9980000 okaloosa county, florida rbc capital markets

Transcription

NEW ISSUE ‑FULL BOOK ENTRY
Ratings: S&P: AA (Radian Insured)
In the opinion of Bond Counsel, interest on the Series 2007 Bonds is not excludable from gross income
for federal income tax purposes.
$9,980,000
OKALOOSA COUNTY, FLORIDA
Taxable Airport Revenue Bonds, Series 2007
Dated: Date of Delivery
Due: October 1, as shown on the inside cover
The Series 2007 Bonds are being issued by Okaloosa County, Florida (the “County”) to finance the
development and construction of a new rental car facility and related improvements at Okaloosa Regional Airport,
Eglin Air Force Base, Okaloosa County, Florida. The Series 2007 Bonds are being issued as fully registered Bonds
in denominations of $5,000 or any integral multiple thereof pursuant to the provisions of a Master Indenture of
Trust (the “Master Indenture”), as supplemented by a First Supplemental Indenture, both dated as of August 1,
2003, and as further supplemented by a Second Supplemental Indenture dated as of December 1, 2007, between
the County and The Bank of New York, New York, New York, as successor trustee (the “Trustee”). The Master
Indenture, as amended and supplemented, is herein sometimes collectively called the “Indenture”. Interest
on the Series 2007 Bonds is payable on April 1 and October 1 of each year, commencing April 1, 2008 (each,
an “Interest Payment Date”). The Series 2007 Bonds will initially be registered in the name of Cede & Co. as
registered owner and nominee for The Depository Trust Company, New York, New York (“DTC”). Purchasers of
the Series 2007 Bonds (the “Beneficial Owners”) will not receive physical delivery of the Series 2007 Bonds. As
long as Cede & Co. is the registered owner as nominee of DTC, payment of the principal of and interest on the
Series 2007 Bonds will be made directly to such registered owner which will in turn remit such payments to DTC
Participants and Indirect Participants for subsequent disbursement to the Beneficial Owners.
The Series 2007 Bonds are subject to redemption prior to maturity, as more fully described herein.
The Series 2007 Bonds will be payable from and secured by a lien upon and pledge of the Net Revenues
derived from the operation by the County of its Airport System and a Customer Facility Charge imposed on all
rental car contracts issued for the rental of passenger motor vehicles at Okaloosa Regional Airport (the “Airport”).
The lien on the Net Revenues is on a parity with the lien thereon of the County’s Airport Revenue Bonds, Series
2003 (AMT), currently outstanding in the aggregate principal amount of $10,405,000. See “SECURITY FOR
THE SERIES 2007 BONDS” “herein.
THE SERIES 2007 BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE A DEBT,
LIABILITY OR OBLIGATION OF THE STATE OF FLORIDA, THE COUNTY, OR ANY OTHER POLITICAL
SUBDIVISION THEREOF (OTHER THAN A SPECIAL OBLIGATION OF THE COUNTY) AND NEITHER
THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OR THE COUNTY OR ANY OTHER
POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2007 BONDS OR
THE INTEREST THEREON.
Payment of principal of and interest on the Series 2007 Bonds will be insured in accordance with the terms
of a financial guaranty insurance policy to be issued simultaneously with the delivery of the Series 2007 Bonds
by Radian Asset Assurance Inc. (“Radian”). See “FINANCIAL GUARANTY INSURANCE” herein.
SEE THE INSIDE COVER PAGE FOR MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES,
YIELDS AND CUSIP NUMBERS.
The Series 2007 Bonds are offered for delivery when, as and if issued and received by the Underwriters,
subject to the approval of legality by Livermore, Freeman & McWilliams, P.A., Jacksonville Beach, Florida, Bond
Counsel, and by Nabors, Giblin & Nickerson, P.A., Tampa, Florida, Disclosure Counsel. Certain legal matters
will be passed upon for the County by its County Attorney, John R. Dowd, Esq. It is expected that the Series 2007
Bonds will be available for delivery through DTC in New York, New York on or about December 13, 2007.
This cover page is not intended to be a summary of the terms or security provisions of the Series 2007
Bonds. Investors are advised to read the entire Official Statement to obtain information essential to the making
of an informed investment decision.
RBC CAPITAL MARKETS
Dated: November 29, 2007
$9,980,000
TAXABLE AIRPORT REVENUE BONDS, SERIES 2007
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES
YIELDS AND INITIAL CUSIP NUMBERS
$1,535,000 6.00 % Term Bonds Due October 1, 2014, Yield 6.50% Initial CUSIP No. 678183BH6
$1,770,000 6.25%Term Bonds Due October 1, 2019, Yield 6.80% Initial CUSIP No. 678183BK9
$6,675,000 7.00% Term Bonds Due October 1, 2030, Yield 7.50% Initial CUSIP No. 678183BJ2
1804 Lewis Turner Boulevard,
Suite 100
Ft. Walton Beach, Florida 32547
(850) 651-7105
THE BOARD OF COUNTY COMMISSIONERS
Don R. Amunds, Chairman
James Campbell, Vice Chairman
Sherry Campbell, Commissioner
Bill Roberts, Commissioner
John Jannazo, Commissioner
CLERK OF THE CIRCUIT COURT
Don W. Howard
COUNTY ADMINISTRATOR
James D. Curry
AIRPORTS DIRECTOR
Jerry L. Sealy A.A.E.
COUNTY ATTORNEY
John R. Dowd, Esq.
FINANCE OFFICER
Gary J. Stanford
FINANCIAL ADVISOR
Fullerton & Friar, Inc.
Largo, Florida
BOND COUNSEL
Livermore, Freeman & McWilliams, P.A.
Jacksonville Beach, Florida
DISCLOSURE COUNSEL
Nabors, Giblin & Nickerson, P.A.
Tampa, Florida
AIRPORT CONSULTANT
Ricondo & Associates, Inc.
Cincinnati, Ohio
[THIS PAGE INTENTIONALLY LEFT BLANK]
No dealer, broker, salesman or other person has been authorized by the County to give any
information or to make any representation with respect to the Series 2007 Bonds other than those
contained in this Official Statement, and if given or made, such information or representations
must not be relied upon as having been authorized by any of the foregoing. This Official Statement
does not constitute an offer to sell nor the solicitation of an offer to buy, nor will there be any sale
of the Series 2007 Bonds by any person in any jurisdiction in which it is unlawful for such person
to make such offer, solicitation or sale. The information set forth herein has been obtained from the
County and other sources which are believed to be reliable, and while not guaranteed as to
completeness or accuracy, is believed to be correct. The Underwriters have reviewed the
information in this Official Statement in accordance with and as a part of their responsibilities to
investors under federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriters do not guarantee the accuracy or completeness of such
information. Any statements in this Official Statement involving estimates, assumptions and
matters of opinion, whether or not expressly so stated, are intended as such and are not
representations of fact, and the County expressly makes no representation that such estimates,
assumptions or opinions will be realized or fulfilled. The information and expressions of opinion
stated herein are subject to change without notice. The delivery of this Official Statement will not,
under any circumstances, create any implication that there has been no change in the affairs of the
County since the date hereof.
This Official Statement contains certain projections and estimates, as well as assumptions
made by the County and the Airport Consultant based upon information currently available to the
County and the Airport Consultant. When used in this Official Statement, the words
"anticipate," "estimate," "expect" and similar expressions are intended to identify projections and
estimates. Such statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated or expected. The
assumptions and expectations concerning the receipt in future years of the Revenues and CFC
Revenues (as such terms are defined herein) that secure the Series 2007 Bonds are subject to
various uncertainties that may adversely affect the amount of Revenues or CFC Revenues
collected by the County.
THE SERIES 2007 BONDS HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS
CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE
SERIES 2007 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE
SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2007 BONDS
HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM
REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE
REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR
ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 2007
BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT.
ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
References herein to laws, rules, regulations, resolutions, agreements, reports and other
documents do not purport to be comprehensive or definitive. All references to such documents are
qualified in their entirety by reference to the particular document, the full text of which may
contain qualifications of and exceptions to statements made herein. Where full texts have not
been included as appendices to this Official Statement they will be furnished on request from Jerry
L. Sealy, A.A.E., Airports Director, Okaloosa County Airports, 1701 State Road 85, Eglin Air
Force Base, Florida 32542-1413, Telephone No. (850) 651-7160.
OTHER THAN WITH RESPECT TO INFORMATION CONCERNING RADIAN
ASSET ASSURANCE INC. CONTAINED UNDER THE CAPTION "FINANCIAL
GUARANTY INSURANCE" HEREIN AND IN APPENDIX F HEREIN, NONE OF THE
INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED
BY RADIAN ASSET ASSURANCE INC., AND RADIAN ASSET ASSURANCE INC.
MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (I) THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION OR; (II) THE VALIDITY OF
THE SERIES 2007 BONDS.
TABLE OF CONTENTS
Page
INTRODUCTION ...........................................................................................................................1
DESCRIPTION OF THE SERIES 2007 BONDS...........................................................................2
General.........................................................................................................................................2
Book-Entry Only System.............................................................................................................3
Redemption Provisions ................................................................................................................5
SECURITY FOR THE SERIES 2007 BONDS ............................................................................11
Limited Obligations ...................................................................................................................11
Net Revenues .............................................................................................................................11
Series 2003 Bonds; Pledged PFC Revenues..............................................................................12
Pledged CFC Revenues .............................................................................................................12
Rate Covenant............................................................................................................................13
Debt Service Reserve Fund........................................................................................................14
Additional Bonds .......................................................................................................................15
FINANCIAL GUARANTY INSURANCE...................................................................................17
FLOW OF FUNDS ........................................................................................................................22
Revenues....................................................................................................................................22
Customer Facility Charge Revenues..........................................................................................24
Construction Fund......................................................................................................................25
THE AIRLINE AGREEMENTS...................................................................................................25
THE COUNTY ..............................................................................................................................26
Background................................................................................................................................26
Population ..................................................................................................................................26
Governing Body.........................................................................................................................26
Budgetary Process......................................................................................................................27
Annual Audit..............................................................................................................................27
Description of Financial Practices .............................................................................................27
Investment Policy ......................................................................................................................28
i
OKALOOSA REGIONAL AIRPORT ..........................................................................................28
General.......................................................................................................................................28
Management...............................................................................................................................29
Service Area...............................................................................................................................30
Airfield Facilities .......................................................................................................................33
Terminal Facilities .....................................................................................................................33
Support Facilities .......................................................................................................................33
Other Airports ............................................................................................................................35
Airlines Serving the Airport ......................................................................................................35
Enplanements.............................................................................................................................35
Airline Market Share .................................................................................................................36
Top 10 Origin and Destination Markets ....................................................................................38
Aircraft Operations ....................................................................................................................38
Landed Weight...........................................................................................................................39
Passenger Facility Charges ........................................................................................................40
HISTORICAL OPERATING RESULTS......................................................................................42
Management Discussion of Financial Results ...........................................................................43
THE 2007 PROJECT.....................................................................................................................43
REPORT OF THE AIRPORT CONSULTANT............................................................................45
INVESTMENT CONSIDERATIONS ..........................................................................................48
General.......................................................................................................................................48
General Factors Affecting Airline Activity at the Airport.........................................................48
General Factors Affecting Authority and Airline Revenues .....................................................51
Operating Results and Financial Condition of Airlines.............................................................51
Effect of Airline Bankruptcy .....................................................................................................53
General Financial Condition of Certain Airlines Serving the Airport.......................................53
Federal Regulation Regarding Rates and Charges Disputes .....................................................54
Capacity of National Air Traffic Control and Airport Systems.................................................55
Uncertainties of Projections and Assumptions ..........................................................................55
Availability of CFCs..................................................................................................................55
LITIGATION.................................................................................................................................56
ii
APPROVAL OF LEGALITY........................................................................................................56
TAX MATTERS............................................................................................................................57
RATINGS ......................................................................................................................................58
FINANCIAL ADVISOR ...............................................................................................................59
UNDERWRITING ........................................................................................................................59
FINANCIAL STATEMENTS .......................................................................................................59
DISCLOSURE MATTERS ...........................................................................................................59
Certificate as to Official Statement............................................................................................59
Continuing Disclosure ...............................................................................................................60
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
EXCERPTS FROM FINANCIAL STATEMENTS OF THE COUNTY
RELATING TO THE AIRPORTS SYSTEM ENTERPRISE FUND FOR
THE FISCAL YEAR ENDED SEPTEMBER 30, 2006
REPORT OF THE AIRPORT CONSULTANT
FORMS OF THE MASTER INDENTURE OF TRUST, THE FIRST
SUPPLEMENTAL
INDENTURE
AND
THE
SECOND
SUPPLEMENTAL INDENTURE
FORM OF BOND COUNSEL OPINION
FORM OF CONTINUING DISCLOSURE CERTIFICATE
SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY
iii
OFFICIAL STATEMENT
Relating to
$9,980,000
Okaloosa County, Florida
INTRODUCTION
The purpose of this Official Statement, which includes the cover page and appendices
hereto, is to furnish information concerning Okaloosa County, Florida (the "County"), its
Airports System and certain other information in connection with the sale by the County of its
$9,980,000 Taxable Airport Revenue Bonds, Series 2007 (the "Series 2007 Bonds"). All
capitalized terms used herein and not otherwise defined shall have the meanings set forth in
APPENDIX C.
The Series 2007 Bonds will be issued pursuant to Part I of Chapter 125, Chapter 332,
and Chapter 159, Part VII and Section 218.385, Florida Statutes, as amended from time to
time, and other applicable provisions of law (the "Act"), and a Master Indenture of Trust (the
"Master Indenture"), as supplemented by a First Supplemental Indenture, each dated as of
August 1, 2003, by and between the County and JP Morgan Chase Bank, as trustee, and as
further supplemented by the Second Supplemental Indenture (the "Second Supplemental
Indenture"), by and between the County and The Bank of New York, New York, New York, as
successor trustee (the "Trustee"), dated as of December 1, 2007 (collectively called the
"Indenture"). The Series 2007 Bonds are to be issued and secured by a pledge of and lien upon
the Trust Estate consisting primarily of Net Revenues derived from the operation of the
County's Airports System, under the Master Indenture, including a lien upon and pledge of a
portion of the revenues derived from a Customer Facility Charge (the "Pledged CFC
Revenues") on all rental car contracts issued for the rental of passenger motor vehicles at the
Okaloosa Regional Airport (the "Airport"). The County has previously issued its Airport
Revenue Bonds, Series 2003 (AMT) (the "Series 2003 Bonds"), secured by the Net Revenues
on a parity with the lien thereon of the Series 2007 Bonds. The Series 2003 Bonds are also
secured by revenues derived from a passenger facility charge (“PFC”) but are not payable from
the Pledged CFC Revenues. The Series 2007 Bonds are not secured by the PFC Revenues.
See "SECURITY FOR THE SERIES 2007 BONDS". The Series 2007 Bonds, the Series 2003
Bonds and any additional bonds which may be issued under the Indenture on a parity therewith
("Additional Bonds") are herein sometimes collectively referred to as the "Bonds".
THE SERIES 2007 BONDS AND THE INTEREST THEREON DO NOT
CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE STATE, THE COUNTY,
OR ANY OTHER POLITICAL SUBDIVISION THEREOF (OTHER THAN A SPECIAL
OBLIGATION OF THE COUNTY) AND NEITHER THE FAITH AND CREDIT NOR THE
TAXING POWER OF THE STATE, THE COUNTY OR ANY OTHER POLITICAL
SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2007
BONDS OR THE INTEREST THEREON.
1
The County is a political subdivision of the State of Florida, located midway between
Pensacola and Panama City in the State's panhandle area. The County provides general
governmental services to its citizens, including the operation of its Airports System, which
consists primarily of the Okaloosa Regional Airport (the "Airport") located on Eglin Air Force
Base on property leased from the U.S. Department of the Air Force and two general aviation
airports, the Destin-Ft. Walton Beach Airport and the Bob Sikes Airport. The Airport had
approximately 370,558 enplaned passengers in calendar year 2006. See "OKALOOSA
REGIONAL AIRPORT" herein and "Report of Airport Consultant" – Appendix B herein.
The proceeds of the Series 2007 Bonds will be used by the County to (i) pay a portion
of the costs of the development of a new rental car facility and related improvements (the
"2007 Project"), (ii) fund the Debt Service Reserve Fund Requirement with respect to the
Series 2007 Bonds, (iii) pay capitalized interest on a portion of the Series 2007 Bonds, and (iv)
pay costs of issuance of the Series 2007 Bonds.
The total cost of the 2007 Project is estimated by the County to be approximately $12.4
million. Approximately $7,400,000 in Project Costs will be funded from proceeds of the
Series 2007 Bonds. The remainder will be funded from various other funding sources. The
County estimates that all elements of the Project will be substantially completed by early
2009. See “The 2007 PROJECT”, herein.
DESCRIPTION OF THE SERIES 2007 BONDS
General
The Series 2007 Bonds will be issued as fully registered bonds without coupons in
denominations of $5,000 or any integral multiple thereof, will be dated the date of their
delivery, and will bear interest from that date to their respective maturities as set forth on the
inside front cover page hereof, subject to mandatory and optional redemption prior to maturity
as set forth below under "DESCRIPTION OF THE SERIES 2007 BONDS - Redemption
Provisions". Interest will be payable semiannually on April 1 and October 1 of each year,
commencing on April 1, 2008. Except as otherwise provided below under "DESCRIPTION
OF THE SERIES 2007 BONDS - Book-Entry Only System", interest will be payable by check
or draft mailed to the registered owners thereof at the address shown on the registration books
kept by The Bank of New York, New York, New York (the "Registrar") at the close of
business on the fifteenth (15th) day of the calendar month, whether or not a Business Day,
next preceding such Interest Payment Date (the "Regular Record Date"); provided, however,
that payment of the Principal Amount of, Redemption Premium, if any, and interest on the
Series 2007 Bonds may, at the option of any registered owner of Series 2007 Bonds in an
aggregate principal amount of at least $1,000,000, be transmitted by wire transfer within the
continental United States to such owner to the bank account number on file with the Registrar
as of the Regular Record Date. The Bank of New York is also serving as paying agent (the
"Paying Agent") and authenticating agent (the "Authenticating Agent") for the Series 2007
Bonds.
2
Book-Entry Only System
THE FOLLOWING INFORMATION CONCERNING DTC AND DTC'S BOOKENTRY ONLY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE COUNTY
BELIEVES TO BE RELIABLE, BUT NEITHER THE COUNTY NOR THE
UNDERWRITERS TAKE ANY RESPONSIBILITY FOR THE ACCURACY OR
COMPLETENESS THEREOF.
The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the Series 2007 Bonds. The Series 2007 Bonds will be issued as fully-registered
Series 2007 Bonds registered in the name of Cede & Co. (DTC's partnership nominee).
Purchases of beneficial ownership interests in the 2007 Bonds will be made in book-entry only
form, in the denominations hereinbefore described. Purchasers of beneficial ownership interests
in the 2007 Bonds ("Beneficial Owners") will not receive bond certificates representing their
ownership interests in the 2007 Bonds, except in the event that use of the book-entry only system
for the 2007 Bonds is discontinued. One fully-registered Series 2007 Bond certificate will be
issued for each maturity of Series 2007 Bonds, and will be deposited with DTC.
DTC, the world's largest depository, is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues, and money market instruments from over 85 countries that
DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned
by a number of Direct Participants of DTC and Members of the National Securities Clearing
Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and
Emerging Markets Clearing Corporation, as well as by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers
and dealers, banks, trust companies, and clearing corporations that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to
DTC and its Direct and Indirect Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com.
3
Purchases of Series 2007 Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Series 2007 Bonds on DTC's records. The
ownership interest of each actual purchaser of each Series 2007 Bond ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase. Beneficial Owners are, however,
expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the Series 2007 Bonds are
to be accomplished by entries made on the books of Direct and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Series 2007 Bonds, except in the event that use of the book-entry system
for the Series 2007 Bonds is discontinued.
To facilitate subsequent transfers, all Series 2007 Bonds deposited by Direct Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other
name as may be requested by an authorized representative of DTC. The deposit of Series 2007
Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee
do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Series 2007 Bonds. DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series 2007 Bonds are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements made among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Series 2007 Bonds may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Series 2007 Bonds, such
as redemptions, tenders, defaults, and proposed amendments to the Series 2007 Bonds
documents. For example, Beneficial Owners of Series 2007 Bonds may wish to ascertain that
the nominee holding the Series 2007 Bonds for their benefit has agreed to obtain and transmit
notices to Beneficial Owners. In the alternative, beneficial owners may wish to provide their
names and addresses to the registrar and request that copies of notices be provided directly to
them. Redemption notices shall be sent to DTC. If less than all of a maturity of the Series 2007
Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of
each Direct Participant in such bonds, as the case may be, to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Series 2007 Bonds unless authorized by a Direct Participant in accordance with DTC's
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts Series 2007 Bonds are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
4
Principal and interest payments on the Series 2007 Bonds will be made to DTC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from the County or the Registrar, on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Direct or Indirect Participants to
Beneficial Owners will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or with securities
registered in "street name," and will be the responsibility of such Direct or Indirect Participants
and not of DTC, the Registrar, or the County, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal and interest to DTC is the
responsibility of the County and/or the Registrar for the Series 2007 Bonds, disbursement of
such payments to Direct Participants is be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the
Series 2007 Bonds at any time by giving reasonable notice to the County. Under such
circumstances, in the event that a successor depository is not obtained, Series 2007 Bonds
certificates are required to be printed and delivered.
The County may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, Series 2007 Bond certificates will be
printed and delivered.
Neither the County nor the Trustee can give any assurances that DTC, DTC Participants
or others will distribute payments of premium, if any, on the Series 2007 Bonds paid to DTC or
its nominee, or any redemption or other notices to the Beneficial Owners or that they will do so
on a timely basis or that DTC will serve or act in a manner described in this Official Statement.
For every transfer and exchange of a beneficial ownership interest in the Series 2007
Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other
government charge that may be imposed in relation thereto.
Redemption Provisions
Optional Redemption. The Series 2007 Bonds maturing on or before October 1, 2017
are not subject to optional redemption prior to maturity. The Series 2007 Bonds maturing after
October 1, 2017 shall be subject to optional redemption by the County on or after October 1,
2017, in whole or in part in such order of maturity and manner as the County may determine,
at the times and redemption prices (expressed as a percentage of the principal amount of Series
2007 Bonds to be redeemed) plus interest accrued to the date fixed for redemption, as follows:
Period During Which Redeemed
(Both Dates Inclusive)
Redemption Price
October 1, 2017, through September 30, 2018
October 1, 2018 through September 30, 2019
October 1, 2019, and thereafter
102%
101
100
5
Mandatory Sinking Fund Redemption. The Series 2007 Bonds maturing on October
1, 2014, are subject to mandatory redemption in part through sinking fund installments on
October of each year, commencing October 1, 2009, at a redemption price equal to 100% of
the principal amount thereof together with accrued interest to the redemption date, in the
aggregate principal amounts set forth below:
Year
Principal Amount
2009
2010
2011
2012
2013
2014*
$220,000
235,000
245,000
265,000
275,000
295,000
_______________
*maturity
The Series 2007 Bonds maturing on October 1, 2019, are subject to mandatory
redemption in part through sinking fund installments on October of each year, commencing
October 1, 2015, at a redemption price equal to 100% of the principal amount thereof together
with accrued interest to the redemption date, in the aggregate principal amounts set forth
below:
Year
Principal Amount
2015
2016
2017
2018
2019*
$315,000
330,000
350,000
375,000
400,000
_______________
*maturity
The Series 2007 Bonds maturing on October 1, 2030, are subject to mandatory
redemption in part through sinking fund installments on October of each year, commencing
October 1, 2020, at a redemption price equal to 100% of the principal amount thereof together
with accrued interest to the redemption date, in the aggregate principal amounts set forth
below:
Principal Amount
Year
2020
2021
2022
2023
$425,000
450,000
485,000
520,000
6
2024
2025
2026
2027
2028
2029
2030*
550,000
595,000
635,000
680,000
725,000
780,000
830,000
_______________
*maturity
Effect of Call for Redemption. On the date designated for redemption by notice, the
Series 2007 Bonds so called for redemption shall become and be due and payable at the
redemption price provided for redemption of such Series 2007 Bonds on such date. If on the
date fixed for redemption moneys for payment of the redemption price and accrued interest are
held by the Paying Agent, interest on such Series 2007 Bonds so called for redemption shall
cease to accrue, such Series 2007 Bonds shall cease to be entitled to any benefit or security
under the Indenture except the right to receive payment from moneys held therefor by the
Paying Agent and the amount of such Series 2007 Bonds so called for redemption shall be
deemed paid and no longer Outstanding.
Method of Selecting Bonds for Redemption. Except when registration of the Series
2007 Bonds is maintained pursuant to a book-entry only system, Series 2007 Bonds shall be
selected for redemption as follows: (a) in the event that less than all of the Series 2007 Bonds
are to be redeemed, the maturities to be redeemed and the method of their selection shall be
determined by the County, (b) in the event that less than all Series 2007 Bonds of a maturity
are to be redeemed, the Series 2007 Bonds of such maturity to be redeemed shall be selected
by lot in such customary manner as the Trustee shall determine, and (c) in the event that less
than all Series 2007 Bonds of a term bond are to be redeemed, the remaining annual amounts
of mandatory sinking fund redemption shall be reduced in such years and amounts as the
County shall determine.
Upon the selection and call for redemption of, and the surrender of, any Series 2007
Bonds for redemption in part only, and except when registration of the Series 2007 Bonds is
maintained pursuant to a book-entry only system, the County shall cause to be executed,
authenticated and delivered to or upon the written order of the Holder thereof, at the expense
of the County, new Series 2007 Bonds in fully registered form of authorized denominations
and like tenor in an aggregate face amount equal to the unredeemed portion of the Series 2007
Bonds surrendered.
Notice of Redemption. During the period that DTC or Cede & Co. is the registered
owner of the Series 2007 Bonds, the Trustee shall not be responsible for mailing notices of
redemption to the Beneficial Owners of the Series 2007 Bonds. See "DESCRIPTION OF THE
SERIES 2007 BONDS -- Book-Entry Only System".
7
Each notice of redemption of Series 2007 Bonds shall specify: (a) the date fixed for
redemption, (b) the Principal Amount of Series 2007 Bonds or portions thereof to be
redeemed, (c) the applicable redemption price, (d) the place or places of payment, (e) that
payment of the Principal Amount and Redemption Premium, if any, will be made upon
presentation and surrender to the Trustee or Paying Agent, as applicable, of the Series 2007
Bonds to be redeemed, (f) that Interest accrued to the date fixed for redemption will be paid as
specified in such notice, (g) that on and after said date interest on Series 2007 Bonds which
have been redeemed will cease to accrue, and (h) the designation, including Series, and the
CUSIP numbers of the Series 2007 Bonds to be redeemed and, if less than the face amount of
any Series 2007 Bonds is to be redeemed, the Principal Amount to be redeemed.
Any notice of redemption shall be sent by the Trustee not less than thirty (30) nor more
than sixty (60) days prior to the date set for redemption by first class mail (a) to the registered
owner of each of such Series 2007 Bonds to be redeemed in whole or in part at its address as it
appears on the Register, (b) to all organizations registered with the Securities and Exchange
Commission as securities depositories, and (c) to at least two information services of national
recognition which disseminate redemption information with respect to tax-exempt securities.
Failure to give any notice specified in (a) with respect to any particular Series 2007 Bond, or
any defect therein, shall not affect the validity of any proceedings for the redemption of any
other Series 2007 Bond with respect to which no such failure or defect has occurred, and
failure to give any notice specified in (b) or (c), or any defect therein, shall not affect the
validity of any proceedings for the redemption of any Series 2007 Bonds with respect to which
the notice specified in (a) is correctly given.
Notice of the optional redemption of the Series 2007 Bonds may be conditioned upon
and made subject to the irrevocable deposit of sufficient funds to pay the redemption price
after such notice is given and on or before the redemption date, provided such condition is
expressly stated in the notice.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
8
SOURCES AND USES OF FUNDS
The following table sets forth the sources and uses of funds from the proceeds of the
Series 2007 Bonds:
Sources of Funds
Principal Amount of the Series 2007 Bonds
Net Original Issue Discount
Total
$9,980,000.00
( 483,239.90)
$9,496,760.10
Uses of Funds
Deposit to Construction Fund
Deposit to Debt Service Reserve Fund
Deposit to Capitalized Interest Account
Costs of Issuance(1)
Total
$7,229,187.50
892,975.00
797,731.84
__ 576,865.76
$9,496,760.10
__________________________________
(1)
Includes underwriters' discount, bond insurance premium, legal fees, rating
agency fees, other costs of issuance.
9
DEBT SERVICE SCHEDULE
The following table sets forth the scheduled annual debt service payments on the Series
2007 Bonds and the Outstanding Series 2003 Bonds, assuming no redemption prior to maturity,
other than mandatory redemption through sinking fund installments for the Term Bonds. Interest
payments are net of capitalized interest.
Series 2007 Bonds
Fiscal Year
Ending
September 30
Series 2003
Bonds
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
$798,233
799,413
799,213
797,950
795,575
797,394
798,144
800,819
797,394
798,144
797,794
796,344
798,794
794,869
799,844
798,169
800,119
798,844
800,825
795,763
798,956
799,844
793,388
Total
$18,355,826
Interest
Total
Total
Debt Service
-0$220,000
235,000
245,000
265,000
275,000
295,000
315,000
330,000
350,000
375,000
400,000
425,000
450,000
485,000
520,000
550,000
595,000
635,000
680,000
725,000
780,000
830,000
-0$334,988
656,775
642,675
627,975
612,075
595,575
577,875
558,188
537,563
515,688
492,250
467,250
437,500
406,000
372,050
335,650
297,150
255,500
211,050
163,450
112,700
58,100
-0$554,988
891,775
887,675
892,975
887,075
890,575
892,875
888,188
887,563
890,688
892,250
892,250
887,500
891,000
892,050
885,650
892,150
890,500
891,050
888,450
892,700
888,100
$798,233
1,354,400
1,690,988
1,685,625
1,688,550
1,684,469
1,688,719
1,693,694
1,685,581
1,685,706
1,688,481
1,688,594
1,691,044
1,682,369
1,690,844
1,690,219
1,685,769
1,690,994
1,691,325
1,686,813
1,687,406
1,692,544
1,681,488
$9,980,000
$9,268,025
$19,248,025
$37,603,851
Principal
10
SECURITY FOR THE SERIES 2007 BONDS
Limited Obligations
The principal amount of, redemption premium, if any and interest on the Series 2007
Bonds will be payable from, and secured by a lien upon and a pledge of, the "Trust Estate"
created and defined in the Indenture. The Trust Estate consists of: (i) the Net Revenues; and
(ii) the moneys and investments in certain Funds and Accounts pledged under the Indenture,
including primarily the Construction Fund (except to the extent encumbered to pay Costs of
Airport Facilities), the Revenue Fund and the Revenue Fund Coverage Account therein, the
Series 2007 Principal, Interest and Redemption Accounts in the Bond Fund, the Series 2007
Debt Service Reserve Account in the Debt Service Reserve Fund and, as described below, the
Pledged CFC Revenues on deposit in the Series 2007 Pledged CFC Account and Series 2007
CFC Coverage Subaccount in the Customer Facility Charge Fund.
THE SERIES 2007 BONDS AND THE INTEREST THEREON DO NOT
CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE STATE, THE COUNTY
OR ANY OTHER POLITICAL SUBDIVISION THEREOF (OTHER THAN A SPECIAL
OBLIGATION OF THE COUNTY) AND NEITHER THE FAITH AND CREDIT NOR THE
TAXING POWER OF THE STATE, THE COUNTY OR ANY OTHER POLITICAL
SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2007
BONDS OR THE INTEREST THEREON.
Net Revenues
Under the Indenture, the County has irrevocably pledged the Net Revenues to the
payment of the Series 2007 Bonds. As described above, such Net Revenues are also pledged
to secure the Series 2003 Bonds and any additional Bonds issued pursuant to the terms of the
Indenture. Net Revenues are defined in the Indenture to mean Revenues less amounts needed
to pay Operation and Maintenance Expenses (as hereinafter defined).
Revenues are defined in the Indenture to mean all income and revenues received or
accrued by the County in connection with the ownership, operation or use of, or otherwise
related to the Airports System, including, but not limited to, (a) rentals, fees, and other charges
for the use of or with respect to the Airports, (b) proceeds of business interruption insurance, and
such other moneys designated as "Revenues" pursuant to the terms of a Supplemental Indenture;
provided, however, that Revenues shall not include (A) interest income on, and any profit
realized from, the investment of moneys in any Fund or Account to the extent that such income
or profit is not transferred to, or retained in, the Revenue Fund, the Repair and Rehabilitation
Fund, the Operation and Maintenance Fund or the Bond Fund; (B) interest income on, and any
profit realized from, the investment of moneys in any fund or account funded from the proceeds
of Special Facility Bonds; (C) amounts received by the County from, or in connection with,
Special Facilities, unless such funds are treated as Revenues by the County; (D) grants-in-aid,
donations, bequests and/or amounts received as reimbursements for previously expended money
unless the County has lawfully elected that such grant, donation, bequest or reimbursement is to
be treated as Revenues; (E) insurance proceeds which are not deemed to be Revenues in
11
accordance with generally accepted accounting principles; (F) the proceeds of any condemnation
awards; (G) the proceeds of any sale of land, buildings or equipment; (H) proceeds of a drawing
under a Credit Facility; (I) passenger facility charge revenue; (J) Bond proceeds; (K) all revenue
sources, such as, but not limited to, cargo facilities charges and CFCs imposed on rental car
customers, unless such revenue sources are treated as Revenues by the County; and (L) any other
amounts which are not deemed to be Revenues in accordance with generally accepted accounting
principles or which are restricted as to their use.
Operation and Maintenance Expenses are defined in the Indenture to mean all expenses
of the County paid or accrued for the operation, maintenance, administration, and ordinary
current repairs of the Airports, including certain payments to the Federal Government pursuant to
the Eglin Agreements. Operation and Maintenance Expenses shall not include (a) the Principal
Amount of, Redemption Premium, if any, or Interest on any Bonds; (b) any allowance for
amortization or depreciation of the Airport Facilities; (c) any other expense for which (or to the
extent to which) the County is or will be paid or reimbursed from or through any source that is
not included or includable as Revenues; (d) any extraordinary items arising from the early
extinguishment of debt; or (e) any expense paid with amounts from the Repair and Rehabilitation
Fund.
Series 2003 Bonds; Pledged PFC Revenues
The County has previously issued its Airport Revenue Bonds, Series 2003, which are
secured by the Net Revenues on a parity with the Series 2007 Bonds. The Series 2003 Bonds
are also secured by certain passenger facility charges (“PFCs”), which do not secure the
Series 2007 Bonds. The Series 2003 Bonds are not payable from the Pledged CFC Revenues.
The County’s expectation with respect to the Series 2007 Bonds is that the PFC revenues will
pay for the debt service associated with the Series 2003 Bonds. See "OKALOOSA REGIONAL
AIRPORT – Passenger Facility Charges."
Pledged CFC Revenues
The Second Supplemental Indenture pledges the County's receipts from a Customer
Facility Charge ("CFC"). The CFC was imposed, as more fully described below, at $2.50 per
transaction day on all rental car contracts issued for the rental of passenger motor vehicles at the
Airport effective December 1, 2004. The CFC was increased to an amount of $3.25 per
transaction day effective July 1, 2007. The CFC has no stated expiration date.
The Pledged CFC Revenues are not pledged to secure the Series 2003 Bonds. The
County's expectation with respect to the Series 2007 Bonds is that Pledged CFC Revenues will
pay the debt service associated with the Series 2007 Bonds.
The CFC was imposed pursuant to Ordinance No. 04-64 of the County, enacted October
19, 2004, as amended by Ordinance No. 07-21 of the County, enacted May 1, 2007 (collectively,
the “CFC Ordinance”). Under the terms of the CFC Ordinance, the CFC is defined as a charge
of $3.25 per Rental Car Transaction Day. "Rental Car Transaction Day" is defined as each 24hour period, or fraction thereof, within a rental period under or pursuant to a Rental Car
12
Contract. "Rental Car Contract" means the document or documents (whether written, electronic
or otherwise) under or pursuant to which any Rental Car Operator rents, arranges for the rental
of, and/or delivers possession of a passenger motor vehicle to a customer. Each Rental Car
Operator is obligated under the CFC Ordinance to remit to the County all CFCs imposed on its
customers pursuant to the CFC Ordinance, whether or not they are actually collected from its
customers.
See "REPORT OF THE AIRPORT CONSULTANT", Appendix B herein, including
Table 5.5, which contains an analysis of the rental car industry, historical collection data and a
projection of CFC Revenues, their anticipated application, and remaining cumulative balances.
Rate Covenant
Pursuant to the Indenture, the County covenants and agrees that it will take all lawful
and available measures to fix and adjust from time to time the rentals, rates, fees and other
charges for the use of the Airports calculated to be at least sufficient to produce (i) Net
Revenues (including Pledged CFC Revenues), plus (ii) Pledged PFC Revenue plus (iii)
amounts, if any, in the Revenue Fund Coverage Account and all PFC Coverage Subaccounts
(collectively, "Amounts Available to Pay Debt Service"), to provide for the greater of either:
(A) (to the extent not otherwise paid from other legally available funds of the
County) the amounts needed for making the required deposits in the Fiscal Year of the County
to the Principal Accounts, the Interest Accounts, the Redemption Accounts, the Debt Service
Reserve Fund, the Operation and Maintenance Reserve Account, the Repair and Rehabilitation
Fund and the Subordinated Indebtedness Fund; or
(B)
an amount not less than 125% of the aggregate Annual Debt Service with respect
to Outstanding Bonds for such Fiscal Year.
The County also covenants in the Indenture that if, upon the receipt of the audit report
for a Fiscal Year, Amounts Available to Pay Debt Service in such Fiscal Year are less than the
amounts specified in (A) or (B) above, the County will take all lawful and available measures
to revise the schedule of rentals, rates, fees and charges for the use of the Airports so as to
generate Amounts Available to Pay Debt Service sufficient to produce the amounts specified
in (A) or (B) above in the Fiscal Year following the Fiscal Year covered by such audit report.
In the event that Amounts Available to Pay Debt Service for any Fiscal Year are less
than the amounts specified in (A) or (B) above, but the County promptly has taken in the next
Fiscal Year all available lawful measures to revise the schedule of rentals, rates, fees and
charges for the use of the Airports so as to generate amounts required in the preceding
paragraph, the Indenture provides that there shall be no Event of Default under the Indenture.
Nevertheless, if after taking the measures required above to revise the schedule of rentals,
rates, fees and charges for use of the Airports, Amounts Available to Pay Debt Service in such
next Fiscal Year during which such adjustments are required to be made (as evidenced by the
audit report for such Fiscal Year) are still less than the amounts specified in (A) or (B) above,
such failure shall constitute an Event of Default under the Indenture.
13
Debt Service Reserve Fund
The Indenture establishes a Debt Service Reserve Fund and provides for the
establishment of separate accounts therein pursuant to Supplemental Indentures for each Series
of Bonds issued under the Indenture. Amounts in each Series Account in the Debt Service
Reserve Fund are to be used to pay debt service on the related Series of Bonds on the date
such debt service is due when insufficient funds for that purpose are available in the Bond
Fund; provided, however, that all amounts in an Account in the Debt Service Reserve Fund are
to be used, together with other amounts available for such purpose under the Master Indenture
as supplemented, to provide for payment of the related Series of Bonds when the aggregate of
such amounts is sufficient for such purpose. Amounts in each Account of the Debt Service
Reserve Fund will be pledged only to Holders of Bonds of the related Series; provided,
however, if so provided in a Supplemental Indenture, upon the issuance of a Series of
Refunding Bonds to refund a portion of a Series of Outstanding Bonds, amounts in the related
Account of the Debt Service Reserve Fund securing the Series of Outstanding Bonds may be
pledged both to the Holders of the unrefunded portion of the Series of Outstanding Bonds and
the Holders of the Series of Refunding Bonds on a combined basis.
The Second Supplemental Indenture establishes the 2007 Series Account in the Debt
Service Reserve Fund and establishes the 2007 Series Debt Service Reserve Fund Requirement
at an amount equal to the least of the following amounts: (a) 10% of the original proceeds of the
Series 2007 Bonds; (b) the Maximum Annual Debt Service on the Series 2007 Bonds occurring
in any Fiscal Year of the Issuer; and (c) 125% of the average Annual Debt Service on the Series
2007 Bonds. "Maximum Annual Debt Service" means the maximum amount of payments
required to be made for principal, interest, sinking fund redemption, reimbursement payments to
Credit Providers, Credit Facility fees, Trustee, Paying Agent and other fiduciary fees and
payments due under a Swap Agreement scheduled to come due within a specified Fiscal Year of
the County or within one day thereafter, if any, with respect to the Series 2007 Bonds for any
Fiscal Year during the term of the Series 2007 Bonds. See “APPENDIX C -- Forms of the
Master Indenture of Trust, The First Supplemental Indenture and the Second Supplemental
Indenture”, herein.
In the event that the balance in the 2007 Series Debt Service Reserve Account is less
than the Debt Service Reserve Fund Requirement following a withdrawal therefrom or the
occurrence of a deficiency resulting from a valuation or the sale of an investment amounts in
the Revenue Fund are to be deposited in such account in equal monthly installments over a
twelve (12) month period sufficient to restore the balance therein to the 2007 Series Debt
Service Reserve Fund Requirement, in accordance with the priority of the flow of funds under
the Indenture. See "FLOW OF FUNDS - Revenues" herein.
Under the Second Supplemental Indenture, such deficiencies are also required to be
funded by monthly deposits of CFC Revenues, to the extent CFC Revenues are legally available
for debt service on the Series 2007 Bonds. As noted above, 100% of CFC Revenues are
expected to be so available.
14
The Indenture provides that in lieu of or in addition to cash or investments, at any time
the County may cause to be deposited to the credit of a Series Account in the Debt Service
Reserve Fund, any form of Credit Facility in an amount which, together with cash, investments
and any other Credit Facilities on deposit in such Debt Service Reserve Fund, will equal the
amount of the related Series Debt Service Reserve Fund Requirement as provided for in the
appropriate Supplemental Indenture, irrevocably payable to the Trustee as beneficiary for the
holders of the related Series of Bonds. The Credit Provider will be required to notify the County
and the Trustee at least twenty-four (24) months prior to expiration of the Credit Facility. If (A)
the County receives such expiration notice and the Credit Provider does not extend its expiration
date, (B) the County and the Trustee receive notice of the termination of the Credit Facility or
(C) the credit rating of the Credit Provider is no longer in the two highest credit rating categories
by two Rating Agencies, the County must (x) provide a substitute Credit Facility that meets the
requirements set forth in the foregoing sentences, (y) deposit the applicable Series Debt Service
Reserve Fund Requirement to the related Series Account in the Debt Service Reserve Fund (1) in
equal monthly installments over the next succeeding twelve (12) months, in the case of receipt of
an expiration notice, (2) prior to the termination date, in the case of receipt of a termination
notice, or (3) within 180 days, in the case of such reduction in credit rating, or (z) instruct the
Trustee to draw on such Credit Facility in the amount of the related Series Debt Service Reserve
Fund Requirement (1) twelve (12) months prior to expiration of the Credit Facility in the case of
receipt of an expiration notice, (2) prior to the termination date in the case of receipt of a
termination notice, or (3) after 180 days in the case of such reduction, in credit rating. The
Trustee shall deposit the proceeds of such drawing to such Series Account in the Debt Service
Reserve Fund.
The 2007 Debt Service Reserve Fund Requirement for the Series 2007 Bonds is
$892,975.00 and will be funded on the date of issuance of the Series 2007 Bonds from the
proceeds of the Series 2007 Bonds.
Additional Bonds
General.
The Indenture permits the issuance of Additional Bonds payable from
Net Revenues on a parity with the Series 2007 Bonds, under certain circumstances as set forth
below.
Additional Bonds. Additional Bonds may be issued under the Indenture, so long as
the County is not in default, as evidenced by a Certificate of No Default executed by an
Authorized Representative, upon satisfaction of one of the following conditions:
for each of the next five (5) full Fiscal Years following issuance of the Additional
Bonds, or each full Fiscal Year from issuance of the Additional Bonds through three
(3) full Fiscal Years following completion of the project or projects financed by the
Additional Bonds proposed to be issued, whichever is later, (i) An Airport Consultant
has provided to the Trustee a certificate stating that, based upon reasonable
assumptions set forth therein, Amounts Available to Pay Debt Service are projected to
be equal to at least 125% of Annual Debt Service (disregarding any Bonds that have
been paid or discharged or will be paid or discharged immediately after the issuance of
15
the Additional Bonds proposed to be issued) provided, however, that if capitalized
interest on any Bonds and proposed Additional Bonds is to be applied in the last Fiscal
Year of the period described in this sentence, the Airport Consultant shall extend the
test through the first three (3) full Fiscal Years for which there is no longer capitalized
interest, or
(ii) the County has provided to the Trustee a certificate stating that in the most
recent completed Fiscal Year for which an independent audit is available or any
consecutive twelve (12) month period out of the last eighteen (18) months Amounts
Available to Pay Debt Service were not less than 125% of (A) Annual Debt Service on
Bonds Outstanding in such Fiscal Year or such period (disregarding any Bonds that
have been paid or discharged or that will be paid or discharged immediately after the
issuance of such Additional Bonds proposed to be issued), plus (B) Maximum Annual
Debt Service with respect to such Additional Bonds proposed to be issued.
Under the First Supplemental Indenture, consent by ACA Financial Guaranty
Corporation, the insurer of the Series 2003 Bonds, and under the Second Supplemental
Indenture, consent by Radian Asset Assurance Inc., the Insurer for the Series 2007 Bonds is
required for issuance of Additional Bonds unless the County complies with the provisions of the
paragraphs set forth above but substituting 150% in place of 125% in clause (i) and clause (ii)
therein.
The County may issue Bond Anticipation Notes, secured on a parity as to the pledge of
Net Revenues with Bonds issued pursuant to the Indenture, provided that the requirements set
forth above are met. For such purpose, Bond Anticipation Notes shall be deemed to have level
debt service (assuming an interest rate equal to The Bond Buyer 25 Bond Revenue Bond Index)
over the anticipated term of the Bonds to be issued to retire such Bond Anticipation Notes.
Refunding Bonds. With respect to Additional Bonds proposed to be issued as
Refunding Bonds, such Bonds may be issued provided that either the requirements set forth
above are satisfied, or the County shall have provided to the Trustee a certificate with an
accompanying schedule indicating that, after issuance of the Refunding Bonds (i) there is no
increase in Maximum Annual Debt Service and (ii) either (A) there is a decrease in the sum of
all Annual Debt Service payable on all Bonds then Outstanding or (B) in each Fiscal Year, the
Annual Debt Service with respect to the Refunding Bonds will be equal to or less than the
Annual Debt Service with respect to the Bonds to be refunded.
Completion Bonds. With respect to Additional Bonds proposed to be issued as
Completion Bonds in order to finish the 2007 Project or portion thereof, the Additional Bonds
test described above need not be met; provided, however, the aggregate Principal Amount of
such Completion Bonds shall be limited to ten percent (10%) of the amount specified in the
Supplemental Indenture in which the initial Series of Bonds issued to finance such project was
authorized as the total principal amount of Bonds and Subordinated Indebtedness originally
projected to be required to complete the funding of such project (as defined in such
Supplemental Indenture). The Construction Manager shall provide a certificate stating the total
estimated cost to complete the project and that the proceeds of the Completion Bonds will not
16
be used for costs related to material changes in the scope of such project. The Financial
Advisor, in reliance on the Construction Manager's certificate, shall provide a certificate
stating (i) the anticipated total principal amount of Bonds and Subordinated Indebtedness
required to finance the project as set forth in the Supplemental Indenture and the principal
amount of Completion Bonds to be issued, and (ii) that the proceeds of the Completion Bonds
are projected to be sufficient to complete the project.
Subordinated Indebtedness. Under the Indenture, the County may incur Subordinated
Indebtedness secured by a lien on Net Revenues and the Trust Estate which is junior and
subordinate to the lien securing the Bonds. Any such Subordinate Indebtedness is required to
have the same payment dates as the Series 2007 Bonds and may not be accelerated without the
consent of the Insurer for the Series 2007 Bonds. See “APPENDIX C – FORMS OF THE
MASTER INDENTURE OF TRUST, THE FIRST SUPPLEMENTAL INDENTURE AND
THE SECOND SUPPLEMENTAL INDENTURE” for a discussion of further restrictions
regarding the issuance of Subordinated Indebtedness. The County expects to issue in late
2007 approximately $2 million in commercial paper indebtedness, the security of which will
be from the Net Revenues on a subordinate basis to the Bonds.
Special Facility Bonds. The Indenture permits the County to issue Special Facility
Bonds to finance any facility, improvement, structure, equipment or assets acquired or
constructed on any land or in or on any structure or building at the Airports, the cost which are
paid for by the primary user under an agreement between the County and such user, or from
the proceeds of Special Facility Bonds, or both. Such payments are excluded from Revenues.
Special Facility Bonds will not be secured by a lien on the Net Revenues and the Trust Estate.
The County has no present plan to issue any Special Facility Bonds.
Application of Revenues Upon Default
Upon the occurrence of a default in the payment of principal or interest under the Master
Indenture, the Revenue Fund and all Revenues therein shall be immediately transferred and held
by the Trustee, and applied as provided in the Indenture. See “APPENDIX C – FORM OF
THE MASTER INDENTURE OF TRUST, THE FIRST SUPPLEMENTAL INDENTURE
AND THE SECOND SUPPLEMENTAL INDENTURE,” herein.
The following information has been furnished by Radian Asset Assurance Inc. ("Radian") for
use in the Official Statement. Reference is made to Appendix F for a specimen of Radian's policy.
FINANCIAL GUARANTY INSURANCE
Description of the Financial Guaranty Insurance Policy
A financial guaranty insurance policy (the "Policy") will be issued by Radian Asset
Assurance Inc. (the "Insurer") simultaneously with the issuance and delivery of the Bonds. The
Policy is noncancelable during its term and provides for the prompt payment of principal of and
interest on the Bonds to the extent that The Bank of New York, New York, New York, as
Trustee (the "Trustee"), has not received sufficient funds from Okaloosa County, Florida (the
17
"Issuer") for payment of the Bonds on the "due date." The Insurer is obligated to make the
required payment on the later of the due date or the first business day after which the Insurer has
received notice from The Bank of New York, as Insurance Trustee (the "Insurance Trustee"),
that the Issuer has failed to pay amounts due on the Bonds. Under the Policy, the "due date" of
the Bonds, when referring to the payment of principal, means the stated maturity date thereof or
the date on which payment of principal is due by reason of mandatory sinking fund payments
and does not mean any earlier date on which payment is due by reason of any call for
redemption, acceleration, or other advancement of maturity, other than in the discretion of the
Insurer. With respect to interest on the Bonds, the "due date" means the stated date for payment
of interest. The Policy guarantees reimbursement of any recovery of any such payment from a
Holder or the Trustee pursuant to a final judgment by any court of competent jurisdiction holding
that such payment constituted a voidable preference within the meaning of any applicable
bankruptcy law.
For specific information on the coverage provided, reference should be made to the
Policy that has been reproduced in specimen form in Appendix F hereto. The Policy does not
insure against nonpayment of principal or interest on the Bonds due to the insolvency,
misconduct or negligence of the Trustee. The Policy does not insure the payment of any
redemption premium.
Radian Asset Assurance Inc.
Radian Asset Assurance Inc. (the "Insurer") is a monoline financial guaranty insurance
company, regulated by the Insurance Department of the State of New York and licensed to do
business in all 50 states, the District of Columbia, Guam and the United States Virgin Islands.
As of September 30, 2007, the Insurer had total consolidated shareholders' equity of
approximately $1,607,013,000 and total consolidated assets of approximately $2,788,746,000,
which amounts include the effects of a $100 million capital infusion into the Insurer made by the
Insurer’s ultimate parent, Radian Group Inc. (“Radian”) on September 7, 2007.
The financial information relating to the Insurer presented in this Official Statement was
prepared internally by the Insurer, based on accounting principles generally accepted in the
United States of America ("GAAP"), and has not been audited by independent auditors. The
address of the Insurer's administrative office is 335 Madison Avenue, New York, New York
10017, and its telephone number is 212-983-5859.
The Insurer has filed the information contained in (i) - (iv) below with entities designated
as Nationally Recognized Municipal Securities Information Repositories ("NRMSIRs") pursuant
to Rule 15c2-12 of the Securities Exchange Act of 1934, and such financial information is
available through such NRMSIRs:
(i)
The Insurer's audited consolidated financial statements as of December 31, 2006
and 2005, and for each of the three years in the period ended December 31, 2006, prepared in
accordance with GAAP, together with the accompanying report of the Insurer's independent
registered public accounting firm, which expresses an unqualified opinion (the "Radian Financial
Statements");
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(ii)
The Insurer's quarterly unaudited consolidated balance sheet as of March 31, 2007
and unaudited consolidated statement of operations for the three-month period then ended,
prepared in accordance with GAAP;
(iii)
The Insurer's quarterly unaudited consolidated balance sheet as of June 30, 2007
and unaudited consolidated statement of operations for the six-month period then ended,
prepared in accordance with GAAP; and
(iv)
The Insurer’s quarterly unaudited consolidated balance sheet as of September 30,
2007 and unaudited consolidated statement of operations for the nine-month period then ended,
prepared in accordance with GAAP.
On September 26, 2007, the Insurer’s independent auditors, Deloitte & Touche LLP,
declined to stand for reappointment as Radian’s and its subsidiaries, including the Insurer,
independent auditors for the 2007 audit and its engagement will end shortly following the filing
of Radian’s Quarterly Report on Form 10-Q for the third quarter of 2007. On October 30, 2007,
Radian engaged PricewaterhouseCoopers LLP as its and its subsidiaries, including the Insurer’s,
independent registered public accounting firm for the year ending December 31, 2007.
Additional information regarding the Insurer can be found in documents filed by Radian
with the Securities and Exchange Commission (“SEC”) referring to the Insurer, the financial
guaranty business or financial guaranty insurance including: (a) Annual Report on Form 10-K
for the year ended December 31, 2006, under the headings: (i) "Forward Looking Statements Safe Harbor Statement" (but only insofar as it relates to the financial guaranty business or
financial guaranty insurance); (ii) Item 1. Business "I. General" (but only insofar as it relates to
the financial guaranty business or financial guaranty insurance), "Financial Guaranty Business
(General)," including subsections 1-4 thereunder, "II. Risk in Force/Net Par Outstanding - B.
Financial Guaranty (Risk in Force/Net Par Outstanding)," "III. Defaults and Claims - B.
Financial Guaranty (Defaults and Claims)," "IV. Loss Management -- B. Financial Guaranty
(Loss Management)," V. Risk Management - B. Financial Guaranty (Risk Management),"
including subsections 1 and 2 thereunder, "VI. Customers - B. Financial Guaranty (Customers),"
"VII. Sales and Marketing - Financial Guaranty (Sales and Marketing)," "VIII - Competition Financial Guaranty (Competition)," "IX. Ratings" (but only insofar as it relates to the Insurer),
and "XI. Regulation" Parts A 2-6, C and D (but in each case only insofar as it relates to the
Insurer or the financial guaranty business); (iii) "Item 1A - Risk Factors" "- Risks Affecting Our
Company" (but only insofar as it relates to the Insurer, the financial guaranty business [or the
proposed merger between Radian and MGIC (as defined below)) and "- Risks Particular to our
Financial Guaranty Business"; (iv) "Item 6 - "Selected Ratios - Financial Guaranty" and
"Other Data - Financial Guaranty," and (v) Item 7 - "Managements' Discussion and Analysis of
Financial Condition and Results of Operations "Business Summary - Financial Guaranty,"
"Overview of Business Results" (but only insofar as it relates to the Insurer), "Results of
Operations - Financial Guaranty" and "Liquidity and Capital Resources" (but only to the extent it
relates to the Insurer), and "Critical Accounting Policies" (but only to the extent it relates to the
Insurer, the financial guaranty business or "Financial Guaranty"); (b) Quarterly Reports on Form
10-Q for the periods ended March 31, 2007, June 30, 2007 (as amended) and September 30,
19
2007, in Part I, Item 2 - Managements' Discussion and Analysis of Financial Condition and
Results of Operations, under the following headings: "Business Summary - Financial Guaranty,"
"Overview, of Business Results" (but only to the extent it relates to the Insurer), "Results of
Operations - Financial Guaranty," "Liquidity and Capital Resources" (but only to the extent it
relates to the Insurer) and "Critical Accounting Policies" (but only to the extent it relates to
"Financial Guaranty"); (c) the Reports on Form 8-K dated January 24, 2007, February 6, 2007,
February 9, 2007, February 12, 2007, April 9, 2007, April 25, 2007, May 11, 2007, July 25,
2007, August 2, 2007, August 13, 2007, August 16, 2007, August 29, 2007, September 5, 2007,
September 10, 2007, October 2, 2007, October 30, 2007 and November 1, 2007; and (d) Report
on Form 8-K/A filed March 16, 2007 (amending Report on Form 8-K filed February 6, 2007).
This information shall be deemed to be incorporated herein by reference and to be a part of this
Official Statement.
Any documents, including any financial statements or financial information of the Insurer
and its subsidiaries that are included therein or attached as exhibit thereto, filed by Radian
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the date of Radian's most recent Quarterly Report on Form 10-Q (as listed in (b)
above) or Annual Report on Form 10-K (as listed in (a) above), and prior to the termination of
the offering of the Bonds offered hereby, that refer to the Insurer or relate to the financial
guaranty business or financial guaranty insurance shall be deemed to be referred to above,
incorporated by reference into this Official Statement from the respective dates of filing such
documents. Any statement contained in a document incorporated or deemed to be incorporated
by reference herein, or otherwise contained in this Official Statement, shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement contained herein or in
any subsequently filed document which also is or deemed incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this Official Statement.
A complete copy of the Radian Financial Statements is available from the Insurer upon
written request.
The Insurer is an indirect, wholly owned subsidiary of Radian, a publicly owned
corporation with its shares listed on the New York Stock Exchange (symbol "RDN"). Radian is
a global credit risk management company headquartered in Philadelphia with significant
operations in both New York and London. Radian develops innovative financial solutions by
applying its core mortgage credit risk expertise and structured finance capabilities to the credit
enhancement needs of the capital markets worldwide, primarily through credit insurance
products. The company also provides credit enhancement for public finance and other corporate
and consumer assets on both a direct and reinsurance basis and holds strategic interests in creditbased consumer asset businesses. Additional information may be found at www.radian.biz.
NONE OF RADIAN, RADIAN'S OTHER SUBSIDIARIES OR ANY OF RADIAN'S
INVESTORS IS OBLIGATED TO PAY THE DEBTS OF OR CLAIMS AGAINST THE
INSURER.
The Insurer is licensed and subject to regulation as a financial guaranty insurance
corporation under the laws of the State of New York, its state of domicile. In addition, Radian
20
and its insurance subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty insurance
corporation licensed to do business in the State of New York, the Insurer is subject to Article 69
of the New York Insurance Law which, among other things, limits the business of each financial
guaranty insurer to financial guaranty insurance and related business lines, requires that each
financial guaranty insurer maintain a minimum surplus to policyholders, establishes contingency,
loss and unearned premium reserve requirements for each financial guaranty insurer, and limits
the size of individual transactions and the volume of transactions that may be underwritten by
each financial guaranty insurer. Other provisions of the New York Insurance Law, applicable to
non-life insurance companies such as the Insurer regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers, consolidations,
acquisitions or sales of assets and incurrence of liability for borrowings.
