Airport Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and on compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with , 14 I I Government Auditing Standards in considering the Salina Airport Authority's internal control over financial reporting and compliance. I CLUBINE AND RETTELE, CHARTERED I C ti?;Ac cw,d 11/60, acct-viz of I Salina, Kansas July 14, 2015 I I I I I 1 I I I I I I 15 1 I I I 1 I I I I (THIS PAGE INTENTIONALLY LEFT BLANK) I I I I I I I I I I 16 i ' FINANCIAL n 2014 MANAGEMENT'S DISCUSSION AND ANALYSIS The management of the Salina Airport Authority offers the readers of the Authority's audited financial statements this narrative overview and analysis of the financial activities of the Salina Airport Authority for the fiscal year ended December 31,2014. ' AIRPORT ACTIVITY AND HIGHLIGHTS The Salina Air Traffic Control Tower (ATCT) ended 2014 having handled 91,101 aircraft operations. This represented a 1%increase in total aircraft operations over the prior year following a decrease of 7.4% ' from 2012 to 2013. The moderate changes over the previous two years signify a stabilization of operations following a significant leap of 40% growth from 2011 to 2012. K-State Salina's expanded professional pilot and helicopter flight training programs on the Airport has assisted in the upward trend in ' air traffic as well as an overall increase in commercial business traffic. At the end of 2014, Salina Regional Airport remains ranked the 2nd busiest air traffic control tower in the state. Salina ATCT's national ranking (out of 516 towers) climbed up one spot in 2014 to 184th. The increase puts the Salina Regional Airport into the top 35%of all air traffic towers in the nation. ' Of significance is that 2014 marked the second highest year in airport operations for the most recent 10- year period. Salina continues to remain strong as a mid-continent refueling stop and has earned the recognition as `America's Fuel Stop". In January 2014, world-class Fixed Based Operator (FBO), ' Avflight Corporation acquired the aircraft fueling divisions of the two existing FBO's on the Airport. Avflight began the new year providing fueling and ground services to the wide mix of air traffic that includes business jets, air carrier, military, and general aviation. Avflight is part of the Avfuel-branded FBO network of 700 independently-owned FBOs around the globe. In addition, Salina continues to ' remain strong as a base of operations for military and civilian flight training. During 2014, Avflight increased fuel sales to nearly 2 million gallons, representing a 12% increase over the prior year following a decrease of 32% from 2012 to 2013. Avflight's takeover of the fueling operation at SLN and subsequent 2014 results has fuel sales on a positive trend. The commercial airline industry is seeing improvements despite the challenges faced by the smaller ' carriers attempting to serve rural communities such as Salina through the Department of Transportation's (DOT) Essential Air Service Program. In early 2012, the DOT EAS contract for Salina's air service was extended for four years providing SeaPort Airlines the opportunity to continue three daily flights, six days a week between Salina and Kansas City. During 2014, the Salina Regional Airport's passenger enplanements decreased 9.7% on the heels of a nearly 20% decrease that essentially negated the 2012 to 2013 increase of 21%. During 2014, SeaPort completed only 82% of its scheduled flights which significantly contributed to the decrease in passenger enplanements. Further detail regarding the Airport's air traffic, fuel flowage and enplanement trends can be found in the statistical section of this report on page 73. • 1 11\ \\( \I_ 1 ) The changes in the Authority's major airport activity indicators for the past three years are as follows: 2014 2013 2012 ' Enplanements - Scheduled Air Carrier& Charter Flights 2,556 2,829 3,526 % increase/(decrease) -9.65% -19.77% 20.88% ' Aircraft Operations -All Categories 91,101 90,131 97,338 % increase/(decrease) 1.08% -7.40% 40.65% Fuel Flowage -(gallons delivered) 1,971,061 1,757,980 2,594,049 % increase/(decrease) 12.12% -32.23% 8.69% AIRPORT INDUSTRIAL CENTER ACTIVITY AND HIGHLIGHTS The Authority owns over 1 million sq. ft. of manufacturing, warehouse and office space at the Airport , Industrial Center. As further described herein,the building and land revenue generated by the Authority's leasing activity constitutes a significant portion of the annual operating revenue budget. During 2014, building rents equaled $827,224 or 43% of operating revenue. At the end of 2014, the Authority had an occupancy rate of 56% in its building inventory, down significantly from the 82% in 2010. The decrease is a result of the 2012 closure of the Hawker Beechcraft Corporation (HBC) division in Salina as discussed further in this report's Letter of Transmittal. From 2012-2014, the Authority made progress in re-leasing a portion of the 484,003 sq. ft. of property vacated by HBC by leasing 140,000 sq. ft. to five new commercial businesses at the Airport Industrial Center. SUMMARY OF OPERATIONS AND CHANGES IN NET POSITION Even with the uncertainty in the aviation industry and the slow growth in the economy, the financial condition of the Authority has held steady in recent years. The Authority has effectively dealt with major cost increases in employee health benefits including medical insurance premiums, utility costs, commercial property insurance premiums and other operating expenses. In addition, the Authority has managed through the termination of four operating revenue leases from three principal tenants since 2012, representing nearly $850,000 in annual operating revenue. Fortunately, since 2012, the Authority has added approximately $100,000 per year for each of the three prior years, in new tenant operating revenue increasing the tenant diversification and revenue base. 1 18 FINANCIAL i 2014 2013 2012 ' Operating revenues $ 1,909,353 $ 2,067,758 $ 2,160,168 Operating expenses (2,059,205) (2,105,710) (2,114,358) ' (Deficit)of revenues over expenses before depreciation (149,852) (37,952) 45,810 Depreciation (2,588,599) (2,588,107) (2,514,587) ' Loss before non-operating revenues and expenses (2,738,451) (2,626,059) (2,468,777) ' Non-operating revenues and(expenses),net 957,790 719,982 593,775 Loss before capital contributions (1,780,661) (1,906,077) (1,875,002) Capital contributions 799,762 623,029 1,779,827 ' Net position Decrease in net position (980,899) (1,283,048) (95,175) Net position,beginning of period 25,228,419 26,511,467 26,606,642 ' Net position,end of period $ 24,247,520 $ 25,228,419 $ 26,511,467 1 ' SUMMARY OF OPERATIONS HIGHLIGHTS Significant items affecting the Summary of Operations and Changes in Net Position for 2014 and 2013 are ' as follows: • Operating revenues have decreased in recent years due to principal customer lease terminations mentioned previously. Fortunately, revenues from aircraft storage and hangar rentals have assisted in softening the decrease in revenue received in building rental. Also fuel flowage fees derived from the delivery and sale of aviation fuel at the Airport is on an upward trend and increased nearly 15% in 2014 over the prior year. There is a continued trend upward in aircraft operations after decrease in corporate and general aviation flying due to the economy which will continue to assist in the upward trend of derived from fuel flowage fees. Military traffic at the Airport continues to remain strong. 19 I I I\ \\c l \I • The Authority has been able to decrease operating expenses for five straight years and reduced costs 2%from 2013 and 13%from 2012. ' o During 2012-2014, the Authority made a concerted effort to hold and reduce operating costs by reducing travel and meeting expense as well as reducing all dues and subscriptions and cancelling all non-essential items. o In addition, the Authority was able to reduce building maintenance expense in recent years by over 60% by utilizing in-house personnel for items that were previously contracted out to third party vendors. • Depreciation expense increased due to new construction moving over $10 million from construction in progress to an asset in service and very capital intensive years from 2007-2012. • Capital contributions during 2014 totaled $1,366,789 with the significant projects including the design of the Airport's rehabilitation of Taxiway's E & B, the rehabilitation of the Authority's ' largest aircraft hangar facility,Hangar 959 and the resurfacing of Taxiway G. • Ad-valorem tax revenue (mill levy) received by the Authority as a local taxing entity increased 11% from 2013 to 2014 and increased 1.2%and decreased 1.2%respectively for 2013 and 2012. Interest received on investments decreased significantly in 2014 as a result of a reduction in bond proceeds on deposit as well as historical lows in investment yields. ' FINANCIAL POSITION SUMMARY The changes in net position may serve over time as a useful indicator of a government's financial position. The Authority's assets exceeded liabilities by$24,247,520 at the close of 2014. A condensed summary of the Authority's total net position at December 31,2014 is shown below. The Authority's net position reflects its heavy investment in capital assets including land, buildings, ' airfield infrastructure and machinery and equipment, less any related debt used to acquire those assets that is still outstanding. The Authority uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Authority's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. I I 20 1 IFINANCIAL P1 11 2014 2013 2012 I ASSETS Current and other assets $ 403,748 $ 1,126,869 $ 1,806,714 Capital assets 47,662,474 48,922,759 50,403,249 ITotal assets 48,066,222 50,049,628 52,209,963 LIABILITIES ILong-term debt outstanding 22,105,796 23,112,497 24,100,631 Other liabilities 1,712,906 1,708,712 1,597,865 ITotal liabilities 23,818,702 24,821,209 25,698,496 NET POSITION I Net investement in 24,510,104 24,818,560 25,339,916 capital assets Unrestricted (262,584) 409,859 1,171,551 ITotal net position $ 24,247,520 $ 25,228,419 $ 26,511,467 1 REVENUES IThe following chart shows the major sources and the percentage of total operating revenues for the year ended December 31,2014: I 1 I •Airfield I •Building and land rent •other revenue I A summary of revenues for the past three years is shown below. Total revenue increased by 1.2% or $46,012 in 2014 over 2013 and decreased by.5%or 20,435 from 2012 to 2013. The decrease in operating I 21 I I FINANCIAL 11'2014 revenue in 2014 is a result of the decline in building and land rental attributable to the increased vacancy rate due to the closure of Hawker Beechcraft facilities at the Airport and the loss of two other principal I customers. 