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Audit Report - 2003 COMPREHENSIVE ANNUAL FINANCIAL REPORT of the SALINA AIRPORT AUTHORITY A Component Unit of the City of Salina, Kansas For the Fiscal Year Ended December 31, 2003 Prepared by the Management of the Salina Airport Authority /' &.Ji-. M ~ S[¿IAi'1!2rt sALINAAirport /I~ SA LI N A A ¡;¡;¡¡; 1~ eedøt't" SALINA AIRPORT AUTHORITY TABLE OF CONTENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT F or the Fiscal Year Ended December 31, 2003 Page INTRODUCTORY SECTION Letter of Transmittal ...................................................................................... ... 1-6 Principal Officers .....................................................................................".... .... 8 Authority Staff Members............... .................... ........... .........." ....... ........ ".... .. .. 9 Organizational Chart ................................................................................".... .. .. 10 Certificate of Achievement ........................................................................... .. .. 11 Salina Municipal Airport Aerial View.......................................................... .. .. 12 FINANCIAL SECTION Independent Auditors' Report ....................................... ........"....... ....... ........ 13-14 Management's Di scussi on and Anal ysis ......................................... 15 - 21 Statements of Net Assets.............................................................................. 22-23 Statements of Revenues, Expenses and Changes in Net Assets........................................................................... .. .. 24 Statements of Cash Flows (Direct Method) ............................................... 25-26 Notes to Financial Statements................. ..,....... ............."..... ....". .............. 27-39 Supplemental Information Schedules of Revenues, Expenses and Changes in Net Assets.................. 42-43 Capital Expenditures.................................................................................... 44-45 General Obligation Bonds - Series 1998-A ............................................... .. .. 46 General Obligation Refunding Bonds - Series 1999-B.............................. .. .. 47 General Obligation Improvement Bonds - Series 2001-A......................... .. .. 48 General Obligation Improvement Bonds - Series 2002-A......................... .. .. 49 Leasehold Revenue Bonds - Series 1991................................................... .. .. 50 KDOCH Loan Payable............................................................................... .. .. 51 Special Assessment Debt-Street and Utility Improvement........................ .. .. 52 Insurance in Force ...................................................................................... .. .. 53 ST A TISTICAL SECTION Operating Revenue History........................................................................... .. ..55 Operating Expense History ........................................................................... .. .. 56 Federal Financial Assistance History............................................................ .. .. 57 Capital Expenditure History.......................................................................... .. .. 58 Revenue Bond Coverage............................................................................... .. ..59 Principal Customers ....................................................................................., .. ..60 Local Government Mill Levy Rates, Direct & Overlapping ........".............. .. .. 61 Mill Levy Revenue................................................................................."..... .. ..62 Air Traffic, Fuel Flowage, and Enplanement Trends ................................... .. .. 63 Major Employers......................................................................,.................... .. ..64 Saline County Population, Demographic and Labor Statistics .............."..... .. .. 65 Saline County Employment Data.................................................................. .. .. 66 OTHER INDEPENDENT AUDITORS' REPORTS Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards........ 67-68 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance In Accordance with OMB Circular A-133 ..........................................69-70 Schedule of Expenditures of Federal Awards ............................................... .... 71 Notes to Schedule of Expenditures of Federal Awards ............................... ....72 Summary Schedule of Prior Audit Findings ................................................ ....73 Schedule of Findings and Questioned Costs ................................................ ....74 Corrective Action Plan............................................. ......."....... ....... ...... .."... ....75 ii I ~ uc y TI On June 30, 2003 the Salina Authority commissioned a new 4,300 foot Runway at the Salina Municipal Airport (SLN). Runway 18/36 was designed to improve safety reduce delays at SLN. Aircraft operations for 2003 totaled 86,21 making Salina's Contract Tower Program facility the busiest VFR control tower in Kansas. SALINAAirport Il~ -' Chairman Robert H. Miller Vice-Chairman Dr. Randy D. Hassler Secretary Stephen C. Ryan Treasurer John K. Vanier, II Past Chairman Donald E. Morris Executive Director Timothy F. Rogers, A.A.E. Mar. of Administration and Finance Michelle R. Swanson Mar. of Operations, Maintenance and ARFF Ryan E. Rocha Board Attorney Greg A. Bengtson June 16, 2004 Salina Airport Authority Board of Directors 3237 AmoldAve. 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 year ended December 31, 2003 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 2003 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 my knowledge and belief, the data as presented is accurate in all material aspects, that it 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 that all disclosures necessary to enable the reader to gain maximum understanding are included in the report. 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 Guide, the Government Auditing Standards issued by the Comptroller General of the United States, and the provisions of the Office of Management and Budget Circular A-133, "Audits of States, Local Governments and Nonprofit Organizations" . GAAP requires that management provide an overview an 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. ORGANIZATION OF THE REPORT The Authority applies the standards for preparation of local government fmancial reports recommended by the Government Finance Officers of the United States and Canada (GFOA). The Authority's 2003 Comprehensive Annual Financial Report is presented in four sections: Introductory Section - contains this letter of transmittal, a list of the Authority's principal officers, a listing of Authority staff members, an organizational chart, the GFOA Certificate of Achievement for Excellence in Financial Reporting for fiscal year 2002, and an aerial photo of the Salina Municipal Airport and Airport Industrial Center. - s~M~~ 3237 Arnold 1 Salina, KS 67401-8190/785.827.39141 Fax: 785.827.2221 sAL!J,I~ft!lJ~J!! ""'= - www.salinaairport.com -- c, ~ '+ TRODUCTORY Financial Section - includes the independent auditors' report, Management's Discussion and Analysis (MD&A), the Authority's 2003 financial statements and the required supplemental information. Statistical Section - includes selected fmancial and demographic information, which highlights economic and demographic trends. Other Indeoendent Auditors' Reoorts Section - includes reports concerning the Authority's compliance and internal control over financial reporting and compliance and internal control over compliance with requirements applicable to administering federal awards programs. REPORTING ENTITY The 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 thc~ former Schilling A.F.B., which was closed by the United States Department of Defense in June 1965. By quitclaim deed the Authority received over 2,700 acres of land and numerous buildings for the purpose of operating and developing the Salina Municipal Airport and the Salina Airport Industrial Center. The Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. The Board appoints the Executive Director, who is the chief executive and administrative officer of the Authority. The Executive Director hires the remaining employees of the Authority. The Executive Director and his staff of eleven employees manage and operate the Salina Municipal Airport and the Salina Airport Industrial Center. The Salina Municipal Airport is the only commercial service airport serving Salina/Saline County and the 22-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 - Salina College of Technology and Aviation (KSUS). The campus of KSUS is located adjacent to the airport. The college offers degrees in professional flight training, airframe and power plant maintenance, and avionics technology. The Salina Airport Industrial Center is home for 76 businesses and organizations. Forty-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 Industrial Cente:r. 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. 2 INTR lDUCTORY 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. Growth in the areas of manufacturing, transportation, [mance, real estate, insurance, services and retail trade, confirm Salina's position as one of Kansas' strongest regional economic centers. According to the April 2004 Strength Index report published by K-State Research and Extension Department of Agricultural Economics, Saline County ranked fifth out of the 105 counties in "strength index" for 2002-2003. The index is a measure of economic prosperity in Kansas counti~:s, and is made up of three components including wealth, personal income and employment indices. The: strength index is determined not only by compiling the key economic indicators in each county, but also comparing those measures against the state's per capita economic progress. A county with a score of 1.0 for all three indices would perfectly reflect the values for the State of Kansas and have a Strength Index of 3.00. Saline County's score of 3.07 indicates that it is prospering at a greater rate than the entire state The Bureau of the Census, the Kansas Department of Revenue, the Kansas Department of Human Resources, the Kansas Governor's Economic and Demographic Report, and K-State Research and Extension comprise the source for the strength index data. Economic Condition of the Airport and Airport Industrial Center As of December 31, 2003, over 70 businesses and organizations at the Airport Industrial Center employed an estimated 4,600 employees. Total payroll was an estimated $121 million. 