Neither the Insurer nor any of its affiliates accepts any responsibility for the accuracy or
completeness of, nor have they participated in the preparation of, this Official Statement or any
information or disclosure that is provided to potential purchasers of the Bonds, or omitted from
such disclosure, other than with respect to the accuracy of information presented under the
heading "FINANCIAL GUARANTY INSURANCE" and as set forth in Appendix F of this
Official Statement. The Insurer's role is limited to providing the coverage set forth in the Policy.
In addition, the Insurer makes no representation regarding the Bonds or the advisability of
purchasing the Bonds.
On February 6, 2007, Radian and MGIC Investment Corporation (NYSE: MTG)
("MGIC") entered into an Agreement and Plan of Merger, pursuant to which Radian agreed,
subject to the terms and conditions of the merger agreement, to merge with and into MGIC. On
September 4, 2007, facing market conditions that had made combining the companies
significantly more challenging, Radian and MGIC entered into an agreement that terminated the
Agreement and Plan of Merger, abandoned the merger contemplated by such agreement and
released each other from related claims. Neither company made a payment to the other in
connection with the termination.
The current ratings of the Insurer are "AA" (outlook stable) by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and "Aa3" (outlook stable)
from Moody's Investors Service, Inc. ("Moody's"). As discussed below, Radian has formally
requested that Fitch Ratings Services ("Fitch") immediately withdraw its insurer financial
strength ratings on the Insurer. Notwithstanding this withdrawal request, Fitch continues to
maintain an A+ (Ratings Watch Evolving) rating on the Insurer.
On September 5, 2007, S&P published a report stating that, unlike the ratings for Radian
and its mortgage insurance subsidiaries ("Radian MI") which are on CreditWatch with negative
implications, the "AA" rating on the Insurer is not on CreditWatch. This report also indicated
that Radian's management has stated that it is willing to take whatever reasonably practicable
steps would be necessary to protect the Insurer from the weaker holding company and affiliates
were Radian and Radian MI to be downgraded.
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On September 5, 2007, Moody's affirmed the Insurer's "Aa3" insurance financial strength
rating and stable outlook. Moody's attributed this affirmation to the Insurer's stable earnings,
limited exposure to residential mortgage risk and the diversity of its direct financial guaranty and
reinsurance portfolio. Moody's stated that it believes the Insurer is adequately capitalized for the
risk of its insured portfolio and that Radian's $100 million capital infusion into the Insurer will
further bolster the Insurer's capital position, enhancing its flexibility to continue to write new
business.
On July 31, 2007, Fitch placed the “AA” insurer financial strength rating of the Insurer,
all obligations insured by the Insurer and all of Radian’s other insurance subsidiaries on Rating
Watch Negative. On September 5, 2007, following the announcement of the termination of the
pending merger between Radian and MGIC, Fitch downgraded the insurer financial strength
rating of the Insurer and the ratings for all obligations insured by the Insurer to “A+” from “AA”
and revised the Rating Watch on the Insurer to “Evolving” from “Negative.” Fitch stated that
the Ratings Watch Evolving on the Insurer indicates that the ratings of the Insurer could be
raised, lowered or affirmed within the very near-term. Absent additional financial or capital
support from either internal or external means, Fitch indicated it is likely that the Insurer’s
ratings will be lowered further, but if additional financial backing is forthcoming, Fitch will
evaluate that level of support and will consider upgrading the Insurer’s ratings at that time.
On September 5, 2007, Radian formally requested that Fitch immediately withdraw all of
its ratings for Radian and its subsidiaries, including the insurer financial strength ratings on the
Insurer. Consequently, Radian has ceased providing information to Fitch in support of its ratings
of the Insurer. On September 9, 2007, Fitch announced that it would not honor Radian’s request
at that time in light of the current high level of investor interest in both the mortgage insurance
and financial guaranty industries, but that Fitch would instead monitor investor interest and make
a decision with respect to Radian’s request at a future date based on market feedback. Fitch also
acknowledged that it would withdraw its ratings of Radian and its subsidiaries regardless of
investor interest if it believed that it no longer had access to adequate public and non-public
information to credibly maintain its ratings.
The ratings of S&P, Moody's and Fitch reflect only the views of the applicable rating
agency, respectively, do not constitute a recommendation to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies. Any further explanation of
any rating may be obtained only from the applicable rating agency. Any downward revision or
withdrawal of any of the above ratings may have an adverse effect on the market price of the
Bonds. The Insurer does not guarantee the market price or investment value of the Bonds nor
does it guarantee that the ratings on the Bonds will not be revised or withdrawn.
FLOW OF FUNDS
Revenues
The County's Revenues are deposited upon receipt in the Revenue Fund held by the
County. On or before the 25th day of each month, the County is required to withdraw money
from the Revenue Fund for application as follows:
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(1)
to the Operation and Maintenance Fund, held by the County, for monthly
Operation and Maintenance Expenses;
(2)
to the applicable Interest Account in the Bond Fund, an amount, which together
with amounts transferred from any Pledged PFC Account relating thereto and amounts
transferred from the Pledged CFC Account relating thereto, is equal to one-sixth (1/6th) of the
next interest payment due after such date with respect to each Series of Bonds provided,
however, that the Issuer shall be credited with any amount which is on deposit in a Capitalized
Interest Account relating to the next interest payment on such Series in the Construction Fund.
(3)
to the applicable Principal Account or Redemption Account as the case may be in
the Bond Fund, an amount, which together with amounts transferred from any Pledged PFC
Account relating thereto and amounts transferred from the Pledged CFC Account relating
thereto, is equal to one-twelfth (1/12th) of the next principal payment or mandatory sinking fund
payment due after such date with respect to each Series of Bonds.
(4)
except as described above or in the applicable Supplemental Indenture, to the
Debt Service Reserve Fund, held by the Trustee, 1/12th of the amount required to restore any
deficiency in the Debt Service Reserve Requirement, after taking into account any monthly
transfers from a Pledged CFC Account or other similar account established under a
Supplemental Indenture (including the Pledged PFC Account established with respect to the
Series 2003 Bonds and the First Supplemental Indenture);
(5)
to the Operation and Maintenance Reserve Account, held by the County, 1/12th of
the amount necessary to restore any deficiency in the Operation and Maintenance Reserve
Account Requirement (which is established under the Indenture as 1/6 of the amount budgeted in
the County's then current Fiscal Year for Operation and Maintenance Expenses);
(6)
to the Revenue Fund Coverage Account held by the County, the amount (in 12
equal monthly installments) needed to restore to such account the Revenue Fund Coverage
Amount (25% of Annual Debt Service in any Fiscal Year, less the amount on deposit in the CFC
Coverage Subaccounts or similar accounts established under a Supplemental Indenture,
including the Pledged PFC Coverage Subaccount established with respect to the Series 2003
Bonds under the First Supplemental Indenture, if any). The County expects to be able to deposit
into a Series 2007 CFC Coverage Subaccount the full coverage amount from CFC Revenues
simultaneously with issuance of the Series 2007 Bonds.
(7)
to the Repair and Rehabilitation Fund, held by the County, the amount (in 12
equal monthly installments) necessary to restore any deficiency in the Repair and Rehabilitation
Fund Requirement (initially $500,000, adjusted as provided in the Indenture);
(8)
to the Subordinated Indebtedness Fund, held by the County, the amount required
for debt service on Subordinated Indebtedness;
(9)
to the Rebate Fund, amounts required to provide for rebate on tax-exempt Bonds;
and
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(10) unless otherwise provided by Supplemental Indenture, to the Airports General
Purpose Fund, all money remaining in the Revenue Fund. The First Supplemental Indenture and
Second Supplemental Indenture require Revenues to be used to fully fund the Debt Service
Reserve Fund prior to any deposit to the Airports General Purpose Fund.
In calculating the amount of any required deposit to a Fund or Account under the
Indenture, credit may be taken for all interest earnings and other amounts lawfully held in such
Fund or Account.
Whenever the amount in a Fund or Account exceeds the amount then required to be on
deposit therein, (i) as to Funds and Accounts held by the County, the County may, or (ii) as to
Funds and Accounts held by the Trustee the Trustee shall, at the written direction of the County
(but only from money held by the Trustee under the Indenture), transfer the excess to the
Revenue Fund or the Airports General Purpose Fund.
Notwithstanding any other provision of the Indenture, money may be deposited into any
Fund or Account from any legally available source, including but not limited to the Airports
General Purpose established under the Indenture.
Customer Facility Charge Revenues
All receipts from the Customer Facility Charge ("CFC Revenue") are deposited into the
2007 Pledged CFC Account therein until, in each month, the amount on deposit in the 2007
Pledged CFC Account equals (i) the CFC Debt Service on the Series 2007 Bonds for such month
and (ii) the product of (I) any required deposit to the 2007 Debt Service Reserve Account times
(II) the CFC Debt Service Percentage. Any remaining receipts of CFC Revenues shall be
deposited into the 2007 CFC Coverage Subaccount in the amount necessary to maintain therein
the 2007 CFC Coverage Amount, which is defined as 25% of the Debt Service on the Series
2007 Bonds during any Fiscal Year. CFC Revenue in the Customer Facility Charge Fund in
excess of the amount required to be transferred to the 2007 Pledged CFC Account and the 2007
CFC Coverage Subaccount shall remain in the Customer Facility Charge Fund, and invested
pursuant to the Indenture; however, such excess CFC Revenues may be pledged to secure other
indebtedness and are not pledged to secure the Series 2007 Bonds. The CFC Debt Service
Percentage is defined in the Second Supplemental Indenture as determined by dividing the total
costs of CFC Eligible Projects funded from proceeds of the Series 2007 Bonds by the total cost
of the 2007 Project. The County expects the total project funded from proceeds of the Series
2007 Bonds to be CFC-Eligible, and the CFC Debt Service Percentage to thus be 100%.
Monthly debt service on the Series 2007 Bonds and any required deposit to the 2007
Debt Service Reserve Account will be transferred from the 2007 Pledged CFC Account or, as
necessary, the 2007 CFC Coverage Subaccount on or before the 25th day of each month to the
required Accounts in the Bond Fund for payment of the Series 2007 Bonds and to the 2007 Debt
Service Reserve Account if required to restore a deficiency therein. See "FORM OF THE
MASTER INDENTURE, THE FIRST SUPPLEMENTAL INDENTURE AND THE SECOND
SUPPLEMENTAL INDENTURE," Appendix "C" hereto.
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Construction Fund
The Indenture creates an Airport Construction Fund, to be held by the County, which
will contain one or more Project Accounts, a Cost of Issuance Account for each Series of
Bonds and may contain a Capitalized Interest Account for each Series of Bonds therein and
such other accounts as may be specified in the applicable Supplemental Indenture. Moneys,
instruments and securities in the Construction Fund shall be held by the County in each Project
Account, in trust for and subject to a pledge and lien in favor of the Holders of the Bonds of
such Series until such moneys have been committed or encumbered to pay lawfully incurred
obligations of the County in connection with paying the Costs of Airport Facilities. The
County covenants that the moneys in such Project Accounts will be applied, in accordance
with the provisions of the Indenture, to the payment of the Cost of the Airport Facilities
financed by such Series of Bonds.
After payments of, and reimbursements with respect to, all costs of issuance of a Series
of Bonds to be financed with proceeds of such Bonds, any amounts remaining in the applicable
Cost of Issuance Account of the Series of Bonds will be transferred to the applicable Project
Account in the Construction Fund and used to pay the Cost of the Airport Facilities financed
by the applicable Series of Bonds.
After payments of, and reimbursements with respect to, the Projects financed by the
related Series of Bonds are completed, as certified by the County, the Project Manager and the
Construction Manager and provided no Event of Default has occurred and is continuing in the
payment of the Principal Amount of or Interest on any Bonds, surplus money in the related
Project Account in the Construction Fund will be applied (i) to eliminate any deficiency in the
related Series Account of the Debt Service Reserve Fund, (ii) for any other Cost of Airport
Facilities, (iii) to the Principal Account, or (iv) to the Redemption Account, if so required by
the applicable Supplemental Indenture.
Pursuant to the Second Supplemental Indenture, there will be established in the
Construction Fund a 2007 Series Project Account, a 2007 Series Cost of Issuance Account and
a 2007 Series Capitalized Interest Account. See "SOURCES AND USES OF FUNDS" herein.
THE AIRLINE AGREEMENTS
The County has executed Signatory Airline Operating Agreements and Terminal
Building Leases ("Airline Agreements") with Atlantic Southeast, ExpressJet, American Eagle
and Northwest airlines, each of which operate as signatory carriers at the Airport. Under
provisions in the Agreement, Delta currently operates as an affiliate of Atlantic Southeast and
Gulfstream operates as an affiliate of ExpressJet. The provisions of the Airline Agreements
commenced (other than with respect to airlines that began service after such date) October 1,
2003 and unless terminated sooner, shall expire on September 30, 2008.
Pursuant to the terms of the Airline Agreement, the County calculates airline terminal
rentals under a compensatory approach with revenue sharing credits under which the airlines pay
25
for their specific use of the terminal area. The calculation of landing fees is determined based on
a residual approach with revenue sharing credits. See the "REPORT OF AIRPORT
CONSULTANT", Appendix B herein, at Section 5.2.5, for a discussion of the detailed
methodology used to calculate terminal rental rates, landing fees and security charges, less
revenue sharing credits, due under the Airline Agreements. Non-Signatory airlines (of which
there currently are none) are required to pay certain non-signatory rates. Amounts due under the
Airline Agreements compose a substantial part of the Net Revenues.
The County has covenanted in the Indenture that it will not amend or terminate the
Airline Agreements in any manner which would impair the ability of the County to comply
with its Rate Covenant. See "SECURITY FOR THE SERIES 2007 BONDS -- Rate
Covenant". For a discussion of the airlines, see "THE AIRLINES AND THE AIRLINE
INDUSTRY".
For a discussion of parking, concession, general aviation and other non-airline
revenues, see "OKALOOSA REGIONAL AIRPORT -- Airport Financial Operations".
THE COUNTY
Background
The County encompasses approximately 1,936 square miles with approximately 24 miles
of coastline along the Gulf of Mexico. It is bordered on the west by Santa Rosa County, on the
north by the State of Alabama and on the east by Walton County. The County was created by an
act of the legislature of Florida in 1915. The County seat is located at the City of Crestview in
the northern portion of the County. Incorporated cities in the County include: Cinco Bayou,
Crestview, Destin, Fort Walton Beach, Laurel Hill, Mary Esther, Niceville, Shalimar and
Valpariso.
Population
The total population of the County was 170,498 according to the 2000 Census and is
estimated at 192,672 in 2006 by the University of Florida, Bureau of Economics and Business
Research, Florida Statistical Abstract 2005. The population and commercial growth of the County
is primarily in the coastal area of the County along the Gulf of Mexico within the cities of Fort
Walton Beach and Destin at the hub of the population center.
Governing Body
The County is governed by an elected five-member Board of County Commissioners (the
“Board”). Each Commissioner is elected for a four-year term of office. The Board appoints a
County Administrator to administer the County’s programs. The Clerk of the Circuit Court of
the County is the clerk, auditor and comptroller for the Board. The County seat is in Crestview,
with a branch office in Fort Walton Beach. In addition to the courthouse facilities, service
complexes are located in the northern and southern sections of the County. Listed below are
current members of the Board of County Commissioners and their term expiration dates.
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Name
Don R. Amunds, Chairman
James Campbell, Vice-Chairman
Sherry Campbell
Bill Roberts
John Jannazo
Date Current
Term Began
November 2006
November 2004
November 2004
November 2004
November 2006
Date Current
Term Expires
November 2010
November 2008
November 2008
November 2008
November 2010
Budgetary Process
The County’s annual budget is prepared pursuant to Chapters 129 and 200, Florida
Statutes, and represents the County’s legal authority to levy taxes and expend funds for County
purposes. On or before May 1 of each year the Sheriff, the Clerk of the Circuit Court and the
Supervisor of Elections must each submit to the Board a tentative budget request for their
respective offices for the ensuing fiscal year. No later than 15 days after the Property Appraiser
certifies the tax roll, the County Budget Officer shall prepare and present to the Board a tentative
budget for each Board fund. The Board will receive and examine the tentative budget for each
fund and, subject to the notice and hearing requirements, make such changes as it deems necessary
provided that the budget remains in balance. A summary of the tentative budget is prepared by the
Board, advertised, publicly reviewed and revised prior to final approval and adoption before the
end of the fiscal year on September 30.
Annual Audit
Florida law requires that an annual audit of all County accounts and records be completed
within one year following the end of each Fiscal Year, by an independent certified public
accountant retained by the County.
Description of Financial Practices
The financial statements of the County are prepared in conformity with generally accepted
accounting principles as applied to local government finances. The County uses funds and
accounts groups to report on its financial position and the results of its operations. A copy of the
County’s Comprehensive Annual Financial Report for the fiscal year ended September 30, 2006 is
available from the office of the Clerk of the Circuit Court.
The Government Finance Officers’ Association has awarded the Certificate of
Achievement for Excellence in Financial Reporting to the County for the past 19 years. In order to
be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and
efficiently organized comprehensive annual financial report, whose contents conform to industry
standards.
27
Investment Policy
Moneys on deposit in the funds and accounts created under the Indenture may be invested
only in Permitted Investments. Additionally, investment of surplus funds of the County is subject
to state law, including, in particular, Section 218.415, Florida Statutes, which requires the adoption
of a formal written investment policy for each unit of local government within the state. In the
absence of such a formal written investment policy, investment of surplus funds is limited to
certain specified types of investments. The Board of County Commissioners has adopted a formal
investment policy (the “Investment Policy”) which governs the investment of surplus County
funds. The County’s Investment Policy applies to all funds held by or for the benefit of the Board
and provides for monthly reporting and quarterly detailed analysis of the investment portfolio of
the County. The Investment Policy specifies the types of investments permitted and specifically
prohibits the investment in derivative financial products. The Investment Policy specifies that the
investment of bond proceeds may be further limited or expanded by the respective bond resolution
or covenants. The Clerk of the Circuit Court, a separate, elected, constitutional officer of the
County, has been designated by the Board of County Commissioners to serve as investment
manager pursuant to Section 125.31, Florida Statutes. A copy of the Investment Policy may be
obtained from the office of the Clerk of the Circuit Court.
OKALOOSA REGIONAL AIRPORT
The following sets forth a summary description of the Okaloosa Regional Airport and its
operations. For more detailed information, please see "APPENDIX B -- Report of the Airport
Consultant," herein.
General
The Airport is located approximately six miles northwest of the City of Fort Walton Beach,
Florida, in Okaloosa County, Florida, on approximately 108 acres of land on Eglin Air Force Base.
Eglin Air Force Base is the largest Air Force base in the world, covering 724 square miles of land
and approximately 123,000 square miles of water ranges in the Gulf of Mexico. The base is under
the direction of the Air Material Command and the Air Armament Center. The Air Armament
Center is responsible for planning, development, direction, and testing and evaluation of U.S. and
allied air armament, navigation/guidance systems, and command and control systems for all airdelivered weapons. Eglin houses over fifty associate units of the Air Force, including specialized
schools, operations and tactical wings, laboratories and research units. The Airport is located on
the western side of the military airfield. The County has leased the property on which the Airport
sits from the Department of the Air Force for many years. The current lease (the "Lease") was
executed on July 30, 2007 and ends on July 29, 2032. The rent payable under the Lease is
$318,000 per year, escalated at 3% per year thereafter. The Lease may be terminated by the Air
Force for failure to cure a default under the Lease during a reasonable cure period, or at any time
during any national emergency. The Lease may also be terminated or suspended 30 days after a
determination by the Secretary of the Air Force that paramount military necessity at Eglin Air
Force Base requires such suspension or termination. The County may terminate the Lease upon 90
days' notice. Under the Lease, the County is required to pay any taxes or assessments imposed
28
upon the County with respect to the Airport property, to maintain the property in good order and
condition, to repair or replace damaged property, to bear the risk of loss of the leased premises and
to insure such risk.
The Lease provides that all construction or alterations to the Airport must be approved by
the Air Force and the County's operation of the Airport is subject to the priority and primacy of the
Air Force's mission at Eglin Air Force Base, in the judgment of the Base Commander.
The Airport is one of 22 joint-use airports in the country. The Airport's civil aviation
operations share the military runways at Eglin Air Force Base and use Eglin's air traffic control
facilities to coordinate aircraft operations. Pursuant to a 30-year Joint-Use Agreement expiring in
2031, the Air Force permits civilian aircraft to use the flying facilities at Eglin Air Force Base for
not more than 84 landings and takeoffs per day, under the control of the Air Force control tower,
and subject to priority for military takeoffs and landings. This agreement is subject to suspension
or termination on a similar basis to the Lease, described above. The County pays an annual
amount based on operations to reimburse the Air Force for its share of the cost of operating and
maintaining the flying facilities.
Management
James D. Curry, Okaloosa County Administrator, was appointed by the Board of County
Commissioners, effective July 2005. He is responsible for implementing the Board's policies,
preparing the annual budget for the Board's approval and appointing department heads. He also
supervises the County's approximately 925 employees. Mr. Curry oversees the executive branch
of government, which includes 16 departments including: Airports, Corrections, Public Safety,
Growth Management, Public Works, Water and Sewer and County Administrative services
(Extension Services, Information Services, Human Resources, Purchasing, Risk Management,
Veteran Services, Fleet Operations, Court Services and Facility Maintenance). Mr. Curry has been
employed with Okaloosa County since 1978. He began as a Correctional Officer at the County Jail
and became the Jail Administrator in 1981. In 1989, the Jail operations were transferred to the
Board of County Commissioners and the position was re-titled Director, Department of
Corrections. In 1997, Mr. Curry was promoted to Administrative Services Director with oversight
of 9 county departments that included: Corrections, Human Resources, Information System, Rick
Management, Purchasing, Fleet Operations, Facility Maintenance, Veteran Services and Court
Services. Mr. Curry holds a Master's Degree in Public Administration from Troy State University.
The Airports Director is Jerry L. Sealy, A.A.E. He has served as Airports Director since
1994. Prior to accepting this position, he was President of Sealy Aviation Associates from 1992 to
1994. Mr. Sealy has held executive leadership positions at Regional Airports in Tallahassee and
Naples, Florida, between 1985 and 1992. He previously had been Director of Aviation and Airport
Director at Corpus Christi, Texas; Gainesville, Florida; and Assistant Director at Spokane,
Washington. Mr. Sealy began his aviation career after graduating from the University of
Oklahoma with a Bachelor of Business Administration in 1963; and attending law school there
until 1965. Mr. Sealy has been an Accredited Airport Executive (A.A.E.) since 1971. He has also
been an active member of the Florida Airports Council (formerly Florida Airport Managers
Association), having served on its Board of Directors from 1988 to 1990; as Secretary/Treasurer,
29
1990-1991; Vice President, 1991-1992, and as President in 1999. Mr. Sealy was honored by the
Florida Department of Transportation in 2000 as its Aviation Professional of the Year.
The Airports Administration and Finance Manager is Jon P. Morris. He has served since
July 1998. Previously he was the Grants and Contracts Manager for Okaloosa County. Prior to his
service with the County, Mr. Morris held senior management positions in the United States Air
Force at the Pentagon and the Air Force Special Operations Command. This last assignment as
Director of Financial Management and Comptroller for AFSOC culminated a 30-year career in
governmental budget and finance. Mr. Morris graduated from the University of Kansas with a
Bachelor of Science in Business Administration and obtained a Master of Science from the
University of Colorado in Management and Accounting. He recently completed a Master of
Aeronautical Science from Embry-Riddle Aeronautical University. He also holds a faculty
position with the University of Phoenix Online.
The Airports Project Manager is Tracy A. Stage. He has served in this capacity since
October 2006. Prior to his employment with Okaloosa County, Mr. Stage was Facilities Project
Administrator for The Boeing Company, Integrated Defense Systems: Special Operations Forces
Division in Fort Walton Beach, Florida. Mr. Stage held a variety of civil engineering positions
with the United States Air Force from 1994 to 2003. He earned his Bachelors Degree in
Management from the University of Phoenix.
The Airports Operations/Maintenance Manager is Terry D. Curry. He has served as the
Airports Operations/Maintenance Manager and as Airports Security Coordinator since June 1996.
Prior to his service with Okaloosa County, he served as Deputy Chief of Operations for Civil
Engineering at Hurlburt Air Force Base as part of the Special Operations Command. Mr. Curry
culminated a 26-year career in the U.S. Air Force as the Civil Engineering Chief of Heavy Repair,
Eglin AFB, Florida.
Service Area
The Airport Consultant has prepared a detailed analysis of the Airport's service area in its
Report of the Airport Consultant, attached as Appendix B herein.
The area primarily served by the Airport (the "Air Trade Area") is Okaloosa County and a
portion of its two adjoining Florida counties, Santa Rosa County and Walton County. The Air
Trade Area is located in the panhandle of Florida along the shores of the Gulf of Mexico. The City
of Fort Walton Beach is the largest city within the Air Trade Area and is located approximately
151 miles west of Tallahassee and 41 miles east of Pensacola.
Passengers originating from adjacent Escambia, Holmes, and Washington counties in
Florida, as well as Southern Alabama, may constitute a secondary service area, but most
passengers using the Airport originate in the Air Trade Area.
There is no connecting or hub activity at the Airport, and all passengers are "origin and
destination passengers."
30
The nearest competing airports are Pensacola Regional Airport, 50 miles to the west, and
Panama City-Bay County International Airport, 66 miles to the east. Panama City is in the process
of relocating their airport to a new site on the west side of Bay County approximately 58 miles to
the east of the Airport. The new Panama City-Bay County International Airport is expected to be
operational in 2010.
Set forth below is the historical regional share of enplanements for the Okaloosa Regional
Airport, the Pensacola Regional Airport and the Panama City-Bay County International Airport.
31
REGIONAL SHARES OF ENPLANEMENTS
32
Calendar
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
1996-2006
Weighted
Average
Compounded
Annual
Growth Rate
Okaloosa Regional
Regional
Enplanements
Share
225,112
24.4%
277,547
27.1%
291,903
28.3%
366,592
33.8%
411,593
36.8%
388,275
35.7%
342,183
28.9%
359,219
29.1%
395,012
29.7%
404,783
28.6%
365,045
27.0%
Pensacola Regional
Regional
Enplanements
Share
546,132
59.3%
574,604
56.1%
570,614
55.3%
545,887
50.4%
526,438
47.1%
526,628
56.6%
668,832
56.6%
690,095
55.8%
741,311
55.7%
821,477
58.0%
812,121
60.0%
Panama City-Bay County
International
Regional
Enplanements
Share
150,207
16.3%
172,246
16.8%
169,494
16.4%
170,863
15.8%
179,570
16.1%
173,385
15.9%
171,456
14.5%
187,066
15.1%
195,688
14.7%
189,938
13.4%
176,640
13.0%
Regional
Total
921,551
1,024,397
1,032,011
1,083,342
1,117,601
1,008,288
1,182,471
1,236,380
1,332,011
1,416,198
1,353,806
29.9%
54.9%
15.1%
100.0%
5.0%
4.0%
1.6%
3.9%
Sources: Report of the Airport Consultant, Table III-1
Airfield Facilities
The airfield facilities at the Airport (the “Airfield”) consist of two precision instrument
runways, Runway 12/30 and Runway 1/19, together with associated taxiways, aircraft parking
aprons and an Air Force air traffic control tower. Runway 12/30 is 12,005 feet long and runway
1/19 is 10,012 feet long and both are equipped with high intensity runway edge lighting with
sequenced flashers located on each end of the runways. Both runways are available to the County
based on the Joint Use Agreement. With the exception of the civilian aircraft Taxiways D-1 and
D-2 and the terminal apron, all airside facilities are maintained by the Air Force. Taxiways D-1
and D-2 are parallel taxiways providing access from the terminal aircraft parking apron to
Runway 12/30 and its northern parallel taxiway. Both taxiways are equipped with medium
intensity taxiway edge lighting. The dual taxiway system provides for the ability to operate
simultaneous arriving and departing operations without undue aircraft hindrance or delay.
Terminal Facilities
Following the completion of the Airport’s 1998 master plan and based on
recommendations therein, the County began the planning, design, and construction of a new
terminal facility. At that time, the age and condition of the Airport’s existing 38,000 square foot
terminal building, and the increasing passenger levels accommodate by the Airport, dictated the
need for a larger, more modern facility. The new two-story terminal facility, with an area of
approximately 110,000 square feet, opened in 2004. The new terminal includes three passenger
loading bridges on the upper-level east side of the concourse and three regional jet gate areas on
the lower west side. In addition to areas for airlines, the new terminal includes areas for five
rental car operators, limited space for the Transportation Security Administration (TSA), and the
Airport’s administration and maintenance departments.
Support Facilities
Rental Car Areas. There are currently five rental car companies operating on-site at the
Airport. Each company currently leases rental car counter and office space totaling
approximately 750 square feet in the passenger terminal to support their on-Airport operations.
The on-site manager and other staff generally share these offices.
The rental care companies share a consolidated service facility located west of the
passenger terminal building. The existing consolidated service facility consists of a paved area
covered by a metal roof structure that is portioned into six bays. Each bay consists of a fuel
pump, water hose connections, vacuums, and miscellaneous wash equipment. Vehicles are
fueled and then hand washed prior to being rented to a new customer. Current industry standard
is the use of automated car wash facilities which provide greater efficiency in the rental car
service process and reduce environmental impacts. The construction of new rental car service
facilities on an area located on the east side of the passenger terminal is a key component of the
2007 Project. Included in the 2007 Project are the construction of office/storage areas, vehicle
maintenance areas, a five-bay consolidated car wash building, a consolidated fueling facility, and
vehicle storage areas for each rental car operator.
33
The Airport's primary ready/return area is located on the west side of the terminal
building and is comprised of Ready Area A. Ready Area B and an overflow area providing
additional spaces is located on the east side of the terminal. Each of these are paved lots. Ready
Area A contains a total of 286 parking spaces and Ready Area B provides 164 spaces. The
overflow ready space area provides an additional 282 parking spaces. On an annual basis, rental
car operators are allocated ready/return spaces in these areas based on their market share at the
Airport. See "APPENDIX B -- Report of the Airport Consultant - Rental Car Market at the
Airport," for a discussion of the rental car market at the Airport.
Public/Employee Parking. Existing public and employee parking facilities at the Airport
comprise a total of approximately 1,910 vehicle parking spaces. Existing parking facilities and
their respective capacities are summarized as follows:
Long Term – 795 total spaces including 16 reserved for handicap use
Short Term – 207 total spaces including 6 reserved for handicap use
Employee Lot – 542 spaces including 12 reserved for handicap use
Reserved – 30 spaces including 2 reserved for handicap use
Overflow – 338 spaces including 8 reserved for handicap use
The reserved parking area will likely be converted to short-term paid parking under an
anticipated new parking management or operation contract. The overflow lot is used for public
parking during holiday peak seasons. During the remainder of the year, the majority of spaces in
the overflow lot are leased to the rental car companies and used for vehicle storage.
Fuel Facility. The Airport's fuel farm is currently located on the west side of the terminal
apron. Three above ground storage tanks, including two 20,000-gallon JetA fuel tanks and one
3,000-gallon tank used for unleaded automotive gasoline, are located within the facility. The
facility is covered with a metal roof, and has a concrete containment area to contain potential
fuel leaks. The tanks are connected via galvanized steel pipes to the delivery system. An
emergency shutoff switch is located on the northeast side of the fuel farm. The construction of a
relocated fuel farm is planned and the rental car component of that project is included in the
2007 Project. The relocation of aviation fueling facilities is not included in the 2007 Project nor
are the costs associated therewith. The cost of dismantling and removing the existing fuel
facility is included in the 2007 Project cost.
Support Facilities. The Baldwin Building, located east of the terminal building, houses
key components of the Airport's electrical and communications infrastructure. Additionally, it
provides limited storage capability. The Airport maintenance department, responsible for
maintaining County-owned buildings, grounds, and apron areas, currently utilizes multiple
locations for storage of supplies and equipment. The department lacks a dedicated shop area,
which could be used for vehicle maintenance, minor carpentry projects and miscellaneous
equipment repairs.
34
Other Airports
In addition to the Airport, the County also owns and operates two general aviation
facilities, Bob Sikes Airport and Destin/Ft. Walton Beach Airport.
Bob Sikes Airport. Bob Sikes Airport is located northeast of the City of Crestview and is
approximately 18 miles north of the Airport. It is a public-use airport accommodating general
aviation, air taxi and some military operations. Runway 17/35 at Bob Sikes Airport has a length
of 8,005 feet, width of 150 feet, and has precision instrument approach capabilities.
Approximately 50 aircraft are based at Bob Sikes Airport and a full service fixed base operator
(FBO), Sunshine Aero, supports local and transient operators.
Destin/Ft. Walton Beach Airport. Destin/Ft. Walton Beach Airport is located
approximately 6 miles southeast of the Airport. The public use general aviation airport has a
4,999-foot runway and is supported by non-precision instrument approaches. Approximately 75
aircraft are based at Destin/Ft. Walton Beach Airport, and the airport's FBO, Miracle Strip
Aviation, provides fueling and aircraft parking services to local and itinerant operators.
Facilities are currently under construction for a second FBO.
Airlines Serving the Airport
Since 1990, aviation activity at the Airport has produced stages of both strong growth and
declines in operations. In terms of passenger service, the Airport has a history of serving mainly as
a spoke airport or a destination point for a number of hub carriers. As of May 2007, the Airport
had scheduled daily non-stop passenger service provided by eight U.S. carriers: American Eagle,
Atlantic Southeast (d/b/a the Delta Connection), Chautauqua and ExpressJet (both d/b/a
Continental Express) and Delta, Freedom (d/b/a the Delta Connection), Gulfstream (d/b/a the
Continental Connection), and Northwest. AirTran Airways withdrew from the market in
November 2001, switching to the Pensacola Regional Airport, after aggressive marketing efforts
by that airport to increase air service from that city. U.S. Air Express withdrew in 2005.
Delta Air Lines has the largest market share and currently operates 8 daily departures
together with its affiliates. As a percent of total departures, Delta and its regional partners operate
over 50 percent of the Airport’s total departures.
Enplanements
Over the long term, total enplaned passengers at the Airport have increased. From 1999 to
2006, total enplanements grew at an annual compound growth rate of 1.37 percent, which is
comparable to the U.S. national rate of 1.43 percent for the same period. Total annual enplaned
passengers increased from 352,340 in 1999 to 370,558 in 2006. The 2002 figure decreased at a
rate slightly below 20 percent because of the events of September 11, 2001, the economic
slowdown and AirTran’s exit from the market. Enplanements rebounded between 2002 and 2005,
going from 329,481 to 407,053. The 2006 figure decreased at a rate of 9 percent due to Delta's
bankruptcy filing and subsequent cutback in service.
35
Historical Enplanements
Fiscal
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Enplaned
Passengers
209,149
269,038
282,020
352,340
403,095
410,324
329,481
355,367
388,958
407,053
370,558
October - August
FY 2006
FY 2007
342,665
364,494
Annual
Percent
Change
28.6%
4.8%
24.9%
14.4%
1.8%
-19.7%
7.9%
9.5%
4.7%
-9.0%
6.4%
Average Compounded Annual Growth Rate
1996-2006
5.9%
Source: Report of the Airport Consultant, Table III-6
Airline Market Share
For the Fiscal Year 2006, Delta Air Lines and its regional affiliates had the largest share
of the Airport’s origination and destination ("O&D") passengers, accounting for over 50 percent
of O&D passengers. Northwest Airlines had the second-largest market share, with just under a
quarter of the market at 21.3 percent, operating three non-stop daily flights to Memphis using
100-seat DC-9-30 aircraft. American Eagle had the third-largest market share, at 15.2%,
primarily serving Dallas/Ft. Worth. Continental Express and its affiliates held fourth place in
total market share with 13.4 percent, serving Houston and Tampa. Prior to its bankruptcy
declaration, Delta had approximately 70% of the Airport's market share for Fiscal Years 20022005.
Set forth below is a table showing historical enplaned passengers by airline for Fiscal
Years 2002-2006.
36
Historical Enplaned Passengers by Airline
FY 2002
37
Enplaned
Airline
Passengers
Delta
Carriers
228,420
85,524
Northwest(1)
American
Eagle
Continental
Express
(2)
AirTran
6,395
US Airways
Express(3)
9,142
AIRPORT
TOTAL(4)
(1)
(2)
(3)
(4)
329,481
FY 2003
Enplaned
Passengers
Share
FY 2004
Enplaned
Passengers
Share
FY 2005
Enplaned
Passengers
Share
FY 2006
Share
Enplaned
Passengers
Share
69.3%
26.0%
245,479
93,132
69.1%
26.2%
275,662
80,909
70.9%
20.8%
278,761
79,370
68.5%
19.5%
185.752
78,783
50.1%
21.3%
-
-
-
-
-
13,719
3.4%
56,202
15.2%
1.9%
5,875
-
1.7%
-
20,796
-
5.3%
-
32,032
-
7.9%
-
49,821
-
13.4%
-
2.8%
10,881
3.1%
11,591
3.0%
3,171
0.8%
-
-
100.00%
355,367
100.0%
388,958
100.0%
407,053
100.0%
370,558
100.0%
Includes data for Mesaba in FY 2003 and FY 2004.
Discontinued service at the Airport in November 2001.
Discontinued service at the Airport in January 2005.
Columns may not add to totals shown because of rounding.
Top 10 Origin and Destination Markets
Atlanta Hartsfield has historically been the top O&D market for the Airport because of its
close proximity to the Airport, as well as its status as Delta Air Lines’ primary hub. However,
during Fiscal Year 2006, Dallas recorded just above 42,190 O&D passengers from the Airport,
giving it a 11.37 percent market share to Atlanta's 9.46%.
Top 10 Origin and Destination City Markets – Fiscal Year 2006
Percent
Cumulative
Percentage
42,190
35,100
33,430
27,380
25,190
19,030
18,590
18,280
16,840
16,120
11.37%
9.46
9.01
7.38
6.79
5.13
5.01
4.93
4.54
4.34
11.37%
20.83
29.84
37.22
44.01
49.14
54.15
59.08
63.62
67.96
Top 10 O&D Passengers
252,150
67.96%
Remaining O&D Passengers
118,910
32.04
Total O&D Passengers
371,060
Rank
1
2
3
4
5
6
7
8
9
10
City Pairs
Dallas/Ft. Worth
Atlanta
Washington
New York
Memphis
St. Louis
Houston
Las Vegas
Tampa
Chicago
Total O&D
Passengers
Aircraft Operations
Majors/Nationals – With AirTran discontinuing service at the Airport in early Fiscal Year
2002, major/national activity decreased 9.6 percent in Fiscal Year 2002 from Fiscal Year 2001
levels, from 5,266 operations to 4,758 operations during this period. This decrease was lessened
by Delta initiating mainline service at the Airport in the first month of Fiscal Year 2002. Delta
continued to steadily increase its mainline presence at the Airport, as major/national activity
increased to 5,538 operations by Fiscal Year 2005. At its peak in Fiscal Year 2005, Delta
provided five to six daily mainline flights to its Atlanta hub from the Airport. Delta’s decision to
cut back service systemwide as a strategy to emerge from Chapter 11 caused major/national
operations and scheduled seats to decrease 28.4 percent and 48.8 percent, respectively, in Fiscal
Year 2006 from Fiscal Year 2005 levels. Mainline activity by Northwest at the Airport was
relatively stable between Fiscal Year 2001 and Fiscal Year 2006, with approximately three to
four daily flights to its Memphis hub during this period.
Regionals/Commuters – Regional/commuter activity at the Airport decreased from
11,806 operations in Fiscal Year 2001 to 9,458 operations in Fiscal Year 2002, primarily due to
the shifting of certain Atlantic Southeast operations to Delta mainline service in Fiscal Year
38
2002. With the continued expansion of service by Delta carriers at the Airport, as well as the
initiation of service by ExpressJet at the Airport in mid-Fiscal Year 2004, regional/commuter
activity increased from 9,458 operations in Fiscal Year 2002 to 12,480 operations in Fiscal Year
2004. With the discontinuation of service by US Airways Express at the Airport in mid-Fiscal
Year 2005, regional/commuter activity decreased 21.5 percent in Fiscal Year 2005 from Fiscal
Year 2004 levels (from 12,580 operations in Fiscal Year 2004 to 9,806 operations in Fiscal Year
2005). The initiation of service by Gulfstream at the Airport in mid-Fiscal Year 2006 offset the
29.4 percent decrease in scheduled seats by Atlantic Southwest in Fiscal Year 2006, resulting in
activity by this major user group to increase from 9,806 operations in Fiscal Year 2005 to 10,726
in Fiscal Year 2006, an increase of 9.4 percent during this period.
Commercial Operations
Fiscal
Year
Majors/
Nationals
Regionals/
Commuters
Airport
Total
2001
5,266
11,806
17,072
2002
2003
2004
2005
2006
4,758
4,902
4,872
5,538
3,964
9,458
10,774
12,480
9,806
10,726
14,216
15,676
17,352
15,344
14,690
-5.5%
-1.9%
-3.0%
Compounded
Annual Growth Rate
2001 – 2006
Landed Weight
The table set forth below presents the historical share of landed weight by commercial
airlines at the Airport between Fiscal Year 2002 and Fiscal Year 2006. As shown, Delta carriers
and Northwest had a combined 85 to 90 percent share of Airport landed weight between Fiscal
Year 2002 and Fiscal Year 2005. Similar to enplanements, approximately 20 percent of the Delta
carriers’ share of Airport landed weight was redistributed to American Eagle and Continental
Express in Fiscal Year 2006 due to cutbacks in Delta service systemwide during this period. Delta
carriers, however, maintained the highest share of landed weight at the Airport with approximately
50 percent of the total in Fiscal Year 2006.
(REMAINDER OF PAGE INTENTIONALLY BLANK)
39
Landed Weight(1)
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
Delta Carriers
Northwest(2)
American Eagle
Continental Express
Air Tran(3)
US Airways Express(4)
Landed
Weight
262,378
119,800
11,232
34,262
Share
61.4%
28.0%
2.6%
8.0%
Landed
Weight
265,566
135,645
9,034
35,291
Share
59.6%
30.4%
2.0%
7.9%
Landed
Weight
326,293
109,046
29,934
34,735
Share
65.3%
21.8%
6.0%
6.9%
Landed
Weight
351,465
108,984
12,015
45,883
8,340
Share
66.7%
20.7%
2.3%
8.7%
1.6%
Landed
Weight
215,532
107,713
60,250
64,497
-
Share
48.1%
24.0%
13.4%
14.4%
-
AIRPORT TOTAL(5)
427,673
100.0%
445,536
100.0%
500,008
100.0%
526,686
100.0%
447,992
100.0%
Airline
_____________________
(1)
Weight in 1,000 pound units.
(2)
Includes data for Mesaba in Fiscal Year 2003 and Fiscal Year 2004.
(3)
(4)
(5)
Passenger Facility Charges
Passenger Facility Charges ("PFCs") are collected by air carriers serving an airport and
are remitted to the airport less a small handling charge. PFCs are available to airports to finance
certain projects that (i) preserve or enhance capacity, safety or security of the national airport
transportation system, (ii) reduce noise resulting from an airport, or (iii) furnish opportunities for
enhanced competition among air carriers. PFC applications are approved by the Federal
Aviation Administration (the "FAA") for specific projects and for specific amounts for each
project. The airport may only impose the designated PFC until it collects the authorized total
amount of that application. Interest earnings on collections count against the application total.
Under certain circumstances, the FAA grants approval to commence collection of PFCs ("impose
only" approval) before approval to spend the PFCs on approved projects ("use" approval) is
granted. Approval to both collect and spend PFCs is referred to as an "impose and use"
approval. Collected PFCs may be spent on projects in approved applications, regardless of the
Charge Effective Date (i.e., the date on which the FAA expects the airport to begin collecting
PFCs) of the application.
The County is currently collecting PFCs at the rate of $4.50 per passenger for each
eligible flight segment flown (eligible flight segments are limited to the first two airports where
PFCs are imposed for one-way tickets and the first two enplaning airports (outbound) and least
two enplaning airports (inbound) on round-trip tickets) The County is currently authorized to
impose and use up to $37,292,945 in PFCs through the Estimated Expiration Date of December
1, 2019. (For purposes of the preceding sentence, "Estimated Expiration Date" means the date
on which the County is expected to have collected enough PFCs to pay for the projects for which
it has filed PFC applications.) As of March 31, 2007, the County had collected PFCs in the
amount of approximately $8,620,073. The County is now in the process of preparing a new PFC
amendment to be filed with the FAA. If this amendment is approved, the number of PFCeligible projects will be increased. The PFCs are pledged to secure the Series 2003 Bonds,
40
but are not pledged to secure the Series 2007 Bonds.
historical PFC Revenues received by the County.
Set forth below is a table showing
Historical PFC Revenues
Fiscal Year
2001
2002
2003
2004
2005
2006
Amount
$855,355.91
741,396.98
1,382,128.131
1,516,234.14
1,505,621.92
1,383,853.92
____
1
The PFC rate increased from $3.50 to $4.50 in 2002.
No assurance can be given that PFCs will actually be received in the amount or at the
time contemplated by the County. The amount of actual PFC Revenues collected, and the rate of
collection, will vary depending on the actual levels of qualified passenger enplanements at the
Airport. In addition, the FAA may terminate the County's ability to impose PFCs, subject to
informal or formal procedural safeguards, if (1) the County fails to use its PFC Revenues for
approved projects in accordance with the FAA's approval, the PFC Act or the PFC Regulations,
or (2) the County otherwise violates the PFC Act or the PFC Regulations. The County's ability
to impose a PFC may also be terminated if the Airport violates certain provisions of the Airport
Noise and Capacity Act of 1990 and its implementing regulations. Furthermore, no assurance
can be given that the County's power to impose a PFC will not be terminated by Congress or the
FAA, or that the PFC program may not be modified or restricted by Congress or the FAA so as
to reduce PFC Revenues available to the County.
41
HISTORICAL OPERATING RESULTS
The following tables of Historical Operating Results of the Airport are derived from the
audited financial statements of the County for the fiscal years ended 2002 through 2006,
inclusive.
2002
2003
2004
2005
2006
OPERATING REVENUES
Charges for Services
Miscellaneous
TOTAL OPERATING REVENUES
$3,672,709
2,030
3,674,739
$4,418,831
68,209
4,487,040
$4,580,630
361
4,580,991
$5,911,154
1,379
5,912,533
$7,064,506
989
7,065,495
OPERATING EXPENSES
Personal Services
Contractual Services
Supplies
Utilities
Other Operating Expenses
Depreciation
TOTAL OPERATING EXPENSES
737,107
590,560
86,493
168,363
571,175
879,779
3,033,477
800,958
425,932
107,658
222,793
741,029
978,105
3,276,475
858,679
664,098
112,502
225,568
835,311
962,361
3,658,519
993,067
1,200,625
213,946
471,165
889,846
1,456,769
5,225,418
1,018,160
1,260,219
208,178
544,288
1,180,361
2,001,370
6,222,576
641,262
1,210,565
922,472
687,115
842,919
80,631
247,356
751,956
(80,086)
(72,586)
17,249
149,080
2,082,164
(51,180)
(38,115)
(56,495)
135,544
1,683,532
(113,841)
(95,369)
645,596
104,475
2,232,334
(494,499)
(52,869)
622,581
397,055
2,839,691
(567,195)
(46,180)
(5,265)
(1,335)
(2,709)
(2,859,301)
4,311
922,006
2,157,863
1,550,662
(424,264)
3,250,263
1,563,268
3,368,428
2,473,133
262,851
4,093,182
(518,792)
(576,266)
(567,700)
(942,983)
(950,569)
1,044,476
2,792,162
1,905,433
(680,132)
3,142,613
OPERATING INCOME (LOSS)
NON-OPERATING REVENUES
(EXPENSES)
Intergovernmental Revenues
Investment Income
Other Non-Operating Income
Interest Expense
Other Debt Service Costs
Gain/Loss on Disposal of Fixed
Assets
TOTAL NON-OPERATING
REVENUES (EXPENSES)
INCOME (LOSS) BEFORE
OPERATING TRANSFERS
Operating Transfers In
Operating Transfers Out
NET INCOME (LOSS)
_________________
Source: Okaloosa County, Florida audited financial statements.
42
Management Discussion of Financial Results
Okaloosa Regional Airport derives its revenues from landing fees and rentals charged to
the airlines servicing the Airport and from a variety of non-airline sources. In addition, a $4.50
passenger Facility Charge (PFC) is collected by Airlines on behalf of the Airport and remitted on a
monthly basis. PFCs are being used to fund the Airport's current debt service on its Series 2003
Bonds. The Airport also began to collect a $2.50 per car rental day CFC in December 2005 to
provide initial funding for the 2007 Project and debt service on the Series 2007 Bonds associated
therewith.
Airline Revenue: Landing fees, terminal space rental, security fees, baggage handling and
jet bridge fees charged to the Airlines comprised 30 percent of the Airport's operating revenues in
Fiscal Year 2006. Landing fees decreased by 30 percent due to Delta's strategy of reducing service
while in bankruptcy. Space rental fees increased 94 percent due to rate increases and additional
space rental. The overall result was a 52% increase in Airline revenue over Fiscal Year 2005.
Non-Airline Revenues: These revenues are derived primarily from commissions and space
rental from rental car companies and public parking. Historical non-airline revenue from Fiscal
Year 2002 to Fiscal Year 2006 increased as a compounded annual growth rate of 15.4 percent.
This annual increase can be attributed to growth in rental car revenues and parking revenues at the
Airport, strong growth in revenues at the County's two general aviation airports, and growth in
other revenue items. Non-airline revenues for Fiscal Year 2005 and Fiscal Year 2006 include the
proceeds of land sales at Bob Sikes Airport. Per the terms of the Indenture, land sale proceeds are
excluded from Revenues in the determination of Airline rates and charges.
Operating Expenses: Historical operation and maintenance expenses from Fiscal Year
2002 to Fiscal Year 2006 increased at a compounded annual growth rate of 18.2 percent, higher
than inflationary impacts. The County attributes the increases to increased personnel costs in its
administrative function and increased contracted services expenses, each related primarily to the
new terminal building. Insurance, utilities and cost of fuel were contributors to the increase in
expenses.
THE 2007 PROJECT
In continuation of the development and expansion of the Airport, the County desires to
implement the 2007 Project which includes, among other components, the relocation of all rental
car service functions on the Airport to a 22.6 acre site located east of the Terminal Building. The
site was recently added to the Airport leasehold following negotiations with the Air Force and
the County has received the necessary approvals from the Air Force to complete 2007 Project.
Key components of the 2007 Project include site development and access improvements, the
relocation of the Airport fuel farm, and the construction of relocated rental car service facilities.
Site development projects include clearing and grubbing, excavation, and drainage
improvements necessary to prepare the project site for development. Utilities, including an
electrical duct bank, will be extended to the site to accommodate the lighting and utility service
needs of the relocated fuel farm and relocated rental car service facilities. Access improvements
included in the 2007 Project will provide vehicular access to the site from State Road 85 to
43
accommodate deliveries as well as provide a connection from the site to the existing terminal
loop road for Ready/Return operations. The addition of turn lanes to State Road 85 is also
included in the 2007 Project.
The Airport’s existing fuel farm will be relocated as part of the 2007 Project. Upon its
completion, the new fuel farm facility will utilize a shared fuel tank configuration in a walled
containment area. The fuel facility will be operated by the Airport and will support the storage of
both aviation and automotive fuels. Above ground tanks will provide storage capacity totaling
80,000 gallons for aviation fuel and 50,000 gallons for automotive fuel. Aviation fuel will be
dispensed to trucks that will service aircraft on the apron that is remote from the farm.
Automotive fuel will be transported through pipelines from the fuel farm the rental car service
area.
On-grade rental car facilities to be constructed as part of the 2007 Project include
roadways, a consolidated rental car fueling facility, a five-bay consolidated wash building, and
five rental car service facility buildings and associated vehicle storage parking areas. Each rental
car service facility building will include office/storage areas, a breakroom, and a vehicle
maintenance area to facilitate light automotive maintenance.
The total estimated cost of the 2007 Project is approximately $13.2 million. The aviation
component of the fuel farm relocation is not included the cost of the 2007 Project. A portion of
project costs associated with access improvements and site development are anticipated to be
funded with federal and state grants. Remaining project costs are anticipated to be funded by
accumulated CFC collections and the proceeds of the Series 2007 Bonds.
44
Set forth below is a table of sources and uses with respect to the 2007 Project:
Project Costs
East Side Access, Site Development and Utilities
$4,196,280
Rental Car Facilities
$7,897,488
Rental Car Fuel Farm Improvements1
$1,124,628
Total Project Costs
$13,218,395
From Federal/State Grants
MAP
FDOT
SIS Funds
$1,589,118
562,500
295,181
From Accumulated CFC Revenues
$3,396,117
Series 2007 Bond Proceeds
$7,375,479
Total Project Cost
1
$13,218,395
Does not include tank removals which is the responsibility of each operator.
REPORT OF THE AIRPORT CONSULTANT
In connection with the issuance of the Series 2007 Bonds, the County retained Ricondo &
Associates, Inc., Cincinnati, Ohio (the "Airport Consultant") to prepare the Report of the Airport
Consultant, attached hereto as Appendix B, which includes a description of the 2007 Project, the
economic basis for air traffic at the Airport, air traffic demand, the rental car industry and rental
car demand, existing airport facilities, other capital projects, and financial analysis related to the
overall feasibility of the 2007 Project. The Report of the Airport Consultant also presents airline
traffic and financial forecasts for Fiscal Years 2007 through 2016 and sets forth certain
assumptions upon which the forecasts are based. These assumptions were provided by, or
reviewed and adopted by the County at the time the Report was issued. The Report of the
Airport Consultant has been included in this Official Statement in reliance upon the reputation of
the Airport Consultant as an expert in preparing forecasts and projections with respect to
airports.
Based upon the assumptions and analysis described in the Report of the Airport
Consultant, the Airport Consultant is of the opinion that:
●
The economic base of the Air Trade Area is stable and diversified, and is capable
of supporting increased demand for air travel at the Airport during the projection period.
45
●
The 2007 Project is feasible in terms of providing facilities at the Airport at a cost
that will produce reasonable levels of rates and charges to the users of the Airport facilities.
●
Cost per enplanement for the passenger airlines that are signatory to the AirlineAirport Use and Lease Agreement (“Airline Agreement”) (“Signatory Airlines”) is estimated to
increase from approximately $5.56 budgeted in Fiscal Year 2007 to $7.33 in Fiscal Year 2016, a
compounded annual increase of 3.1%. The Signatory Airlines’ landing fee rate as adjusted is
projected to increase from approximately $1.07 per thousand pounds budgeted in Fiscal Year
2007, to $1.51 per thousand pounds in Fiscal Year 2016.
●
Projected airline rates and charges together with other Airport revenues are
sufficient to ensure that all Operation and Maintenance (O&M) expenses, debt service, and fund
deposit requirements can be generated through reasonable user fees. Debt service coverage is
projected to range from 2.53x to 3.71x, meeting the rate covenant requirement of the Indenture in
each year of the projection period.
The following table sets forth projected debt service coverage of the Series 2003 Bonds
and Series 2007 Bonds for the Fiscal Years ending September 30, 2007 through 2016.
(REMAINDER OF PAGE INTENTIONALY BLANK)
46
2008
2009
Actual
$7,744,450
$8,123,521
$9,160,857
$10,255,979
$10,640,195
(5,942,634)
(6,156,649)
(6,432,501)
(6,971,680)
Net Revenues
1,801,816
1,966,872
2,728,356
PFC Revenue for
Debt Service and
Coverage3
994,838
997,541
Available for Debt
Service
2003 Debt Service
2007 Debt Service
2,796,653
795,870
0
Debt Service
Coverage
3.51
2007
Debt Service
Coverage
Total Revenues1,2
Less: O&M
Expenses
2010
2011
2012
47
2013
2014
2015
$11,083,745
$11,521,942
$11,989,671
$12,477,490
$12,978,064
(7,290,101)
(7,608,042)
(7,941,494)
(8,291,268)
(8,658,218)
(9,043,245)
3,284,299
3,350,094
3,475,703
3,580,448
3,698,403
3,819,273
3,934,819
$999,266
999,016
997,438
994,469
996,742
997,680
1,001,023
996,742
2,964,413
798,033
0
3,727,622
799,413
544,988
4,283,315
799,213
891,775
4,347,532
797,950
887,675
4,470,172
795,575
892,975
4,577,191
797,394
887,075
4,696,082
798,144
890,575
4,820,296
800,819
892,875
4,931,561
797,394
888,188
3.71
2.75
2.53
2.58
2.65
2.72
2.78
2.85
2.93
Source: Ricondo & Associates, Inc.
1
Total Revenues include pledged CFC revenues equal to 125% of Series 2007 Bond debt service
2
CFC Revenues are not pledged to secure the Series 2003 Bonds
3
PFC Revenues are not pledged to secure the Series 2007 Bonds
2016
The Report of the Airport Consultant should be read in its entirety for an understanding
of the forecasts and the underlying estimates and assumptions.
The references herein to the Report of the Airport Consultant as independent airport
consultants, have been approved by said firm.
INVESTMENT CONSIDERATIONS
General
The following discussion describes certain risks affecting the payment of and security for
all Bonds outstanding under the Indenture, including the Series 2007 Bonds. The following
discussion is not meant to be an exhaustive list of the risks associated with the purchase of the
Series 2007 Bonds and does not necessarily reflect the relative importance of the various risks.
Potential investors are advised to consider the following along with all other information
described elsewhere or incorporated by reference in this Official Statement in evaluating their
purchase of the Series 2007 Bonds.
General Factors Affecting Airline Activity at the Airport
There are numerous factors which affect air traffic generally and air traffic at the Airport
specifically. Demand for air travel is influenced by factors such as population, levels of
disposable income, the nature, level and concentration of industrial and commercial activity in
the service area, and the price of air travel. The price of air travel is, in turn, affected by the
number of airlines serving a particular airport and a particular destination, the financial
condition, cost structure and hubbing strategies of the airlines serving an airport, the willingness
of competing airlines to enter into an airport market, the cost of operating at an airport, the price
of fuel, and any operating constraints (due to capacity, environmental concerns or other related
factors) limiting the frequency or timing of airport traffic within the national system or at a
particular airport. In addition, the global hostilities and the threat of renewed terrorist attacks
may dampen air traffic.
Airport Security. Concerns about the safety of airline travel and the effectiveness of
security precautions, particularly in the context of international hostilities and terrorist attacks,
influence passenger travel behavior and air travel demand. These concerns have intensified in
the aftermath of the September 11 events and more recent threatened activity with respect to
certain flights to the United States from the United Kingdom in August 2006. Travel behavior
may be affected by anxieties about the safety of flying and by the inconveniences and delays
associated with more stringent security screening procedures, both of which may give rise to the
avoidance of air travel generally and the switching from air to surface travel modes.
Historically, air travel demand has recovered after temporary declines stemming from
terrorist attacks, hijackings, aircraft crashes and international hostilities and, provided that the
intensified security precautions now being implemented in the United States and elsewhere are
48
effective in restoring confidence in the safety of commercial aviation while not imposing
unacceptable inconveniences for air travelers, of which there can be no assurance, it can be
expected that future demand for airline travel at the Airport will depend primarily on economic
rather than security factors.
