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Audit Report - 2004COMPREHENSIVE ANNUAL FINANCIAL REPORT of the SALINA AIRPORT AUTHORITY A Component Unit of the City of Salina, Kansas For the Fiscal Year Ended December 31, 2004 Prepared by the Management of the Salina Airport Authority Air ort ' SLN��rt SALINA SALINAAi ort SALINA AIRPORT AUTHORITY TABLE OF CONTENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended December 31, 2004 INTRODUCTORY SECTION Letterof Transmittal ....................................................... ............................... 1 -9 PrincipalOfficers ........................................................... ............................... 10 AuthorityStaff Members ............................................... ............................... 11 OrganizationalChart ...................................................... ............................... 12 Certificate of Achievement ............................................ ............................... 13 Salina Municipal Airport Aerial View ......................... ............................... 14 FINANCIAL SECTION Independent Auditors' Report ......................................... ............................... 15 -16 Management's Discussion and Analysis ....................... ............................... 17 -23 Statementsof Net Assets ............................................. ............................... 24 -25 _ Statements of Revenues, Expenses and Changesin Net Assets ............................................ ............................... 26 Statements of Cash Flows (Direct Method) ................ ............................... 27 -28 Notes to Financial Statements ..................................... ............................... 29 -41 Supplemental Information Schedules of Revenues, Expenses and Changes in Net Assets .................. 44 -46 Capital Expenditures ................................................... ............................... 47 -48 General Obligation Bonds - Series 1998- A ................. ............................... 49 General Obligation Refunding Bonds - Series 1999 -B .............................. 50 General Obligation Improvement Bonds - Series 2001- A ......................... 51 General Obligation Improvement Bonds - Series 2002 -A ......................... 52 Leasehold Revenue Bonds - Series 1991 .................... ............................... 53 KDOCHLoan Payable ................................................ ............................... 54 Special Assessment Debt - Street and Utility Improvement ........................ 55 TemporaryNotes ......................................................... ............................... 56 Insurancein Force ....................................................... ............................... 57 STATISTICAL SECTION Operating Revenue History ............................................ ............................... 59 Operating Expense History ............................................ ............................... 60 Federal Financial Assistance History ............................. ............................... 61 Capital Expenditure History ........................................... ............................... 62 RevenueBond Coverage ................................................ ............................... 63 PrincipalCustomers ....................................................... ............................... 64 Local Government Mill Levy Rates, Direct & Overlapping ......................... 65 MillLevy Revenue ......................................................... ............................... 66 Air Traffic, Fuel Flowage, and Enplanement Trends ..... ............................... 67 MajorEmployers ............................................................ ............................... 68 Saline County Population, Demographic and Labor Statistics ..................... 69 Saline County Employment Data ................................... ............................... 70 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........ 72 -73 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance In Accordance with OMB Circular A -133 ........... ............................... 74 -75 Schedule of Expenditures of Federal Awards ................ ............................... 76 Notes to Schedule of Expenditures of Federal Awards . ............................... 77 Summary Schedule of Prior Audit Findings ................. ............................... 78 Schedule of Findings and Questioned Costs ................. ............................... 79 CorrectiveAction Plan .................................................. ............................... 80 INTRODUCTORY SECTION On December 1, 2004, Virgin Atlantic Airways announced that the Salina Municipal Airport would be the launch and landing site for the Virgin Atlantic GlobalFlyer record attempt. VAA also announced that Mission Control for the attempt would be based at Kansas State University at Salina, located adjacent to the Airport. - AIrport SA L iNA Chairman Vice- Chairman Treasurer Secretary Past Chairman Dr. Randy D. Hassler Stephen C. Ryan Donald E. Morris Eric R. Hardman Robert H. Miller Executive Director Timothy F. Rogers, A.A.E. Mgr. of Administration and Finance Michelle R. Swanson Mgr. of Operations, Maintenance and ARFF Ryan E. Rocha Board Attorney Greg A. Bengtson June 15, 2005 Salina Airport Authority Board of Directors 3237 Arnold Ave. Salina, KS 67401 To the Board of Directors of the Salina Airport Authority: The Comprehensive Annual Financial Report (CAFR) of the Salina Airport Authority (the "Authority ") for the fiscal year ended December 31, 2004 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 2004 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 financial reports recommended by the Government Finance Officers of the United States and Canada (GFOA). The Authority's 2004 Comprehensive Annual Financial Report is presented in four sections: SLN�`irpo rt 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 2003, and an aerial photo of the Salina Municipal Airport and Airport Industrial Center. SALINAA�i p zJOA&I-Id ee"46 �n- 3237 Arnold / Salina, KS 67401 -8190 / 785.827.3914 / Fax: 785.827.2221 www.salinaairport.com ItVT OD UCTOR Y Financial Section - includes the independent auditors' report, Management's Discussion and Analysis (MD &A), the Authority's 2004 financial statements and the required supplemental information. Statistical Section - includes selected financial and demographic information, which highlights economic and demographic trends. Other Independent Auditors' Reports 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 the 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 2,900 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 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 at Salina (KSUS). The campus of K.SUS is located adjacent to the Airport. The college offers degrees in professional flight training, airframe and power plant maintenance, and avionics technology. The Salina Municipal Airport and Airport Industrial Center is home for 80 businesses and organizations. Forty-five of the businesses and organizations are tenants of the Authority. One of the primary functions of the Authority is to facilitate the continued growth of jobs and payroll at the Airport and Airport Industrial Center. The Authority works in partnership with the City of Salina, Saline County and the Salina Area Chamber of Commerce for the retention of existing business and industry and the recruitment of new business and industry. 2 LNY ODCICTORY ECONOMIC CONDITIONS AND OUTLOOK Local Economy The Salina/Saline County economy has continued to demonstrate economic strength, as compared to other regions of the state. In 2004, Saline County's total employment increased nearly 1,000. The average unemployment rate fell from 4.0 percent to 3.7 percent. Growth in the areas of manufacturing, transportation, finance, real estate, insurance, services and retail trade, confirm Salina's position as one of _ Kansas' strongest regional economic centers. In recent studies by Kansas State University, Saline County ranks fourth in the state out of 105 counties _ in "Retail Trade Pull Factory. The high trade pull factor is a reflection of retail sales activity, indicating that a large volume of retail sales activity is coming from outside of Saline County. The county's trade area capture increased from 68,259 to 69,060, and the percent of Saline County retail trade increased from 94.33 percent to 94.88 percent. 