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 new jobs per year will be added to the economy ove:r the next five years. Airport Industrial Center businesses and organizations such as Schwan's Food Manufacturing, Inc., Salina Vortex Corporation, Aerospace Systems and Technologies, Inc., Flower Aviation, and the Kansas State University-Salina College of Technology and Aviation continue to work on facility expansion plans. These expansions will result in additional jobs and payroll. INITIATIVES AND D EVELO PMENT Salina Municipal Airport On June 30, 2003, a new, locally funded $1.4 million runway opened at the Salina Municipal Airport. The 4,300 ft. runway designated Rwy 18/36 runs parallel to the airport's primary runway and was financed with SAA issued General Obligation bonds making it one of the country's few new runways paid for without using federal dollars. Rwy 18/36 was built to better accommodate the growth of aircraft traffic ITom the Kansas State University - Salina College of Technology and Aviation, in addition to military training and flight-tests ITom Wichita aircraft manufacturers. In addition, the new parallel general aviation runway will relieve congestion on the airport's primary runway and reduce delays for 3 TRODUCTORY the itinerate traffic using Salina as a mid-continent refueling stop. The project was completed in less than 12 months from the date the engineering contract was signed. The year ending December 31, 2003, marked the fourth consecutive year that fuel sales on the airport exceeded the 4 million gallon level. The airport's two Fixed Base Operators (FBO), America Jet and Flower Aviation continue to provide top-notch service and the top selling aviation fuel brands to the wide variety of aircraft that utilize the Salina Municipal Airport including general aviation, air carrier, and military. Because of Salina's geographic location, the Salina Municipal Airport is a popular mid- continent refueling stop. Fuel sales are an important component to the operation of the Airport as the fuel flowage fee revenue generated over 20% of the Authority's 2003 operating revenue. The Salina Municipal Airport was the first airport in Kansas to comply with the requirements of the newly formed Transportation Security Administration (TSA). In November 2003 the TSA completed its first full year of federalized airport security screening at Salina. During 2003, the Authority worked with Mesa Air Group to reduce air fares out of Salina and provide a reasonable Salina to Kansas City fare allowing Salina area passengers the opportunity to connect with air carriers such as Southwest. The efforts included an Air Service Development Questionnaire that surveyed Salina area businesses and organizations regarding their travel tendencies. On October 9, 2003, Mesa announced that it was reducing fares by as much as 40% for service from the Salina Municipal Airport to the Kansas City International Airport. Salina Airport Industrial Center During 2003, the Authority continued to make improvements to Airport Industrial Center facilities through the utilization of the funds provided with the 2001 Facility Improvement General Obligation Bond issue. I.) Two new parking lots were constructed at the Bostater Realty Airport Apartments and a lease addendum generating additional airport revenue was finalized; 2.) The improvements to the vacant manufacturing facility at 3600 Airport Road were completed; and 3.) The d~molition of three large former USAF structures was completed. The Authority was pleased with its involvement in bringing Turbine Specialties/Cooper Cameron to the Airport Industrial Center. With Turbine's purchase of a vacant manufacturing facility, the existing Turbine jobs will stay in Salina and additional jobs will be created as they consolidate operations. Capital Financial Plannim! Throughout the year, the Authority staff worked on the development of a five-year capital improvement program. All projects included in the plan are designed to meet the objectives as set forth in the Airport's 1991 Master Plan. A significant portion of the funding for the capital improvement projects will come from the Authority's entitlement dollars under the Federal Aviation Administration's (FAA) Airport Improvement Program. It is anticipated that the Federal share of the identified projects range from 85% to 95% of the total project development cost. All projects under this five-year capital improvement program are subject to FAA review and approval. In August 2003, the SAA received a FAA grant offer in the amount of $2,416,016 to fund 87% of the cost to rehabilitate the airports primary Runway 17/35 during 2004. 4 INTR IDUCTORY FINANCIAL CONTROLS The Authority follows generally accepted accounting principles applicable to gov~:rnmental 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 ITom loss, theft, or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of finan,cial 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: (I) 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. An annual budget is prepared in accordance with the Authority's By-laws. However, the Authority is specifically exempt ITom the budget laws of the State of Kansas (K.S.A. 27-322) and the Authority is not required to demonstrate statutory compliance with its annual operating budget. Accordingly, budgetary data is not included in the accompanying financial statements. CASH MANAGEMENT All cash temporarily idle during 2003 was invested by the Executive Director of the Authority in short- term investments to attain the highest possible return consistent with the Authority's liquidity needs. All investments are in compliance with K.S.A. 12-1675 which controls the investment of public funds by Kansas governmental units. RISK MANAGEMENT The Authority is exposed to risks of loss associated with the operation of a public use airport and the operation of an airport industrial center. To handle the associated risks of loss, the Authority uses available tort liability legislation and purchases the appropriate types of insurance coverage. It is the policy of the Authority to eliminate or transfer risk ofloss where possible. The Kansas Tort Claims Act (K.S.A. 75-6101 et seq.) generally limits tort liability for Kansas governmental entities. The maximum liability for claims as specified by the Act is $500,000 for any number of claims arising out of a single occurrence or accident. For wrongful acts, Kansas governmental entities or their employees are exempted ITom liability. The Authority carries $500,000 of comprehensive general liability insurance which matches the limit established by the Kansas Tort Claims Act. During 2003 the Authority carried $12,455,674 of insurance on airport commercial properties. The Authority also acquires construction builders' risk policies for all major construction projects or requires evidence of coverage ITom the contractor. The Authority's commercial property insurance included $1,123,878 in loss of rents (;overage. All contractors and lessees are required to carry amounts of property insurance with limits and deductibles approved by the Authority. A schedule of insurance in force at December 31, 2003 is included in the Supplemental Section of this report. 5 TRODUCTORY In addition, the Authority uses various risk management techniques. All contracts and leases are reviewed by the Authority's legal counsel. All contractors and subcontractors are required to submit evidence of insurance coverage naming the Salina Airport Authority and the City of Salina as named additional insured. GFOA CERTIFICATE OF ACHIEVEMENT The Govemment 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 fmancial report (CAFR) for the fiscal year ended December 31, 2002. This was the eleventh consecutive year that the Salina Airport Authority has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report (CAFR). This reporlt 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 believle that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another ,certificate. ACKNOWLEDGEMENTS The support of the Authority's Board of Directors 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 advisors, Harrison & Arnett, Chartered, Saline County Clerk's Office, Gerald Cook, President of the Salina Area Chamber of Commerce, Rod Franz, Director of Finance for the City of Salina, 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, T2~1~ Executive Director Salina Airport Authority l{f~ tf.~ Michelle R. Swanson Manager of Administration and Finance Salina Airport Authority cc: The City of Salina Board of Commissioners 6 (THIS PAGE INTENTIONALL Y LEFT BLANK) 7 SALINA AIRPORT AUTHORITY PRINCIPAl, OFFICRRS AS OF ORCRMRRR J1 200J BOARD OF DIRECTORS Donald E. Morris Robert H. Miller Dr. Randy D. Hassler Stephan C. Ryan John K. Vanier, II Chairman Vice-Chairman Secretary Treasurer Past Chairman AUTHORITY'S COUNSEL Greg A. Bengtson Clark, Mize & Linville, Chartered Salina, Kansas AUTHORITY'S BOND COUNSEL Gilmore & Bell Kansas City, Missouri AUTHORITY'S FINANCIAL ADVISOR George K. Baum & Company Kansas City, Missouri AUTHORITY'S AUDITOR Leslie M. Corbett, c.P.A. Clubine & Rettele, Chartered Salina, Kansas 8 SALINA AIRPORT AUTHORITY A IJTHORTTY ST A FF MF,MRRRS 9~ of J)ecemher 11 200J ADMINISTRATION STAFF Timothy F. Rogers, A.A.E. Ryan E. Rocha Michelle R. Swanson Donald C. Kneubuhl Cathy Lentz Executive Director Manager of Operations, Maintenance & ARFF Manager of Administration & Finance;: Manager of Special Projects Administrative Assistant OPERATIONS, MAINTENANCE, AIRCRAFT RESCUE & FIRE FIGHTING STAFF Loren Carleton Kim Colby Gary Hansen Dale Mattison David Nease Rob Pejsha Jason Pinnick Operations, Maintenance & ARFF Operations, Maintenance & ARFF Operations, Maintenance & ARFF Operations, Maintenance & ARFF Operations, Maintenance & ARFF Operations, Maintenance & ARFF Operations, Maintenance & ARFF 9 SALINA AIRPORT AUTHORITY Organizational Chart December 31,2003 SAA BOARD OF DIRECTORS John K. Vanier, II 3/1/99 - 2/28/05 Donald E. Morris 3/1/00 - 2/28/06 Robert H. Miller 3/1/01 - 2/28/04 Dr. Randy D. Hassler 3/1/02 - 2/28/05 Stephan C. Ryan 3/1/03 - 2/28/06 MANAGER OF ADMINISTRATION & FINANCE Michelle R. Swanson MANAGER OF SPECIAL PROJECTS Donald C. Kneubuhl MANAGER OF OPERATIONS, MAINTENANCE & ARFF Ryan E. Rocha -I a Certificate of Achievement for Excellence in Financial Reporting Presented to Salina Airport Authority, Kansas For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2002 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and fmancial reporting. ~# President ~/~ Executive Director 11 L Airport ¡:¡~---- " = January 