2014 2013 2012 111 Operating Revenue: Airfield $ 722,791 $ 539,799 $ 737,563 Building and land rent 1,136,063 1,474,057 1,365,853 Other revenue 50,499 53,902 56,752 Total Operating 1,909,353 2,067,758 2,160,168 Non-Operating Income: I Mill Levy 1,993,889 1,788,284 1,767,338 Interest Income 437 676 1,500 Gain on sale of assets 50,904 51,853 - I Total Non-Operating 2,045,230 1,840,813 1,768,838 TOTAL REVENUE $ 3,954,583 $ _ 3,908,571 $ 3,929,006 1 EXPENSES I The following chart shows the major expense categories and the percentage of total operating expenses for the year ended December 31,2014: I Oil •Administrative I •Maintenance I 1 A summary of expenses for the past three years is shown below. Total operating expenses decreased 2.5% in 2013 from the previous year and 2% from 2012 to 2013. The Authority has taken significant I I 22 i I FINANCIAL FY 2014 steps to hold operating expenses in recent years including completing more facility maintenance projects 1 in-house and reducing administrative expenses such as travel and meetings. t 2014 201 3 2012 2 Operating Expenses Administrative $ 1,198,445 $ 1,232,833 $ 1,245,267 Maintenance 860,760 872,877 869,091 Total Operating 2,059,205 2,105,710 2,114,358 Non-Operating Expense ' Interest Expense 1,087,440 1,120,831 1,175,063 Bond Issue Costs - - Total Non-Operating 1,087,440 1,120,831 1,175,063 TOTAL EXPENSES $ 3,146,645 $ 3,226,541 89 ,2 26541 $ 3,2 ,421 CAPITAL ACQUISITIONS AND CONSTRUCTION ACTIVITIES Capital contributions during 2014 totaled $1,366,789 with the significant projects including the design of the Airport's rehabilitation of Taxiway's E & B, the rehabilitation of the Authority's largest aircraft hangar facility,Hangar 959 and the resurfacing of Taxiway G. The Authority acquired$1,344,789 in capital assets during 2014. Significant items included the design of the Airport's rehabilitation of Taxiway's E & B, the rehabilitation of the Authority's largest aircraft hangar facility,Hangar 959 and the resurfacing of Taxiway G. The capital asset investment also included several building improvement projects that were the continued renovation to Authority buildings and hangars that were vacated by HBC in the first quarter of 2012 year. Additional information on the Authority's capital assets can be found in Note III (C) in the notes to the financial statements and within the Supplemental Section of this report. Capital asset acquisitions exceeding $1,000 are capitalized at cost and are depreciated over their useful lives, with the exception of land. The Authority's capital assets are financed using Federal and State grants with matching Authority funds, debt issuance and Authority revenues. Additional information can be found in Note I(C)in the notes to the financial statements. 1 1 23 I I I\ \\c \I '1 DEBT ADMINISTRATION The outstanding long-term debt of the Authority was $23,131,470 net of unamortized bond discounts at December 31, 2014. This debt consists of general obligation bonds, a financing lease and City of Salina special assessments. Maturities range from 2016 through 2031. Both principal and interest are payable from the general revenues of the Authority and mill levy revenue. Details of the Authority's debt can be found in Note III(D)in the notes to the financial statements. REQUEST FOR INFORMATION This Management Discussion and Analysis is designed to provide detailed information on the Authority's 1 operations and the financial results of those operations to all those with an interest in the Authority's financial affairs. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Manager of Administration and Finance by e-mail: shellis @salair.org or in writing to, Salina Airport Authority,3237 Arnold Ave.,Salina,KS 67401. Respectfully submitted, U 1 . Z4., 2 Timothy F.Rogers,A.A.E. Michelle R. Swanson,C.M. , Executive Director Director of Administration and Finance I I 1 I I I i I 24 1 I I I I I I I (THIS PAGE INTENTIONALLY LEFT BLANK) I I I I I I I I I I 25 I FINANCIAL FY 2014 SALINA AIRPORT AUTHORITY STATEMENTS OF NET POSITION As of December 31,2014 and December 31,2013 ASSETS December 31 ' 2014 2013 CURRENT ASSETS Cash $ 290,742 $ 887,178 Accounts receivable 107,939 90,629 Prepaid expenses 5,067 147,437 Inventory-Avgas - 1,625 Total Current Assets 403,748 1,126,869 1 NON-CURRENT ASSETS Capital Assets Land 9,823,047 9,800,188 Buildings, improvements and equipment, net of depreciation 37,004,694 38,193,767 Construction in progress 834,733 928,804 Total Non-Current Assets 47,662,474 48,922,759 I TOTAL ASSETS $48,066,222 $ 50,049,628 1 1 (continued) The accompanying notes are an integral part of these financial statements. 26 I IFINANCIAL FY 2014 I SALINA AIRPORT AUTHORITY STATEMENTS OF NET POSITION As of December 31, 2014 and December 31, 2013 I (continued) LIABILITIES December 31 ' 2014 2013 CURRENT LIABILITIES: Accounts payable $ 143,803 $ 124,994 ' Accrued payroll and expenses 60,671 55,636 Accrued property tax 75,165 76,471 Accrued special assessments 10,221 8,088 I Sales tax payable - 618 Unearned rental income 28,950 80,091 Accrued interest 347,798 359,410 ICurrent maturities of long-term debt 1,025,674 991,702 Total Current Liabilities 1,692,282 1,697,010 INON-CURRENT LIABILITIES Bonds and note payable,less current maturities 22,105,796 23,112,497 ISecurity Deposits Returnable 20,624 11,702 Total Non-Current Liabilities 22,126,420 23,124,199 ITotal Liabilities 23,818,702 24,821,209 INET POSITION Net investment in capital assets 24,510,104 24,818,560 IUnrestricted (262,584) 409,859 Net Position $ 24,247,520 $ 25,228,419 I I I IThe accompanying notes are an integral part of these financial statements. I 27 I I I\ \\( I \I I III SALINA AIRPORT AUTHORITY STATEMENTS OF REVENUES,EXPENSES and CHANGES IN NET POSITION IAs of December 31,2014 and December 31,2013 January 1 to December 31 2014 2013 Operating Revenues I Airfield $ 722,791 $ 539,799 Building and land rent 1,136,063 1,474,057 Other revenue 50,499 53,902 I Total Operating Revenues 1,909,353 2,067,758 Operating Expenses I Administrative 1,198,445 1,232,833 Maintenance 860,760 872,877 I Total Operating Expenses 2,059,205 2,105,710 (Deficit)of Revenues over Expenses before Depreciation (149,852) (37,952) I Depreciation 2,588,599 2,588,107 I Operating Loss Before Non-Operating Revenues and Expenses (2,738,451) (2,626,059) Non-Operating Revenues and(Expenses) I Mill levy 1,993,889 1,788,284 IInterest on investments 437 676 Interest expense (1,087,440) (1,120,831) Gain on sale of assets 50,904 51,853 I Total Non Operating Revenues and(Expenses) 957,790 719,982 Loss before Capital Contributions. (1,780,661) (1,906,077) I Capital Contributions 799,762 623,029 Net Position I (Decrease)in Net Position (980,899) (1,283,048) Net Position,beginning of period 25,228,419 26,511,467 I Net position,end of period $ 24,247,520 $ 25,228,419 I The accompanying notes are an integral part of these financial statements. I I 28 FINANCIAL FY 2014 ' SALINA AIRPORT AUTHORITY STATEMENTS OF CASH FLOWS (DIRECT METHOD) As of December 31, 2014 and December 31, 2013 January 1 to December 31 2014 2013 ' CASH FLOWS FROM OPERATING ACTMTIES Cash received from providing services $ 1,849,824 $ 2,162,181 Cash paid to employees for services (731,571) (766,300) ' Cash paid to suppliers for goods and services (1,170,505) (1,469,899) Net(Used) in Operating Activities (52,252) (74,018) CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of property,plant and equipment (1,348,143) (1,238,629) t Proceeds from capital grants 799,762 623,029 Proceeds from property tax 1,993,889 1,788,284 Proceeds from sale of capital assets 81,652 218,361 Principal payments on debt (972,729) (959,134) ' Proceeds of new borrowing - - Interest paid on long-term debt (1,099,052) (1,131,523) Net Cash(Used)in Capital and Related Financing Activities (544,621) (699,612) ' CASH FLOWS FROM INVESTING ACTIVITIES Interest received on deposits 437 676 DECREASE IN CASH (596,436) (772,954) CASH BALANCE-January 1 887,178 1,660,132 ' CASH BALANCE-December 31 $ 290,742 $ 887,178 1 ' (continued) The accompanying notes are an integral part of these financial statements 29 I I I\ \\( I \I , II I SALINA AIRPORT AUTHORITY I STATEMENTS OF CASH FLOWS (DIRECT METHOD) (continued) I As of December 31,2014 and December 31,2013 RECONCILIATION OF OPERATING LOSS TO NET 11 CASH PROVIDED BY OPERATING ACTIVITIES January 1 to December 31 I2014 2013 OPERATING LOSS $ (2,738,451) $ (2,626,059) I ADJUSTMENTS RECONCILING OPERATING LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: IDepreciation 2,588,599 2,588,107 CHANGES IN ASSETS AND LIABILITIES: Decrease (Increase)in accounts receivable (17,310) 43,757 I Decrease(Increase)in prepaid expense 142,370 (138,501) Decrease in inventory 1,625 1,635 Increase in accounts payable-operations 7,272 13,505 I Increase in accrued payroll expenses 5,035 4,299 Increase(Decrease)in accrued property tax and special assessments 827 (11,427) Increase(Decrease)in unearned rental income (51,141) 38,964 I Increase in security deposits 8,922 11,702 NET CASH(USED)BY OPERATING ACTIVITIES $ (52,252) , $ (74,018) I I I I I The accompanying notes are an integral part of these financial statements t Ig P 30 I IFINANCIAL FY 2014 Salina Airport Authority INOTES TO FINANCIAL STATEMENTS Il December 31, 2014 II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity IThe Salina Airport Authority (Authority) was established by the City of Salina, pursuant to Chapter 27, Article 3, of the Kansas Statutes Annotated for the purpose of acquiring surplus federal government property, specifically the former Schilling Air Force Base, located near the City of I Salina. The Authority operates, maintains, and develops the Salina Regional Airport and the Salina Airport Industrial Center. The Authority is controlled by a five-member Board of Directors appointed by the Salina City Commission and, in accordance with Governmental Accounting I Standards Board (GASB) Statement No. 61, the Authority is considered to be a component unit of the City of Salina. The Authority is discreetly presented in the City's comprehensive annual financial reports. IB. Measurement Focus, Basis of Accounting and Basis of Presentation I The accompanying financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) for state and local governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental I accounting and financial reporting principles for state and local governments in the United States of America. The Authority consists of a single enterprise fund. Enterprise funds are classified as proprietary I funds by the GASB and are accounted for using a total economic resource measurement focus. The enterprise fund is used to account for operations that are financed and operated in a manner similar to private business enterprises. The intent of the Authority is that the costs of providing services on a I continuing basis be recovered through user fees and rents. The financial statements are prepared on the accrual basis of accounting. Under the