The Aviation and Transportation Security Act (the “Aviation Security Act”) requires that
all United States airports use TSA-approved explosive detection systems (“EDS”) to screen all
checked baggage. EDS equipment purchased by the federal government has been installed at the
Airport. The Aviation Security Act also requires that eventually all passenger bags, mail and
cargo be screened to prevent the carriage of weapons (including chemical and biological
weapons), explosives or incendiary devices; however, as of the date hereof, no regulations
regarding these enhanced security measures have been proposed. The Airport continues to
follow and implement security initiatives based on the policy and guidelines established by the
TSA and is currently in compliance with all federally mandated security requirements.
However, TSA has broad discretion to modify security requirements from time to time.
The Airport’s operating costs increase when “Code Orange” (high) or “Code Red”
(severe) national threat levels are declared by the Department of Homeland Security and
heightened procedures are implemented consistent with those declarations. Since the institution
of the alert system, the national threat level has never been raised to Code Red, but it has been
raised to Code Orange a number of times. Historically, each time the Department of Homeland
Security raises the threat level to Code Orange, the Airport’s operating costs increased.
The Airport expects that, pursuant to federal regulations, airports in the United States will
be required to implement the Transportation Workers Identification Credential (“TWIC”)
program in the future. It is likely that the TSA will require airports to bear the cost of the daily
operation of the program, including the purchase, maintenance and operation of card readers and
ongoing verifications of credentials for airport workers. The TWIC program may impose
increased short and long term security costs for the Airport. In addition, the TSA announced on
May 17, 2006 new requirements designed to protect the more than 50,000 tons of cargo that is
transported aboard passenger and all-cargo aircraft each day. The security requirements mark
the first substantial changes to air cargo regulations since 1999, and represent a joint
government-industry vision of an enhanced security baseline. Compliance with the new security
measures could increase the Authority’s security costs.
To the extent that the Airport incurs substantial security costs in the future, such costs
could adversely affect the Airport’s financial condition. Although the Airport has received
various capital grants and reimbursements for a portion of security operating costs from the
federal government since 2002, there can be no assurance that the Airport will continue to
receive such federal assistance or that such assistance will be sufficient to mitigate the impact of
such costs. In addition, if the airlines are required to pay substantial security costs, it would
place an additional financial burden on many already financially troubled airlines which, in turn,
could have a negative impact on the operations of the Airport and the Airport’s revenues. The
Airport cannot predict the likelihood or impact of any future government-required security
measures.
49
The Homeland Security Act created the Department of Homeland Security (“DHS”) to
accomplish several primary goals, identified by the statute as: preventing terrorist attacks within
the United States; reducing the nation’s vulnerability to terrorism; minimizing the damage of,
and assisting in the recovery from, terrorist attacks that do occur; and monitoring connections
between illegal drug trafficking and terrorism and coordinating efforts to sever such connections.
The TSA is now a part of the DHS.
The Homeland Security Act extended the federal government’s guarantee of war-risk
insurance to airlines through August 31, 2007. According to the Air Transport Association,
efforts are underway to extend the guaranty beyond August 31, 2007. The Homeland Security
Act caps the total premium paid by any airline for war-risk insurance at no more than twice the
premium the airline was paying the U.S. Department of Transportation for its third-party policy
as of June 19, 2002. The Homeland Security Act also requires that carriers include methods of
self-defense within their security training programs for flight attendants. The Act also requires
DHS to establish a program for arming pilots, though participation in the program remains
voluntary.
Cost of Aviation Fuel. According to the Air Transport Association, fuel is the second
largest cost component of airline operations after labor and continues to be an important and
uncertain determinate of an air carrier’s operating economics. There has been no shortage of
aviation fuel since the “fuel crisis” of 1974, but any increase in fuel prices causes an increase in
airline operating costs. With higher crude prices driving up the cost of refined products, the
price paid by the U.S. airlines for jet fuel averaged $1.96 per gallon in 2006, an 18 percent
increase from the 2005 average price. At these levels, airlines are not able to fully realize the
expected financial boost from their aggressive conservation measures. According to the Air
Transport Association, a one-dollar increase in the price of oil per barrel equates to
approximately $425 million in annual additional expense for U.S. airlines.
Low-cost Carriers and Low-fare Divisions of Legacy Carriers. In recent years, low-cost
carriers have accounted for an increasing share of the domestic U.S. passenger market at the
expense of the legacy carriers. Nationally, low-cost carrier service accounted for approximately
10% of passenger traffic in the early 1990s and increased to approximately 25% by early 2004.
Increased competition from low-cost carriers has placed additional pressure on the legacy carrier
to institute further cost-cutting measures, reduce their fares to remain competitive and introduce
their own low-fare divisions.
Travel Substitutes. Teleconference, video-conference and web-based meetings have
improved in quality and price and are often considered satisfactory alternatives to face-to-face
business meetings. In addition, leisure and business travelers may choose alternative modes of
transportation, such as cars. The September 11 events have accelerated this trend. Although the
impact cannot be accurately quantified, it is possible that business travel to and from Okaloosa
County may be negatively affected by this trend.
Structural Changes in the Travel Market. Many factors have combined to alter
consumer travel patterns. The threat of terrorism against the United States remains high. As a
result, the federal government has mandated various security measures that have resulted in new
50
security taxes and fees and longer passenger processing and wait times at airports. Both add to
the costs of air travel and make air travel less attractive to consumers relative to ground
transportation, especially to short-haul destinations. The Air Transport Association observes a
disproportionate decline in short-haul air travel and a consistent rise in automobile travel. More
people are choosing to drive where in the past they would have flown. In addition, consumers
have become more price-sensitive. Efforts of airlines to stimulate traffic by discounting fares
heavily have changed consumer expectations regarding airfares. Consumers have now come to
expect low fares. In addition, the availability of fully transparent price information on the
Internet now allows quick and easy comparison shopping, and this has changed consumer
purchasing habits. Consumers have shifted from purchasing paper tickets from travel agencies
or airline ticketing offices to purchasing electronic tickets over the Internet. This has made
pricing and marketing even more competitive in the U.S. airline industry. Finally, smaller
corporate travel budgets, combined with the higher time costs of travel, have made business
customers more amenable to communications substitutes such as tele- and video-conferencing.
Capacity of National Air Traffic Control and Airport Systems. Demands on the national
air traffic control system continue to cause aircraft delays and restrictions, both on the number of
aircraft movements in certain air traffic routes and on the number of landings and takeoffs at
certain airports. These restrictions affect airline schedules and passenger traffic nationwide. The
FAA is gradually automating and enhancing the computer, radar, and communications
equipment of the air traffic control system and assisting in the development of additional airfield
capacity through the construction of new runways and the more effective use of existing
runways. However, increasing demands on the national air traffic control and airport systems
could cause increased delays and restrictions in the future.
General Factors Affecting Airport and Airline Revenues
The revenues of both the Airport and the airlines may be materially affected by many
factors including, without limitation: declining demand, service and cost competition, airline
mergers, the availability and cost of fuel and other necessary supplies, high fixed costs, high
capital requirements, the cost and availability of financing, technological changes, national and
international disasters and hostilities, the cost and availability of employees, strikes and other
employee disruptions, the maintenance and replacement requirements of aircraft, the availability
of routes and slots at various airports, litigation liability, regulation by the federal government,
environmental risks and regulations, noise abatement concerns and regulation, deregulation,
federal and state bankruptcy and insolvency laws and other risks. Many airlines, as a result of
these and other factors, have operated at a loss in the past and several have filed for bankruptcy,
ceased operations and/or have merged with other airlines.
Operating Results and Financial Condition of Airlines
While the Airport generates revenues from multiple sources, it derives a substantial
portion of its operating revenues from landing and facility rental fees paid by the airlines.
Revenues from landing and facility rental fees paid by airlines constitute 30% of the Airport’s
revenues in 2006. The financial strength and stability of the airlines using the Airport, together
with numerous other factors, influence the level of aviation activity at the Airport.
51
Since 2001, the global airline industry has undergone substantial structural changes and
sustained significant financial losses. Due to the discretionary nature of business and personal
travel spending, airline passenger traffic and revenues are heavily influenced by the strength of
the U.S. economy, other regional economies, security concerns and other factors. Permanent
structural changes to the airline industry are the result of a number of factors including the
impact of low cost carriers, internet travel websites and carriers reorganizing under the U.S.
Bankruptcy Code. Since 2001, numerous U.S. air carriers have sought to reorganize under
Chapter 11 of the Bankruptcy Code (“Chapter 11”), including United, Delta, Northwest, and US
Airways (which has sought reorganization twice). It is possible that other airlines may seek to
reorganize in or out of Chapter 11. See Effect of Airline Bankruptcy, below.
Prior to the events of September 11, 2001, the domestic airline industry was predicting
total losses of approximately $2.5 billion in 2001. As a result of the events of September 11,
2001, and the weakening economy, U.S. airlines, as represented by the Air Transport Association
(“ATA”) members, lost $8.3 billion in 2001, $11.3 billion in 2002, $3.6 billion in 2003, $9
billion in 2004 and $5.6 billion in 2005, with an estimated $2 billion loss for 2006. The longterm credit ratings of many domestic airlines were downgraded, and all domestic airlines were
placed on credit review lists maintained by national credit rating agencies.
According to the ATA, the initial industry economic outlook for 2007 is the most
promising in several years. However airline debt levels remain high, leaving airlines vulnerable
to fuel price spikes, recession or other exogenous events (e.g., terrorism, natural disasters, and
pandemics). It is uncertain whether the industry will sustain such a financial outlook over the
long-term given the risk factors outlined above and high fuel prices.
Airlines have accelerated the structural changes that had been underway prior to
September 11 events. Growing competition from low-cost, low-fare carriers forced network
carriers to implement route rationalization including route transfers to regional partners and the
reduction, or elimination, of service to unprofitable markets. Airlines reduced schedules,
simplified fleets, deferred new aircraft delivery, implemented pay cuts and reduced workforces.
In addition, many legacy airlines have shown increasing flexibility in adjusting fares to match
discount fares offered by low-cost carriers. Airlines have also introduced innovations in
passenger service and convenience – notably the expanded use of the Internet and self-service
kiosks, which have greatly reduced waiting lines for boarding passes.
The County cannot predict the likelihood of future air transportation disruptions or the
impact of these events on any of the airlines using the Airport. For further information regarding
the financial condition and effect on operations of the airlines, including further information
regarding the airlines’ reported load and capacity factors since September 11, 2001, reference is
made to the statements and reports filed periodically by the airlines with the SEC. See Airlines
Subject to Airline Lease Agreement, below.
52
Effect of Airline Bankruptcy
In the event of bankruptcy proceedings involving one or more of the airlines operating at
the Airport, the debtor or its bankruptcy trustee must determine within a time period determined
by the court whether to assume or reject the applicable Airline Lease Agreement or other lease
agreements or operating agreements. In the event of assumption, the debtor would be required to
cure any prior defaults and to provide adequate assurance of future performances under the
relevant agreements. Rejection of a lease or an executory contract by any of such airlines would
give rise to an unsecured claim of the County for damages, the amount of which in the case of a
lease is limited by the Bankruptcy Code.
See below for further detail about Delta Airlines and Northwest Airlines and their
commuter affiliates.
General Financial Condition of Certain Airlines Serving the Airport
Since September 11, 2001, substantially all airlines have been downgraded by the rating
agencies, several have declared Chapter 11 bankruptcy, including Delta Airlines, Northwest
Airlines, US Airways and United, and many airlines have implemented service reductions and
employee layoffs in response to a reduction in passenger demand.
Delta. For the Fiscal Year ended September 30, 2006, Delta and its commuter affiliates
represented approximately 50.0% of the market share of enplaned passengers at the Airport. On
September 14, 2005, Delta and its subsidiaries filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code. Atlanta Southeast, Delta's affiliate, paid the $120,000 owing the
Airport at the time of the bankruptcy filing. Delta emerged from Chapter 11 on April 30, 2007.
During its bankruptcy, Delta continued paying amounts owed as an affiliate under the County's
Airline Agreement with Atlantic Southeast.
Northwest. For the Fiscal Year ended September 30, 2006, Northwest and its commuter
affiliates represented approximately 21.3% of the market share of enplaned passengers at the
Airport. On September 14, 2005, Northwest and its subsidiaries filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code. At the time of the filing of the Northwest
bankruptcy petitions, Northwest officials stated that the airline expected to continue normal
business operations. Northwest has no plans to reject its Airline Agreement with the County and
has continued paying its obligations thereunder. The County has pending prepetition claims in
the amount of $76,855 in connection with the Northwest bankruptcy. There is no payment plan
established at this time. Northwest emerged from Chapter 11 on May 31, 2007.
Because of the constant flow of financial information regarding domestic airlines,
potential investors are urged to review the financial information filed by all airlines serving the
Airport. See Airlines Subject to Airline Lease Agreement below. Information herein under
General Financial Conditions of Certain Airlines Serving the Airport has been included
based upon publicly available information. Neither the Underwriters nor the County make any
representation as to the current accuracy or completeness of such information.
53
Each of the Airlines subject to the Airline Agreement (or their respective parent
corporations) is subject to the information reporting requirements of the Securities Exchange Act
of 1934, as amended, and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the “Commission”). Certain other airlines are subject to
the information reporting requirements of the Commission. Certain information, including
financial information, as of particular dates concerning each of these reporting airlines (or their
respective parent corporations) is disclosed in reports and statements filed with the Commission.
Such reports and statements can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and the Commission’s regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 233 Broadway, New York, New York 10279. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 (at the above address at the prescribed rates). The Commission also
maintains a website that contains reports, proxy and information statements and other written
information regarding companies that file electronically with the Commission. The address of
the website is http://www.sec.gov. In addition, each of the Airlines subject to the Airline Lease
Agreement is required to file periodic reports of financial and operating statistics with the United
States Department of Transportation (the “DOT”). Such reports can be inspected at the
following location: Office of Aviation Information Management, Data Requirements and Public
Reports Division, Research and Special Programs Administration, Department of Transportation,
400 Seventh Street, S. W. Washington, D.C. 20590, and copies of such reports can be obtained
from the DOT at prescribed rates.
Federal Regulation Regarding Rates and Charges Disputes
In August 1994, the President of the United States signed into law the FAA Authorization
Act of 1994 (the “1994 Act”), which continues the pre-existing federal requirement that airline
rates and charges set by airports be “reasonable” and mandates an expedited administrative
process by which the Secretary of Transportation (the “Secretary”) shall review rates and charges
complaints, 49 U.S.C. § 47129. Under 49 U.S.C. § 47129 an affected air carrier may file a
written complaint requesting a determination of the Secretary as to reasonableness within 60
days after such carrier receives written notice of the establishment or increase of such fee.
During the pendency of the review, the airlines must pay the disputed portion of the fee to the
airport under protest, subject to refund to the extent such fees are found to be unreasonable by
the Secretary. The airport must obtain a letter of credit, surety bond or other suitable credit
facility equal to the amount in dispute unless the airport and the complaining carriers agree
otherwise. In January 1995, pursuant to the 1994 Act, the DOT issued a rule which was
amended effective December 16, 1996 (the “Final Rule”) outlining the rules of practice for filing
complaints and adjudicating complaint matters involving federally assisted airports. This Final
Rule is broader in application and covers matters other than just rates and charges complaints.
The initial rule was accompanied by a policy statement setting forth the standards DOT would
apply to resolving airport fee disputes under 49 U.S.C. § 47129. The initial policy statement was
supplemented in September of 1995 and replaced on June 14, 1996 by the “Policy Regarding
Airport Rates and Charges.” In an August 1, 1997 decision, the U.S. Court of Appeals for the
District of Columbia Circuit ruled that the proposed policy regarding determining the
“reasonableness” of fees was “arbitrary and capricious” Until DOT promulgates a new policy
54
regarding rates and charges, the guiding principle for determining whether rates and charges
established for use of airport assets is the requirement of federal law that such charges be
“reasonable”.
Capacity of National Air Traffic Control and Airport Systems
Demands on the national air traffic control system continue to cause aircraft delays and
restrictions, both on the number of aircraft movements in certain air traffic routes and on the
number of landings and takeoffs at certain airports. These restrictions affect airline schedules
and passenger traffic nationwide. The FAA is gradually automating and enhancing the
computer, radar, and communications equipment of the air traffic control system and assisting in
the development of additional airfield capacity through the construction of new runways and the
more effective use of existing runways. However, increasing demands on the national air traffic
control and airport systems could cause increased delays and restrictions in the future.
Uncertainties of Projections and Assumptions
The Report of the Airport Consultant included as Appendix B to this Official Statement
contains certain assumptions and projections. Demonstration of projected compliance with
certain of the covenants contained in the Indenture is based upon assumptions and projections
which are inherently subject to significant uncertainties. Actual results are likely to differ,
perhaps materially, from those projected. Accordingly, the projections contained in the Report
or that may be contained in any future certificate of the County or a consultant are not
necessarily indicative of future performance, and neither the Airport Consultant nor the County
assumes any responsibility for the failure to meet such projections. In addition, certain
assumptions with respect to future business and financing decisions of the County are subject to
change. No representation is made or intended, nor should any representation be inferred, with
respect to the likely existence of any particular future set of facts or circumstances, and
prospective purchasers of the Series 2007 Bonds are cautioned not to place undue reliance upon
the Report or upon any projections or requirements for projections. If actual results are less
favorable than the results projected or if the assumptions used in preparing such projections
prove to be incorrect, the amount of Net Revenues or Pledged CFC Revenues may be materially
less than expected and consequently, the ability of the County to make timely payments of the
principal of and interest on the Series 2007 Bonds may be materially adversely affected.
Availability of CFCs
The plan of finance for the 2007 Project as described in the Report assumes certain
amounts of CFCs will be available to pay a portion of the costs of the 2007 Project and debt
service on the Series 2007 Bonds. No assurance can be given that these sources of funding will
actually be available in the amounts or on the schedule assumed.
Construction of New Panama City Airport
As described herein, the Panama City-Bay County Airport and Industrial District is
constructing a new Panama City-Bay County Airport on the northwestern side of Panama City,
55
closer to Okaloosa County than the existing airport. Although the Panama City Airport is
smaller than the Airport and serves a more tourism-related market, such that the County does not
foresee substantial impact on operations at the Airport, no assurance can be given that the
opening of such new airport will have no adverse impact upon the operations of the Airport.
LITIGATION
General. The Board of County Commissioners, the Clerk, the Sheriff, the County Property
Appraiser and the County Tax Collector are defendants from time to time in various lawsuits. The
County Attorney represents the Board. The County Property Appraiser, the Clerk, the Sheriff, and
the County Tax Collector each have separate counsel. It is the opinion of the County Attorney with
respect to litigation pending against the Board that the Board either (1) has meritorious defenses
against claims asserted in such litigation, (2) is immune from liability under principles of sovereign
immunity, or (3) has adequate insurance coverage or reserves against liability with respect to such
claims. There can be no assurance, however, that the Clerk and the Board will not incur liability for
which adequate reserves do not exist, as a result of such litigation. In the event of such liability,
the Board could be required, among other responses, to expend reserves, reduce the level of
services, or borrow money in order to satisfy such liability. It is not expected that any such
liability would affect the obligation of the Board to apply the Trust Estate in accordance with the
provisions of the Indenture.
The Series 2007 Bonds. There is no pending or, to the knowledge of the County,
threatened litigation against the County which in any way questions or affects (1) the 2007 Project,
(2) the validity of the Series 2007 Bonds, or any proceedings or transactions relating to their sale,
issuance or delivery, (3) the pledge of the Trust Estate to secure payment of the Series 2007 Bonds,
or (4) the operation of the Airports or the provisions for collection and application of the Net
Revenues and Pledged CFC Revenues in accordance with the provisions of the Indenture.
APPROVAL OF LEGALITY
Certain legal matters incident to the issuance of the Series 2007 Bonds and with regard to
the treatment of the interest on the Series 2007 Bonds for Florida and federal tax purposes (see
“TAX MATTERS”) are subject to the legal opinion of Livermore, Freeman & McWilliams, P.A.,
Bond Counsel. Bond Counsel's legal opinion, dated and premised on law in effect as of the date of
original delivery of the Bonds, will be delivered to the Underwriters at the time of original delivery
of the Bonds.
The proposed text of the legal opinion is set forth as Appendix D hereto. The actual legal
opinion to be delivered may vary from that text if necessary to reflect facts and law on the date of
delivery. The opinion will speak only as of its date and subsequent distribution of such legal
opinion by recirculation of the Official Statement or otherwise shall create no implication that
Bond Counsel has reviewed or expresses any opinion concerning any of the matters referenced in
the opinion subsequent to its date.
56
Certain legal matters incident to the issuance of the Series 2007 Bonds will be passed upon
for the County by John R. Dowd, County Attorney, and Nabors, Giblin & Nickerson, P.A., Tampa,
Florida, Disclosure Counsel.
TAX MATTERS
General
In the opinion of Livermore, Freeman & McWilliams, P.A., Bond Counsel, interest on
the Series 2007 Bonds is not excluded from gross income for federal income tax purposes under
Section 103(a) of the Internal Revenue Code of 1986, as amended. Bond Counsel has expressed
no opinion regarding other federal tax consequences arising with respect to the Series 2007
Bonds.
The following is a summary of certain anticipated federal income tax consequences of the
purchase, ownership and disposition of the Series 2007 Bonds under the Internal Revenue Code
of 1986, as amended (the "Code"), the regulations promulgated thereunder (final and proposed)
(the "Regulations"), and the judicial and administrative rulings and court decisions now in effect,
all of which are subject to change or possible differing interpretations. The summary does not
purport to address all aspects of federal income taxation that may affect particular investors in
light of their individual circumstances, nor certain types of investors subject to special treatment
under the federal income tax laws. Potential purchasers of the Series 2007 Bonds should consult
their own tax advisors in determining the federal, state or local tax consequences to them of the
purchase, holding and disposition of the Series 2007 Bonds.
In general, interest paid on the Series 2007 Bonds, original issue discount, if any, and
market discount, if any, will be treated as ordinary income to the owners of the Series 2007
Bonds, and principal payments (excluding the portion of such payments, if any, characterized as
original issue discount or accrued market discount) will be treated as a return of capital.
Discount Bonds
The Series 2007 Bonds are offered at an original issue discount (“OID”) in the amount of
the excess of the stated redemption price at maturity (as shown on the cover page of this Official
Statement) over the issue price. The issue price is the initial offering price to the public
(excluding bond houses and brokers and others acting as an underwriter) at which a substantial
amount of the OID Bonds were sold.
If the OID is less than 0.25% of the stated redemption price at maturity, multiplied by the
number of complete years to maturity (“de minimus OID”), the amount of de minimus OID is
included in income as stated principal payments are made, pro rata, and is generally treated as
gain recognized on retirement of the OID Bonds.
If the OID is greater than the de minimus OID amount, the OID is generally included in
the gross income of the holder of the OID Bonds in an amount accrued on a daily basis using the
constant yield to maturity method (unless the holder elects to treat all interest as OID). OID
accruing in an accrual period is generally calculated as the product of the Bond’s yield to
57
maturity (i.e., the discount rate that, when used to compute the present value of all principal and
interest payments to be made on the Bond, produces and amount equal to the issue price) times
the adjusted issue price at the beginning of the accrual period less the amount of qualified stated
interest allocable to the accrual period, and allocated ratably to each day in the accrual period.
An accrual period cannot be longer than one (1) year, and a scheduled payment of either
principal or interest must occur on the first or final day of an accrual period. The adjusted issue
price is the issue price increased by the amount of OID previously includable in gross income.
Generally, the adjusted issue price is also the holder’s basis for determining gain or loss on sale
of the OID Bond.
Exceptions and Qualifications
The federal income tax consequences of the purchase, ownership and redemption, sale or
payment at maturity of OID Bonds may be determined according to rules which differ from
those described above. Holders of OID Bonds should consult their own tax advisors with respect
to the consequences of owning OID Bonds, including the effect of such ownership under
applicable state and local laws.
The foregoing general discussion of certain federal income tax treatment of original issue
discount and original issue premium is subject to numerous exceptions and does not consider the
effect of any holder’s individual circumstances. Holders of the Series 2007 Bonds at original
issue and upon subsequent purchase or other acquisition and upon sale or other disposition of
such Series 2007 Bonds are advised to consult their personal tax advisors for specific treatment
of discount and premium applicable to them
RATINGS
Radian Asset Assurance Inc. ("Radian") has issued a commitment for the delivery of its
Financial Guaranty Insurance policy with respect to the Series 2007 Bonds on the date of
issuance and delivery thereof. The Series 2007 Bonds are expected to be rated at the time of
delivery thereof based upon the issuance of the Radian Financial Guaranty Insurance policy.
Financial Guaranty Insurance issued by Radian currently results in bond issues being rated "AA"
by Standard & Poor's Ratings Service. No assurance can be given that the rating assigned to the
Series 2007 Bonds will not be different from those currently assigned to bond issues insured by
Radian.
Each such rating should be evaluated independently of any other rating. No application
has been made to any other rating agency in order to obtain additional ratings on the Series 2007
Bonds.
The ratings reflect the respective rating agency's current assessment of the
creditworthiness of Radian and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only from the applicable
rating agency.
The above described ratings of Radian-insured issues are not recommendations to buy,
sell or hold the Series 2007 Bonds, and such ratings may be subject to revision or withdrawals at
58
any time by the rating agencies. Any downward revision or withdrawals of any of the ratings
may have an adverse effect on the market price of the Series 2007 Bonds.
FINANCIAL ADVISOR
The County has retained Fullerton & Friar, Inc., Largo, Florida, as financial advisor to the
County and, in that capacity, has provided advice in connection with the planning, structuring and
issuance of the Series 2007 Bonds. The financial advisor will not engage in any underwriting
activities with regard to the issuance and sale of the Series 2007 Bonds. The financial advisor is
not obligated to undertake and has not undertaken to make an independent verification or to
assume responsibility for the accuracy, completeness or fairness of the information contained in
this Official Statement. A portion of the financial advisor’s fee is contingent upon the issuance of
the Series 2007 Bonds and is expected to be paid from the proceeds of the Series 2007 Bonds.
UNDERWRITING
The senior managing underwriter for the Series 2007 Bonds is RBC Dain Rauscher Inc.,
doing business under the name RBC Capital Markets. The Underwriters shown on the cover
page hereof have agreed, subject to the proceedings authorizing the sale of the Series 2007
Bonds, to purchase the Series 2007 Bonds from the County, at a price of $9,431,031.35
($9,980,000 par amount, less Underwriters’ discount of $65,728.75 and less original issue
discount of $483,239.90), for the purpose of resale. The Underwriters have furnished the
information on the cover page of this Official Statement pertaining to the public offering price of
the Series 2007 Bonds. The public offering price of the Series 2007 Bonds may be changed from
time to time by the Underwriters, and the Underwriters may allow a concession from the public
offering price to certain dealers. None of the Series 2007 Bonds will be delivered by the County
to the Underwriters unless all of the Series 2007 Bonds are so delivered.
FINANCIAL STATEMENTS
Excerpts from the audited financial statements of the County relating to the Airports
System Enterprise Fund for the Fiscal Year ended September 30, 2006 have been included as
Appendix A to this Official Statement as a public document. The auditor has not been requested
to perform, and has not performed, any service in connection with, and is therefore not
associated with, the offering of the Series 2007 Bonds.
DISCLOSURE MATTERS
Certificate as to Official Statement
The County has duly authorized, executed and delivered this Official Statement. At the
time of delivery of the Series 2007 Bonds to the Underwriters, the County will provide to the
Underwriters a certificate (which may be included in a consolidated closing certificate of the
County), signed by those County officials who signed this Official Statement, relating to the
accuracy and completeness of this Official Statement and to its being deemed a “final official
statement” in the judgment of the County for the purposes of SEC Rule 15c2-12(b)(3).
59
Continuing Disclosure
The County has covenanted for the benefit of Bondholders to provide certain financial
information and operating data relating to the Airports and the Series 2007 Bonds in each year, and
to provide notices of the occurrence of certain enumerated material events. Annual financial
information and operating data and the audited financial statements will be filed by the County
with each Nationally Recognized Municipal Securities Information Repository (the “NRMSIRs”),
as well as any state information depository that is subsequently established in the State of Florida
(the “SID”). The notices of material events, when and if they occur, shall be timely filed by the
County with the NRMSIRs or the Municipal Securities Rulemaking Board, and with the SID. The
specific nature of the financial information, operating data, and of the type of events which trigger
a disclosure obligation, and other details of the undertaking are described in “APPENDIX E –
Form of Continuing Disclosure Certificate” attached hereto. The Continuing Disclosure
Certificate will be executed by the County prior to the issuance of the Series 2007 Bonds. These
covenants have been made in order to assist the underwriters in complying with the continuing
disclosure requirements of Rule 15c2-12 promulgated by the Securities and Exchange
Commission.
60
The County has previously entered into a continuing disclosure undertaking with respect to
its outstanding Fourth Cent Tourist Development Tax Revenue Bonds, Series 2000, issued on
March 9, 2000. The annual financial information and data, including the annual financial
statements, for the years 2001 and 2002, required to be filed by April 30 in each of the years, were
not timely filed. In May, 2003, the County filed a Notice of Failure to File and also filed all of the
required information, data and the annual financial statements as of that date. The County has
undertaken measures to ensure future timely compliance with its undertakings, and has timely filed
all the required information annually since 2003.
By: /s/ Don R. Amunds
Don R. Amunds, Chairman,
Board of County Commissioners
By: /s/ Don W. Howard
Don W. Howard
Clerk, Board of County Commissioners
By: /s/ Gary J. Stanford
Gary J. Stanford, Deputy Clerk and
Finance Officer
By: /s/ James Curry
James Curry
County Manager
By: /s/Jerry L. Sealy
Jerry L. Sealy, A.A.E.
Airport Director
61
APPENDIX A
EXCERPTS FROM FINANCIAL STATEMENTS OF THE COUNTY RELATING TO
THE AIRPORTS SYSTEM
ENTERPRISE FUND FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006
THE CONSORTIUM OF
Certified Public Accountants
O’Sullivan Creel L.L.P.
Nicholson, Reeder & Reynolds, P.A.
Allen, Yagow & Carr
Saltmarsh, Cleaveland & Gund, P.A.
36474A Emerald Coast
Parkway
Suite 1201
Destin, Florida 32540
(850) 837-0398
To the Honorable Chairman and Members of the
INDEPENDENT AUDITORS’ REPORT
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the discretely presented component unit, each major fund, and the aggregate remaining fund
information of Okaloosa County, Florida, as of and for the fiscal year ended September 30, 2006, which
collectively comprise the County’s basic financial statements as listed in the table of contents. These
financial statements are the responsibility of Okaloosa County, Florida’s management. Our responsibility is
to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business-type activities, the aggregate discretely
presented component unit, each major fund, and the aggregate remaining fund information of Okaloosa
County, Florida, as of September 30, 2006, and the respective changes in financial position and where
applicable, cash flows, and the respective budgetary comparison for the General Fund, the Fine and
Forfeiture Fund and the Natural Disasters Fund thereof for the year then ended in conformity with accounting
principals generally accepted in the United States of America.
Independent Auditors’ Report
1
Page Two
In accordance with Government Auditing Standards, we have also issued our report dated March 20, 2007, on
our consideration of Okaloosa County, Florida’s internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing and 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 Assessing the results of our audit..
The management’s discussion and analysis on pages 3 through 15 is not a required part of the basic financial
statements but is supplementary information required by accounting principles generally accepted in the
United States of America. We have applied certain limited procedures, which consisted principally of
inquires of management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise Okaloosa County, Florida’s basic financial statements. The introductory section, combining and
individual nonmajor fund financial statements, and statistical section are presented for purposes of additional
analysis and are not a required part of the basic financial statements. The accompanying schedule of
expenditures of federal awards and state financial assistance 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 Chapter 10.550, Rules of the Auditor General, Local Governmental Entity
Audits, and is also not a required part of the basic financial statements of Okaloosa County, Florida. The
accompanying schedule of passenger facility charges is presented for purposes of additional analysis as
specified in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation
Administration, and is not a required part of the basic financial statements of Okaloosa County, Florida. The
combining and individual nonmajor fund financial statements, the schedule of expenditures of federal awards
and state financial assistance and the schedule of expenditures of passenger facility charges have been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The
introductory section and statistical section have not been subjected to the auditing procedures applied in the
audit of the basic financial statements and, accordingly, we express no opinion on them.
O’SULLIVAN CREEL, L.L.P.
Certified Public Accountants and Consultants
For the Consortium
March 20, 2007
2
BALANCE SHEET
PROPRIETARY FUNDS
September 30, 2006
Water and Sewer
Enterprise Fund
ASSETS
Current Assets
Cash and Cash Equivalents
Investments
Receivables , Net of Allowance
for Uncollectibles
Due from Other Funds
Due from Other Elected Officials
Due from Other Governments
Inventory
Prepaids
Restricted Assets
Customer Deposits
Other Deposits
Investments
$
Total Restricted Assets
Total Current Assets
Noncurrent Assets
Capital Assets
Land
Buildings
Improvements Other Than Buildings
Machinery and Equipment
Construction in Progress
Infrastructure
Works of Art
Less Accumulated Depreciation
Total Capital Assets (Net of
Accumulated Depreciation)
Other Assets
Investment in Joint Venture, at Equity
Total Other Assets
Total Noncurrent Assets
Total Assets
$
2,148,441
13,754,938
Business -Type
Solid Waste
Enterprise Fund
Airport
Enterprise Fund
$
984,181
6,056,872
$
252,938
1,284,184
2,303,877
153,650
0
1,447,886
1,190,281
21,184
2,441,324
0
0
4,323,289
2,340
2,681
602,917
0
0
27,982
0
692
1,307,316
1,348,258
4,056,223
23,375
0
1,828,517
30,258
0
0
6,711,797
1,851,892
30,258
27,732,054
15,662,579
2,198,971
3,188,505
5,959,862
0
7,723,739
13,032,017
151,492,504
0
(62,165,051)
5,546,382
39,997,435
0
1,786,321
1,635,940
35,913,403
61,198
(9,913,914)
133,301
106,268
276,776
3,025,242
0
0
0
(2,864,242)
119,231,576
75,026,765
677,345
191,340
0
0
191,340
0
0
119,422,916
75,026,765
677,345
147,154,970
$
90,689,344
$
2,876,316
Exhibit VIII
Activities
Conference Center
Enterprise Fund
$
$
Other
Enterprise Funds
3,160,409
5,475,839
$
Governmental
Activities -Internal
Service Funds
Total
Enterprise Funds
507,756
1,151,553
$
7,053,725
27,723,386
$
2,056,864
682,328
45,623
254,721
0
0
0
975
2,612,923
0
0
4,375
0
3,455
8,006,664
408,371
0
5,803,532
1,192,621
28,987
110,266
277,255
390
250,408
266,498
30,542
0
0
992,875
0
16,200
0
1,360,949
1,364,458
6,877,615
0
0
0
992,875
16,200
9,603,022
0
9,930,442
4,296,262
59,820,308
3,674,551
0
17,886,334
9,915
860,871
3,450
363,670
0
(2,049,735)
0
148,857
0
3,669,906
0
0
0
(2,443,056)
8,868,188
64,098,756
286,691
17,066,079
14,671,407
187,769,577
61,198
(79,435,998)
316,860
702,563
257,345
3,429,297
79,917
0
0
(4,007,157)
17,074,505
1,375,707
213,385,898
778,825
0
0
191,340
0
0
0
191,340
0
17,074,505
1,375,707
213,577,238
778,825
27,004,947
$
5,671,969
$
273,397,546
$
4,453,376
Continued...
27
BALANCE SHEET
PROPRIETARY FUNDS
September 30, 2006
Water and Sewer
Enterprise Fund
LIABILITIES AND EQUITY
Liabilities
Current Liabilities
Accounts Payable
Contracts Payable
Accrued Liabilities
Compensated Absences
Closure Costs Payable
Claims and Judgments
Other Accrued Liabilities
Due to Other Funds
Due to Other Governments
Revenue Bonds Payable
Deferred Revenue
Current Liabilities Payable from
Restricted Assets
Customer Deposits Payable
Interest Payable
Due to Other Elected Officials
Loan - State of Florida
Total Current Liabilities Payable
from Restricted Assets
Total Current Liabilities
$
460,434
2,148,492
Business -Type
Solid Waste
Enterprise Fund
Airport
Enterprise Fund
$
132,971
546,497
$
62,420
518,614
508,114
0
0
146,626
0
164
30,712
3,403,311
57,783
0
0
24,920
153,650
3,751
0
124,070
61,698
268,397
0
18,223
0
0
0
0
1,436,963
292,001
0
814,479
2,375,000
23,375
283,598
0
0
230,000
30,258
0
0
0
0
4,918,443
536,973
30,258
11,616,296
1,580,615
959,610
Exhibit VIII
Activities
Conference Center
Enterprise Fund
$
15,137
69,887
Other
Enterprise Funds
$
29,106
24,191
Governmental
Service Funds
Total
Enterprise Funds
$
700,068
3,307,681
$
242,288
1,353
35,431
0
0
15,129
0
1,697
0
64,630
207,353
0
0
137,471
0
65,612
0
331,328
870,379
268,397
0
342,369
153,650
71,224
30,712
3,923,339
1,112,597
0
2,105,741
26,208
7,000
0
0
5,932
0
0
12,321
0
0
16,470
0
0
0
0
1,507,066
575,599
12,321
814,479
2,605,000
0
0
0
0
0
12,321
16,470
5,514,465
0
214,232
811,531
15,182,284
3,501,119
Continued...
28
BALANCE SHEET
PROPRIETARY FUNDS
September 30, 2006
Water and Sewer
Enterprise Fund
Noncurrent Liabilities
Compensated Absences
Closure Costs Payable
Claims and Judgments
Loan - State of Florida
(Net of unamortized discounts)
(Net of unamortized discounts and
deferred amount on refunding)
Total Noncurrent Liabilties
Total Liabilities
Equity
Invested in Capital Assets, Net
of Related Debt
Restricted for Debt Service
Restricted for Other Purposes
Unrestricted
Total Equity
Total Liabilities and Equity
$
Business -Type
Solid Waste
Enterprise Fund
Airport
Enterprise Fund
422,186
0
0
50,152
0
0
57,575
4,316,865
0
10,948,941
0
0
24,643,448
9,884,295
1,106,973
36,014,575
9,934,447
5,481,413
47,630,871
11,515,062
6,441,023
80,448,994
5,112,480
0
13,962,625
64,912,470
1,020,858
4,340,073
8,900,881
(429,629)
0
0
(3,135,078)
99,524,099
79,174,282
(3,564,707)
147,154,970
$
90,689,344
$
2,876,316
Exhibit VIII
Activities
Conference Center
Enterprise Fund
$
Other
Enterprise Funds
Governmental
Service Funds
Total
Enterprise Funds
21,971
0
0
73,064
0
0
624,948
4,316,865
0
72,172
0
1,710,594
0
0
10,948,941
0
12,535,000
0
48,169,716
0
12,556,971
73,064
64,060,470
1,782,766
12,771,203
884,595
79,242,754
5,283,885
4,539,504
3,942,178
5,752,062
0
1,375,706
0
0
3,411,668
150,847,045
10,075,516
10,092,135
23,140,096
778,825
0
0
(1,609,334)
14,233,744
4,787,374
194,154,792
(830,509)
27,004,947
$
5,671,969
$
273,397,546
$
The notes to the financial statements are an integral part of this statement.
29
4,453,376
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN EQUITY
PROPRIETARY FUNDS
For The Fiscal Year Ended September 30, 2006
Water and Sewer
Enterprise Fund
Operating Revenues
Licenses and permits
Charges for services
Miscellaneous
$
Total Operating Revenues
0
22,386,718
61,504
Business -Type
Solid Waste
Enterprise Fund
Airport
Enterprise Fund
$
0
7,064,506
989
$
0
8,285,668
460
22,448,222
7,065,495
8,286,128
6,198,689
3,391,696
932,151
0
1,232,886
3,516,638
4,466,806
1,028,160
1,260,219
208,178
0
544,288
1,180,361
2,001,370
815,076
7,117,129
130,913
0
7,115
225,222
223,844
Total Operating Expenses
19,738,866
6,222,576
8,519,299
Operating Income (Loss)
2,709,356
842,919
(233,171)
0
3,649
1,256,339
15,134
294,375
(1,194,827)
(808)
42,323
0
0
0
622,581
397,055
0
674,577
(567,195)
(46,180)
4,311
2,165,114
0
0
168,117
70,290
0
0
(79,577)
0
21,280
0
0
3,250,263
180,110
4,093,182
2,478,906
0
(950,569)
(53,061)
0
0
0
Operating Expenses
Personal Services
Contractual Services
Supplies
Insurance Premiums and Claims
Utilities
Other Operating Expenses
Depreciation
Nonoperating Revenues (Expenses)
Taxes
Intergovernmental
Investment Income
Net Gain/Loss from Joint Venture
Other Non-Operating Revenue
Interest Expense
Gain/Loss on Disposal of Capital Assets
Passenger and Customer Facility Charges
Administrative Charges
Total Nonoperating Revenues (Expenses)
416,185
Income (Loss) Before
Contributions and Transfers
Capital Contributions
Transfers In
Transfers Out
3,125,541
1,074,757
0
0
Change in Equity
Total Equity - Beginning
Total Equity - Ending
4,200,298
95,323,801
$
99,524,099
5,621,519
73,552,763
$
79,174,282
(53,061)
(3,511,646)
$
(3,564,707)
Exhibit IX
Activities
Conference Center
Enterprise Fund
$
$
Other
Enterprise Funds
0
643,594
291
$
1,846,783
4,075,022
11,280
Governmental
Service Funds
Total
Enterprise Funds
$
1,846,783
42,455,508
74,524
$
0
18,111,087
2,368
643,885
5,933,085
44,376,815
18,113,455
710,295
1,111,434
70,556
0
214,079
294,680
591,061
5,773,516
761,894
663,474
0
22,369
657,283
384,625
14,525,736
13,642,372
2,005,272
0
2,020,737
5,874,184
7,667,706
1,312,978
249,207
2,629,962
11,979,648
1,100
253,386
92,994
2,992,105
8,263,161
45,736,007
16,519,275
(2,348,220)
(2,330,076)
(1,359,192)
1,594,180
4,023,126
0
453,596
0
0
(709,700)
(975)
0
0
(108,598)
2,474,065
61,683
99,453
0
0
0
0
(6,280)
0
0
6,497,191
856,030
2,276,733
15,134
968,952
(2,551,299)
(47,963)
61,634
2,165,114
(108,598)
0
0
41,007
0
0
0
0
155,469
0
0
3,657,449
2,628,921
10,132,928
196,476
1,309,229
0
0
0
298,845
9,784
33,000
0
1,309,229
12,924,515
341,629
4,445,745
14,233,744
$
4,787,374
8,773,736
3,563,447
33,000
(950,569)
1,790,656
46,952
315,000
0
11,419,614
182,735,178
$
194,154,792
2,152,608
(2,983,117)
$
30
(830,509)
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For The Year Ended September 30, 2006
Business-type Activities
Water and
Sewer
System
CAS FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers
Receipts from Interfund Services Provided
Payments to Suppliers
Payments to Employees
Payments for Interfund Services Used
Net Cash Provided(Used) by Operating Activities
$
CAS FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Operating Subsidy - Taxes
Operating Subsidy - Intergovernmental Revenue
Interest paid on non-capital debt
Transfers In
Transfers (Out)
Net Cash Provided (Used) by Non-capital
Financing Activities
CAS FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Purchase of Capital Assets
Passenger Facility Charges
Customer Facitlity Charges
Proceeds from Disposal of Capital Assets
Net Borrowing (Repayments)
Proceeds from Capital Debt
Principal Paid on Capital Debt
Interest Paid on Capital Debt
Taxes
Capital Contributions
Net cash provided (used) by capital and related
financing activities
Airport
Enterprise
Solid Waste
22,136,423 $
397,418
(6,717,424)
(5,891,911)
(2,653,966)
7,270,540
6,650,798 $
0
(2,484,306)
(967,265)
(887,636)
2,311,591
8,241,084
26,027
(7,426,466)
(754,470)
(846,504)
(760,329)
0
2,970
0
1,625,000
(20,000)
0
622,581
0
0
(950,569)
0
201,835
0
20,000
0
1,607,970
(327,988)
221,835
(13,492,747)
0
0
47,593
(4,237,786)
1,383,854
781,260
6,460
(8,363)
0
0
21,280
5,232,479
(3,464,084)
(1,235,427)
(14,544)
0
1,071,642
0
(225,000)
(569,895)
(1,431)
0
2,649,165
79,577
(201,621)
0
(79,577)
0
0
(11,855,088)
(213,373)
(188,704)
Exhibit X
Governmental
Activities
Internal
Service Funds
-Enterprise Funds
Conference
Center
$
656,345 $
4,450
(1,382,976)
(677,912)
(336,112)
(1,736,205)
Other
Enterprise
Funds
5,943,072 $
0
(1,305,071)
(5,402,164)
(1,247,849)
(2,012,012)
Total
43,627,722 $
427,895
(19,316,243)
(13,693,722)
(5,972,067)
5,073,585
1,991,066
0
0
352,000
0
2,475,195
372,999
0
33,000
(51,500)
4,466,261
1,200,385
0
2,030,000
(1,022,069)
2,343,066
2,829,694
6,674,577
8,158,352
9,800,729
(15,958,373)
(1,174,070)
(165,579)
661,059
0
0
(16,359)
322,000
(300,500)
5,141
(24,917)
0
0
0
(549,914)
0
0
0
(18,313,727)
1,383,854
781,260
75,333
0
(245,000)
(709,700)
(108,458)
1,991,065
0
0
0
0
0
0
5,000
5,312,056
(4,135,705)
(2,515,022)
(204,010)
1,991,065
3,725,807
0
0
0
0
0
0
(544,914)
(11,899,089)
72,030
902,990
(86,521)
0
0
158,551
Continued…
31
PROPRIETARY FUNDS
Water and
Sewer
System
NET CAS FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale and Maturities of Investments
Interest Income
Purchases of Investments
Net Cash Provided (Used) by Investing Activities
8,640,000
1,208,960
(4,527,733)
5,321,227
Airport
Enterprise
792,000
341,823
(2,617,995)
(1,484,172)
Solid Waste
500,000
66,401
(1,303,336)
(736,935)
Net Increase (Decrease) in Cash and Cash Equivalents
2,344,649
286,058
(1,464,133)
Cash and Cash Equivalents - Beginning of Year
2,459,366
721,498
1,747,329
Cash and Cash Equivalents - End of Year
Cash and Cash Equivalents at End of Year Consist of:
Current assets
Restricted assets
Total
Reconciliation of Operating Income (Loss) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)
Ad ustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities
Depreciation
Bond Amortization
Other revenue
Decrease (Increase) in Assets
Accounts Receivables
Due from Other Funds
Due from Other Governments
Inventory
Prepaid Expenses
$
4,804,015 $
1,007,556 $
283,196
$
$
2,148,441 $
2,655,574
4,804,015 $
984,181 $
23,375
1,007,556 $
252,938
30,258
283,196
$
2,709,356 $
842,919 $
4,466,806
294,766
294,375
40,981
76,844
(28,603)
(260,000)
72,761
2,001,370
0
0
(390,567)
0
0
2,252
(1,250)
(233,171)
223,844
7,489
0
(18,767)
0
0
0
(692)
Exhibit X
Governmental
Activities
Internal
Service Funds
-Enterprise Funds
Conference
Center
1,250,477
418,043
(992,024)
676,496
Other
Enterprise
Funds
950,000
93,331
(1,077,475)
(34,144)
Total
12,132,477
2,128,558
(10,518,563)
3,742,472
200,970
54,313
(638,365)
(383,082)
2,186,347
238,624
3,591,545
355,148
974,062
283,372
6,185,627
1,701,716
$
3,160,409 $
521,996 $
9,777,172 $
2,056,864
$
$
3,160,409 $
0
3,160,409 $
507,756 $
16,200
523,956 $
7,053,725 $
2,725,407
9,779,132 $
2,056,864
0
2,056,864
$
(2,348,220) $
(2,330,076) $
(1,359,192) $
1,594,180
591,061
0
0
384,625
0
0
10,030
0
0
0
(250)
18,374
0
(4,375)
0
(1,753)
7,667,706
302,255
294,375
92,994
0
0
(339,949)
76,844
(32,978)
(257,748)
68,816
(59,727)
792
(95,404)
(51,772)
(27,045)
Continued…
32
PROPRIETARY FUNDS
Water and
Sewer
System
Ad ustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities - Continued
Increase (Decrease) in Liabilities
Accounts Payable
Service Contracts Payable
Due to Other Funds
Due to Other Governments
Compensated Absences Payable
Closure Cost Payable
Claims and Judgements Payable
Other Accrued Liabilities
Deposits
Deferred Revenue
Total Ad ustments
Airport
Enterprise
Solid Waste
(63,490)
(121,510)
(64)
164
104,235
0
0
(17,939)
26,838
(324,980)
4,561,184
53,744
(179,534)
0
950
4,111
0
0
2,676
0
(25,080)
1,468,672
(511,570)
411,328
(57)
0
5,225
(643,701)
0
(7)
(250)
0
(527,158)
(760,329)
Net Cash Provided (Used) by Operating Activities
$
7,270,540 $
2,311,591 $
Noncash Investing, Capital, and Financing Activities:
Improvements Acquired Through Contributions
Amortization of Loan Costs and Refunding Losses
Transfer of Capital Assets From Other Funds
Transfer of Capital Assets to Other Funds
Gain on Joint Venture
Loss on Disposal of Capital Assets
Unrealized Gain/(Loss) on Investments
$
$
$
$
$
$
$
263,670
(294,766)
0
(559)
15,134
(5,269)
58,508
0
(44,749)
0
(55)
0
(2,094)
22,053
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0
(7,489)
0
0
0
0
3,842
Exhibit X
Governmental
Activities
Internal
Service Funds
-Enterprise Funds
Other
Enterprise
Funds
Conference
Center
Total
(20,006)
14,581
0
459
9,801
0
0
(176)
0
6,515
612,015
(19,741)
(43,722)
(32)
(14,113)
633
0
0
(12,453)
69
10,552
318,064
$
(1,736,205) $
(2,012,012) $
$
$
$
$
$
$
$
0
0
0
0
0
0
19,036
$
$
$
$
$
$
$
0
0
0
0
0
(8,240)
5,085
(561,063)
81,143
(153)
(12,540)
124,005
(643,701)
0
(27,899)
26,657
(332,993)
6,432,777
$
$
$
$
$
$
$
111,749
(9,329)
0
0
98,715
0
(991,832)
(2,227)
0
(35)
(933,121)
5,073,585 $
263,670
(347,004)
0
(614)
15,134
(15,603)
108,524
$
$
$
$
$
$
$
661,059
0
0
44,952
0
0
(3,082)
1,724
33
NOTES TO FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Okaloosa County, Florida (hereinafter referred to as County) have been
prepared in conformity with accounting principles generally accepted in the United States (GAAP) as
applied to governments. The Governmental Accounting Standards Board (GASB) is the accepted
standard-setting body for governmental accounting and financial reporting. The County uses the Uniform
Accounting System mandated by Chapter 218.33, Florida Statutes.
The County also applies those Financial Accounting Standards Board (FASB) statements and
interpretations issued on or before November 30, 1989 to its governmental and business-type activities at
the government-wide financial reporting level and to its proprietary funds at the fund reporting level,
provided they do not conflict or contradict GASB pronouncements.
The following is a summary of the more significant accounting policies of the County.
A.
The Reporting Entity
Okaloosa County is a political subdivision of the State of Florida, governed by a five member Board
of County Commissioners, each elected by the citizenry at large for four-year terms. The Board has
no powers other than those expressly vested in it by State Statute and their governmental powers
cannot be delegated. In addition, the Clerk of the Circuit Court, Sheriff, Tax Collector, Property
Appraiser and Supervisor of Elections are elected by the citizenry at-large and function
independently of the Board.
As required by generally accepted accounting principles, these financial statements present
Okaloosa County (the primary government) and its component units. As of September 30, 2006, the
County had one component unit as defined by GASB 14, the Emerald Coast Bridge Authority
(Authority). It is included in the County s reporting entity as a result of fiscal dependency upon the
County and is presented as a governmental fund type. The Authority is discretely presented in a
separate column in the combined financial statements to emphasize it is legally separate from the
primary government. The Authority has a September 30 year-end. The Authority does not issue
separate financial statements. Following is a description.
Emerald Coast Bridge Authority
The Emerald Coast Bridge Authority was established in May 2001 by legislative action amending
Chapter 90-412, Laws of Florida. The legislative action changed the name of the Fort Walton
Bridge Authority to the Emerald Coast Bridge Authority (hereinafter referred to as the Authority).
The Authority consists of five members all appointed by the Governor of Florida. The purpose of
the Authority is the planning, constructing, operating, and maintaining of a bridge or bridges
transversing Choctawhatchee Bay or Santa Rosa Sound, or both, and access roads to the bridge or
bridges. The Board of County Commissioners has the responsibility to review and change the
Authority s budget. The Authority has been in the planning state of its mission statement and has
conducted feasibility studies to determine the best location for a bridge. During fiscal year 2006,
public meetings were held to discuss the bridge corridor options recommended by the studies. It
was determined that none of the options were acceptable to the local public. In May of 2006, the
Authority requested that the Okaloosa County Board of County Commissioners forward a letter to
the Florida Legislature asking that they, 1) dissolve the Authority, 2) forgive the debt owed and 3)
state that the bridge corridor options have no public support. No action has been taken by the
Florida Legislature. The Authority is now dormant. Following are their last available fund
statements as of September 30, 2006.
35
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
A.
The Reporting Entity – Continued
Balance Sheet
September 30, 2006
ASSETS
$
0
LIABILITIES
$
0
FUND BALANCE
Unrestricted
0
TOTAL LIABILITIES AND FUND BALANCE
$
0
Statement of Revenues, Expenditures, and Changes in Fund Balance
General Fund
For the Fiscal Year Ended September 30, 2006
Revenues
$
Expenditures
Transportation
Debt Service - Principal
Total Expenditures
0
445,898
54,985
500,883
Deficiency of Revenues Under Expenditures
(500,883)
Other Financing Sources
Proceeds from Debt Issue
Net Change in Fund Balance
883
(500,000)
Fund Balances - Beginning
500,000
Fund Balances - Ending
$
36
0
B.
Government-Wide and Fund Financial Statements
1. Government-Wide Statements
The government-wide financial statements include the statement of net assets and the statement of
activities. These statements display information on all of the non-fiduciary activities of the primary
government and its component unit. The primary government and the component unit are reported
separately with the focus of the statements being the primary government. Individual funds are not
displayed. Governmental activities, which normally are supported by taxes, intergovernmental
revenues, and other non-exchange transactions, are reported separately from business-type activities,
which rely to a significant extent on fees and charges for support.
The statement of activities presents a comparison between direct expenses and program revenues for
each function of the County s governmental activities and for the different business-type activities
of the County. A function is an assembly of similar activities and may include portions of a fund or
summarize more than one fund to report the expenses and program revenues associated with a
distinct functional activity. Direct expenses are those that are clearly identifiable with a specific
function or segment. The County does not allocate indirect expenses to functions in the statement of
activities.
Program revenues include 1) charges to customers or applicants who purchase, use, or directly
benefit from goods, services, or privileges provided by the programs of the County and 2) grants and
contributions that are restricted to meeting the operational activities or the construction, acquisition,
or rehabilitation of capital assets required by a particular program. These revenues are sub ect to
externally imposed restrictions to these program uses. The determining factor for identifying to
which function program revenue pertains is which function generated the revenue in the case of
charges for service. For grants and contributions, the determining factor is to which function the
revenues are restricted.
Taxes and other items not properly included among program revenues are reported instead as
general revenues of the County. The comparison of direct expense with program revenues in the
statement of activities identifies the extent to which each governmental function and each business
activity is self-financing and how much they draw from the general revenues of the County.
2. Fund Financial Statements
During the year, transactions related to certain functions or activities are segregated into separate
funds in order to aid financial management and to demonstrate legal compliance. A fund is a fiscal
and accounting entity with a self-balancing set of accounts. The fund financial statements are
designed to present detail information about the County s financial activities. Separate financial
statements are provided for governmental funds, proprietary funds and fiduciary funds, even though
the latter are excluded from the government-wide financial statements. The emphasis of fund
financial statements is on ma or governmental and enterprise funds, each displayed in a separate
column. All remaining governmental and enterprise funds are aggregated and reported as nonma or
funds.
37
C.
Measurement Focus, Basis o Accounting, and Financial Statement Presentation
1.
Exchange and Non-exchange Transactions
Exchange transactions are those in which each party receives and gives up essentially equal values.
An example of an exchange transaction is a charge for service, rent, in exchange for a specific
service, use of a County building. Non-exchange transactions are those in which the County gives
(or receives) value without directly receiving (or giving) equal value in exchange. An example of a
non-exchange transaction is property tax revenue received by the County which is used to fund
various general governmental services. The revenue from these exchange and non-exchange
transactions is recognized in the financial statements in varying ways depending on the basis of
accounting used.
2. Government-Wide and Fiduciary Fund Financial Statements
The government-wide financial statements are reported using the economic resources measurement
focus. All assets and all liabilities associated with the operation of the County are included on the
statement of net assets. The statement of activities reports all revenues and expenses. Fiduciary
funds are excluded from the government-wide financial statements. The statement of fiduciary assets
and liabilities reports all assets and liabilities associated with the agency funds of the County.
Agency funds are the only type of fiduciary fund used by the County.
Government-wide financial statements are reported using the accrual basis of accounting. Revenues
are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of
when the related cash flows take place. Nonexchange transactions include property taxes, grants,
entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the
fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is
recognized in the fiscal year in which all eligibility requirements have been satisfied. The agency
funds of the County use the accrual basis of accounting to recognize the receivables and payables
recorded in those funds.
The effect of interfund activity has been eliminated from the government-wide financial statements
except for interfund services provided and used. Elimination of those charges would distort the
direct costs and program revenues reported for the various functions concerned on the statement of
activities.
3. Governmental Fund Financial Statements
All governmental funds are accounted for using a flow of current financial resources measurement
focus. With this measurement focus, only current assets and current liabilities generally are included
on the balance sheet. The statement of revenues, expenditures and changes in fund balances reports
the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other
financing uses) of current financial resources. This approach differs from the manner in which the
governmental activities of the government-wide financial statements are prepared. Governmental
fund financial statements therefore include reconciliations with brief explanations to better identify
the relationship between the government-wide statements and the governmental fund statements.
Governmental fund financial statements are reported using the modified accrual basis of accounting.
Under this method, revenues are recognized when susceptible to accrual (i.e., when they become
both measurable and available). “Measurable” means the amount of the transaction can be
determined and “available” means collectible within the current period or soon enough thereafter to
be used to pay liabilities of the current period. The County considers all revenues reported in the
38
C. Measurement Focus, Basis o Accounting, and Financial Statement Presentation –Continued
3. Governmental Fund Financial Statements - Continued
governmental funds to be available if the revenues are collected within sixty days after year-end.
Those revenues susceptible to accrual are sales tax, gasoline taxes and other intergovernmental
revenues collected and held by the state at year end on behalf of the County, special assessments,
licenses, interest revenue and charges for service. Current year property taxes uncollected at the end
of the fiscal year are generally immaterial in amount and highly susceptible to uncollectibility and
are not recorded as a receivable on the balance sheet. All other revenue items are considered to be
measurable and available only when the government receives cash.
Expenditures are recorded when the related fund liability is incurred. Principal and interest on
general long-term debt are recorded as fund liabilities when due or when amounts have been
accumulated in the debt service fund for payments to be made in the following year. General capital
asset acquisitions are reported as expenditures in governmental funds. Proceeds of general longterm debt and acquisitions under capital leases are reported as other financing sources.