2004 /i~ M~ SL Ai 0 '~ ~ L A4Þ 1~ 12 CTIO Mesa Air Group's subsidiary, Midwest, lowered fares from the Salina Municipal Airport to the Kansas City International Airport by as much as 40% during October 2003. The airline operates as US Airways Express with three-daily flights to Kansas City enabling area travelers to make multiple airline connections destinations throughout the world. CLUBlNE& RETIELE CHARfERED Certified Public Accountants fill Robert I. Clubine, C.PA David A. Rettele, C.PA Jay D. Langley, C.PA Jon K. Bell, C.PA Leslie M. Corbett, C.PA Stacy J. Osner, C.PA Marci K. Fox, C.PA Valerie K. Linenberger, C.PA Delores K. Longenecker, C.PA John T. Millikin, C.P.A. Linda A. Suelter, C.P.A. 218 South Santa Fe P.O. Box 2267 Salina, Kansas 67402-2267 Salina 785 / 825-5479 Salina Fax 785 / 825-2446 Ellsworth 785/472-3915 Ellsworth Fax 785/472-5478 INDEPENDENT AUDITORS' REPORT To the Board of Directors Salina Airport Authority We have audited the accompanying basic financial statements of Salina Airport Authority, a component unit of the City of Salina, Kansas, as of and for the years ended December 31, 2003 and 2002, as listed in the table of contents. These financial statements are the responsibility of Salina Airport Authority, management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and 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 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Salina Airport Authority, as of December 31, 2003 and 2002, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note IB, the Authority has implemented a new financial reporting model, as required by the provisions of GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of December 31, 2003. The management's discussion and analysis on pages 15 through 21 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 13 In accordance with Government Auditing Standards, we have also issued our report dated April 30,2004, on our consideration of Salina Airport Authority's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying schedules and additional information listed in the supplemental information of the Financial Section and the Statistical Section of the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by u.s. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. Such information, except for the Statistical Section as listed in the table of contents on which we express no opinion, has been subjected to the auditing procedures applied in the audit ofthe financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. CL UB INE AND RETTELE, CHARTERED ~~~ April 30, 2004 14 FINANCIAL MANAGEMENT'S DISCUSSION AND ANALYSIS The Management of the Salina Airport Authority offers the readers of the Authority's financial statements this narrative overview and analysis of the financial activities of the Salina Airport Authority for the fiscal year ended December 31, 2003. We highly encourage readers to consider the information presented here in conjunction with the information offered in the letter of transmittal within the Introductory Section of this report. AIRPORT ACTIVITY AND HIGHLIGHTS The Salina Air Traffic Control Tower (ATCT) ended 2003 having handled 86,214 aircraft operations. Although total operations were down from 2002, which was the highest year for the most recent 10-year period, the itinerant traffic categories of operations continue to remain strong. The: most significant reduction in operations fell in the military category. The biggest percentage decrease (46%) was in the category of local military training flights, which reconciles with the fact that certain units that use Salina for training flights were deployed outside of the United States during 2003. Salina continues to remain strong as a mid-continent refueling stop as is evident in the number of gallons of aviation fuel delivered by the two tenants of the Authority specializing in the sale of aviation fuel. The commercial airline industry continues to experience financial stress, especially for the carriers attempting to serve rural communities such as Salina. For the first time in history the Salina Municipal Airport became a player in the Department of Transportation (DOT) Essential Air Service Program. This event was trigged when Salina's air carrier, Air Midwest, filed its 90-day notice to terminate service in January 2002 after a decline in passenger emplacements beginning in 2001. This lead to the DOT issuing the order prohibiting Air Midwest from suspending service at Salina for 30 days beyond the end of its 90- day notice period and requesting proposals from carriers interested in providing replaœment service at Salina. On December 8, 2003, Mesa Air Group on behalf of its subsidiary, Air Midwest submitted a proposal to provide Essential Air Service (EAS) at Salina at the current level of thrc~e daily weekday flights and multiple weekend flights. At the end of 2003, Air Midwest continued to provide service at Salina operating under hold-in orders from DOT. The changes in the Authority's major airport activity indicators for the past three years are as follows: 2003 2002 2001 Enplanements - Scheduled Air Carrier 2,242 2,565 6,507 % increase / (decrease) -12.6% -153.7% -36.6% Aircraft Operations - All Categories 86,214 95,801 92,870 % increase / (decrease) -10.0% 3.1% 5.9% Fuel Flowage - (gallons delivered) 4,358,563 4,695,093 4,396,429 % increase / (decrease) -7.2% 6.4% -1. 7% Further airport activity data can be found in the Statistical Section of this report. 15 FINANCIAL AIRPORT INDUSTRIAL CENTER ACTIVITY AND HIGHLIGHTS The Authority owns 838,748 sq. ft. of leasable manufacturing, warehouse and office space at the Airport Industrial Center. As further described herein, the building revenue generated by the Authority's leasing activity constitutes a significant portion of the annual operating revenue budget. During 2003, building rents equaled 45.6 % or $632,787 of operating revenue. At the end of 2003, the Authority had only two vacant facilities, representing 4,011 sq. ft. of commercial office space and 66,926 sq. ft. of combined office and manufacturing space, in its available leasing inventory. This constitutes a 92% occupancy rate. SUMMARY OF OPERATIONS AND CHANGES IN NET ASSETS Even with the uncertainty in the aviation industry and the slow growth in the economy, the [mancial 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 prerniwns, utility costs, commercial property insurance premiums and other operating expenses. Fortunately, with the diversified revenue base, including building and land rental from the Authority's Industrial Center, total operating revenue increased from 2002 to 2003. The Authority also instituted a new fee schedule:, which went into effect January 1,2003. Operating Revenues Operating Expenses 2003 $ 1,387,297 (1,300,268) 2002 $ 1,387,079 (1,182,264) Excess before Depreciation and other non-operating income and expenses 87,029 204,815 Depreciation (1,022,474) (974,140) Excess (loss) before other non-operating income and expenses (935,445) (769,325) Other Non-Operating Income and (Expenses) net 772.257 646,095 Loss before Capital Contributions (163,188) (123,230) 434,763 144,005 $ 271,575 $ 20,775 Capital Contributions Increase in Net Assets 16 FINANCIAL SUMMARY OF OPERATIONS HIGHLIGHTS Significant items effecting the Summary of Operations and Changes in Net Assets for 2003 are as follows: . Operating revenues remained steady at $1.387 million for both 2002 and 2003. While airfield and terminal building commission revenues decreased, building, commercial land and agri-land income increased due to consumer price index increases on existing lease agreements and new rental agreements negotiated. Operating expenses increased by 10% due to the following: 0 Increases in maintenance salaries and employee benefits as a result of a significant amount of overtime incurred during the construction of the Authority's new parallel runway during the summer of2003. The Authority was able to decrease the capital outlay required for the construction of the runway by painting and striping thc~ new runway in- house. 0 The Authority's health insurance premium rates were raised twice during 2003 increasing the cost of this employee benefit by 17% over the 2002 expense. 0 Utility costs and snow removal expense increased due to the colder winter and increased snow removal operations. . . The net result of the above was operating income before depreciation decreased by $117,786 fÌ'om 2002. Depreciation expense increased due to new construction moving fÌ'om construction in progress to an asset in service. The significant items being the two new snowplows acquired with 95% grant funds and the Authority's new parallel runway. Non-operating income and (expenses) increased by 19.5% as a result of the increase in ad- valorem tax revenue (mill levy) received by the Authority as a local taxing I:;:ntity. Mill levy revenue increased by $170,471 fÌ'om 2002. Capital contributions received in the form of grants from the Federal Aviation Administration increased fÌ'om 2002 by $290,758. This was a result of the new snowplows being delivered in early 2003 and grant funding received. . . 17 FINANCIAL FINANCIAL POSITION SUMMARY The changes in net assets may serve over time as a useful indicator of a government's financial position. The Authority's assets exceeded liabilities by $20,030,048 at the close of2003. A condensed summary of the Authority's total net assets at December 31 is shown below. 2003 2002 ASSETS Current and other assets Capital assets Total assets $ 3,676,007 24,954,889 28,630,896 $ 5,701,810 23,700,563 29,402,373 LIABILITIES Long-term debt outstanding Other liabilities Total liabilities 6,246,510 2,354,338 8,600,848 7,235,433 2,408,467 9,643,900 NET ASSETS: Invested in capital assets, net of related debt Restricted Unrestricted 17,711,718 15,418,378 85,000 85,000 2,233,330 4,255,095 $20,030,048 $19,758,473 TOTAL NET ASSETS By far the largest portion of the Authority's net assets (88%) reflects its 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. 18 FINANCIAL REVENUES The following chart shows the major sources and the percentage of total operating revc~nues for the year ended December 31, 2003: Building and Ian rent 66% Other revenue 2% A summary of revenues ITom the year ended December 31, 2003 and the amount and percentage of change in relation to prior year amounts is as follows: Increase Percent Percent (Decrease) Increase 2003 Amount of Total from 2002 (Decrease) Operating Revenue: Airfield $ 447,842 17.9% $ (7,048) -1.5% Building and land rent 916,585 36.6% 53,024 6.1% Gain (loss) on sale of assets .