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 counties, 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, 2004, 80 businesses and organizations at the Salina Municipal Airport and Airport Industrial Center employed nearly 4,000 employees. Total payroll was an estimated $128 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 over the next three to five years. Salina Municipal Airport businesses including Aerospace Systems and Technologies, Inc., Flower Aviation of Kansas, Inc., and Kansas State University at Salina, continue work on facility expansion plans. Salina Airport Industrial Center businesses including Schwan's Food Manufacturing, Inc., Salina Vortex Corporation, and the Kansas Army National Guard at Salina, also continue to work on facility expansions. Collectively, these expansions will result in additional jobs and payroll. A major economic initiative came about in 2004 with the passage of a one - quarter cent city sales tax, designating 12.5 percent or approximately $275,000 per year for economic development:. The funds will INT ODUCTORY be available to assist in the job- training portion of the Salina community's new economic development initiatives, which are designed to help keep Salina competitive with other communities. The Salina Airport Authority in partnership with the Salina Area Chamber of Commerce, the City of Salina and Saline County, continue to work and expand on economic development programs that include web based building and site directories, electronic newsletters, trade show participation and expanding contacts through the Kansas Department of Commerce. During 2004, the community launched the Salina Aviation Service Center campaign designed to attract aviation service businesses to the Salina Municipal Airport. The campaign received a boost when the Kansas legislature passed a state sales tax exemption for parts and labor used in aircraft maintenance repair and overhaul activity. INITIATIVES AND DEVELOPMENT Salina Municipal Airport (SLN) On December 1, 2004, after over one year of discussions with the Salina Airport Authority, Virgin Atlantic Airways of London announced that the Salina Municipal Airport would be the launch and landing site for Virgin Atlantic GlobalFlyer. Virgin Atlantic, along with adventurer pilot Steve Fossett, determined Salina's 12,300 feet, recently rehabilitated runway, the availability of large aircraft hangars and having Kansas State University at Salina on the airport to serve as headquarters for mission control, would make it an ideal launch site. Early in 2005, Fossett, in the GlobalFlyer, became the first person to fly around the world, solo, non -stop and non - refueled. This event brought unprecedented national and international attention and publicity to the Salina Municipal Airport, Kansas State University at Salina and the community while it placed Salina on the roll call of sites for milestones in aviation history. Although the Airport's primary runway was shut down for 90 days over the summer for construction, 2004 was still the fifth highest year in the Airport's history in terms of fuel flowage. The 3,843,344 gallons of aviation fuel delivered is a result of the airport's two Fixed Base Operators (FBO), America Jet and Flower Aviation continuing to provide world class service and the top selling aviation fuel brands to the wide variety of aircraft that utilize the Salina Municipal Airport including general aviation, business jets, 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 16 percent of the Authority's 2004 operating revenue. During that 90 -day primary runway closure, the Authority successfully completed one of its most extensive airfield construction projects to date. The Airport's primary runway, still one of the longest runways in North America, was rehabilitated and reconfigured to a width of 150 feet and a length of 12,300 feet. In addition to a new runway surface, the Authority installed new high - intensity runway lights, pavement subdrains, new airfield guidance signs and a new standby generator for .airfield lighting. The Authority was awarded $2.4 million in grant funds for this major reconstruction effort through the Federal Aviation Administration's (FAA) Airport Improvement Program (AIP). Completion of this milestone project assures the Salina Municipal Airport that it will maintain its role as "'America's Fuel Stop" for years to come. 4 In addition, during 2004 under the FAA's AIP program, the Authority was awarded a $270,750 grant for the rehabilitation design of the Airport's crosswind runway. Project design is scheduled for completion during the second quarter of 2005 with construction scheduled for the summer of 2005. Completion of the project will provide Airport users with multiple runway options. During the fall of 2004, the Authority contracted with industry leader Jeppesen to complete an airspace and instrument approach procedure feasibility study. Jeppesen was instructed to complete a comprehensive review of the existing airspace and instrument approach procedures, environment affecting air traffic safety, efficiency and capacity at the Airport. The study will be completed in 2005 and will provide the Authority guidance on priority airspace improvements that will enable growth in the number of aircraft operations and fuel delivered at the Salina Municipal Airport. During 2004, two of the Authority's large aircraft hangars were successfully remodeled and renovated. Both hangars required new hangar doors, electrical improvements, heating and cooling upgrades. Each hangar is now equipped with new digital video recording systems for improved security and risk management. Following the completion of the Hangar renovations, the Authority was able to host the 442 "d Fighter _ Wing, Whiteman AFB for a two week training deployment. During the deployment, America Jet at Salina, the Airport's government fuel contractor on the field, delivered approximately 65,000 gallons of fuel to the 442 "d aircraft. The 442 "d was able to base seven A -10 attack aircraft and 135 people at the Airport's Hangar 4509. The 442 "d was the first of many military aviation units that will be able to use the hangar as a base of operations while using the Smoky Hill Air National Guard (ANG) Range. The Authority is working with the Kansas National Guard and other branches of the military to utilize the Salina Municipal Airport and Hangar #509 for additional aviation unit training deployments. The second renovated hangar facility, Hangar #703, continues to house the Virgin Atlantic GlobalFlyer. The improvements to the hangar were key to pilot Steve Fossett's and Virgin Atlantic's decision to — select the Salina Municipal Airport as the launch site for the GlobalFlyer. Both hangars have been used for overnight business jet storage since renovations were completed. The availability of the two hangars meets requirements of a growing number of business jet operators that must have the availability of overnight storage before using SLN for refueling. — The Airport Authority coordinated with the FAA for the installation of a new Instrument Landing System (ILS) for Runway 35. The FAA funded project replaced a decades -old ILS with new state -of- the -art equipment. The new ILS will provide airport users an accurate and dependable system for years — to come. On July 21, 2004, the Authority Board of Directors approved a lease agreement with Flower Aviation of Kansas, Inc. The agreement provided for the construction of a new 5,000 sq. ft. customer service center to be leased to Flower. The new facility will enable Flower SLN to remain one of the top- ranked FBO's in the nation. Construction bids were opened on November 3, 2004 and construction started on November 29. The facility will open during 2005. In addition to the FAA grant funds mentioned previously, during 2004, the Authority also received a — FAA grant offer in the amount of $621,747 to fund 95% of the cost to purchase a new Aircraft Rescue and Firefighting vehicle and a new multi- agency communications system. These INT ODUCTORY improvements will provide the Authority and Salina Fire Department additional capabilities when responding to airfield emergencies. The Authority continued to work in a cooperative manner with the Transportation Security Administration (TSA), Saline County Sheriffs Office, Salina Police Department, Kansas Highway Patrol and other law enforcement agencies to maintain compliance with federal airport security requirements. Maintaining an up -to -date Airport Security Plan has become a daily task. The most significant responsibility is keeping up with new threat assessments and adjusting the Authority's security measures accordingly. On December 3, 2004, the Federal Security Director of the Transportation Security Administration, Wichita Mid - Continent Airport, recognized the Authority with the TSA's 2004 Partnership award. In partnership with the Salina Area Chamber of Commerce, the Authority attended the annual conference of the National Business Aviation Association (NBAA) with the specific purpose of increasing SLN's mage as a center for aviation service businesses. The Authority's new marketing materials and news release were well received. The SLN Aviation Service Center was featured in the NBAA convention daily news publications. As part of its ongoing marketing efforts, the Authority's website, http: / /www.salinaa :ln2ort.com/ was redesigned and went online on December 1, 2004. Salina Airport Industrial Center In partnership with the Salina Economic Development Corporation, the Authority began facilitating the development of a new corporate headquarters and manufacturing campus for Salina Vortex Corporation. As a leader in the manufacturing of slide gates and diverter valves for handling dry bulk materials, Salina Vortex has been an anchor tenant within the Airport Industrial Center for 18 years. The new worldwide corporate headquarters will be 105,000 sq. ft. of new construction on 17 acres within the Airport Industrial Center. Construction is expected to begin in June of 2005 with completion in May of 2006. Also during the year, Turbine Specialties, a division of Houston, TX based Cooper Energy Services, occupied a large manufacturing/warehouse facility located in the Airport Industrial Center. Turbine Specialties employ approximately 90 people and was a welcome addition to the industrial center. During 2004, the Authority continued to make capital improvements to Airport Industrial Center facilities. The Authority completed the demolition of three former U.S. Air Force buildings that no longer had economic value. The demolitions of obsolete buildings eliminate potential liabilities and in most cases, open up land for the construction of new structures. The Authority funded the extension of Cox Cable TV and Internet cable to the southern portion of the Airport Industrial Center. This improvement benefits several existing businesses and will provide cable TV to undeveloped Authority industrial sites. During the summer months, the Authority began working with the Kansas Army National Guard ( KSARNG) as a prospective tenant to occupy a vacant 66,000 sq. ft. manufacturing; facility within the Airport Industrial Center. The Authority completed a facility