4. Proprietary Fund Financial Statements
The proprietary fund financial statements are reported using the economic resources measurement
focus. Under this measurement focus, all assets and all liabilities associated with the operation of
the fund are included on the balance sheet. The statement of revenue, expenses and changes in
equity reports revenues and expenses. The proprietary funds are reported using the accrual basis of
accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are
incurred, regardless of when the related cash flows take place.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods
in connection with a proprietary fund s principal ongoing operations. All revenues and expenses
not meeting this definition are reported as non-operating revenues and expenses.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. The principal operating revenues for the
proprietary funds are fees and charges for water and sewer, airports, solid waste, inspection services,
emergency medical services, convention center, self-insurance, compensated absence debt service
and fleet internal service operations. Operating expenses for the enterprise funds, and the internal
service funds, include the cost of sales and services, administrative expenses and depreciation of
capital assets.
Non-operating revenues, such as subsidies and investment earnings, result from nonexchange
transactions or ancillary activities. They include property taxes, grants, entitlements, donations and
capital contributions. On an accrual basis, revenue from property taxes is recognized in the fiscal
year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized
in the fiscal year in which all eligibility requirements have been satisfied.
Contributions of capital in proprietary fund financial statements arise from internal and external
contributions of capital assets or from grants or outside contribution of resources restricted to capital
acquisition and construction.
39
C. Measurement Focus, Basis o Accounting, and Financial Statement Presentation – Continued
5. Other Financial Statement Presentation In ormation
The County currently employs an indirect allocation system. An administrative service fee is
charged by the General Fund, at the direction of the Board of County Commissioners, to several
special revenue and enterprise funds to address General Fund services (finance, personnel,
purchasing, legal, technology management, etc.) provided.
As a general rule, the effect of interfund activity has been eliminated from the government-wide
financial statements. An exception to this general rule is the charge back of services, such as
insurance costs, vehicle maintenance, and central costs. Elimination of these charges would distort
the direct costs and program revenues reported for the various functions concerned.
The County reports the following ma or governmental funds:
General Fund
This is the County s primary operating fund. It accounts for all financial resources of the
general government, except those required to be accounted for in another fund.
Fine and For eiture Fund
This fund is used to account for all criminal ustice activity of Okaloosa County including the
concession sales and expenses related to prisoner activities.
This fund includes
appropriations to the Sheriff, the County Department of Corrections, the Clerk of the Circuit
and County Courts, the Circuit and County Judges, the County Medical Examiner, the State
Attorney and the State Public Defender. The fund accounts for most restricted activity related
to fees generated from the assessment of court costs or fees collected by the Clerk of the
Circuit Court for the County such as those for the improving of court facilities, providing
education and training for law enforcement officers, activities of the Law Library and Legal
Aid that are funded under Chapter 67-1787, Laws of Florida from assessment of a court cost
and the proceeds from the sale of confiscated property declared forfeited by the Circuit Court.
Natural Disasters Fund
This fund is used to account for disaster funding and expenditures not considered normal
recurring operating activity of the County. During fiscal year ended September 30, 2006,
Okaloosa County did not have any new hurricane activity, however, the County was
recovering from damages from urricanes Dennis and Katrina that occurred in 2005 and
from sever damage by urricane Ivan that occurred in fiscal year 2004. This fund accounts
for all recovery activity relating to the storms and for all sources of revenue, federal, state and
local used to fund those activities.
The County reports the following ma or enterprise funds:
Water and Sewer Fund
This fund is used to account for the user charges and expenses associated with the provision
of water and sewer services to residents of the unincorporated areas of Okaloosa County.
40
C.
Measurement Focus, Basis o Accounting, and Financial Statement Presentation – Continued
5.
Other Financial Statement Presentation In ormation – Continued
Airport Enterprise Fund
This fund is used to account for the operation of three Okaloosa County airports. Revenue
sources include federal and state grants, fees from concessionaires and other fees and charges
for services to tenants and airport users.
Solid Waste Fund
This fund is used to account for the revenues and expenses associated with the provision of
solid waste management within Okaloosa County.
Con erence Center Fund
This fund is used to account for the general operation of the Conference Center. This fund
also accounts for the debt service on the Fourth Cent Tourist Development Tax Revenue
Bonds, Series 2000, issued to fund construction of the Conference Center.
The County reports the following fund types:
Internal Service Funds
These funds account for insurance coverage, fleet management services, and funding of
compensated absence debt provided to other departments or agencies of the government, or to
other governments, on a cost reimbursement basis.
Agency Funds
These funds account for monies held on behalf of individuals and companies that use the
County as a depository; property taxes, fines, court costs, licenses and fees collected on
behalf of other governments; and surety bonds and performance deposits.
D.
Assets, Liabilities, and Net Assets or Equity
1. Deposits and Investments
Sections 28.33, 218.415, and 219.075, Florida Statutes, require the investment of surplus public
funds and prescribe the instruments in which those investments are authorized, specifically the State
of Florida Local Government Surplus Funds Trust Fund; SEC registered money market funds with
the highest credit quality rating; interest-bearing time deposits or savings accounts in qualified
public depositories as defined in s. 280.02; direct obligations of the United States Treasury, federal
agencies and instrumentalities; and securities of or other interest in certain investment companies or
investment trusts the portfolio of which is limited to obligations of the United States Government or
any agency or instrumentality thereof and to repurchase agreements fully collateralized by such
obligations. Because the County has adopted written investment policies as provided in subsection
(1) through (15) of s. 218.415, other investments may be authorized by resolution or ordinance.
Currently authorized are investments in term repurchase agreements with primary broker/dealers
collateralized in the County s name by securities of the United States Government or any agency or
instrumentality thereof; overnight repurchase agreements with collateral held by the custodian bank
or its trust department; tax exempt bonds, notes or obligations rated in the two highest
classifications; inventory-based domestic bankers acceptances eligible to qualify for use as
41
D.
Assets, Liabilities, and Net Assets or Equity - Continued
1. Deposits and Investments - Continued
collateral at the Federal Reserve Bank; SEC registered open-end mutual funds whose portfolios
consist of United States Government securities and repurchase agreements secured by such
securities; and Florida Local Government Investment Trust. The County adheres strictly to the
provisions of those cited Statutes and investments authorized by resolution or ordinance, as well as
with Chapter 517, Florida Statutes, which establishes registration procedures for securities and
dealers.
The Board of County Commissioners maintains a cash and investment pool available for use by all
funds of the Board. Earnings from such investments are allocated to the respective funds based on
applicable cash participation by each fund. In addition, certificates of deposits, money market
accounts and debt securities can be separately maintained by several Board funds. Other elected
officials maintain similar pooled cash accounts or individual cash accounts through which their
office activities are managed.
Each fund s portion of the pooled cash and individual deposit type investments are displayed on the
balance sheet as “cash and cash equivalents.” For purposes of these statements, all highly liquid
investments (including restricted assets) with maturity of ninety days or less when purchased are
considered to be cash equivalents.
U.S. Treasury and agency obligations with maturities of one year or less when purchased are
reported on the balance sheet at their amortized cost. Nonparticipating investment contracts,
generally certificates of deposit, are reported at cost. All other investments are reported at fair
value. The State of Florida provides regulatory oversight for the external investment pools in which
the County invests. The pools either meet the “2A-7 like” criteria of GASB 31 or value investments
at fair value. Therefore, fair value of the position in these pools is the same as the value of the pool
shares.
2. Receivables and Payables
During the course of operations, numerous transactions occur between individual funds for goods
provided or services rendered. These receivables and payables are classified as “due from other
funds or elected officials” or “due to other funds or elected officials” on the fund statement balance
sheets. Short-term interfund loans are also classified as “interfund receivables/payables.” Noncurrent portions of long-term interfund loan receivables are reported as advances and are offset
equally by a fund balance reserve account that indicates that they do not constitute expendable
available financial resources and therefore are not available for appropriation. Any residual
balances outstanding between the governmental activities and business-type activities are reported in
the government-wide financial statements as “internal balances.”
The Emergency Medical Services Enterprise Fund and the Water and Sewer Enterprise Fund are the
only funds of Okaloosa County that provide for an allowance for doubtful accounts for trade
accounts receivables. All other funds write off accounts receivable when determined to be
uncollectible.
42
D.
Assets, Liabilities, and Net Assets or Equity – Continued
2. Receivables and Payables - Continued
Property taxes attach as an enforceable lien on property as of the date of assessment and remain in
effect until discharge by payment. Taxes are payable when levied (on November 1, or as soon
thereafter as the assessment roll becomes available to the Tax Collector). The County bills and
collects its own property taxes, as well as taxes for the County School District and taxes for
municipalities and special districts within the County in accordance with the laws of the State of
Florida. No accrual has been made for 2005 ad valorem taxes because property taxes are not legally
due until subsequent to the end of the fiscal year. Collection of taxes and remittance of them to
other governmental agencies are accounted for in the Disbursements Agency Fund of the Tax
Collector.
The following is the current property tax calendar.
Lien Date
Levy Date
Due Date
Delinquent Date
January 1, 2006
November 1, 2006
November 1, 2006
April 1, 2007
Discounts of 1% for each month taxes are paid prior to March 2007 are granted.
Revenue recognition criteria for property taxes under the Governmental Accounting Standards
Board requires that property taxes expected to be collected within 60 days of the current period be
accrued. Current year taxes that are uncollected as of the end of the fiscal year are generally
immaterial in amount and highly susceptible to uncollectibility and, therefore, are not recorded as a
receivable on the balance sheet date.
3. Inventories and Prepaid Items
Inventory is valued at cost (first-in, first-out) in the governmental funds and at lower of cost (first-in,
first-out) or market in the proprietary funds. The consumption method is used to account for the
inventory. Under the consumption method, inventory items are recorded as expenditures during the
period inventory is used.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded
as prepaid items in both government-wide and fund financial statements.
4. Restricted Assets
Certain proceeds of the Water and Sewer System Enterprise Fund revenue bonds, the Airport
Enterprise Fund revenue bonds and the Conference Center Enterprise Fund revenue bonds, as well
as certain resources set aside for their repayment, are classified as restricted assets on the balance
sheet because their use is limited by applicable bond covenants. In addition, restricted assets include
funds set aside for repayment of customer deposits in several enterprise funds.
43
D.
5. Capital Assets
Capital
Instead,
and the
County.
assets are not capitalized in the governmental funds used to acquire or construct them.
capital acquisition and construction are reflected as expenditures in governmental funds,
related assets are reported on the government-wide statement of net assets of Okaloosa
Capital assets acquired by proprietary funds are reported in those funds.
Property, plant and equipment purchased or acquired is carried at historical cost or estimated
historical cost. Contributed assets are recorded at fair market value as of the date received. The
County s capitalization levels are $1,000 on tangible personal property and $5,000 on buildings,
improvements other than buildings and infrastructure. The Sheriff maintains a tangible personal
property inventory and uses a $1,000 capitalization level. Other costs incurred for repairs and
maintenance are expensed as incurred. General infrastructure assets acquired prior to July 1, 1980
are included in the capital asset inventory and are reported at estimated historical cost using deflated
replacement cost.
Depreciation on all assets is provided on the straight-line basis over the following estimated useful
lives:
_______________YEARS______________
Buildings 10 - 50
Improvements Other Than Buildings 7 – 25
Equipment 3 – 7
Vehicles 2 - 15
Roads and Bridges 10 – 75
Wastewater Lines and Pump Stations 10 – 50
Other Infrastructure 10 - 50
6. Compensated Absences
The liability for compensated absences reported in the government-wide and proprietary fund
statements consists of unpaid, accumulated annual and sick leave or compensatory time balances.
The liability is accrued when incurred in the government-wide and proprietary fund financial
statements. A liability for these amounts is reported in governmental funds financial statements only
if they have matured, for example, as a result of employee resignations and retirements.
7. Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities and long-term obligations are reported in the government-wide
financial statements and the proprietary fund financial statements.
In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a
timely manner and in full from current financial resources are reported as obligation of these funds.
owever, compensated absences and claims that will be paid from governmental funds are reported
as a liability in the find financial statements only to the extent that they are “due for payment”
during the current year. Bonds and capital leases are recognized as a liability in the governmental
fund financial statements when due. . At the inception of capital leases reported in governmental
funds, expenditures and an “Other Financing Source” of an equal amount are reported at the net
present value of future minimum lease payments.
44
D.
8. Bond Premiums, Discounts and Issuance Costs
On the government-wide statement of net assets and the proprietary fund type statement of net
assets, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the
life of the bonds using the effective interest method. Bonds payable are reported net of the
applicable bond premium or discount. Bond issuance costs are reported as deferred charges and
amortized over the term of the related debt. Unamortized losses on bonds are presented as a
reduction of the face amount of bonds payable. The Water and Sewer Enterprise Fund is the only
fund that has unamortized losses on bonds. These unamortized losses on revenue bonds as of
September 30, 2006 are $605,219 (Series 2004).
In the fund financial statements, governmental fund types recognize bond premiums and discounts,
as well as bond issuance costs, during the current period. The face amount of debt issued is reported
as other financing sources. Premiums received on debt issuances are reported as other financing
sources while discounts on debt issuances are reported as other financing uses. Issuance costs,
whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
9. Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for amounts
that are not available for appropriation or are legally restricted by outside parties for use for a
specific purpose. Designations of fund balance represent tentative management plans that are
sub ect to change. When both restricted and unrestricted resources are available for use, it is the
policy of the Board to use restricted resources first, and then unrestricted resources as they are
needed.
10. Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. BUDGETARY INFORMATION
Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual
appropriated budgets are adopted for all governmental and proprietary funds; however, budgets for
proprietary funds are not required to be reported on and are not included in these financial statements. All
appropriations lapse at fiscal year end. Budgetary data reflected in the financial statements are established
by the following Board procedures.
On or about June 1 of each year, proposed budgets are received by the Board of County Commissioners
from its department heads, from all other constitutional officers, and from other agencies requesting
funding for the ensuing fiscal year. These proposed expenditures, along with all estimated receipts, taxes
to be levied, and balances expected to be brought forward are considered by the Board of County
Commissioners in a series of workshops beginning on or before July 15. The Board of County
45
NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY – CONTINUED
A. BUDGETARY INFORMATION - CONTINUED
Commissioners requires such changes as deemed necessary, sets proposed millages and establishes dates
for tentative and final public budget hearings as prescribed by Florida Statutes. Proposed budgets are
advertised in a newspaper of general circulation in the County. Public hearings are conducted in Crestview
and Fort Walton Beach for the purpose of receiving input, responding to complaints and providing reasons
and explanations for intended actions to all citizens participating.
In the event the final budget has not been adopted by October 1, the beginning of the fiscal year, Florida
Statutes provide for expenditures based on the adopted tentative budget or the Board readopts its prior
year s adopted final budget, as amended, and expends monies based on that budget until such time as its
tentative budget is adopted pursuant to law. The final appropriations budget is adopted by resolution of the
Board of County Commissioners.
Florida Statutes require that the individual budgets of several of the constitutional officers must be
approved by the State of Florida. The “fee” portion of these budgets is not a part of the appropriations
budget passed by the Board of County Commissioners.
The budgetary information shown in these
financial statements includes the entire budget for each constitutional office. The level of budgetary control
(that is the level at which expenditures cannot legally exceed appropriations) has been established at the
fund level. The County Manager is authorized to transfer budgeted amounts within departments of a fund
and between departments of a fund; however, the Board of County Commissioners must approve any
revisions that alter the total expenditures of any fund. Each constitutional officer is authorized to make line
item transfers but must request approval from the Board for increases in appropriations.
Budget amounts are originally adopted amounts as amended by action of the Board of County
Commissioners by revision of fund totals. Supplemental budgetary appropriations of $75,489,681
representing a 26.88 percent increase over the original adopted budget were necessary during the fiscal
year. All amendments to originally adopted amounts were made in a legally permissible manner.
Encumbrance accounting, under which purchase orders, contracts and other commitments for the
expenditure of resources are recorded in order to reserve that portion of the applicable appropriation, is
employed in the governmental funds. Encumbrances at fiscal year end do not constitute expenditures since
the commitments will be honored during the subsequent year. Encumbrances will instead be reported as a
reservation of fund balance.
B. DEFICIT FUND EQUITY
The Solid Waste Enterprise Fund reported deficit fund equity of $3,564,707 for the year ended September
30, 2006. The deficit is caused by changes in reporting closure costs and long-term care costs for the solid
waste landfills of the County. Further description of these costs and methods of funding them are
discussed in Note 7.
The Self Insurance Internal Service Fund reported deficit fund equity of $2,379,949. Claim liabilities for
workers compensation, general and automobile liabilities and property damage are funded by actuarially
pro ected budget requirements for expected yearly cash payouts. This funding method results in a deficit
fund balance which will be charged back to the other funds over a reasonable period of time so that service
fund revenues and expenses will be equal.
46
NOTE 3 – DEPOSITS AND INVESTMENTS
The County maintains its deposits only with qualified public depositories as defined in Chapter 280,
Florida Statutes. The provisions of this statute generally require public funds to be deposited in a bank or
savings association designated by the State Chief Financial Officer as a “Qualified Public Depository”.
All qualified public depositories must maintain deposit insurance. They also must place with or in the
name of the Chief Financial Officer of the State of Florida, collateral in the amount of the greater of the
average daily balance of public deposits multiplied by the average monthly balance of public deposits or
125 percent of the average daily balance of public deposits greater than capital. Collateral requirements
may be increase according to statue if specified conditions exist. Eligible collateral includes federal,
federally-guaranteed, state and local government obligations and corporate bonds. In the event of default
by a qualified public depository excess losses over insurance and collateral will be recovered through
assessments to all qualified public depositories of the same type as the depository in default. Under this
method, all County deposits, including certificates of deposit, are considered fully insured.
As of September 30, 2006 the County had the following investments:
Investment Type and Quantity
Florida Local Government Surplus
Funds Trust investment pool
Florida Local Government Investment
Trust investment pool
U.S. Treasury bill (1)
Repurchase Agreement (1)
Federal ome Loan Mortgage Corp (3)
Par/Principal Value
Federal National Mortgage Assoc. (4)
Total investments
Fair Value
Maturity
25,384,808
25,384,808
On Demand
20,698,970
7,000
800,825
2,000,000
2,000,000
2,000,000
2,000,000
3,000,000
1,958,000
3,000,000
62,849,603
20,698,970
6,834
800,825
2,002,240
1,997,020
1,998,280
1,995,000
2,979,390
1,942,708
2,985,000
62,791,075
On Demand
3/29/2007
10/1/2013
8/22/2008
11/28/2008
4/7/2010
11/28/2007
4/27/2009
3/30/2010
1/25/2011
State Statutes and the formal investments and portfolio policies adopted by the Board of County
Commissioners restrict the types of investments that can be made by the County. A description of the
requirements and the types of investments allowed as well as information about valuation and other
investment policies can be found in Note 1.D.1.
The investment policy manual details the methods used to manage the risks inherent to the investment
process. The authority for investment of County funds rests with the Clerk of the Circuit Court who has
delegated management of the investment program to the Finance Director. Investments can only be made
by ma ority vote of the investment committee appointed by the Clerk. Although the policies allow
investments in many types of instruments, the investment committee has chosen to limit investment risks
by investing mainly in allowed investment pools. The pools manage interest rate risk by limiting the
weighted average maturity of their portfolios, manage credit risk by investing in mainly governmental and
other highly rates securities, manage concentration of credit risk by limiting investment in any one issuer to
less than 5 percent of the portfolio and manage custodial credit risk by requiring collateral for investments
held by counterparties.
47
NOTE 3 – DEPOSITS AND INVESTMENTS – CONTINUED
Interest rate risk. In accordance with the investment policy, the exposure to declines in fair value of
investments outside of the pools is managed by matching the investments to a specific cash flow
requirement. The Treasury bill, repurchase agreement and instrumentalities are matched to the timing of
required debt service payments.
Credit risk. As of September 30, 2006, the investment in Florida Local Government Investment Trust
investment pool was rated AAAS-1 by Standard and Poor s. The U.S. government instrumentalities held
at September 30 were all AAA rated by Standard and Poor s and other rating agencies. The investment in
Florida Local Government Surplus Fund Trust investment pool has not been rated.
Concentration of credit risk. The investment policies of the County diversify the portfolio by limiting the
maximum percentage of various types of investments that can be purchased. The investment policy
maximum percentages for the current portfolio are 50 percent for U.S. Treasuries, agencies and
instrumentalities and 50 percent for repurchase agreements. More than 5% of the County s investments
are in the Federal ome Loan Mortgage Corporation and the Federal National Mortgage Association.
These investments are 9.6% and 15.8% respectively of the County s total investments.
Custodial credit risk. Okaloosa County has a perfected first security interest in the collateral underlying
the repurchase agreement. U.S. Treasury bills and U.S. instrumentalities are held by the County s agent in
the County s name in accordance with the Okaloosa County Investment Policy requiring third party
custody and safekeeping.
48
NOTE 4 – RECEIVABLES / DEFERRED REVENUE
Receivables as of year-end for the government s individual ma or funds and nonma or, internal service,
and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as
follows:
Funds
Accounts
General
Fine and Forfeiture
Natural Disasters
Water and Sewer
Airport
Solid Waste
Conference Center
Nonma or and
Other Funds
$
Total
$ 12,205,021 $
Due From
Other
Governments
Total
Receivables
369,544 $
136,311
(3,183)
2,543,877
2,441,324
602,917
45,623
973,459 $
1,409,705
7,864,124
1,447,886
4,323,289
27,982
0
1,343,003 $
1,546,016
7,860,941
3,991,763
6,764,613
630,899
45,623
6,068,608
3,843,464
9,912,072
19,889,909 $ 32,094,930 $
Less:
Allowance for
Doubtful Accounts
Net Total
Receivables
Sept. 30, 2006
0 $
0
0
(240,000)
0
0
0
(2,695,760)
1,343,003
1,546,016
7,860,941
3,751,763
6,764,613
630,899
45,623
7,216,312
(2,935,760) $
29,159,170
Governmental funds report deferred revenue in connection with receivables for revenues that are not
considered to be available to liquidate liabilities of the current period. Governmental funds also defer
revenue recognition in connection with resources that have been received, but not yet earned. At the end
of the current fiscal year, the various components of deferred revenue and unearned revenue reported in
the governmental funds were as follows.
Unavailable
General Fund
Grant Revenue
Tax Redemption Fees
Tax Revenue Received in Advance
Special Revenue Funds
Fine and Forfeiture
Grant Revenue
Natural Disasters
Grant Revenue
Nonma or Funds
Grant Revenue
$
Total deferred/unearned revenue for governmental funds
49
$
0 $
0
0
Unearned
80,756
189
226,554
129,901
541,623
1,381,397
0
0
89,265
1,511,298 $
938,387
NOTE 5 – CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2006 was as follows.
Beginning
Balance
Governmental activities:
Capital assets, not being depreciated:
Land
Construction in progress
$
Total capital assets, not being depreciated
Increases
Decreases
7,385,186 $
285,582 $
0 $
8,813,730
15,328,901
(2,367,382)
Ending
Balance
7,670,768
21,775,249
16,198,916
15,614,483
(2,367,382)
29,446,017
35,604,153
15,361,258
35,452,730
4,248,934
1,185,841
6,831,456
0
(3,892)
(2,889,004)
39,853,087
16,543,207
39,395,182
679,093
87,889,659
0
2,367,666
0
(16,796)
679,093
90,240,529
174,986,893
14,633,897
(2,909,692)
186,711,098
(12,785,709)
(4,087,036)
(25,311,358)
(962,202)
(400,327)
(5,126,726)
0
0
2,670,406
(13,747,911)
(4,487,363)
(27,767,678)
(271,637)
(58,570,145)
(135,820)
(2,203,527)
0
0
(407,457)
(60,773,672)
(101,025,885)
(8,828,602)
2,670,406
(107,184,081)
Total capital assets, being depreciated, net
73,961,008
5,805,295
Governmental activities capital assets, net $
90,159,924 $ 21,419,778 $ (2,606,668) $ 108,973,034
Capital assets, being depreciated:
Buildings
Improvements other than buildings
Machinery and equipment
Machinery and equipment under
capital lease
Infrastructure
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Machinery and equipment under
capital lease
Infrastructure
Total accumulated depreciation
(239,286)
79,527,017
Note: The “Increases” column includes transfers of assets purchased in prior years from business-type
activities to governmental activities as well as reclassifications from completed multiyear construction
pro ects. Therefore the amounts in the column will not be equal to capital outlay or total depreciation
expense by ma or capital asset class in the governmental funds.
50
NOTE 5 – CAPITAL ASSETS - CONTINUED
Beginning
Balance
Business-type activities
Capital assets, not being depreciated:
Land
Construction in progress
Works of art
Total capital assets, not being depreciated
$
Increases
8,690,670 $
177,518 $
8,470,100
13,317,226
0
61,198
17,160,770
13,555,942 $
Ending
Balance
Decreases
0 $ 8,868,188
(7,115,919)
14,671,407
0
61,198
(7,115,919)
23,600,793
Capital assets, being depreciated:
Buildings
Infrastructure
60,376,976
281,145
15,829,396
180,825,670
3,721,780
5,546
1,817,360
6,943,907
0
0
(580,677)
0
64,098,756
286,691
17,066,079
187,769,577
Total capital assets being depreciated
257,313,187
12,488,593
(580,677)
269,221,103
Less accumulated depreciation for:
Buildings
Infrastructure
(4,718,478)
(83,086)
(11,023,573)
(56,414,269)
(1,579,727)
(10,125)
(1,543,458)
(4,636,201)
0
0
572,919
0
(6,298,205)
(93,211)
(11,994,112)
(61,050,470)
Total accumulated depreciation
(72,239,406)
(7,769,511)
572,919
(79,435,998)
Total capital assets, being depreciated, net
185,073,781
4,719,082
Business-type activities capital assets, net $ 202,234,551 $ 18,275,024 $
(7,758)
189,785,105
(7,123,677) $ 213,385,898
Depreciation expense was charged to functions/programs as follows.
General government
Public safety
Physical environment
Transportation, including depreciation of general infrastructure assets
Economic environment
uman services
Culture and recreation
Court related
Capital assets held by the government's internal service funds are
charged to the various functions based on their usage of the assets
Total depreciation expense - governmental activities
51
$
$
1,021,635
1,985,529
18,826
3,516,548
36,914
281,120
434,226
179,306
92,994
7,567,098
Business-type activities:
Water and sewer
Airport
Solid waste
Conference center
Other enterprise funds
Total depreciation expense - business-type activities
$
$
4,466,806
2,001,370
223,844
591,061
384,625
7,667,706
Construction Commitments
Road and Other In rastructure Improvements
The Board of County Commissioners has entered into contracts to improve roads and other
infrastructure at various locations throughout the County. The contracts total $13,842,061.
Cumulative expenditures total $8,866,721, with $4,975,340 remaining liability outstanding at
September 30, 2006.
Park Improvements
The Board of County Commissioners has continued a construction pro ect to make significant
improvements to Marler Park. The original contract amount is $3,737,740, with expenditure through
September 30, 2006 of $3,361,066. The remaining liability under this contract is $376,674.
The Board of County Commissioners has also begun a pro ect to improve the June White Decker
Beach Accessway. The original contract amount is $501,785. Expenditures as of September 30, 2006
total $247,252.
Water and Sewer Expansion and Renovation
The Water and Sewer System is continuing significant expansion and renovations throughout the
County. Based on the fiscal year 2007 capital budget, total expenditures will approximate $6,300,000
on contracted pro ects already under construction at September 30, 2006, plus an additional
$4,300,000 for in-house construction. New construction contracts for 2007 are estimated at
$1,330,000.
Future plans also include the construction of a new wastewater treatment plant to service the Garnier s
area of south Okaloosa County. The total pro ect is expected to cost $60 to $65 million to complete.
See Note 19 regarding borrowings subsequent to year-end that finance that pro ect.
Certain lift station/force main upgrades, replacements or relocation are also required in con unction
with the new plant. In January 2006, the Board amended an existing State of Florida, Department of
Environmental Protection State Revolving Loan Program agreement to provide access to an additional
$6,681,000 of loan funds to complete the lift station/force main pro ects. The amended loan amount is
now $8,737,360 including loan service fees. Approximately $6,864,000 of these funds had been
drawn down or requested for reimbursement as of September 30, 2006.
52
Construction o Okaloosa Regional Airport
The Airport is continuing planning and design for developing a 22.6 acre parcel to be leased from
Eglin Air Force Base on the east side of the current 108 acre leasehold. The new area will include a
consolidated rental car service along with a new fuel farm. A separate commercial access road will
provide additional security for deliveries to the terminal. In addition, a new cargo/maintenance facility
is planned to replace the building razed during the recent terminal construction pro ect completed in
FY 2005. The estimated cost of the rental car facility and fuel farm is about $13 million to be funded
in part by Federal Aviation Administration and Florida Department of Transportation grants as well as
a bond issue to be repaid by the collection of Customer Facility Charges.
Construction at Bob Sikes Airport
A new fire station is nearing completion at Bob Sikes Airport. The facility is a oint pro ect with the
North Okaloosa Fire District. The County has completed construction on its portion of the pro ect, the
shell of the building. NOFD should be completed with the interior design and construction by October
of 2007.
A pro ect for the rehabilitation of the main runway 17/35 is in the design phase. The design,
construction and construction management is anticipated to cost $10 million. The Federal Aviation
Administration will fund 77.2% based on its determination that 81.3% of the runway is eligible for
95% federal funding. The balance will be undertaken by the Florida Department of Transportation
and the County.
Construction at Destin/Fort Walton Beach Airport
A pro ect to replace high mast apron lighting has been designed with construction to begin in FY
2007. Estimated cost for the pro ect is $494,000.
NOTE 6 – COMPENSATED ABSENCES
Each constitutional officer s policy for compensated absences is summarized below.
Board of County Commissioners and Supervisor of Elections
The policy of the Board of County Commissioners and the Supervisor of Elections for annual and sick
leave and compensatory time is as follows.
Employees may accrue an unlimited amount of annual and sick leave. The employees earn leave at
varying rates per month based on their work schedules.
53
NOTE 6 – COMPENSATED ABSENCES - CONTINUED
Board of County Commissioners and Supervisor of Elections -Continued
Group A
40 hours/
week
Years of
Service
Annual Leave
Full time employees
0-5
6-10
11-15
16-20
21-25
26+
8 hours
10 hours
12 hours
14 hours
16 hours
18 hours
1
4 hours
Part time employees
Group B
48 hours/
week
Group C
24 hours on/
48 hours off
10 hours
12 hours
14 hours
17 hours
19 hours
22 hours
11 hours
14 hours
17 hours
20 hours
22 hours
25 hours
Amount paid upon
separation from service
240 hours
288 hours
336 hours
Sick Leave
Full time employees
Part time employees
8 hours
0 hours
10 hours
11 hours
Unused sick leave will be paid to employees having ten consecutive years of service upon
termination or retirement at varying percentages based on the total unused hours: 50% for the first
480 hours; 25% for the second 480 hours and 20% for all hours over 960
Compensatory Time
Compensatory time is available only to hourly (non-exempt) employees. Most employees may
accrue up to 240 hours except for law enforcement and correctional officers who can accrue up to
480 hours. Unused amounts will be paid upon termination or retirement.
Clerk of the Circuit Court
The policy of the Clerk of the Circuit Court for annual and sick leave is that full-time employees
earn four hours of annual leave (five hours if employed five years or longer) and four hours of sick
leave per biweekly pay period. The employee can accumulate a maximum of 240 hours of annual
leave and an unlimited amount of sick leave. Annual leave earned in excess of 240 hours is credited
to sick leave. Upon retirement or termination, the employee may be paid a maximum of 240 hours
accumulated annual leave. Unused sick leave will be paid as follows upon termination (provided
the employee has 160 hours accrued and 24 months of service).
2 years service - 20% of all sick leave accrued
20 years+ service - 50% of all sick leave accrued
54
Clerk of the Circuit Court - Continued
Upon retirement from the Florida Retirement System with 30 years of service, of which the last 20
years of service must have been served with the Clerk s office, employees will be paid for 100% of
their accrued sick leave balance, not to exceed 1800 hours.
Sheriff
The Sheriff maintains a policy providing for annual leave and sick pay for all full-time employees.
Employees are allowed to accumulate unlimited time, however, upon separation the employee will
receive compensation only for any unused annual leave up to a maximum of 240 hours. Annual
leave is calculated as follows:
Years of Service
Less than five (5) years
Five (5) to Ten (10) years
Ten (10) and more years
Accrual Rate
8 hours per calendar month
10 hours per calendar month
12 hours per calendar
Sick leave is accrued by all personnel at 8 hours per month. This accrued time is carried over from
year to year. Employees terminating after ten years of service will be compensated for unused sick
leave up to a maximum of 100 hours. An employee who meets eligibility requirements receives a
minimum of twelve weeks of leave, paid and/or unpaid in accordance with federal guidelines.
Tax Collector
The policy of the Tax Collector for annual and sick leave is that employees are entitled to two weeks
annual leave and 12 days sick leave. Annual leave increases to three and four weeks after five and
ten years, respectively, of continuous employment. Employees may accumulate up to 160 hours of
annual leave and 240 hours of sick leave. Upon termination, unused sick leave is forfeited.
Property Appraiser
The Property Appraiser s policy provides for “paid days off” (a combination of sick and annual
leave) which may be used at the employee s discretion. Paid days off accumulate ratably during
each year of employment at the following rates based on years of employment.
1 to 5 years
5 to 10 years
Over 10 years
192 hours per year
216 hours per year
240 hours per year
Employees are allowed to accumulate up to 360 hours of paid days off for which they will be paid
upon termination of employment. Paid days off accumulated in excess of 360 hours at the end of
the calendar year are lost except for employees planning retirement. Employees planning retirement
within the following year may increase the accrued paid days off to a maximum of 500 hours.
55
The total amounts of accumulated annual leave and other compensated absences for all elected officials as
of September 30, 2006 follow.
Current
Portion
Elected Official
Sheriff
Tax Collector
Property Appraiser
Supervisor of Elections
Totals
Long-Term
Portion
Totals
$
2,435,437 $
224,171
796,024
0
0
21,725
1,680,025 $
501,813
1,259,690
121,766
139,655
3,892
4,115,462
725,984
2,055,714
121,766
139,655
25,617
$
3,477,357 $
3,706,841 $
7,184,198
The total current and long-term portions of compensated absences are shown on the face of the
government-wide statement of net assets using the full accrual method of accounting.
NOTE 7 - LANDFILL CLOSURE AND POST CLOSURE CARE COSTS
The County is required to study, estimate, and certify to the U.S. Environmental Protection Agency
through the Florida Department of Environmental Protection the estimated cost to close and to perform
certain maintenance and monitoring functions at Baker Landfill, Wright Landfill, and Laurel ill Landfill
for thirty years after closure and Niceville Landfill for twenty years after closure. One hundred percent of
the landfill capacity has been used in the landfills and they have all been permanently closed.
The Florida Department of Environmental Protection approved termination of long-term care at the
permanently closed Laurel ill Landfill effective September 30, 2006.
The County is required by state and federal laws and regulations to develop its estimates using rates
normal to commercial contracting firms and is based on the amount of the landfill capacity used to date,
100%. The landfill closure and post closure costs are reevaluated each year. The estimate is sub ect to
changes resulting from inflation, deflation, technology, or changes in applicable laws or regulations. The
effect of this change in estimates has been reflected in the operations of the Solid Waste Enterprise Fund
and has increased net income by $643,701. The estimated liability for landfill closure and post closure care
costs has a balance of $4,585,262 as of September 30, 2006.
The County issued bonds during the fiscal year ended September 30, 1991 to cover a portion of the
estimated closure and post-closure care costs for the Wright Landfill, which ceased operations on March 1,
1990. Information on that Bond Issue can be found in Note 10.
56
NOTE 8 – INTERFUND BALANCES AND ACTIVITY
The composition of interfund balances as of September 30, 2006 is as follows.
Receivable Fund
General
General
General
General
General
General
Fine and Forfeiture
Fine and Forfeiture
Payable Fund
Fine and Forfeiture
Fine and Forfeiture
Natural Disasters
Nonma or Governmental
Internal Service
General
General
Amount
508,362
54,091
305,000
7
12,382
7,000
1,555,046
49,020
Fine and Forfeiture
Fine and Forfeiture
Natural Disasters
Water and Sewer
Conference Center
Conference Center
Internal Service
General
Fiduciary Fund Type
General
Airport
General
General
General
Natural Disasters
General
General
28,735
273,499
5,445
153,650
12,321
254,720
96,315
8,352
500,000
125,987
390
Total
$
Purpose
Grant Revenue
Appropriations
Interfund loan
Recording fees
Administrative fee
Interfund loan
Refund of excess fees
Refund of excess
appropriations
Interest restitution
Fines and fees
Grant Refund
Construction costs
Administrative fee
Allocation of taxes
Capital asset
Refund of excess fees
Interfund loan
Vessel commissions
Interfund services
3,950,322
Interfund transfers:
Transfer In
General
General
General
Fine and Forfeiture
Fine and Forfeiture
Nonma or Enterprise
Internal Service
Total
Transfer Out
Fine and Forfeiture
Fine and Forfeiture
General
Airport
General
Fine and Forfeiture
General
57
Amount
$ 28,031,456
811,072
28,000
1,354,259
950,569
200,000
1,576,048
33,000
315,000
$ 33,299,404
Purpose
Appropriations
Appropriations
Allocation of tax revenue
Excess fees
Sheriff appropriation
Pro ect funding
Pro ect funding
Allocation of tax revenue
Tempory funding
NOTE 9 - LEASES
Operating Leases – Lessor
The Board of County Commissioners leases four county-owned parks and park buildings located on
Okaloosa Island to outside parties. Capitalized investment in these assets is $6,588,730. Accumulated
depreciation of $999,235 has been recorded as of September 30, 2006. All of the leases were for a 25-year
period. owever, one of the leases has been renegotiated and the period extended to thirty years. Three of
the leases contain a 20% or 30% rent increase every five years. The renegotiated lease contains a fixed
rental through 2029. One of the leases contains a contingent rent fee of 5% of gross revenue if that amount
is greater than the set rent amount. To date, the contingent rent option has not been needed. The
remaining terms of the leases range from 2 to 23 years.
The Board of County Commissioners leases land and a building to a convenience store company.
Capitalized investment in the building is $132,488. Accumulated depreciation of $24,841 has been
recorded as of September 30, 2006. The annual lease contains two option renewal periods. These option
periods extend through 2010.
The Board of County Commissioners has leased space on a water tower to a wireless communication
company. The five year lease can be renewed for five five-year periods through 2034. Monthly rental fees
begin at $1667 and increase at each renewal to $3,352 in the final renewal period. There is no capitalized
investment related to this lease.
The Board of County Commissioners has leased space on a telecommunications tower the parcel of land on
which it is located to a wireless communication company. The five year lease can be renewed for four
five-year periods through 2031. Monthly rental fees begin at $1,900 and increase at each renewal period
by 15% to $3,324 in the final renewal period. There is no capitalized investment related to this lease.
The Board of County Commissioners has entered into operating leases with various lessees and
concessionaires for lease of space and facilities at the Okaloosa County Air Terminal, the Bob Sikes
Airport and the Destin Airport. Lease periods vary with expiration dates through 2026. Capitalized
investment in assets associated with these leases is $26,814,773. Accumulated depreciation of $1,341,955
has been recorded as of September 30, 2006.
Total minimum future rentals for material operating leases in which the County is the lessor are as follows.
Fiscal Year Ended September 30
2007
2008
2009
2010
2011
Thereafter
58
$
2,860,223
2,904,006
2,651,480
2,707,295
445,217
6,204,175
$
17,772,396
NOTE 9 – LEASES - CONTINUED
Operating Leases – Lessee
1.
Okaloosa County leases the land on which the airport facilities are located from the United States
Government under a thirty-year lease agreement expiring in February 2031. The land lease agreement
is with the Department of the Air Force for an annual sum of $165,000 for the years 2007 through
2011; $825,000 for five-year increments of 2012-2016, 2017-2021, 2022-2026, 2027-2031.
Lease
expense for fiscal year 2006 was $165,000.
2.
Okaloosa County has an air space oint use agreement with the Department of the Air Force for an
annual fee based on the estimated number of landings per year. Expiration of the current lease is in
2008. The total minimum lease payments for the years 2007 through 2008 will be $305,642 with an
average yearly amount of $152,821. This lease and the yearly payment amount are renegotiated every
five years.
3.
Okaloosa County leases office space used by the Tax Collector and the Property Appraiser through
December 31, 2008. The rent is based on $10,058 per month plus a proportionate amount of any
annual Consumer Price Index increase from the previous year. Based on assumed increases of 3%,
total rent will be $352,044 for the remaining term of the lease. Lease expenditure for fiscal year 2006
was $149,289.
4.
Okaloosa County leases office space used by public safety and veteran s affairs departments of the
Board through March 2009. Monthly payments under the lease are $4,495 with total minimum lease
payments for the years 2007 through 2009 of $134,852. Lease expenditure for fiscal year 2006 was
$26,970.
5.
The Clerk of the Circuit Court leases copier equipment under non-cancelable operating leases effective
for forty-eight months. Monthly payments under the lease are $4,414. Future minimum lease
payments for these leases total $167,732 through February 2010. Lease expenditures for the fiscal
year ended September 30, 2006 amounted to $65,451.
6.
The Sheriff has entered into certain operating leases for office equipment effective for five years.
Future minimum payments for these leases total $94,935 through 2009. Lease expenditure for the
fiscal year 2006 was $47,796.
7.
The Sheriff rents office space under an operating lease effective for a five-year term through May
2008. Monthly payments under the lease are $9,400 with total minimum lease payments through 2008
of $183,300. Total lease expenditures for fiscal year 2006 were $112,800.
8. The Tax Collector rents office space for a decentralized location to accommodate residents in a certain area
of the County. The three-year lease expires in fiscal year 2009. The yearly rental rate is $147,000. There
are also two small operating leases for use of office equipment. Future minimum lease payments for these
leases total $366,308.
59
NOTE 9 – LEASES – CONTINUED
Operating Leases – Lessee – Continued
Total lease expenditure/expense for material operating leases in which the County is the lessee for fiscal
year ended September 30, 2006 amounted to $725,097. Future minimum lease payments for these leases
are as follows.
2007
2008
2009
2010
2011
2012-2016
2017-2021
2022-2026
2027-2031
$
904,708
790,481
329,504
177,404
167,381
825,000
825,000
825,000
825,000
$
5,669,478
Capital Leases
The Board entered into a lease agreement for financing 911 communications equipment. Payments of
$13,022 are required for a sixty-month term. The lease obligation qualifies as a capital lease for accounting
purposes and, therefore, has been recorded at the present value of the future minimum lease payments at
the inception of the lease, October 1, 2003. $679,093 has been capitalized on the government-wide
statement of net assets of Okaloosa County. Accumulated depreciation of $407,456 has been recorded as
of September 30, 2006. The net book value of the equipment is $271,637.
Following is a schedule of the future minimum lease payments under this lease and the present value of the
net minimum lease payments at October 1, 2006.
2007
$
156,268
2008
156,267
Total future minimum lease payments
312,535
Less amounts representing interest
(17,703)
Present value of future minimum lease payments
$
294,832
60
NOTE 10 – LONG-TERM DEBT
Component Unit
The following is a summary of long-term debt transactions of the Emerald Coast Bridge Authority for the
fiscal year ended September 30, 2006.
Note
Payable
Long-term debt payable October 1, 2005
$
1,831,391
Increase/Decrease in long-term debt
(54,102)
Long-term debt payable September 30, 2006
$
NOTES PAYABLE
$1,033,391 loan advances, 1991-92, due in annual payments
(payments have not been made) through 2005, including
$11,322 interest.
1,777,289
$
1,033,391
$298,000 loan advance, 2003 zero interest, repayable from
future toll revenue. No payment date or amount.
298,000
$500,000 loan advance, 2005, zero interest, repayable from
future toll revenue. No payment date or amount.
445,898
Total Notes Payable
$
1,777,289
Primary Government
The following debt issues are outstanding for September 30, 2006.
Governmental Activities:
REVENUE BONDS
$2,524,287 Capital Improvement Revenue Bonds, Series 1991, capital
appreciation bonds with no stated interest rate, effective interest rate of 7.15
percent compounded semi-annually through December 1, 2010; issued in
denominations of $5,000 maturity value due in annual installments of $35,000 to
$685,000 from December 1, 1993 through December 1, 2010. “Second
Guaranteed Entitlement Revenues” as defined in Paragraph II, Chapter 218
Florida Statutes are pledged for payment of these special obligation revenue
bonds. Proceeds from the bonds were used to finance the acquisition and
construction of roads within the County.
$
1,321,071
Total Governmental Activities Revenue Bonds
$
1,321,071
61
NOTE 10 – LONG-TERM DEBT – CONTINUED
Governmental Activities - Continued
LOANS AND NOTES
$550,000 Note payable to a commercial bank; interest rate 5.65%; The note is
unsecured. Principal and interest payments are due monthly beginning in
November 2006. Proceeds were used to finance an office building.
$
$2,000,000 Note payable to individuals; payments in the amount of $1,000,000,
principal only are due November 15, 2006 and 2007. The note finances the
purchase of an office building that is the security for the loan. The note is
payable solely from non-ad valorem taxes.
Total Governmental Activities Loans and Notes
550,000
2,000,000
$
2,550,000
Solid Waste
$2,180,777 Capital Improvement Revenue Bonds, Series 1991, capital
appreciation bonds with no stated interest rate, effective interest rate of 7.15
percent compounded semi-annually through December 1, 2010; issued in
denominations of $5,000 maturity value due in annual installments of $35,000 to
$685,000 from December 1, 1993 through December 1, 2010. “Second
Guaranteed Entitlement Revenues” as defined in Paragraph II, Chapter 218
Florida Statutes are pledged for payment of these special obligation revenue
bonds. Proceeds from the bonds were used to finance landfill closure and post
closure costs of the Wright Landfill.
$
1,141,298
Airport
$10,860,000 Airport Revenue Bonds, Series 2003, serial and term bonds with
stated interest rates ranging from 2.4 percent to 6.0 percent compounded semiannually through October 1, 2030; issued in denominations of $5,000 maturity
value due in annual installments of $225,000 to $510,000 from October 1, 2003
through October 1, 2030. Net revenue derived from the operation of the Airport
System and the Passenger Facility Changes imposed per enplaned passenger at
the Okaloosa Regional Airport are pledged for payment of the bonds. Proceeds
from the bonds were used to finance a portion of the cost of the Terminal
Development Program and to repay a commercial paper loan that provided
partial temporary financing for the pro ect. This issue is sub ect to federal
arbitrage regulations.
$
10,635,000
Business-type Activities:
REVENUE BONDS
62
NOTE 10 – LONG-TERM DEBT - CONTINUED
Primary Government - Continued
Business-type Activities – Continued:
REVENUE BONDS- CONTINUED
Conference Center
$13,450,000 Fourth Cent Tourist Development Tax Revenue Bonds, Series
2000, serial and term bonds with stated interest rates ranging from 4.6 percent to
5.75 percent compounded semi-annually through October 1, 2030; issued in
denominations of $5,000 maturity value due in annual installments of $215,000
to $940,000 from October 1, 2003 through October 1, 2030. Fourth Cent Tourist
Development Tax monies are pledged for payment of these special obligation
revenue bonds. Proceeds from the bonds were used to finance the costs of
acquisition and construction of the Okaloosa County Conference Center. This
issue is sub ect to federal arbitrage regulations.
12,535,000
Water and Sewer
The following parity bonds are secured by a pledge of the net revenues from the
operation of the water and sewer system.
$650,000 Subordinated Revenue Bond, Series 1985, term bond due in semiannual installments of $34,338 beginning July 1, 1985 through January 2,
2015; interest at 10.0 percent per annum. Proceeds from the bonds were
used to finance constructing and acquiring additions, extensions and
improvements to the County Water and Sewer System.
387,132
$5,155,000 Water and Sewer Revenue Bonds, Series 1992, serial bonds due
in annual installments of $25,000 to $2,260,000 beginning July 1, 1994
through July 1, 2011, interest ranging from 4.00 percent to 6.00 percent per
annum. Proceeds from the bonds were used to finance constructing and
acquiring additions, extensions and improvements to the County Water and
Sewer System. This issue is sub ect to federal arbitrage regulations.
4,655,000
$31,170,000 Water and Sewer Revenue Bonds, Series 2004, due in annual
installments of $300,000 to $3,680,000 through July 1, 2016; interest
ranging from 1.017 percent to 3.61 percent per annum. Proceeds from the
bond were used to refund Water and Sewer Revenue Refunding Bonds,
Series 1993 and Water and Sewer Refunding Revenue Bonds, Series 1998
as well as constructing and acquiring additions, extensions and
improvements to the County Water and Sewer System. This issue is sub ect
to federal arbitrage regulations.
Total Business-type Revenue Bonds
23,115,000
$
63
52,468,430
Business-type Activities – Continued:
The following loans from the State of Florida were obtained for construction of extensions and
improvements to the County sewer system. Water and Sewer revenue net of operating costs and debt
service are pledged for repayment of these loans.
LOANS – STATE OF FLORIDA
$5,927,701 State of Florida Department of Environmental Regulation Revolving
Loan Fund; annual payments of $429,920 including capitalized interest at 4.20%
to 4.26% beginning April 1, 1992 through April 1, 2011.
$
$1,458,000 State of Florida Department of Environmental Protection Revolving
Loan Fund; semi-annual payments of $46,776 including interest at 2.59% and
3.24% beginning December 30, 1994 through June 30, 2014.
$729,744 State of Florida Department of Environmental Protection Revolving
Loan Fund; semi-annual payments including capitalized interest of $22,230 at
2.59% beginning October 10, 1995 through April 10, 2015.
1,901,648
668,888
354,882
3.28% and 2.63% beginning April 1, 1997 reducing to $58,007 beginning April
1, 2001 through October 1, 2016.
2.63% and 2.99% beginning September 15, 1999 reducing to $56,219 beginning
September 15, 1999 through March 15, 2017.
1,020,923
$351,895 State of Florida Department of Environmental Protection Revolving
3.18% beginning February 15, 2000 reducing to $11,073 beginning February 15,
2001 through August 15, 2019.
234,309
994,528
2.71% and 3.00% beginning June 15, 2007 through December 15, 2023.
6,863,724
Total Loans – State of Florida
12,038,902
Total Business-type Loans and Notes
$
64
12,038,902
The following is a summary of the changes in long-term debt of the County for the fiscal year ended
September 30, 2006.
Balance Due
October
1, 2005
Increases
Decreases
Balance Due
September
30, 2006
Due Within
One Year
Governmental Activities:
Revenue Bonds
Capital Improvement Revenue
Bonds, Series 1991
$
1,462,338
$
92,112
*
$
(233,379) $
1,321,071
$
241,427
Loans and Notes
Comercial Bank loan
Comercial Bank loan
Personal loan
450,009
0
0
0
550,000
2,000,000
(450,009)
0
0
0
550,000
2,000,000
0
17,714
1,000,000
Total Loans and Notes
450,009
2,550,000
(450,009)
2,550,000
1,017,714
430,218
366,963
5,132,044
4,808,167
0
0
710,268
44,255
(135,386)
(366,963)
(153,441)
(1,036,087)
294,832
0
5,688,871
3,816,335
143,254
0
2,606,978
2,105,741
Capital leases
Operating lease with rent increase
Accrued compensated absences
Estimated claims payable
Total Governmental Activities
$
12,649,739
$
3,396,635
$
(2,375,265) $
13,671,109
$
6,115,114
$
414,990
$
0
$
(27,858) $
387,132
$
30,712
Business-type Activities:
Revenue Bonds
Subordination Revenue Series 1985
Capital Improvement Revenue
Bonds, Series 1991
Revenue Bonds Series 1992
Refunding Revenue Series 2004
Fourth Cent Tourist Development
Tax Revenue Bonds, Series 2000
Airport Revenue Bonds, Series 2003
Less deferred amounts
For issuance discounts
On refunding
Total Revenue Bonds
1,263,342
4,705,000
25,835,000
79,577
0
0
12,780,000
10,860,000
0
0
(1,162,379)
(825,298)
(13,736)
0
53,870,655
65,841
*Accretion
65
*
(201,621)
(50,000)
(2,720,000)
1,141,298
4,655,000
23,115,000
208,573
55,000
2,320,000
(245,000)
(225,000)
12,535,000
10,635,000
0
230,000
118,332
220,079
(1,057,783)
(605,219)
(3,131,068)
50,805,428
0
0
2,844,285
Balance Due
October
1, 2005
Increases
Decreases
Balance Due
September
30, 2006
Due Within
One Year
Business-type Activities - Continued
Loans and Notes
State of Florida Revolving Loan
Fund, April 11, 1992 through
April 1, 2011
Fund, December 30, 1994 through
June 30, 2014
Fund, October 10, 1995 through
April 10, 2015
Fund, April 1, 2001 through
October 1, 2016
Fund, September 15, 1999 through
March 15, 2017
Fund, February 15, 2001 through
August 15, 2019
Fund, beginning February 15, 2006
Less deferred amounts
For issuance discounts
2,236,946
0
(335,298)
1,901,648
349,486
742,835
0
(73,947)
668,888
75,959
389,476
0
(34,594)
354,882
35,496
1,119,595
0
(125,067)
994,528
85,271
1,103,886
0
(82,963)
1,020,923
85,235
248,661
0
(14,352)
234,309
14,812
35,947
6,827,777
6,863,724
168,219
(106,844)
0
(177,226)
8,588
(275,482)
0
Total Loans and Notes
5,770,502
6,650,551
(657,633)
11,763,420
814,478
Accrued compensated absences
Estimated closure costs payable
1,371,321
5,228,963
132,740
0
(8,734)
(643,701)
1,495,327
4,585,262
870,379
268,397
(4,741,136) $
68,349,437
Total Business-type Activities
$ 66,241,441
$
6,849,132
$
$
4,797,539
Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for
them are included as part of the above totals for governmental activities. At year-end $1,184,769 of
internal service funds compensated absences and $3,816,335 of claims liabilities are included in the above
governmental activities amounts.
Compensated absences typically have been liquidated in the general and other governmental funds. Claims
liabilities typically have been liquidated in the internal service fund.
66
Primary Government – Continued
Debt service requirements to maturity on long-term debt at September 30, 2006 are as follows.
Governmental Activities
Revenue Bonds
Loans and Notes
Principal
Interest
Principal
Interest
Year Ending September 30,
2007
2008
2009
2010
2011
2012-2016
$
159,511 $ 1,017,714 $
251,940
1,020,397
260,826
21,580
268,018
22,831
136,814
24,155
0
443,323
28,072
29,551
28,369
27,117
25,793
107,673
$ 1,321,071 $ 1,077,109 $ 2,550,000 $
246,575
Revenue Bonds
Principal
Interest
Year Ending
September 30,
2007
$
2008
2009
2010
2011
2012-2016
2017-2021
2022-2026
2027-2031
81,916 $
114,011
106,749
99,487
918,908
0
Loans and Notes
Principal
Interest
Landfill ClosureCosts
Principal
Interest
2,849,285 $ 1,663,656 $
814,478 $
295,652 $
268,397 $
3,280,012
2,380,827
1,012,896
388,832
268,397
3,374,886
2,312,872
1,046,519
355,209
217,407
3,468,653
2,236,885
1,081,305
320,423
217,407
3,492,965
1,951,019
1,117,310
284,427
217,407
18,689,674
6,846,206
3,596,899
1,030,583
1,087,035
4,400,000
4,412,579
2,458,840
595,489
1,087,035
5,840,000
3,019,188
910,655
141,501
880,205
6,965,000
1,147,575
0
0
341,972
0
0
0
0
0
0
0
0
0
$ 52,360,475 $ 25,970,807 $ 12,038,902 $ 3,412,116 $ 4,585,262 $
0
In prior years, the County has defeased various bond issues. Of those defeased issues, the following
amounts are outstanding at September 30, 2006.
Refunding Revenue and Improvements Bonds of 1978
$
1,435,000
Business-type activities:
Water and Sewer System Enterprise Fund Refunding Revenue, Series 1986
$
4,245,000
67
NOTE 11 - CONDUIT DEBT
Since 1984, the Okaloosa County has authorized eight industrial development revenue bond issues that are
still outstanding. The original issues totaled $55,765,000, and as of September 30, 2006, $40,220,000 was
the principal liability. These bonds do not constitute an indebtedness of the County and are not a charge
against its general credit or taxing powers. The bonds are payable solely from revenues of the respective
industries to which these bond proceeds were remitted.
NOTE 12 - RESERVED FUND BALANCES
The governmental fund balance sheet contains the line item “Reserved for Other Legally Restricted
Purposes”. Following is a list of the detail balances contained in that line item for September 30, 2006.
Fund
General
General
Special Revenue Funds
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Fine and Forfeiture
Tourist Development
Municipal Services
Benefit Units
Public Records Moderization
Trust
Public Records Courts
Capital Pro ects Fund
Capital Outlay Construction
Total Other Restricted Purpose
Amount
745,590
358,751
$
30,351
136,013
969,813
103,585
10,293
104,751
92,456
148,667
139,529
327,532
2,499,759
272,367
1,349,240
1,235,628
616,378
$
Purpose
911 Emergency System
County Revolving Loan Fund Program
Police Academy
Law Enforcement Trust Fund
Judicial Information Technology
Family Mediation Services
Law Library
Prisioner Benefit Trust
Teen Court
Alcohol and Other Drug Abuse Trust Fund
Domestic Violence Trust Fund
Public Records Innovation
Tourist Development Tax
Assessments Reserve
Public records Technology
Judicial Information Technology
Florida Boating Improvement Trust
9,140,703
The proprietary fund balance sheet contains the line item “Equity Restricted for Other Purposes”.
Following is a list of the detail balances contained in that line item for September 30, 2006.
Fund
Conference Center Enterprise Fund
$
Amount
4,340,073
5,752,062
Total Restricted for Other Purposes
$
10,092,135
68
Purpose
Passenger Facility Charges Program
Tourist Development Tax
NOTE 13 - PENSION PLAN
Plan Description
Okaloosa County contributes to the Florida Retirement System (FRS), a cost-sharing multiple-employer
defined benefit pension plan administered by the State of Florida Division of Retirement, Department of
Management Services. The Florida Retirement System provides retirement, disability or death benefits to
plan members or their designated beneficiaries. Florida Statutes Chapter 121 provides the authority under
which benefit provisions are established. The provisions may only be amended by legislative action.
Beginning in 2002, a defined contribution plan alternative to the existing defined benefit plan known as the
Public Employee Optional Retirement Program or the FRS Investment Plan became available to FRS
members. Members in either plan who have reached normal retirement age may retire and continue
employment with the County for up to 60 months. During that period the member s retirement benefits
accumulate in the FRS Trust Fund increased by a cost-of-living ad ustment each July and earned interest at
an annual rate of 6.5%. The Florida Retirement System issues a publicly available financial report that
includes financial statements and required supplementary information. That report may be obtained by
writing to State of Florida Division of Retirement, PO Box 9000, Tallahassee, Florida 32315-9000; emailing Research and Education at [email protected]; or by calling (877) 377-1737.
Funding Policy
Contribution requirements of the plan are established in Florida Statutes Chapter 121 and may only be
amended by legislative action. All retirement legislation must comply with Article X, Section 14 of the
State Constitution and with Part VII, Chapter 112, Florida Statutes. Both of these provisions require that
any increase in retirement benefits must be funded concurrently on an actuarially sound basis. Active plan
members do not contribute to the plan. The FRS funding policy provides for monthly employer
contributions at actuarially determined rates that, expressed as percentages of annual covered payroll are
adequate to accumulate sufficient assets to pay benefits when due. Level percentages of payroll employer
contribution rates, established by state law, are determined using the entry-age actuarial funding method.