(6,631) -0.3% (36,086) -122.5% Other revenue 29,501 1.2% (9,672) -24.7% Total Operating 1,387,297 55.4% 218 0% Non-Operating Income: Mill Levy 987,970 39.5% 170,471 2Jl% Interest Income 128,640 5.1% (19,123) -13% Total Non-Operating 1,116,610 44.6% 151,348 16% TOTAL REVENUES $ 2,503,907 100.0% $ 151,566 6% Further detail regarding the Authority's operating revenue can be found in the Supplemental Section of this report. 19 FINANCIAL EXPENSES The following chart shows the major expense categories and the percentage of total operating expenses for the year ended December 31, 2003 Maintenance 37% Administrati()n 63% A summary of expenses for the year ended December 31, 2003 and the amount and percentage of change in relation to prior year amounts is as follows: Percent Increase Percent of (Decrease) Increase 2003 Amount Total from 2002 (Decrease) Operating Expense Administration $ 825,064 50.2% $ 73,330 9.8% Maintenance 475,204 28.9% 44,674 10.4% Total Operating 1,300,268 79.1% 118,004 10% Non-Operating Expense Interest Expense 324,500 19.7% 25,186 8% Amortization of bond costs 19,853 1.2% 0% Total Non- Operating 344,353 20.9% 25,186 8% TOTAL EXPENSES $ 1,644,621 100.0% $ 143,190 10% Further detail regarding the Authority's operating expenses can be found in the Supplemental Section of this report. 20 FINANCIAL CAPIT AL ACQUISITIONS AND CONSTRUCTION ACTIVITIES The Authority expended $2,283,433 on capital activities during 2003. The most significant item was the construction of the Airport's new parallel runway at a cost of$I,384,742. The second major item was the acquisition of two new rollover snow plows at a cost of $400,374. 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 on the Authority's capital assets can be found in Note III (F) in the notes to the financial statements and within the Supplemental Section of this report. DEBT ADMINISTRATION The outstanding long-term debt of the Authority was $6,246,510 at December 31, 2003. This debt consists of general obligation bonds, leasehold revenue bonds, a HUD Community Development Block Grant loan and City of Salina special assessments. Maturities range from 2006 through 2016. Both principal and interest are payable from, proceeds of a direct financing lease, the general revenues of the Authority and mill levy revenue. The Authority issued no new debt during 2003. Details of the Authority's debt can be found in Note III (E) - in the notes to the financial statements and within the Supplemental Section. REQUEST FOR INFORMATION This comprehensive annual financial report is designed to provide detailed information on the Authority's 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 request for additional information should be addressed to the Manager of Administration and Finance bye-mail: shellis(a~salair.org or in writing to, Salina Airport Authority, 3237 Arnold Ave., Salina, KS 67401. Respectfull y sub~;1d,- 2dl~ Executive Director \jr¿œIdú t.~ Michelle R. Swanson Manager of Administration and Finance 21 FINANCIAL SALINA AIRPORT AUTHORITY STATEMENTS OF NET ASSETS ASSETS December 31 2003 2002 CURRENT ASSETS: Cash Accounts receivable Prepaid expenses Taxes receivable $ 1,383,276 109,996 8,332 1,023,355 $ 3,386,102 80,591 4,315 977,990 Total Current Assets 2,524,959 4,448,998 RESTRICTED ASSETS: Cash and cash equivalents 85,000 85,000 968,853 1,050,764 24,954,889 23,700,563 NET INVESTMENT IN FINANCING LEASE NET INVESTMENT IN CAPITAL ASSETS OTHER ASSETS: Bond issue costs, less accumulated amortization of$144,302 and $124,449 respectively 97,195 117,048 TOTAL ASSETS $28,630,896 $29,402,373 ( continued) See notes to financial statements. 22 FINANCIAL SALINA AIRPORT AUTHORITY STATEMENTS OF NET ASSETS ( continued) LIABILITIES AND NET ASSETS December 31 2003 2002 CURRENT LIABILITIES: Accounts payable-operations Accounts payable-capital purchases Accrued payroll and expenses Accrued property tax Accrued special assesments Deferred tax revenue Deferred maintenance agreement Unearned rental income Accrued interest payable Unearned interest - financing lease Current maturities of long-term debt $ 14,120 $ 17,168 33,649 69,467 22,939 21,700 56,929 51,187 25,047 25,047 1,023,355 977,990 2,995 5,176 41,064 31,277 91,550 105,752 53,767 56,953 988,923 1,046,750 2,354,338 2,408,467 Total Current Liabilities LONG-TERM LIABILITIES: Bonds and note payable, less current maturities 6,246,510 7,235,433 Total Liabilities 8,600,848 9,643,900 NET ASSETS: Invested in Capital Assets, net of Related Debt Restricted, Bond Reserve Funds Unrestricted 17,711,718 15,418,378 85,000 85,000 2,233,330 4,255,095 20,030,048 19,758,473 $28,630,896 $29,402,373 Total Net Assets TOTAL LIABILITIES AND NET ASSETS See notes to financial statements. 23 SALINA AIRPORT AUTHORITY STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FINANCIAL January I to Dt~cember 31 2003 2002 OPERATING REVENUES: Airfield Building and land rent Gain (loss) on sale of assets Other revenue $ 447,842 916,585 (6,631) 29,501 1,387,297 825,064 475,204 1,300,268 87,029 1,022,474 (935,445) 987,970 128,640 (344,353) 772,257 (163,188) 434,763 271,575 19,758,473 $20,030,048 Total Operating Revenues OPERATING EXPENSES Administrative Maintenance Total Operating Expenses OPERATING INCOME BEFORE DEPRECIATION DEPRECIATION OPERATING LOSS NON-OPERATING INCOME AND (EXPENSES) Mill levy Interest on investments and financing lease Interest expense Total Non-Operating Income and (Expenses) LOSS BEFORE CAPITAL CONTRIBUTIONS CAPITAL CONTRIBUTIONS NET ASSETS Increase in Net Assets Total Net Assets, beginning of year Total Net Assets, end of year See notes to financial statements. $ 454,890 863,561 29,455 39,173 1,387,079 751,734 430,530 1,182,264 204,815 974,140 (769,325) 817,499 147,763 (319,167) 646,095 (123,230) 144,005 20,775 19,737,698 $19,758,473 24 SALINA AIRPORT AUTHORITY STATEMENTS OF CASH FLOWS (DIRECT METHOD) FINANCIAL January I to December 31 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from providing services Cash paid to employees for services Cash paid to suppliers for goods and services $ 1,374,310 (462,822) (837,530) Net Cash Provided in Operating Activities 73,958 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of property, plant and equipment (2,319,252) Purchases in satisfaction of maintenance agreement (9,736) Proceeds from capital grants 434,763 Proceeds from property tax 987,970 Principal payments on debt (1,046,750) Proceeds of new borrowing Principal received on financing lease Interest received on financing lease Bond issue costs paid Interest paid on long-term debt 81,911 107,535 (338,703) Net Cash Provided (Used) in Capital and Related Financing Activities (2, I 02,262) CASH FLOWS FROM INVESTING ACTIVITIES: Interest received on deposits 25,475 INCREASE (DECREASE) IN CASH (2,002,829) CASH BALANCE - January I CASH BALANCE - December 31 3,471,102 $ 1,468,273 CASH AT END OF YEAR CONSISTS OF: Unrestricted cash Restricted cash $ 1,383,276 85,000 $ 1,468,276 ( continued) See notes to financial statements. $ 1,503,652 (450,013) (748,272) 305,367 (2,176,229) ( 19,095) 144,005 817,499 (694,761) 3,200,235 75,541 113,905 (26,119) (262,795) 1,172,186 30,921 1,508,474 1,962,628 $ 3,471,102 $ 3,386,102 85,000 $ 3,471,102 25 SALINA AIRPORT AUTHORITY STATEMENTS OF CASH FLOWS (DIRECT METHOD) ( continued) FINANCIAL RECONCILIA nON OF OPERATING LOSS TO NET CASH FLOWS FROM OPERATING ACTIVITIES OPERATING LOSS ADJUSTMENTS RECONCILING OPERATING LOSS TO NET CASH FROM OPERATING ACTIVITIES: Depreciation Basis of assets sold CHANGES IN ASSETS AND LIABILITIES: Decrease (increase) in accounts receivable Decrease in accounts payable - operations Increase in accrued payroll expenses Decrease (increase) in prepaid expense Increase (decrease) in accrued property tax Increase in unearned rent NET CASH PROVIDED BY OPERATING ACTIVITIES See notes to financial statements. January I to December 31 2003 2002 $(935,445) $(769,325) 1,022,474 6,631 974,140 83,048 (29,405) (3,048) 1,239 (4,017) 5,742 9,787 17,358 (735) 1,183 489 (16,958) 16,167 $ 73,958 $ 305,367 26 FINANCIAL Salina Airport Authority NOTES TO FINANCIAL STATEMENTS December 31, 2003 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The Salina Airport 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 Schilling Air Force Base, located near the City of Salina. The Authority administers the airport commercial development and rental of associated real estate. The Authority is controlled by a five-member Board of Directors appointed by the Salina City Commission and, in accordance with Governmental Accounting Standards Board (GASB) Statement No. 14, the Authority is considered to be a component unit of the City of Salina. The Authority is discreetly prestmted in the City's comprehensive annual financial reports. B. Measurement Focus, Basis of Accounting and Basis of Presentation The Authority consists of an enterprise fund. Enterprise funds are classified as proprietary 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 matter similar to private business enterprises. The intent of the Authority is that the costs of providing services on a 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. It is the Authority's policy to follow all Financial Accounting Standards Board (FASB) standards issued after November 30, 1989, for its proprietary activities unless those new FASB pronouncements conflict with GASB guidance. The Authority has implemented a new financial reporting model as required by the provisions of GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, as of December 31, 2003. The prior year information has been re-stated to conform to the new reporting model. Revenues from airlines, fuel flowage fees, building and land rents, rental car commissions and the sale of assets are reported as operating revenues. Transactions which are capital, financing or investing related 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. 27 FINANCIAL C. Assets, Liabilities and Equity 1. Cash and Investments The Authority's cash and cash equivalents are considered to be cash on hand, dl~mand 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. Property taxes receivable. The determination of assessed valuations and the collections of property taxes for all political subdivisions in the State of Kansas is the responsibility of the various counties. The office of the County Appraiser annually determines assessed valuations and the County Clerk spreads the annual assessment on the tax rolls. The County Treasurer is the tax collection agent for all taxing entities within the county. In accordance with state statutes, property taxes are levied November I of the current year and are a revenue source to be used to finance the budget of the ensuing year. One-half of the property taxes are due December 20, prior to the fiscal year for which they are budgeted, and the second half is due the following May 10. Collection of current year property tax by the County Treasurer is not completed, apportioned nor distributed to the various subdivisions until the succeeding year, such procedure being in conformity with governing state statutes. Consequently, current year property taxes receivable are not available as a resource that can be used to finance the current year operations of the Authority. It is the Authority's practice to record uncollected current year property tax as an account receivable and to record the same amount as deferred revenue. It is not practicable to apportion delinquent taxes held by the County Treasurer and, further, the amounts thereof are not material in relationship to the financial statements taken as a whole. 