renovation design based on the needs of the KSARNG and a construction contract was awarded on December 15, 2004. Subsequent Is! [.VT ODUCTORY — to the close of the year, a lease agreement was executed and the KSARNG will occupy the facility in the fall of 2005 with a new Readiness Sustainment Maintenance Site involving the overhaul and rebuild of military trailers. Capital Financial Planning 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. A significant capital planning tool is the Airport Layout Plan (ALP). During 2004, the Authority's ALP was updated for planned and future improvements. The effect any capital improvement program will have on future operating budgets is evaluated at the time a specific project is authorized by the Authority and is undertaken on a cost - benefit analysis. All current authorized capital projects scheduled for completion in 2005 have their projected revenues and expenses incorporated into the Authority's 2005 operating budget. FINANCIAL CONTROLS The Authority follows generally accepted accounting principles applicable to governmental unit enterprise funds. Accordingly, the financial statements are prepared on the accrual basis. Management of the Authority is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Authority are protected from loss, theft, or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. An annual budget is prepared in accordance with the Authority's By -laws. However, the Authority is specifically exempt from 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 2004 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. 7 INT ODUCTORY 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 of loss 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 from liability. The Authority carries $500,000 of comprehensive general liability insurance which matches the limit established by the Kansas Tort Claims Act. During 2004 the Authority carried $13,486,643 of insurance on airport commercial properties. The Authority also acquires construction builders' risk policies for all major construction projects or requires evidence of coverage from the contractor. The Authority's commercial property insurance included $1,344,105 in loss of rents coverage. 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, 2004 is included in the Supplemental Section of this report. 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 Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Salina Airport Authority for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2003. This was the twelfth 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 report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. INT ODUCTOR�' 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 its 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 Infonnation Services, in the preparation of this report. Respec4Ro tted, Timoth, A. Executive Director Salina Airport Authority cc: The City of Salina Board of Commissioners Michelle R. Swanson Manager of Administration and Finance Salina Airport Authority E SALINA AIRPORT AUTHORITY PRINCIPAL OFFICERS AS OF DECEMBER 31, 2004 BOARD OF DIRECTORS Robert H. Miller Chairman Dr. Randy D. Hassler Vice - Chairman Stephan C. Ryan Secretary John Vanier Treasurer Donald E. Morris 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 10 SALINA AIRPORT AUTHORITY Staff Members as of December 31, 2004 ADMINISTRATIVE STAFF Timothy F. Rogers, A.A.E. Executive Director Ryan E. Rocha Manager of Operations, Maintenance and ARFF Michelle R. Swanson Manager of Administration and Finance Donald C. Kneubuhl Manager of Special Projects Kasey L. Fabrizius Administrative Assistant OPERATIONS, MAINTENANCE, AIRCRAFT RESCUE & FIRE FIGHTING STAFF Ron Boyd Dale Mattison Loren Carleton David Nease Roger K. Colby Rob Pejsha Gary Hansen 11 LL LL. � v ui }k z§ /} § 0 k k ■ U. w z « Z U LL R / / E / 2 c § E $ g /\ \ m_ > \ ■ to ■D —o U) j § § ? 2 b� z ) § 9 / 2 $ C:) @ ~ Q Q S w \ m w q / % b } LI: k 0 k cd _ U_ 4 / \ §{ I e � \ / \ > a ) 6 / \ k w z « Z LL ca 2 c § E $ g /\ \ m_ > \ ■ to ■D —o k 5 A S b� ) § ) / a u E a / 2 ) § � § (D ) ) 0 � � K 0� 0 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, 2003 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 financial reporting. BF UN B cUN�,r (f W DMITED STAlE5�7 DMDMT CA MU President d C t y�A✓ SXAUL Doti 9SICA0 *'� A4:-::PA0k" Executive Director 13 SA LINA A irport January 2004 /sue ,y""iclft SLNAI"rport SA LINA A I J J 14 FINANCIAL SECTION A $2.4 million grant from the Federal Aviation Administration provided funding for a new runway surface for the Salina Municipal Airport's (SLN) primary Runway 17135. Following - this rehabilitation in 2004, SLN is better prepared to serve in its role as a mid - continent fuel stop for over 7, 000 business jets that use the airport each year. - CLUBINE RETT'ELE& INDEPENDENT AUDITORS' REPORT CRARnMM Ceni(ted Public Aavunumu 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, 2004 and 2003, as listed in the table of contents. These _ financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our — audit. Robert I. Clubine, C.P.A. dated May 3, 2005, on our consideration of Salina Airport Authority's internal David A. Rettele, C.P.A. We conducted our audits in accordance with auditing standards generally accepted Jay D. Langley, C.P.A. Jon K. Bell, C.P.A. in the United States of America and the standards applicable to financial audits Leslie M. Corbett, C.P.A. Stacy J. Sokol, C.P.A. contained in Government Auditing Standards, issued by the Comptroller General of P.O. Box 2267 Salina, Kansas the United States and the Kansas Municipal Audit Guide, prescribed by the — Marci K. Fox, C.P.A. Director of Accounts and Reports, Department of Administration of the State of Delores K. Longenecker, C.P.A. Kansas. Those standards require that we plan and perform the audit to obtain John T. Millikin, C.P.A. reasonable assurance about whether the financial statements are free of material Linda A. Svelter, C.P.A. — misstatement. An audit includes examining, on a test basis, evidence supporting — 785 / 825 -5479 the amounts and disclosures in the financial statements. An audit also includes Salina Fax assessing the accounting principles used and significant estimates made by -- management, as well as evaluating the overall financial statement presentation. We — Ellsworth 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, 2004 and 2003, and the changes in financial position and cash flows _ for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated May 3, 2005, 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 grant agreements and other matters. -- 218 South Santa Fe The purpose of that report is to describe the scope of our testing and internal P.O. Box 2267 Salina, Kansas control over financial reporting and compliance and the results of that testing and 67402 -2267 not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with Salina this report in considering the results of our audit. — 785 / 825 -5479 Salina Fax The management's discussion and analysis on pages 17 through 23 is not a require 785 / 825 -2446 part of the basic financial statements but is supplementary information required by — Ellsworth accounting principles generally accepted in the United States of America. We have 785 / 472 -3915 applied certain limited procedures, which consisted principally of inquiries of Ellsworth Fax 785 / 472 -5478 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. — 15 Our audit was conducted for the purpose of forming an opinion on the basic financial statements. The _ Introductory Section and 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 basic financial statements of Salina Airport _ Authority. 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 basic financial statements. _ Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The Introductory Section and the accompanying schedules and additional _ information listed in the supplemental information of the Financial Section and the Statistical Section of the table of contents has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. _ CLUBINE AND RETTELE, CHARTERED u'A, v_ RAM_q__' May 3, 2005 16 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, 2004. 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 2004 having handled 81,465 aircraft operations. The decrease in aircraft operations over prior recent years was, in large part, attributable to the closure of the Aiport's primary runway for a three -month reconstruction period. The most significant reduction in operations fell in the itinerant general aviation category. Local military training flights increased by 48% from 2003, which reconciles with the fact that certain units that use Salina for training had returned from recent deployments. The highest year for the most recent 10 -year period was 2002. 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 through the Department of Transportation's (DOT) _ Essential Air Service Program. The Salina Municipal Airport continues to offer scheduled air service provided by Air Midwest, a subsidiary of Mesa Air Group. Operating as USAirway Express, Air Midwest continued to provide three daily flights to the Kansas City International Airport from Salina during 2004. Since September 11, 2001, enplanements from the Salina Municipal Airport have continued a slow, steady upward trend. The changes in the Authority's major airport activity indicators for the past three years are as follows: Enplanements - Scheduled Air Carrier % increase /(decrease) Aircraft Operations - All Categories % increase/ (decrease) Fuel Flowage - (gallons delivered) % increase/ (decrease) 2004 2003 2002 2,974 2,242 2,565 28.2% -12.6% - 153.7% 81,465 86,214 95,801 -5.5% -10.0% 3.1% 3,843,330 4,358,563 4,695,093 -11.8% -7.2% 6.4% Further airport activity data can be found in the Statistical Section of this report. 