If an unfunded actuarial liability re-emerges as a result of future plan benefit changes, assumption changes,
or methodology changes, it is assumed any unfunded actuarial liability would be amortized over 30 years,
using level dollar amounts. Except for gains reserved for rate stabilization, it is anticipated future actuarial
gains and losses are amortized on a rolling 10% basis, as a level dollar amount. Effective July 1, 2002, the
Florida Legislature established a uniform contribution rate system for the FRS, covering both the FRS
Pension Plan and the FRS Investment Plan. The current actuarially determined contribution rates
expressed as a percentage of covered payroll are for regular employees 6.72%, special risk employees
17.42%, special risk administrative support 8.81%, elected udges 17.54%, elected county officers 14.12%,
senior management service class 9.34%, and 8.22% for the Deferred Retirement Option Program (DROP).
The County s contributions to the plan for the years ended September 30, 2006, 2005, and 2004, listed
below were equal to the required contributions for the year.
Elected Officials
2006
Years Ended September 30,
2005
2004
Sheriff
Tax Collector
Property Appraiser
Supervisor of Elections
$
3,138,209
312,404
2,884,556
214,936
143,120
59,063
$
2,861,602
269,287
2,577,051
188,207
118,750
48,961
$
2,866,897
258,526
2,300,835
162,289
114,207
42,424
Total Contributions
$
6,752,288
$
6,063,858
$
5,745,178
69
NOTE 14 - POSTEMPLOYMENT BENEFITS
In addition to the pension benefits described in Note 9, the County offers postretirement health care
benefits, in accordance with the Consolidated Omnibus Budget Reconciliations Act of 1985 (COBRA), to
all employees who retire from the County. Similar coverage is also offered terminated employees under
the same COBRA rules except that the retiree coverage has no maximum coverage period. The retiree or
the terminated employee pays the premium expense for health care benefits. The County records no
expenditures for postemployment health care. At September 30, 2006, 65 of the former employees of the
County were eligible to receive postemployment benefits under the health care plan.
In 1987, the Florida Legislature established the Retiree ealth Insurance Subsidy to assist retirees of all
state-administered retirement systems in paying health insurance costs. Eligible retirees received an extra
$5 per month for each year of creditable service completed at the time of retirement with a minimum
monthly payment of $30 and a maximum payment of $150.
To be eligible to receive the ealth Insurance Subsidy, a retiree under any state-administered retirement
must provide proof of health insurance coverage, which can include Medicare. Any spouse or financial
dependent who receives a monthly retirement benefit may also receive the ealth Insurance Subsidy.
The ealth Insurance Subsidy program is funded by requirement contributions from Florida Retirement
System participating employers. For fiscal year ended September 30, 2006, each employer contributed
1.11% of payroll for all active employees covered by the Florida Retirement System. This contribution is
added to the amount submitted for retirement contributions but is deposited in a separate trust fund (The
Retiree ealth Insurance Subsidy Trust Fund) from which ealth Insurance Subsidy payments are
authorized. If these contributions fail to provide full subsidy benefits to all participants, the subsidy
payments may be reduced or canceled.
NOTE 15 - RISK MANAGEMENT
The County is exposed to risk of loss for claims and udgments for public liability, workers compensation,
employee medical benefits and other special risks. The County uses the Self Insurance Internal Services
Fund to account for all risks from workers compensation loss, general liability, and medical benefit claims
for all County employees except those of the Sheriff, from catastrophic damage to real and tangible
property and from special risk policies for the Board. A mixture of commercial insurance coverage and
self-insurance, which is described below, manages the risk to the County. There has been no significant
reduction in insurance coverage from the prior fiscal year, and insurance coverage has been sufficient to
cover all claims made in the prior three fiscal years.
A.
Method of Risk Management
Public Liability
Florida Statutes 768.28(5) limits the maximum County liability for claims and udgments by
any one person and any one incident to $100,000 and $200,000, respectively. The County
self-insures public liability claims for automobile, general and professional liability. A third
party administrator manages claims. Currently, the County retains the risk for the first
$200,000 ($50,000 for automobile liability) of each claim or incident. Excess insurance is
purchased to cover losses over the $200,000 ($50,000 for automobile liability) self-insured
retention.
The Sheriff maintains a commercial insurance policy for public liability and bears no risk of
loss under this type of coverage.
70
NOTE 15 - RISK MANAGEMENT - CONTINUED
Property Insurance
The County self-insures the risk of physical loss to its real property, business property and
equipment. The County retains the risk of the first $50,000 of physical damage to County
property. The self-insurance retention increases to a maximum of $200,000 if the damage is
the result of a named storm. Excess insurance is purchased to cover the physical damage
exposure over the self-insured retention amount.
All Lines Aggregate Policy
The County purchased an All Lines Aggregate insurance policy that limits the County s risk
for deductible and self-insured retention expenses to $2,400,000 for the fiscal year ended
September 30, 2006.
Workers’ Compensation
The County contracts with a service company to have its workers compensation claims
processed. The County retains risk for all claims up to $400,000 per employee per accident.
Excess insurance is purchased to cover losses up to $25,000,000 for workers compensation
and $1,000,000 for employers liability. The County retains no liability for claims that have
been settled by purchase of annuity contracts.
The Sheriff participates in the Florida Sheriff s Association Workers Compensation
Program. It is a fully insured, guaranteed cost program with a deductible trust fund and
insurance with a commercial carrier. The Sheriff retains no risk.
Employee Medical Benefits
The Board of County Commissioners and all other elected officials of Okaloosa County,
except the Sheriff, use a fully insured commercial insurance plan to fund employee medical
benefits. The Board of County Commissioners or elected official pays the premiums for the
employees while the individual pays for dependent and retiree coverage. The County bears
no risk of loss under this type of coverage.
The Sheriff uses a self-funded health plan to provide comprehensive medical benefits to
employees, retirees and their dependents. The plan is funded by contributions from the
Sheriff s General Fund resources and employee contributions. The Sheriff contracts with the
Florida Sheriffs Association Multiple Employers Trust for claims processing. The plan has
an accumulated surplus of $671,346 as well as sufficient revenue to pay current and future
liabilities, as required by Florida Statutes, Section 112.08.
Excess insurance is purchased from a commercial carrier to provide a Specific Claim and
Aggregate Limits coverage. Specific claim coverage benefits the covered individual by
providing $1,000,000 of coverage to begin when a specific claim exceeds $65,000. This
coverage is sub ect to a $2,000,000 aggregate lifetime maximum limit per covered individual.
Aggregate Limits coverage limits the Sheriff s total risk exposure. This coverage provides
the Sheriff with an additional $1,000,000 in coverage for the coverage year when total claims
paid less the total paid under the Specific Claim excess coverage exceeds $3,472,577 for the
fiscal year ended September 30, 2006.
71
A.
Method of Risk Management – Continued
The Sheriff uses an internal service fund to account for risks from medical benefit claims.
Claim expenditures and liabilities are reported when it is probable that a loss has occurred and
the amount of that loss can be reasonably estimated. At September 30, 2006, the amount of
these liabilities was $377,577. This liability has been determined based on an actuarial
evaluation of all claims reported and all claims incurred but not reported (IBNR) as of
September 30, 2006. Claim liabilities are calculated considering the effects of inflation,
recent claim settlement trends including frequency and amount of payouts and other
economic and social factors.
Reconciliation of Claims Liablities for Medical Benefits
Okaloosa County Sheriff
As of
As of
September 30, 2006
September 30, 2005
Unpaid claims and ad ustment expenses at
beginning of year
$
333,322 $
294,991
Incurred claims and claim ad ustment expenses
A) Provision for insured events of current
fiscal year
2,364,078
2,442,827
0
0
2,364,078
2,442,827
2,319,823
2,404,496
0
0
2,319,823
2,404,496
B) Increases (decreases) in provision for insured
events of prior fiscal years
Total incurred claims and claim ad ustment expenses
Payments
A) Claims and claim ad ustment expenses
attributable to insured events of current
fiscal year
B) Claims and claim ad ustment expenses
attributable to insured events of prior
fiscal year
Total payments
Unpaid claims and claim ad ustment
at end of year
$
377,577 $
333,322
Special Risk Policies
The Board of County Commissioners purchases commercial crime coverage against theft of
money and securities. All of the other elected officials, except the Sheriff, are covered under
the policy. Florida Statute requires certain classes of employees be provided with a special
death and disability benefit. The Board of County Commissioners purchases a commercial
policy. The County bears no risk of loss under this type of coverage. The Sheriff insures this
exposure separately.
72
B.
Claim Liabilities for Retained Risk
Claim liabilities for workers compensation, general liabilities (including errors and omissions), and
auto liability (both bodily in ury and property damage) have been determined based on an actuarial
evaluation of all claims reported and all claims incurred but not reported (IBNR) as of September
30, 2006. Claim liabilities are calculated considering the effects of inflation, recent claim settlement
trends including frequency and amount of payouts and other economic and social factors. The
actuarial estimation of ultimate losses does not include any future recoveries from the Florida
Special Disability Fund, subrogation or third party liens, etc. except to the degree they are implicitly
included in the trending process of estimating ultimate losses. The ultimate loss calculation does
take into consideration specific excess reinsurance recoverable. Claims liabilities recognized in the
Self Insurance Fund of the Board of County Commissioners at September 30, 2006 were as follows.
Current
C.
Long-term
Total
Workers' compensation
General liability
Auto liability
Property
$ 1,438,283
198,493
62,857
28,531
$ 1,292,921
357,689
59,984
0
$ 2,731,204
Total claims liability recognized
$ 1,728,164
$ 1,710,594
$ 3,438,758
556,182
122,841
28,531
Funding of Claims Liabilities
The Self Insurance Fund charges the other funds of the Board and other participating elected
officials for the cost of claim liabilities based on actuarially pro ected budget requirements for
expected yearly cash payouts. This funding method results in a deficit fund balance that will be
charged back to the other funds over a reasonable period of time so that service fund revenues and
expenses will be approximately equal.
73
D.
Reconciliation of Claims Liabilities
As of September 30, 2006
Workers'
Compensation
Liability
Property
As of September 30, 2005
Total
Unpaid claims and ad ustment expenses
at beginningof year
$ 3,594,364 $
631,416 $ 249,065 $ 4,474,845 $
Incurred claims and claim
ad ustment expenses
A) Provision for insured events of
current fiscal year
256,960
573,647
B) Increases (decreases) in provision for
insured events of prior fiscal years (1,302,254)
Total incurred claims and claim
ad ustment expenses
(728,607)
290
830,897
Workers'
Compensation
3,627,044 $
Liability
744,349 $
Property
Total
3,375 $ 4,374,768
516,575
603,987
43,000
1,163,562
16,181
(201,895)
(1,487,968)
361,616
(270,351)
207,689
298,954
273,141
(201,605)
(657,071)
878,191
333,636
250,689
1,462,516
Payments
A) Claims and claim ad ustment
expenses attributable to insured
events of current fiscal year
155,804
43,663
290
199,757
109,260
410,708
(7,000)
512,968
B) Claims and claim ad ustment
expenses attributable to insured
events of prior fiscal year
(21,251)
181,871
18,639
179,259
801,611
35,861
11,999
849,471
134,553
225,534
18,929
379,016
910,871
446,569
4,999
1,362,439
679,023 $
28,531 $ 3,438,758 $
Total payments
Unpaid claims and claim ad ustment
expenses at end of year
$ 2,731,204 $
74
3,594,364 $
631,416 $ 249,065 $ 4,474,845
NOTE 16 – COMMITMENTS AND CONTINGENCIES
911 Service Agreement
At the end of fiscal year 2003, the Board of County Commissioners converted an existing operating lease
for 911 communications equipment to a capital lease. The new lease also included installation of
additional and upgraded equipment. Details of that lease are in Note 9. At the same time the Board
entered into a sixty-month service agreement on the equipment requiring monthly payments of $10,514
beginning October 1, 2003. This obligation totaled $630,840 over the lease term and has $252,336
liability remaining at September 30, 2006.
Reclaimed Water System
The Board of County Commissioners has entered into an agreement to share equally in the costs to
expand a reclaimed water system with the City of Niceville. Prior capital expenditures by the County of
approximately $1,300,000 have been matched by the City to achieve an equitable basis for ownership of
the future oint venture. Additional capital expenditure by the County totaled $1,000,000 through
September 30, 2006. After the system becomes operational, the County agreed to perform minor
maintenance services, equally share with the City of Niceville the future costs of capital expenditures,
operations, ma or maintenance and billing and collection services. The agreement, signed in October
2002, has an initial term of 20 years which may be continued for additional ten-year increments by mutual
written consent of both parties. The system began preliminary operations in November, 2006 and should
be fully on-line in early 2007. The County s investment in this oint venture will be carried in the Water
and Sewer Enterprise Fund.
Customer Facility Charge Agreement
As of December 1, 2004, the County entered into a Customer Facility Charge Agreement with the onairport rental car companies. In accordance with Ordinance No. 04-64, the County imposes and the rental
car companies collect on behalf of the County, a Customer Facility Charge (GFC) of two dollars and fifty
cents ($2.50) per rental car transaction Day on all rental car contracts. CFC revenue will be utilized by
the County to construct, operate and maintain facilities and services for the rental car operators and their
customers at the Okaloosa Regional Airport. CFC collections for the year ended September 30, 2006
were $781,260.
Grants
Amounts received or receivable from grant agencies are sub ect to audit and ad ustment by grantor
agencies, principally the federal government. Any disallowed claims, including amounts already
collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which
may be disallowed by the grantor cannot be determined at this time although the County expects such
amount, if any, to be immaterial.
Lawsuits
The County is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently
determinable, it is the opinion of the County s counsel that resolution of most of these matters will not
have a material adverse effect on the financial condition of the County.
75
NOTE 16 – COMMITMENTS AND CONTINGENCIES -CONTINUED
Arbitrage Rebate
Section 148(f) of the Internal Revenue Code of 1986, as amended, and the proposed and temporary
regulations issued by the Internal Revenue Service on May 15, 1989, and made final effective May 18,
1992, require the rebate to the United States government of the excess of earnings on non-purpose
investments over earnings which would have been made on such investments if they had been made at
bond yield, together with earnings on all future rebate amounts. Although rebates need not be remitted
until five years after issuance of the bonds and each five years thereafter, computations must be made
annually to show financial position at fiscal year end. Okaloosa County has four bond issues falling
within the purview of the above directives - $5,155,000 Water and Sewer Revenue Bonds, Series 1992;
$13,450,000 Fourth Cent Tourist Development Tax Revenue Bonds, Series 2000; and $10,860.000
Airport Revenue Bonds, Series 2003; and $31,170,000 Water and Sewer Revenue Bond, Series 2004.
According to the calculations, the County has no rebate liability with respect to the bonds at September
30, 2006. This determination reflects the liability on that date only and does not represent any amount
that may be due at the end of the five-year period from the delivery date of the bonds.
Hurricane Activity
In September 2004, Okaloosa County, along with most of Northwest Florida, sustained damage due to
urricane Ivan. During fiscal year 2005 the County also received damage from urricane Dennis and
urricane Katrina. Recovery activities due to these events are expected to continue for several years.
The County records hurricane activities in the Natural Disasters Special Revenue Fund. Storm related
expenses incurred during fiscal year 2006 were $1,482,137. As of September 30, 2006, the County has
recorded receivables from the United States Department of omeland Security, Federal Emergency
Management Agency (FEMA) and the Florida Department of Community Affairs, Emergency
Management Agency (DCA) of $6,574,462 and $401,213, respectively. For urricane Ivan, it is
expected that FEMA will reimburse 90% of the eligible cost plus a 3% administration fee with certain
costs occurring within the first 72 hours of the event reimbursed at 100%. DCA will reimburse eligible
costs up to 5%. For the other storms, it is expected that the federal government will reimburse 75% with
the remainder to be funded by state and local sources. The remainder of the expenses including those
considered not eligible for reimbursement, such as debris removal from private property, will be covered
by insurance or funded by the County. Revenue related to the FEMA and DCA receivables has been
deferred on the balance sheet of the Natural Disasters Special Revenue Fund as some receipts from the
agencies were not available under the modified accrual basis of accounting.
76
NOTE 17 – RELATED ORGANIZATION
Library Cooperative
The Okaloosa County Board of County Commissioners entered into an inter-local agreement with six
municipalities located within Okaloosa County, Florida to provide for operation of a countywide public
library system. The governing body of the cooperative is the Okaloosa County Public Library
Cooperative Board made up of one appointee from each municipality and the County. Capital assets
remain the property of the participating municipalities. Under the agreement, the County agreed to
provide annual funding to the cooperative of not less than the following amounts for the term of the
agreement. The current agreement is effective October 1, 2003 and ends on September 30, 2008 but is
sub ect to renewal or revision at that time. The Okaloosa County Board of County Commissioners
contribution to the library cooperative for the year ended September 30, 2006 was $899,700. Future
commitments to the library cooperative are:
Fiscal Year Ending September 30,
2007
2008
Total amount of Funding
$
$
77
Funding Amount
1,204,000
1,304,000
2,508,000
NOTE 18 - JOINT VENTURE
Okaloosa County, in alliance with the City of Valparaiso and City of Niceville, began implementation, in
1975, of initial steps leading to the eventual construction of a comprehensive regional sanitary sewer
system designed to provide service to residents of Niceville and Valparaiso as well as County residents
within the general area. The pro ect was funded 75% by U.S. Environmental Protection Agency (EPA)
Grants under provisions of Public Law 92-500 and 25% by the local government applicants.
The system was completed and placed in service during the fiscal year ended September 30, 1982.
During the fiscal year ended September 30, 1990, a one-million gallon-per-day expansion was completed.
The Board of County Commissioners presently owns 36% of the operating capacity of the total system.
The City of Niceville is a 44% owner and the City of Valparaiso is a 20% owner. The in-service cost of
the property, plant and equipment paid for through the combined funding of the participants and the EPA
is recorded pro-rata on the accounting records of the individual participants.
The Board of County Commissioners portion of assets (at original cost) accounted for in its water and
sewer enterprise fund are as follows.
Land
Building and plant
Plant improvements
Lift stations, force mains and sprayfields
$
$
33,496
877,641
978,577
3,460,547
4,439,124
14,978
Total
$
5,365,239
The system is managed and operated by a separate governing body (Niceville, Valparaiso, Okaloosa
County Regional Sewer Board, Inc.) consisting of six members; two appointed by each of the three
participants. The Sewer Board is responsible for preparing and approving its own budget. The cost of
operations, including additional equipment, inventory purchases, etc., are funded by water and sewer user
fees and are accounted for, in total, on the books and financial statements of the Sewer Board. The
County s share of the operating results of the Niceville, Valparaiso, Okaloosa County Regional Sewer
Board, Inc. is reported in the Board of County Commissioner s water and sewer enterprise fund. The
Board of County Commissioners portion of the equity in the oint venture is $191,340 as of September
30, 2006. Complete financial statements for the Niceville, Valparaiso, Okaloosa County Regional Sewer
Board, Inc. can be obtained from the Sewer Board s administrative office at 507 Crestview Avenue,
Niceville, Florida or from the County Clerk s office at the Okaloosa County Courthouse in Crestview,
Florida.
78
NOTE 19-SUBSEQUENT EVENTS
On December 5, 2006, Okaloosa County issued $65,150,000 of Water and Sewer System Revenue Bonds
with and average coupon interest rate of 4.69%. The bonds were issued to refund $4,655,000 of
outstanding Water
Sewer Revenue Bonds, Series 1992 with an average interest rate of 6.0%, and to
obtain construction funding for a new wastewater treatment facility. The net proceeds of $65,692,000
included an approximate $2,000,000 reoffering premium. After payment of $1,582,000 in underwriting
fees, bond insurance premiums and other insurance costs the net proceeds were used to advance refund
the Series 1992 bonds and to fund the pro ect construction fund in the amount of $60,649,775. Prior debt
service reserve funds of $3,850,225 were also transferred into the construction fund to provide a total of
$64,500,000 to construct the new facility. Final plans for the facility are not yet complete, but,
construction is targeted to begin in the next six to twelve months, with completion in approximately three
years. The County sustained an economic loss (difference between the present values of the old and new
debt service payments) on the refunded debt of $37,700.
In addition, the County executed a land lease with the United States Air Force for the property on which
the new facility is to be constructed. The lease begins October 1, 2007 and has a 30 year term. Annual
payments under the lease increase each year and range from $325,000 to $577,150. The total lease
obligation amounts to approximately $13,185,000 over the life of the lease.
79
SCHEDULE OF PASSENGER FACILITY CHARGES
For the Fiscal Year Ended September 30, 2006
Grantor/Program: Passenger Facility Charges
Application Approval Number: 00-01-C-00-VPS
Latest ROD 03-02-C-00-VPS
Amended
Amount of
Approval
$
37,292,945
Cumulative Earned
Amount at
September 30, 2005
$
6,189,911
Current Year
Earned
Amount
$
1,600,159
Cumulative Earned
Amount at
September 30, 2006
$
7,790,070
156
Current
Year
Expenditures
$
798,626
Unliquidated Passenger Facility Charges
at
at
September 30, 2005
September 30, 2006
$
3,538,540
$
4,340,073
APPENDIX B
Okaloosa County
Okaloosa Regional Airport
Report of the Airport Consultant
36 East Fourth Street, Suite 1206
Cincinnati, OH 45202
513.651.4700 (telephone)
513.412.3570 (facsimile)
B-1
November 30, 2007
Mr. James D. Curry
County Administrator
Okaloosa County
1804 Lewis Turner Blvd., Suite 400
Fort Walton Beach, FL 32547
Re:
Okaloosa County
Appendix B: Report of the Airport Consultant
Dear Mr. Curry:
This report sets forth findings, assumptions, and projections of the air traffic and financial
analyses developed by Ricondo & Associates, Inc. (R&A), in conjunction with the planned
issuance by Okaloosa County (County) of its Taxable Airport Revenue Bonds, Series 2007
(Series 2007 Bonds). The County operates Okaloosa Regional Airport (the Airport) as well as
two general aviation airports, Bob Sikes Airport and Destin/Ft. Walton Beach Airport,
(collectively known as the Airport System). This report is intended for inclusion in the Official
Statement for the Series 2007 Bonds as Appendix B: Report of the Airport Consultant.
The Series 2007 Bonds will provide funds, along with other available funds of the
County, to fund components of the Capital Improvement Program (CIP) known as the 2007
Project, to fund the required Debt Service Reserve Fund with respect to the Series 2007 Bonds,
and to pay costs of issuance of the Series 2007 Bonds. Key components of the 2007 Project
include site development and access improvements, the relocation of the Airport fuel farm, and
the construction of relocated rental car service facilities.
This report includes an overview of the 2007 Project, the economic base of the Air Trade
Area, air traffic demand, existing airport facilities, the rental car industry and rental car demand,
other capital projects, and financial analysis related to the overall feasibility of the 2007 Project
through fiscal year (FY) 2016 1.
On the basis of the assumptions and analyses described in this report, R&A is of the
opinion that the County’s Revenue will be adequate to meet the County’s rate covenant, as set
forth in the Indenture, during the projection period FY 2008 through FY 2016. Additional
findings of these analyses include the following:
1
The County’s fiscal year is the 12-month period ending September 30.
36 EAST FOURTH STREET, SUITE 1206, CINCINNATI, OHIO 45202
Telephone (513) 651-4700 Facsimile (513) 412-3570
B-2
Mr. James D. Curry
Okaloosa County
November 30, 2007
Page 2
Economic Base
x
Population growth in the Air Trade Area (as defined in Chapter 2) between 1990 and
2005 was higher than that experienced in Florida and nationwide. Population growth
in Okaloosa County 1990 and 2005 was slower than experienced in Florida but in
Santa Rosa and Walton Counties, populations grew at a rate almost double that of the
state of Florida. Population growth in the Air Trade Area between 2005 and 2015 is
expected to exceed that projected for Florida and the nation.
x
Between 2000 and 2005, per capita effective buying income (EBI) for the Air Trade
Area increased at a compounded annual growth rate that was greater than that for
both Florida and the nation. According to Sales and Marketing Management
magazine, continued strong growth in per capita EBI for the Air Trade Area is
expected between 2005 and 2010.
x
Employment rates for the Air Trade Area were higher than those for Florida and the
nation between 1995 and 2005.
x
With the exception of transportation which remained relatively flat, all of the major
industry groups in the Air Trade Area experienced positive growth between 2001 and
2005, with the highest growth occurring in the construction and financial sectors.
x
The temperate climate and natural resources of the Air Trade Area attract many
tourists to the area, many traveling into the area via the Airport.
x
The Air Trade Area is an important center for the military and the military presence
is a significant economic generator.
x
The economic base of the Air Trade Area is stable and diversified, and is capable of
supporting increased demand for air travel at the Airport during the projection period.
Air Traffic
x
The Airport is part of a wide, multi-airport catchment area that also includes
Pensacola Regional Airport (Pensacola) and Panama City-Bay County International
Airport (Panama City). Pensacola is located in Escambia County, Florida,
approximately 50 miles west of the Airport; while Panama City is located in Bay
County, Florida, approximately 70 miles east of the Airport.
x
In November 2001, the low-cost carrier AirTran shifted its service from the Airport
to Pensacola after aggressive marketing efforts by that airport to increase air service
from Pensacola. As a result, the Airport’s share of regional enplanements decreased
from 35.7 percent in CY 2001 to 27.0 percent in CY 2006, while Pensacola’s share
increased from 48.4 percent to 60.0 percent during this same period.
B-3
Mr. James D. Curry
Okaloosa County
November 30, 2007
Page 3
x
As of September 2007, the Airport had scheduled passenger service provided by
seven U.S. carriers: American Eagle, Atlantic Southeast (d/b/a the Delta Connection),
Chautauqua and ExpressJet (both d/b/a Continental Express), Delta, Gulfstream
(d/b/a the Continental Connection), and Northwest. Nonstop service from the Airport
is provided primarily to these airlines’ respective hubs (Atlanta, Dallas, Houston, and
Memphis), with Gulfstream also providing nonstop service to Tampa from the
Airport.
x
On September 14, 2005, both Delta and Northwest voluntarily filed for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code. Delta and Northwest filed
their respective Plan of Reorganization and related Disclosure Statement with the
U.S. Bankruptcy Court on December 19, 2006 and February 16, 2007, respectively.
Delta emerged from Chapter 11 on April 30, 2007, and Northwest emerged from
Chapter 11 on May 31, 2007.
x
Passenger activity at the Airport increased from 209,149 enplanements in FY 1996 to
370,558 in FY 2006. This increase represents a compounded annual growth rate of
5.9 percent during this period, compared to 1.8 percent growth nationwide.
Financial Analysis
x
The 2007 Project is feasible in terms of providing facilities at the Airport at a cost
that will produce reasonable levels of rates and charges to the users of the Airport
facilities.
x
Cost per enplanement for the passenger airlines that are signatory to the Signatory
Airline Operating Agreement and Terminal Building Lease (“Airline Agreement”)
(“Signatory Airlines”) is estimated to increase from approximately $5.56 budgeted in
FY 2007, to $7.33 in FY 2016, a compounded annual increase of 3.1 percent. The
Signatory Airlines’ landing fee rate as adjusted is projected to increase from
approximately $1.07 per thousand pounds budgeted in FY 2007, to $1.51 per
thousand pounds in FY 2016.
x
Projected airline rates and charges together with other Airport revenues are sufficient
to ensure that all Operation and Maintenance (O&M) expenses, debt service, and
fund deposit requirements can be generated through reasonable user fees. Debt
service coverage is projected to range from 2.53x to 3.71x, meeting the rate covenant
requirement of the Indenture in each year of the projection period.
Except as defined otherwise, the capitalized terms used in this report are as defined in the
Indenture. The techniques used in this report are consistent with industry practices for similar
studies in connection with airport revenue bond sales. While R&A believes the approach and
assumptions utilized are reasonable, some assumptions regarding future trends and events may
B-4
Mr. James D. Curry
Okaloosa County
November 30, 2007
Page 4
not materialize. Achievement of projections described in this report, therefore, is dependent upon
the occurrence of future events, and variations may be material.
Sincerely,
RICONDO & ASSOCIATES, INC.
B-5
Okaloosa County
TABLE OF CONTENTS
I.
Introduction................................................................................................................................. B-9
1-1
II.
Economic Base for Air Transportation ....................................................................................... B-12
2-1
2-2
2-3
2-4
2-5
2-6
III.
Regional Perspective ..................................................................................................... B-31
Airlines Serving the Airport .......................................................................................... B-37
Historical Passenger Activity ........................................................................................ B-41
Historical Air Service .................................................................................................... B-44
Historical Commercial Aircraft Operations and Landed Weight .................................. B-47
Factors Affecting Aviation Demand.............................................................................. B-50
Projections of Aviation Demand ................................................................................... B-54
Airport Facilities and the Rental Car Industry ............................................................................ B-61
4.1
4.2
4.3
4.4
V.
Area Trade Area ............................................................................................................ B-12
Population...................................................................................................................... B-12
Income ........................................................................................................................... B-15
Employment .................................................................................................................. B-15
Economic Base .............................................................................................................. B-18
Summary........................................................................................................................ B-29
Air Traffic ................................................................................................................................... B-31
3-1
3-2
3-3
3-4
3-5
3-6
3-7
IV.
The 2007 Project ........................................................................................................... B-10
Okaloosa Regional Airport............................................................................................ B-61
Other Airports................................................................................................................ B-64
Capital Improvement Program ...................................................................................... B-64
Rental Car Industry........................................................................................................ B-68
Financial Analysis....................................................................................................................... B-76
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
Governing Body ............................................................................................................ B-76
Financial Structure ........................................................................................................ B-76
Financing Plan ............................................................................................................... B-86
Operations and Maintenance Expenses ......................................................................... B-90
Nonairline Revenues ..................................................................................................... B-93
PFC and CFC Revenues ................................................................................................ B-97
Airline Rates.................................................................................................................. B-98
Cost per Enplanement.................................................................................................... B-101
Airport Cash Flow and Debt Service Coverage ............................................................ B-101
Application of Revenues ............................................................................................... B-101
B-6
November 30, 2007
Okaloosa County
LIST OF TABLES
Table No.
II-1
II-2
II-3
II-4
II-5
II-6
II-7
II-8
II-9
Historical & Projected Population .............................................................................................. B-14
Effective Buying Income ............................................................................................................ B-16
Civilian Labor Force & Unemployment Rates ........................................................................... B-17
Employment Trends by Major Industry Division ....................................................................... B-19
Major Employers......................................................................................................................... B-20
Total Retail Sales ........................................................................................................................ B-24
Recent New & Expanded Businesses ......................................................................................... B-25
Residential Building Permit Units & Valuation.......................................................................... B-27
Total Bank Deposits.................................................................................................................... B-28
III-1
III-2
III-3
III-4
III-5
III-6
III-7
III-8
III-9
III-10
III-11
III-12
III-13
III-14
Regional Shares of Enplanements............................................................................................... B-31
Fare and Yield Market Averages ................................................................................................ B-34
Nonstop Market Comparison ...................................................................................................... B-38
Airlines Serving the Airport........................................................................................................ B-39
Air Carrier Base .......................................................................................................................... B-40
Historical Enplanements ............................................................................................................. B-42
Historical Enplaned Passengers by Airline ................................................................................. B-45
Primary O&D Passenger Markets ............................................................................................... B-46
Nonstop Markets ......................................................................................................................... B-48
Historical Commercial Aircraft Operations ................................................................................ B-49
Historical Landed Weight by Airline.......................................................................................... B-51
Enplanement Projections............................................................................................................. B-57
Operations Projections ................................................................................................................ B-58
Landed Weight Projections ......................................................................................................... B-60
IV-1
IV-2
IV-3
IV-4
IV-5
IV-6
The 2007 Project ......................................................................................................................... B-65
Funding for the 2007 Project ...................................................................................................... B-66
Capital Improvement Program (FY 2007 - FY 2012) ................................................................. B-67
U.S. Rental Car Company Market Share .................................................................................... B-71
CFC Level Comparison............................................................................................................... B-74
Historical Rental Car Activity..................................................................................................... B-75
V-1
V-2
V-3
V-4
V-5
V-6
V-7
V-8
V-9
V-10
V-11
V-12
Estimated Sources and Uses of Funds......................................................................................... B-87
Debt Service and Commercial Paper Expense ............................................................................ B-89
Historical O&M Expenses .......................................................................................................... B-90
Operation & Maintenance Expenses........................................................................................... B-91
Historical Nonairline Revenues .................................................................................................. B-94
Nonairline Revenue by Airport and Revenue Source ................................................................. B-95
Projected PFC and CFC Collections ........................................................................................... B-99
Signatory Airlines’ Terminal Rental Rate................................................................................... B-100
Signatory Airlines’ Landing Fee Rate......................................................................................... B-102
Signatory Airline Cost Per Enplaned Passenger ......................................................................... B-103
Cash Flow and Debt Service Coverage....................................................................................... B-104
Application of Revenues............................................................................................................. B-105
B-7
November 30, 2007
Okaloosa County
LIST OF EXHIBITS
Exhibit No.
I-1
2007 Project ................................................................................................................................ B-11
II-1
Primary Air Trade Area............................................................................................................... B-13
III-1
III-2
III-3
Regional Shares of Enplanements............................................................................................... B-33
Average Fares Comparison ......................................................................................................... B-35
Revenue Yields Comparison....................................................................................................... B-36
IV-1
IV-2
Airport Diagram .......................................................................................................................... B-62
U.S. Rental Car Market Car Gross Sales .................................................................................... B-70
V-1
Flow of Funds defined in the Bond Indenture ............................................................................ B-79
B-8
November 30, 2007
Okaloosa County
I.
Introduction
This Report of the Airport Consultant has been prepared to evaluate the financial feasibility of the
planned issuance of Taxable Airport Revenue Bonds, Series 2007 (the Series 2007 Bonds) by
Okaloosa County (the County). Proceeds of the Series 2007 Bonds will partially fund the
development of relocated rental car service and other support facilities (the 2007 Project) at Okaloosa
Regional Airport (the Airport). The 2007 Project will also be funded with federal and state grants,
investment income, and Customer Facility Charges (CFCs) on a pay-as-you-go basis. Debt service
on the Series 2007 Bonds will be repaid with Airport Revenues including a portion of Customer
Facility Charges (CFCs) collected by the rental car companies that are pledged to debt service and
coverage. This report discusses the 2007 Project, the economic base of the Air Trade Area, air traffic
demand, existing airport facilities, other capital projects, an overview of the rental car industry and
rental car demand at the Airport, and financial analysis related to the overall feasibility of the 2007
Project.
Okaloosa County operates the Airport as well as two general aviation airports, Bob Sikes Airport and
Destin/Ft. Walton Beach Airport. The Airport is a joint-use facility operated on the United States Air
Force’s Eglin Air Force Base through written agreement between Okaloosa County and the Air
Force. Through a joint-use agreement with the Department of the Air Force, the County is
authorized to permit civil aircraft to use the flying facilities at Eglin Air Force Base. The current
joint-use agreement is a 30-year agreement scheduled to expire in February 2031. In addition, the
Airport Enterprise Fund of the Board of County Commissioners leases the land on which the Airport
facilities are located from the United States Government under a 25-year agreement expiring in 2032.
With the execution of a new lease on July 30, 2007, the County’s leasehold was increased from
approximately 108 acres to approximately 131 acres, in part to support the 2007 Project.
The Airport is located six miles northeast of Fort Walton Beach and primarily serves Okaloosa
County and portions of Santa Rosa and Walton Counties. Approximately 370,600 passengers were
enplaned at the Airport in Fiscal Year (FY) 2006. Based on passenger enplanement levels, the
Airport is designated as a small-hub facility by the Federal Aviation Administration (FAA). Delta
Air Lines and its affiliated carriers maintain the largest share of air traffic at the Airport and enplaned
approximately 50.1 percent of the Airport’s total traffic in FY 2006.
As discussed in Section 4.4.6 of this report, the County executed the Rental Car Concession Agreement
and Lease (the Concession Agreement) with the five rental car companies currently operating on the
Airport in October 2005. The term of the Concession Agreement extends until September 30, 2010.
The County has also executed a new Rental Car Service Facilities Lease (Lease Agreement) with the
rental car companies. The new Lease Agreement includes the rental car facilities in the 2007 Project.
The rental car companies serving the Airport began collecting CFCs from customers renting cars at the
Airport following the adoption of County Ordinance No. 04-64 (the Ordinance) on October 19, 2004.
The Ordinance was amended on May 1, 2007 and the CFC level was increased from $2.50 to $3.25 per
rental transaction day. As of July 1, 2007, a uniform CFC of $3.25 per rental transaction day is imposed
on rental car customers’ rental agreements at the Airport. The CFC can be increased by subsequent
ordinance of the County.
The following section of this chapter provides a description of the 2007 Project and its estimated
costs.
B-9
November 30, 2007
Okaloosa County
1.1
The 2007 Project
In continuation of the development and expansion of the Airport, the County desires to implement
the 2007 Project which includes, among other components, the relocation of all rental car service
functions on the Airport to a 22.6 acre site located east of the Terminal Building. The site was
recently added to the Airport leasehold following negotiations with the Air Force and the County has
received the necessary approvals from the Air Force to complete the 2007 Project. Key components
of the 2007 Project include site development and access improvements, the relocation of the Airport
fuel farm, and the construction of relocated rental car service facilities.
Site development projects include clearing and grubbing, excavation, and drainage improvements
necessary to prepare the project site for development. Utilities, including an electrical duct bank,
will be extended to the site to accommodate the lighting and utility service needs of the relocated fuel
farm and relocated rental car service facilities. Access improvements included in the 2007 Project
will provide (1) vehicular access to the site from State Road 85 to accommodate deliveries and (2)
provide connection from the site to the existing terminal loop road for Ready/Return operations. The
addition of turn lanes to State Road 85 is also included in the 2007 Project.
The Airport’s existing fuel farm will be relocated as part of the 2007 Project. Upon its completion, the
new fuel farm facility will utilize a shared fuel tank configuration in a walled containment area. The fuel
facility will be operated by the Airport and will support the storage of both aviation and automotive fuels.
Above ground tanks will provide storage capacity totaling 80,000 gallons for aviation fuel and 50,000
gallons for automotive fuel. Aviation fuel will be dispensed to trucks that will service aircraft on apron
areas that are remote from the farm. Automotive fuel will be transported through pipelines from the fuel
farm to the rental car service area.
On-grade rental car facilities to be constructed as part of the 2007 Project include roadways, a
consolidated rental car fueling facility, a five-bay consolidated wash building, a consolidated rental
car service facility building with five bays, and associated vehicle storage parking areas. Each rental
car service facility bay will include office/storage areas, a breakroom, and a vehicle maintenance area
to facilitate light automotive maintenance.
Exhibit I-1 presents a graphical depiction of the 2007 Project. Total estimated cost of the 2007
Project is approximately $13.2 million. The aviation component of the fuel farm relocation is a
separate project included in the Airport’s Capital Improvement Program (CIP) and is not included in
the cost of the 2007 Project. A portion of project costs associated with access improvements and site
development are anticipated to be funded with federal and state grants. Remaining project costs are
to be funded by accumulated CFC collections and the proceeds of the Series 2007 Bonds.
B-10
November 30, 2007
Okaloosa County
B-11
Prepared by: Ricondo & Associates, Inc.
Exhibit I-1
The 2007 Project
November 30, 2007
Okaloosa County
II.
Economic Base for Air Transportation
The demand for air transportation is, to a large degree, dependent upon the demographic and economic
characteristics of an airport’s air trade area (i.e. the geographical area served by an airport). This
relationship is particularly true for origin-destination (O&D) passenger traffic, which has been the
foremost component of demand at the Airport. The major portion of demand for air travel at the Airport,
therefore, is influenced more by the local characteristics of the area served than by individual air carrier
decisions regarding hub and service patterns in support of connecting activity. This chapter presents data
that indicate that the Airport’s air trade area has an economic base capable of supporting increased
demand for air travel at the Airport during the projection period.
2.1
Air Trade Area
The borders of an air trade area are influenced by the location of other metropolitan areas and their
associated airport facilities. For purposes of these analyses, the primary air trade area for the Airport is
the Fort Walton Beach, Crestview, Destin, Florida Metropolitan Statistical Area (MSA), as defined by the
federal government’s Office of Management and Budget, and a portion of Santa Rosa and Walton
Counties. The MSA includes all of Okaloosa County. According to the federal government, an MSA is a
geographical area with a large population nucleus, along with any adjacent communities that have a high
degree of economic and social interaction with that nucleus.
It is the economic strength of the MSA that provides the primary base for supporting air transportation at
the Airport. Socioeconomic data for the MSA (hereinafter referred to as the Air Trade Area) were
analyzed in conjunction with those for Florida and the United States to determine the economic strength.
Although only a portion of Santa Rosa and Walton Counties contribute to the Air Trade Area, statistical
data are only available for the entire counties. Exhibit II-1 presents the geographical location of the
Airport’s primary air trade area, as well as its proximity to alternative facilities.
Passengers originating from neighboring Escambia, Holmes, and Washington counties as well as southern
Alabama may represent a secondary air trade area, but most passengers using the Airport originate in the
Air Trade Area.
The identification of this three-county region as the Airport’s Air Trade Area also reflects consideration
of the other two commercial service airports located in Western Florida, Pensacola Regional Airport
(PNS) and Panama City-Bay County International Airport (PFN). Each of these airports has its own
specific role and air trade area.
x
PNS, located approximately 50 miles west of the Airport, serves primarily the domestic travel
needs of its local market, which includes the majority of Santa Rosa County.
x
PFN, located approximately 70 miles southeast of the Airport, serves primarily the domestic
travel needs of its local market, which includes the majority of Walton County.
2.2
Population
Historical population for the Air Trade Area, Florida, and the United States is presented in Table II-1.
Population in the Air Trade Area increased from 253,144 people in 1990 to 328,842 people in 2000 and
to 375,601 people in 2005. Between 1990 and 2005, the Air Trade Area experienced population growth
at a compounded annual growth rate of 2.7 percent, which was higher than that experienced for Florida
and the nation (compounded annual growth rates of 2.1 percent and 1.2 percent, respectively).
B-12
November 30, 2007
Okaloosa County
Montgomery
MISSISSIPPI
GEORGIA
ALABAMA
Dothan
HOLMES
ESCAMBIA
WASHINGTON
Mobile
Pensacola
Tallahassee
Panama City
FLORIDA
SANTA ROSA*
OKALOOSA
WALTON*
* The Primary Air Trade Area includes a portion of Santa Rosa and Walton Counties
Mileage from VPS
Pensacola .......................................................................50
Panama City...................................................................70
Mobile (AL) .................................................................. 130
Dothan (AL).................................................................. 135
Tallahassee .................................................................. 170
Montgomery (AL) ........................................................ 190
Source: Cartesia Software, Map Art, 1998.
Exhibit II-1
Primary Air Trade Area
B-13
November 30, 2007
Okaloosa County
Table II-1
Historical & Projected Population
Area
Okaloosa
Santa Rosa
Walton
Compounded Annual Growth Rate
Historical
Projected
1990-2000 2000-2005 1990-2005
2005-2015
1990
Historical
2000
2005
Projected
2015
143,776
81,608
27,760
170,498
117,743
40,601
182,172
143,105
50,324
225,000
178,800
77,200
1.7%
3.7%
3.9%
1.3%
4.0%
4.4%
1.6%
3.8%
4.0%
2.1%
2.3%
4.4%
Air Trade Area
253,144
328,842
375,601
481,000
2.7%
2.7%
2.7%
2.5%
State of Florida
12,937,926
15,982,378
17,789,864
21,831,500
2.1%
2.2%
2.1%
2.1%
248,709,873 281,421,906 296,410,404
312,268,000
1.2%
1.0%
1.2%
0.5%
United States
Sources: U.S. Department of Commerce, Bureau of the Census (historical - all areas; projected - U.S.)
University of Florida, Bureau of Economic and Business Research, Bulletin No. 147, February, 2007.
(Medium-growth depicted.)
B-14
November 30, 2007
Okaloosa County
Table II-1 also presents population projections for the Air Trade Area, Florida, and the nation for 2015.
As shown, population in the Air Trade Area is expected to increase from 375,601 people in 2005 to
481,000 in 2015. This increase represents a compounded annual growth rate of 2.5 percent during this
period, which is higher than that projected for both Florida and the nation (compounded annual growth
rates of 2.1 percent and 0.5 percent, respectively).
2.3
Income
One measure of the relative income of an area is its effective buying income (EBI). EBI is essentially
disposable personal income and includes personal income less personal taxes (federal, state, and local),
non-tax payments including fines and penalties, and personal contributions for social insurance. EBI is a
composite measurement of market potential and indicates the general ability to purchase an available
product or service. According to Sales and Marketing Management Magazine, of the top 300
Metropolitan and Micropolitan Statistical Areas in the nation, the MSA ranked 109th in Median
Household EBI in 2005. 1
Table II-2 presents per capita EBI for the Air Trade Area, Florida, and the nation between 2000 and
2005. Per capita EBI for the Air Trade Area was lower than Florida in each year between 2000 and 2005.
Per capita EBI for the Air Trade Areas was lower than the U.S. in 2000 and 2001, but surpassed the U.S.
in 2002 and has been higher in each subsequent year with the differential increasing in each year. Also as
shown, per capita EBI for the Air Trade Area increased at a compounded annual growth rate of 4.6
percent between 2000 and 2005, which was higher than that for Florida and the nation during this same
period (compounded annual growth rates of 2.6 and 1.4 percent, respectively). EBI in the Air Trade Area
increased 12.4 percent from 2001 to 2002. Most of this increase occurred in Walton County and can be
attributed to significant growth in the area adding higher-salaried employees to the Air Trade Area.
Table II-2 also presents projections of per capita EBI for 2010, the latest year for which such projections
are currently available. According to Sales and Marketing Management magazine, per capita EBI for the
Air Trade Area is projected to increase from $20,354 in 2005 to $22,961 in 2010. This increase
represents a compounded annual growth rate of 2.4 percent during this period, which is slightly higher
than projected for Florida and the nation.
An additional indicator of the market potential for air transportation demand is the percentage of
households in the higher income categories. An examination of this indicator is important in that as
personal income increases, air transportation becomes more affordable and, therefore, is used more
frequently. Table II-2 also presents percentages of households in selected EBI categories for 2005. As
shown, 17.5 percent of households in the Air Trade Area had an EBI of $75,000 or more in 2005, which
was comparable to the 17.6 percent for Florida and 17.9 percent for the nation.
2.4
Employment
Recent employment trends for the Air Trade Area, Florida, and the United States are presented in Table
II-3. The Air Trade Area’s civilian labor force increased from approximately 140,000 workers in 1995 to
approximately 186,000 workers in 2005. This increase represents a compounded annual growth rate of
2.9 percent during this period, compared to 2.1 percent for Florida and 1.2 percent for the nation. Table
1
The Office of Management and Budget revised its geographical census definitions to include Metropolitan and
Micropolitan Statistical Areas, collectively called Core Based Statistical Areas (CBSAs). The CBSA
Metropolitan Areas have at least one central urbanized core area of 50,000 people and the CBSA Micropolitan
Areas have at least one urbanized core area of at least 10,000 people, but fewer than 50,000.
B-15
November 30, 2007
Okaloosa County
Table II-2
Effective Buying Income
Per Capita EBI
Year
Air Trade Area
Florida
United States
Historical
2000
2001
2002
2003
2004
2005
$16,261
$16,719
$18,787
$18,984
$19,657
$20,354
$18,272
$18,671
$19,474
$19,741
$20,394
$20,770
$18,426
$18,491
$18,375
$18,662
$19,289
$19,779
$22,961
$22,923
$21,852
Projected
2010
Compounded
Annual Growth Rate
2000 - 2005
2005 - 2010
4.6%
2.4%
2.6%
2.0%
1.4%
2.0%
Percentage of Households in Income Categories (2005 EBI)
Income Category
Air Trade Area
Florida
United States
25.1%
35.9%
21.5%
10.4%
7.1%
29.0%
34.4%
19.0%
9.5%
8.1%
27.6%
34.2%
20.3%
9.7%
8.2%
Less than $24,999
$25,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 or More
Sources: Sales & Marketing Management, Survey of Buying Power , 2001-2005
TradeDimensions International, Inc., Demographics USA 2006 - County Edition
B-16
November 30, 2007
Okaloosa County
Table II-3
Civilian Labor Force & Unemployment Rates
Civilian Labor Force (000's)
Year
Air Trade Area
Florida
United States
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
140
143
149
153
157
155
159
164
171
180
186
7,045
7,208
7,409
7,573
7,711
7,870
7,998
8,125
8,246
8,451
8,711
132,304
133,943
136,297
137,673
139,368
142,583
143,734
144,863
146,510
147,401
149,320
2.9%
2.1%
1.2%
Compounded
Annual Growth Rate
1995 - 2005
Unemployment Rates
Year
Air Trade Area
Florida
United States
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
4.3%
3.9%
3.8%
3.8%
3.7%
3.7%
4.2%
4.7%
4.0%
3.7%
3.1%
5.5%
5.3%
5.0%
4.5%
4.0%
3.8%
4.7%
5.7%
5.3%
4.7%
3.8%
5.6%
5.4%
4.9%
4.5%
4.2%
4.0%
4.7%
5.8%
6.0%
5.5%
5.1%
Source: U.S. Department of Labor, Bureau of Labor Statistics
B-17
November 30, 2007
Okaloosa County
II-3 presents average annual unemployment rates for the Air Trade Area, which were consistently below
those for Florida and for the nation each year between 1995 and 2005.
An analysis of nonfarm employment trends by major industry division is presented in Table II-4, which
compares the Air Trade Area’s employment trends to those for the nation for 2001 and 2005. As shown,
nonfarm employment in the Air Trade Area increased from approximately 102,541 workers in 2001 to
approximately 121,887 workers in 2005. This increase represents a compounded annual growth rate of
4.4 percent during this period, which was higher than the 0.1 percent growth rate nationwide during this
same period.
The largest employers in the Air Trade Area include the military and associated services as well as
tourism service and health care. Major employers in the Air Trade Area, as measured by the number of
employees, are presented in Table II-5 and includes ResortQuest International, Wal-Mart Stores,
Crestview Aerospace, Sandestin Golf & Beach Resort and the Fort Walton Beach Medical Center.
2.5
Economic Base
This section reviews the local economy in greater detail to more clearly examine the basis for the
economic strength of the Air Trade Area. On June 12, 2007, The Wall Street Journal reported that Fort
Walton Beach ranked second in the Moody’s Economy.com Business Vitality Index, which compares 379
U.S. metropolitan areas using a number of metrics, from household income growth to regional cost
structure to employment volatility. The city trailed only Austin, Texas among the nation’s most vital
markets.
2.5.1
Services
Services employment in the Air Trade Area increased at a compounded annual growth rate of 2.5 percent
between 2001 and 2005 compared to 1.5 percent for the nation. The services sector is the largest segment
of employment in the Air Trade Area and in 2005, and accounted for approximately 53,018 employees in
the Air Trade Area (43.5 percent of total nonfarm employment), the highest employment level among
sectors.
2.5.1.1
Travel and Tourism
Tourism is a significant economic contributor for the Air Trade Area, attracting visitors to the sugar-white
beaches and other outdoor recreational opportunities. Although tourism peaks in the spring and summer,
vacationers and part-time residents from the northern United States and Canada enjoy the mild fall and
winter months. Well known beaches that attract tourists to the Air Trade Area include the following:
x
Navarre Beach in Santa Rosa County - 12 miles of coastline; eight miles undeveloped; 130 acres
in total.
x
Destin and Fort Walton Beach in Okaloosa County - 24 miles of beach.
x
The Beaches of Walton County - 26 miles of beach in 14 separate communities.
According to the Okaloosa County Economic Development Council, an estimated 4.5 million people visit
the beaches every year, contributing $1 billion annually and stimulating the need for 35,000 tourismrelated positions in Okaloosa County. Tourism provides over 45 percent of the sales tax returned by the
B-18
November 30, 2007
Okaloosa County
Table II-4
Employment Trends by Major Industry Division
Air Trade Area
Nonfarm Employment
Industry
Services
Trade
Government
Construction 1/
Financial
Manufacturing
Information 2/
Transportation/Utilities
TOTAL3/
United States
Nonfarm Employment (000's)
Compounded
Annual Growth Rate
2001
53,018
22,716
12,811
12,545
8,887
6,225
2,932
2,753
2.5%
2.8%
4.9%
14.9%
9.7%
5.7%
4.8%
(0.33%)
49,415
21,011
21,118
7,432
7,807
16,441
3,629
4,971
52,537
21,044
21,804
7,964
8,153
14,226
3,061
4,915
1.5%
0.0%
0.8%
1.7%
1.1%
(3.55%)
(4.17%)
(0.28%)
121,887
4.4%
131,824
133,704
0.1%
2001
2005
48,109
20,316
10,569
7,197
6,138
4,996
2,426
2,790
102,541
Compounded
Annual Growth Rate
2005
Percent of 2005 Nonfarm Employment
Services
39.3%
Trade
15.7%
16.3%
10.3%
Construction
6.0%
7.3%
6.1%
5.1%
Financial
Manufacturing
Transportation/Utilities
1/
2/
3/
10.6%
2.4%
2.3%
2.3%
3.7%
0.0%
United States
18.6%
10.5%
Government
Information
43.5%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Air Trade Area
Includes natural resources and mining employment.
The information sector includes communications, publishing, motion picture and sound recording, and on-line services.
Some information was not disclosable because the data did not meet BLS or State agency disclosure standards therefore the data was not included above.
Source: U.S. Department of Labor, Bureau of Labor Statistics
B-19
November 30, 2007
Okaloosa County
Table II-5
Major Employers
Employer
Employees
Product or Service
Private Employers:
1/
ResortQuest International
Wal-Mart Stores
Crestview Aerospace
Sandestin Golf & Beach Resort
Fort Walton Beach Medical Center
BAE Systems
Tybrin Corporation
Baptist Health Systems
Metric Systems Corporation
Sverdrup Technology
Hilton Sandestin Beach Resort
North Okaloosa Medical Center
Santa Rosa Medical Center
Sacred Heart Hospital on the Emerald Coast
L3 Communications
Manufacturing Technologies, Inc.
Perdue Farms
White-Wilson Medical Center
TRX Fulfillment Services
Bridgeway Center, Inc.
Mold-Ex/Southland
Arvida/St. Joe Company
Air Products & Chemicals
HealthMark Regional Medical Center
Mediacom
Seaside Development Corporation
Professional Products, Inc.
The Listener Group
Exxon-Mobile
1,815
1,441
1,220
1,200
941
910
875
850
730
650
600
585
536
500
470
450
400
380
330
277
270
255
240
238
210
175
170
150
135
Resort Property Management
Retail
Aircraft Manufacturing, Maintenance, & Modification
Resort
Full Service Hospital
Range Test Facilities, Logistics, Electronics
Engineering Analysis & Software Development
Healthcare
Defense Electronics
Engineering Services
Resort
Healthcare
Healthcare
Healthcare
Aircraft Maintenance & Support
Engineering, Development, and Avionics
Poultry Processing
Outpatient Medical Services
Travel Fulfillment Services
Healthcare
Rubber Products
Resort/Real Estate Development
Chemicals
Healthcare
Cable TV and Internet
Resort/Real Estate Development
Manufacturer of Orthopedic Devices
Market Research
Petroleum Products
8,400
3,300
3,000
1,005
900
867
490
Military
Education
Education
Education
Government
Government
Government
Public Employers:
2/
Eglin Air Force Base
Okaloosa County Schools
Santa Rosa County School District
Walton County School District
Okaloosa County
Santa Rosa County
Walton County
1/
2/
Abbott Resorts was purchased by ResortQuest International in 2005.
Source: Air Armament Center Economic Impact Analysis.
Source: Team Santa Rosa Economic Development Council, Inc.
Economic Development Council of Okaloosa County, Inc.
Walton County Chamber of Commerce
Enterprise Florida, Inc. (Walton County)
Okaloosa County
B-20
November 30, 2007
Okaloosa County
State of Florida to Okaloosa County from tourism services and product sales and over 35 percent of the
gas tax revenues returned for local area road repairs 2 .
Okaloosa County is host to many festivals and special events throughout the year. The Emerald Coast
Conference Center hosts trade shows, conferences, regional association meetings, local and state meetings
and entertainment events. The facility includes banquet and theatre facilities and has 21,000 square feet
of meeting rooms. Sporting function capabilities include dance, cheerleading, gymnastics, wrestling, and
martial arts competitions.
In the fall season, Autumn Tides, a four-month festival, is held annually in Walton County. The 14 beach
communities combine to host this festival, which includes oceanfront events, outdoor concerts, fresh
seafood feasts and local art shows. Additionally, Santa Rosa County hosts the Beaches to Woodlands
Tour which is a multi-week series of festivals and special events held at various venues along the coast.
2.5.1.2
Recreational and Sports Activities
Due to the temperate climate, visitors enjoy many outdoor activities in the Air Trade Area year-round.
Tennis enthusiasts and golfers visit the area to take advantage of the many tennis facilities and the
numerous private, semi-private and public golf courses.
Other recreational activities center on natural activities and include hiking, biking, camping, and water
sports on the rivers, lakes and waterways in the Air Trade Area. The Blackwater River State Forest is
located on 189,000 acres and includes many hiking, biking and canoe trails. Other parks and waterways
in the Air Trade Area include Blackwater River State Park, which offers camping, swimming, fishing,
nature studies, hiking and horse stables; a portion of the Florida Trail; the Eglin Reservation, 280,000
acres on the Eglin AFB, portions of which are open conditionally to public recreation; a portion of the
Gulf Islands National Seashore Park - a 160-mile national park; Choctawahatchee Bay and the
Intercoastal Waterway. Fishing is popular in the region and offers onshore freshwater fishing as well as
offshore fishing in the Gulf of Mexico.
Other tourism attractions in the Air Trade Area include the Air Force Armament Museum, the only U.S.
museum dedicated to the display of Air Force armament; Florida’s Gulfarium, America’s second oldest
marine park; and The Zoological Park & Botanical Gardens of Northwest Florida.
2.5.1.3
Medical and Health
The Air Trade Area offers a wide range of advanced medical services including the following facilities:
2
x
Fort Walton Beach Medical Center. In 2007, this 247-bed medical center was ranked among
the nation's top 5 percent of hospitals by HealthGrades, an independent health care ratings
company and also earned the Distinguished Hospital Award for Clinical Excellence. Fort Walton
Beach Medical Center is the sixth-largest employer in the Air Trade Area, employing almost
1,000 employees.
x
North Okaloosa Medical Center. This 110-bed facility provides 24-hour emergency care;
specialized programs for women, children, and seniors and provides education about health and
wellness.
x
Santa Rosa Medical Center. Santa Rosa Medical Center is Santa Rosa County’s largest healthcare facility. The 129-bed acute care facility provides services that include 24-hour physician-
Source: Okaloosa Tourist Development Council 2004
B-21
November 30, 2007
Okaloosa County
staffed emergency care, women’s services including the Baby Suite Family Birthing Center, day
surgery, critical care, high-tech radiology, skilled nursing facilities, business health program and
physician referral. The facility employees more than 500 people in the Air Trade Area.
x
Baptist Health Care Gulf Breeze Hospital. As a 60-bed acute care hospital Gulf Breeze
Hospital provides a variety of medical services. Gulf Breeze Hospital's workforce of more than
400 people includes employees at the Baptist Medical Park in Navarre.
x
Sacred Heart Hospital on the Emerald Coast. The 50-bed hospital located east of Destin
offers a wide range of medical and surgical services, including an intensive care unit, general and
orthopedic surgery, cardiology, cancer care, comprehensive radiology and laboratory services,
rehabilitation services, as well as 24-hour emergency care. Approximately 500 employees staff
the hospital.
x
Healthmark Regional Medical Center. The 50-bed, 58,000 square foot facility in DeFuniak
Springs serves Walton County with a full range of medical services and employs more than 200
people in the Air Trade Area.
x
Twin Cities Hospital. Twin Cities Hospital offers 65 inpatient beds and a wide variety of
services including its Wellness Center, critical care units, the Cardiac Rehabilitation Program, 24hour emergency room services, and the Senior Friends Program.
x
White-Wilson Medical Center. A physician-owned, multi-specialty group of professionals
provide comprehensive primary and specialty healthcare services to Okaloosa County and the
Emerald Coast from 4 locations of this major outpatient medical facility. White-Wilson Medical
Center employs more than 50 physicians in 17 different specialties.
x
Baptist Health Care Jay Hospital. This 55-bed hospital serves Jay, Century, Flomaton and
other small communities in the northwest Florida and southern Alabama area. The hospital offers
services such as CT and MRI scans, 24-hour emergency room, mammography, outpatient
surgery, a 24-hour nurse advice line and physician appointment/referral services.