3. Inventories The Authority maintains no significant inventory of office and maintenance suppIÜ:s. These items are expensed as purchased and no inventory is recorded in these financial statements. 4. Prepaid items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. 5. Restricted Assets Certain proceeds of leasehold revenue bonds are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. 28 FINANCIAL 6. Capital Contributions and Net Assets Certain expenditures for airport capital improvements are significantly funded through the Federal Aviation Administration's Airport Improvement Program (AlP), with certain matching funds of the Authority. Capital funding provided under the AlP grant program is considered e:arned as the related allowable expenditures are incurred. Grants received under the AlP program are reported in the Statement of Revenues, Expenses and Changes in Net Assets, after non-operating revenues and expenses as capital contributions. 7. Fixed Assets Fixed 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 fixed assets cost. Fixed 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 ITom the United States of America, September 9, 1966 and recorded at fair value at that date. Fixed assets are depreciated using the straight-line method over the following estimated useful lives: Assets Buildings Equipment Vehicles Airfield Years 5-50 5 -10 7 -10 10 - 30 8. 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 rec:ognized as incurred and included in accrued expenses. The amount accrued for such liabilities at Declember 31, 2003 and 2002 was $16,727 and $16,123 respectively. II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information The Authority is specifically exempt from Kansas Budget Law. The Authority is not required to demonstrate statutory compliance with its annual operating budget. Accordingly, budgetary data is not included in the financial statements. B. Compliance With Bond Reserve Requirements The Leasehold Revenue Bonds Series 1991 proceeds were used to construct a building that is leased to a state university. The lease is a financing lease that transfers ownership of the building at the end of the lease. The bond agreement established an $85,000 reserve requirement, which the Authority has met. 29 FINANCIAL III. DETAILED NOTES A. Deposits The bank balance as of December 31, 2003 and 2002 were entirely insured or collateralized with securities held by third party banks in the Authority's name. At December 31,2003 and 2002, the carrying amount of the deposits were $1,468,226 and $3,470,437 plus $50 and $665 cash on hand respectively, and the bank balance was $1,462,756 and $3,639,134 respectively. The difference between the carrying amount and the bank balance is outstanding checks. Of the bank balance, $219,431 and $320,537 respectively was covered by federal deposit insurance and the remaining $1,243,325 at December 31, 2003 was collateralized by pledged sl;:curities held under joint custody receipts issued by a third-party bank in the Authority's name. The third-party bank holding the pledged securities is independent of the pledging bank. The pledged securities are held under a tri-party custodial agreement signed by all three parties: the Authority, the pledging bank, and the independent third-party bank holding the pledged securities. SALINA AIRPORT AUTHORITY COMPARISON OF GROSS CASH BALANCES WITH DEPOSITORY SECURITY Gross Cash Balances Cash in checking Cash in savings Less deposits in transit Add uncleared checks December 31. 2003 UMB- National Bank Sunflower of America Bank Total $ 44,965 $ 32,988 $ 77,953 57,646 1,332,627 1,390,273 (29,305) (29,305) 13,137 10.698 23,835 86.443 1,376,313 1,462,756 86.443 132,988 219.431 $ $1.243.325 $1.243.325 $ $1,243,325 $1,243,325 60,075 3.286,157 3,346.232 $ $ $ Bank Balance Less FDIC Coverage Balances Securable by Collateral Security Required (100%) Security Provided by Depositories Amount Under-secured by Statute 30 FINANCIAL B. Receivables Receivables as of year-end, including the applicable allowance for uncollectible accounts, are as follows: December 31 Receivables: Accounts Less: allowance for uncollectibles 2003 $ 111,714 (1.718) 109,996 1.023.355 2002 $ 82,341 (1.750) 80,591 977,990 Taxes Total $1.133.351 $1.058.581 C. Net Investment in Financing Lease Net investment in financing lease is as follows: December 31 2003 2002 $1,705,014 654.250 Total lease payments receivable Less: Unearned income $1,515,568 546,715 $ 968.853 $1.050.764 Net investment in financing leases Activity in net investment in financing leases was as follows: December 31 2003 2002 Beginning Balance Less: Collected principal $1,050,764 81.911 $1,126,305 75,541 Ending Balance $ 968.853 $1.050.764 31 FINANCIAL D. Fixed Assets The following is a summary of the changes in the general fixed assets account group during the current year. Balance Balance January 1, December 31, - 2003 Additions Dispositions Reclassify 2003 Land $ 9,035,150 $ 33,792 $ $ 38,284 $ 9,107,226 Buildings and improvements 7,814,291 123,113 7,937,404 Airfield and improvements 17,118,787 1,420,280 7,700 124,679 18,656,046 Equipment 1,608,412 474,200 1,224 3,761 2,085,149 Construction in progress 392,816 232,048 (166,724) 458,140 35,969,456 2,283,433 8,924 38,243,965 Less: Accumulated depreciation 12,268,893 1,022,474 2,291 13,289,076 Total $ 23,700,563 $ 1,260,959 $ 6,633 $ - $ 24,954,889 The following is a summary of proprietary fund-type fixed assets at December 31, 2003 and 2002: Net Fixed Assets December 31 2003 2002 $ 9,107,226 $ 9,035,150 7,937,404 7,814,291 18,656,046 17,118,787 2,085,149 1,608,412 458,140 392,816 38,243,965 35,969,456 13,289,076 12,268,893 $24,954,889 $ 23,700,563 Land Buildings and improvements Airfield and improvements Equipment Construction in progress Less: Accumulated depreciation 32 E. Long-Term Liabilities FINANCIAL Following is a summary of changes in long-term liabilities for year 2003: General obligations bonds Revenue bonds KDOCH loan payable Special assessment debt Balance January 1, 2003 $7,160,000 315,000 270,620 536,563 $8.282.183 Additions Balance December 31, Reductions 2003 $ 895,000 $6,265,000 70,000 245,000 51,991 218,629 29,759 506,804 $1.046.750 $7.235.433 $ $ The following is a detailed listing of the Authority's long-term debt including general obligation bonds, revenue bonds and loan payable. General Obligation Bonds General Obligation 1998, due 2008 General Obligation 1999-B, due 2010 General Obligation 2001-A, due 2012 General Obligation 2002-A, due 2012 Revenue Bonds Leasehold revenue 1991, due 2006 Kansas Department of Commerce and Housing Loan, due 2007 Special assessment debt Total Interest expense in 2003 is as follows: General Obligation Bonds Revenue Bonds Loan Special assessment debt Add: Amortization of bonds costs Total Original Issue Interest Rates Bonds Outstandin2 $4,440,000 555,000 1,385,000 2,635,000 4.05% to 5.50% 3.90% to 5.20% 4.45% to 5.60% 2.45% to 3.70% 2,215,000 360,000 1,280,000 2.410.000 6.265.000 $ 850,000 5.00% to 7.25% $ 468,542 2% $ 565,235 3.19% 245,000 218.629 506,804 $7.235.433 $ 276,501 22,510 5,154 20.336 324,501 19,853 $ 344.353 33 FINANCIAL In prior years, the Authority defeased certain general obligation bonds by placing funds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Authority's financial statements. On December 31,2003, $380,000 of bonds outstanding are considered defeased. Annual debt service requirements to maturity for general obligation bonds to be paid with tax levies and rental revenues: Bonds Interest Year Outstandin1! Due Total 2004 $ 830,000 $ 253,762 $1,083,762 2005 850,000 220,434 1,070,434 2006 850,000 186,866 1,036,866 2007 885,000 154,858 1,039,858 2008 905,000 120,041 1,025,041 2009-2012 I ,945,000 207,842 2,152,842 $6.265.000 $1.143.803 $7.408.803 Annual debt service requirements to maturity for revenue bonds to be paid with rental revenues: Bonds Interest Year Outstandin1! Due Total 2004 $ 75,000 $ 17,610 $ 92,610 2005 80,000 12,285 92,285 2006 90.000 6,525 96,525 $245.000 $ 36.420 $ 281.420 Annual debt service requirements to maturity for Kansas Department of Commerce and Housing Loan to be paid from rental revenues: Loan Interest Year Principal Due Total 2004 $ 53,036 $ 4,109 $ 57,145 2005 54,109 3,043 57,152 2006 55,184 1,955 57,139 2007 56.300 846 57.146 $218.629 $ 9.953 $228.582 34 FINANCIAL Annual debt service requirement to maturity for Special Assessment Debt to be paid from rental revenue: Loan Interest Year Principal Due Total 2004 $ 30,886 $ 19,209 $ 50,095 2005 32,056 18,038 50,094 2006 33,271 16,824 50,095 2007 34,533 15,562 50,095 2008 35,841 14,254 50,095 2009-2013 200,642 49,826 250,468 2014-2016 139.576 10,711 150.287 $506.805 $ 144.424 $ 651.229 F. Capital Contributions and Net Assets Since its inception, the Authority has received capital contributions through Federal and State grants as follows: Inception to Date 2003 2002 Federal State $ 16,773,982 515,610 $ 434,763 $ 144,005 Total $ 17,289,592 $ 434,763 $ 144,005 = Unrestricted net assets consist of the following: December 3! 2003 2002 Designations of unrestricted net assets Undesignated unrestricted net assets Total unrestricted net assets $ 50,000 2,183,330 $2.233.330 $ 4.255.094 $4.255.094 During 2003 the Authority designated $50,000 to be used as an insurance increase æserve or to accelerate future debt service payments. As of December 31 2003, the reserve had been funded but not used. 35 FINANCIAL 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 supplementalY information. Those reports may be obtained by writing to KPERS (611 S. Kansas Avenue, Suite 100, Topeka, Kansas 66603-3803) or by calling 1-800-228-0366. Funding policy - KSA 74-4919 establishes the KPERS member-employee contribution rate at 4% of covered salary. The employer collects and remits member-employee contributions according to the provision 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 2003 was 3.67 for January- March and 3.07% for April through December. The Authority employer contributions to KPERS for the years ending December 31,2003,2002 and 2001 were $14,490, $12,166, and $11,404 respectively, equal to the required contributions for each year. 