accrual basis, revenues are recognized as earned and expenses as incurred. IRevenues from airlines, fuel flowage fees, building and land rents, and rental car commissions are reported as operating revenues. Transactions, which are capital, financing or investing related, and I the sale of assets, related to economic development, are reported as non-operating revenues. All expenses related to operating the Airport and Industrial Center are reported as operating expenses. Interest expense and financing costs are reported as non-operating expenses. IDuring the fiscal year ended December 31, 2012, the Authority adopted the following new accounting standards issued by GASB: I Effective January 1, 2012, the Authority implemented the provisions of GASB No. 62 —Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 GASB and AICPA Pronouncements. Implementation of this statement required modification to the disclosure in Ithe Summary of Significant Accounting Policies and resulted in the Authority increasing the amount 31 1 FINANCIAL FY 2014 ' previously reported in 2011 for interest expense and reducing the net amount of long term liabilities by $18,892. This restatement was necessary to amortize bond discounts over the life of the 111 associated debt. In addition, the Authority also implemented GASB No. 63 — Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and GASB No. 65 —Items Previously Reported as Assets and Liabilities. GASB 63 resulted in the replacement of the Authority's Statement of Net Assets with a Statement of Net Position. The Authority reviewed all financial statement elements and determined none to be deferred outflows or inflows of resources. The Authority determined a previously reported deferred liability (deferred mill levy receivable) did not meet the new standard's definition of either a liability or a deferred inflow of resources. Therefore, this change resulted in the restatement of the 2011 financial statements by removing the $1,638,423 in deferred mill levy liability and the offset in the same amount as a mill levy receivable. The restatement did not result in any change to the Net Position. GASB 65 required the Authority to restate certain items previously reported as assets and liabilities. The Authority's bond issue costs were restated as expenses of the current period as opposed to amortizing the costs over the life of the bond issue and reporting the unamortized portion as an asset. This restatement resulted in an increase in bond issue costs previously reported for 2011 by $74,588. Additionally,this required restatement of the previously reported beginning net position to reflect the expense of certain previously deferred bond issuance expenses and resulted in a reduction of $130,729 to the Net Assets position reported at December 31, 2011. C. Assets, Liabilities and Equity 1. Cash and Investments The Authority's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from date of acquisition. The Authority held no investments during these years. 2. Receivables Accounts Receivable. The Authority records revenues when services are provided. All receivables are shown net of an allowance for uncollectibles. 3. Inventories 1 The Authority maintains no significant inventory of office and maintenance supplies. These items are expensed as purchased and no inventory is recorded in these financial statements. The Authority uses the consumption approach in valuing inventories of Avgas sold for retail. That is, the purchase is recorded as an asset on the cost basis and the expenditure is deferred until the inventory is consumed under the weighted average cost method. 4. Prepaid items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. 32 tFINANCIAL F='. 2014 5. Capital Contributions and Net Assets ' Airport Improvement Program - Certain expenditures for airport capital improvements are significantly funded through the Federal Aviation Administration's Airport Improvement Program ' (AIP) and the Kansas Department of Transportation's Airport Improvement Program (KAIP), with certain matching funds of the Authority. Capital funding provided under the AIP grant programs are considered earned as the related allowable expenditures are incurred. Grants received under the AIP ' programs are reported in the Statement of Revenues, Expenses and Changes in Net Position, as non- operating revenues and expenses as capital contributions. ' Defense Reutilization Marketing Office Program - The Authority is a participant in the Defense Reutilization Marketing Office (DRMO) program. The DRMO entity disposes of United States military surplus property. The property is first offered for reutilization with the Department of ' Defense, transferred to other federal agencies or donated to state and local governments. The Authority's policy is to record fixed assets having a cost (or by implication fair value) in excess of $1,000 at acquisition. The Authority's capitalization policy with respect to fixed assets is to t expense fixed assets costing $1,000 or less. Freight or other expenses necessary to put the asset into service equal to or greater than $1,000,are capitalized. ' The Authority records United States military donated assets having an original cost by the military of $5,000 or less at $1 in order to meet the tracking requirement and will memo in the asset file the original cost because the Authority believes the fair value of these is less than $1,000 each. ' The Authority estimates the donated items to have a value equal to 20% of cost. Items having an original cost by the military of less than $5,000 will be valued at $1 with memo of original cost. Items having an original cost of more than $5,000 will be valued at 20% of original cost rounded to the nearest $1,000 with a memo to the file of the original cost. ' If the Authority receives reliable written information indicating this procedure has produced a value significantly different from fair value, an adjustment to that value will be made. Donated DRMO property with a value in excess of$1,000 is reported in the Statement of Revenues, ' Expenses and Changes in Net Position, as non-operating revenues and expenses as capital contributions. The Federal Aviation Administration, as the oversight agency, requires that the Airport track all the contributed property and the property must be held for at least one year prior to disposition. ' 6. Capital Assets Capital assets purchased or constructed are recorded at cost. The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend assets' lives are not included in capital assets cost. Capital assets donated to the Authority are recorded at their estimated fair value ' at the date of donation. Donated assets include property and equipment transferred to the Authority from the United States of America, September 9, 1966 and recorded at fair value at that date. The Authority maintains a capitalization threshold of$1,000. 33 1 1 FINANCIAL w 2014 Capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 5—50 Equipment 5— 10 Vehicles 7— 10 Airfield 10—30 7. Compensated Absences Substantially all full-time employees receive compensation for vacations, holidays, illness and certain other qualifying absences. The number of days compensated for various categories of absence is generally based on length of service. Liabilities relating to these absences are recognized as incurred and included in accrued expenses. Per the Authority's compensation policy, the paid time off is not able to accrue beyond a one year period, therefore all such liabilities are recorded as current. The amount accrued for such liabilities at December 31, 2014 and 2013 was $54,583 and $54,583 respectively. Balance Balance January 1, December 31, 2014 Incre ase Decrease 2014 $ 54,583 $ 10,888 $ (6,381) $ 59,090 Balance Balance January 1, December 31, 2013 Increase Decrease 2013 $ 49,566 $ 12,637 $ (7,620) $ 54,583 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Cash-Basis Law(KSA 10-1113) The Authority was in compliance with this law at all times during the year. B. Depository Security(KSA 9-1402) ' The Authority's funds were adequately secured at all times during the year. 34 t FINANCIAL FY 2014 III. DETAILED NOTES A. Deposits As of December 31, 2014 and 2013, the Authority had cash and cash equivalents as listed below: December 31, 2014 2013 Gross Cash Balances Cash $ 290,742 $ 887,178 Less deposits in transit and petty cash (50) (12,227) Add uncleared checks 59,922 13,873 Bank Balance 350,614 888,824 Less FDIC Coverage 500,000 500,000 Balances Securable by Collateral $ - $ 388,824 Security Provided by Depositories $ 2,132,843 $ 9,293,834 The Authority did not have any activity in investment-type assets. ' The Authority's policies relating to deposits and investments are governed by various Kansas Statutes (KSA). Those statutes specify the type of deposits and investments as well as the securing of those deposits and investments. ' Interest rate risk— In accordance with Kansas Statute 12-1675, the Authority manages its exposure to interest rate fluctuations by limiting all time investments to maturities of less than two years. tCredit risk — State law limits the amount of credit risk by restricting governments to specific investment types as listed in KSA 12-1675. The Authority's policy is to place idle funds in ' certificates of deposit, United States obligations, and the Kansas Municipal Investment Pool (KMIP). The KMIP was rated AAAf/S 1+ by Standard & Poor's as of the date of this report. The KMIP is permitted to invest in fully collateralized certificates of deposit, certain obligations of the United States, certain repurchase/reverse repurchase agreements, and other types of investments. Maturity ' information released by the KMIP showed that the investment pool consisted of investment with a maturity date of 365 days or less. ' Custodial credit risk—The Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit ' risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a 35 I FINANCIAL r .'u1 7 government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. Kansas Statutes 9-1402 and 9-1405 require that governments obtain security for all deposits. The Authority manages its custodial credit risk by requiring the financial institutions to grant a security interest in securities held by third-party custodial banks. Monies in the Kansas Municipal Investment Pool are not required to have pledged securities. ' Concentration of credit risk— This is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Authority manages this risk by placing funds with financial institutions only after contacting all eligible institutions in the taxing area and monies in the Kansas Municipal Investment Pool are diverse according to the policies of the investment pool. B. Receivables ' Receivables as of year-end, including the applicable allowance for uncollectible accounts, are as follows: December 31, I 2014 2013 