2.5.1.4
Higher Education
Higher education is provided in the Air Trade Area by several colleges and universities, including the
following:
x
University of West Florida has several campuses located in the Air Trade area including
campuses at Crestview, Niceville, Fort Walton Beach, Eglin Air Force Base and Hurlburt Air
Force Base. Total enrollment at UWF including its main campus in Pensacola totals
approximately 10,000 students.
x
Okaloosa - Walton College is one of 28 community colleges in the State of Florida and one of
several Florida community colleges authorized to offer bachelor’s degrees. Approximately
14,600 and 4,800 students were enrolled on a part-time and full-time basis, respectively, for the
2005/2006 school year.
Other universities that have campuses in the Air Trade Area include Troy University, Embry Riddle
Aeronautical University, The University of Oklahoma and The University of Arkansas, all located in
Okaloosa County.
2.5.2
Trade
Trade employment in the Air Trade Area increased at a compounded annual growth rate of 2.8 percent
between 2001 and 2005, compared to flat growth for the nation (0 percent). In 2005, the trade sector
B-22
November 30, 2007
Okaloosa County
accounted for approximately 22,716 employees in the Air Trade Area (18.6 percent of total nonfarm
employment).
One indicator of growth in the trade sector is retail sales, defined as all net sales (gross sales minus
refunds and allowances for returns) for establishments engaged primarily in retail trade. Table II-6
presents total retail sales for the Air Trade Area, Florida, and the nation between 2001 and 2006. As
shown, total retail sales for the Air Trade Area increased from $3.9 billion in 2001 to $7.1 billion in 2006.
This increase represents a compounded annual growth rate of 12.5 percent during this period, which was
higher than that for Florida and the nation (compounded annual growth rates of 8.5 and 4.4 percent,
respectively) and reflects the growth in population.
Table II-6 also presents projections of total retail sales for 2011, the latest year for which projections are
currently available. According to Sales and Marketing Management magazine, total retail sales for the
Air Trade Area are projected to increase at a compounded annual growth rate of 5.4 percent between 2006
and 2011, higher than the growth for both Florida and the nation during this same period.
2.5.3
Government
Government employment in the Air Trade Area increased at a compounded annual growth rate of 4.9
percent between 2001 and 2005, compared to 0.8 percent for the nation. In 2005, this sector accounted
for approximately 12,811 employees in the Air Trade Area (10.5 percent of total nonfarm employment).
The Air Trade Area is an important center for the military and its presence is a significant primary
economic generator. The Air Trade Area supports three military installations, Eglin Air Force Base,
Hurlburt Field, and Duke Field, all on one of the largest military bases in the world; Eglin Air Force Base,
covering 724 square miles of land and 101,165 square miles of water in the Gulf of Mexico. These three
installations are collectively known as the Eglin Complex. The local bases support over 60,000 active
military, civil service, and military dependents.
The Eglin Complex is estimated to contribute $1.5 billion economic impact to the Air Trade Area in FY
2006. This estimate does not include the impact from retired military and spouses. 3
2.5.4
Construction
Construction employment in the Air Trade Area increased at a compounded annual growth rate of 14.9
percent between 2001 and 2005 (the highest-growing sector during this period), compared to 1.7 percent
for the nation. In 2005, the construction sector accounted for approximately 12,545 employees in the Air
Trade Area (approximately 10.3 percent of total nonfarm employment).
Table II-7 presents major new and expanded business development in the Air Trade Area.
Okaloosa County, along with the Eglin Complex, is currently planning some major infrastructure
improvements across Okaloosa County. These improvements include a Mid-Bay Bridge expansion, a
Highway 98 by-pass across three counties, and a new air traffic control tower in Destin.
Other planned development includes:
x
3
Pace / Pea Ridge Commercial Development. A shopping center is planned in the fast growing
Pace / Pea Ridge area and will result in the largest single commercial development in that area.
Air Armament Center; Economic Impact Analysis 2006.
B-23
November 30, 2007
Okaloosa County
Table II-6
Total Retail Sales
(Dollar Amounts in Millions)
Year
Air Trade Area
Florida
United States
$3,925
$3,959
$4,237
$4,612
$5,146
$7,061
$213,757
$211,717
$218,991
$229,956
$252,984
$321,733
$3,658,749
$3,627,218
$3,724,992
$3,906,482
$4,206,053
$4,539,497
$9,169
$408,737
$5,256,887
2001 - 2006
12.5%
8.5%
4.4%
2006 - 2011
5.4%
4.9%
3.0%
Historical
2001
2002
2003
2004
2005
2006
Projected
2011
Compounded
Annual Growth Rate
Sources: Sales & Marketing Management, Survey of Buying Power , 2001-2005
TradeDimensions International, Inc., Demographics USA 2006 - County Edition
B-24
November 30, 2007
Okaloosa County
Table II-7
Recent New & Expanded Businesses 1
Company
Products or Service
Meltpro
H.T. Hackney Company
Boise Cascade
Hope Lumber Company
Baaron Rentals
Project Crystal
Andrews Institute
Expanded Correction Facility
Manufacturing
Distribution & Logistics
Manufacturing
Manufacturing
Manufacturing
Customer Service
Medical
Government
Investment ($000)
$500-$1,000
$5,000-$10,000
$5,000-$10,000
$1,000-$5,000
$500
$2,000
$15,000
$12,500
New Jobs
15
100
100
50
10
400
125
65
Source: Team Santa Rosa, Economic Development Council, Inc.;
Okaloosa County
B-25
November 30, 2007
Okaloosa County
x
Santa Rosa Commons. Mpirical Development of St. Louis is developing 40 acres for
commercial use on U.S. 90.
x
Jubilee Housing Development. Construction of the largest development in Santa Rosa County
is scheduled to begin in 2007 on a 2,700 acre-site. The first phase of development will include
construction of 588 homes and a golf course. The project will ultimately include development of
retail shops and restaurants for residents. Forty percent of the site is wetlands, which will be set
aside for preservation.
x
Okaloosa County Jail. The Department of Corrections has planned a 256-bed direct supervision
facility. Design is underway and construction of the estimated $12.5 million facility is expected
to begin at the end of 2007.
x
Walton County/Destin Beach Restoration. A beach restoration project totaling $27.7 million
was completed in June 2007, which restored beaches in the Okaloosa and Walton Counties.
x
Business Park. The Air Force has entered into a lease with a developer to build a high-tech
business park adjacent to the University of Florida Research and Engineering Education Facility
(REEF). The complex is expected to be 1.1 million square feet on 100 acres very near the airport.
Table II-8 presents residential building permit units and valuations for the Air Trade Area, Florida, and
the United States from 2000 to 2005. As shown, residential building permit units in the Air Trade Area
increased from 4,009 in 2000 to 7,793 in 2005; and building permit valuation increased from
approximately $562 million to approximately $1.8 billion during this same period. These increases
represent compounded annual growth rates of 14.2 percent and 25.6 percent, respectively. As also
shown, these respective growth rates were higher than Florida and the nation during this same period.
2.5.5
Financial
Finance/insurance/real estate employment in the Air Trade Area increased at a compounded annual
growth rate of 9.7 percent between 2001 and 2005, compared to 1.1 percent for the nation. In 2005, this
sector accounted for approximately 8,887 employees in the Air Trade Area (7.3 percent of total nonfarm
employment).
Table II-9 presents total bank deposits for the Air Trade Area, Florida, and the nation for the 12 months
ending June 30th between 1996 and 2006. As shown, total bank deposits in the Air Trade Area increased
from $2.4 billion on June 30, 1996 to $5.7 billion on June 30, 2005. This increase represents a
compounded annual growth rate of 9.0 percent during this period, which was higher than both Florida and
the nation during this same period (compounded annual growth rates of 7.4 and 6.8 percent, respectively).
2.5.6
Manufacturing, Information, Transportation / Utilities
Manufacturing employment in the Air Trade Area increased from 4,996 to 6,225 employees between
2001 and 2005 and accounted for approximately 5.1 percent of total nonfarm employment. This increase
reflects the opposite trend being experienced in the United States for the same time period in which the
number of manufacturing employees decreased by 3.6 percent.
The information sector includes communications, publishing, motion picture and sound recording, and
online services. Information employment in the Air Trade Area increased at a compounded annual
growth rate of 4.8 percent between 2001 and 2005, compared to decrease of 4.2 percent for the nation. In
2005, the information sector accounted for approximately 2,932 employees in the Air Trade Area (2.4
percent of total nonfarm employment).
B-26
November 30, 2007
Okaloosa County
Table II-8
Residential Building Permit Units & Valuation
Air Trade Area
State of Florida
United States
Year
Units
Valuation ($000)
Units
Valuation ($000)
Units
Valuation ($000)
2000
2001
2002
2003
2004
2005
4,009
4,311
4,361
5,432
7,325
7,793
$561,770
$574,780
$725,831
$885,036
$1,387,343
$1,757,358
155,269
167,035
185,431
213,567
255,893
287,250
$17,462,411
$19,465,400
$22,467,802
$28,351,596
$36,959,407
$46,802,753
1,592,267
1,636,676
1,747,678
1,889,214
2,070,077
2,155,316
$185,743,681
$196,242,858
$219,188,681
$249,693,105
$292,413,691
$329,254,469
14.2%
25.6%
13.1%
21.8%
6.2%
12.1%
Compounded
Annual Growth Rate
2000 - 2005
B-27
Source: U.S. Department of Commerce, Bureau of the Census
November 30, 2007
Okaloosa County
Table II-9
Total Bank Deposits
(Dollar Amounts in Thousands)
Total Bank Deposits
Year
1/
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Air Trade Area
State of Florida
United States
$2,426,000
$2,508,000
$2,628,000
$2,775,000
$2,949,000
$3,193,000
$3,366,000
$3,742,000
$4,486,000
$5,678,000
$5,739,000
$178,524,000
$183,620,000
$194,203,000
$200,783,000
$207,852,000
$222,797,000
$242,821,000
$268,174,000
$300,961,000
$342,821,000
$363,415,000
$3,328,303,000
$3,496,763,000
$3,657,849,000
$3,783,554,000
$4,003,744,000
$4,326,207,000
$4,606,092,000
$5,132,110,000
$5,464,782,000
$5,933,763,000
$6,449,864,000
9.0%
7.4%
6.8%
Compounded
Annual Growth Rate
1996 - 2006
1/
Twelve months ending June 30.
Source: Federal Deposit Insurance Corporation (FDIC)
B-28
November 30, 2007
Okaloosa County
Transportation/utilities employment in the Air Trade Area slightly decreased at a compounded annual
growth rate of 0.3 between 2001 and 2005, comparable to the nation, which also decreased at a
compounded annual growth rate of 0.3 percent. In 2005, the transportation/utilities sector accounted for
approximately 2,753 employees in the Air Trade Area (2.3 percent of total nonfarm employment).
2.5.7
Quality of Life
The Air Trade Area has consistently been identified by various respected resources as one of the best
leisure destinations in the nation. According to the Okaloosa Economic Development Council, the
beaches in Okaloosa County have received the following recognition:
x
“Best Beaches for Vacationing” by USA Today, Parent Magazine, and Florida Living Magazine
x
Destin, Florida - “A Top-Ten Vacation Rental Destination for 2004” by Hotel.com
x
“Best Beach in The South & Top Family Destination” by Southern Living Magazine (seven years
in a row)
x
Okaloosa County, Florida was declared “One of the Top-Ten Best Small Places To Live” by
Forbes Magazine for five years and was identified as being in the “Top 100 Least Stressed Areas”
by The Business Xpansion Journal, 2000.
x
Taimerica Management Company recognized this area as one of the Top Ten Fasting Growing
Metros in America in 2000. 4
2.6
Summary
A summary of the socioeconomic trends in the Air Trade Area includes the following trends:
4
x
Population growth in the Air Trade Area between 1990 and 2005 was higher than that
experienced in Florida and nationwide. Population growth in Okaloosa County 1990 and 2005
was lower than experienced in Florida but in the other two counties, populations grew at a rate
almost double that of the State of Florida. Population growth in the Air Trade Area between
2005 and 2015 is expected to exceed that projected for Florida and the nation.
x
Between 2000 and 2005, per capita EBI for the Air Trade Area increased at a compounded annual
growth rate that was greater than that for both Florida and the nation. According to Sales and
Marketing Management magazine, continued strong growth in per capita EBI for the Air Trade
Area is expected between 2005 and 2010.
x
Average annual unemployment rates for the Air Trade Area were below those for Florida and the
nation between 1995 and 2005.
x
With the exception of transportation employment which remained relatively flat, all of the major
industry groups in the Air Trade Area experienced positive growth between 2001 and 2005, with
the highest growth occurring in the construction and financial sectors.
x
The temperate climate and natural resources of the Air Trade Area attract many tourists to the
area, many traveling into the area via the Airport.
x
The Air Trade Area is an important center for the military and the military presence is a
significant economic generator.
Okaloosa Economic Development Council website.
B-29
November 30, 2007
Okaloosa County
x
The economic base of the Air Trade Area is stable and diversified, and is capable of supporting
increased demand for air travel at the Airport during the projection period.
B-30
November 30, 2007
Okaloosa County
III.
Air Traffic
This chapter describes historical and projected aviation activities at the Airport and discusses key factors
affecting these activity levels.
3.1
Regional Perspective
The Airport is part of a wide, multi-airport catchment area that also includes Pensacola Regional
Airport (Pensacola) and Panama City-Bay County International Airport (Panama City). As shown
earlier on Exhibit 2.1, Pensacola is located in Escambia County, Florida, approximately 50 miles
west of the Airport; while Panama City is located in Bay County, Florida, approximately 70 miles
east of the Airport. These three airports are located in the Florida Panhandle, which includes the
westernmost 16 counties in Florida. Each of these airports serves O&D passengers, with little or no
connecting passenger traffic.
Table III-1 presents regional shares of historical enplanements for these airports during calendar
year (CY) 1996 through CY 2006. As shown, regional enplanements increased from 921,551 in CY
1996 to 1.4 million in CY 2006, a compounded annual growth rate of 3.9 percent. The compounded
annual growth rate was 5.0 percent for the Airport, 4.0 percent for Pensacola, and 1.6 percent for
Panama City during this same period. On a weighted average basis, the Airport had a 29.9 percent
share of regional enplanements between CY 1996 and CY 2006, while Pensacola and Panama City
had a 54.9 and 15.1 percent share, respectively. The presence of the low-cost carrier AirTran in the
region, however, has provided a shifting of these shares of enplanements among the airports.
AirTran initiated service at the Airport in October 1996 with low-fare service to Atlanta. With the
resultant diversion of passengers from Pensacola and Panama City, the Airport’s share of regional
enplanements increased from 24.4 percent in CY 1996 to a high of 36.8 percent in CY 2000. In
November 2001, AirTran shifted its service to Pensacola after aggressive marketing efforts by that
airport to increase air service from Pensacola. As a result, the Airport’s share of regional
enplanements decreased from 35.7 percent in CY 2001 to 27.0 percent in CY 2006, while
Pensacola’s share increased from 48.4 percent to 60.0 percent during this same period. Exhibit III-1
illustrates the trends in regional shares of enplanements for the three airports.
This shifting of service by AirTran from the Airport to Pensacola in November 2001 (i.e., early FY
2002) is also reflected in average fares and revenue yield per coupon mile (revenue yields) trends for
these three airports. 1 As shown in Table III-2, average fares at the Airport were significantly below
those for Pensacola and Panama City each year between FY 1998 and FY 2001; however, average
fares at the Airport were higher than those for Pensacola beginning in FY 2002, with the difference
increasing each year through FY 2006. As also shown, revenue yields for the Airport were relatively
stable through the years shown on Table III-2; however, revenue yields decreased significantly at
Pensacola in FY 2002, from approximately $0.1700 between FY 1995 through FY 2002 to $0.1384
in FY 2003, and remained relatively stable at this level through FY 2005. Revenue yields at
Pensacola increased by approximately $0.02 in FY 2006 from the previous year’s levels; however,
they remained below revenue yields for the Airport and Panama City during this same period.
Exhibit III-2 and Exhibit III-3 illustrate the trends in average fares and revenue yields, respectively,
for the three airports.
1
Revenue yield is the average revenue received from each passenger for each mile flown on a particular route.
B-31
November 30, 2007
Okaloosa County
Table III-1
Regional Shares of Enplanements
Calendar Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Okaloosa Regional
Enplanements
Regional Share
225,112
277,547
291,903
366,592
411,593
388,275
342,183
359,219
395,012
404,783
365,045
B-32
1996 - 2006
Weighted Average
24.4%
27.1%
28.3%
33.8%
36.8%
35.7%
28.9%
29.1%
29.7%
28.6%
27.0%
Pensacola Regional
Enplanements
Regional Share
546,132
574,604
570,614
545,887
526,438
526,628
668,832
690,095
741,311
821,477
812,121
59.3%
56.1%
55.3%
50.4%
47.1%
48.4%
56.6%
55.8%
55.7%
58.0%
60.0%
Panama City-Bay County International
Enplanements
Regional Share
150,307
172,246
169,494
170,863
179,570
173,385
171,456
187,066
195,688
189,938
176,640
16.3%
16.8%
16.4%
15.8%
16.1%
15.9%
14.5%
15.1%
14.7%
13.4%
13.0%
Regional Total
921,551
1,024,397
1,032,011
1,083,342
1,117,601
1,088,288
1,182,471
1,236,380
1,332,011
1,416,198
1,353,806
29.9%
54.9%
15.1%
100.0%
5.0%
4.0%
1.6%
3.9%
Compounded
Annual Growth Rate
1996 - 2006
Sources: Okaloosa County Airport Administration
Pensacola Regional Airport
Panama City-Bay County International Airport
November 30, 2007
Okaloosa County
70%
60%
50%
40%
30%
20%
10%
B-33
0%
CY 96
97
98
99
Okaloosa
00
01
Pensacola
02
03
04
05
06
Panama City
Sources: Okaloosa County Airport Administration; Pensacola Regional Airport; Panama City - Bay County International Airport
Exhibit III-1
Regional Shares of Enplanements
November 30, 2007
Okaloosa County
Table III-2
Fare and Yield Market Averages
Fiscal Year
Okaloosa
Regional
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
$175
$157
$152
$146
$146
$151
$150
$162
$167
$170
$208
Average Fares
Pensacola
Regional
$158
$154
$161
$164
$172
$172
$134
$134
$138
$144
$166
Panama City-Bay
County International
Okaloosa
Regional
$178
$171
$163
$174
$174
$173
$159
$165
$178
$179
$210
$0.1785
$0.1688
$0.1610
$0.1651
$0.1654
$0.1639
$0.1500
$0.1612
$0.1650
$0.1626
$0.1997
Revenue Yield per Coupon Mile
Pensacola
Panama City-Bay
Regional
County International
$0.1702
$0.1577
$0.1663
$0.1666
$0.1746
$0.1690
$0.1384
$0.1367
$0.1346
$0.1397
$0.1616
$0.1845
$0.1744
$0.1674
$0.1791
$0.1685
$0.1671
$0.1537
$0.1601
$0.1715
$0.1732
$0.2046
B-34
Source: O&D Survey of Airline Passenger Traffic, U.S. DOT
November 30, 2007
Okaloosa County
$220
$210
$200
$190
$180
$170
$160
$150
$140
B-35
$130
$120
FY 96
97
98
99
Okaloosa
00
01
Pensacola
02
03
04
05
06
Panama City
Exhibit III-2
Average Fares Comparison
November 30, 2007
Okaloosa County
$0.2100
$0.2000
$0.1900
$0.1800
$0.1700
$0.1600
$0.1500
$0.1400
B-36
$0.1300
$0.1200
FY 96
97
98
99
Okaloosa
00
01
Pensacola
02
03
04
05
06
Panama City
Exhibit III-3
Revenue Yields Comparison
November 30, 2007
Okaloosa County
Table III-3 presents a comparison of daily nonstop service at these three facilities. As shown, the
Airport has a total of 23 daily nonstop flights to six markets; Pensacola has a total of 44 daily
nonstop flights to nine markets, and Panama City has a total of 12 daily nonstop flights to three
markets. As also shown, the three airports primarily serve as spokes to hub airport systems, although
there is intrastate service provided to certain destination markets such as Fort Lauderdale, Orlando,
and Tampa.
On September 15, 2006, the FAA delivered its Final Agency Decision stating a recommendation to move
the current location for Panama City approximately 12 miles northwest to a 4,000-acre west Bay County
site. It is currently estimated that the new airport will open in late 2009/early 2010.
3.2
Airlines Serving the Airport
As of September 2007, the Airport had scheduled passenger service provided by seven U.S. carriers:
American Eagle, Atlantic Southeast (d/b/a the Delta Connection), Chautauqua and ExpressJet (both
d/b/a Continental Express), Delta, Gulfstream (d/b/a the Continental Connection), and Northwest.
As discussed in more detail below, nonstop service from the Airport is provided primarily to these
airlines’ respective hubs (Atlanta, Dallas, Houston, and Memphis), with Gulfstream also providing
nonstop service to Tampa from the Airport. Table III-4 lists the airlines serving the Airport as of
September 2007.
On September 14, 2005, both Delta and Northwest voluntarily filed for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code. Delta and Northwest filed their respective Plan of
Reorganization and related Disclosure Statement with the U.S. Bankruptcy Court on December 19,
2006 and February 16, 2007, respectively. Delta emerged from Chapter 11 on April 30, 2007, and
Northwest emerged from Chapter 11 on May 31, 2007.
Table III-5 presents the historical air carrier base at the Airport between FY 1997 and FY 2007
(through August 2007). Specific points concerning the air carrier base at the Airport are discussed
below:
x
Atlantic Southeast has provided service at the Airport during each year shown on Table III-2.
Operating as the Delta Connection, this airline provided nonstop service to Delta’s Atlanta
hub during these years, as well as nonstop service to Delta’s Dallas hub between late FY
2002 and early FY 2005. Delta initiated mainline service at the Airport in FY 2002 with
three daily nonstop flights to Atlanta and continues to operate at the Airport. Delta’s
subsidiary Comair provided nonstop service from the Airport to Delta’s Cincinnati hub
between FY 2002 and FY 2005 and a portion of FY 2007; however, not on a daily basis.
Operating as the Delta Connection, Freedom provided service at the Airport between April
2007 and August 2007 with daily nonstop service to Atlanta.
x
Northwest has also provided service at the Airport during each year shown on Table III-2,
with three to four daily nonstop flights to its Memphis hub.
x
Chautauqua and ExpressJet operate as Continental Express at the Airport, while Gulfstream
operates as the Continental Connection. ExpressJet has provided service at the Airport since
FY 2003 with one daily nonstop flight to Continental’s Houston hub. After US Airways
Express discontinued service at the Airport in mid-FY 2005, having previously provided
nonstop service to Orlando and Tampa, Gulfstream initiated service at the Airport soon
thereafter with three daily nonstop flights to Tampa. Chautauqua initiated service at the
B-37
November 30, 2007
Okaloosa County
Table III-3
Nonstop Market Comparison
Okaloosa Regional
Market
Daily Flights
Atlanta
4
3
1
6
2
1
3
3
-
Charlotte
Chicago
Dallas
Fort Lauderdale
Houston
B-38
Memphis
Orlando
Tampa
TOTAL
Airlines
Atlantic Southeast (DL)
Delta Air Lines
American Eagle
American Eagle
Chautauqua (CO)
ExpressJet (CO)
Northwest
Gulfstream (CO)
-
23
Pensacola Regional
Daily Flights
5
2
6
3
1
2
6
2
5
3
3
2
4
44
Airlines
AirTran
Delta Air Lines
Mesa (US)
PSA (US)
American Eagle
American Eagle
Freedom (DL)
Chautauqua (CO)
Pinnacle (NW)
Freedom (DL)
Freedom (DL)
Gulfstream (CO)
Panama City-Bay County International
Daily Flights
Airlines
7
-
-
3
2
-
Pinnacle (NW)
Freedom (DL)
-
12
Source: Official Airline Guide, Inc., September 19, 2007.
November 30, 2007
Okaloosa County
Table III-4
Airlines Serving the Airport 1/
Airlines (7)
Doing Business As:
American Eagle
Atlantic Southeast
Chautauqua
Delta Air Lines 2/
Delta Connection
Continental Express
ExpressJet
Gulfstream
Northwest 3/
1/
2/
2/
Continental Express
Continental Connection
As of September 2007.
Delta filed for reorganization under Chapter 11 of the Bankruptcy Code
on September 14, 2005. It emerged from bankruptcy protection on
April 30, 2007.
Northwest filed for reorganization under Chapter 11 of the Bankruptcy
Code on September 14, 2005. It emerged from bankruptcy protection
on May 31, 2007.
Source: Okaloosa County Airport Administration
B-39
November 30, 2007
Okaloosa County
Table III-5
Air Carrier Base
Air Carrier
Atlantic Southeast (d/b/a Delta Connection)
Northwest
Delta
ExpressJet (d/b/a Continental Express)
American Eagle
Gulfstream (d/b/a Continental Connection)
Chautauqua (d/b/a Continental Express)
FY 1997
FY 1998
FY 1999
FY 2000
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007 1/
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
Air Carriers No Longer Serving the Airport
Freedom (d/b/a Delta Connection)
2
Comair (d/b/a Delta Connection)
US Airways Express
Mesaba (d/b/a Northwest Airlink)
SkyWest (d/b/a Delta Connection)
AirTran
B-40
1/
2/
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
z
As of September 2007.
Provided one nonstop flight to Cincinnati on Saturdays between June 9, 2007 and August 18, 2007.
Source: Official Airline Guide, Inc.
November 30, 2007
Okaloosa County
Airport in mid-FY 2007 with one daily nonstop flight to Continental’s Houston hub, reducing
ExpressJet’s nonstop service to Houston from three daily flights to two daily flights.
Chautauqua currently provides two daily nonstop flights to Houston.
x
With Atlantic Southeast discontinuing nonstop service to Dallas from the Airport in early FY
2005, American Eagle initiated nonstop service to Dallas from the Airport later that fiscal
year with four daily flights (currently with six daily nonstop flights to this market). On
September 5, 2007, American Eagle initiated nonstop service to Chicago with one daily
flight.
x
AirTran initiated low-fare service at the Airport in the first month of FY 1997 (then ValuJet
until October 1997), providing nonstop service to Atlanta with three daily flights. As
discussed in the next section, this low-fare service stimulated passenger traffic at the Airport
between FY 1997 and FY 2001, with the incumbent Delta carriers providing competitive
low-fare service during this same period to maintain their share of the Atlanta market. In
November 2001, AirTran discontinued its service at the Airport and shifted its low-fare
Atlanta service to Pensacola Regional Airport that same month. This shifting of service was
due to incentives provided at this facility created through an airline travel bank. 2 The
Pensacola Air Travel Bank with AirTran was set up with $2.1 million and 319 local
businesses.
x
As discussed above, US Airways Express discontinued service at the Airport in mid-FY
2005. Up to this point, this airline provided daily nonstop flights to Tampa and Orlando, as
well as daily direct flights to these same markets through Panama City.
3.3
Historical Passenger Activity
This section presents historical trends in enplaned passengers at the Airport and the major factors
influencing these trends, as well as historical market shares of enplanements by airline.
3.3.1
Enplaned Passengers
Table III-6 presents historical data for enplaned passengers at the Airport and the nation. As shown,
passenger activity at the Airport increased from 209,149 enplanements in FY 1996 to 370,558 in FY
2006. This increase represented a compounded annual growth rate of 5.9 percent during this period,
compared to 1.8 percent growth nationwide. As also shown, the Airport’s share of U.S. enplanements
increased from 0.038 percent in FY 1996 to 0.055 percent in FY 2006, reflective of the higher
compounded annual growth rate experienced at the Airport than that for the nation during this period.
Specific details concerning enplaned passengers at the Airport between FY 1996 and FY 2007 (through
August 2007) are discussed below:
x
2
FY 1996 - FY 2001. The Airport experienced significant growth in enplanements between
FY 1996 and FY 2001, increasing from 209,149 enplanements in FY 1996 to 410,324
enplanements in FY 2001, the highest enplanment level at the Airport in any fiscal year to
date. This increase represented a compounded annual growth rate of 14.4 percent during this
An airline travel bank is not a typical subsidy or revenue guarantee. It is the financial commitment of a
business community to use a specific air service initiative for a specified period. At the core of an airline travel
bank is a banking arrangement that contractually locks in the financial commitment of individual businesses in
the community to support the partner airline.
B-41
November 30, 2007
Okaloosa County
Table III-6
Historical Enplanements
Fiscal Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Airport
Enplanements
Airport
Growth
209,149
269,038
282,020
352,340
403,095
410,324
329,481
355,367
388,958
407,053
370,558
28.6%
4.8%
24.9%
14.4%
1.8%
(19.7%)
7.9%
9.5%
4.7%
(9.0%)
342,665
364,494
6.4%
U.S. Domestic
Enplanements
557,000,000
577,800,000
590,400,000
610,900,000
641,200,000
626,800,000
574,600,000
587,800,000
628,500,000
668,000,000
1/
667,700,000
U.S.
Growth
Market
Share
3.7%
2.2%
3.5%
5.0%
(2.2%)
(8.3%)
2.3%
6.9%
6.3%
(0.0%)
0.038%
0.047%
0.048%
0.058%
0.063%
0.065%
0.057%
0.060%
0.062%
0.061%
0.055%
October - August
FY 2006
FY 2007
N/A
N/A
Compounded
Annual Growth Rate
1/
1996 - 2001
2001 - 2002
2002 - 2006
14.4%
(19.7%)
3.0%
2.4%
(8.3%)
3.8%
1996 - 2006
5.9%
1.8%
Estimated by the FAA.
Sources: Okaloosa County Airport Administration (Airport activity); FAA (U.S. activity)
B-42
November 30, 2007
Okaloosa County
period, compared to 2.4 percent nationwide. The initiation of service at the Airport by
AirTran in FY 1997 and the competitive response by Delta carriers to maintain their market
share during this period was the primary factor contributing to this significant growth in
passenger activity at the Airport. Whereas AirTran’s share of Airport enplanements
increased from 2.9 percent in FY 1996 to 23.7 percent in FY 2001, Delta carriers’ share of
Airport enplanements was relatively stable during this period, ranging from a high of 50.3
percent in FY 1997 to a low of 45.1 percent in FY 2000. Delta carriers’ share of Airport
enplanements was 45.4 percent in FY 2001.
3
x
FY 2002. Passenger activity at the Airport decreased from 410,324 enplanements in FY 2001 to
329,481 in FY 2002, a decrease of 19.7 percent during this period compared to an 8.3 percent
decrease nationwide. The significant decrease in activity nationwide was primarily due to the
terrorist attacks of September 11, 2001 (hereinafter referred to as September 11) and the
nationwide economic slowdown. Although these events were contributing factors in the decrease
in Airport enplanements in FY 2002 (enplanements for Northwest and US Airways decreased
24.8 percent and 30.1 percent, respectively, in FY 2002 from FY 2001 levels, resulting in a
combined decrease of 32,204 enplanements for these two carriers), the discontinuation of service
by AirTran from the Airport in early FY 2002 was also a factor affecting passenger activity levels
at the Airport during this fiscal year. However, enplanements for Delta carriers increased from
186,165 in FY 2001 to 228,420 in FY 2002, as Delta initiated mainline service at the Airport in
the first month of FY 2002 utilizing 142-seat MD-80 aircraft to complement its Atlantic
Southeast service to Atlanta.
x
FY 2003 - FY 2005. Passenger activity at the Airport increased from 329,481 enplanements
in FY 2002 to 407,053 in FY 2005, nearly matching the Airport’s highest fiscal year
enplanement level reached in FY 2001. This increase represented a compounded annual
growth rate of 7.3 percent, compared to 5.1 percent nationwide. The majority of this growth
was due to increased service at the Airport by Delta carriers during this period, as passenger
activity for these carriers increased from 228,420 enplanements in FY 2002 to 278,761 in FY
2005 (accounting for approximately 65 percent of the total increase in enplanements at the
Airport during this period). During this period, Delta expanded its mainline service to
Atlanta from the Airport and added Delta Connection service to Dallas, the top-ranked
origin-destination (O&D) market for the Airport in FY 2006. 3 Based on Official Airline
Guide data, scheduled departing aircraft seats for Delta carriers increased at a compounded
annual growth rate of 6.5 percent between FY 2002 and FY 2005. In addition, ExpressJet
initiated service at the Airport in late FY 2003 providing service to Houston, the seventhranked O&D market for the Airport in FY 2006.
x
FY 2006. Passenger activity at the Airport decreased from 407,053 enplanements in FY
2005 to 370,558 enplanements in FY 2006, a 9.0 percent decrease during this period. As
discussed earlier, both Delta and Northwest filed for bankruptcy protection under Chapter 11
in late FY 2005. Although traffic levels for Northwest remained relatively stable at the
Airport between FY 2005 and FY 2006 (79,370 and 78,783 enplanements, respectively),
activity for Delta carriers decreased from 278,761 enplanements in FY 2005 to 185,752 in
FY 2006 (a 33.4 percent decrease during this period). This decrease was primarily due to
Delta’s decision to cut back service systemwide to increase load factors and enhance revenue
Although Atlantic Southeast discontinued nonstop service to Dallas in early FY 2005, American Eagle initiated
nonstop service to this top O&D market from the Airport later that fiscal year.
B-43
November 30, 2007
Okaloosa County
performance as a strategy to emerge from Chapter 11. This systemwide cutback by Delta in
FY 2006 was evident at the Airport, as scheduled departing aircraft seats for Delta carriers at
the Airport decreased from 398,876 seats in FY 2005 to 234,256 in FY 2006.4 This 41.3
percent decrease in departing seats was similar to the 33.4 percent decrease in enplanements
for this carrier in FY 2006 from FY 2005 levels. Although American Eagle and Continental
Express increased by a combined 60,272 enplanements at the Airport in FY 2006, the
significant decrease in service by Delta carriers offset this increase for an overall 9.0 percent
decrease in passenger activity in FY 2006.
x
3.3.2
FY 2007 Year-to-Date. Based on data through August 2007, enplanements at the Airport
for 11 months of FY 2007 were 6.4 percent higher than enplanement levels for a similar
period in FY 2006 (364,494 and 342,665 enplaned passengers, respectively). Although Delta
enplanements were nearly 40 percent below its FY 2006 levels during 11 months of FY
2007, enplanements for its subsidiary Atlantic Southeast was nearly 35 percent above its FY
2006 levels during 11 months of FY 2007. The initiation of service by Chautauqua and
Freedom at the Airport in April 2007 provided approximately 50 percent of the growth
experienced during this period.
Enplaned Passengers by Airline
Table III-7 presents the historical share of enplanements by airline at the Airport between FY 2002 and
FY 2006. As shown, Delta carriers maintained an approximate 70 percent share of enplanements at the
Airport between FY 2002 and FY 2005. As also shown, Northwest maintained an approximate 26
percent share of Airport enplanements in FY 2002 and FY 2003; however, this share decreased to 20
percent in FY 2004 and FY 2005 due to full fiscal years of activity by Continental Express during this
period. With the cutback in service by Delta and increased passenger activity by American Eagle and
Continental Express in FY 2006, a shifting of shares of enplanements occurred during this period.
Although Northwest maintained its approximate 20 percent share of Airport enplanements in FY 2006,
approximately 20 percent of the Delta carriers’ share was redistributed to American Eagle and
Continental Express. Delta carriers, however, maintained the highest share of enplanements at the
Airport with approximately 50 percent of the total in FY 2006.
3.4
Historical Air Service
An important airport characteristic is the distribution of its O&D markets, which is a function of air
travel demands and available services and facilities. This is particularly true for the Airport, as it
services primarily O&D passengers. Table III-8 presents historical data on the Airport’s primary
(i.e., top 20) O&D markets for FY 2001 and FY 2006. As shown, the Airport primarily served
medium-haul markets in the periods depicted, with an average stage length (i.e., passenger trip
distance) of 800 miles in FY 2001 and 922 miles in FY 2006. The Airport’s average stage lengths
during these periods reflect the Airport’s geographical location and strong local demand for major
southern (i.e., Dallas and Atlanta) and eastern (i.e., Washington and New York) markets. Changes in
the O&D rankings and passenger levels are discussed below:
x
4
With the exception of Dallas, the rankings for the top four O&D markets in FY 2001
remained relatively unchanged in FY 2006. However, the number of O&D passengers for
This systemwide cutback by Delta in FY 2006 was also evident at Pensacola and Panama City, as scheduled
departing aircraft seats for Delta carriers at these airports decreased 23.9 percent and 6.6 percent, respectively,
in FY 2006 from FY 2005 levels.
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November 30, 2007
Okaloosa County
Table III-7
Historical Enplaned Passengers by Airline
FY 2002
Airline
Delta Carriers (DL)
Northwest 1/ (NW)
American Eagle (AE)
Continental Express (CE)
2/
AirTran (AT)
3/
US Airways Express (US)
AIRPORT TOTAL
1/
2/
3/
4/
4/
Enplaned
Passengers
228,420
85,524
6,395
9,142
329,481
FY 2003
Share
Enplaned
Passengers
69.3%
26.0%
1.9%
2.8%
245,479
93,132
5,875
10,881
100.0%
355,367
FY 2004
Share
Enplaned
Passengers
69.1%
26.2%
1.7%
3.1%
275,662
80,909
20,796
11,591
100.0%
388,958
FY 2005
Share
Enplaned
Passengers
70.9%
20.8%
5.3%
3.0%
278,761
79,370
13,719
32,032
3,171
100.0%
407,053
FY 2006
Share
Enplaned
Passengers
Share
68.5%
19.5%
3.4%
7.9%
0.8%
185,752
78,783
56,202
49,821
-
50.1%
21.3%
15.2%
13.4%
-
100.0%
370,558
100.0%
B-45
FY 2002 Enplanement Market Shares
US Airways
Express, 2.8%
Northwest,
26.0%
FY 2006 Enplanement Market Shares
CO Express,
13.4%
AirTran, 1.9%
American Eagle,
15.2%
Delta, 50.1%
Delta, 69.3%
Northwest,
21.3%
November 30, 2007
Okaloosa County
Table III-8
Primary O&D Passenger Markets
FY 2001
FY 2006
Trip
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Market
Atlanta
Washington
New York
Memphis
Chicago
Dallas
Boston
Philadelphia
Minneapolis
Dayton
Orlando
St Louis
Detroit
Los Angeles
Pittsburgh
Norfolk
Fort Lauderdale
Kansas City
Raleigh
Denver
Length
Total O&D
1/
SH
MH
MH
SH
MH
MH
MH
MH
MH
MH
SH
MH
MH
LH
MH
MH
SH
MH
SH
MH
Passengers
92,230
45,770
40,400
33,310
29,140
29,080
24,870
20,590
18,920
16,350
14,090
13,860
13,050
12,300
11,990
11,230
10,050
9,990
9,890
9,130
Trip
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Average
Market
Dallas
Atlanta
Washington
New York
Memphis
St Louis
Houston
Las Vegas
Tampa
Chicago
Baltimore
Denver
Minneapolis
Los Angeles
Boston
Kansas City
San Antonio
Philadelphia
Detroit
Dayton
Length
MH
SH
MH
MH
SH
MH
SH
MH
SH
MH
MH
MH
MH
LH
MH
MH
MH
MH
MH
MH
800
Airport 2/
922
United States
811
United States
865
2/
Passengers
42,190
35,100
33,430
27,380
25,190
19,030
18,590
18,280
16,840
16,120
14,270
14,250
13,540
12,930
12,570
12,170
10,350
9,850
9,530
9,450
Average
Airport 2/
1/
Total O&D
1/
(SH) Short Haul = 0 to 600 miles
(MH) Medium Haul = 601 to 1,800 miles
(LH) Long Haul = over 1,800 miles
Average calculated for all of the Airport's O&D markets.
B-46
November 30, 2007
Okaloosa County
each of these markets (Atlanta, Washington, New York, and Memphis) decreased in FY 2006
from FY 2001 levels. The Atlanta market experienced the most significant decrease, from
92,230 passengers in FY 2001 to 35,100 passengers in FY 2006. This decrease was
primarily due to the discontinuation of service by AirTran at the Airport in FY 2002, the
resultant higher fares (on average, approximately $50 higher per ticket in FY 2006 compared
to FY 2001), and the reduction of service by Delta carriers at the Airport in FY 2006. The
decreases in O&D passengers for the other three markets were primarily due to higher fares.
x
O&D traffic to the Dallas market from the Airport increased from 29,080 passengers in FY 2001
to 42,190 in FY 2006, resulting in this market becoming the top-ranked O&D market at the
Airport in FY 2006. This increase was primarily due to American Eagle initiating daily nonstop
service to Dallas from the Airport in late FY 2005.
x
Connecting service from the Airport to Orlando, Pittsburgh, Fort Lauderdale, and Raleigh
was provided by AirTran through Atlanta in FY 2001. These markets dropped out of the top
20 O&D markets in FY 2006 primarily due to higher fares (on average, approximately $130,
$50, $45, and $75 higher per ticket, respectively, in FY 2006 compared to FY 2001 levels).
As of September 2007, daily nonstop service was provided to six markets with a total of 23 flights:
Delta’s Atlanta hub with seven flights, American’s Dallas hub with six flights, Continental’s
Houston hub with three flights, and Northwest’s Memphis hub with three flights. On September 5,
2007, American Eagle initiated nonstop service to Chicago with one daily flight. Table III-9
presents the Airport’s nonstop markets as of September 2007, including the markets served, daily
flights, and airlines providing nonstop flights. This current commercial traffic level is well below the
maximum 84 civilian aircraft operations (takeoffs and landings) permitted under the Joint-Use
Agreement between the U.S. Air Force and the City for utilizing the airfield at the Airport.
3.5
Historical Commercial Aircraft Operations and Landed Weight
This section presents historical commercial aircraft operations and landed weight by majors/nationals and
regionals/commuters. Majors/nationals are passenger air carriers having the majority of its scheduled
and/or nonscheduled service using aircraft with more than 90 seats. Regionals/commuters predominantly
utilize aircraft with 90 seats or less.
3.5.1
Commercial Aircraft Operations
Table III-10 presents historical commercial operations at the Airport between FY 2001 and FY
2006. As shown, total commercial activity at the Airport ranged from a high of 17,352 operations in
FY 2004 to a low of 14,216 operations in FY 2002. Specific points concerning trends in operational
activity by major user category at the Airport are discussed below:
x
Majors/Nationals. With AirTran discontinuing service at the Airport in early FY 2002,
major/national activity decreased 9.6 percent in FY 2002 from FY 2001 levels, from 5,266
operations to 4,758 operations during this period. This decrease was lessened by Delta
initiating mainline service at the Airport in the first month of FY 2002. Delta continued to
steadily increase its mainline presence at the Airport, as major/national activity increased to
5,538 operations by FY 2005. At its peak in FY 2005, Delta provided five to six daily
mainline flights to its Atlanta hub from the Airport. Delta’s decision to cut back service
systemwide as a strategy to emerge from Chapter 11 resulted in major/national operations
and scheduled seats to decrease 28.4 percent and 48.8 percent, respectively, in FY 2006 from
FY 2005 levels. Mainline activity by Northwest at the Airport was relatively stable between
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November 30, 2007
Okaloosa County
Table III-9
Nonstop Markets
Daily
Nonstop Flights
Number
of Airlines
Atlanta
Chicago
Dallas
Houston
Memphis
Tampa
7
1
6
3
3
3
2
1
1
2
1
1
TOTAL
23
Market
Airline(s)
Atlantic Southeast (4), Delta (3)
American Eagle
American Eagle
Chautauqua (2), ExpressJet (1)
Northwest
Gulfstream
Source: Official Airline Guide, Inc., September 19, 2007
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November 30, 2007
Okaloosa County
Table III-10
Historical Commercial Aircraft Operations
Fiscal Year
2001
2002
2003
2004
2005
2006
Majors/
Nationals
5,266
4,758
4,902
4,872
5,538
3,964
Regionals/
Commuters
11,806
9,458
10,774
12,480
9,806
10,726
Airport Total
17,072
14,216
15,676
17,352
15,344
14,690
Compounded
Annual Growth Rate
2001 - 2006
(5.5%)
(1.9%)
(3.0%)
B-49
November 30, 2007
Okaloosa County
FY 2001 and FY 2006, with approximately three to four daily flights to its Memphis hub
during this period.
x
3.5.2
Regionals/Commuters. Regional/commuter activity at the Airport decreased from 11,806
operations in FY 2001 to 9,458 operations in FY 2002, primarily due to the shifting of certain
Atlantic Southeast operations to Delta mainline service in FY 2002. With the continued
expansion of service by Delta carriers at the Airport, as well as the initiation of service by
ExpressJet at the Airport in mid-FY 2004, regional/commuter activity increased from 9,458
operations in FY 2002 to 12,480 operations in FY 2004. With the discontinuation of service
by US Airways Express at the Airport in mid-FY 2005, regional/commuter activity decreased
21.4 percent in FY 2005 from FY 2004 levels (from 12,480 operations in FY 2004 to 9,806
operations in FY 2005). The initiation of service by Gulfstream at the Airport in mid-FY
2006 offset the 29.4 percent decrease in scheduled seats by Atlantic Southeast in FY 2006,
resulting in activity by this major user group to increase from 9,806 operations in FY 2005 to
10,726 in FY 2006, an increase of 9.4 percent during this period.
Landed Weight by Commercial Airlines
Table III-11 presents the historical share of landed weight by commercial airlines at the Airport
between FY 2002 and FY 2006. As shown, Delta carriers and Northwest had a combined 85 to 90
percent share of Airport landed weight between FY 2002 and FY 2005. Similar to enplanements,
approximately 20 percent of the Delta carriers’ share of Airport landed weight was redistributed to
American Eagle and Continental Express in FY 2006 due to cutbacks in Delta service systemwide
during this period. Delta carriers, however, maintained the highest share of landed weight at the
Airport with approximately 50 percent of the total in FY 2006.
3.6
Factors Affecting Aviation Demand
The projections included herein were prepared on the basis of measurable factors (e.g.,
socioeconomic variables) that determine aviation activity at the Airport. This section discusses
qualitative factors that could influence future aviation activity at the Airport.
3.6.1
National Economy
Air travel demand is directly correlated to income. As consumer income and business profits
increase, so does air travel. Economic indicators in the nation prior to September 11 were beginning
to show signs of a recession. In November 2001, the National Bureau of Economic Research
officially announced that in March 2001 the U.S. economy had entered its 10th recession since the
end of World War II. The loss of household wealth dampened consumer confidence and
significantly reduced consumer spending. According to the Bush Administration’s Council of
Economic Advisers (Council), business investment slowed sharply in late 2000 and remained soft for
more than two years. Also according to the Council, the U.S. economy lost over 900,000 jobs from
December 2000 to September 2001, and then lost almost another 900,000 jobs in the three months
following September 11. 5 The effects of September 11 accelerated the downturn in consumer
spending on consumer goods and services, including spending on air travel.
5
Economic Report of the President, February 2005.
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November 30, 2007
Okaloosa County
Table III-11
Historical Landed Weight by Airline
(Weight in 1,000 Pound Units)
FY 2002
Airline
Landed Weight
Delta Carriers
1/
Northwest
262,378
119,800
American Eagle
Continental Express
2/
AirTran
US Airways Express 3/
AIRPORT TOTAL
1/
2/
3/
4/
Landed Weight
265,566
135,645
11,232
34,262
61.4%
28.0%
2.6%
8.0%
427,673
100.0%
-
4/
FY 2003
Share
FY 2004
Share
Landed Weight
326,293
109,046
35,291
59.6%
30.4%
2.0%
7.9%
445,536
100.0%
9,034
-
FY 2005
Share
Landed Weight
351,465
108,984
12,015
45,883
34,735
65.3%
21.8%
6.0%
6.9%
500,008
100.0%
29,934
-
FY 2006
Share
Landed Weight
215,532
107,713
60,250
64,497
8,340
66.7%
20.7%
2.3%
8.7%
1.6%
526,686
100.0%
447,992
-
-
Share
48.1%
24.0%
13.4%
14.4%
100.0%
B-51
FY 2002 Landed Weight Market Shares
US Airways
Express, 8.0%
FY 2006 Landed Weight Market Shares
CO Express, 14.4%
AirTran, 2.6%
American Eagle,
13.4%
Northwest, 28.0%
Delta, 48.1%
Delta, 61.4%
Northwest, 24.0%
November 30, 2007
Okaloosa County
According to the Council, economic conditions improved substantially in 2003 due to faster growth
in household consumption, significant gains in residential investment, and strong growth in
investment in equipment and software by businesses. Also according to the Council, the recovery of
the national economy became a full-fledged expansion in 2004, with strong output growth and steady
improvement in the labor market. This expansion of the U.S. economy continued in 2005 and 2006,
with the economy increasing 3.1 percent and 3.4 percent, respectively, from the previous year, and
payroll employment increased by 2.0 million employees in 2005 and 2.2 million employees in
2006. 6 , 7 According to the Council, economic expansion is expected to continue, with economic
growth projected to continue at approximately 3.0 percent in 2007 and thereafter, while the
unemployment rate is projected to remain stable and below 5.0 percent. 8 Blue Chip Economic
Indicators, a consensus forecast of 50 U.S. economists, also predicts GDP growth to remain near this
3.0 percent level (2.8 percent for the second half of 2007 and 2.9 percent for 2008), confirming the
Council’s forecast as well as those by the Federal Reserve Board for expansion to continue at a
moderate pace. The expected growth in the economy is a factor included in the assumptions
underlying the projections included herein.
3.6.2
State of the Airline Industry
The U.S. aviation industry has been significantly affected by a number of events that occurred earlier
this decade (e.g., September 11, the economic slowdown, the outbreak of SARS in Asia and Canada,
and the Middle East conflicts). These events contributed to substantial financial losses for the
aviation industry between 2001 and 2005 ($35 billion in cumulative net losses during this period,
excluding extraordinary restructuring charges and gains).
Since the events of September 11 and the nationwide economic slowdown, numerous U.S. passenger
airlines filed for bankruptcy court protection under Chapter 11, including (in chronological order) US
Airways (in 2002 and 2004), United, Hawaiian, Midway, ATA, Aloha, Delta, Northwest, Mesaba,
and Independence Air. Except for Midway and Independence Air, each of these airlines has since
emerged from Chapter 11, most recently Delta on April 30, 2007 and Northwest on May 31, 2007.
Midway and Independence Air ceased operations in 2003 and 2006, respectively.
The Air Transport Association estimates that the aviation industry will report earnings ranging from
$2 billion to $3 billion in 2006 and projects $4 billion in earnings for 2007. The airlines have
responded to the changing nature of the industry by furloughing employees, negotiating significant
wage reductions, deferring aircraft deliveries, streamlining operations, and improving productivity.
While conditions have improved and the overall financial outlook is guardedly optimistic, massive
debt levels, large unfunded pension obligations, and age of aircraft fleets leave the industry
vulnerable to fuel spikes, recession, or other factors beyond the airlines’ control.
The way airlines do business has dramatically changed over the last five years. Faced with the
growth of low-cost airlines and evolving business technology, U.S. legacy airlines have been forced
to change business practices. Carriers that once structured their services around the business traveler
during the economic boom in the 1990s found that more and more businesses were either switching
to low-cost carriers or significantly reducing or eliminating business travel. U.S. legacy carriers
6
7
8
Ibid.
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November 30, 2007
Okaloosa County
were therefore forced to reduce, eliminate, or switch service to smaller regional jets on unprofitable
routes, reduce work force and implement pay cuts, and reduce fares in order to compete with lowcost carriers.
A major tangible change in the airline industry has been the significantly increased use of smaller,
regional jets. According to Official Airline Guide data, scheduled flights on regional jets nationwide
increased from an average of 85,300 monthly departures in 2000 to 271,100 in 2006, a compounded
annual growth rate of 21.3 percent during this period. Scheduled regional jet traffic nationwide
accounted for approximately 33 percent of scheduled domestic flights in 2006, compared to
approximately 10 percent in 2000.
Most industries have one or more of three inherent structural weaknesses: labor intensive, capital
intensive, and/or vulnerability to cost and supply of a key commodity (e.g., aviation fuel). Airlines
have all three weaknesses. As indicated above, four of the six U.S. legacy carriers have undergone
reorganization under Chapter 11 since the events of September 11. Chapter 11 protection enables
these carriers the ability to pursue cuts in wages, as well as pension and health benefits for workers
and retirees. American and Continental are the two U.S. legacy carriers that have not filed for
bankruptcy protection since the events of September 11, which may or may not become an issue
during the projection period.
3.6.3
Factors Directly Affecting the Airline Industry
3.6.3.1
Cost of Aviation Fuel
As industry fundamentals go, the price of fuel is the most significant force affecting the industry
today. With the price of fuel today, compared to the price of fuel in 2000, the airlines are struggling
to make a profit. The average price of jet fuel was $0.81 per gallon in 2000 compared to $1.97 in
2006. According to the Air Transport Association, every one-cent increase in the price per gallon
increases annual airline operating expenses by approximately $190 million to $200 million.
Also according to the Air Transport Association, U.S. airline fuel expense increased from $16.4 billion in
2000 to $38.0 billion in 2006, a compounded annual growth rate of 15.0 percent during this period. The
airline industry paid $7.5 billion more for fuel in 2004 than in 2003, $10.4 billion in 2005 than in 2004,
and $4.9 billion more in 2006 than in 2005. According to the Air Transport Association’s airline cost
index for the third quarter of 2006, fuel has overtaken labor as the industry’s top cost (27.4 percent of
industry expenditures compared to 23.6 percent, respectively).
The price of jet fuel has forced some airlines to find ways of becoming more fuel efficient, and some
airlines have found ways to save millions of dollars by taking many steps including using newer,
more fuel-efficient airplanes, using only a single engine for taxi, lowering cruise speeds, onboard
weight reduction, more direct routes, and other measures. In the initial years following the events of
September 11 and the nationwide economic slowdown, some U.S. airlines attempted to pass the
higher fuel costs on to consumers by increasing the fuel surcharge; however, some of these attempts
were unsuccessful as many airlines, particularly low-cost carriers, refused to match the increase in a
number of instances.
Airlines have hedged fuel prices through the purchase of oil futures contracts; however, the amount
of hedged fuel cost has varied tremendously by airline and is limited by an individual airline’s
financial condition. The substantial increase in fuel prices has had a significant impact on
profitability and future increases or sustained higher prices could affect airfares and airline service.
B-53
November 30, 2007
Okaloosa County
3.6.3.2
Airport Security
With enactment of the Aviation and Transportation Security Act (ATSA) in November 2001, the
Transportation Security Administration (TSA) was created, which established different and improved
security processes and procedures. The ATSA mandates certain individual, cargo and baggage
screening requirements, security awareness programs for airport personnel and deployment of
explosive detection devices. The act also permits the deployment of air marshals on all flights and
requires air marshals on all "high-risk" flights. To finance these federal security services, the ATSA
provides for payment by the airlines of approximately $700 million, estimated to be the cost of
providing such services prior to the events of September 11, and imposes a passenger fee of $2.50 for
each flight segment, not to exceed $5.00 per one-way trip.
In November 2002, Congress enacted the Homeland Security Act, which created the Department of
Homeland Security (DHS) to accomplish several primary goals: (1) prevent terrorist attacks within
the United States, (2) reduce the nation’s vulnerability to terrorism, (3) minimize the damage of and
assist in the recovery from terrorist attacks that do occur, (4) and monitor connections between illegal
drug trafficking and terrorism and coordinate efforts to sever such connections. The TSA is now a
part of the DHS.
The Homeland Security Act extended the federal government’s guarantee of war-risk insurance to airlines
through February 15, 2007, which was further extended by the Secretary of Transportation through
December 31, 2007. The Homeland Security Act caps the total premium paid by any airline for war-risk
insurance at no more than twice the premium the airline was paying the U.S. DOT for its third-party
policy as of June 19, 2002. The Homeland Security Act also requires that carriers include methods of
self-defense within their security training programs for flight attendants. The Act also requires DHS to
establish a program for arming pilots, though participation in the program remains voluntary.
3.6.3.3
Threat of Terrorism
As has been the case since September 11, the recurrence of terrorism incidents against either
domestic or world aviation during the projection period remains a risk to achieving the activity
projections contained herein. Tighter security measures have restored the public’s confidence in the
integrity of U.S. and world aviation security systems. Any terrorist incident aimed at aviation would
have an immediate and significant impact on the demand for aviation services.
3.6.3.4
Impact of the Airline Industry on the Airport
Continued increases to the cost of aviation fuel and/or an aviation-related terrorist incident during the
projection period would negatively impact activity at the Airport, as higher fuel prices may hasten
the need for certain carriers serving the Airport to seek bankruptcy court protection. An aviationrelated terrorist incident would further erode the health of the aviation industry and require the
airlines to refine their business plans further to remain viable, which certain airlines may not be able
to implement to survive.
3.7
Projections of Aviation Demand
Projections of aviation demand were analyzed on the basis of local socioeconomic and demographic
factors, the Airport’s historical shares of U.S. enplanements, and anticipated trends in air carrier
usage of the Airport.
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November 30, 2007
Okaloosa County
In developing the projections of enplaned passengers at the Airport, two methodologies were
utilized:
x
Market Share Approach. In this methodology, judgments are made as to how and to what
extent the Airport’s rate of growth in domestic enplanements will differ from that projected
for the nation by the FAA. On a macro scale, the U.S. projection provides a growth base
reflecting how industry traffic in general is anticipated to grow in the future. The growth rate
used for the Airport can be reflected as an increase or decrease in its future share of the
market.
x
Socioeconomic Regression Approach. Statistical linear regression modeling is used in this
methodology, with local socioeconomic factors as the independent variable and enplaned
passengers as the dependent variable. Socioeconomic factors utilized in these analyses
included population, income, and employment. Of interest in the analyses, among other factors,
was how well each socioeconomic variable explained the annual variations in enplaned
passengers at the Airport (i.e., the model’s correlation coefficient). Historical activity by AirTran
was omitted from the modeling process to prevent the resultant model projections from being
biased upwards.