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 employe:es, 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 risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Authority carries commercial insurance. Settlements of claims did not exceed coverage for the years ended December 31, 2003 and 2002. 36 FINANCIAL 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 is 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 Dece:mber 31, 2003. F. Environmental Matter The Authority has been involved in discussions with the Corps of Engineers, Environmental Protection Agency, and the Kansas Department of Health and Environment relative to the former Schilling Air Force Base (the "Base") in Salina, Kansas. The Base was operational from 1942 1:0 1965 when it was decommissioned and became the current Salina Municipal Airport and Salina Airport Industrial Center. During its period of operation, the Base was used for large aircraft including B-ITs, B-29's, B-4Ts and the refueling KC-9Ts and KC-135's. The Army Corps of Engineers did a removal of 107 fonl1er underground storage tanks at the former Base in 1995. The Army Corps of Enginee:rs is now evaluating any other potential environmental contamination at the former Schilling Air Force Base caused by the Department of Defense. In addition to efforts by the Corps of Engineers, the Environmental Protection Agency has conducted an Expanded Site Investigation (ESI) to evaluate all sources of potential contamination at the Site. During the surnmer of 2003, the Corps of Engineers conducted additional sampling and investigation work. The Corps of Engineers will report on the results of their work during 2004. Once the additional information gathering effort has been conducted and all parties know the nature and the extent of the contamination determined to exist on the property owned by the Authority and other public and private landowners, which make up the Airport Industrial Center, it is anticipated that there will be a discussion with respect to cleanup options and allocation of responsibility. At this time, it is not known whether the City of Salina or the Airport Authority will have cleanup obligations nor can an estimate of loss or estimate of cleanup cost be reasonably determined. The Corps of Engineers is in the process of formulating a final work plan for more investigative work in several areas of the former Schilling Air Force Base. Although the process is moving slowly, it is believed the Corps of Engineers will take the lead on remediating contamination left behind by the military. The Authority also anticipates work in the next year or two related to lead contamination left behind by an outdoor skeet shooting range located on the southwestern portion of the Airport Industrial Center. This work is anticipated to be some soil removal of lead contamination caused by lead shot in the shooting range. At this point, the Authority anticipates conducting any work necessary under the authority of the Kansas Department of Health and Environment Voluntary Clean-up Program. 37 FINANCIAL G. 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 fix(~d 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 2004 2005 2006 2007 2008 Later years $ 737,117 638,290 521,745 266,165 126,407 464,1 12 Total $2.753.836 H. Major Customers The Authority receives significant operating and financing lease revenue from Raytheon Aircraft Company, Kansas State University-Salina, Flower Aviation, America Jet, the Schwan Food Company, and Two Rivers Vending Company. Rentals ITom these six tenants equals 53% of operating and capital lease revenue for the year ended December 31, 2003. I. Non-Operating Income Net non-operating income consisted of the following for the years ended December 31, 2003 and 2002: 2003 2002 Mill levy $ 987,970 $ 817,499 Interest and investment income Financing lease 103,165 116,842 Other interest 25.475 30,921 Total 1,116,610 965.262 Interest expense Revenue bond 22,510 21,284 General obligation bonds 276,500 250,686 Special assessment debt 20,336 21,422 Other debt 5,154 5,922 Amortization of bond issue costs 19.853 19,853 Total 344,353 319,167 Net non-operating income $ 772.257 $ 646.095 38 FINANCIAL J. Commitment Under Operating Lease The Authority has entered into certain non-cancellable operating lease agreements for the rental of office equipment. Minimum rentals, on an annual basis are as follows: Years Ended December 31 2004 2005 2006 2007 2008 $ 6,180 6,180 6,180 5,578 2,918 $ 27.036 39 (THIS PAGE INTENTIONALL Y LEFT BLANK) 40 lementallnformation In September 2003, the 77,089 gallons of fuel sold the airport was the best September record. from Naval Station 7, Salina Municipal Airport as a base for training flights at the KS Air National Guard Smoky Bombing Range during a two-week stay. (THIS PAGE INTENTIONALLY LEFT BLANK) 41 P P LEMENT AL SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS January I to December 31 2003 2002 OPERATING REVENUES Airfield Fuel flowage fees Hangar rent Landing fees Ramp rent Total airfield Building and land rent Agri land rent Building rents Land rents Tank rent Total building and land rents Gain (loss) on sale of assets Other revenue ARFF training Commissions Other income Total Other revenue $ 257,475 $ 278,948 126,133 111,843 6,061 4,514 58,173 59,584 447,842 454,889 59,570 59,161 632,787 596,599 214,915 197,827 9,313 9,975 916,585 863,562 (6,631) 29,455 2,450 5,150 17,862 18,285 9,189 15,738 29,501 39,173 1,387,297 1,387,079 Total operating revenue OPERATING EXPENSES Administrative AlE, consultants, brokers Airport promotion Computer network administration Dues and subscriptions Employee retirement FICA and medicare Industrial development Insurance, property Insurance, medical Kansas unemployment tax Legal and accounting Office salaries Office supplies Other administrative Postage Property appraisals Property taxes Telephone Travel and meetings Total Administrative Expenses 16,048 33,087 4,633 16,267 15,024 34,189 20,000 107,372 104,925 441 35,774 233,644 9,941 11,145 3,402 4,500 140,959 10,839 22,874 825,064 12,166 21,624 1,610 17,568 12,798 33,886 20,000 83,642 89,761 442 44,892 222,408 9,563 9,822 4,095 2,200 136,714 10,292 18,251 751,734 (continued) 42 PPLEMENT AL SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS ( continued) Total Maintenance Expenses January I to December 31 2003 2002 10,795 10,311 2,905 1,306 41,374 39,901 32,182 25,838 21,111 12,483 11,616 4,960 230,417 228,788 11 , 184 9,759 17,379 14,383 96,241 82,80 I 475,204 430,530 1,300,268 1,182,264 87,029 204,815 1,022,474 974,140 (935,445) (769,325) 987,970 817,499 103,165 116,842 25,475 30,921 (324,500) (299,314) (19,853) (19,853) 772,257 646,095 (163,188) (123,230) 434,763 144,005 271,575 20,775 19,758,473 19,737,699 $20,030,048 $19,758,473 MAINTENANCE EXPENSES Airfield maintenance Airport security Building maintenance Equipment fuel and repairs Fire services Grounds maintenance Maintenance salaries Other maintenance expenses Snow removal expense Utilities Total Operating Expenses OPERATING INCOME BEFORE DEPRECIATION DEPRECIATION EXPENSE OPERATING PROFIT (LOSS) NON-OPERATING INCOME (EXPENSE) Mill levy Interest income-capital lease Interest income Interest expense Amortization of bond costs Net Non-Operating Income LOSS BEFORE CAPITAL CONTRIBUTION CAPITAL CONTRIBUTIONS INCREASE (DECREASE) IN RETAINED EARNINGS NET ASSETS, January I NET ASSETS, December 31 43 "PLEMENTAL SALINA AIRPORT AUTHORITY CAPITAL EXPENDITURES January I to December 31 2:003 AIRPORT IMPROVEMENTS Mill & Patch concrete heaves on airport taxiways Rwy 18/36 design & construction FBO aircraft hangar design 10,660 1,384,742 24,878 Total Airport Improvements 1,420,280 BUILDINGS New gutters at manufacturing facility #498 Manufacturing facility # I 021 improvements Roof repair at manufacturing facility #512 New carpeting in Salina Dev. Center Unit B Roof repair at warehouse #595 HV AC improvements in office facility #939 Concrete floor repair in manufacturing facility #498 HV AC improvements at Airport Terminal bldg. FBO Hangar #409 exterior signage FBO Hangar #409 exterior awning improvements FBO Hangar #409 lounge and office carpeting Construction of two new asphalt parking lots at the Airport Apts. 975 21,813 8,000 2,249 4,465 6,913 1,800 3,385 2,437 3,595 3,183 64,297 Total Buildings 123,112 CONSTRUCTION IN PROGRESS Airport layout plan update R wy 17/35 rehab design Rehabilitation ofRwy 17/35 construction FAA Airways facility office/shop design Gun Club environmental Schilling env. project Hangar #509 improvements Hangar #703 improvements Water line improvements in Schilling Sudivision No.6 9,769 85,464 22,198 31,730 1,272 57,049 ][2,313 1l0,4l8 1,836 Total Construction in Progress 232,049 (continued) 44 'l'LEMENT AL SALINA AIRPORT AUTHORITY CAPITAL EXPENDITURES ( continued) January I to December 31 ~~003 EQUIPMENT Two OshKosh rollover snowplows Lights & control switch at Hangar #504 Motion detectors in Airport Terminal Pumphouse 305 tank monitor & leak detect system Cannon Image 0660 copier/printer Compaq tablet computer Migmaster 250 welder Land Pride 9" auger Two rotary brush brooms Two NEC flat screen computer monitors Two-2003 airfield Line Lazer paint stripers Trailer for runway painting 2003 Chevrolet LD 3500 truck 400,374 1,800 3,050 27 ,656 600 3,367 2,001 965 2,700 780 9,938 895 20,074 Total Equipment 474,200 LAND Water main improvements NW of Hangar #509 Water service line improvements at office facility #939 Demolition of warehouse facilities #624, #634, #654 1,618 3,074 29,100 Total Land 33,792 TOTAL CAPITAL EXPENDITURES 2,283,433 45 . SU' SALINA AIRPORT AUTHORITY GENERAL OBLIGATION BONDS SERIES 1998 - A December 31, 2003 Date of issue: Amount of issue: Interest rate: Maurity date: Principal paid: Outstanding balance: 'LEft'/ENT AL June 29, 1998 $4,440,000 4.05% to 5.50% September 1, 2008 $2,225,000 $2,215,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2004 $ 94,130 $ 445,000 2005 75,662 445,000 2006 56,972 445,000 2007 38,060 440,000 2008 19,140 440,000 $283,964 $2,215,000 46 SUPPL Date of isue: Amount of issue: Interest rate: Maturity date: Principal paid: Outstanding balance: SALINA AIRPORT AUTHORITY GENERAL OBLIGATION REFUNDING BONDS SERIES 1999 - B December 31,2003 Schedule of Bond Interest and Principal Payments i!ZiŒI June 29, 1999 $ 555,000 3.90% to 5.20% September I, 2010 $ 