Receivables Accounts $ 109,439 $ 91,613 ' Less: allowance for uncollectibles (1,500) (984) Total $ 107,939 $ 90,629 1 1 t 1 36 I IFINANCIAL F1 2014 C. Capital Assets IThe following is a summary of the changes in capital assets during the current and preceding year: I Balance Balance I January 1, December 31, 2014 Additions Dispositions Reclassify 2014 Capital Assets I Non-Depreciable Land $ 9,800,189 $ 22,694 $ (21,547) $ 21,711 $ 9,823,047 Construction in progress 928,804 371,219 - (465,290) 834,733 ITotal Non-Depreciable 10,728,993 393,913 (21,547) (443,579) 10,657,780 I Depreciable - Buildings and improvements 26,233,641 383,553 15,311 26,632,505 Airfield and improvements 39,661,944 490,653 - 428,268 40,580,865 IEquipment 3,974,255 98,670 (82,402) - 3,990,523 Total Depreciable 69,869,840 972,876 (82,402) 443,579 71,203,893 I Total Non-Depreciable & Depreciable $ 80,598,833 $ 1,366,789 $ (103,949) $ - $ 81,861,673 I Accumulated depre ciation Buildings and improvements $ (9,333,461) $ (992,073) $ - - $ $ (10,325,534) Airfield and improvements (19,361,356) (1,367,745) - - (20,729,101) IEquipment (2,981,257) (228,781) 65,474 - (3,144,564) Total Accumulated 1 Depreciation (31,676,074) (2,588,599) 65,474 - (34,199,199) Total Capital Assets $ 48,922,759 $ (1,221,810) $ (38,475) $ - $ 47,662,474 I 1 I I I 37 I I FINANCIAL F ,i : )1 ; Balance Balance January 1, December31, 2013 Additions Dispositions Reclassify 2013 Capital Assets Non-Depreciable Land $ 9,872,183 $ 94,514 $ (166,508) $ 9,800,189 Construction in progress 734,309 429,468 - (234,973) 928,804 1 Total Non-Depreciable 10,606,492 523,982 (166,508) (234,973) 10,728,993 Depreciable I Buildings and improvements 25,826,449 172,219 - 234,973 26,233,641 Airfield and improvements 39,123,784 540,392 - (2,232) 39,661,944 I Equipment 3,934,491 37,532 - 2,232 3,974,255 Total Depreciable 68,884,724 750,143 - 234,973 69,869,840 Total Non-Depreciable & Depreciable $ 79,491,216 $ 1,274,125 $ (166,508) $ - $ 80,598,833 Accumulated depreciation I Buildings and improvements $ (8,333,245) $ (1,000,216) $ - $ - $ (9,333,461) Airfield and improvements (18,023,932) (1,337,424) - - (19,361,356) I Equipment (2,730,790) (250,467) - - (2,981,257) Total Accumulated I Depreciation (29,087,967) (2,588,107) - - (31,676,074) Total Capital Assets $ 50,403,249 $ (1,313,982) $ (166,508) $ - $ 48,922,759 1 I I I I I I 38 I I IFINANCIAL FY 2014 Long-Term Liabilities ID. Following is a summary of changes in long-term liabilities during the current and preceding years: ICurrent Balance Balance Maturities I January 1, December31, December31, 2014 Additions Reductions 2014 2014 Long-term Liabilities I General obligation bonds $24,185,000 $ - $ 925,000 $ 23,260,000 $ 955,000 Less unamortized discount (304,339) (18,894) (285,445) Financing lease payable 156,791 - 48,825 107,966 52,190 Special assessment debt 66,746 - I 17,797 48,949 18,484 Security deposits returnable 11,702 16,007 7,085 20,624 - Total Long-Term Liabilities $24,115,900 $ 16,007 $ 979,813 $ 23,152,094 $ 1,025,674 Current Maturities (991,702) (1,025,674) ILong Term Liability Net $23,124,198 $ 22,126,420 I I Current I Balance Balance Maturities January 1, December31, December31, 2013 Additions Reductions 2013 2013 Long-term Liabilities IGeneral obligation bonds $25,080,000 $ $ 895,000 $ 24,185,000 $ 895,000 Less unamortized discount (323,231) - (18,892) (304,339) - Financing lease payable 202,617 - 45,826 156,791 45,826 I Special assessment debt 103,947 37,201 66,746 21,876 Security deposits returnable 11,702 11,702 - Total Long-Term Liabilities $25,063,333 $ 11,702 $ 959,135 $ 24,115,900 $ 962,702 Current Maturities (962,702) (991,702) Long Term Liability Net $24,100,631 S 23,124,198 I I I I 39 I FINANCIAL FY 2014 I The following is a detailed listing of the Authority's long-term debt including general obligation t bonds, financing lease and special assessment debt at December 31, 2014: Original Issue Interest Rates Bonds Outstanding, I General Obligation Bonds General Obligation 2005-A,due 2020 $ 3,635,000 4.75% to 5.25% $ 2,110,000 I General Obligation 2007-A,due 2022 1,005,000 4.60% to 6.00% 630,000 General Obligation 2009-A,due 2029 2,025,000 4.31% 2,025,000 General Obligation 2009-B,due 2026 6,080,000 3.00% to 5.50% 4,690,000 I General Obligation 2011-A,due 2030 11,820,000 4.64% 11,300,000 General Obligation 2011-B,due 2031 2,505,000 4.28% 2,505,000 ILess unamortized bond discount (285,445) Total General Obligation Debt 22,974,555 I Financing Lease, due December 2016 425,000 6.609% 107,966 Special Assessment Debt 1 Airport Industrial Center,due 2016 565,235 3.79% 33,820 Hangar 600 Sanitary Sewer,due 2021 27,599 4.47% 15,129 Total Special Assessment Debt 48,949 Total Long Term Debt $ 23,131,470 I Interest Expense in 2014 is as follows: General Obligation Bonds 1,057,332 Special Assessment Debt 2,645 Financing Lease 8,569 I Amortization of Bond Discount 18,894 Total Debt Interest Expense $ 1,087,440 I I I II I 40 i I IFINANCIAL FY 2014 I Annual debt service requirements to maturity for general obligation bonds to be paid with tax levies and rental revenues: I Bonds Year Outstanding Interest Due Total I2015 $ 955,000 $ 1,036,264 $ 1,991,264 2016 990,000 1,001,531 1,991,531 2017 1,030,000 963,874 1,993,874 I2018 1,070,000 923,756 1,993,756 2019 1,115,000 878,519 1,993,519 I 2020-2024 6,370,000 3,600,036 9,970,036 2025-2029 7,985,000 1,985,411 9,970,411 2030-2031 3,745,000 244,325 3,989,325 $ 23,260,000 $ 10,633,716 $ 33,893,716 ii- IAnnual debt service requirements for Financing Lease payable rental revenues: IYear Principal Due Interest Due Total 2015 $ 52,271 $ 6,201 $ 58,472 2016 55,696 2,776 58,472 $ 107,967 $ 8,977 $ 116.944 I I Annual debt service requirement to maturity for Special Assessment Debt to be paid from rental revenue: IYear Principal Interest Due Total 2015 $ 18,484 $ 1,958 $ 20,442 I 2016 19,197 1,245 20,442 2017 2,061 504 2,565 2018 2,153 412 2,565 I 2019 2,249 315 2,564 2020-2021 4,805 325 5,130 $ 48,949 $ 4,759 $ 53,708 I I 41 FINANCIAL F 2oia E. Capital Contributions and Net Assets Since its inception, the Authority has received capital contributions through Federal and State grants as follows: Inception to Date 2014 2013 Federal $29,509,784 $ 423,378 $ 377,527 ' State 2.215.849 376,384 245.502 Total $ 31,725,633 $ 799,762 $ 623,029 ' 1 The Authority has designated$90,000 to be used as an insurance increase reserve or to accelerate future debt service payments. As of December 31,2014,the reserve had been funded but not used. ' IV. OTHER INFORMATION A. Defined Benefit Pension Plan Plan description — The Authority participates in the Kansas Public Employees Retirement System ' (KPERS). The plan is a cost-sharing multiple-employer defined benefit pension plan as provided by Kansas statutes(KSA 74-4901 et seq). KPERS provides retirement benefits, life insurance, disability income benefits and death benefits. Kansas law establishes and amends benefit provisions. KPERS issues a publicly available financial report that includes financial statements and required supplementary information. Those reports may be obtained by writing to KPERS (611 S. Kansas Avenue, Suite 100, Topeka,Kansas 66603-3803)or by calling 1 (888)275-5737. Funding policy — KSA 74-4919 establishes the KPERS member-employee contribution rate at 5% for Tier 1 and 6%for Tier 2 employees of covered salary. The employer collects and remits member- employee contributions according to the provisions of section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rates be determined annually based on the results of an annual actuarial valuation. KPERS is funded on an actuarial reserve basis. State law sets a limitation on annual increases in the employer contribution rates. The KPERS employer rate established for calendar year 2014 was 9.69%. The Authority employer contributions to KPERS for the years ending December 31, 2014, 2013 and 2012 were 68,461, $64,810 and$64,872 respectively, equal to the required contributions for each year. 42 FINANCIAL FY2014 B. Deferred Compensation Plan ' The Authority offers its employees a deferred compensation plan ("Plan") created in accordance with Internal Revenue Code Section 457. The Plan, available to all Authority employees, permits them to ' defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. Plan assets are transferred to a plan agent in a custodial trust and are not available to the claims of the Authority's ' general creditors. C. Flexible Benefit Plan (I.R.C. Section 125) ' The Authority has adopted by resolution a salary-reduction flexible benefit plan ("Plan") under Section 125 of the Internal Revenue Code. All Authority employees working more than 20 hours per ' week are eligible to participate in the Plan beginning after thirty days of employment. Each participant may elect to reduce his or her salary to purchase benefits offered through the Plan. Benefits offered through the Plan include various insurance and disability benefits. ' D. Risk Management The Authority is exposed to various levels of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. There has been no significant reduction in the Authority's insurance coverage from the previous year. ' In addition, there have not been settlements in excess of the Authority's coverage in any of the prior three years. ' E. Contingent Liabilities The Authority receives significant financial assistance from numerous federal and state governmental agencies in the form of grants and state pass-through aid. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit. Any disallowed claims resulting from such audits could become a liability of the Authority. However, in the opinion of management, any such disallowed claims would not have a material effect on any of the financial statements of the Authority at December 31, 2014. ' F. Other Postemployment Benefits (OPEB) As a component unit of the City of Salina, the Authority participates in the City's defined benefit health care plan that is administered by the City. The Employee Benefit Plan (the Plan) provides medical and dental benefits to eligible early retirees and their spouses. KSA 12-5040 requires all local governmental entities in the state that provide a group health care plan to make participation available to all retirees and dependents until the retiree reaches the age of 65 years. No separate financial report is issued for the Plan. As a component unit of the primary government, the Authority is not required to make contributions to the plan. ' The OPEB cost, actuarial valuations of the ongoing plan and net OPEB obligations for the Authority as a sub-group of the plan, are calculated and recorded in the City's CAFR. 43 FINANCIAL r T ,'1'1 1 i G. Environmental Matter 1 The U.S. Department of Defense transferred property located at the former Schilling Air Force Base (the Base or Site) to the Authority on or about September 9, 1966. The property is now known to contain areas of extensive soil and groundwater contamination, which is a result of the use and disposal of chlorinated solvents during military operations at the Base from 1942 until Base closure in 1965. The U.S. Department of Defense is responsible for the investigation and remediation of contamination caused by military activities at current and former military bases. The U.S. Army Corps of Engineers(Corps) is the lead agency for the Department at formerly used defense sites. The Corps has investigated the soil and groundwater contamination at the Site under the regulatory oversight of the U.S. Environmental Protection Agency (EPA) and the Kansas Department of Health and Environment(KDHE). The Site is not designated as a National Priority List Superfund site, but investigation and remediation are required to be in compliance with the Comprehensive Environmental Response,Compensation and Liability Act(CERCLA). Potential liability for contamination under CERCLA extends broadly to parties associated with the release or presence of hazardous substances, including not only those entities involved with contaminant use and disposal, but in some cases other current and former owners and operators of contaminated sites. As a current owner of extensive amounts of property at the Site, the Authority is potentially liable under CERCLA, although the Authority believes that it has meritorious defenses to such liability. The Authority is considered to be a Potentially Responsible Party (PRP) for the Site, primarily due to its status as a property owner. The Authority, City of Salina, Unified School District No. 305 and the Kansas Board of Regents (Kansas State University at Salina) (collectively Salina Public Entities) currently own over 90% of the nearly 4,000 acres of the Base property. No third party has asserted any claim for bodily injury or property damage. Beginning in August 2007, the Salina Public Entities initiated settlement negotiations with the U.S. Federal Government. The negotiation objectives at that time included transferring the responsibility for completing the cleanup from the U.S. to the Salina Public Entities. The local objective was to reach a settlement agreement with the U.S. that provides the Salina Public Entities sufficient funds to complete cleanup operations over a 30-year period. ' During calendar year 2008, the Salina Public Entities, by and through its environmental consultant, prepared a detailed Cost to Complete Estimate (CTC). The CTC preparation included consultation with the EPA and KDHE. The Salina Public Entities' CTC was completed in June of 2008 and submitted to the Corps. Subsequently, on January 23, 2009, the Salina Public Entities delivered a demand letter to the Corps. ' The letter demanded that settlement negotiations begin immediately with the U.S. Department of Justice. On May 14, 2009 the Authority was notified that the Corps referred the Base demand letter to the U.S. Department of Justice on May 12, 2009. The Salina Public Entities delivered on or about May 10, 2010, a settlement offer and a draft of a lawsuit complaint to the attorney for the U.S. Department of Justice. The Salina Public Entities planned to file suit against the U.S. if the matter was not settled by the end of May, 2010. The Salina Public Entities did not intend to cut off settlement negotiations by the filing of suit, and this has been 44 FINANCIAL FY 2014 communicated to the U.S. No remedial action plan or record of decision has been adopted by the ' EPA or KDHE. On or about May 27, 2010, the Salina Public Entities filed their Complaint against the United States of America, the United States Department of Defense and Secretary of Defense, Robert M. Gates, in his official capacity (collectively, "Defendants"). On or about September 22, 2010, the Salina Public Entities filed their First Amended Complaint in four counts: Count I Citizen Suit Claim Pursuant to t 42 U.S.C.§ 9659(a)(2), Count II Citizen Suit Claim Pursuant to 42 U.S.C.§ 9659(a)(1), Count III Claim for Recovery of Response Costs Pursuant to 42 U.S.C.§ 9607(a) and Count IV Claim for Declaratory Judgment Pursuant to 42 U.S.C.§ 9613(g)(2). ' On or about October 6, 2010, Defendants filed their motion to dismiss and to strike, primarily with respect to the citizen suit claims. On or about March 25, 2011, Judge Murguia entered his ' Memorandum and Order. The Judge granted the Defendants' motion to dismiss Counts I and II (citizen suit claims) for lack of subject matter jurisdiction. He also granted the Defendants' motion to dismiss the Salina Public Entities' requests for attorney fees, with the exception of non-litigation attorney fees. He denied the Defendants' motion to strike the Salina Public Entities' allegations of a ' conflict of interest. The Salina Public Entities' claims under Counts III and IV for response costs under CERCLA 9607(a) are not affected by the Judge's rulings. The Salina Public Entities disagree with most of the Judge's filings and, if necessary, plan to take an interlocutory appeal to the Tenth ' Circuit to contest the rulings. On or about April 22, 2011, Defendants filed their Answer to First Amended Complaint and Counterclaim against the Salina Public Entities. Count I of the Counterclaim alleges a claim for contribution under CERCLA,42 U.S.C.§ 9613(0(1). Count II of the Counterclaim alleges a claim for cost recovery under CERCLA, 42 U.S.C.§ 9607(a)(1). Count II alleges costs incurred by the U.S. Environmental Protection Agency of approximately $1,838,241 as of September 30, 2007, and alleges costs incurred by the Corps of approximately $14,915,228 as of April 17, 2009. The Salina Public Entities intend to vigorously contest the claims brought against them and will assert, among other defenses, the third party defense under 42 U.S.C.§ 9607(b)(3). The parties agreed on a mediation to discuss settlement. The mediation sessions occurred in October 2011, and the mediation discussions continued for over a year. The parties have now agreed upon a partial settlement. The partial settlement includes payment by the U.S. in exchange for performance by the Salina Public Entities of a remedial investigation/feasibility study through entry of a Corrective Action Decision by KDHE (the "Work"). The present cost estimate of the Work is less than $10,000,000. The agreement is that the U.S. will pay 90% of the cost of the Work with the Salina Public Entities responsible for payment of the remaining 10%. It is anticipated that the agreed share of the Salina Public Entities will be paid by the City of Salina. Also, the claims and ' counterclaims in the lawsuit have been dismissed without prejudice with provisions tolling any and all statutes of limitation. No party is obligated under the settlement agreement to implement the Corrective Action Decision upon its entry by KDHE, and the parties will either negotiate an ' agreement to implement such Corrective Action Decision or refile their claims in court. The Salina Public Entities have entered into a Consent Agreement and Final Order ("CAFO") with KDHE, which is conditioned upon the U.S.'s payment to the City. On May 2, 2013, the U.S. District Court ' for the District of Kansas entered its Consent Decree. City of Salina, Kansas, et al. v. United States of America, et al., Case No. 1 0-CV -2298 CM/DJW. The Court's Consent Decree approved the settlement among the parties. The current status is that the U.S. wire transferred $8,426,700 to the 45 1 FINANCIAL F )> z account of the City, and the City added the share of the Salina Public Entities in the amount of $936,300 to the account. ' Although the claims and counterclaims in the lawsuit have been dismissed without prejudice, the Authority intends to vigorously pursue its claims that the U.S. should implement the Corrective Action Decision upon its entry by KDHE and its defenses against any claims brought against it. Based on presently known information, the Authority has determined that while a possible liability exists,at this time no reasonable estimate of the possible liability can be made. Therefore,no liability related to that matter has been recorded. H. Rental Income Under Operating Leases ' A significant portion of the operating revenue of the Authority is generated through the leasing of airport and building space to airport fixed base operators and others on a fixed fee as well as a contingent rental basis. Ownership risks are retained by the Authority, and accordingly, such leases are treated as operating leases. The following is a schedule of minimum future rentals on non-cancellable operating leases to be received in each of the next five years and thereafter: Years Ended December 31 2015 $ 1,021,828 2016 843,876 2017 691,875 2018 657,473 2019 633,683 Later Years 3,083,535 ' Total $ 6,932,270 I. Major Customers ' The Authority received significant operating revenue from the Kansas Military Board, Avflight Salina, US Special Operations Command, Schwan's Global Supply Chain and Learjet Inc. Rent from these five tenants equals 48%of operating revenue for the year ended December 31, 2014. I 1 46 I IFINANCIAL f ) .'.'1 : IJ. Non-Operating Revenue and (Expense) Net non-operating revenue and expense consisted of the following for the years ended December 31, I2014 and 2013: December 31, I2014 2013 Mill levy $ 1,993,889 $ 1,788,284 I Interest income 437 50,904 676 Gain on sale of assets 904 51,853 Total $ 2,045,230 $ 1,840,813 ' Interest expense General obligation bonds $ (1,057,332) $ (1,087,231) Special assessment debt (2,645) (3,071) I Financing lease (8,569) (11,637) Amortization of bond discount (18,894) (18,892) Total (1,087,440) (1,120,831) INet non-operating revenue $ 957,790 $ 719,982 K. Commitment Under Operating Lease IThe Authority has entered into a certain non-cancellable operating lease agreements which will expire in 2018, for the rental of office equipment. During 2014 the Authority paid $4,559 and in 2013 paid 4,939 in rentals. Minimum rentals, on an annual basis hereafter are as follows: IYears Ended December 31 I2015 $ 4,559 2016 4,559 2017 4,559 I 2018 1,520 Total S 15,197 I L. Subsequent Events IThe Salina Airport Authority's management has evaluated events and transactions occurring after December 31, 2014 through July 14,2015. The aforementioned date represents the date the financial statements were available to be issued. 47 I I I I I I I I I (THIS PAGE INTENTIONALLY LEFT BLANK) I I I I I I I I I I 48 Supplemental Information . . _ _ . ��ire M __.. �� : .. . � II — � ..iwio �i - — � in ,'. •y. •�. , ..,... ► . '.ice_w vw.�a ••v .•, ....• ,•zi ` `—.w.= w + w. r� ..... W v- ar � i "a1%.a.� � r M�r� T r r �1 a w rrrr �. rr:— _ ���. .:�� ~••"+ .-.%w s '= w _" : r E ......1;0=11......a.,_ �' � r + �_ —. ..w . -= c__a., _'• �i 'k; : T.:1.*i!, S-�t 1 'rte. rig ./.if ;.c:.: y s.v.t'*.vi � +, Tr--- s - , '4 _ ,_ �� z, �yXd - :i5 -1*-8: -47---7:7: 1':mot r� = Tr -8'x-, ! I jfl1111 ' _ _ kij 11 i PP IP _ . 