The projections are based on a number of underlying assumptions, including:
9
x
The Airport will continue its role of serving primarily O&D passengers and providing
nonstop service to major hub airport systems. In addition, the Airport will continue to serve
primarily medium-haul markets.
x
Low-cost carriers will not initiate service at the Airport or the new Panama City airport during the
projection period. As such, long-term growth at the Airport will be influenced more by local
socioeconomic growth rather than a stimulation or diversion of traffic demand generated by low
fares.
x
Leakage of Airport passenger traffic from Escambia, Santa Rosa, Okaloosa, and Walton counties
that occurred from AirTran moving its base of activity in the region to Pensacola will remain
at current levels.
x
Service levels at the new Panama City airport will not be significantly different from the
current levels. Although some diversion of local O&D traffic may occur from the Airport to
the new Panama City airport, especially those air travelers residing in eastern Okaloosa
County, it will not materially affect long-term passenger demand at the Airport.
x
Eglin Air Force Base’s operations will maintain its status quo during the projection period,
thereby continuing to provide air travel demand from this sector. 9 Established air travel
contracts and pricing at the Airport for military personnel and their dependents will remain in
place during the projection period.
x
Military aircraft activity levels during the projection period will not prohibit the commercial
airlines from increasing their aircraft activity to meet future passenger demand at the Airport.
In its final report to Congress, the U.S. Department of Defense recommended personnel and mission
realignments to Eglin Air Force Base that will result in an estimated $300 million in new construction and the
addition of approximately 6,000 military and civilian personnel to the base by 2010.
B-55
November 30, 2007
Okaloosa County
x
Continued high fuel prices in the short term will likely have an adverse impact on airline
profitability, as well as hamper the recovery plans and cost-cutting efforts of certain airlines.
Higher fuel prices may cause changes in air service at the Airport; however, the passenger
demand for its major O&D markets will continue to be served during the projection period.
x
Airline consolidation/mergers that may occur during the projection period are not likely to
negatively impact passenger activity levels at the Airport due to its high percentage of O&D
passengers. New airline alliances, should they develop, will be restricted to code sharing and
joint frequent flyer programs, and will not reduce airline competition at the Airport.
x
For these analyses, and similar to the FAA's nationwide projections, it is assumed that there
will not be terrorist incidents against either domestic or world aviation during the projection
period.
x
Economic disturbances will occur during the projection period causing year-to-year traffic
variations; however, a long-term increase in nationwide traffic is expected to occur
(compounded annual growth rate of 3.3 percent between 2006 and 2016, as projected by the
FAA). 10
Many of the factors influencing aviation demand cannot necessarily or readily be quantified; and any
projection is subject to uncertainties. As a result, the projection process should not be viewed as
precise. Actual future traffic levels at the Airport may differ from projections presented herein
because events and circumstances do not occur as expected, and these differences may be material.
3.7.1
Enplanement Projections
Table III-12 presents historical and projected enplanements for the Airport’s majors/nationals and
regional/commuters. Based on 11 months of actual data and one month of scheduled data,
major/national activity is expected to further decrease in FY 2007 from FY 2006 levels, as Delta
continues to limit its mainline service at the Airport and shift more activity to its regional affiliates.
As a result, major/national enplanements are projected to decrease 13.1 percent in FY 2007 from FY
2006 levels, while regional/commuter enplanements are projected to increase 26.4 percent during this
same period. The overall impact is a 7.8 percent increase in total passenger enplanements at the
Airport in FY 2007. Thereafter, total enplanements are projected to increase from 399,600 in FY
2007 to 514,300 in FY 2016. This increase represents a compounded annual growth rate of 2.8
percent during this period, compared to the 3.3 percent growth projected nationwide by the FAA. As
also shown, major/national and regional/commuter enplanements are expected to increase at a
compounded annual growth rate of 2.2 and 3.2 percent, respectively, between FY 2007 and FY 2016.
It is anticipated that Delta’s mainline service will increase in the long term from its base level
projected in FY 2007; however, it will not increase at as high a rate experienced between FY 2002
and FY 2005. The regionals/commuters’ share of total enplanements at the Airport is expected to
increase slightly from approximately 62 percent in FY 2007 to approximately 64 percent in FY 2002.
3.7.2
Commercial Airline Operations Projections
Table III-13 presents historical and projected commercial airline operations at the Airport. As
shown, passenger airline activity is projected to increase from 14,690 operations in FY 2006 to
16,200 in FY 2007, and then to 19,180 in FY 2016. This increase represents a compounded annual
10
FAA Aerospace Forecasts, Fiscal Years 2007 – 2020.
B-56
November 30, 2007
Okaloosa County
Table III-12
Enplanement Projections
Fiscal
Year
Majors/
Nationals
Regionals/
Commuters
Airport
Total
Regional/
Commuter
Share of Total
98,401
121,683
131,830
176,212
205,691
211,085
211,004
215,166
225,154
253,617
174,046
110,748
147,355
150,190
176,128
197,404
199,239
118,477
140,201
163,804
153,436
196,512
209,149
269,038
282,020
352,340
403,095
410,324
329,481
355,367
388,958
407,053
370,558
53.0%
54.8%
53.3%
50.0%
49.0%
48.6%
36.0%
39.5%
42.1%
37.7%
53.0%
399,600
411,000
422,100
433,700
445,900
458,400
471,700
485,200
499,600
514,300
62.1%
62.5%
62.7%
62.9%
63.1%
63.4%
63.6%
63.8%
64.0%
64.2%
Historical
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Projected
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
151,300
154,300
157,500
160,900
164,400
168,000
171,800
175,700
179,800
184,000
248,300
256,700
264,600
272,800
281,500
290,400
299,900
309,500
319,800
330,300
Compounded
Annual Growth Rate
1996 - 2001
16.5%
12.5%
14.4%
2001 - 2002
0.0%
-40.5%
-19.7%
2002 - 2006
-4.7%
13.5%
3.0%
2006 - 2007
-13.1%
26.4%
7.8%
2007 - 2016
2.2%
3.2%
2.8%
Sources: Okaloosa County Airport Administration (historical)
Ricondo & Associates, Inc. (projected)
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November 30, 2007
Okaloosa County
Table III-13
Operations Projections
Fiscal
Year
Majors/
Nationals
Regionals/
Commuters
Airport
Total
Historical
2001
2002
2003
2004
2005
2006
5,266
4,758
4,902
4,872
5,538
3,964
11,806
9,458
10,774
12,480
9,806
10,726
17,072
14,216
15,676
17,352
15,344
14,690
3,240
3,300
3,360
3,420
3,480
3,560
3,640
3,700
3,780
3,860
12,960
13,220
13,440
13,680
13,920
14,180
14,460
14,720
15,020
15,320
16,200
16,520
16,800
17,100
17,400
17,740
18,100
18,420
18,800
19,180
2001 - 2002
-9.6%
-19.9%
-16.7%
2002 - 2006
-4.5%
3.2%
0.8%
2006 - 2007
-18.3%
20.8%
10.3%
2007 - 2016
2.0%
1.9%
1.9%
Projected
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Compounded
Annual Growth Rate
B-58
November 30, 2007
Okaloosa County
growth rate of 1.9 percent during this latter period, compared to 2.2 percent projected nationwide for
air carriers and air taxis combined by the FAA. In general, the passenger airline projections were
developed based on historical relationships between enplaned passengers, load factors, and average
seating capacities of aircraft utilized at the Airport. Specifically, average seats for the
majors/nationals are projected to increase slightly from approximately 120 seats in FY 2006 to
approximately 121 seats in FY 2007 (based on scheduled activity provided in the Official Airline
Guide), and then increase to approximately 123.5 seats by the end of the projection period.
Percentage load factors for this major user group are expected to range in the mid-70s during this
period, similar to that projected nationwide by the FAA. Average seats for the regionals/commuters
are projected to increase from approximately 45 seats in FY 2006 to approximately 52 seats in FY
2016, while percentage load factors stay range in the high 70s/low 80s. It is expected that some
shifting from the 50-seat regional jet to the 70-seat regional jet will occur during the projection
period.
3.7.3
Commercial Airline Landed Weight Projections
Table III-14 presents historical and projected commercial airline landed weight at the Airport. As
shown, passenger airline landed weight is projected to increase from 447.992 thousand pounds in FY
2006 to 468,663 thousand pounds in FY 2007, and then to 584.950 thousand pounds in FY 2016 (a
compounded annual growth rate of 2.5 percent during this latter period). In general, the increases in
landed weight are expected as a result of anticipated use of larger aircraft and/or increased operations
at the Airport during the projection period.
B-59
November 30, 2007
Okaloosa County
Table III-14
Landed Weight Projections
(Weight in Thousand Pounds)
Fiscal
Year
Majors/
Nationals
Regionals/
Commuters
Airport
Total
Historical
2001
2002
2003
2004
2005
2006
273,116
271,562
266,555
277,396
328,294
223,419
211,658
156,111
178,982
222,612
198,392
224,573
484,774
427,673
445,536
500,008
526,686
447,992
188,627
191,876
195,117
198,348
201,571
205,942
210,301
213,494
217,831
222,156
280,037
288,700
296,601
305,048
313,607
322,731
332,435
341,803
352,229
362,794
468,663
480,576
491,717
503,397
515,178
528,673
542,736
555,297
570,061
584,950
Projected
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Compounded
Annual Growth Rate
2001 - 2002
-0.6%
-26.2%
-11.8%
2002 - 2006
-4.8%
9.5%
1.2%
2006 - 2007
-15.6%
24.7%
4.6%
2007 - 2016
1.8%
2.9%
2.5%
B-60
November 30, 2007
Okaloosa County
IV.
Airport Facilities and the Rental Car Industry
This section presents a review of existing Airport facilities, and facilities at the County’s two general
aviation airports, and provides a description of major projects included in the current capital
improvement program.
4.1
The Airport is a commercial service airport located on the northwest side of the airfield at Eglin Air
Force Base in northwest Florida. The Airport is located six miles northeast of Fort Walton Beach
and serves an area including Okaloosa County and portions of Santa Rosa and Walton Counties.
Okaloosa County manages the Airport, along with two other general aviation facilities, Bob Sikes
Airport and Destin/Ft. Walton Beach Airport. Vehicular access to the Airport is provided via State
Highway 85, a major roadway bisecting Eglin Air Force Base. From areas south and west, including
Fort Walton Beach and Destin, regional access to Highway 85 and the Airport is provided via
Highways 98 and 393. Fifteen miles to the north, Interstate 10 provides access to Highway 85 from
areas such as Panama City to the east and Pensacola to the west.
The Airport is one of 22 joint-use airports in the country. As a joint-us facility, a written agreement
between a military department, in this case the Air Force, and Okaloosa County authorizes use of the
military airfield facilities for a public airport. The Airport is one of 12 joint-use Air Force facilities
in the country, there are nine army joint-use facilities and one navy facility. The County leases land
from the Air Force on which the Airport’s terminal and ancillary facilities are located, and pays
additional fees based on the number of civilian operations occurring on the airfield.
Following the completion of the Airport’s 1998 master plan and based on recommendations therein,
the Airport began the planning, design, and construction of a new terminal facility. At that time, the
age and condition of the Airport’s existing 38,000 square foot terminal building, and the increasing
passenger levels accommodated by the Airport, dictated the need for a larger, more modern facility.
Existing Airport facilities are illustrated in Exhibit IV-1 and can be summarized as follows:
x
Airfield Facilities. The airfield facilities at the Airport (the “Airfield”) consist of two
precision instrument runways, Runway 12/30 and Runway 1/19, together with associated
taxiways, aircraft parking aprons and an Air Force air traffic control tower. Runway 12/30 is
12,005 feet long and Runway 1/19 is 10,012 feet long and both are equipped with high
intensity runway edge lighting with sequenced flashers located on each end of the runways.
Both runways are available to the County based on the Joint Use Agreement. With the
exception of the civilian aircraft Taxiways D-1 and D-2 and the terminal apron, all airside
facilities are maintained by the Air Force. Taxiways D-1 and D-2 are parallel taxiways
providing access from the terminal aircraft parking apron to Runway 12/30 and its northern
parallel taxiway. Both taxiways are equipped with medium intensity taxiway edge lighting.
The dual taxiway system provides for the ability to operate simultaneous arriving and
departing operations without undue aircraft hindrance or delay.
x
Terminal Facilities. The new two-story terminal facility, with an area of approximately
110,000 square feet, opened on November 14, 2004. The new terminal includes three
passenger loading bridges on the upper-level east side of the concourse and three regional jet
gate areas on the lower-level west side. In addition to areas for airlines, the new terminal
B-61
November 30, 2007
Okaloosa County
Okaloosa Regional
Airport Terminal
B-62
Exhibit IV-1
Airport Diagram
November 30, 2007
Okaloosa County
includes areas for five rental car operators, limited space for the Transportation Security
Administration (TSA), and the Airport’s administration and maintenance departments. The
terminal building was designed and constructed in a manner that will allow it to
accommodate expansion needs, including extension of the concourse, should the need arise.
x
Rental Car Areas. There are currently five rental car companies operating on-site at the
Airport. Each company currently leases rental car counter and office space totaling
approximately 750 square feet in the passenger terminal to support their on-Airport
operations. The on-site manager and other staff generally share these offices.
The rental car companies share a consolidated service facility located west of the passenger
terminal building. The existing consolidated service facility consists of a paved area covered
by a metal roof structure that is portioned into six bays. Each bay consists of a fuel pump,
water hose connections, vacuums, and miscellaneous wash equipment. Vehicles are fueled
and then hand washed prior to being rented to a new customer. Current industry standard is
the use of automated car wash facilities which provide greater efficiency in the rental car
service process and reduce environmental impacts. The construction of new rental car
service facilities on an area located on the east side of the passenger terminal is a key
component of the Series 2007 Project. Included in this project is the construction of
office/storage areas, vehicle maintenance areas, a five-bay consolidated car wash building, a
consolidated fueling facility, and vehicle storage areas for each rental car operator.
The Airport’s primary ready/return areas, Ready Area A and Ready Area B, are located west and
east of the terminal building, respectively. Each of these are paved lots. Ready Area A contains
a total of 286 parking spaces and Ready Area B provides 164 spaces. An additional ready space
area provides 282 parking spaces for vehicle storage. On an annual basis, rental car operators are
allocated ready/return spaces in these areas based on their market share at the Airport.
x
Public/Employee Parking. Existing public and employee parking facilities at the Airport
comprise a total of approximately 1,910 vehicle parking spaces. Existing parking facilities
and their respective capacities are summarized as follows:
- Long Term - 795 total spaces including 16 reserved for handicap use
- Short Term - 207 total spaces including 6 reserved for handicap use
- Employee Lot - 542 spaces including 12 reserved for handicap use
- Reserved - 30 spaces including 2 reserved for handicap use
- Overflow - 338 spaces including 8 reserved for handicap use
The reserved parking area will likely be converted to short-term paid parking under an anticipated
new parking management or operation contract. The overflow lot is used for public parking
during holiday peak seasons. During the remainder of the year, the majority of spaces in the
overflow lot are leased to the rental car companies and used for vehicle storage.
x
Fuel Facility. The Airport’s fuel farm is currently located on the west side of the terminal
apron. Three aboveground storage tanks, including two 20,000-gallon JetA fuel tanks and
one 3,000-gallon tank used for unleaded automotive gasoline, are located within the facility.
The facility is covered with a metal roof and has a concrete containment area to contain
potential fuel leaks. The tanks are connected via galvanized steel pipes to the delivery
system. An emergency shutoff switch is located on the northeast side of the fuel farm. The
B-63
November 30, 2007
Okaloosa County
construction of a relocated fuel farm is planned and the rental car component of that project is
included of the Series 2007 Project. The relocation of aviation fueling facilities is not
included in the project nor are the costs of that project. The cost of dismantling and
removing the existing fuel facility is included in the Series 2007 Project cost.
x
4.2
Support Facilities. The Baldwin Building, located east of the terminal building, houses key
component of the Airport’s electrical and communications infrastructure. Additionally, it
provides limited storage capability. The Airport maintenance department, responsible for
maintaining County-owned buildings, grounds, and apron areas, currently utilizes multiple
locations for storage of supplies and equipment. The department currently lacks a dedicated
shop area, which could be used for vehicle maintenance, minor carpentry projects, and
miscellaneous equipment repairs.
However, the County anticipates beginning the
construction of a new maintenance facility that can accommodate such activities in FY 2008.
Other Airports
In addition to the Airport, the County also owns and operates two general aviation facilities, Bob
Sikes Airport and Destin/Ft. Walton Beach Airport.
x
Bob Sikes Airport. Bob Sikes Airport is located northeast of the City of Crestview and is
approximately 18 miles north of the Airport. It is a public-use airport accommodating
general aviation, corporate aviation, air taxi, and some military operations. Runway 17/35 at
Bob Sikes Airport has a length 8,005 feet, width of 150 feet, and has precision instrument
approach capabilities. Approximately 50 aircraft are based at Bob Sikes Airport and a full
service fixed base operator (FBO), Sunshine Aero, supports local and transient operators.
x
Destin/Ft. Walton Beach Airport.
Destin/Ft. Walton Beach Airport is located
approximately 6 miles southeast of the Airport. The public use general aviation airport has a
4,999-foot runway and is supported by non-precision instrument approaches. Approximately
75 aircraft are based at Destin/Ft/ Walton Beach Airport, and the airport’s FBO, Miracle
Strip Aviation, provides fueling and aircraft parking services to local and itinerant operators.
Facilities are currently under construction for a second FBO.
4.3
Capital Improvement Program
The 2007 Project was summarily described in Chapter 1 of this report. Table IV-1 presents
components of the 2007 Project and estimated costs. Key project components include access
improvements, site development, and utilities for the site; the construction of rental car lots,
roadways, and service facility buildings; and fuel farm improvements. Total 2007 Project cost is
currently estimated to be approximately $13.2 million. Approximately $5.8 million in funding is
anticipated from federal Military Airport Program (MAP) grants, Florida Department of
Transportation (FDOT) grants and Florida Strategic Intermodal System (SIS) funds, and accumulated
CFC collections. Table IV-2 summarizes the anticipated sources of funds for the 2007 Project. As
shown in Table IV-2, the remaining portion of estimated project costs, approximately $7.4 million, is
anticipated to be funded by the proceeds of the Series 2007 Bonds.
In addition to the 2007 Project, there are a number of other projects included in the FY 2007 through
FY 2012 Capital Improvement Program (CIP) that are planned to be undertaken by the County. The
CIP is presented in Table IV-3 and includes projects anticipated to be undertaken by the County at
the Airport and the two general aviation airports that it operates, Destin/Ft. Walton Beach and Bob
Sikes. These other projects total approximately $27.1 million over the five-year period FY 2007
B-64
November 30, 2007
Okaloosa County
Table IV-1
The 2007 Project
Estimated Cost
1/
East Side Access, Site Development and Utilities
Site Development
Site Utilities
East Side Access
Other
$1,509,655
1,404,433
468,743
0
Subtotal Construction Costs
$3,382,831
10% Construction Contingency
Design - Civil
2/
Inspection, Testing and Construction Admin.
Subtotal Construction, Design and Inspection
$338,283
282,797
192,369
$4,196,280
Rental Car Lots, Roadways, Etc.
Rental Car Service Facility Buildings
$1,656,592
4,879,800
Subtotal Construction Costs
$6,536,392
Design - Civil
Design - Architectural
2
$653,639
138,642
197,115
371,700
$7,897,488
TOTAL ACCESS, PARKING AND SERVICE FACILITIES COSTS
$12,093,767
Rental Car Fuel Farm Improvements 3/
Construction
$882,327
Design - Civil
$88,233
43,894
50,175
$1,064,628
Allowance for Removal/Restoration of Current Service Facilities 4/
TOTAL PROJECT COSTS
1/
2/
3/
4/
$60,000
$13,218,395
Contingency is shown separately for each component.
Allocated based on construction costs
Only includes the rental car portion of fuel farm improvements
Does not include tank removals which is the responsibility of each operator
Source: LPA Group
B-65
November 30, 2007
Okaloosa County
Table IV-2
Funding for the 2007 Project
Estimated Amount
The 2007 Project
Estimated Project Cost
1
$13,218,395
From Federal/State Grants
MAP
FDOT
SIS Funds
$1,589,118
562,500
295,181
Subtotal From Grants
$2,446,799
From Accumulated CFC Revenues
$3,396,117
TOTAL FROM GRANTS AND APPLIED CFCS
$5,842,916
FROM SERIES 2007 BOND PROCEEDS
$7,375,479
TOTAL SOURCES OF FUNDING
1
$13,218,395
Construction contingency (10%) is included in the estimated costs
Source: Okaloosa Regional Airport
B-66
November 30, 2007
Okaloosa County
Table IV-3
Capital Improvement Program (FY 2007 - FY 2012)
Funding Sources
Airport
CFC Pay-As- PFC Pay-AsSeries 2007
You-Go
You-Go
AIP
State
Commercial
1
Paper
Local
Total
Series 2007:
East Side Access/Site Development/Utilities
Rental Car Fuel Farm Improvements
Allowance for Removal of Current Facilities
Okaloosa
Okaloosa
Okaloosa
Okaloosa
$0
7,375,479
0
0
$1,749,481
522,008
1,064,628
60,000
$0
0
0
0
$1,589,118
0
0
0
$857,681
0
0
0
$0
0
0
0
$0
0
0
0
$4,196,280
7,897,487
1,064,628
60,000
$7,375,479
$3,396,117
$0
$1,589,118
$857,681
$0
$0
$13,218,395
$0
0
0
0
0
0
0
$0
0
0
0
0
0
0
$8,819
32,244
173,057
333,038
10,823
482,514
0
$335,124
270,156
1,138,825
999,113
411,272
3,300,000
0
$8,819
7,109
189,798
333,038
10,823
482,514
285,000
$0
0
0
0
0
0
0
$0
40,491
16,702
0
0
0
285,000
$352,762
350,000
1,518,382
1,665,189
432,918
4,265,028
570,000
$0
$0
$1,040,495
$6,454,490
$1,317,101
$0
$342,193
$9,154,279
$0
0
0
$0
0
0
$100,301
15,468
443,005
$1,695,461
587,789
3,000,000
$100,000
15,468
443,005
$1,100,000
0
0
$0
0
0
2,995,762
618,725
3,886,010
$0
$0
$558,774
$5,283,250
$558,473
$1,100,000
$0
$7,500,497
$0
0
$0
0
$0
198,037
$90,000
1,341,093
$55,000
198,037
$900,000
0
$55,000
0
$1,100,000
1,737,167
$0
$0
$198,037
$1,431,093
$253,037
$900,000
$55,000
$2,837,167
$0
0
$0
0
$0
0
$1,800,000
720,000
$100,000
40,000
$0
0
$100,000
40,000
$2,000,000
800,000
$0
$0
$0
$2,520,000
$140,000
$0
$140,000
$2,800,000
$0
0
0
$0
0
0
$0
0
0
$0
0
900,000
$2,550,000
400,000
50,000
$0
0
0
$450,000
400,000
50,000
$3,000,000
800,000
1,000,000
$0
$0
$0
$900,000
$3,000,000
$0
$900,000
$4,800,000
No Current Projects
$0
$0
$0
$0
$0
$0
$0
$0
FY 2012 TOTAL
$0
$0
$0
$0
$0
$0
$0
$0
2007 PROJECT TOTAL COSTS
FY 2007:
Extend Existing Apron
Install Backup Emergency Generator for Terminal
Design Terminal/Concourse Expansion
Relocate Fuel Farm (Aviation)
Update Master Plans
Rehab Runway 17/35 - Phase I
Construct T-Hangar Complex Infrastructure
Okaloosa
Okaloosa
Okaloosa
Okaloosa
System
Sikes
Sikes
FY 2007 TOTAL
FY 2008:
Construct Cargo and Maintenance Facility
Procure and Install Two Regional Boarding Bridges
Rehab Runway 17/35 - Phase II
Okaloosa
Okaloosa
Sikes
FY 2008 TOTAL
FY 2009:
Replace Existing Airfield Lighting System Phase II
Rehab Runway 17/35 - Phase III
Sikes
Sikes
FY 2009 TOTAL
FY 2010:
Widen and Overlay All Taxiways
Design and Install Approach Lighting System with New PAPI
Sikes
Sikes
FY 2010 TOTAL
FY 2011:
Grade Separation Entrance/Exit at SR 5
Construct New Entrance/Exit
Resurface and Expand Apron
FY 2011 TOTAL
Okaloosa
Okaloosa
Sikes
FY 2012:
TOTAL FY 2007 - FY 2012
$0
$0
$1,797,306
$16,588,833
$5,268,611
$2,000,000
$1,437,193
$27,091,943
TOTAL PROJECT COSTS
$7,375,479
$3,396,117
$1,797,306
$18,177,951
$6,126,292
$2,000,000
$1,437,193
$40,310,338
1
The County intends to utilize draws from its commercial paper program to provide interim financing for project costs in FY 2008 and FY 2009. Commercial paper principal and interest is assumed to be paid
from the Airports General Purpose Fund assuming an all-in interest rate of 4.5 percent and a 10-year principal amortization period starting in FY 2010. The Airport is seeking approval to use a portion of future
PFC collections to pay commecial paper principal and interest which may reduce the amount of funding required from the Airports General Purpose Fund.
Sources: Okaloosa Regional Airport
LPA Group
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November 30, 2007
Okaloosa County
through FY 2012. Funding sources for these other projects do not include any proceeds from the
issuance of the Series 2007 Bonds or proceeds from the issuance of any additional bonds. The
County is participating in a commercial paper program and intends to use a total of approximately
$2.0 million in commercial paper proceeds to fund a portion of project costs in FY 2008 and FY
2009. Future commercial paper debt service payments are subordinate to Series 2003 and Series
2007 debt service payments and are assumed to be paid from Airport Revenues transferred to the
Subordinated Indebtedness Fund. Commercial paper debt service payments are estimated assuming a
4.5 percent all-in interest cost and a 10-year principal amortization period starting in FY 2010.
The future capital projects depicted in the CIP include long-term development plans for each of the
County’s airports. The Airport will only proceed with those projects for which actual demand
materializes and not until such time as adequate funding, including federal and state grants, becomes
available. Furthermore, major future capital projects will likely be the subject of additional
feasibility studies and analysis of the Airport’s ability to maintain its debt service rate covenant and
the Airport’s overall financial situation.
Estimated CIP costs at system airports and major projects included therein can be summarized as
follows:
x
The Airport. Excluding the 2007 Project, the Airport’s CIP is comprised of projects totaling
approximately $11.3 million. These projects include the relocation of the aviation fuel farm,
construction of a cargo/maintenance building, design of terminal/concourse expansions, and
ground access improvements
x
Destin/Ft. Walton Beach Airport. No major capital projects are currently planned at
Destin/Ft. Walton Beach Airport.
x
Bob Sikes Airport. Projects identified in the CIP for Bob Sikes Airport include a multi-year
rehabilitation of runway 17/35, and hangar infrastructure and apron development projects.
The total cost of these projects is approximately $15.4 million.
In addition, the County is undertaking master plan updates at each system airport, the total combined
project cost of these master plans is approximately $433,000. Detailed capital programs beyond FY
2012 have not been developed by the County. Long-term capital programs at the County’s airports
will likely be influenced by the findings of master plan updates currently being undertaken for the
Airport, Destin/Fort Walton Beach Airport, and Bob Sikes Airport. For the purposes of the financial
analysis, it is assumed that the County will undertake capital projects that require approximately
$500,000 of County funds annually for FY 2012 through FY 2016.
4.4
Rental Car Industry
A primary component of the 2007 Project is the development of new rental car service facilities and a
key funding source for the debt service and other costs associated with the project is anticipated to be
CFCs collected by rental car operators. As discussed in more detail in Chapter V of this report, the
number of rental car transaction days at the Airport, or the total number of days cars are rented for all
rental car transactions, is the basis for CFC collections and is related to passenger levels at the
Airport.
Therefore, this section presents an overview of the rental car industry, a description of recent trends and
events occurring in the rental car industry nationwide, a review of the local rental car market.
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Okaloosa County
4.4.1
Industry Overview
The U.S. rental car industry is comprised of two basic components, the airport market and the local
insurance/replacement market. The airport market generally consists of business and leisure air
travelers who rent cars at airports for ground transportation to their destinations. Following declines
after the events of September 11 and the ensuing economic slowdown, the U.S. rental car market has
rebounded and, based on Auto Rental News statistics, total rental car industry revenues have
increased in each year since 2002. Exhibit IV-2 presents historical U.S. rental car industry gross
sales.
4.4.2
Major Rental Car Companies
As shown in Table IV-4, Enterprise has the largest share (34.9 percent) of the total U.S. rental car
market with approximately $7.0 billion of gross sales for CY 2006 due in large part to its dominance
of the insurance/car replacement market. Enterprise has begun to increase its focus at airport markets
and is the fastest-growing rental car company in the airport segment, having grown from one onairport location in 1995 to more than 200 currently. Enterprise opened 39 on-airport locations in the
last year and continues to add two to three on-airport locations each month. In 2006, Enterprise
ranked highest in the J.D. Power and Associates Rental Car Satisfaction Study for airport car rentals. In
March 2007, Enterprise entered into a definitive agreement to purchase Vanguard and the transaction
closed on August 1, 2007.
Currently, six major rental car companies dominate the U.S. rental car market: Avis, Budget,
Dollar/Thrifty, Enterprise, Hertz, and Vanguard. As reflected in Table IV-4, these six companies
accounted for 93.4 percent of total U.S. rental car market gross revenues in CY 2006.
Several ownership changes occurred in the late 1990s due, in large part, to the actions of the major U.S.
automakers. In the late 1980s and early 1990s, most rental car companies were owned by automobile
manufacturers and used as an outlet for unsold automobiles. As a result, rental car agencies were able to
purchase automobiles with very favorable terms. By the mid 1990s, however, the automobile
industry’s financial condition improved, and the need to sell excess car inventories to the rental car
industry diminished. As a result, most of the major automobile manufacturers divested themselves from
rental car companies in the late 1990s. By 1997, nearly all major rental car companies were publicly
traded. As the rental car companies became stand-alone businesses, their profit margins became thinner
in part because the cost of supplying automobile fleets increased.
By the year 2000, Hertz had been purchased by the Ford Motor Company; Avis was purchased by
the Cendant Corporation; Alamo and National were spun off and became a publicly traded company
known as ANC Rental Corporation. Significant changes in ownership have occurred in the rental car
industry since CY 2002. Several companies have undergone a change in controlling ownership
following bankruptcy proceedings. In CY 2002, the ANC Rental Corporation (ANC) (the parent
company of Alamo and National) filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. In that same year, Budget Rent A Car filed for Chapter 11 bankruptcy and was subsequently
purchased by the Cendant Car Rental Group (the parent company of Avis).
In CY 2003, Cerberus Capital Management bought ANC and the corporate name of ANC has since
been changed to Vanguard Car Rental USA, Inc. In December 2005, Hertz was acquired by three
leading private equity investment companies: Clayton, Dubilier & Rice, The Carlyle Group, and
Merrill Lynch Global Private Equity. Dollar Thrifty Automotive Group (DTAG), the parent
company of Dollar and Thrifty, became publicly traded after being spun off by its former parent, the
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November 30, 2007
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
$22
$24
1994
1995
Source: Auto Rental News
U.S. Rental Car Gross Sales
(Billions)
B70
1996
1997
1998
2000
2001
2002
2003
2004
2006
Exhibit IV-2
2005
November 30, 2007
U.S. Rental Car Market Car Gross Sales
Calendar Year
1999
Okaloosa County
Okaloosa County
Table IV-4
U.S. Rental Car Company Market Share
Sorted by U.S. Market Share CY 2006
(Dollars in Billions)
Company
1
Enterprise
Hertz
2
Avis
1, 3
Vanguard
Dollar Thrifty Group
Budget 2
Other
TOTAL
1
2
3
4
5
Share
Total U.S. Rental Car Market
CY 2005
Gross Revenues
Share
$5.830
3.500
2.280
1.840
1.688
1.130
1.370
33.1%
19.8%
12.9%
10.4%
9.6%
6.4%
7.8%
$6.400
3.870
2.450
1.930
1.673
1.220
1.370
33.8%
20.5%
13.0%
10.2%
8.8%
6.5%
7.2%
$7.000
3.900
2.750
2.140
1.534
1.430
1.326
34.9%
19.4%
13.7%
10.7%
7.6%
7.1%
6.6%
$17.638
100.0%
$18.913
100.0%
$20.080
100.0%
CY 2004
Gross Revenues
4
5
CY 2006
Gross Revenues
Share
Enterprise purchased Vanguard on August 1, 2007.
A brand of the Cendant Car Rental Group.
Brands include Alamo and National.
Brands include Dollar and Thrifty
Totals may not add due to individual rounding.
Source: Auto Rental News
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November 30, 2007
Okaloosa County
Chrysler Corporation. DTAG then transformed Thrifty from an off-airport, franchisee-operated
brand, to an on-airport, corporately-operated brand. Amid all this turmoil and chaos, Enterprise,
which remains privately held, has grown to become the largest rental car company in the world.
Recent months have seen the industry undergo a series of yet more ownership and structural
transformations. Hertz was sold to a private investor group that subsequently announced its intent to
take the company public. Cendant Corporation broke itself apart with Avis/Budget Group now a
separate, publicly traded company. On August 1, 2007, Enterprise purchased Vanguard.
As of the date of this report, the Avis and Budget brands are owned and operated by one company,
Avis/Budget Group; the Dollar and Thrifty brands are owned and operated by one company, DTAG;
and the Alamo and National brands are owned and operated by one company, Vanguard, which was
purchased by Enterprise. Vanguard will continue to operate as an independent subsidiary of
Enterprise. In general, the rental car companies have maintained brand separate identities for their
respective brands, but have undertaken vigorous measures to cut costs by consolidating fleets,
pooling employees, and consolidating redundant facilities and rental locations.
These events indicate that the rental car industry is attempting to adjust to new market conditions.
However, the U.S. airport rental car market has generally followed airline passenger activity and this
relationship should continue even with restructuring within the industry. While the market shares of
the individual rental car companies may change, a significant percentage of the total U.S. airport
rental car market will continue to grow or shrink primarily as a function of airline passenger activity.
The FAA has projected 3.4 percent compounded annual growth in domestic U.S. enplanements
between FY 2006 and FY 2020.
4.4.3
Rental Car Industry Trends
As shown on Exhibit IV-2, total U.S. rental car gross sales have grown steadily since CY 2002, with
7.2 percent growth in both CY 2004 and CY 2005 and 6.2 percent growth in CY 2006, as both
nationwide enplaned passenger levels and local/insurance replacement market activity have increased
in recent years. The decreases in total U.S. rental car gross sales in CY 2001 and CY 2002 are
primarily attributable to the downturn in the economy (beginning as early as CY 2000) and the
downturn in airline passenger activity nationwide following the events of September 11.
U.S. airport rental car markets generally experienced declines in rental car gross sales, transactions,
and transaction days following the downturn in the economy and the events of September 11. In
recent years, key rental car activity trends at the Airport (and a number of other U.S. airports) have
reversed, illustrated by the growth in rental car transaction days at the Airport from approximately
322,300 transaction days in FY 2002 to approximately 349,500 transaction days in FY 2006.
4.4.4
Consolidated Rental Car Facilities
As airline passenger activity grew in the 1990s, so did airport landside congestion. Remote
consolidated rental car facilities became a popular means for airport operators to address this
congestion problem. Instead of each rental car company having its own shuttle bus system to
transport customers to and from individual remote sites, a consolidated facility brings all the onairport rental car companies together at a single location. A single transit system, typically a bus
system, transports rental car customers to and from the terminal.
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Okaloosa County
The first consolidated rental car facilities in the U.S. were completed in the late 1990s. Typically,
but not in the case of the 2007 Project at the Airport, the primary source of funding for these facilities
has been special facility bonds backed by a CFC, which is a fee imposed by an airport upon the
customers of the rental car companies to fund a portion of the costs of these facilities. As previously
mentioned, these fees are typically based on rental car transaction days, although some CFCs are
charged on a per-contract basis.
The 2007 Project includes the construction of new rental car service facilities in an area east of the
passenger terminal building. Upon completion of the 2007 Project, facilities used in common with
other rental car operators at the Airport will include the new fueling facility, the fuel storage facility,
a five-bay rental car service building, and a consolidated car wash building. Each of the five onairport rental car operators will lease on a preferential basis separate office areas,
service/maintenance facilities, and parking areas. Due to the relatively proximate location of existing
rental car facilities to the Terminal Building, and to an even greater degree with the facilities
resulting from the 2007 Project, no bus system is required to serve rental car customers at the
Airport.
4.4.5
Airport Taxes and Surcharges
Taxes and surcharges received considerable attention from the rental car industry during the 1990s,
both in terms of opposition of new taxes to pay for non-rental car-related facilities (such as
convention centers and sports arenas) or promoting the pass through of charges (such as airport
concession fees) to their customers. In an industry that rarely can sustain rate increases, the passthrough movement began in the late 1990s as a result of car rental companies looking for innovative
ways to become more profitable. As a result, rental car companies began implementing passthroughs of concession fees, access fees, and state license and title fees.
Airports also began using CFCs to help pay for improvements to ground access and rental car
facilities, including in some cases consolidated rental car facilities and automated people movers.
The fees are typically charged on a per transaction day or per transaction basis and are passed
through to the customer. The County amended its CFC Ordinance on May 1, 2007, raising the CFC
level at the Airport from $2.50 to $3.25 per rental transaction day. The new CFC level was imposed
on rental car customers’ rental agreements at the Airport starting July 1, 2007. Table IV-5 presents a
comparison of other U.S. airports charging CFCs on a per transaction day basis. The Airport’s $3.25
per transaction day CFC is lower than the current maximum transaction day CFC for all airports
included in the comparison and falls between the mean and the median per transaction day CFC at
airports in the Southeast. Pensacola Regional Airport, located approximately 50 miles west of the
Airport, currently imposes a $3.60 per transaction day CFC and is included in the survey results
summarized in Table IV-5.
4.4.6
Rental Car Market at the Airport
The Airport is currently provided rental car service by five companies that have concession and rental
agreements with the County. The concession agreement was competitively bid in FY 2005 and the
new agreement was in place for the majority of FY 2006. Avis, Budget, Hertz, and Vanguard (operating
as Alamo and National) are corporate operations at the Airport while Dollar/Thrifty is a franchise
operated by LaGrange Aero, Inc.
Table IV-6 below summarizes rental car activity by on-Airport operators for the 12-month period
ending March 31, 2007.
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Okaloosa County
Table IV-5
CFC Level Comparison
(Only those airports charging on a transaction day basis)
CFC Per
Transaction Day
All Airports (45)
Maximum
Mean
Median
Low
$4.50
$2.66
$3.00
$0.75
CFC Per
Transaction Day
Southeast Airports (11)
Maximum
Mean
Median
Low
$4.00
$3.01
$3.50
$1.00
Source: Ricondo & Associates, Inc.
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November 30, 2007
Okaloosa County
Table IV-6
Historical Rental Car Activity
For the 12-Month Period Ending
March 31, 2007
Gross Revenues
$15,543,865
Total CFC Collections
$862,689
Transactions
74,065
Transaction Days
345,019
Average Rental Days per Transaction
4.7
Enplaned Passengers
367,597
Average Rental Days per Enplanement
0.94
Source: Okaloosa Regional Airport
Enterprise is an off-Airport operator that does not currently lease Airport facilities. As an off-Airport
operator that does not use rental car support facilities at the Airport, Enterprise is not currently
required to collect or submit CFCs for customers that it serves via the Airport. Similar to the onairport operators, it is required to pay a monthly commission of 10 percent of commissionable
revenues to the Airport based revenues earned from its Airport customers. The recent purchase of
Vanguard by Enterprise is not anticipated to negatively impact rental car activity or CFC collections
at the Airport. It is assumed that Enterprise will continue to operate off-Airport and Alamo/National
will continue as an on-Airport operator.
Historical rental car activity is used in Chapter V of this report to develop future projections of onAirport rental car activity, including rental car transaction days and CFC collections.
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November 30, 2007
Okaloosa County
V.
Financial Analysis
This chapter examines the financial structure of the Airport, cost and financial implications of the
2007 Project, operating expense and revenue projections, reserve requirements established under the
Master Indenture of Trust, dated August 1, 2003, and subsequent supplements thereto (hereinafter
referred to as the “Indenture”), and the rate covenant requirement following completion of the 2007
Project.
5.1
Governing Body
The Airport and the general aviation airports, Destin-Ft. Walton Beach Airport and the Bob Sikes
Airport are owned and operated by the County. The County is a political subdivision of the State of
Florida and is governed by an elected five-member Board of County Commissioners (Board). Each
Commissioner is elected for a four-year term of office. The Board appoints a County Administrator
to administer the County’s programs. The Airports Director reports to the County Administrator.
The County funds operations and capital improvements within the Airport System with revenues
generated from rentals, fees and charges; PFC Revenues; customer facility charge revenues; and
federal grants-in-aid. The County maintains its financial records in accordance with generally
accepted accounting principles as they apply to government entities.
5.2
Financial Structure
This section discusses the requirements of the Indenture, key components of the Department of the
Air Force Property Lease, key components of the Eglin Air Force Base Joint-use Agreement, the cost
centers that the County utilizes for the purposes of accounting for revenues, operating expenses,
amortization, and debt service, and the Signatory Airline Operating Agreement and Terminal
Building Lease (Airline Agreement).
5.2.1
Indenture
The financial operation of the Airport System will be governed primarily by the Indenture and the
Airline Agreement. The Indenture provides conditions for the issuance of the Series 2007 Bonds and
the application of Airport System Revenues, as defined therein, to the payment of operating expenses
and debt service.
The Indenture defines Airport System “Revenues” to mean all income and revenues received or
accrued by the County in connection with the ownership, operation or use of, or with respect to the
Airport System including, but not limited to, (a) rentals, fees, and other charges for the use of or with
respect to the Airport System, and (b) proceeds of business interruption insurance, and any such other
moneys designated as Revenues pursuant to the terms of a Supplemental Indenture; provided,
however, that Revenues shall not include (A) interest income on, and any profit realized from, the
investment of moneys in any Fund or Account to the extent that such income or profit is not
transferred to, or retained in, the Revenue Fund, the Repair and Rehabilitation Fund, the Operation
and Maintenance Fund or the Bond Fund; (B) interest income on, or profit realized from, the
investment of moneys in any fund or account funded from the proceeds of Special Facility Bonds;
(C) amounts received by the County from, or in connection with, Special Facilities, unless such funds
are treated as Revenues by the County; (D) grants-in-aid, donations, bequests, and/or amounts
received as reimbursements for previously expended money unless the County has lawfully elected
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November 30, 2007
Okaloosa County
that such grant, donation, bequest or reimbursement is to be treated as Revenues; (E) insurance
proceeds which are not deemed to be Revenues in accordance with generally accepted accounting
principles; (F) the proceeds of any condemnation awards, (G) the proceeds of any sale of land,
buildings or equipment; (H) proceeds of a drawing under a Credit Facility; (I) PFC Revenue; (J)
Bond proceeds; (K) all other revenue sources, such as, but not limited to, cargo facility charges and
customer facility charges imposed on rental car customers (unless such are treated as Revenue by the
County); and (L) any other amounts which are not deemed to be Revenues in accordance with
generally accepted accounting principles or which are restricted as to their use.
The term “Operation and Maintenance Expenses” (O&M Expenses) is defined to mean all expenses
of the County paid or accrued for the operation, maintenance, administration, and ordinary current
repairs of the Airport System, including certain payments to the Federal Government pursuant to the
Eglin Agreements and shall not include; (a) the Principal Amount of, Redemption Premium, if any,
or Interest on any Bonds; (b) any allowance for amortization or depreciation of the Airport System
facilities; (c) any other expense for which (or to the extent to which) the County is or will be paid or
reimbursed from or though any source that is not included or includable as Revenues; (d) any
extraordinary items arising from the early extinguishment for debt; or (e) any expense paid with
amounts from the Repair and Rehabilitation Fund.
The term “Net Revenues” is defined to mean for any Fiscal Year of the County or other period of
time shall mean Revenues for such year or period, including Pledged CFC Revenues as defined in the
Indenture, less the amount needed for the payment of Operation and Maintenance Expenses for such
year or period. Under the provisions of the Indenture, the Series 2007 Bonds are to be payable from
and secured by a lien on Net Revenues. The term “Amounts Available for Debt Service” is defined
to mean for any Fiscal Year of the County the Net Revenues for such Fiscal Year, plus Pledged PFC
Revenue for such Fiscal Year, plus amounts, if any, in the Revenue Fund Coverage Account and all
PFC Coverage Subaccounts, if any, at the end of such Fiscal Year.
5.2.1.1
Rate Covenant
The County covenants in Section 705 of the Indenture to fix and adjust rentals, fees, and other
charges for the use of the Airport System so as to produce Amounts Available to Pay Debt Service to
provide for the greater of either (1) the amounts needed for making the required deposits in the Fiscal
Year to the Debt Service Fund, the Debt Service Reserve Fund, the O&M Reserve Fund, the Repair
and Rehabilitation Fund, and the Subordinated Indebtedness Fund; or (2) an amount not less than 125
percent of the aggregate Annual Debt Service with respect to Outstanding Bonds for such Fiscal
Year.
5.2.1.2
Additional Bonds Test
Section 214 of the Indenture permits the County to issue Additional Bonds as long as the County is
not in default under the Indenture, as evidenced by a certificate of no default executed by its
Authorized Representative upon the satisfaction of one of two requirements. For Additional Bonds
either of the following is required; (1) an Airport Consultant has provided the Trustee a certificate
stating that, for each of the next five Fiscal Years of the County following the issuance of the
Additional Bonds, or each full Fiscal Year of the County from issuance of the Additional Bonds
through three full Fiscal Years of the County following completion of the Project or Projects
financed by the Additional Bonds proposed to be issued, whichever is later, based upon reasonable
assumptions set forth therein, Amounts Available to Pay Debt Service are projected to be equal to at
least 125 percent of Annual Debt Service on Bonds (disregarding any Bonds that have been paid or
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November 30, 2007
Okaloosa County
discharged or will be paid or discharged immediately after the issuance of the Additional Bonds
proposed to be issued); provided, however, that if Capitalized Interest on any of the Bonds and
proposed Additional Bonds is to be applied the Airport Consultant will extend the test through the
first three Fiscal Years of the County for which there is no longer Capitalized Interest; or (2) the
County has provided to the Trustee a certificate stating that in the most recent completed Fiscal Year
of the County for which an independent audit is available or for any consecutive twelve-month
period out of the last eighteen months Amounts Available to Pay Debt Service were not less than 125
percent of (i) Annual Debt Service on Bonds Outstanding in such Fiscal Year of the County or such
period (disregarding any Bonds that have been paid or discharged or will be paid or discharged
immediately after the issuance of the Additional Bonds proposed to be issued), plus (ii) Maximum
Annual Debt Service with respect to such Additional Bonds proposed to be issued.
5.2.1.3
Flow of Funds
Article VI of the Indenture creates certain funds and accounts and establishes the principal functions
and uses of each fund and account. The requirements of the Indenture and the rate-making
methodology adhered to by the County were utilized to develop the estimated flow of funds included
in these financial analyses. Exhibit V-1 presents the flow of funds as specified in the Indenture. The
Indenture requires that all Revenues be deposited in the Revenue Fund and applied in the following
order of priority in monthly deposits:
Held by the County for monthly Operation and
x
Operation and Maintenance Fund.
Maintenance Expenses.
x
Bond Fund. First to the applicable Interest Account in the Bond Fund held by the Trustee
that, together with amounts transferred from any Pledged PFC or CFC Account, is equal to
one-sixth of the next interest payment due. Secondly to applicable Principal and Redemption
Accounts in the Bond Fund, also held by the Trustee, a deposit equal to one-twelfth of the
next principal payment coming due, less the amounts transferred there from a Pledged PFC
or CFC Account, allocable capitalized interest funded in a Capitalized Interest Account, and
investment income credited at the time of the last deposit of each interest period.
x
Debt Service Reserve Fund. Held by the Trustee, one twelfth of the amount required to
restore any deficiency in the Debt Service Reserve Requirement.
x
Operation and Reserve Account. Held by the County, any withdrawals or deposits
required to maintain the Operation and Maintenance Reserve Requirement at two months of
the then current Fiscal Year’s O&M Expenses budget, replenished in monthly deposits equal
to one-twelfth of the amount necessary to restore the balance to the required level of two
month’s O&M Expenses.
x
Revenue Coverage Account. An amount which the County shall provide, but not to exceed
in such account 25 percent of Annual Debt Service in any Fiscal Year, less the amount on
deposit in the PFC or CFC Coverage Subaccounts, if any.
x
Repair and Rehabilitation Fund. Held by the County, monthly deposits are made as the
County determines to fund any deficiency in the balance of the fund.
x
Subordinated Indebtedness Fund. Held by the County, the amount required for debt
service on Subordinated Indebtedness, to the extent that these amounts are not paid from
other legally available funds of the County.
x
Rebate Fund. Amounts required under the applicable Supplemental Indenture.
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Okaloosa County
Passenger Facility Charge Fund 1
Customer Facility Charge (CFC) Fund 3
Airport Revenue Fund
Operation & Maintenance Fund
Bond Fund
2003 & 2007 Interest Accounts
2003 & 2007 Principal Accounts
2003 & 2007 Redemption Accounts
2003 Pledged PFC Account
2
2007 Pledged CFC Account
4
2003 Debt Service Reserve Account
2007 Debt Service Reserve Account
Operation & Maintenance Reserve
B-79
2003 PFC Coverage Sub-Account
Revenue Fund Coverage Account
2007 CFC Coverage Sub-Account
Repair and Rehabilitation Fund
2003 PFC Project Account
2007 CFC Project Account
Subordinated Indebtedness Fund
1
PFC Revenues not pledged to pay debt service,
coverage, or used for Project costs will be retained on
deposit within the Passenger Facility Charge Fund.
3
Rebate Fund
2003 Airport Rebate Account
2
CFC Revenues not pledged to pay debt service,
coverage, or used for Project costs will be retained on
deposit within the Customer Facility Charge Fund.
4
To the extent required to fund deficiencies in the 2003
Debt Service Reserve Account.
To the extent required to fund deficiencies in the 2007
Debt Service Reserve Account.
Airports General Purpose Fund
Source: Wayne County Airport Authority Master Airport Revenue Bond Ordinance, September 26, 2003.
Exhibit V-1
Flow of Funds defined in the Bond Indenture
November 30, 2007
Okaloosa County
x
Airports General Purpose Fund. All of the money remaining in the Revenue Fund.
Pursuant to the terms of the Supplemental Indenture for the Series 2007 Bonds, the County will establish
in the Customer Facility Charge Fund, a 2007 Pledged CFC Account and a 2007 CFC Coverage Subaccount. CFC Revenue shall be transferred into the 2007 Pledged CFC Account until, in each month,
the amount on deposit in the 2007 Pledged CFC Account equals the CFC Debt Service on the 2007 Bonds
for such month. CFC Debt Service is the amount of debt service eligible to be paid with CFC Revenues.
That amount is currently estimated at 100 percent of Series 2007 debt service. CFC Revenue will be
deposited into the 2007 CFC Coverage Sub-account in the amount necessary to maintain therein the 2007
CFC Coverage Amount (25 percent of the CFC Debt Service on the Series 2007 Bonds during any Fiscal
Year).
PFC Revenues are available only to pay debt service on the County’s Airport Revenue Bonds, Series
2003 (AMT) and other identified purposes. Pledged CFC Revenues are available only to pay debt service
on the 2007 Bonds and other identified purposes.
5.2.2
Key Provisions of the Department of the Air Force Property Lease
The County leases certain property form the Eglin Air Force Base for the purposes of constructing,
operating and maintaining the Airport and related facilities. On July 30, 2007, the County executed a
25-year lease with the United States Air Force that leases to the County approximately 131 acres of
land located on the Eglin Air Force Base (the “Property Lease”). The July 30, 2007 lease replaces a
prior 30-year lease that the County had executed with the Air Force on February 27, 2001. The
purpose of the new lease is to expand the County’s leasehold from the 108.23 acres that was included
in the prior lease to support the 2007 Project, among others. The sole purposes for which the leased
land may be used, in the absence of prior written approval of the United States government for any
other use, is for the construction, operation, and maintenance of an airport terminal and directly
related facilities; and the construction, development, operation, and maintenance of a fuel farm along
with secure access and support facilities for rental car agencies.
As part of the Property Lease, the County and the Air Force signed an Environmental Condition
Report (“ECR”) setting forth those environmental conditions and matters on and affecting the Leased
Premises on the commencement date of the Lease. At the expiration or earlier termination of the
Property Lease, an updated ECR will be prepared to document the environmental conditions and
matters on and affecting the Leased Premises on the ending date of the Lease. In accordance with the
Environmental Baseline Survey conducted dated November 2005 and a Final Environmental
Assessment dated June 2006, the leased site appears to be free of any contamination.
The Property Lease also provided for a Physical Condition Report (“PCR”) prepared by the
Department of the Air Force 10 days after the execution date of the Property Lease. The PCR set
forth the agreed physical appearance and condition of the Lease Premises as of the commencement
date of the Property Lease as determined by a joint inspection by the Department of the Air Force
and the County. At the expiration or earlier termination of the Property Lease, an updated PCR will
be prepared to document the appearance and physical conditions of the Leased premises on the
ending date of the Property Lease. In accordance with a joint survey of the property, the County and
the Air Force concluded and documented that the leased premises is in excellent condition.
In accordance with the terms of the current Lease, the County is scheduled to pay the Department of
the Air Force $318,000 in FY 2008, the first year of payment under the new Property Lease. For
each year thereafter, the annual amount will be escalated at 3 percent per year.
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Okaloosa County
In accordance with the terms of the Lease the Eglin Commander must approve all County plans for
any construction, installation, modifications, alterations, or additions to the Airport before
construction is started, and all construction must be in accordance with approved design and plans
with no expense to the government. The Commander has approved the 2007 Project and has
approved a concurrent project, the construction of a replacement Airport maintenance and cargo
building.
The Lease may be suspended or terminated by the Deputy Assistant Secretary of the Air Force at any
time during any national emergency, present or future, declared by the President or the Congress of
the United States, or after a written determination of the Secretary of the Air force that paramount
military necessity at Elgin requires such suspension or termination.
5.2.3
Key Provisions of the Eglin Air Force Base Joint-Use Agreement
The Joint-Use Agreement became effective February 27, 2001 and will remain effective for 30 years,
unless otherwise renegotiated or terminated. Furthermore, the Joint-Use Agreement shall not survive
the termination or expiration of the Property Lease. If significant changes in circumstance or
conditions relevant to the Joint-Use Agreement should occur, the Joint-Use Agreement states that the
Air Force and the County may enter into negotiations to revise the provisions of the Joint-Use
Agreement at any time.
The Joint-Use Agreement authorizes the County to permit civil aircraft equipped with two-way
radios capable of communicating with the Eglin Air Force Base Control tower to use the flying
facilities at Eglin, subject to certain operation limitations and subject to Government aircraft having
priority over all civil aircraft at all times. In accordance with the Joint-Use Agreement, civil aircraft
operations are limited to no more that 84 operations per day. An operation is defined as a landing or
a take-off. The current forecast of aircraft operations for the Forecast Period is not affected by this
limitation. The 2016 forecast projects that 48 air carrier operations per day will occur at the Airport,
up from approximately 42 air carrier operations in 2006. Operations limitations in the Joint-Use
agreement are not likely to negatively impact air carrier or other civilian aircraft activity at the
Airport during the projection period of this analysis.
For the purposes of reimbursing the Air Force for the County’s share of the cost of maintaining and
operating the flying facilities, the County agrees to pay the Government, with respect to civil aircraft
authorized to use the flying facilities, a fee based on the total actual number of yearly operations from
a low of 60 operations per day (21,900 operations per year) up to a maximum of 84 operations per day
(30,660 operations per year) in accordance with the payment schedule contained in the Joint-Use
Agreement. Under the payment schedule, the County will pay the Government $7.20 for each operation
occurring in FY 2007. This charge is adjusted each Fiscal Year for inflation, using the Office of the
Secretary of Defense Raw Inflation Indices. At the end of each five-year period during the term of the
Joint-Use Agreement, the charge per operations will be renegotiated. Annual payments are to be made 30
days after the end of the Federal Fiscal Year (September 30).
In accordance with the Joint-Use Agreement, the Air Force will provide fire, crash, and rescue
services involving civil aircraft outside any hangars or other structures within the limits of its existing
capabilities, equipment, and available personnel. The County agrees to reimburse the Air Force for
expenses incurred by the Air Force for fire fighting and/or crash and rescue materials expended in
connection with the providing of such services to civil aircraft. No County reimbursements have
been required since the execution of the Agreement.
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November 30, 2007
Okaloosa County
5.2.4
County Accounting
Expenditures and Revenues of the County are categorized into Cost Centers and include those areas
or functional activities of the Airport System used for the purposes of accounting for Revenues,
O&M Expenses, Capital Outlays, Debt Service, Coverage Requirements, and Fund Deposits. Cost
Centers under the Airline Agreement include, but are not necessarily limited to, those discussed
below.
5.2.4.1
Airfield Area
The Airfield Area Cost Center includes all land and facilities, improvements, and equipment located
on the Eglin Leased Areas and on other Airport property acquired by the County for Airport purposes
which provide for the general support of air navigation, flight activity and other aviation needs or
requirements of the Airport. This Cost Center includes the aircraft parking apron adjacent to the
Airport Terminal Building, County-constructed taxiways and ramp areas not included in any other
Cost Center, County-provided safety areas and infield areas, together with all associated aircraft
taxiing, landing and navigational aids provided by the County; the costs and all obligations of the
County with respect to the Eglin Airfield Facilities as provided for in the Eglin Agreements; areas of
land acquired by the County for buffer requirements for the landing area or other Airport facilities;
the cost of all land acquisition for Airport expansion unless and until said land is used or dedicated to
another Direct Cost Center; all Airport noise mitigation facilities, measures or costs; County-owned
or controlled Airport facilities and aviation controls and related system requirements related to the
Airfield Area; any County fueling equipment and facilities serving the Airlines or other users of the
Airport whether physically located in the Airfield Area Cost Center or elsewhere, including any
hydrant system exclusively serving the Airlines utilizing the Terminal Building aircraft parking
apron; airport cargo facilities at the Airport; and all costs incurred by the County for mitigation or
damages resulting from Airport noise, environmental incidents or conditions or other Airport or
aircraft –related conditions or activities.
5.2.4.2
Terminal Area
The Terminal Area Cost Center includes all land and facilities improvements, and equipment located
on the Eglin Leased Areas and on other Airport property acquired by the County for Airport purposes
which support passenger terminal functions for the Airport, including all passenger terminal
buildings or structures used to serve Airport passengers, including concourses, connecting structures,
passenger walkways, passenger and terminal service tunnels, passenger holdroom areas, passenger
loading bridges, support buildings and equipment.
5.2.4.3
Parking/Ground Transportation
The Parking/Ground Transportation Cost Center includes all land and facilities improvements, and
equipment located on the Eglin Leased Areas and on other Airport property acquired by the County
for Airport purposes which support parking and commercial ground transportation functions
including long-term and short-term parking facilities, overflow parking lots, curb lanes and
circulation roadway supporting these facilities that are not included in the General Support Facilities
Cost Center, employee parking lots and facilities, car rental ready return space, service areas and
other car rental facilities, and facilities, improvements, and equipment related to other commercial
ground transportation services, including taxicab, limousine, courtesy vehicles, and other pay-forhire vehicles, and the King Building.
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November 30, 2007
Okaloosa County
5.2.4.4
General Aviation
The General Aviation Cost Center includes all land, facilities, improvements and equipment located
at or which are apart of any County-owned general aviation airport and any facilities, improvements,
and equipment located elsewhere that support the operation of any such facilities.
5.2.4.5
Administration
The Administration Cost Center is an indirect cost center and includes all personnel, facilities, and
equipment provided for the general management, administration, direction, maintenance, and
operation of the Airport System including any administrative services and functions provided by
other departments and offices of the County.