17 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 2004, building rents equaled 43.2 % or $609,791 of operating revenue. At the end of 2004, 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 constituted a 92�% occupancy rate. Subsequent to the end of 2004, the Authority entered into a lease agreement with the State of Kansas for the lease of the manufacturing facility. SUMMARY OF OPERATIONS AND CHANGES IN NET ASSETS Even with the uncertainty in the aviation industry and the slow growth in the economy, the financial condition of the Authority has held steady in recent years. The Authority has effectively dealt with major cost increases in employee health benefits including medical insurance premiums, utility costs, commercial property insurance premiums and other operating expenses. Fortunately, with the diversified revenue base, including building and land rental from the Authority's Industrial Center, total operating revenue increased from 2003 to 2004. 2004 2003 2002 _ Operating Revenues $ 1,412,120 $ 1,387,297 $ 1,387,079 Operating Expenses (1,394,095) (1,3001268) (1,182,264) Excess before Depreciation and other non - operating income and expenses 18,025 87,029 204,815 Depreciation (1,151,664) (1,022,474) (974,140) Excess (loss) before other non - operating income and expenses (1,133,639) (935,445) (769,325) Other Non - Operating Income and (Expenses) net 814,744 772,257 646,095 Loss before Capital Contributions (318,895) (163,188) (123,230) Capital Contributions 2,289,342 434,763 144,005 Increase in Net Assets $ 1,970,447 $ 271,575 $ 20,77:5 SUMMARY OF OPERATIONS HIGHLIGHTS Significant items effecting the Summary of Operations and Changes in Net Assets for 2004 are as follows: • Operating revenues have remained steady in recent years, with 2004 bringing about a 1.8% increase over 2003. Decreases in building rental revenue are attributable to two large aircraft hangars being turned back to the Authority and undergoing renovations, one large industrial building vacancy and one professional office building vacancy. Airfield revenue also decreased during 2004 due to a decrease of 9% in fuel flowage fee revenue as a result of the Airport's primary runway being closed for a 3 -month construction project. • Operating expenses increased by 6% due to the following: o Utility costs increased by 14% over the prior year due to utility price increases and the Authority taking on the two additional aircraft hangars. o Bad debt expense in the amount of $38,355 as a result of one uncollectible account due to a tenant bankruptcy. o Airport and Industrial Center property and liability insurance increased by 22% as a result of additional properties brought on to the Authority's schedule. • The net result of the above was operating income before depreciation decreased by $69,004 from 2003. Depreciation expense increased due to new construction moving from construction in progress to an asset in service. The significant item being the newly rehabilitated primary runway. • Non - operating income and (expenses) increased by 6% as a result of the increase in ad- valorem tax revenue (mill levy) received by the Authority as a local taxing entity. Mill levy revenue increased by $48,609 from 2003. • Capital contributions received in the form of grants from the Federal Aviation Administration increased from 2003 by $1,854,579. 19 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 $22,000,495 at the close of 2004. A condensed summary of the Authority's total net assets at December 31 is shown below. 2004 2003 2002 ASSETS Current and other assets Capital assets, net Total assets LIABILITIES Long -term debt outstanding Other liabilities Total liabilities NET ASSETS: Invested in capital assets, net of related debt Restricted Unrestricted TOTAL NET ASSETS $ 5,091,812 27,968,139 $ 33,059,951 $ 8,485,351 2,574,105 $ 11,059,456 $ 18,468,297 85,000 3,447,198 $ 22,000,495 $ 3,676,007 24,954,889 $ 28,630,896 $ 6,246,510 2,354,338 $ 8,600,848 $ 17,711,718 85,000 2,233,330 $ 20,030,048 $ 5,701,810 23,700,563 $ 29,402,373 $ 7,235,433 2,408,467 $ 9,643,900 $ 15,418,378 85,000 4,255,095 $ 19,758,473 By far the largest portion of the Authority's net assets (84 %) 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. 20 REVENUES The following chart shows the major sources and the percentage of total operating revenues for the year ended December 31, 2004: Gain (loss) on sale of assets 4% Building anu a, u rent 63% Other revenue field I% A summary of revenues from the year ended December 31, 2004 and the amount and percentage of change in relation to prior year amounts is as follows: Further detail regarding the Authority's operating revenue can be found in the Supplemental Section of this report. 21 Percent Increase Percent of (Decrease) Increase 2004 Total from 2003 (Decrease) Operating Revenue: Airfield $ 439,672 17.1% $ (8,170) -1.8% — Building and land rent 890,631 34.6% (25,954) -2.8% Gain (loss) on sale of assets 59,943 2.3% 66,574 1000.4% Other revenue 21,874 0.8% (7,627) -25.9% _ Total Operating $ 1,412,120 54.8% $ 24,823 1.8% — Non - Operating Income: Mill Levy $ 1,036,579 40.2% $ 48,609 4.9% Interest Income 126,949 4.9% (1,691) -1.3% Total Non - Operating 1,163,528 45.2% 46,918 4.2% _ TOTAL REVENUE $ 2,575,648 100.0% $ 71,741 2.9% Further detail regarding the Authority's operating revenue can be found in the Supplemental Section of this report. 21 EXPENSES The following chart shows the major expense categories and the percentage of total operating expenses for the year ended December 31, 2004: Maintenai 33% inistrative 67% A summary of expenses for the year ended December 31, 2004 and the amount and percentage of change in relation to prior year amounts is as follows: 22 Increase Percent Percent (Decrease) Increase 2004 of Total from 2003 Decrease Operating Expenses Administrative $ 928,679 53.3% $ 103,615 12.6% Maintenance 465,416 26.7% 9,788 -2.1% Total Operating $ 1,394,095 80.0% $ 93,827 7.2% Non - Operating Expense Interest Expense $ 331,505 19.0% $ 7,005 2.2% Amortization of bond costs 17,279 1.0% (2,574) -13.0% Total Non - Operating $ 348,784 20.0% $ 4,431 1.3% TOTAL EXPENSES $ 1,742,879 100.0% $ 98,258 6.0% 22 Further detail regarding the Authority's operating expenses can be found in the Supplemental Section of this report. CAPITAL ACQUISITIONS AND CONSTRUCTION ACTIVITIES The Authority expended $4,218,144 on capital activities during 2004. The most significant item was the reconstruction of the Airport's primary runway at a cost of $2,612,539. The next major item was the rehabilitation of two large aircraft hangars at a total cost of $894,840. 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 $8,485,351 at December 31, 2004. 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 $3,255,000 in general obligation temporary notes during 2004. 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 by e-mail: shellis(&salair.org or in writing to, Salina Airport Authority, 3237 Arnold Ave., Salina, KS 67401. Respectfully su nutted, T' o y . Ro , A. Michelle R. Swanson Executive Director Manager of Administration and Finance 23 SALINA AIRPORT AUTHORITY STATEMENTS OF NET ASSETS ASSETS CURRENT ASSETS: Cash Accounts receivable Prepaid expenses Taxes receivable Total Current Assets CAPITAL ASSETS Land Buildings, improvements and equipment, net of depreciation Construction in progress Total Capital Assets OTHER ASSETS: Net investment in finance lease Bond issue costs, less accumulated amortization of $161,581 and $144,302 respectively Total Other Assets TOTAL ASSETS Decembf ,-r 31 2004 2003 $ 2,962,020 $ 1,468,276 107,053 109,996 4,055 8,332 1,052,591 1,023,355 4, 125,719 2,609,959 9,156,560 9,107,226 18,385,174 15,389,523 426,405 458,140 27,968,139 24,954,889 880,030 968,853 86,063 97,195 28,934,232 26,020,937 $33,059,951 $28,630,896 (continued) See notes to financial statements. 24 _ SALINA AIRPORT AUTHORITY STATEMENTS OF NET ASSETS (continued) LIABILITIES AND NET ASSETS December 31 2004 2003 CURRENT LIABILITIES: Accounts payable- operations $ 24,865 $ 14,120 Accounts payable - capital purchases 116,465 33,649 Accrued payroll and expenses 17,741 22,939 Accrued property tax 58,878 56,929 _ Accrued special assesments 25,047 25,047 Deferred tax revenue 1,052,591 1,023,355 — Deferred maintenance agreement 3,222 2,995 Unearned rental income 71,176 41,064 Accrued interest 137,649 91,550 — Unearned interest - financing lease 50,312 53,767 Current maturities of long -term debt 1,016,159 988,923 — Total Current Liabilities 2,574,105 2,354,338 LONG -TERM LIABILITIES: Bonds and note payable, less current maturities 8,485,351 6,246,510 Total Liabilities 11,059,456 8,600,848 — NET ASSETS: Invested in capital assets, net of related debt 18,468,297 17,711,718 Restricted, bond reserve funds 85,000 85,000 — Unrestricted 3,447,198 2,233,330 Total Net Assets 22,000,495 20,030,048 TOTAL LIABILITIES AND NET ASSETS $33,059,951 $28,630,896 See notes to financial statements. 25 SALINA AIRPORT AUTHORITY STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS OPERATING REVENUES: Airfield Building and land rent Gain (loss) on sale of assets Other revenue 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 January I to December 31 2004 2003 $ 439,672 $ 447,842 890,631 916,585 59,943 (6,631) 21,874 29,501 1,412,120 1,387,297 928,769 465,326 1,394,095 18,025 1,151,664 (1,133,639) 1,036,579 126,949 (348,784) 814,744 (318,895) 2,289,342 Increase in Net Assets 1,970,447 TOTAL NET ASSETS, beginning of year 20,030,048 TOTAL NET ASSETS, end of year $22,000,495 See notes to financial statements. 