195,000 $ 360,000 Due in Bond Bond Year Interest Principal 2004 $ 17,672 $ 40,000 2005 15,872 40,000 2006 14,032 30,000 2007 12,623 55,000 2008 9,955 60,000 2009-2010 10,595 135,000 $ 80,749 $ 360,000 47 . SUP' El~IENTAL Date of issue: Amount of issue: Interest rate: Maturity date: Principal paid: Outstanding balance: SALINA AIRPORT AUTHORITY GENERAL OBLIGATION IMPROVEMENT BONDS SERIES 200 I - A December 31, 2003 October 31, 2001 $ 1,385,000 4.45% to 5.60% September 1,2012 $ 105,000 $ 1,280,000 Schedule of Bond Interest and Principal Pavrnents Due in Bond Bond Year Interest Principal 2004 $ 66,298 $ 110,000 2005 60,522 120,000 2006 54,222 125,000 2007 48,660 135,000 2008 42,316 140,000 2009-2012 91,497 650,000 $363,515 $ 1,280,000 = 48 Date of issue: Amount of issue: Interest rate: Maturity date: Principal paid: Outstanding balance: 'LEMENT AL GENERAL OBLIGA nON IMPROVEMENT BONDS SERIES 2002 - A December 31, 2003 August 29, 2002 $ 2,635,000 2.45% to 3.70% September I, 2012 $ 225,000 $ 2,410,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2004 $ 75,662 $ 235,000 2005 68,378 245,000 2006 61,640 250,000 2007 55,515 255,000 2008 48,630 265,000 2009-2012 105,750 1,160,000 $415,575 $ 2,410,000 49 SUPP. SALINA AIRPORT AUTHORITY LEASEHOLD REVENUE BONDS SERIES 1991 December 31, 2003 Date of issue: Amount of issue: Interest rate: Maturity rate: Principal paid: Outstanding balance: E1WENT AL November I, 1991 $ 850,000 5.00% to 7.25% September I, 2006 $ 605,000 $ 245,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2004 17,610 75,000 2005 12,285 80,000 2006 6,525 90,000 $ 36,420 $ 245,000 50 . SUPPL EmIl SALINA AIRPORT AUTHORITY KANSAS DEPARTMENT OF COMMERCE AND HOUSING, LOAN PAYABLE December 31, 2003 Date of loan: Amount of loan: Interest rate: Maturity date: Principal paid: Outstanding balance: October I, 1997 $ 468,542 2% October 1,2007 $ 249,913 $ 218,629 Schedule of Loan Interest and Principal Payments Due in Loan Loan Year Interest Principal 2004 4,109 53,037 2005 3,043 54,103 2006 1,955 55,190 2007 846 56,299 $ 9,953 $ 218,629 : 51 "LEMENT AL SALINA AIRPORT AUTHORITY SPECIAL ASSESMENT DEBT-STREET AND UTILITY IMPROVEMENT December 31, 2003 Date of loan: Amount of loan: Interest rate: Maturity date: Principal paid: Outstanding balance: September II, 2002 $ 565,235 3.79% October I, 2011 $ 58,430 $ 506,804 Schedule of Loan Interest and Principal Payments Due in Loan Loan Year Interest Principal 2004 $ 19,209 $ 30,886 2005 18,038 32,056 2006 16,824 33,271 2007 15,562 34,533 2008 14,254 35,841 2009-2013 49,826 200,642 2014-2016 10,711 139,575 $ 144,424 $ 506,804 52 Insurance Policy Employers Insurance of Wausau on behalf ofUSAIG Pol. #WCC-Z91-547496-013 National Union Fire Ins. Co. of Pittsburgh, P A Pol. #AP3229456-09 The Travelers Insurance Co. Pol. #P630594X3132TILO3 Pol. #QT-660-594XI925TIL03 Pol. #BAJBMG696X7490TIL03 Pol. #81 0306K4932TIL03 ITT Hartford Pol. #37BPEAG4896 Northland Insurance Pol. #MLOlO133 Great American Alliance Ins. Co. Pol. # KST 788-29-33-09 Northland Insurance Pol. #A Y060411 SALINA AIRPORT AUTHORITY INSURANCE IN FORCE December 31, 2003 Tvpe of Coveraee Workmen's Compensation and Employer's Liability Bodily Injury & Liability Hangar Keepers Deluxe Property-Buildings Business Income Inland Marine - Equipment Boiler & Machinery Vehicles & Equipment Liability Medical payments Uninsured motorists Crime Policy Employee theft - per employee Public Officials & Empl. Liability Each wrongful act Aggregate limit Kansas Underground Storage Tank Liability Environmental Incident Annual aggregate Limit of defense Law Enforcement Professional Liability Each person limit Each occurrence limit Annual aggregate , UPPLEMENTAL Amount of Coverage $ 500,000 $ $ 500,000 500,000 $12,455,674 $ 1,123,878 $ 2,295,003 $ 4,272,796 $ 1,000,000 $ 5,000 $ 1,000,000 $ 100,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 100,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 53 (THIS PAGE INTENTIONALLY LEFT BLANK) 54 s L TI In ugust of 2003, new ownership resulted a new name for one of the commercial aviation businesses at the Municipal Airport. America Jet at SLN is a full service aviation business selling Phillips brand aviation fuel. For calendar year, 4 million gallons aviation fuel was delivered on the airport at Salina Airport Authority OPERATING REVENUE HISTORY Ten Years Ended December 31,2003 Gain (Loss) Other Total Fiscal Rental Fuel Flowage Landing on Sale of Operating Operating Year Revenue Fees Fees Assets Receipts Revenue 1994 $975,011 $90,511 $10,982 - $5,914 $1,082,418 1995 $1,048,563 $98,429 $13,714 ($24,024) $15,637 $1,152,319 1996 $1,038,467 $152,393 $9,055 - $65,723 $1,265,638 1997 $1,067,236 $193,501 $8,503 $69,663 $29,393 $1,368,296 1998 $1,154,716 $178,814 $8,784 - $22,128 $1,364,442 1999 $1,202,149 $234,338 $10,660 - $26,966 $1,474,113 2000 $1,121,194 $263,264 $12,133 $222,664 $25,992 $1,645,247 2001 $1,111,662 $252,942 $7,250 $86,719 $33,162 $1,491,735 2002 $1,034,989 $278,948 $4,514 $29,455 $39,173 $1,387,079 2003 $1,100,891 $257,475 $6,061 ($6,631) $29,501 $1,387,297 Source: Salina Airport Authority Records \..rI \..rI STATISTICAL Salina Airport Authority OPERATING EXPENSE HISTORY Ten Years Ended December 31,2003 Office & Total Administrative Maintenance Operating Fiscal Year Expense Expense Expense 1994 $467,803 $370,266 $838,069 1995 $481,914 $375,594 $857,508 1996 $497,561 $398,287 $895,848 1997 $568,606 $367,530 $936,136 1998 $631,072 $377,551 $1,008,623 1999 $726,651 $377,457 $1,104,108 2000 $740,530 $386,095 $1,126,625 2001 $754,003 $448,189 $1,202,192 2002 $751,734 $430,530 $1,182,264 2003 $825,064 $475,204 $1,300,268 56 Salina Airport Authority FEDERAL FINANCIAL ASSISTANCE mSTORY Ten Years Ended December 31,2003 STA TISTICAL Fiscal Year Federal Aviation Administration Airport Improvement Grants State Commerce & Housing Community Development Block Grant 1994 $270,191 1995 $3,210,933 1996 $2,006,786 1997 $1,640,967 1998 $1,026,918 1999 ($7,920) 2000 2001 2002 $144,005 2003 $434,763 NOTE: 1. The use of Federal Aviation Administration Airport Improvement Program Grant Funds are limited to funding specific airfield capital improvements. Airfield capital improvements are detailed in program grant agreements entered into by the Salina Airport Authority and the Federal Aviation Administration 2. During 1998, the SAA was awarded a Community Development Block Grant from the Kansas Department of Commerce and Housing in the amount of $1 ,031 ,219. The proceeds were used to reconstruct over 6.5 miles of secondary streets within the Salina Airport Industrial Center. 50% of the awarded amount was a true grant. The other 50% was a loan which is recorded as a long term liability under Bonds and Note Payable on the Statements of Net Assets. 3. During 1999, the SAA closed out two (2) Airport Improvement Projects. AlP No. 18 closeout resulted in the SAA refunding the Federal Aviation Administation in the amount of$11,132. The SAA received a final reimbursment in the amount of $3,212 to closeout AlP No. 19. $841,700 $189,520 57 Salina Airport Authority CAPITAL EXPENDITURE HISTORY Ten Years Ended December 31,2003 Construction Total Fiscal Building in Capital Year EQuipment Additions Land Infrastructure Airfield Pr02ress Expenditures 1994 $31,289 $305,127 $119,800 - $309,215 - $765,431 1995 $13,043 $403,009 $262,930 - $3,603,339 - $4,282,321 1996 $25,814 $47,925 $147,749 $2,303,568 - $2,525,056 1997 $40,572 $229,999 $111,993 $324,802 $2,079,840 - $2,787,206 1998 $53,972 $266,894 - $4,622,240 $1,167,881 - $6,110,987 1999 $25,908 $490,557 $132,948 $642,111 $97,328 - $1,388,852 2000 $43,108 $372,277 $226,193 $15,215 $93,548 - $750,341 2001 $49,520 $172,295 $202,248 - $144,249 - $568,312 2002 $125,318 $1,067,221 $616,474 - $9,385 $392,816 $2,211,214 2003 $474,200 $123,113 $33,792 - $1,420,280 $232,048 $2,283,433 Source: Salina Airport Authority Records V1 00 STATISTICAL Salina Airport Authority REVENUE BOND COVERAGE Ten Years Ended December 31,2003 1994 $421,554 Revenue Bond Debt Service Covera2e $280,578 1.50 $163,215 1.16 $163,790 1.16 $168,962 1.12 $163,938 1.16 $163,841 1.16 $185,013 1.02 $164,420 1.15 $158,320 1.20 $151,923 1.25 Fiscal Year Pledged Revenue 1995 $189,446 1996 $189,446 1997 $189,446 1998 $189,446 1999 $189,446 2000 $189,446 2001 $189,446 2002 $189,446 2003 $189,446 Notes: 1. During 1999, the Series 1990-B Bonds were refinanced to remove IRS restrictions and achieve an interest rate savings. Source: Salina Airport Authority Records 59 Salina Airport Authority Principal Customers Year Ended December 31,2003 Company Raytheon Aircraft Co. Kansas State University-Salina Flower Aviation Midway Aviation Schwan Food Company Two Rivers Vending Co., Inc. JRM Enterprises, Inc., d/b/a America Jet Geocore Services Aerospace Systems & Technologies, Inc. AcuStep, Inc. Federal Aviation Administration Palleton of Kansas, Inc. Salina Vortex Corporation Builders Choice Concrete Kejr, Joe Waddle's Manufacturing & Machine Laas, Brent and Mark Hertz Corporation Blicks Agri-Farm Cen WWC License LLC Professional Flight Training, LC Palmer Trucking Co., Snak-Atak L & R Farms Triangle Trucking Scrommel Resource Management, Inc. Salina Auto Auction Mesa Airlines/Air Midwest Salina Snack Sales Bostater Realty, Inc. Scientific Engineering Civil Air Patrol, KS Wing HDQ Revenue $265,230 232,891 157,417 101,816 87,114 48,993 48,209 35,280 31,390 24,448 22,350 21,600 20,116 17,490 15,342 15,000 14,805 14,561 12,996 12,860 12,700 12,648 12,410 12,317 12,189 11,658 11,170 10,437 9,675 8,860 8,700 7,836 STATISTICAL % of Operating & Direct Finance Lease Revenue 16.75% 14.71 % 9.94% 6.43% 5.50% 3.09% 3.04% 2.23% 1.98% 1.54% 1.41 % 1.36% 1.27% 1.10% 0.97% 0.95% 0.94% 0.92% 0.82% 0.81% 0.80% 0.80% 0.78% 0.78% 0.77% 0.74% 0.71% 0.66% 0.61% 0.56% 0.55% 0.49% Total Operating Lease and Direct Finance Lease Revenue for 2003 was $1,583,374 Source: Salina Airport Authority Records 60 Salina Airport Authority LOCAL GOVERNMENT MILL LEVY RATES, DIRECT AND OVERLAPPING Ten Years Ended December 31,2003 Other Unified Salina State Special Fiscal Saline City of School Airport of Taxing Year County Salina Dist. #305 Authoritv Kansas Districts Total 1994 26.575 28.709 42.401 1.900 1.5 5.015 106.100 1995 23.370 27.145 42.287 1.372 1.5 5.393 101.067 1996 22.925 26.942 42.312 1.275 1.5 5.565 100.519 1997 18.141 25.705 39.529 1.129 1.5 5.804 91.808 1998 20.488 25.270 36.840 2.950 1.5 5.419 92.467 1999 23.187 24.876 56.321 2.653 1.5 5.419 113.828 2000 22.337 24.365 58.524 2.426 1.5 5.183 114.335 2001 24.066 24.218 68.178 2.424 1.5 5.406 125.792 2002 25.657 24.092 57.384 2.806 1.5 5.378 116.817 2003 28.081 24.013 56.632 2.795 1.5 5.553 118.574 Note: Funds generated from the Salina Airport