1,0-- _ s -=___ ....,...iiiiiman 11 II -- --- - - • Salina, Kan. (April 29, 2014) -Vortex Valves is considered the world leader in valves for handling dry bulk solids. Sitting on a 15-acre campus in Salina, Kan.,the state-of-the-art manufacturing facility and office complex spans over 150,00o square feet.Vortex's current footprint allows them to introduce lean manufacturing methods supported by advanced fabrication equipment and laser cutting technology. As they began to expand and modernize, they were also footprint into new global markets. They have sold valve solutions in over 75 countries with local representatives in 3o-plus countries. Along with their corporate headquarters located in Salina, they have global offices in the United Kingdom, Switzerland, Latin America and Asia. 11111111116, 41it 1 I I I I I 1 1 I 1 1 1 1 1 1 1 1 1 1 I ISUPPLE\II \ I \l. FY2014 I SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES,EXPENSES AND CHANGES IN NET POSITION As of December 31,2014 and December 31,2013 IJanuary 1 to December 31 2014 2013 I Operating Revenues Airfield Fuel flowage fees $ 150,110 $ 128,277 I Hangar rent 518,465 360,086 Landing fees 3,312 3,232 Ramp rent 50,904 48,204 ITotal Airfield 722,791 539,799 Agri land rent 56,826 61,563 IBuilding rents 827,224 1,142,775 Land rents 243,051 260,635 Tank rent 8,962 9,084 ITotal Building and Land Rents 1,136,063 1,474,057 Other revenue I Commissions 19,409 22,152 Sale of avgas 8,037 40,595 Less cost of avgas (7,653) (38,619) I Other income 30,706 29,774 Total Other Revenue 50,499 53,902 ITotal Operating Revenue $ 1,909,353 ti 2,067,758 I I I I (continued) I 49 I I S 1'1'1 1 \11\ 1 \1. FY2014 I SALINA AIRPORT AUTHORITY I SCHEDULES OF REVENUES,EXPENSES AND CHANGES IN NET POSITION As of December 31, 2014 and December 31,2013 I(continued) January 1 to December 31 2014 2013 Operating Expenses I Administrative A/E,consultants,brokers $ 6,163 $ 16,928 Airport promotion 19,982 20,836 I Bad debt expense 9,276 - Computer network administration 11,898 9,790 Dues and subscriptions 33,021 28,614 I Employee retirement 68,461 64,810 FICA and medicare 52,156 54,935 Industrial development 15,000 15,000 IInsurance,property 144,241 152,132 Insurance,medical 162,328 179,658 Kansas unemployment tax 11,492 744 Legal and accounting 39,836 36,465 I Office salaries 409,847 415,859 Office supplies 7,803 8,794 Other administrative 6,274 12,492 I Postage 2,722 2,849 Property appraisal 7,750 - Property taxes 157,666 179,082 I Special events 516 123 Telephone 17,318 16,070 Training 4,053 6,637 I Travel and meetings 10,642 11,015 Total Administrative Expenses S 1,198,445 S 1,232,833 I I I I (continued) I I 50 I ISUPPLEMENTAL FY 2014 SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES,EXPENSES AND CHANGES I IN NET POSITION As of December 31,2014 and December 31,2013 (continued) I January 1 to December 31 2014 2013 Maintenance Expenses I Airfield maintenance $ 31,016 $ 15,347 Airport security 1,016 17 Building maintenance 57,027 50,157 Equipment fuel and repairs 84,726 102,406 I Fire services 500 - Grounds maintenance 3,617 939 Maintenance salaries 326,759 355,388 I Other maintenance expenses 20,954 20,462 Snow removal expense 7,295 17,538 Utilities 327,850 310,623 ITotal Maintenance Expenses 860,760 872,877 Total Operating Expenses 2,059,205 2,105,710 I (Deficit)of Revenues over Expenses before Depeciation (149,852) (37,952) Depreciation 2,588,599 2,588,107 IOperating Loss Before Non-Operating Revenues and Expenses (2,738,451) (2,626,059) I Non-Operating Revenues and(Expenses) Mill levy 1,993,889 1,788,284 Interest income 437 676 Interest expense (1,087,440) (1,120,831) IGain on sale of assets 50,904 51,853 Total Non-Operating Revenue(Expense) 957,790 719,982 ILoss Before Capital Contributions (1,780,661) (1,906,077) Capital Contributions 799,762 623,029 INet Position (Decrease)in Net Position (980,899) (1,283,048) INet Position,beginning period 25,228,419 26,511,467 INet Position,end of period $24,247,520 $25,228,419 I I 51 I I SUPPLEMENTAL FY 2014 I SALINA AIRPORT AUTHORITY CAPITAL EXPENDITURES January 1 to December 31 1 2014 AIRPORT IMPROVEMENTS Airport Master Plan Update(AIP-35) $ 78,107 I Convert overhead electric line facilities to underground across Txy G-west of Hangar 959 30,242 Txy G and Hangar 959 south apron rehabilitation 341,352 I Airfield security fencing improvements north ramp area adjacent to Hangar 959 14,885 Hangar 600 ramp,pavement rehabilitation 3,441 Rwy. 17-35 rubber deposit removal 22,626 Total Airport Improvements 490,653 I BUILDINGS Bldg. 655 electric meter separation 20,446 IHgr. 506-2 hangar door repairs 1,220 Bldg. 620-a/e design for offices and restrooms 4,650 Bldg. 723 -exterior rehab and painting 8,200 Hgr. 626 new Lennox HVAC heater for east rooms 1,786 Hgr. 626 personnel door replacements(2 north and 1 south) 4,236 H626 a/e services-building code review 1,200 Hgr. 959 rehabilitation 286,917 Bldg. 723 - 1 1/2 ton air conditioner 13 SEER and air handler 4,550 Hgr. 509 HVAC condensor 2,451 Hgr.409,Avflight South, replace SE entrance door and bldg. door recoring 4,550 Bldg. 700, Avflight North,door recoring 1,520 I PH 305 improvements(emergency shutoffs,tank cleaning,seal manholes,veeder-root repairs,callibrate meters) 20,116 Total Building Improvements 361,842 I EQUIPMENT (15)handheld communication radios and accessories 13,224 Two HP desktop computers 1,510 I ARFF 3 -turrett and joystick replacement 6,900 1986 Idaho Norland snow blower repair 12,067 2014 John Deere 6105D w/H260LDR tractor 57,716 I Snow plow blades and shoes 7,253 Total Equipment 98,670 CONSTRUCTION IN PROGRESS I A/E design Txy E& B rehabilitation(AIP 37) 371,219 LAND I Water line repairs 1,069 PH305 - Phase I& II ESA 7,219 Hgr.409 - Phase I& II ESA 7,094 I B700-Phase I& II ESA 6,329 Environmental-SAFB 22,693 Total Land 44,405 TOTAL CAPITAL EXPENDITURES S 1,366,789 I I 52 I SUPPLEMENTAL FY 2014 ' SALINA AIRPORT AUTHORITY GENERAL OBLIGATION IMPROVEMENT BONDS SERIES 2005 -A December 31, 2014 Date of issue: August 1, 2005 Amount of issue: $ 3,635,000 t 4.75%to 5.25% Maturity date: September 1,2020 Principal paid: S 1,525,000 ' Outstanding balance: S 2,1 10,000 Schedule of Bond Interest and Principal Payments ' Due in Bond Bond Year Interest Principal 2015 $ 104,612 S 305,000 ' 2016 88,600 320,000 2017 73,400 340,000 2018 57,250 360,000 ' 2019 39,250 380,000 2020 20,250 405,000 ' $ 383,362 $ 2,110,000 1 ' 53 1 •,I I'I'I I \II \ I \I SALINA AIRPORT AUTHORITY GENERAL OBLIGATION IMPROVEMENT BONDS ' SERIES 2007-A December 31,2014 Date of issue: December 15,2007 Amount of issue: $ 1,005,000 Interest rate: 4.6%to 6.0% Maturity date: September 1,2022 Principal paid: $ 375,000 Outstanding balance: $ 630,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Interest Principal 2015 $ 31,983 $ 65,000 2016 28,928 70,000 2017 25,568 70,000 2018 22,138 75,000 2019 18,313 80,000 2020-2022 29,213 270,000 $156,143 $ 630,000 1 54 ' 1 'IT! I:\1I \ I \L FY2014 ' SALINA AIRPORT AUTHORITY GENERAL OBLIGATION BONDS SERIES 2009-A December 31,2014 Date of issue: June 1,2009 Amount of issue: $ 2,025,000 ' Interest rate: 4.31% Maturity date: September 1,2029 Principal paid: $ - ' Outstanding balance: $ 2,025,000 Schedule of Bond Interest and Principal Payments ' Due in Bond Bond Year Interest Principal 2015 S 85,648 S - ' 2016 85,648 - 2017 85,648 2018 85,648 - 2019 85,648 - 2020-2024 428,238 2025-2029 322,315 2,025,000 t $ 1.178,793 S 2,025,000 I ' 55 1 tit Ifl'I I \II \ I \I_ FY 2014 SALINA AIRPORT AUTHORITY TAXABLE GENERAL OBLIGATION BONDS SERIES 2009-B December 31, 2014 Date of issue: June 1,2009 Amount of issue: S 6,080,000 Interest rate: 4.998% Maturity date: September 1,2026 Principal paid: S 1,390,000 Outstanding balance: S 4,690,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2015 $ 225,038 $ 325,000 2016 213,663 335,000 2017 200,263 345,000 2018 186,463 360,000 2019 171,163 375,000 2020-2024 562,800 2,180,000 2025-2026 56,925 770,000 S 1.616,315 S 4,690,000 ' 1 I 56 SUPPLEMENTAL FY 2014 SALINA AIRPORT AUTHORITY TAXABLE GENERAL OBLIGATION Bonds SERIES 2011-A ' December 31, 2014 Date of issue: August 17,2011 ' Amount of issue: $ 11,820,000 Interest rate: 4.64% Maturity date: September. 1, 2030 Principal paid: $ 520,000 Outstanding balance: $ 11,300,000 ' Schedule of Bond Interest and Principal Payments Due in Bond Bond ' Year Interest Principal 2015 $ 485,653 $ 260,000 2016 481,362 265,000 ' 2017 475,665 468,928 275,000 2018 275,000 2019 460,815 280,000 ' 2020-2024 2,042,880 1,089,515 3,515,000 2025 2029 5,190,000 2030 62,000 1,240,000 S 5,566,818 S 11.300,000 • 1 57 I SUPPLEMENTAL FY 2014 ' SALINA AIRPORT AUTHORITY I GENERAL OBLIGATION Bonds SERIES 2011-B December 31,2014 Date of issue: August 17,2011 Amount of issue: $ 2,505,000 I Interest rate: 4.280% Maturity date: September. 1,2031 Principal paid: $ - I Outstanding balance: $ 2,505,000 Schedule of Bond Interest and Principal Payments I Due in Bond Bond Year Interest Principal 2015 $ 103,331 $ - 2016 103,331 - 2017 103,331 - I2018 103,331 - 2019 103,331 - 2020-2024 516,656 - I2025-2029 516,656 - 2030-2031 182,325 2,505,000 $ 1,732,292 $ 2,505,000 1 I I I I I I I 58 SUPPLI.MENTAL FY 2014 ' SALINA AIRPORT AUTHORITY SPECIAL ASSESSMENT DEBT-STREET AND UTILITY IMPROVEMENT Airport Industrial Center Subdivisions December 31,2014 Date of loan: September 11,2002 Amount of loan: S 306,582 ' Interest rate: 3.79% Maturity date: October 1,2016 Principal paid: S 272,761 ' Outstanding balance: S 33,821 Schedule of Loan Interest and Principal Payments ' Due in Loan Loan Year Interest Principal 2015 S 1,282 S 16,596 ' 2016 653 17,225 S 1,935 S 33,821 I 59 SUPPLEMENTAL FY 2014 SALINA AIRPORT AUTHORITY SPECIAL ASSESSMENT DEBT-SANITARY SEWER EXTENSION HANGAR 600 December 31,2014 Date of loan: April 23,2007 Amount of loan: $ 27,599 Interest rate: 4.47% Maturity date: December 20,2021 Principal paid: $ 12,470 Outstanding balance: $ 15,129 Schedule of Loan Interest and Principal Payments Due in Loan Loan Year Interest Principal 2015 $ 676 $ 1,888 2016 592 1,973 2017 504 2,061 2018 412 2,153 2019 315 2,249 2020-2021 325 4,805 $ 2,824 $ 15,129 1 I I I 1 60 I ' SUPPLEMENTAL FY 2014 SALINA AIRPORT AUTHORITY FINANCING LEASE PAYABLE December 31,2014 ' Date of loan: Amount of loan: September 28,2006 $ 425,000 Interest rate: 6.609% Maturity date: September 1,2016 Principal paid: $ 317,033 Outstanding balance: $ 107,967 Schedule of Loan Interest and Principal Payments Due in Loan Loan Year Interest Principal 2015 $ 6,201 S 52,271 2016 2,776 55,696 S 8,977 $ 107,967 1 I 1 1 61 I StI X11 NI.1L FY2014 SALINA AIRPORT AUTHORITY INSURANCE IN FORCE December 31,2014 Amount of Insurance Policy Type of Coverage Coverage Liberty Mutual Insurance Worker's compensation Pol. #WC7-Z91-547496-014 and employer's liability $ 500,000 National Union Fire Ins.Co. Bodily Injury& liability $ 2,000,000 1 Pol. #AP003229456-20 Hangar keepers $ 1,000,000 Affiliated FM Pol.