825,064 475,204 1,300,268 87,029 1,022,474 (935,445) 987,970 128,640 (344,353) (163,188) 434,763 271,575 19,758,473 $20,030,048 26 SALINA AIRPORT AUTHORITY — STATEMENTS OF CASH FLOWS (DIRECT METHOD) — January 1 to ]December 31 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: — Cash received from providing services $ 1,459,696 $ 1,374,310 Cash paid to employees for services (472,178) (462,822) Cash paid to suppliers for goods and services (871,435) (837,530) Net Cash Provided in Operating Activities 116,083 73,958 — CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of property, plant and equipment (4,126,043) (2,319,249) Purchases in satisfaction of maintenance agreement (5,863) (9,736) — Proceeds from capital grants 2,289,342 434,763 Proceeds from property tax 1,036,579 987,970 Principal payments on debt (988,922) (1,046,750) — Proceeds of new borrowing 3,255,000 - Principal received on financing lease 88,823 81,911 Interest received on financing lease 100,623 107,535 — Bond issue costs paid (6,147) - Interest paid on long -term debt (294,691) (338,703) _ Net Cash Provided (Used) in Capital and Related Financing Activities 1,348,701 (2,102,259) CASH FLOWS FROM INVESTING ACTIVITIES: _ Interest received on deposits 28,960 25,475 INCREASE (DECREASE) IN CASH 1,493,744 (2,002,826) CASH BALANCE - January 1 1,468,276 3,471,102 CASH BALANCE - December 31 $ 2,962,020 $ 1,468,276 (continued) See notes to financial statements. 27 SALINA AIRPORT AUTHORITY STATEMENTS OF CASH FLOWS (DIRECT METHOD) (continued) RECONCILIATION 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 (increase) in accounts payable - operations Increase (decrease) in accrued payroll and expenses Decrease (increase) in prepaid expense Increase (decrease) in accrued property tax and special assessments Increase in unearned rental income NET CASH PROVIDED BY OPERATING ACTIVITIES January I to L)ecember 31 2004 2003 $(1,133,639) $(935,445) 1,151,664 53,230 2,943 10,745 (5,198) 4,277 1,949 30,112 $ 116,083 During 2004, the Authority incurred bad debt expense in the amount of $38,700 and capitalized interest in the amount of $9,292. See notes to financial statements. 1,022,474 6,631 (29,405) (3,048) 1,239 (4,017) 5,742 $ 73,958 C Salina Airport Authority NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 presented 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. 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. 29 C. Assets, Liabilities and Equity 1. Cash and Investments The Authority's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from date of acquisition. The Authority held no investments during these years. 2. Receivables Accounts Receivable. The Authority records revenues when services are provided. All receivables are shown net of an allowance for uncollectibles. 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 1 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 tax receivables 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 supplies. 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 Statement of Net Assets because their use is limited by applicable bond covenants. 30 6. Capital Contributions and Net Assets Certain expenditures for airport capital improvements are significantly funded through the Federal Aviation Administration's Airport Improvement Program (AIP), with certain matching funds of the Authority. Capital funding provided under the AIP grant program is considered earned as the related allowable expenditures are incurred. Grants received under the AIP program are reported in the — Statement of Revenues, Expenses and Changes in Net Assets, as non - operating revenues and expenses as capital contributions. 7. Capital Assets Capital assets purchased or constructed are recorded at cost. The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend assets' lives are not included in capital assets cost. Capital assets donated to the Authority are recorded at their estimated fair value at the date of donation. Donated assets include property and equipment transferred to the Authority from the United States of America, September 9, 1966 and recorded at fair value at that date. Capital assets are depreciated using the straight -line method over the following estimated useful lives: Assets Years Buildings 5-50 Equipment 5-10 Vehicles 7-10 Airfield 10-30 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 recognized as incurred and included in accrued expenses. The amount accrued for such liabilities at December 31, 2004 and 2003 was $17,528 and $16,727 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. 31 III. DETAILED NOTES A. Deposits The bank balance as of December 31, 2004 and 2003 were entirely insured or collateralized with securities held by third party banks in the Authority's name. At December 31, 2004 and 2003, the carrying amount of the deposits were $2,960,196 and $1,468,226 plus $1,824 and $50 cash and undeposited checks on hand respectively, and the bank balance was $2,994,433 and $1,462,756 respectively. The difference between the carrying amount and the bank balance is outstanding checks. Of the bank balance, $304,729 and $219,431 respectively was covered by federal deposit insurance and the remaining $2,689,704 at December 31, 2004 was collateralized by pledged securities 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 batik. 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 December 31, 2004 Security Required (100 %) $ 2,133,305 $ - $ 556,399 $ 2,689,704 Security Provided by Depositories 3,442,360 234,358 5,089,444 8,766,162 Amount Under - secured by Statute $ - $ - $ - $ - 32 UMB- First Bank National Bank Sunflower Kansas of America Bank Total Gross Cash Balances Cash in checking $ 2,231,070 $ 32,698 $ 32,264 $ 2,296,032 Cash in savings 7,765 656,399 664,164 Less deposits in transit - - - - Add uncleared checks 2,235 32,002 - 34,237 Bank Balance 2,233,305 72,465 688,663 2,994,433 Less FDIC Coverage 100,000 72,465 132,264 _304,729 Balances Securable by Collateral $ 2,133,305 $ - $ 556,399 $ 2,689,704 Security Required (100 %) $ 2,133,305 $ - $ 556,399 $ 2,689,704 Security Provided by Depositories 3,442,360 234,358 5,089,444 8,766,162 Amount Under - secured by Statute $ - $ - $ - $ - 32 B. Receivables — Receivables as of year -end, including the applicable allowance for uncollectible accounts, are as follows: _ December 31 2004 2003 _ Receivables: Accounts $ 108,771 5 111,714 Less: allowance for uncollectibles (1,718) _ (1,718) _ 107,053 109,996 Taxes 1,052,591 _ 1,023,355 _ Total $1,152,644 ;6 1.133.351 _ C. Net Investment in Financing Lease Net investment in financing lease is as follows: December 31 2004 2003 Total lease payments receivable $1,326,122 $1,515,568 Less: Unearned income 446,092 546,715 Net investment in financing leases X34 5 Activity in net investment in financing leases was as follows: December 31 2004 2003 — Beginning Balance $ 968,853 $1,050,764 Less: Collected principal 88,823 81.911 Ending Balance S 8 33 D. Capital Assets The following is a summary of the changes in capital assets during the current year. Balance January 1, 2004 Additions Dispositions Reclassify Cost Balance December 31, 2004 Land $ 9,107,226 $ 44,289 $ 52,003 $ 57,047 $ 9,156,559 Buildings and improvements 7,937,403 917,709 54,462 8,909,574 Airfield and improvements 18,656,046 2,656,039 331,033 21,643,118 Equipment 2,085,149 189,300 23,719 2,250,730 Construction in progress 458,140 410,807 (442,542) 426,405 506,804 - _ 30,887 475,917 General obligation 38,243,964 4,218,144 75,722 - 42,386,386 Accumulated depreciation Buildings and improvements (3,164,659) (250,872) (3,415,531) Airfield and improvements (8,946,026) (763,135) (9,709,161) Equipment (1,178,390) (137,657) (22,492) (1,293,555) General obligations bonds $6,265,000 $ - (13,289,075) (1,151,664) (22,492) - (14,418,247) 245,000 - Total Capital Assets $ 24,954,889 $ 3,066,480 $ 53,230 $ - $ 27,968,139 E. Long -Term Liabilities Following is a summary of changes in long -term liabilities for year 2004: 34 Balance Balance January 1, December 31, 2004 Additions Reductions 2004 General obligations bonds $6,265,000 $ - $ 830,000 $5,435,000 Revenue bonds 245,000 - 75,000 170,000 KDOCH loan payable 218,629 - 53,036 165,593 Special assessment debt 506,804 - _ 30,887 475,917 General obligation temporary notes - 3,255.000 - _3,255.000 7.235.433 $3.255.000 i� 34 The following is a detailed listing of the Authority's long -term debt including general obligation bonds and temporary notes, revenue bonds and loan payable. — Original Interest Bonds Issue Rates Outstanding General Obligation Bonds — General Obligation 1998, due 2008 $4,440,000 4.05% to 5.50% $1,770,000 General Obligation 1999 -13, due 2010 555,000 3.90% to 5.20% 320,000 General Obligation 2001 -A, due 2012 1,385,000 4.45% to 5.60% 1,170,000 — General Obligation 2002 -A, due 2012 2,635,000 2.45% to 3.70% 2,175,000 5,435,000 Revenue Bonds Leasehold revenue 1991, due 2006 $ 850,000 5.00% to 7.25% 170,000 _ Kansas Department of Commerce and Housing Loan, due 2007 $ 468,542 2% 165,593 Special assessment debt, due 2016 $ 565,235 3.19% 475,917 General Obligation Temporary Notes, $ 3,255,000 3.12% 3,255,000 due 2005 _ Total V-5-0-1,5-Al _ Interest expense in 2004 is as follows: General obligation bonds $ 238,054 Revenue bonds 12,286 Loan (KDOCH) 3,886 _ Special assessment debt 18,038 Temporary note _ 59,241 331,505 Add: Amortization of bonds costs _ 17,279 Total :� 348.784 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, 2004, $260,000 of bonds outstanding are considered defeased. 