Authority's 2003 mill levy become available during calendar year 2004 and are budgeted accordingly. Source: Saline County Clerk '" I-' ST A TISTI CAL Salina Airport Authority MILL LEVY REVENUE Ten Years Ended December 31,2003 Fiscal Year Mill Levy Revenue 1994 $301,829 1995 $406,232 1996 $357,887 1997 $338,058 1998 $322,270 1999 $783,363 2000 $801,237 2001 $795,404 2002 $817,499 2003 $987,970 Source: Salina Airport Authority Records 62 STATISTICAL Salina Airport Authority AIR TRAFFIC, FUEL FLOWAGE AND ENPLANEMENT TRENDS Ten Years Ended December 31,2003 Scheduled Fiscal Air Traffic Fuel Flowage Air Service Year Operations Gallons Enplanements 1994 61,215 2,424,880 7,175 1995 68,291 2,435,656 7,813 1996 62,021 2,907,894 8,652 1997 68,822 3,577,650 9,153 1998 80,338 3,603,673 12,909 1999 90,400 3,808,886 13,436 2000 87,709 4,472,164 10,270 2001 92,870 4,396,429 6,507 2002 95,801 4,695,093 2,565 2003 86,214 4,358,563 2,319 Note: One air traffic operation equals one aircraft takeoff and landing Source: Salina Airport Authority Records 63 STATISTICAL Salina Airport Authority MAJOR EMPLOYERS IN THE SALINA/SALINE COUNTY AREA December 31, 2003 Major Private Emplovers Company Approx. # Emplovees Tony's Pizza Salina Reg. Med. Center Exide Corporation Great Plains Manufacturing Philips Lighting Solomon Corp. Lock/Line Raytheon Aircraft Co. Eldorado National, Inc. Wal-Mart Crestwood Cabinets, Inc. OCCK Advance Auto/Parts America KASA/KASA Fab Lowe's Home Improvement Exline Salina Journal Sunflower Bank Premier Pneumatics Blue Beacon Int'l PKM Steel 2,000 1,082 800 650 600 300 420 234 255 183 160 150 150 140 140 130 130 120 115 104 100 Major Public Emplovers Public Ore:anizations Approx. # Emplovees Unified School District #305 City of Salina Saline County US Postal Service Kansas State University - Salina 935 471 233 128 126 Source: Salina Area Chamber of Commerce Type of Business Frozen Foods Manufacturer Health Care Battery Manufacturing Fann Implements & Landscaping Equipment Fluorescent Lamp Manufacture Electrical Equipment Cell Phone Insurance Aircraft Sub-assemblies Manuf. Medium & Small Shuttle Buses Retail Custom Made Cabinets Plastic products, Subcontracting Warehouse Distribution Electronic Controls & Steel Fabrication Home Improvement Retail Structural steel fabrication Newspaper Publishing Bank Pneumatic Convey Equipment Truck Wash Steel Fabrication Tvpe of Public Bodv School System City Government County Government Postal Service Engineering Technology & Aviation Technology 64 Salina Airport Authority SALINE COUNTY POPULATION, DEMOGRAPHIC AND LABOR STATISTICS Year Population Saline County Population 1994 1995 1996 1997 1998 1999 2000* 2001 2002 2003 52,240 52,892 53,140 53,168 53,182 53,485 53,597 53,785 53,902 53,737 III 54,500 "0 54,000 c: 53,500 : 53,000 ::::I 52,500 ~ 52,000 I- 51,500 51,000 ~..s:J,V:> ~ ~ ..s:J,'Þ ~ cl ~" ~').o.JJ'> ,,<1) ~- ,,<1) ,,<1) ,,«>- ,,<1) ~Çj rþS rþS 17- Year Note: * Indicates decennial census 100% population counts. Other counts are population estimates. Demographics Median Age (2000) Number of Households (2000) Median Household Income (2000) Per Capita Income (2001) 36.1 21,436 $39,862 $28,168 Employment and Civilian Labor Force (Annual Average) Civilian Labor Year Force Employed Unemployed Employment and Civilian Labor Force 1993 28,603 27,415 1,188 1994 27,748 26,679 1,069 1995 29,580 28,376 1,204 32,000 1996 29,966 28,800 1,166 30,000 1997 30,178 29,082 1,096 28,000 1998 30,420 29,365 1,055 26,000 1999 30,906 30,144 762 24,000 2000 30,559 29,703 856 â>'? â>';> ~ ~~ ~':' >$i >$i .$l ~ 2001 30,093 29,037 1,056 2002 30,569 29,462 1,107 Sources: Institute for Public Policy and Business Research, University of Kansas and Kansas Department of Human Resources Labor Market Information Services United States Census Bureau 65 Salina Airport Authority SALINE COUNTY EMPLOYMENT DATA Annual Average Unemployment - 1994-2003 1994 1,069 3.90% 1995 1,204 4.10% 1996 1,166 3.90% 1997 1,096 3.60% 1998 1,055 3.50% 1999 762 2.50% 2000 856 2.80% 2001 1,055 3.50% 2002 1,104 3.60% 2003 1,247 4.00% Year Unemployment Unemployment Rate Saline County Unemployment Rate History 6.00% 4.00% 2.00% 0.00% Year 1994 1995 1996 1997 1998 199920002001 2002 Employment by Industry 2000 1990 Services Retail Trade Manufacturing Government & Gov't Services Construction Finance, Insurance, Real Estate Wholesale Trade Transportation Fann Ag. Services Mining (D)=suppressed to avoid disclosure 11,135 7,864 6,967 4,422 (D) 2,208 1,714 1,939 771 (D) (D) 8,935 6,332 5,969 3,823 1,715 1,491 1,814 1,222 851 265 262 Sources: Institute for Public Policy and Business Research University of Kansas, Salina/Saline County Profile Report United States Census Bureau 66 AU I 0 5' T TI N Yes, it does snow in Kansas. The Salina Airport received $360,337 in grant funds from the Federal Aviation Administration to purchase two new snow plows. was part of the FAA's Airport Improvement Program CLUBlNE& RETIELE CHARfERED Certified Public Accountants (fI1 Robert I. Clubine, C.P.A. David A. Rettele, C.P.A. Jay D. Langley, C.PA Jon K. Bell, C.PA Leslie M. Corbett, C.PA Stacy J. Osner, C.PA Marci K. Fox, CPA Valerie K. Linenberger, C.PA Delores K. Longenecker, C.P.A. John T. Millikin, C.PA Linda A. Suelter, C.PA 218 South Santa Fe P.O. Box 2267 Salina, Kansas 67402-2267 Salina 785 / 825-5479 Salina Fax 785 / 825-2446 Ellsworth 785/472-3915 Ellsworth Fax 785/472-5478 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Salina Airport Authority We have audited the financial statements of Salina Airport Authority as of and for the years ended December 31, 2003 and 2002, and have issued our report thereon dated April 30, 2004. 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 Guide, prescribed by the Director of Accounts and Reports, Department of Administration of the State of Kansas. Compliance As part of obtaining reasonable assurance about whether Salina Airport Authority's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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 that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Salina Airport Authority's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. 67 This report is intended solely for the information and use of the audit committee, management, others within the organization, the City Commission and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. ~T~l~ffi~6 April 30, 2004 68 CLUBlNE& RETIELE CHARfERED Certified Public Accountants crtIl Robert I. Clubine, C.PA David A. Rettele, C.PA Jay D. Langley, C.PA Jon K. Bell, C.PA Leslie M. Corbett, C.PA Stacy J. Osner, C.PA Marci K. Fox, C.PA Valerie K. Linenberger, C.PA Delores K. Longenecker, C.PA John T. Millikin. C.PA Linda A. Suelter, C.PA 218 South Santa Fe P.O. Box 2267 Salina, Kansas 67402-2267 Salina 785 / 825-5479 Salina Fax 785 / 825-2446 Ellsworth 785/472-3915 Ellsworth Fax 785/472-5478 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 To the Board of Directors Salina Airport Authority Compliance We have audited the compliance of Salina Airport Authority, with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-I33 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31,2003. Salina Airport Authority's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of Salina Airport Authority's management. Our responsibility is to express an opinion on Salina Airport Authority's compliance based on our audit. We conducted our audit of compliance 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-I33 require that we plan and perform the audi1: to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Salina Airport Authority's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Salina Airport Authority's compliance with those requirements. In our opinion, Salina Airport Authority complied in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the fiscal year ended December 31, 2003. Internal Control Over Compliance The management of Salina Airport Authority is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered Salina Airport Authority's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. 69 Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operations that we consider to be material weaknesses. This report is intended solely for the information and use of the audit committee, management, others within the organization, the City Commission and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. CLUBINE AND RETTELE, CHARTERED ~!\'\L oJ.. ~ 70 SALINA AIRPORT AUTHORITY Salina, Kansas SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31,2003 Federal CFDA Number Federal Grantor / Pass-through Grantor / Program or Cluster Title U.S. Department of Transportation Airport Improvement Program 20.106 Schedule 1 Pass-through Entity Identifying Federal Numbé:r Expenditures N/A See notes to the schedule of expenditures of federal awards. $ 434,763 71 SALINA AIRPORT AUTHORITY Salina, Kansas NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS For the Year Ended December 31,2003 Note 1 Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Salina Airport Authority and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements ofOMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 72 SALINA AIRPORT AUTHORITY Salina, Kansas Schedule 2 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the Year Ended December 31, 2003 There are no prior audit findings. 73 SALINA AIRPORT AUTHORITY Salina, Kansas Schedule 3 SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended December 31, 2003 SUMMARY OF AUDIT RESULTS 1. The auditors' report expresses an unqualified opinion on the financial statements of Salina Airport Authority. 2. No instances of noncompliance material to the financial statements of Salina Airport Authority were disclosed during the audit. 3. The auditors' report on compliance for the major federal award programs for Salina Airport Authority expresses an unqualified opinion on all major federal programs. 4. There were no audit findings relative to the major federal award programs for Salina Airport Authority. 5. The programs tested as major programs included: 20.106 Airport Improvement Program 6. The threshold for distinguishing Types A and B programs was $300,000. 7. The Salina Airport Authority was determined to be a high risk auditee. FINDINGS - FINANCIAL STATEMENTS AUDIT None. 74 SALINA AIRPORT AUTHORITY Salina, Kansas Schedule 4 CORRECTIVE ACTION PLAN For the Year Ended December 31,2003 None required. 75 (THIS PAGE INTENTIONALLY LEFT BLANK) 76 . 1 ++-+ !J~ e~-f~t in 2003, SAA finalized several facility improvement projects within the Salina Airport Industrial Center. The newly renovated manufacturing building pictured above will provide 66,926 sq. for new tenant.