#EN468 Deluxe property-building,contents,stock, personal property of others, EDP equipment, business income $62,632,105 Extra expense $ 1,000,000 Data processing media $ 500,000 I Philadelphia Insurance Company Pol.#PHPK1103534 Vehicles&equipment Bodily injury/property damage $ 1,000,000 Medical payments $ 5,000 Uninsured motorists $ 1,000,000 Underinsured motorist $ 1,000,000 One Beacon Insurance Group Pol. #790-01-42-26-0000 Inland marine-equipment $ 1,508,688 Hartford Fire Insurance Company Crime policy Pol.#37BDDGW6926 Employee theft, forgery,alteration, computer fraud, faithful performance $ 250,000 Darwin Select Insurance Company Public officials and employment practices liability Pol.#020-4091 Each claim $ 2,000,000 Aggregate limit $ 2,000,000 Great American Alliance Ins.Co. Underground storage tank liability Pol. # KST7882933-20 Each incident $ 1,000,000 Aggregate limit $ 1,000,000 Defense expense limit each incident $ 100,000 I I 62 •Statistica' rimmomminesememillif Salina, Kan. (March 12,2015)-For the first time,with the help of the Air Force's 433rd Airlift Wing out 1 of Joint Base San Antonio-Lackland, Fort Riley transported an MIA1/2 Abrams main battle tank from Fort Riley to the National Training Center in California in a Lockheed C-5 Galaxy in a short amount of ' time. The tank loading took place at the Salina Regional Airport,a designated airport of embarkation for Ft. 1 Riley. I I I I 1 I I I I I I I I I I I I I I 1 STATISTICAL FY 2014 I STATISTICAL able of Contents This part of the Salina Airport Authority's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the government's overall financial health. Financial Trends 64-68 These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over ' time. Debt Capacity 69 1 This schedule presents information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ' ability to issue additional debt in the future. ' Revenue Capacity 70-72 These schedules contain information to help the reader assess the government's revenue source. ' Operating Information 73 P g ' This schedule contains service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. Demographic and Economic Information 74-77 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. 1 1 63 I ' I \ II,,tIt \I I1 .`()I I I SALINA AIRPORT AUTHORITY TOTAL ANNUAL REVENUES,EXPENSES AND CHANGES IN NET POSITION FOR YEARS ENDED DECEMBER 31, 1 2005 2006 2007 TOTAL REVENUES I OPERATING REVENUES Airfield $ 237,506 $ 263,524 $ 376,553 Fuel flowage fees 259,981 247,740 246,113 Building and land rent 1,106,146 1,294,166 1,525,071 Other revenue 49,654 70,605 53,772 TOTAL OPERATING REVENUES 1,653,287 1,876,035 2,201,509 1 TOTAL EXPENSES OPERATING EXPENSES I Administrative 1,039,270 1,043,176 1,161,530 Maintenance 618,346 627,546 807,485 TOTAL OPERATING EXPENSES 1,657,616 1,670,722 1,969,015 I OPERATING INCOME(LOSS)BEFORE DEPRECIATION (4,329) 205,313 232,494 DEPRECIATION 1,392,316 1,580,750 1,650,187 I OPERATING LOSS (1,396,645) (1,375,437) (1,417,693) NON-OPERATING INCOME AND(EXPENSES) I Mill levy 1,058,688 1,184,481 1,201,602 Interest on investments and financing lease 118,087 148,936 241,478 Interest expense (374,851) (500,431) (774,315) Bond Issue Costs - - - Gain(loss)on sale of assets 204,083 10,777 281,803 TOTAL NON-OPERATING INCOME AND(EXPENSES) 1,006,007 843,763 950,568 I LOSS BEFORE CAPITAL CONTRIBUTIONS (390,638) (531,674) (467,125) CAPITAL CONTRIBUTIONS 3,186,636 1,204,559 404,773 I INCREASE(DECREASE)IN NET POSITION 2,795,998 672,885 (62,352) NET POSITION AT YEAR END COMPOSED OF: I Net investment in capital assets 24,193,395 24,442,779 13,515,783 Restricted 85,000 85,000 - Unrestricted 518,098 941,600 11,891,243 1 $24,796,493 $25,469,378 $25,407,026 I Note<1>The 2010 Investment in Capital Assets,Net of Related Debt was Iadjusted by$130,729 in accordance with GASB Statement 65. See Note Ito the Financial Statements-Summary of Significant Accounting Policies. I 64 I Iti 1 \TISTICAL FY 201-1 SALINA AIRPORT AUTHORITY TOTAL ANNUAL REVENUES,EXPENSES AND CHANGES IN NET POSITION IFOR YEARS ENDED DECEMBER 31, 2008 2009 2010 2011 2012 2013 2014 I $ 470,182 $ 502,193 $ 654,786 $ 613,721 $ 548,193 $ 411,522 $ 572,681 210,292 165,443 191,027 167,569 189,370 128,277 150,110 1,407,984 1,402,230 1,497,330 1,491,710 1,365,853 1,474,057 1,136,063 47,591 28,710 48,206 33,965 56,752 53,902 50,499 2,136,049 2,098,576 2,391,349 2,306,965 2,160,168 2,067,758 1,909,353 1 1,303,374 1,352,357 1,414,922 1,385,079 1,245,267 1,232,833 1,198,445 941,926 867,771 821,798 771,450 869,091 872,877 860,760 I 2,245,300 2,220,128 2,236,720 2,156,529 2,114,358 2,105,710 2,059,205 (109,251) (121,552) 154,629 150,436 45,810 (37,952) (149,852) 1 1,606,811 1,748,348 2,290,253 2,407,566 2,514,587 2,588,107 2,588,599 (1,716,062) (1,869,900) (2,135,624) (2,257,130) (2,468,777) (2,626,059) (2,738,451) 1,256,816 1,327,647 1,768,154 1,795,660 1,767,338 1,788,284 1,993,889 185,215 74,313 9,948 9,856 1,500 676 437 I (1,022,539) (1,014,129) (1,003,998) (973,882) (1,175,063) (1,120,831) (1,087,440) (103,580) 16,321 - (86,067) 19,039 - 51,853 50,904 I 435,813 387,831 688,037 747,093 593,775 719,982 957,790 (1,280,249) (1,482,069) (1,447,587) (1,510,037) (1,875,002) (1,906,077) (1,780,661) 1,650,041 3,770,558 1,172,507 457,227 1,779,827 623,029 799,762 I369,792 2,288,489 (275,080) (1,052,810) (95,175) (1,283,048) (980,899) t24,471,896 26,410,681 23,586,562 22,065,441 25,339,916 24,818,560 24,510,104 1 1,304,922 1,654,626 4,072,936 4,541,202 1,171,551 409,859 (262,584) I $25,776,818 $ 28,065,307 $ 27,659,498 $26,606,688 $26,511,467 $25,228,419 $24,247,520 I I 1 65 I ti I .\ 1 lK I I( \I 11 1)14 1 SALINA AIRPORT AUTHORITY CHANGES IN CASH AND CASH EQUIVALENTS I FOR YEARS ENDED DECEMBER 31, 2005 2006 2007 1 CASH FLOWS FROM OPERATING ACTIVITES Cash received from providing services $2,107,817 $1,993,164 $ 4,588,310 Cash paid to employees for services (504,691) (552,966) (638,839) 1 Cash paid to suppliers for goods and services (1,157,454) (1,087,149) (1,281,618) NET CASH PROVIDED(USED)IN OPERATING ACTIVITIES 445,672 353,049 2,667,853 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of property,plant and equipment (5,948,674) (5,130,780) (3,242,102) 111 Purchases in satisfaction of maintenance agreement (1,350) (15,143) (21,601) Proceeds from capital grants 3,186,636 1,204,559 404,773 Return of capital grant proceeds - - - I Proceeds from property tax 1,058,688 1,184,481 1,201,602 Proceeds from sale of capital assets - - - Principal payments on debt (4,388,400) (1,019,673) (1,048,833) I Proceeds of new borrowing 3,635,000 3,350,000 12,007,599 Principal received on financing lease 96,320 104,453 113,279 Interest received on financing lease 93,126 84,993 76,167 I Bond defeasance and issue costs paid (22,183) (13,024) (59,955) Interest paid on long-term debt (356,080) (407,795) (376,499) NET CASH PROVIDED(USED)IN CAPITAL AND ' RELATED FINANCING ACTIVITIES (2,646,917) (657,929) 9,054,430 CASH FLOWS FROM INVESTING ACTIVITES; I Interest received on deposits 25,463 68,896 182,515 NET INCREASE(DECREASE)IN CASH AND CASH I EQUIVALENTS (2,175,782) (235,984) 11,904,798 CASH AND CASH EQUIVALENTS,beginning of year 2,962,020 786,238 550,254 I CASH AND CASH EQUIVALENTS,end of year $ 786,238 $ 550,254 $ 12,455,052 1 Note: In 2010,the SAA began classifying the sale of assets as non-operating income. 1 I I 66 I STATISTICAL FY 2014 SALINA AIRPORT AUTHORITY ICHANGES IN CASH AND CASH EQUIVALENTS FOR YEARS ENDED DECEMBER 31, 1 2008 2009 2010 2011 2012 2013 2014 $ 2,426,455 $ 1,974,744 $2,374,283 $ 2,466,747 $ 2,091,754 $ 2,162,181 $ 1,849,824 1 (790,936) (830,298) (825,454) (812,393) (784,733) (766,300) (731,571) (1,475,036) (1,457,074) (1,136,760) (1,315,871) (1,345,746) (1,469,899) (1,170,505) 160,483 (312,628) 412,069 338,483 (38,725) (74,018) (52,252) II (8,663,391) (6,999,968) (3,471,985) (1,962,366) (4,789,419) (1,238,629) (1,348,143) (7,912) (3,445) 1,552,002 3,674,507 1,077,310 443,681 1,755,598 623,029 799,762 1 1,256,816 1,327,647 1,768,154 1,795,660 1,767,338 1,788,284 1,993,889 (86,067) 19,039 - 218,361 81,652 (3,946,317) (4,739,437) (8,162,886) (12,756,306) (1,154,007) (959,134) (972,729) 8,012,154 11,675,000 14,060,137 122,855 133,242 144,485 - - - - 66,592 56,204 - - - - - (75,986) (39,535) (103,580) (1,249,490) (922,725) (1,145,591) (754,537) (1,190,236) (1,131,523) (1,099,052) 1 (10,868,845) 462,193 1,758,885 741,728 (3,610,726) (699,612) (544,621) 125,309 15,550 9,948 9,856 1,500 676 437 (10,583,053) 165,115 2,180,902 1,090,067 (3,647,951) (772,954) (596,436) I12,455,052 1,871,999 2,037,114 4,218,016 5,308,083 1,660,132 887,178 $ 1,871,999 $ 2,037,114 $4,218.016 S 5,308,083 $ 1,660,132 $ 887,178 $ 290,742 1 I 67 1 I STATISTICAL FY 2014 1 _ I 1. & - q @ @ r © R § $ v 2 ' « w 2 U g 04 R @ G / % ' 7 I F Q _ o 0 N e Tr en 0 en n « I c o tz to E f / .O - 0 G $ - , 4 / > I § 2 / \ ~ „1, / \ ■ - -• S ® u I iel ' k N K k 2 k / 2 - m - / 7 I I 2 \0 0 N N 1| k k s a - / ' J \ 2 / 2 G 2 $ + n I r N n en r a' 't I al ( E r- / N N n N. @ C n 2 ,e ,r;-; 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V7 01 �T M M V1 00 00 1, E N (%] u N N N N en en M Kam' ten een 1 e0 M W 0 U 1g I o r Pi 2 - .4 0 w 0 Q I Q u o0 co to 8 8 8 8 8 0 0 N en 0 o I V7 ,4 [1' Gi I �I N N N N N N N N N N raw V1 I I ISTATISTICAL IA 2014 Salina Airport Authority Principal Customers ICurrent and Ten Years Ago 2014 2004 Percentage of Percentage of I Company Revenue Rank Revenue Revenue Rank Revenue Avflight Salina S 282,298 I 13.99% Kansas Military Board 250,492 2 12.42% I Learjet Inc. 212,716 3 10.56% US Special Operations Command 140,806 4 6.98% Schwan's Global Supply Chain 106,308 5 5.27% 85,182 5 5.53% I Tischlerei-Fine Woodworking,LLC 78,184 6 3.88% Two Rivers Vending Co.,lnc. 61,162 7 3.03% 49,325 6 3.20% Universal Forest Products 52,487 8 2.61% I Kansas State University-Salina 52,239 9 2.59% 232,802 2 15.10% Geocore Services 37,920 10 1.90% 37,920 7 2.46% JRM Enterprises,Inc,d/b/a America Jet(formerly I Moore's Midway Aviation) 133,586 4 8.67% Flower Aviation 144,491 3 9.37% CAV Aerospace,Inc. 37,205 8 2.41% I Beechcraft Corporation(Formerly Hawker Beechcraft Corporation and Raytheon Aircraft Co.) 240,595 1 15.61% Federal Aviation Administration 22,350 9 1.45% I Salina Vortex 21,588 10 1.40% S 992.314 63.23°. 