35 Annual debt service requirements to maturity for general obligation bonds to be paid with tax levies and rental revenues: Annual debt service requirements to maturity for Kansas Department of Commerce and Housing Loan to be paid from rental revenues: Bonds Interest Year Outstanding Due Total 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 490,000 82,951 572,951 2010 -2012 1,455,000 124,891 1,579,891 U 2 Annual debt service requirements to maturity for revenue bonds to be paid with rental revenues: Bonds Interest Year Outstanding Due Total 2005 $ 80,000 $ 12,285 $ 92,285 2006 90,000 6,525 _ 96,525 20 S Annual debt service requirements to maturity for Kansas Department of Commerce and Housing Loan to be paid from rental revenues: 36 Loan Interest Year Principal Due Total 2005 $ 54,109 $ 3,043 $ 57,152 2006 55,184 1,955 57,139 2007 56,300 846 _ 57,146 44 1> 36 Annual debt service requirement to maturity for Special Assessment Debt to be paid from rental revenue: — Loan Interest Year Principal Due Total — 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 37,200 12,894 50,094 2010 -2013 163,444 36,933 200,3717 — 2014 -2016 139,572 10,711 150,283 S421 Annual debt service requirements to maturity for temporary notes to be paid from rental revenues: Loan Interest _ Year Principal Due Total 2005 S3,255.M U4 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 2004 2003 Federal $19,063,324 $ 2,289,342 $ 434,7153 State 515,610 Total S 19,578,934 $ 2,289,3424 Z�? Unrestricted net assets consist of the following: December 31 2004 2003 Designations of unrestricted net assets $ 65,000 $ 50,000 Undesignated unrestricted net assets 3,382,198 2,183.330 Total unrestricted net assets 4 1 12 a 3 3X4 _ The Authority designated $65,000 to be used as an insurance increase reserve or to accelerate future debt service payments. As of December 31 2004, the reserve had been funded but not used. 37 IV. OTHER INFORMATION A. Defined Benefit Pension Plan Plan description — The Authority participates in the Kansas Public Employees Retirement System ( KPERS). The plan is a cost - sharing multiple - employer defined benefit pension plan as provided by Kansas statutes (KSA 74 -4901 et seq). KPERS provides retirement benefits, life insurance, disability income benefits and death benefits. Kansas law establishes and amends benefit provisions. KPERS issues a publicly available financial report that includes financial statements and required supplementary information. Those reports may be obtained by writing to KPERS (611 S. Kansas Avenue, Suite 100, Topeka, Kansas 66603 -3803) or by calling 1- 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 2004 was 322% for January — June and 3.82% for July through December. The Authority employer contributions to KPERS for the years ending December 31, 2004, 2003 and 2002 were $15,236, $14,490, and $12,166 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 employees, permits them to defer a portion of their salary until future years. The deferred compensation is riot 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, 2004 and 2003. 38 E. Contingent Liabilities The Authority receives significant financial assistance from numerous federal and state governmental agencies in the form of grants and state pass - through aid. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit. Any disallowed claims resulting from such audits could become a liability of the Authority. However, in the opinion of management, any such disallowed claims would not have a material effect on any of the financial statements of the Authority at December 31, 2004. 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 fortner Schilling Air Force Base (the "Base ") in Salina, Kansas. The Base was operational from 1942 to 11965 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 -17's, B -29's, B -47's and the refueling KC -97's and KC- 135's. The Army Corps of Engineers did a removal of 107 former underground storage tanks at the former Base in 1995. The Army Corps of Engineers 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 summer of 2003, the Corps of Engineers conducted additional sampling and investigation work. The Corps of Engineers was scheduled to report on the results of their work during 2004. The Corps of Engineers report is scheduled to be released during the summer of 2005. 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 three operable units 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 prior military activity. 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. 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 fixed fee as well as a 39 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 2005 2006 2007 2008 2009 Later Years Total H. Major Customers $666,033 569,503 311,320 171,562 80,420 990,453 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 from these six tenants equals 54% of operating and capital lease revenue for the year ended December 31, 2004. I. Non - Operating Income and (Expense) Net non - operating income and expense consisted of the following for the years ended December 31, 2004 and 2003: Interest expense Revenue bond 2004 2003 Mill levy $1,036,579 $ 987,970 Interest and investment income (18,038) (20,336) Financing lease 97,989 103,165 Other interest 28.960 25,475 Total 1,163,528 1,116,610 Interest expense Revenue bond (12,286) ( 22,510) General obligation bonds (238,054) (276,500) Special assessment debt (18,038) (20,336) Loan (KDOCH) (3,886) (5,154) Temporary Note (59,241) - Amortization of bond issue costs (17,279) (19,853) Total (348,784) (344,353) Net non - operating income 4 44 40 J. Commitment Under Operating Lease The Authority has entered into certain non - cancellable operating lease agreements, which expire in 2008, for the rental of office equipment. Minimum rentals, on an annual basis are as follows: Years Ended December 31 2005 $ 6,180 2006 6,180 2007 5,578 2008 2.918 20,856 41 (THIS PAGE INTENTIONALLY LEFT BLANK) 42 SUPPLEMENTAL INFORMATION N377SF I - ii II is 11 h•IP� '� I s � ^, � � 2. The Authority completed two major aircraft hangar rehabilitations during 2004. Both large hangars can be used to store overnight transient aircraft or transform to accommodate aviation events. (THIS PAGE INTENTIONALLY LEFT BLANK) 43 SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Building and land rent Agri land rent January 1 to December 31 59,570 2004 2003 OPERATING REVENUES 632,787 Airfield 218,980 Fuel flowage fees $ 235,362 $ 257,475 Hangar rent 135,785 126,133 Landing fees 5,950 6,061 Ramp rent 62,575 58,173 Total Airfield 439,672 447,842 Building and land rent Agri land rent 53,792 59,570 Building rents 609,791 632,787 Land rents 218,980 214,915 Tank rent 8,068 9,313 Total Building and Land Rents 890,631 916,585 Gain (loss) on sale of assets 59,943 (6,631) Other revenue ARFF training 4,400 2,450 Commissions 12,574 17,862 Other income 4,900 9,189 Total Other Revenue 21,874 29,501 Total Operating Revenue 1,412,120 1,387,297 (continued) 44 SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - OPERATING EXPENSES Administrative A/E, consultants, brokers 27,914 16,048 _ Airport promotion 26,840 33,087 Bad debt expense 38,709 - _ Computer network administration 5,493 4,633 Dues and subscriptions 16,700 16,267 Employee retirement 15,236 15,024 - FICA and medicare 34,018 34,189 Industrial development 20,000 20,000 Insurance, property 131,240 107,372 - Insurance, medical 108,495 104,925 Kansas unemployment tax 448 441 Legal and accounting 35,095 35,774 Office salaries 244,312 233,644 Office supplies 12,457 9,941 Other administrative 18,560 11,145 _ Postage 4,697 3,402 Property appraisals - 4,500 _ Property taxes 144,176 140,959 Special events 12,583 - Telephone 9,534 10,839 - Travel and meetings 22,262 22,874 Total Administrative Expenses 928,769 825,064 (continued) 45 SALINA AIRPORT AUTHORITY SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (continued) NON - OPERATING INCOME (EXPENSE) Mill levy January 1 to 1December 31 987,970 2004 2003 MAINTENANCE EXPENSES Interest income 28,960 Airfield maintenance 7,761 10,795 Airport security 5,731 2,905 Building maintenance 38,355 41,374 Equipment fuel and repairs 34,499 32,182 Fire services 11,455 21,111 Grounds maintenance 7,397 11,616 Maintenance salaries 222,668 230,417 Other maintenance expenses 13,554 11,184 Snow removal expense 14,102 17,379 Utilities 109,804 96,241 Total Maintenance Expenses 465,326 475,204 Total Operating Expenses 1,394,095 1,300,268 OPERATING INCOME BEFORE DEPRECIATION 18,025 87,029 DEPRECIATION EXPENSE 1,151,664 1,022,474 OPERATING PROFIT (LOSS) (1,133,639) (935,445) NON - OPERATING INCOME (EXPENSE) Mill levy 1,036,579 987,970 Interest income - capital lease 97,989 103,165 Interest income 28,960 25,475 Interest expense (331,505) (324,500) Amortization of bond costs (17,279) (19,853) Net Non - Operating Income 814,744 772,257 LOSS BEFORE CAPITAL CONTRIBUTION (318,895) (163,188) CAPITAL CONTRIBUTIONS 2,289,342 434,763 INCREASE (DECREASE) IN RETAINED EARNINGS 1,970,447 271,575 NET ASSETS, January 1 20,030,048 19,758,473 NET ASSETS, December 31 $22,000,495 $20,030,048 46 SALINA AIRPORT AUTHORITY CAPITAL EXPENDITURES January 1 to December 31 2004 AIRPORT IMPROVEMENTS Rwy 17/35 Construction AIP -22 2004 $ 2,612,539 Heaves TXW A &B joint relief Hgr 703 ramp 21,224 _ Airfield security fencing 18,776 Rwy 17/35 engineering design 2004 3,500 _ Total Airport Improvements 2,656,039 _ BUILDINGS Gutter additions & paint exterior Bldg #122 6,700 Heat Pump Geocorem SDC Unit B 1,710 — Thermostat Civil Air Patrol Bldg. #939 3,708 Hangar #509 improvements 547,833 Hangar #703 improvements 347,007 — FBO improvements - America Jet Hgr. #409 pane 6,882 HVAC improvements at Airport Terminal bldg. 1,475 Roof repair Bldg. #1101 2,394 Total Buildings 917,709 — CONSTRUCTION IN PROGRESS Textile break - arresting barrier design 31,128 Rwy 12/30 rehab design AIP -23 94,585 — Air Traffice Ctrl - Airspace study 26,750 Facility improvement Bldg #1021 A/E 121,503 Executive hangar design 18,476 — CSC design Flower Aviation 30,121 CSC site improvements 88,244 — Total Construction in Progress 410,807 (continued) 47 SALINA AIRPORT AUTHORITY CAPITAL EXPENDITURES (continued) January 1 to December 31 :2004 EQUIPMENT Multi - agency comm sys AIP 24 49,336 IC -A200 mobil VHF radio 1,034 Mobil radio Airport 1 902 Computer equipment 23,738 Model LX 178 mower 321 Mobil home, Model 2000 Schult 23,900 Mobil belt loader Model 660 1997 23,295 Range & refrigerator, Eagle Med. 1,076 Passenger stair 22,816 Two EXMark mowers 16,532 Repair 1986 IHC Dump 3,324 Heaters for tunnel at terminal 504 Benches (Petoskey) for walkway 1,868 Panel & heaters in terminal walkway 3,100 Microwave and coffee bar 157 Batteries for terminal wheelchair lift 220 Air - conditioner, terminal walkway 4,346 Coffee service service cart 685 VHF /UHF portable radios 13 ea 12,146 Total Equipment 189,300 LAND Service line repair Airport Industrial Center improvements 1,743 Building demolition #508 4,900 Building demolition Boiler House 7,750 Cox cable south industrial 4,661 Environmental 2004 6,591 Cox cable south industrial 18,644 Total Land 44,289 TOTAL CAPITAL EXPENDITURES $ 4,218,144 48 SALINA AIRPORT AUTHORITY GENERAL OBLIGATION BONDS SERIES 1998 - A December 31, 2004 Date of issue: June 29, 1998 Amount of issue: $4,440,000 Interest rate: 4.05% to 5.50% _ Maurity date: September 1, 2008 Principal paid: $2,670,000 Outstanding balance: $1,770,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2005 $ 75,662 $ 445,000 2006 56,972 445,000 2007 38,060 440,000 2008 19,140 440,000 $1 89,834 $1,770,000 49 SALINA AIRPORT AUTHORITY GENERAL OBLIGATION REFUNDING BONDS SERIES 1999 - B December 31, 2004 Date of isue: June 29, 1999 Amount of issue: $ 555,000 Interest rate: 3.900% to 5.20% Maturity date: September 1, 2010 Principal paid: $ 235,000 Outstanding balance: $ 320,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2005 $ 15,872 $ 40,000 2006 14,032 30,000 2007 12,623 55,000 2008 9,955 60,000 2009 6,955 65,000 2010 3,640 70,000 $ 63,077 $ 320,000 50 SALINA AIRPORT AUTHORITY GENERAL OBLIGATION IMPROVEMENT BONDS SERIES 2001 - A December 31, 2004 Date of issue: October 31, 2001 Amount of issue: $ 1,385,000 Interest rate: 4.4:5% to 5.60% _ Maturity date: September 1, 2012 Principal paid: $ 215,000 Outstanding balance: $ 1,170,000 Schedule of Bond Interest and Princinal Payments Due in Bond Bond Year Interest Princinal 2005 $ 60,522 $ 120,000 2006 54,222 125,000 2007 48,660 135,000 2008 42,316 140,000 2009 35,316 150,000 2010-2012 56,181 500,000 $297,217 $ 1,170,000 51 SALINA AIRPORT AUTHORITY GENERAL OBLIGATION IMPROVEMENT BONDS SERIES 2002 - A December 31, 2004 Date of issue: August 29, 2002 Amount of issue: $ 2,635,000 Interest rate: 2.45% to 3.70% Maturity date: September 1, 2012 Principal paid: $ 460,000 Outstanding balance: $ 2,175,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2005 $ 68,378 $ 245,000 2006 61,640 250,000 2007 55,515 255,000 2008 48,630 265,000 2009 40,680 275,000 2010-2012 65,070 885,000 $339,913 $ 2,175,000 52 SALINA AIRPORT AUTHORITY LEASEHOLD REVENUE BONDS SERIES 1991 December 31, 2004 Date of issue: November 1, 1991 Amount of issue: $ 850,000 Interest rate: 5.00% to 7.25% Maturity rate: September 1, 2006 Principal paid: $ 680,000 Outstanding balance: $ 170,000 Schedule of Bond Interest and Principal Payments Due in Bond Bond Year Interest Principal 2005 $ 12,285 $ 80,000 2006 6,525 90,000 $ 18,810 $ 170,000 53 SALINA AIRPORT AUTHORITY KANSAS DEPARTMENT OF COMMERCE AND HOUSING, LOAN PAYABLE December 31, 2004 Date of loan: October 1, 1997 Amount of loan: S 468,542 Interest rate: 2% Maturity date: October 1,2007 Principal paid: S 302,949 Outstanding balance: $ 165,593 Schedule of Loan Interest and Principal Payments Due in Loan Loan Year Interest Principal 2005 $ 3,043 `6 54,109 2006 1,955 55,184 2007 846 _ 56,300 $ 5,844 $ 165,593 54 _ SALINA AIRPORT AUTHORITY SPECIAL ASSESMENT DEBT - STREET AND UTILITY IMPROVEMENT December 31, 2004 Date of loan: September 11, 2002 Amount of loan: $ 565,235 Interest rate: 3.79% Maturity date: October 1, 2016 Principal paid: $ 89,318 _ Outstanding balance: $ 475,917 _ Schedule of Loan Interest and Principal Payments Due in Loan Loan — Year Interest Principal 2005 $ 18,038 $ 32,056 — 2006 16,824 33,271 2007 15,562 34,533 2008 14,254 35,841 — 2009 12,894 37,200 2010 -2014 42,223 208,249 2015 -2016 5,421 94,767 $ 125,216 $ 475,917 55 lirml SALINA AIRPORT AUTHORITY TEMPORARY NOTES December 31, 2004 Date of loan: June 1, 2004 Amount of loan: :$ 3,255,000 Interest rate: 3.12% Maturity date: December 1, 2005 Principal paid: ,� Outstanding balance: $ 3,255,000 Schedule of Loan Interest and Principal Payments Due in Loan Loan Year Interest Principal 2005 S 152,334 :$ 3,255,000 56 Insurance Policy Employers Insurance of Wausau on behalf of USAIG Pol. #WCC- Z91- 547496 -014 National Union Fire Ins. Co. of Pittsburgh, PA — Pol. #AP3229456 -10 The Travelers Insurance Co. — Pol. #P630594X3132- TIL -04 — Pol. #BAJBM21696X7490- TIL -04 Pol. #810306K4932TIL04 St. Paul Fire & Marine — Pol. #IM08002895 ITT Hartford — Pol. #37BPEAG4896 Steadfast Insurance Company Pol. #3746625 -00 Great American Alliance Ins. Co. Pol. # KST 788- 29 -33 -10 — Gemini Insurance Company Pol. #UGL0000015 -00 SALINA AIRPORT AUTHORITY INSURANCE IN FORCE December 31, 2004 Type of Coverage Workmen's Compensation and Employer's Liability Bodily Injury & Liability Hangar Keepers Deluxe Property- Buildings Business Income Boiler & Machinery (Property Damage) Business Income Vehicles & Equipment Liability Medical payments Uninsured motorists Inland Marine - Equipment 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 Amount of Coverage $ 500,000 $ 500,000 $ 500,000 $13,486,643 $ 1,344,105 $ 4,551,745 $ 800,000 $ 1,000,000 $ 5,000 $ 1,000,000 $ 2,157,229 $ 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 57 (THIS PAGE INTENTIONALLY LEFT BLANK) Ga-. STATISTICAL SECTION _ - - -- snr � 07 U 3.... s The two fixed base operators at the Salina Municipal Airport continue to provide outstanding service to their customers. In April 2004, Aviation International News ranked America Jet at SLN as one of the top six FBOs in the country. In May 2004, Flower Aviation was ranked fourth best FBO in the country by the Professional Pilot magazine. N E 0 U 0) O w O Q r 0 CL Q c0 c U 0 55 d M � co O M � � N t` i m 0) ' T T d N T O N T M T M Ll7 N ch N CD 6 CV OD ICT L6 co 6i N y� t-: N r..r 0 O � r N M M 0 Y. Co M M > � O N V% JN � _ M O T T T T T v), T 69 T T 69 T v), T � N 0 M 69 69 6-i 69 N O LO 06 (MO O O N E 0 U 0) O w O Q r 0 CL Q c0 c U 0 55 L M co O N T O t` i •V GO ti M T 0 Q) N T M T M Ll7 N OO T Q a, a co 6i N y� N K3 N d9J EA 69 Efi E� N GS 0 Y. N V% JN � _ M O � O O) LA LO T � N N N O LO 06 (MO O O .� r �O O 0), � V), u) C NT LO M 'T f O 't O N 0�, t � O T N O O OEii O Loll T � 69 � � vj �' U) J N M T r co � (O O li d M Ili 00 M N 0) O) M LI O r - N N N N N N Q9, 69 EA 6191 69 69 6Fi 69 69 (A LL M fo (O (O C) N CD 0 00 0 0 O) 0 C LOi) � N I T T to 0) 00 C d co co r— C14 T M °0 0000 N> O O O N O O �: W M li T 69 T 69 T 69 T 69 T 69 T 69 T 69 T EA T 69 T 6q Z TW s� c aF- En C W } V L1j (O t— 00 0 0) O o T °o N °o M o ITT °o Co a0 F(D �) rn T 0) T 0) T 0) T T N N N N N N E 0 U 0) O w O Q r 0 CL Q c0 c U 0 55 Salina Airport Authority OPERATING EXPENSE HISTORY Ten Years Ended December 31, 2004 .0 Office & Total Administrative Maintenance Operating Fiscal Year Expense Expense Expense 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 2004 $928,679 $465,416 $1,394,095 .0 Salina Airport Authority FEDERAL FINANCIAL ASSISTANCE HISTORY Ten Years Ended December 31, 2004 Federal Aviation State Commerce & Administration Housing Airport Community Development Fiscal Year Improvement Grants Block C ;rant 1995 $3,210,933 ' 1996 $2,006,786 ' 1997 $1,640,967 ' 1998 $1,026,918 $841,700 1999 ($7,920) $189,520 2000 2001 2002 $144,005 ' 2003 $434,763 2004 $2,289,342 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. AIP No. 18 closeout resulted in the SAA refunding the Federal Aviation Administation in the amount of $1 1,132. The SAA received a final reimbursment in the amount of $3,212 to closeout AIP No. 19. 61 y STATISTICAL — ^' y C:r oN0 N 0t-0 OHO kn oo 00 N N N W a o rA +..+ QM — V G� � Lr oo O o0 y V a M 69 N 69 et 6"9 O a — U M M ) 00 00 00 00 N 00 00 N M O y O O M v'1 M N 00 M NO vi .Li �O M O p. p. O N b9 Fi3 69 bf3 69 69 — 6� L — � O _ 00 rr N a 1m -0I O T M 00 M 00 a' N C, On "t r-- N Ic N M 4 4 ff3 fi3 6A 6A b9 64 69 69 — Q N N N N O O cl� 0�0 vV1in _ O` ID Ob9 69 IS 69 69 69 b9 � 5r9 O; 69 — � W � y a aj v o o CD o0 0 O 0 O O — O O^ a` M M A M .M-+ N N "T v) 7 Ol 69 69 69 fH fi? 69 69 Os 69 ,, � W — p W y O Q C C C a > V 6 GC w) �c � 00 Q\ O N M e} N 62 _ Salina Airport Authority REVENUE BOND COVERAGE Ten Years Ended December 31, 2004 Fiscal Pledged Revenue Bond Year Revenue Debt Service 1995 $189,446 $163,215 1996 $189,446 $163,790 1997 $189,446 $168,962 1998 $189,446 $163,938 1999 $189,446 $163,841 2000 $189,446 $185,013 — 2001 $189,446 $164,420 2002 $189,446 $158,320 2003 $189,446 $151,923 2004 $189,446 $150,283 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 Coverage 1.16 1.16 1.12 1.16 1.16 1.02 1.15 1.20 1.25 1.26 63 Salina Airport Authority Principal Customers Year Ended December 31, 2004 % of Operating & Direct Company Revenue Finance Lease Revenue Raytheon Aircraft Co. 240,595 15.151% Kansas State University at Salina 232,802 15.10% Flower Aviation 144,491 9.317% JRM Enterprises, Inc, d /b /a America Jet 133,586 8.67% The Schwan Food Company 85,182 5.53% Two Rivers Vending Co.,Inc. 49,325 3.20% Geocore Services 37,920 2.46% Aerospace Systems & Technologies, Inc. 37,205 2.41% Federal Aviation Administration 22,350 1.45% Salina Vortex Corporation 21,588 1.40% Kejr, Joe 18,442 1.20% Builders Choice Concrete 17,490 1.13% Professional Flight Training, LC 17,244 1.12% Waddle's Manufacturing & Machine 15,875 1.03% Laas, Brent and Mark 13,429 0.87% Hertz Corporation 13,421 0.87% AcuStep, Inc. 13,200 0.86% Bostater Realty, Inc. 13,002 0.84% WWC License LLC 12,860 0.83% Triangle Trucking 12,540 0.81% Palmer Trucking Co., 12,120 0.79% Raytheon Aircraft Parts Inven. & Distr. 12,000 0.78% Salina Auto Auction 11,964 0.78% Scrommel Resource Management, Inc. 11,916 0.77% Mesa Airlines /Air Midwest 10,826 0.70% Salina Snack Sales 9,720 0.63% Scientific Engineering 8,700 0.56% Land of OZ Meats 8,340 0.54% L & R Farms 8,268 0.54% Blue Beacon International 8,213 0.53% Total Operating Lease and Direct Finance Lease Revenue for 2004 was $1,541,623 Source: Salina Airport Authority Records M r CT oo to N r 'IT r- en V- 00 N y i L .r pA w -°� oMO O vMi C c 00 M kn 0 O y kn V1 V'1 V1 V1 �1 V'1 �D t T r. Y rN V c 0 U C i 7 O 65 0 C w f L r h v G C z Q r r N �n vl N N O CD C1 � N O Q N N N N N • Z 1 A ..r �Nr N N r oho M � c V �.