1,005,044 38.91% Source: Salina Airport Authority Records I I I I I I I 1 71 STATISTICAL FY 2014 ' Salina Airport Authority MILL LEVY REVENUE Ten Years Ended December 31,2014 Mil Levy 1 Fiscal Year Revenue 2005 1,058,688 I 2006 1,184,481 ' 2007 1,201,602 2008 1,256,816 1 2009 1,327,647 ' 2010 1,768,154 2011 1,795,660 2012 1,767,338 ' 2013 1,788,284 2014 1,993,889 Source: Salina Airport Authority Records ' I I I 72 I 111 STATISTICAL FY 201.1 I Salina Airport Authority AIR TRAFFIC, FUEL FLOWAGE AND ENPLANEMENT TRENDS Ten Years Ended December 31,2014 IPassenger Enplanements Fiscal Air Traffic Fuel Flowage Scheduled Non-Scheduled Total IYear Operations Gallons Air Carrier Air Carrier Enplanements 2005 86,292 4,162,887 2,346 459 2.805 111 2006 81,464 3,817,112 1,854 1,023 2,877 2007 76,479 3,778,794 2,504 1,623 4,127 t2008 71,575 3,114,515 3,673 1,497 5,170 I2009 65,062 2,481,585 2,447 421 2,868 2010 60,451 2,763,991 1,698 1,446 3,144 I2011 69,207 2,386,670 2,705 212 2,917 2012 97,338 2,594,049 2,546 980 3,526 I2013 90,131 1,757,980 2,361 468 2,829 2014 91,101 1,971,061 2,138 418 2,556 I Note: One air traffic operation equals one aircraft takeoff and landing I • Sources: Salina Airport Authority Records IFederal Aviation Administration Office of Airport Planning and Program Non-scheduled air carrier data is estimated as data not available from FAA until July of the following calendar year I I I I 1 73 I STATISTICAL FY 2014 I Salina Airport Authority I Principal Employers Current Year and Eight Years Prior I 2014 2006' Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment Schwan's Global Supply Chain, Inc. 1,800 1 7.2% 1,800 1 5.1% 1 Unified School District No. 305 1,659 2 6.6% 1,659 2 4.7% Salina Regional Health Center 1,300 3 5.2% 1,600 3 3.7% I Exide Technologies 750 4 3.0% 750 4 2.1% Philips Lighting Company 490 5 2.0% 490 7 1.4% City of Salina 465 6 1.9% 723 5 2.0% 1 Wal-Mart 421 7 1.7% 421 8 1.2% Dillons Stores 343 8 1.4% I Solomon Corporation 324 9 1.3% Great Plains Manufacturing 258 10 1.0% Blue Beacon International 544 6 1.5% I Assurian, Inc 374 9 1.0% Hawker Beechcraft Corp. 350 10 1.0% ITotal 7,810 31.2% 8,711 23.7% Source: Salina Area Chamber of Commerce I 1-2005 Historical records not available I 1 I I I I 74 I I Itil \ II', II( \I F1' 2014 I Salina Regional Airport and Salina Airport Industrial Center Airport/Industrial Center Information As of December 31, 2014 IAirport Code SLN Location: 3 miles Southwest of City of Salina IElevation 1,288 ft. Tower: Midwest ATC 0700- 2300 -365 IFBO: AVFlight I2005 2014 Acreage+1- Airport 2,502 2,502 ' Airport Industrial Center 403 360 Runways : 35/17 North/South ILS/GPS/VOR/NDB 12,301 x 150 ft. 12,301 x 150 ft. I 30/12 Southeast/northwest GPS 36/18 North/South 6,510 x 100 ft. 6,510 x 100 ft. 4,301 x 75 ft. 4,301 x 75 ft. 22/4 West/East 3,648 x 75 ft. 3,648 x 75 ft. 111 Aircraft Rescue& Fire Fighting Facility ARFF Station 2,500 10,000 ICommercial Air Service Terminal M.J. Kennedy Air Terminal Bldg. - sq. ft. 10,750 10,750 IVehicle parking spaces 123 123 Number of Rental Car Agencies in Terminal 1 1 IApron Commercial Service Ramp - sq. ft. 541,218 541,218 FBO - sq. ft. 319,596 319,596 I KS National Guard - sq. ft. 261,523 261,523 General Aviation/Other- sq. ft. 1,896,664 1,896,664 111 Buildings Sq. Ft. 1,051,631 1,163,471 Employees Airport Authority I Administration 4 5 Operations 7 9 Total Airport Authority Employees 11 14 ISource: Salina Airport Authority Records I 75 I I I STATISTICAL FY 2014 uo C go '1 M M N O, 0-0+ ON\ O N" v - M Q M N N M N N ---- 00 rYi O Oo O Q; ON O: ON O■ O■ O■ o0 I L C III 0 cis R 4. O N N b v1 er N O • ach ° 000000000000 � � N II rXi C I 44 t",,,su e e o e o o e e 0 0 .• cITr r- Tr Oh Tr. 00NOhN M = a er M M M v, vi .0 vi v, II 0 a 0 II 3 Qy M NO Oh N N N 00 M er vl �� N N N OC N N N 00 N ■D M M M M M M M M m M I i ^ O N y a N oo O N C i i OOo I 0. O --. O v? N n ken n O. .--, ., C M .-.� qD app v) 00 O �-. O: rr VC ON S 0--0 N M V en F --. .-. .--. N N N N N N N C tn cr 0 C 0 IS u I ° pppp 0 0 g $ N O N 00 O 0 co v1 00 l� v) M I l� M O� O O O ° I. 0 M M M M M M Cr t} � W tl.) II o 0 li 55 cu F3. C o O� c �y -. A = i O� O 00 vl 1 O iE 00 .4 I '�� y o O os 01 O^ -4 In M '.D ON N 000 ..V. W 0 L"" t' bDC M e e e In vi vi In vn v1 b y ,4. 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N M o A O A b —9" d co QV aAi LS 88882' 1 R a UF°„ a co Q H N N N N N N N N N N Q 1 :7 end • :: O eC V1 V1 A N I I ISTATISTICAL f y .Noi-i 1 Largest Taxpayers According to the Saline County Clerk's Office, the following table lists the largest taxpayers in the City, their November 2014 assessed valuations, and the percentage each taxpayer comprised of the total assessed I valuation of the City. %of Type of Assessed Total I Comoanv Business Valuation Valuation Westar Energy Utility $9,980,609 2.21% Schwan's Global Supply Chain Inc Manufacturing 7,980,031 1.77% Garrison Salina Owner, LLC Regional Shopping Center 4,950,001 1.10% I Gateway Adams Inc Regional Shopping Center 4,478,018 0.99% Kansas Gas Service Utility 3,553,735 0.79% Menard Inc Home Improvement Store 2,629,399 0.58% I Salina Regional Health Center Inc Hospital&Medical Offices 2,550,905 0.57% Great Plains MFG Inc Manufacturing 2,357,071 0.52% Collier, Dennis D Commercial & Residential 2,163,976 0.48% Dillon Companies Inc Grocery 2,160,125 0.48% I 9.48% Tax Collections I Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before May 10 of the following year. Taxes that are unpaid on the due dates are penalized at a statutorily prescribed rate until paid or until the property is sold for taxes. Real estate bearing unpaid taxes is advertised for sale in July of each year and is sold by the County for taxes and all I legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. I Personal property taxes are assessed, due and may be paid in the same manner as real estate taxes. Motor vehicle property taxes are based on valuations provided by the Kansas Department of Revenue and the county average tax rate for the county in which the vehicle is registered. Motor vehicle taxes are payable to the I county treasurer at the time of the vehicle's annual registration. Vehicle registration dates are assigned by the State in a manner such as to equal registration over a twelve-month period. Motor vehicle taxes are distributed by the county to the state, city and other taxing jurisdictions based on their proportionate tax levies. Delinquent personal and motor vehicle taxes are penalized at the same rate as delinquent real property taxes. The following is I a summary of tax collections for the years shown. Current Current and Delinquent Levy Tax Taxes Tax Collections Tax Collections I Year Rate Levied Amount % Amount % 2014 27.080 10,751,166 10,659,755 99.1% $10,751,166 100.0% 2013 26.927 10,643,466 10,026,784 94.2% 10,643,466 100.0 2012 26.190 10,228,923 9,340,888 91.3 10,228,922 100.0 I 2011 26.272 10,355,328 9,463,715 91.4 10,309,325 10,118,285 99.5 2010 26.022 10,425,260 9,823,578 94.2 97.1 2009 25.855 10,289,701 9,831,289 95.5 10,126,228 98.4 2008 25.886 10,369,087 9,825,122 94.8 10,119,876 97.6 I `Collections as of February 28, 2015 I Source: Saline County I 77 1 I I I I I I I I (THIS PAGE INTENTIONALLY LEFT BLANK) I I I I I I I I I I 78 I .___ . Compliance s. tr . Iliteg. I a Al° 1 I Fi .. , w , ..., 7 s... 2 ,,,;.,,,,„,, \ \\ ..' . . . .,,,,:::„/„. .........iiik. _ -;;;;'- ;-..: N■1,. ' AP r irl i' t 1 -ill\ . l : ,� t\. . , .r�-f • !r ' .rl. a Jrj 1r !!l J '� CIiI Salina,Kan.(May 4,2014)—Tait Middleton and his father Dave teamed up to launch TDM Aerotek and provide KSLN increased aircraft maintenance and repair capabilities. As a K-State Salina Aviation graduate,Tait has already established a working relationship with one of the nation's leading aviation maintenance training programs for the benefit of his customers. "We're here for the pilots,"Tait said."We want to keep our prices competitive and we'd like to get more young people interested in aviation." 1 1 CLUBINE& RETTELE INDEPENDENT AUDITORS'REPORT ON INTERNAL CONTROL OVER I GIARIERED FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS Certified Pubi" Acwntants PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING I Irgi STANDARDS To the Board of Directors ISalina Airport Authority We have audited, in accordance with the auditing standards generally accepted in I the United States of America and the standards applicable to financial audits Robert I.Clubine,CPA contained in Government Auditing Standards issued by the Comptroller General of David A. Rettele,CPA the United States and the Kansas Municipal Audit and Accounting Guide, Jay D.Langley,CPA,CGMA I Jon K. Bell,CPA prescribed by the Director of Accounts and Reports, Department of Administration Leslie M. Corbett,CPA,CGMA Stacy J.Osner,CPA of the State of Kansas, the financial statements of the business-type activities of the Salina Airport Authority as of and for the years ended December 31, 2014 and 2013, and the related notes to the financial statements which collectively comprise I Linda K.Fox,CPA the Salina Airport Authority's basic financial statements and have issued our report Linda A.Svelter,CPA rP Y P Valerie K. Linenberger, CPA thereon dated July 14, 2015. Johnna R.Vosseller,CPA IInternal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the I Salina Airport Authority's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for I the purpose of expressing an opinion on the effectiveness of the Salina Airport Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of Salina Airport Authority's internal control IA deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their I assigned functions, to prevent or detect and correct misstatements on a timely basis. 218 South Santa Fe A material weakness is a deficiency, or a combination of deficiencies, in internal P.O. Box 2267 control such that there is a reasonable possibility that a material misstatement of the I Salina, Kansas 67402-2267 entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. I Salina 785/825-5479 Salina Fax Our consideration of internal control was for the limited purpose described in the 785/825-2446 first paragraph of this section and was not designed to identify all deficiencies in IEllsworth internal control that might be material weaknesses or significant deficiencies. 785/472-3915 Given these limitations, during our audit, we did not identify any deficiencies in Ellsworth Fax internal control we consider to be material weaknesses. However, material t785/472-5478 weaknesses may exist that have not been identified. I 79 Compliance and Other Matters ' As part of obtaining reasonable assurance about whether the Salina Airport Authority's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CLUBINE AND RETTELE, CHARTERED ' Cif�c aA4 d Ctatintd Salina, Kansas July 14, 2015 80 1 1 1 2 0 1 4 • . . . • • . .. • . • . • J... f•••• ••• . '411.• • "•114 1 The Salina Regional Airport has a 12,30o-foot primary runway.The Airport's world-class FBO,Avflight Salina, delivers aviation fuel to thousands of business jets and military aircraft every year. This has earned Salina the moniker,"America's Fuel Stop."The air traffic control tower is busy during the year with aircraft operations exceeding 90,00o. 1 .,; SAL21NAA4i9ort i 1 - 1 x .r. SALINAAIrP$i 9 . eeis,A+14 /s2 eS / Aviation SLNAirport SLN/t7 er 1 1 1 1 1 3237 Arnold I Salina,KS 67401 I 785-827-3914 www.salinaairport.com www.flysalina.com 1