+ N N M N Wl CT 00 M Wl 00 00 U ►.� C/� •iyi � �h M M � V1 l0 � Vl � G ^ Fi a s A W F,y .n N "!T Vl C) O \D •n 00 N c C N o0 M N O O O 4 Ctl N N N N N N N N -,T N N j 'i ` W s W W t r- r4 00 °O. M o � 00 o E oro E.y ON Q U N N N N N N N N N z � M .� o W L � co � G s Q 4 > d lz or'J r- Q i h CT CT 00 0T O CT O O O O O O Q t O O O Y rN V c 0 U C i 7 O 65 Salina Airport Authority MILL LEVY REVENUE Ten Years Ended December 31, 2004 Mill Levy Fiscal Year Revenue 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 2004 $1,036,579 Source: Salina Airport Authority Records ^, — Salina Airport Authority AIR TRAFFIC, FUEL FLOWAGE AND ENPLANEMENT TRENDS Ten Years Ended December 31, 2004 Scheduled Fiscal Air Traffic Fuel Flowage Air Service Year Operations Gallons Enplanements 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 2004 81,465 3,843,330 2,974 Note: One air traffic operation equals one aircraft takeoff and landing Source: Salina Airport Authority Records 67 Salina Airport Authority MAJOR EMPLOYERS IN THE SALINA /SALINE COUNTY AREA December 31, 2004 Maior Private Employers Approx. # Type of Company Employees Business Tony's Pizza 2,000 Frozen Foods Manufacturer Salina Reg. Med. Center 1,082 Health Care Exide Corporation 800 Battery Manufacturing Great Plains Manufacturing 650 Farm Implements & Landscaping Equipment Philips Lighting 600 Fluorescent Lamp Manufacture Solomon Corp. 300 Electrical Equipment Lock/Line 420 Cell Phone Insurance Raytheon Aircraft Co. 234 Aircraft Sub - assemblies Manuf. Eldorado National, Inc. 255 Medium & Small Shuttle Buses Wal -Mart 183 Retail Crestwood Cabinets, Inc. 160 Custom Made Cabinets OCCK 150 Plastic products, Subcontracting Advance Auto/Parts America 150 Warehouse Distribution KASA/KASA Fab 140 Electronic Controls & Steel Fabrication Lowe's Home Improvement 140 Home Improvement Retail Exline 130 Structural steel fabrication Salina Journal 130 Newspaper Publishing Sunflower Bank 120 Bank Premier Pneumatics 115 Pneumatic Convey Equipment Blue Beacon Int'l 104 Truck Wash PKM Steel 100 Steel Fabrication Maior Public Employers Approx. # Public Orp-anizations Employees Type of Public Body Unified School District #305 935 School System City of Salina 471 City Government Saline County 233 County Government US Postal Service 128 Postal Service Kansas State University - Salina 126 Engineering Technology & Aviation Technology Source: Salina Area Chamber of Commerce Salina Airport Authority SALINE COUNTY POPULATION, DEMOGRAPHIC AND LABOR STATISTICS Year Population 1994 52,240 1995 52,892 1996 53,140 1997 53,168 _ 1998 53,182 1999 53,485 2000* 53,597 v 2001 53,785 2002 53,902 2003 53,737 Saline County Population 54,500 54,000:,8 A 53 :00p0000 0 52;000 51,500 51,000 "tea �c6p �co �Ce � CO, Year Note: * Indicates decennial census 100% population counts. Other counts are population estimates. Demographics Median Age (2000) 36.1 _ Number of Households (2000) 21,436 Median Household Income (2000) $39,862 Per Capita Income (200 1) $28,168 Employment and Civilian Labor Force (Annual Average) Year Civilian Labor Force Employed Unemployed 1994 27,748 26,679 1,069 1995 29,580 28,376 1,204 1996 29,966 28,800 1,166 1997 30,178 29,082 1,096 1998 30,420 29,365 1,055 1999 30,906 30,144 762 2000 30,559 29,703 856 2001 30,093 29,037 1,056 2002 30,569 29,462 1,107 2003 30,866 29,557 1,309 2004 31,897 30,532 1,365 Sources: Economagic.com - Unemployment Levels Real Estate Center - Saline County Employment Employment and Civilian Labor Force 35,000 30,000 25,000 20,000 .• Salina Airport Authority SALINE COUNTY EMPLOYMENT DATA Annual Averaee Unemployment - 1994 -2004 Unemployment veo.. Unmmnlnvment Rate 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 1,309 4.00% 2004 1,365 3.70% Saline County Unemployment Rate History 6.00% ,. 4 zi .00% 2.00% 0.00% o0 0A o0 00 00 Emolovment by Industr 2000 1990 Services 11,135 8,935 Retail Trade 7,864 6,332 Manufacturing 6,967 5,969 Government & Gov't Services 4,422 3,823 Construction (D) 1,715 Finance, Insurance, Real Estate 2,208 1,491 Wholesale Trade 1,714 1,814 Transportation 1,939 1,222 Farm 771 851 Ag. Services (D) 265 Mining (D) 262 (D)= suppressed to avoid disclosure Sources: Institute for Public Policy and Business Research University of Kansas, Salina /Saline County Profile Report United States Census Bureau 70 (THIS PAGE INTENTIONALLY LEFT BLANK) 71 OTHERINDEPENDENT AUDITORS' REPORTS SECTION SLNA v 1 a t i o n �A��= S"," Center During 2004, the Authority launched the Salina Aviation Service Center campaign. The SLN Aviation Service center offers excellent hangar facilities and sites for new construction. In partnership with the City of Salina and the State of Kansas, numerous incentives are available to qualified firms. CLUBINESL RETTELE Corti /ied Public Ammutnu Robert 1. Clubine, C.P.A. David A. Rettele, C.P.A. Jay D. Langley, C.P.A. Jon K. Bell, C.P.A. Leslie M. Corbett, C.P.A. Stacy J. Sokol, C.P.A. Mardi K. Fox, C.P.A. Delores K. Longenecker, C.P.A, 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 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS To the Board of Directors Salina Airport Authority We have audited the basic financial statements of Salina Airport Authority as of and for the years ended December 31, 2004 and 2003, and have issued our report thereon dated May 3, 2005. 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. Internal Control Over Financial Reportin>? 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 basic financial statements and not to provide an opinion 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 reportable 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 caused by error or fraud in amounts that would be material in relation to the basic 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether Salina Airport Authority's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and contracts, grant agreements noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. 72 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 OLJ'��� �^-��" a(� May 3, 2005 73 C 7 M REPORT REPORT ON COMPLIANCE WITH REQUIREMI3NTS RLUB APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -133 C- ni /ied Public A=mumu _ 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 Robert I. Clubine, C.P.A. (OMB) Circular A -133 Compliance Supplement that are applicable to each of its David A. Rettele, C.P.A. major federal programs for the year ended December 31, 2004. Salina Airport Jay D. Langley, C.P.A. — Jon K. Bell, C.P.A. Authority's major federal programs are identified in the summary of auditors' Leslie M. Corbett, C.P.A. results section of the accompanying schedule of findings and questioned costs. Stacy J. Sokol, C.P.A. Compliance with the requirements of laws, regulations, contracts and grants _ applicable to each of its major federal programs is the responsibility of Salina Marci K. Fox, C.P.A. Delores K. Longenecker, C.P.A. Airport Authority's s management. Our responsibility is to express an opinion on John T. Millikin, C.P.A. Salina Airport Authority's compliance based on our audit. Linda A. Suelter, C.P.A. _ 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 -133 require that we plan and perform the audit 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. 218 South Santa Fe In our opinion, Salina Airport Authority complied in all material respects, with the P.O. Box 2267 requirements referred to above that are applicable to each of its major federal Salina, Kansas _ 67402 -2267 ro ams for the year ended December 31, 2004. p y Internal Control Over Compliance Salina 785 / 825 -5479 The management of Salina Airport Authority is responsible for establishing and Salina Fax maintaining effective internal control over compliance with requirements of laws, — 785 / 825 -2446 regulations, contracts and grants applicable to federal programs. In planning and Ellsworth performing our audit, we considered Salina Airport Authority's :internal control 785 / 472 -3915 over compliance with requirements that could have a direct and material effect on a — Ellsworth Fax 785 / 472 -5478 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. 74 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 reportable 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 caused by error or fraud 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 operation 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 cjj.)�� �� P&UJ_4' May 3, 2005 75 SALINA AIRPORT AUTHORITY — Salina, Kansas SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2004 _ Federal Grantor / Pass - through Grantor / Program or Cluster Title — U.S. Department of Transportation Airport Improvement Program Schedule 1 Pass - through Federal Entity CFDA Identifying Federal Number Number Expenditures 20.106 N/A $ 2,289,342 See notes to the schedule of expenditures of federal awards. 76 SALINA AIRPORT AUTHORITY Salina, Kansas NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2004 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 of OMB 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. 77 SALINA AIRPORT AUTHORITY Salina, Kansas Schedule 2 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the Year Ended December 31, 2004 There are no prior audit findings. WE:3 SALINA AIRPORT AUTHORITY Salina, Kansas Schedule 3 SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended December 31, 2004 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 $500,000. 7. The Salina Airport Authority was determined to be a low risk auditee. FINDINGS - FINANCIAL STATEMENTS AUDIT None. 79 SALINA AIRPORT AUTHORITY Salina, Kansas Schedule 4 CORRECTIVE ACTION PLAN For the Year Ended December 31, 2004 None required. M A 1r 'Otrtt SA L INA Ynd4az%u- d- mom - The Authority completed a facility renovation design during 2004 for this 66, 000 sq. ft. manufacturing building that will _ become the Kansas Army National Guard Readiness Sustainment Maintenance Site.