5.2.4.6
General Support Facilities
The General Support Facilities Cost Center is an indirect cost center and includes all land and
facilities, improvements, and equipment located on the Eglin Leased Areas and on other Airport
property acquired by the County for Airport purposes which provide for the general and systems
support of the Airport, including Airport access system and other roadways on Airport property not
included in another Airport Cost Center.
5.2.5
Airport Lease and Use Agreements
The provisions of the Airline Agreement commenced October 1, 2003 and unless terminated sooner,
shall expire on September 30, 2008. The Airline Agreement establishes ratemaking procedures for
the term of the agreement. For the purposes of the analyses contained herein, it is assumed that the
rate making procedures established in the existing Airline Agreement remain in effect through the
projection period. Atlantic Southeast, ExpressJet, Gulfstream, and Northwest have executed the
Airline Agreement and operate as signatory carriers at the Airport. Under provisions in the
agreement, Delta currently operates as an affiliate of Atlantic Southeast.
Pursuant to the terms of the Airline Agreement, the County calculates Airline Terminal rentals under
a compensatory approach with revenue sharing credits under which the Airlines pay for their specific
use of the Terminal Area. The calculation of Landing Fees is determined based on a residual
approach with revenue sharing credits. The Airline Agreement provides for the County to charge
those airlines not signatory to the Airline Agreement non-signatory rates and charges.
For each Fiscal Year the County Airport System Requirement, defined in the Airline Agreement as
operating expenses, capital outlays, debt service, amortization, coverage requirement, fund deposits
and certain other charges is determined and allocated to the County’s Direct and Indirect Cost
Centers discussed in Section 5.2.4 of this report in accordance with the County’s cost accounting and
cost allocation methodologies.
The net amount of the Airport System Requirement allocated to each of the two Indirect Cost Centers
is reallocated to Direct Cost Centers based on each Direct Cost Center’s proportionate share of the
direct Operating Expenses. The total amount of the Airport System Requirement allocated and
reallocated to the Terminal Area Cost Center is referred to as the Terminal Area Requirement. The
amount allocated and reallocated to the Airfield Area Cost Center is referred to as the Airfield Area
Requirement. In addition to determining the annual Terminal Area Requirement and Airfield Area
Requirement, the County also separately allocates and determines the annual Operating Expenses of
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November 30, 2007
Okaloosa County
providing law enforcement assistance to the Airlines’ terminal facilities and functions (Security
Charges).
Calculation of Signatory Airlines rates and charges are described below.
5.2.5.1
Terminal Rentals
In accordance with the provisions of the Airline Agreement, the annual Terminal Building Rental Rates
are calculated as follows. The annual Terminal Area Requirement is reduced by the sum of applied
PFCs, investment income, transferred coverage, and reimbursements for loading bridges allocated to
the Terminal Area Cost Center to determine the Net Terminal Area Requirement.
The annual Terminal Building Rental Rate is calculated by dividing the Net Terminal Area
Requirement by the Rental Divisor for the Terminal Building. Rental Divisor is defined as space
within the Terminal Building made available by County for rental to airlines and other Airport
tenants plus space in the Terminal Building assigned to the Transportation Security Administration
(“TSA”).
Space in the new Terminal Building is leased to the Airlines on a Preferential Use, Common Use, or
Joint-Use basis. For Preferential Use space, each Airline pays the amount, which is the product of
the square footage of the Preferentially Leased Premises and the applicable Terminal building Rental
Rate. For Common Use Leased Premises, each Airline utilizing the Common Use Leased Premises
pays its pro-rata share of the product of the Terminal Building Rental Rate and the square footage of
the Common Use Leased Premises based on their pro-rata share of Enplaned Passengers. For Joint
Use Leased Premises, each Airline utilizing the Joint Use Leased Premises pays its pro-rata share of
the product of the Terminal Building Rental Rate and the square footage of the Joint Use Leased
Premises based on a formula agreed to by and between the County and the Airlines occupying the
Joint Use Leased Premises.
5.2.5.2
Landing Fee Calculation
In accordance with the provisions of the Airline Agreement, the annual Landing Fee Rates are
calculated as follows. The annual Airfield Area Requirements is reduced by the sum non-signatory
landing fees, applied PFCs, investment income, transferred coverage, and other airfield area nonairline revenues allocated to the Airfield Area Cost Center to determine the Net Airfield Area
Requirement.
The annual Signatory Landing Fee Rate per thousand pounds landed weight is determined by dividing
the Net Airfield Area Requirement by the estimated Maximum Gross Landed Weight of all Revenue
Aircraft Arrivals by the Signatory Airlines for the Fiscal Year divided by one thousand.
5.2.5.3
Security Charge
In accordance with the provisions of the Airline Agreement, the annual Airlines’ Security Charge for
each Fiscal Year the County calculates the annual costs associated with the operation, maintenance,
management and administration of the County Sheriff’s Officers deployed at the Airport plus (i) any
equipment costs necessary to support the deployed Sheriff Officers and (ii) any TSA space rental
requirements less any amount received as reimbursement from TSA. These costs are then allocated
to various Airport functions and Cost Centers to determine security costs allocable to the Airlines.
Each Airline’s share of the annual Security Charge is determined based on the Airlines’ percentage
of the total enplaned passengers for the Fiscal Year.
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November 30, 2007
Okaloosa County
5.2.5.4
Revenue Sharing
The County calculates and credits against the Airlines’ Terminal Building Rentals and Landing Fees
a Revenue Sharing Credit. The Revenue Sharing Credit is determined by adding together the
following Airport System revenues:
x
Nonairline revenues, including primarily rental car and parking revenues and revenues from
Bob Sikes and Destin/Ft. Walton Beach airports.
x
Unadjusted Airline Revenues, including Terminal Building Rentals, Landing Fees, and
Security Charges amounts prior to the application of the Revenue Sharing Credits.
x
Other Available Revenues, including Pledged PFC Revenue, Pledged CFC Revenue, Investment
Income, Transferred Coverage, Transferred General Purpose Fund and Equipment and Capital
Outlays Account amounts.
Total net revenues available for revenue sharing is then determined by subtracting Operating and
Maintenance Expenses, Debt Service, and Fund Deposits/Transfers, including transfers from the
General Purpose Fund and Equipment and Capital Outlay Accounts; Annual Capital Outlays; and
any restricted revenues included in Other Available Revenues including PFC and CFC Revenue
pledged for coverage; PFC and CFC Investment Income; Non-PFC/CFC Coverage; and any other
restricted charges from the above referenced Airport System revenues.
Sixty (60) percent of the first $1.2 million of revenue sharing amount is shared with the Airlines and
the County retains the remaining 40 percent. When net revenues available for revenue sharing
exceeds $1.2 million, the Airlines receive 40 percent of the amount exceeding $1.2 million and the
County retains the remaining 60 percent of the amount exceeding $1.2 million. Each Signatory Airlines’
allocable share of the credit is in proportion to its percentages of Signatory Airlines’ Terminal Building
Rentals, Landing Fees and Security Charges for the Fiscal Year.
5.2.5.5
Adjustment of Airline Fees and Charges
If, in the first six months of any Fiscal Year, the current Terminal Building Rentals and Landing Fees
would result in an underpayment of 10 percent or more of the amount required to be generated, the
County may adjust the remaining monthly Landing Fee Rate and Terminal Building Rental Rates, as
applicable.
5.2.5.6
Capital Project Approvals
For certain Capital Projects, the Airlines have the right, through a majority-in-interest clause,
(“MII”), to defer a particular Capital Project for a period of up to twelve months. With respect to
Airfield Area Capital Projects, the MII provision means more that 50 percent of Signatory Airlines
that together landed more than 66 percent of the Signatory Airlines’ Landed Weight during the
previous 12-month period. With respect to any Terminal Area Capital Projects, the MII provision
extends to more than 50 percent of all Signatory Airlines that together lease more than 66 percent of
the total square footage of Signatory Airlines’ Preferential Use Space. Capital Projects that are
excluded from this MII provision include:
x
Any Capital Project in either the Terminal Area or Airfield cost center that has a net capital
cost of $500,000 or less, or whenever the aggregate net capital costs of Capital Projects
proposed in any Fiscal Year is estimated to not exceed $1 million. These limitation amounts
are adjusted annually by a CPI adjustment. Net capital cost means the capital cost exclusive
of Grants-in-Aid and PFCs, the capital cost funded from bonds amortized from PFCs, and
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November 30, 2007
Okaloosa County
any other portion of the capital cost paid from funds not included in Signatory airlines’ rates
and charges.
x
Any Capital Project needed for emergency or safety purposes.
x
Any Capital Project needed to comply with any applicable law, rule regulation, policy of
order of any federal, state or local agency or court or any federal or state grant agreement or
airport certification requirement.
x
Any Capital Project needed to remedy any environmental problem.
x
Any Capital Project needed to repair any casualty damage not covered by insurance.
x
Any Capital Project needed to settle lawful claims, satisfy judgments or comply with judicial
orders against the County.
x
Any Capital Project in the Terminal Area Cost Center or the Airfield Cost Center where the
Debt Service related to the capital project is not paid through Signatory Airline rates and
charges.
x
Any Capital Project in the Terminal Area Cost Center of the Airfield Cost Center that does
not result in an increase in Terminal Building Rentals or Landing Fees paid by the Signatory
Airlines.
x
Any Capital Project related to any Airport gate construction, improvements or repairs that are
funded with MAP funds.
5.2.5.7
Extraordinary Coverage
The Airline Agreement provides that for any Fiscal Year in which Revenues less O&M Expenses
plus other funds available to meet the County’s Rate Covenant under the Indenture is or is projected
to be less than 125 percent of the Debt Service Requirement, the Airlines will make Extraordinary
Coverage Protection Payments to the County in an amount equal to the calculated or projected
shortfall in Revenues. Payments will be apportioned among the Airlines based on their pro-rata
share of Terminal Building Rentals and Landing Fees for the Fiscal Year. Extraordinary Coverage
Protection Payments will be repaid to the Airlines as soon as funds are available for repayment.
5.3
Financing Plan
As discussed earlier, the proceeds of the Series 2007 Bond will fund, in part, the 2007 Project as
described in Chapter I. As presented in Chapter IV, see Table IV-1 and Table IV-2, the total cost
associated with the 2007 Project is approximately $13.2 million, with approximately $7.4 million
funded from the proceeds of the Series 2007 Bonds. A list of sources and uses of funds resulting
from the sale of the Series 2007 Bonds is presented in Table V-1.
The Series 2007 Bonds have the following characteristics:
x
Fixed rate securities were issued.
x
The Series 2007 Bonds are taxable and have an average interest rate of approximately 7.4
percent.
x
The Series 2007 Bonds have a debt service reserve requirement that is initially funded with
bond proceeds at the maximum annual debt service.
B-86
November 30, 2007
Okaloosa County
Table V-1
Estimated Sources and Uses of Funds
2007
Project
Sources:
Par Amount of Bonds
$9,980,000
TOTAL SOURCES
$9,980,000
Uses:
Construction Fund Deposit
Capitalized Interest Fund Deposit
Debt Service Reserve Fund Deposit
Other Costs of Issuance
$7,229,188
797,732
892,975
1,060,106
TOTAL USES
$9,980,000
Fullerton & Friar, Inc. (November 2007)
B-87
November 30, 2007
Okaloosa County
x
A portion of Series 2007 Bonds will be used to pay interest through completion of the 2007
Project.
x
The Series 2007 Bonds have a final maturity date of October 1, 2030.
Table V-2 presents the annual debt service requirements resulting from the issuance of the Series
2007 Bonds as well as the existing Airport debt service on Series 2003 Bonds, the only other
outstanding series, and anticipated commercial paper expense. The annual debt service requirement
in FY 2010 on Series 2007 Bonds, the first full year of debt service on that series, is approximately
$891,775. Aggregate annual debt service thereafter on Series 2003 and Series 2007 Bonds is
approximately $1.7 million. Commercial paper expense in FY 2010, the first year of principal and
interest payments on the estimated $2.0 million total commercial paper draw that is anticipated to
fund a portion of project costs in FY 2008 and FY 2009, is estimated at approximately $253,000.
B-88
November 30, 2007
Okaloosa County
Table V-2
Debt Service and Commercial Paper Expense
(Fiscal Year Ended September 30)
Actual
2006
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Series 2003
Airfield Area
Terminal Area
Administration
General Aviation
$54,328
654,138
88,730
0
0
0
$53,915
653,913
88,043
0
0
0
$53,228
652,575
92,230
0
0
0
$52,888
655,375
91,150
0
0
0
$57,288
651,975
89,950
0
0
0
$56,438
652,838
88,675
0
0
0
$55,538
652,713
87,325
0
0
0
$54,613
651,844
90,938
0
0
0
$53,663
655,206
89,275
0
0
0
$57,563
650,906
92,350
0
0
0
$56,188
651,056
90,150
0
0
0
$797,195
$795,870
$798,033
$799,413
$799,213
$797,950
$795,575
$797,394
$798,144
$800,819
$797,394
Airfield Area
Terminal Area
Administration
General Aviation
$0
0
0
0
0
0
$0
0
0
0
0
0
$0
0
0
0
0
0
$0
0
554,988
0
0
0
$0
0
891,775
0
0
0
$0
0
887,675
0
0
0
$0
0
892,975
0
0
0
$0
0
887,075
0
0
0
$0
0
890,575
0
0
0
$0
0
892,875
0
0
0
$0
0
888,188
0
0
0
TOTAL SERIES 2007
$0
$0
$0
$554,988
$891,775
$887,675
$892,975
$887,075
$890,575
$892,875
$888,188
$54,328
654,138
88,730
0
0
0
$53,915
653,913
88,043
0
0
0
$53,228
652,575
92,230
0
0
0
$52,888
655,375
646,138
0
0
0
$57,288
651,975
981,725
0
0
0
$56,438
652,838
976,350
0
0
0
$55,538
652,713
980,300
0
0
0
$54,613
651,844
978,013
0
0
0
$53,663
655,206
979,850
0
0
0
$57,563
650,906
985,225
0
0
0
$56,188
651,056
978,338
0
0
0
$797,195
$795,870
$798,033
$1,354,400
$1,690,988
$1,685,625
$1,688,550
$1,684,469
$1,688,719
$1,693,694
$1,685,581
$0
$0
$49,500
$90,000
$252,758
$252,758
$252,757
$252,758
$252,758
$252,758
$252,758
$797,195
$795,870
$847,533
$1,444,400
$1,943,746
$1,938,383
$1,941,307
$1,937,227
$1,941,477
$1,946,452
$1,938,339
TOTAL SERIES 2003
Series 2007
B-89
Total Debt Service
Airfield Area
Terminal Area
Administration
General Aviation
TOTAL DEBT SERVICE
TOTAL COMMERCIAL PAPER EXPENSE
TOTAL DEBT SERVICE AND COMMERCIAL PAPER EXPENSE
Fullerton & Friar, Inc. (Series 2003 - July 2004; Series 2007 - November 2007; Commercial Paper - August 2007)
November 30, 2007
Okaloosa County
5.4
Operations and Maintenance Expenses
Table V-3 below illustrates historical O&M Expense for the Airport System from FY 2002 through
Estimated FY 2006.
Table V-3
Historical O&M Expenses
Fiscal Year Ended
1/
Actual
2002
Actual
2003
Actual
2004
Actual
2005
Actual
2006
Compounded
Annual Growth Rate
Total O&M Expenses ($000)
$2,634
$2,972 1/
$3,079
$4,347
$5,134
18.2%
Enplaned Passengers
329,481
355,367
388,958
407,053
370,558
4.0%
O&M Expenses per
Passenger
$8.00
$8.36
$7.92
$10.68
$13.85
14.7%
Estimated O&M for the purposes of rates and charges calculations.
Source: Okaloosa County, Okaloosa Regional Airport
Historical O&M Expenses from FY 2002 to FY 2006 increased at a compounded annual growth rate
of 18.2 percent, higher than inflationary impacts. This annual increase can be attributed to increased
personnel costs in the administration function and increased contracted services expenses, each of
which are primarily attributable to the new terminal building. Insurance, utilities, and cost of fuel
were also contributors to the increase in expenses. As described in Section 5.5 of this chapter, nonairline revenues also experienced strong growth over this period. To a large degree, growth in nonairline revenues offset the growth in O&M expenses.
Table V-4 presents O&M Expense for Okaloosa County Airport System by type of expense, airport,
and cost center for FY 2006, Budgeted FY 2007, and projected FY 2008 through FY 2016. O&M
expenses were approximately $5.1 million in FY 2006, budgeted to be $5.9 million in FY 2007, and
projected to increase to $9.0 million in FY 2016. The increase in O&M Expenses projected between
FY 2007 and FY 2016 represents a compounded annual growth rate of 4.8 percent.
As discussed earlier, there are seven direct and indirect categories of expenses included in the Airport’s
financial structure. The major expense categories include the following:
x
Personnel Services. These expenses represent the salaries, wages, and benefits associated
with employment of all Airport personnel as well as personnel at Destin/Ft. Walton Beach
Airport and Bob Sikes Airport. These expenses are projected to increase from approximately
$2.3 million budgeted in FY 2007 to approximately $3.8 million in FY 2016. The
compounded annual growth rate for these expenses for the period FY 2007 to FY 2016 is 5.9
percent.
x
Professional Services. These expenses include costs associated with accounting and
auditing, attorney, consulting, engineering, permitting, and other services that support the
operation of the Airport System. Professional services expenses are projected to increase
from approximately $305,000 in the FY 2007 budget to approximately $435,000 in FY 2016,
B-90
November 30, 2007
Okaloosa County
Table V-4
Operation & Maintenance Expenses
Actual
2006
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Airport System O&M by Type of Expense:
Personnel Services
Professional Services
Contract Services
Utilities
Rentals & Leases
Maintenance & Repairs
Other
$1,978,727
349,988
907,927
544,290
335,305
503,147
514,605
$2,286,978
305,300
1,208,888
566,690
554,900
354,188
665,690
$2,421,152
317,512
1,257,244
589,358
521,734
364,814
684,837
$2,563,297
330,212
1,307,533
612,932
537,386
375,758
705,382
$2,713,893
343,421
1,559,835
687,449
553,508
387,031
726,543
$2,873,449
357,158
1,626,408
715,992
570,113
398,642
748,340
$3,042,503
371,444
1,682,977
742,510
587,216
410,601
770,790
$3,221,629
386,302
1,741,809
770,089
604,833
422,919
793,913
$3,411,435
401,754
1,802,994
798,770
622,978
435,607
817,731
$3,612,563
417,824
1,866,627
828,599
641,667
448,675
842,263
$3,825,699
434,537
1,932,805
859,622
660,917
462,135
867,531
TOTAL O&M EXPENSES
$5,133,989
$5,942,634
$6,156,649
$6,432,501
$6,971,680
$7,290,101
$7,608,042
$7,941,494
$8,291,268
$8,658,218
$9,043,245
Okaloosa Regional Airport:
Personnel Services
Professional Services
Contract Services
Utilities
Rentals & Leases
Maintenance & Repairs
Other
$1,725,273
266,917
902,227
517,630
331,392
362,054
435,107
$1,978,479
252,500
1,129,688
531,200
550,900
247,188
556,034
$2,094,143
262,600
1,174,876
552,448
517,614
254,604
572,715
$2,216,668
273,104
1,221,871
574,546
533,142
262,242
589,896
$2,346,467
284,028
1,470,745
647,528
549,137
270,109
607,593
$2,483,976
295,389
1,533,755
674,474
565,611
278,212
625,821
$2,629,663
307,205
1,586,618
699,331
582,579
286,559
644,596
$2,784,018
319,493
1,641,596
725,182
600,056
295,155
663,934
$2,947,567
332,273
1,698,772
752,068
618,058
304,010
683,852
$3,120,863
345,564
1,758,236
780,029
636,600
313,130
704,367
$3,304,497
359,386
1,820,078
809,108
655,698
322,524
725,498
TOTAL O&M EXPENSES
$4,540,598
$5,245,989
$5,429,000
$5,671,469
$6,175,607
$6,457,239
$6,736,550
$7,029,435
$7,336,600
$7,658,789
$7,996,790
Destin/Ft. Walton Beach Airport
242,350
350,927
367,795
385,527
404,169
423,771
444,384
466,062
488,864
512,851
538,086
Bob Sikes Airport
351,041
345,718
359,855
375,505
391,904
409,091
427,108
445,997
465,804
486,578
508,368
$5,133,989
$5,942,634
$6,156,649
$6,432,501
$6,971,680
$7,290,101
$7,608,042
$7,941,494
$8,291,268
$8,658,218
$9,043,245
$562,469
2,009,247
416,562
307,564
1,244,757
593,390
$733,939
2,485,558
478,533
316,254
1,231,706
696,645
$745,337
2,597,583
478,557
322,779
1,284,743
727,650
$778,308
2,716,358
498,985
337,610
1,340,208
761,031
$812,912
2,840,908
770,375
353,192
1,398,220
796,073
$849,238
2,971,532
808,002
369,567
1,458,901
832,862
$887,380
3,108,544
831,466
386,777
1,522,383
871,491
$927,437
3,252,278
856,048
404,870
1,588,802
912,059
$969,514
3,403,083
881,807
423,893
1,658,302
954,668
$1,013,721
3,561,330
908,803
443,899
1,731,036
999,428
$1,060,178
3,727,408
937,102
464,941
1,807,162
1,046,455
$5,133,989
$5,942,634
$6,156,649
$6,432,501
$6,971,680
$7,290,101
$7,608,042
$7,941,494
$8,291,268
$8,658,218
$9,043,245
$815,838
2,914,330
604,206
799,614
$1,002,408
3,394,755
653,576
891,895
$1,018,787
3,550,584
654,129
933,149
$1,063,486
3,711,653
681,817
975,544
$1,095,542
3,828,624
1,038,217
1,009,296
$1,143,889
4,002,532
1,088,345
1,055,334
$1,195,530
4,188,013
1,120,200
1,104,299
$1,249,742
4,382,517
1,153,544
1,155,691
$1,306,663
4,586,510
1,188,457
1,209,639
$1,366,442
4,800,482
1,225,018
1,266,276
$1,429,235
5,024,951
1,263,315
1,325,745
$5,133,989
$5,942,634
$6,156,649
$6,432,501
$6,971,680
$7,290,101
$7,608,042
$7,941,494
$8,291,268
$8,658,218
$9,043,245
Airport System O&M by Airport:
B-91
AIRPORT SYSTEM TOTAL
Airport System O&M by Cost Center:
Airfield Area
Terminal Area
Administration
General Aviation
Airport System O&M by Cost Center After Allocation:
Airfield Area
Terminal Area
General Aviation
November 30, 2007
Okaloosa County
representing a compounded annual growth rate for these expenses of approximately 4.0
percent over the period.
x
Contract Services. This category includes services provided by outside contractors such as
security, parking, skycap, lawn maintenance, and other services. In addition, certain costs
related to County administrative functions that are allocated to the Airport are included in this
category. Contributing to the O&M increase in Budget FY 2007 as compared to FY 2006 is
an increase of approximately $250,000 in contract service expenses. These expenses are
projected to increase from approximately $1.2 million budgeted in FY 2007 to approximately
$1.9 million in FY 2016. A portion of this increase is attributable to contract services
expenses included in the O&M component of the new rental car service facility, estimated at
approximately $200,000 in FY 2010 and escalated at 3.0 percent per year thereafter. The
compounded annual growth rate for these expenses for the period FY 2007 to FY 2016 is 5.4
percent.
x
Utilities. Utilities expenses include the cost of electricity, gas, sewer and water, and waste
disposal for the Airport System. The compounded annual growth rate for these expenses for
the period FY 2007 to FY 2016 is 4.7 percent and they are projected to increase from
approximately $567,000 in the FY 2007 budget to approximately $860,000 in FY 2016. A
portion of this increase is attributable to utilities expenses anticipated for the new rental car
service facility, estimated at approximately $50,000 in FY 2010 and escalated at 3.0 percent
per year thereafter.
x
Rentals & Leases. This category includes Airport System costs related to the rental and
lease of land, buildings, equipment, and fleet vehicles. The largest component of this
expense category is the County’s lease expense associated with the Joint-Use Agreement.
Total Rentals and Leases expense is projected to increase from approximately $555,000 in
the FY 2007 budget to approximately $661,000 in FY 2016. The FY 2007 budget currently
includes an increase of approximately $230,000 in land lease expenses that did not
materialize. Representative of the conservative approach used to budget this item in FY
2007, the actual FY 2008 land lease amount in the new lease, and the 3.0 percent escalation
factor applicable to the land lease and the Joint-Use Agreement for the period FY 2008
through the end of their terms, the compounded annual growth rate for these expenses for the
period FY 2007 to FY 2016 is 2.0 percent..
x
Maintenance & Repairs. Expenses related to the maintenance and repair of Airport System
facilities and equipment is included in this category. Maintenance and repairs expenses are
projected to increase from the budgeted FY 2007 amount of approximately $354,000 to
approximately $462,000 in FY 2016, representing a compounded annual growth rate of
approximately 3.0 percent.
x
Others. The largest single expense item included in this category of expense is insurance.
Additional items included in this category include, but are not limited to, advertising,
promotion, supplies, training, and memberships. The compounded annual growth rate for
these expenses for the period FY 2007 to FY 2016 is 3.0 percent and they are projected to
increase from approximately $666,000 in the FY 2007 budget to approximately $868,000 in
FY 2016.
Specific points concerning the projections of O&M Expenses by Direct Cost Center, after the
allocation of indirect expenses are discussed below:
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November 30, 2007
Okaloosa County
5.4.1
Airfield Area
O&M Expenses in the Airfield Area Cost Center are expected to increase from approximately $1.0
million budgeted in FY 2007 to approximately $1.4 million in FY 2016. This increase represents a
compounded annual growth rate of 4.0 percent during this period.
5.4.2
Terminal Area
O&M Expenses in the Terminal Area Cost Center are expected to increase from approximately $3.4
million budgeted in FY 2007 to approximately $5.0 million in FY 2016. This increase represents a
5.4.3
O&M Expenses in the Parking/Ground Transportation Cost Center are expected to increase from
approximately $654,000 budgeted in FY 2007 to approximately $1.3 million in FY 2016. This
increase represents a compounded annual growth rate of 7.6 percent during this period and includes
anticipated O&M expenses associated with the new rental car service facility. The O&M component
of the new service facility is estimated at approximately $250,000 in FY 2010, the first full year after
DBO, and anticipated to increase at a rate of 3.0 percent per year.
5.4.4
General Aviation
O&M Expenses in the General Aviation Cost Center are expected to increase from approximately
$892,000 budgeted in FY 2007 to approximately $1.3 million in FY 2016. This increase represents a
5.5
Nonairline Revenues
Table V-5 below illustrates historical Nonairline Revenues from FY 2002 through Estimated FY
2006:
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November 30, 2007
Okaloosa County
Table V-5
Historical Nonairline Revenues
Actual
2002
Actual
2003
Actual
2004
Actual
2005
Total Nonairline Revenues
($000)
$2,894
$3,364
$3,441
$4,352
$5,139
15.4%
Enplaned Passengers
329,481
355,367
388,958
407,053
370,558
4.0%
Nonairline Revenue
per Passenger
$8.78
$9.47
$8.85
$10.69
$13.87
12.1%
Fiscal Year Ended
Actual
2006
Compounded
Annual Growth Rate
Source: Okaloosa County, Okaloosa Regional Airport
Historical nonairline revenue from FY 2002 to FY 2006 increased at a compounded annual growth
rate of 15.4 percent. This annual increase can be attributed to growth in rental car revenues and
parking revenues at the Airport, strong growth in revenues at the County’s two general aviation
airports, and growth in other revenue items. Nonairline revenues presented in Table V-5 for FY
2005 and FY 2006 include the proceeds of land sales at Bob Sikes Airport. Per the terms of the
Indenture, land sale proceeds are excluded from Revenues in the determination of Airline rates and
charges.
Table V-6 presents nonairline revenues for the Airport System by airport and type of revenue for FY
2006, Budgeted FY 2007, and projected FY 2008 through 2016. Nonairline revenues are budgeted to
be approximately $5.4 million in FY 2007 and projected to be approximately $7.9 million in FY
2016. This increase represents a compounded annual growth rate of 4.4 percent. In general,
projections of future nonairline revenues were based on a review of existing agreements, historical
trends, the anticipated impacts of inflation, expected rate/revenue increases, and the projected growth
in activity. Starting in FY 2010, an increase of approximately $250,000 in rental car revenues,
escalated at 3.0 percent per year thereafter, is expected as an offset to incremental O&M expenses
anticipated to result from the new rental car service facility. Specific points concerning these
projections are discussed below:
5.5.1
Rental Car Revenue
Rental car revenue at the Airport is comprised of commission fees, terminal and parking area space
rents, and anticipated service facility rentals (including reimbursements for the facility’s O&M
component). Total rental car revenues are projected to increase from approximately $2.7 million
budgeted in FY 2007 to approximately $4.1 million in FY 2016, representing a compounded annual
growth rate of approximately 4.8 percent.
Commission revenues for the period FY 2007 through FY 2010 are primarily comprised of minimum
annual guarantees (MAG) included in the rental car concession agreement. In addition to the MAG,
commission revenues included in Table V-6 include commissions on excess rental car gross
revenues, an amount budgeted at $60,000 in FY 2007, and increased thereafter based on anticipated
inflationary impacts. Beyond FY 2010, total rental car commission revenues are projected to
increase based on projected activity growth and inflationary impacts.
B-94
November 30, 2007
Okaloosa County
Table V-6
Nonairline Revenue by Airport and Revenue Source
Actual
2006
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Okaloosa Regional Airport:
B-95
Rental Car (excluding CFC)
Commission
Auto Rentals - Other
Service Facility
$1,954,091
341,265
0
$2,104,817
418,972
149,700
$2,184,368
431,541
154,191
$2,276,706
444,487
158,816
$2,359,365
457,822
413,581
$2,462,691
471,557
425,988
$2,570,543
485,703
438,768
$2,683,117
500,274
451,931
$2,800,622
515,283
465,489
$2,923,273
530,741
479,453
$3,051,295
546,663
493,837
TOTAL RENTAL CAR
$2,295,356
$2,673,489
$2,770,100
$2,880,010
$3,230,768
$3,360,236
$3,495,014
$3,635,323
$3,781,394
$3,933,468
$4,091,796
Concessionaire
Advertising
Parking
Miscellaneous/Limos
TSA Rentals & Reimbursements
Fuel Flowage
Other Revenue
$123,929
55,223
1,527,290
56,012
191,174
49,752
43,754
$155,500
40,000
1,513,000
63,450
203,405
84,000
21,374
$162,310
41,104
1,579,260
65,354
213,575
86,053
22,015
$169,418
42,238
1,648,423
67,314
224,254
88,156
22,676
$176,838
43,403
1,720,614
69,334
235,467
90,310
23,356
$184,582
44,600
1,795,967
71,414
247,240
92,517
24,057
$192,666
45,831
1,874,620
73,556
259,602
94,778
24,778
$201,103
47,095
1,956,717
75,763
272,582
97,094
25,522
$209,911
48,394
2,042,410
78,035
286,211
99,467
26,287
$219,103
49,729
2,131,855
80,377
300,522
101,898
27,076
$228,699
51,101
2,225,218
82,788
315,548
104,388
27,888
TOTAL OKALOOSA REGIONAL
$4,342,490
$4,754,218
$4,939,771
$5,142,488
$5,590,089
$5,820,613
$6,060,844
$6,311,199
$6,572,109
$6,844,028
$7,127,426
$1,170
232,357
132,268
0
$1,080
209,243
153,304
0
$1,112
215,520
157,903
0
$1,146
221,986
162,640
0
$1,180
228,645
167,519
0
$1,216
235,505
172,545
0
$1,252
242,570
177,721
0
$1,290
249,847
183,053
0
$1,328
257,342
188,545
0
$1,368
265,063
194,201
0
$1,409
273,015
200,027
0
$365,795
$363,627
$374,536
$385,772
$397,345
$409,265
$421,543
$434,190
$447,215
$460,632
$474,451
$6,110
46,362
45,631
189,630
0
733
$6,107
39,852
68,444
121,623
0
0
$6,290
41,048
70,497
125,272
0
0
$6,479
42,279
72,612
129,030
0
0
$6,673
43,547
74,791
132,901
0
0
$6,873
44,854
77,034
136,888
0
0
$7,080
46,199
79,345
140,994
0
0
$7,292
47,585
81,726
145,224
0
0
$7,511
49,013
84,177
149,581
0
0
$7,736
50,483
86,703
154,068
0
0
$7,968
51,998
89,304
158,690
0
0
$288,465
$236,026
$243,107
$250,400
$257,912
$265,649
$273,619
$281,827
$290,282
$298,991
$307,960
$4,996,750
$5,353,871
$5,557,413
$5,778,660
$6,245,346
$6,495,528
$6,756,007
$7,027,216
$7,309,607
$7,603,650
$7,909,837
Destin/Fort Walton Beach Airport
Landing Fee Revenue
Fixed Base Operation
Hangar and Field Fees
Other Revenue
TOTAL DESTIN/FORT WALTON BEACH
Bob Sikes Airport
Federal Government
Fixed Base Operation
Hangar and Field Fees
Crestview Aerospace
Land Sale - Industrial Park
Miscellaneous
TOTAL BOB SIKES
TOTAL - AIRPORT SYSTEM
November 30, 2007
Okaloosa County
5.5.2
Public Parking
Parking revenue at the Airport is projected to increase from approximately $1.5 million budgeted in
FY 2007 to approximately $2.2 million in FY 2016, representing a compounded annual growth rate
of approximately 4.4 percent.
The County’s contract with the existing parking operator, Republic Parking, expired at the end of FY
2005. Since then, the parking contract has been extended on a month-to-month basis using key
provisions of the expired lease. The County is currently examining alternative parking agreements,
including a parking management contract, seeking to maximize parking revenues. For the purposes
of this analysis, parking revenue projections are developed consistent with the prior parking
agreement. Should the County execute a parking management contract, or other agreement, the
parking revenue projection contained herein could be understated.
Therefore, growth in parking revenues in this projection methodology is attributable to projected growth
in passenger traffic and assumed parking rate increases. As presented in Chapter III, passenger
enplanements at the Airport are projected to increase at a compounded average annual rate of
approximately 2.8 percent from FY 2007 to FY 2016. That growth rate is applied to parking revenues
through the projection period in addition to a parking rate increase assumed to be implemented prior to
the start of FY 2008. The assumed parking rate increase will raise the maximum daily rate in for short
term parking from $8.50 to $10.00 and the maximum daily rate for the long term lot from $6.00 to $7.00.
5.5.3
Passenger Building Revenue
Passenger building revenue at the Airport is primarily comprised of concessionaire and advertising
revenues. Total passenger building revenues are projected to increase from approximately $196,000
budgeted in FY 2007 to approximately $280,000 in FY 2016, representing a compounded annual
The County executed a 15-year concession agreement with the Airport’s current concessionaire on
June 7, 2004. Under the terms of the existing agreement, the concessionaire pays a MAG or a
percentage rent based on total food and beverage sales, whichever is greater. In each full year of
operation under this agreement, revenues from the concessionaire have exceeded the MAG. Future
concessionaire revenues are projected based on anticipated passenger growth at the Airport and
inflationary impacts.
The County’s existing contract for advertising in the terminal building has a term extending 10-years
from DBO of the new terminal. Per the existing contract, advertising revenue received by the
County is comprised of a commission calculated based on 30 percent of gross revenues received by
the advertiser for static terminal rentals and 23 percent of gross revenues received from video,
motion, or computer advertising. Future advertising revenues are projected based on anticipated
passenger growth at the Airport.
5.5.4
TSA Rentals and Reimbursements
TSA rentals and reimbursements are projected to increase from approximately $203,400 budgeted in
FY 2007 to approximately $316,000 in FY 2016, representing a compounded annual growth rate of
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November 30, 2007
Okaloosa County
5.5.5
Fuel Flowage
Fuel flowage revenues are projected to increase from approximately $84,000 budgeted in FY 2007 to
approximately $105,000 in FY 2016, representing a compounded annual growth rate of
Under the County’s current agreement with Flightline, Inc., that company manages and operates the
Airport’s fueling concession and is reimbursed for a portion of its incurred expenses. Currently, the
County reimburses Flightline expenses at a rate of $2,000 per month, or $24,000 per year, which is
included as a component in Airport O&M. For the right to do business at the Airport, Flightline is
charged a fuel flowage fee of $0.02 per gallon pumped. The current five-year contract became
effective on January 1, 2007, and provides Flightline an option for a five-year extension at the end of
the initial term. The contract does include provisions for increasing the fuel flowage fee; however,
for the sake of this analysis no increases area assumed. Therefore, projected increases in fuel
flowage revenues at the Airport are attributable to increased aircraft operations.
5.5.6
Miscellaneous/Limo
Miscellaneous and limousine revenues are projected to increase from approximately $63,500
budgeted in FY 2007 to approximately $82,800 in FY 2016, representing a compounded annual
5.5.7
Other
Other revenues are projected to increase from approximately $21,400 budgeted in FY 2007 to
approximately $27,900 in FY 2016, representing a compounded annual growth rate of approximately
3.0 percent.
5.5.8
Destin/Fort Walton Beach Airport
Revenues items at Destin/Ft. Walton Beach Airport include fixed based operation rentals and fees,
hangar and field fees, and landing fee revenue. Total revenues are projected to increase from
approximately $363,600 budgeted in FY 2007 to approximately $474,500 in FY 2016. This increase,
representing a compounded annual growth rate of 3.0 percent, is primarily attributable to anticipated
rental rate increases reflective of inflationary impacts.
5.5.9
Bob Sikes Airport
Revenues items Bob Sikes Airport include fixed based operation rentals and fees, hangar and field fees,
and rentals from tenants, including the federal government. Total revenues are projected to increase from
approximately $236,000 budgeted in FY 2007 to approximately $308,000 in FY 2016. This increase,
representing a compounded annual growth rate of 3.0 percent, is primarily attributable to anticipated
rental rate increases reflective of inflationary impacts.
5.6
PFC and CFC Revenues
The Airport is currently authorized to collect a passenger facility charge (PFC) of $4.50 per enplaned
passenger. The Airport is currently authorized by the FAA to collect a total PFC amount of
approximately $37.3 million and has collected approximately $8.6 million through March 2007.
County Ordinance No. 07-21 adopted on May 1, 2007, imposed a uniform CFC of $3.25 per rental
transaction day on rental car customers’ rental agreements at the Airport beginning on July 1, 2007.
The CFC can be increased by subsequent ordinance of the County. Projected FY 2007 CFC
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November 30, 2007
Okaloosa County
collections reflect the CFC rate increase from $2.50 to $3.25 on July 1, 2007. Table V-7 presents
projections of PFC and CFC collections for the forecast period based on the activity forecast
prepared in Chapter III of this report.
For the purposes of this analysis, it is assumed that 90 percent of enplaning passengers at the Airport
are PFC-eligible, and no changes to the current PFC rate or administrative expense are assumed. In
addition to the CFC rate increase in FY 2007, the CFC projection assumes that the ratio of rental car
transaction days per enplanement experienced in FY 2006 remains constant through the projection
period. As shown in Table V-7, the PFC and CFC potential collections based on the forecast are
more than sufficient to cover the estimated total annual debt service for Series 2003 Bonds and Series
2007 Bonds, respectively.
5.7
Airline Rates
Airline rates for the period Budget FY 2007 through FY 2016, calculated per the requirements of the
Airline Agreement, are presented in the following sections. Included in the calculation of terminal
rental rate, landing fee rate, and security charges are projected amounts of net revenues available for
revenue sharing.
5.7.1
Terminal Rental Rate
The terminal rental rate calculation combines direct and indirect O&M expenses and debt service and
other requirements attributable to the Terminal Area Cost Center to determine the Terminal Area
Requirement. Terminal area other revenue credits, passenger loading bridge charges, and personnelrelated security costs allocable to the Airlines’ Security Charge are credited to the Terminal Area
Requirement resulting in a Net Terminal Area Requirement. The Average Terminal Building Rental
Rate is calculated by dividing the Net Terminal Area Requirement by the Airline Rentable Space for
the Terminal Building, which is defined as the sum of rentable space and space assigned to the TSA
for pre-boarding screening of airline passengers and baggage.
Table V-8 presents the calculation of the Signatory Airlines’ Terminal Rental Rate. Per the Airline
Agreement, a revenue sharing credit is included in the calculation. Based on the existing Airline
Agreement, 60 percent of the calculated Total Revenue Sharing Credit in each year is allocable to the
terminal and 40 percent is allocable to the airfield. The amount allocable to the terminal is further
allocated to Airlines’ Rented Space and Security Space based on their pro-rata share of terminal
square footage. After application of allocable amounts of projected revenue sharing credits to
Airlines’ Rented Space, the Signatory Airlines’ Effective Terminal Rental Rate as Adjusted is
projected to increase from approximately $40.47 per square foot in FY 2007, to approximately
$65.77 per square foot in FY 2016. This increase is primarily attributable to increasing O&M
expenses, growth in annual capital charges, and increasing amortization expense.
5.7.2
Landing Fee Rate
The Signatory Airline landing fee rate calculation combines direct and indirect O&M expenses and
debt service and other requirements attributable to the Airfield Area Cost Center to determine the
Airfield Area Requirement. Airfield area nonairline revenues and other revenue credits attributable
to the Airfield Area Cost Center are applied to the Airfield Area Requirement to calculate the Net
Airfield Area Requirement. The Net Airfield Area Requirement is divided by Signatory Airline
landed weight to determine the Signatory Airline Unadjusted Landing Fee Rate per thousand pounds
B-98
November 30, 2007
Okaloosa County
Table V-7
Projected PFC and CFC Collections
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Total Enplanements
PFC Eligible Enplanement %
399,600
90%
411,000
90%
422,100
90%
433,700
90%
445,900
90%
458,400
90%
471,700
90%
485,200
90%
499,600
90%
514,300
90%
Total PFC Eligible Enplanements
359,640
369,900
379,890
390,330
401,310
412,560
424,530
436,680
449,640
462,870
PFC Rate
Less: Admininstration Expense
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
$4.50
0.11
Net PFC Rate
$4.39
$4.39
$4.39
$4.39
$4.39
$4.39
$4.39
$4.39
$4.39
$4.39
$1,578,820
$1,623,861
$1,667,717
$1,713,549
$1,761,751
$1,811,138
$1,863,687
$1,917,025
$1,973,920
$2,031,999
PFC Collections
TOTAL PFC COLLECTIONS
Less: PFCs Pledged To Pay Debt Service
Less: PFC Pledged Coverage
NET REMAINING PFCs AVAILABLE FOR PAY-AS-YOU-GO
PROJECTS
($795,870)
331
($798,033)
(541)
($799,413)
(345)
($799,213)
50
($797,950)
316
$783,281
$825,288
$867,960
$914,386
$964,117
B-99
Budget
2007
CFC Collections
2008
2009
2010
2011
($795,575)
594
$1,016,157
Projected
2012
($797,394)
(455)
$1,065,838
2013
($798,144)
(188)
$1,118,694
($800,819)
(669)
$1,172,432
2014
2015
($797,394)
856
$1,235,462
2016
1/
Total Enplanements
Rental Car Transaction Days per Enplanement
399,600
0.94
411,000
0.94
422,100
0.94
433,700
0.94
445,900
0.94
458,400
0.94
471,700
0.94
485,200
0.94
499,600
0.94
514,300
0.94
Total Rental Car Transaction Days
376,887
387,639
398,108
409,049
420,556
432,345
444,889
457,622
471,203
485,068
$2.69
$3.25
$3.25
$3.25
$3.25
$3.25
$3.25
$3.25
$3.25
$3.25
$1,012,885
$1,259,828
$1,293,852
$1,329,410
$1,366,806
$1,405,122
$1,445,890
$1,487,271
$1,531,411
$1,576,471
CFC Rate
TOTAL CFC COLLECTIONS
Less:
Less:
Less:
Less:
Less:
CFCs Pledged To Pay Debt Service
CFC Pledge Coverage
CFCs Used for Eligible O&M Expenses
CFC Revenues for Ground Rentals on Other Areas
CFCs for Operation and Maintenance Reserve Fund
NET REMAINING CFCs AVAILABLE FOR PAY-AS-YOU-GO
PROJECTS
1/
$0
0
(108,193)
0
0
$904,692
$0
0
(108,193)
(34,119)
0
$1,117,516
($554,988)
(138,747)
(108,193)
(35,143)
0
($891,775)
(84,197)
(96,295)
(36,197)
(41,667)
($887,675)
1,025
(21,295)
(37,283)
0
($892,975)
(1,325)
(21,295)
(38,401)
0
($887,075)
1,475
(21,295)
(39,553)
0
($890,575)
(875)
(21,295)
(40,740)
0
($892,875)
(575)
(21,295)
(41,962)
0
($888,188)
1,172
(21,295)
(43,221)
0
$456,782
$179,279
$421,578
$451,126
$499,442
$533,786
$574,704
$624,939
In FY 2011, the year in which the maximum amount of CFCs are pledged to debt service and coverage, approximately 63 percent of total CFC collections are pledged to debt service
and coverage, or used for eligible O&M expenses.
November 30, 2007
Okaloosa County
Table V-8
Signatory Airlines' Terminal Rental Rate
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Terminal Area Operating Requirement
Total O&M (Direct and Indirect)
Allocated Indirect Other Requirements
Debt Service & Other Airport Requirements
Series 2003 Debt Service
Coverage
Fund Deposits:
O&M Reserve
Repair & Rehabilitation Fund
Capital Charges:
Annual Capital Charges
Amortization
TERMINAL AREA REQUIREMENT
B-100
Less: Other Revenue Credits and Airline Reimbursements
Applied PFC Revenue 1/
Allocated Investment Income
Transfer from General Purpose Fund 2/
Passenger Loading Bridge Charge
Security Cost Reimbursement
$3,394,755
62,551
$3,550,584
69,346
$3,711,653
72,997
$3,828,624
71,575
$4,002,532
74,387
$4,188,013
76,846
$4,382,517
79,741
$4,586,510
82,735
$4,800,482
85,832
$5,024,951
89,035
$653,913
163,478
$652,575
163,144
$655,375
163,844
$651,975
162,994
$652,838
163,209
$652,713
163,178
$651,844
162,961
$655,206
163,802
$650,906
162,727
$651,056
162,764
$138,600
78,967
$16,373
0
$21,104
0
$22,124
0
$24,361
0
$24,324
0
$25,511
0
$26,760
0
$28,074
0
$29,457
0
$80,065
0
$82,724
6,911
$85,471
6,911
$88,310
6,911
$91,243
6,911
$94,274
6,911
$97,405
9,258
$100,640
11,605
$103,982
13,952
$107,436
16,299
$4,572,328
$4,541,658
$4,717,356
$4,832,513
$5,015,482
$5,206,259
$5,409,236
$5,627,257
$5,845,955
$6,080,999
($823,819)
(40,448)
(217,567)
(21,600)
(285,123)
NET TERMINAL AREA REQUIREMENT
($822,339)
(46,834)
0
(28,800)
(309,276)
($826,038)
(47,401)
0
(28,800)
(334,835)
($821,993)
(47,866)
0
(28,800)
(361,885)
($823,282)
(48,398)
0
(28,800)
(390,514)
($823,342)
(48,891)
0
(28,800)
(420,817)
($822,480)
(49,370)
0
(28,800)
(452,896)
($826,913)
(50,085)
0
(28,800)
(486,857)
($821,775)
(50,443)
0
(28,800)
(522,813)
($822,207)
(51,051)
0
(28,800)
(560,887)
$3,183,771
$3,334,408
$3,480,282
$3,571,970
$3,724,488
$3,884,409
$4,055,690
$4,234,602
$4,422,122
$4,618,054
Rentable Space + TSA Space
51,086
51,086
51,086
51,086
51,086
51,086
51,086
51,086
51,086
51,086
Average Terminal Building Rental Rate
$62.32
$65.27
$68.13
$69.92
$72.91
$76.04
$79.39
$82.89
$86.56
$90.40
Signatory Airline Rented Space
Signatory Airline Unadjusted Terminal Rental Revenue
Signatory Airline Terminal Building Revenue Sharing Credit
Signatory Airline Adjusted Terminal Rental Revenue
3/
30,386
30,386
30,386
30,386
30,386
30,386
30,386
30,386
30,386
30,386
$1,893,710
$1,983,309
$2,070,075
$2,124,611
$2,215,329
$2,310,450
$2,412,328
$2,518,745
$2,630,283
$2,746,823
($663,988)
($676,728)
($718,459)
($677,853)
($662,633)
($672,295)
($689,448)
($708,583)
($728,122)
($748,356)
$1,229,722
$1,306,581
$1,351,616
$1,446,758
$1,552,696
$1,638,155
$1,722,881
$1,810,162
$1,902,161
$1,998,466
Signatory Airline Rented Space
30,386
30,386
30,386
30,386
30,386
30,386
30,386
30,386
30,386
30,386
Signatory Airline Effective Terminal Rental Rate as Adjusted
$40.47
$43.00
$44.48
$47.61
$51.10
$53.91
$56.70
$59.57
$62.60
$65.77
1/
2/
3/
Includes debt service, coverage, reimbursement of allocated administrative costs, and transferred coverage. Assumes 100 percent of 2003 Debt Service and associated coverage is funded with PFCs.
County agreed to fund annual O&M Reserve and Repair & Rehabilitation Fund deposits through FY 2007.
Equivalent to allocable Airline percentage of Net Revenues Available for Revenue Sharing in current year.
November 30, 2007
Okaloosa County
Table V-9 presents the calculation of the Signatory Airlines’ Landing Fee Rate. After application of
40 percent of the Total Revenue Sharing Credit as calculated per the Airline Agreement, the
Signatory Airline Effective Landing Fee as Adjusted is projected to increase from approximately
$1.07 per thousand pounds in FY 2007, to approximately $1.51 per thousand pounds in FY 2016.
This increase is primarily attributable to increasing O&M, capital, and amortization expenses,
partially offset by increasing Airfield nonairline revenues.
5.7.3
Security Charges
Based on the provisions of Section 6.05 of the Airline Agreement, and allocable amounts of projected
revenue sharing credits, the Signatory Airlines’ Adjusted Security Fee is projected to increase from
approximately $1.25 per passenger in FY 2007, to approximately $1.78 per passenger in FY 2016.
This increase is primarily attributable to increases in County security-related personnel costs.
5.7.4
Loading Bridge Charges
Per Section 6.11 of the Airline Agreement, Airlines pay the County for use of County-owned
passenger loading bridges. Loading bridge charges are budgeted at an annual amount of $21,600
(monthly amount of $600 per loading bridge) in FY 2007. Loading bridge charges will be increased
to an annual amount of $28,800 (monthly amount of $800 per loading bridge) in FY 2008. For the
purposes of this analysis, loading bridge charges are assumed to remain constant at the FY 2008
amount through the projection period.
5.8
Cost per Enplanement
Table V-10 presents projections of the Airport’s estimated average cost per enplaned passenger
(CPE) over the period FY 2007 through FY 2016. The Airport’s estimated signatory airline CPE is
projected to increase from approximately $5.56 in FY 2007, to approximately $7.33 in FY 2016.
5.9
Airport Cash Flow and Debt Service Coverage
Table V-11 presents projected Airport cash flow and debt service coverage for the period FY 2007
through FY 2016. Only CFC Revenues Pledged to Debt Service and CFC Revenues Available for
Coverage are included in Revenues. Total O&M expenses are subtracted from Total Revenues to
determine Net Revenues. PFC Revenues Pledged to Debt Service and PFC Revenues Available for
Coverage are added to Net Revenues to yield Amounts Available for Debt Service. Amounts
Available for Debt Service are divided by projected debt service amounts to calculate Revenue Bond
Debt Service Coverage for the period. Debt service coverage ratios are projected to exceed the
requirement of 1.25 times debt service required in the Indenture in each year of the financial
projection.
Table V-11 also presents projections of Surplus Funds to be Deposited in the Airports General
Purpose Fund. These represent amounts available for transfer to the Airports General Purpose Fund
after accounting for debt service, coverage, and other requirements, including but not limited to
deposits to the O&M Reserve Fund and Repair and Rehabilitation Fund.
5.10
Application of Revenues
Table V-12 presents the projected Airport cash flow for the period FY 2007 through FY 2016. After
fully funding the funds and accounts established in the Flow of Funds of the Indenture and making
B-101
November 30, 2007
Okaloosa County
Table V-9
Signatory Airlines' Landing Fee Rate
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Airfield Area Operating Requirement
Total O&M Expense
Allocated Indirect Other Requirements
Debt Service & Other Airport Requirements
Coverage
Fund Deposits:
O&M Reserve
Repair & Rehabilitation Fund
Capital Charges:
Annual Capital Charges
Amortization
AIRFIELD AREA REQUIREMENT
B-102
Less: Revenue Credits
Non-Signatory Landing Fees
Other Airfield Area Nonairline Revenues
Less: Other Revenue Credits
Applied PFC Revenue 1/
Allocated Investment Income:
2/
Transfer from General Purpose Fund
NET AIRFIELD AREA EQUIREMENT
Signatory Airline MG Revenue Landed Weight
Signatory Airline Unadjusted Landing Fee Rate
$1,002,408
18,470
$53,915
13,479
$1,018,787
19,898
$1,063,486
20,916
$1,095,542
20,481
$1,143,889
21,259
$1,195,530
21,937
$1,249,742
22,739
$1,306,663
23,570
$1,366,442
24,432
$1,429,235
25,324
$53,228
13,307
$52,888
13,222
$57,288
14,322
$56,438
14,109
$55,538
13,884
$54,613
13,653
$53,663
13,416
$57,563
14,391
$56,188
14,047
$40,926
23,317
$3,381
0
$4,357
0
$4,568
0
$5,030
0
$5,022
0
$5,267
0
$5,525
0
$5,796
0
$6,082
0
$80,065
0
$82,724
0
$85,471
0
$88,310
0
$91,243
0
$94,274
0
$97,405
0
$100,640
0
$103,982
0
$107,436
0
$1,232,580
$1,191,323
$1,240,340
$1,280,510
$1,331,968
$1,386,185
$1,443,419
$1,503,477
$1,572,606
$1,638,311
$0
(84,000)
$0
(86,053)
$0
(88,156)
$0
(90,310)
$0
(92,517)
$0
(94,778)
$0
(97,094)
$0
(99,467)
$0
(101,898)
$0
(104,388)
($67,965)
(4,866)
(64,244)
($67,123)
(5,979)
0
($66,716)
(6,049)
0
($72,234)
(6,383)
0
($71,190)
(6,440)
0
($70,084)
(6,498)
0
($68,948)
(6,559)
0
($67,781)
(6,624)
0
($72,677)
(6,937)
0
($70,980)
(6,992)
0
$1,011,506
468,663
$1,032,168
480,576
$1,079,419
491,717
$1,111,583
503,397
$1,161,821
515,178
$1,214,825
528,673
$1,270,817
542,736
$1,329,605
555,297
$1,391,094
$1,455,951
570,061
584,950
$2.16
$2.15
$2.20
$2.21
$2.26
$2.30
$2.34
$2.39
$2.44
$2.49
468,663
480,576
491,717
503,397
515,178
528,673
542,736
555,297
570,061
584,950
Signatory Airline Unadjusted Landing Fee Revenue
$1,011,506
$1,032,168
$1,079,419
$1,111,583
$1,161,821
$1,214,825
$1,270,817
$1,329,605
$1,391,094
$1,455,951
Signatory Airline Landing Fee Revenue Sharing Credit 3/
($508,739)
($518,499)
($550,473)
($519,362)
($507,701)
($515,103)
($528,245)
($542,906)
($557,877)
($573,380)
$502,767
$513,669
$528,946
$592,221
$654,120
$699,721
$742,572
$786,698
$833,217
$882,571
468,663
480,576
491,717
503,397
515,178
528,673
542,736
555,297
570,061
584,950
$1.07
$1.07
$1.08
$1.18
$1.27
$1.32
$1.37
$1.42
$1.46
$1.51
Signatory Airline Adjusted Landing Fee Revenue
SIGNATORY AIRLINE EFFECTIVE LANDING FEE AS ADJUSTED
1/
2/
3/
Includes debt service, coverage, reimbursement of allocated administrative costs, and transferred coverage. Assumes 100 percent of 2003 Debt Service and associated coverage is funded with PFCs.
County agreed to fund annual O&M Reserve and Repair & Rehabilitation Fund deposits through FY 2007.
Equivalent to allocable Airline percentage of Net Revenues Available for Revenue Sharing in current year.
November 30, 2007
Okaloosa County
Table V-10
Signatory Airline Cost Per Enplaned Passenger
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Airline Revenues
Adjusted Landing Fee Revenues
Adjusted Terminal Rental Revenues
Adjusted Airline Security Charges
Loading Bridge Charges
TOTAL AIRLINE REVENUES
Signatory Enplanements
SIGNATORY AIRLINE COST PER ENPLANEMENT
$502,767
1,229,722
468,695
21,600
$513,669
1,306,581
504,322
28,800
$528,946
1,351,616
536,604
28,800
$592,221
1,446,758
577,856
28,800
$654,120
1,552,696
622,299
28,800
$699,721
1,638,155
665,360
28,800
$742,572
1,722,881
710,086
28,800
$786,698
1,810,162
757,076
28,800
$833,217
1,902,161
806,767
28,800
$882,571
1,998,466
859,216
28,800
$2,222,784
$2,353,372
$2,445,966
$2,645,634
$2,857,915
$3,032,035
$3,204,339
$3,382,737
$3,570,944
$3,769,053
399,600
411,000
422,100
433,700
445,900
458,400
471,700
485,200
499,600
514,300
$5.56
$5.73
$5.79
$6.10
$6.41
$6.61
$6.79
$6.97
$7.15
$7.33
B-103
November 30, 2007
Okaloosa County
Table V-11
Cash Flow and Debt Service Coverage
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Revenues
Total Airline Revenues
Total Nonairline Revenues
CFC Revenues Pledged to Debt Service
CFC Revenues Pledged for Coverage
Interest Earnings
TOTAL REVENUES
$2,222,784
5,353,871
0
0
59,602
$2,353,372
5,557,413
0
0
70,424
$2,445,966
5,778,660
554,988
138,747
99,162
$2,645,634
6,245,346
891,775
222,944
117,788
$2,857,915
6,495,528
887,675
221,919
118,582
$3,032,035
6,756,007
892,975
223,244
119,788
$3,204,339
7,027,216
887,075
221,769
120,695
$3,382,737
7,309,607
890,575
222,644
122,073
$3,570,944
7,603,650
892,875
223,219
123,545
$3,769,053
7,909,837
888,188
222,047
124,423
$7,636,257
$7,981,209
$9,017,522
$10,123,487
$10,581,617
$11,024,048
$11,461,094
$11,927,636
$12,414,233
$12,913,548
($5,942,634)
108,193
0
($6,156,649)
108,193
34,119
($6,432,501)
108,193
35,143
($6,971,680)
96,295
36,197
($7,290,101)
21,295
37,283
($7,608,042)
21,295
38,401
($7,941,494)
21,295
39,553
($8,291,268)
21,295
40,740
($8,658,218)
21,295
41,962
($9,043,245)
21,295
43,221
$1,801,816
$1,966,872
$2,728,356
$3,284,299
$3,350,094
$3,475,703
$3,580,448
$3,698,403
$3,819,273
$3,934,819
$795,870
198,968
$798,033
199,508
$799,413
199,853
$799,213
199,803
$797,950
199,488
$795,575
198,894
$797,394
199,348
$798,144
199,536
$800,819
200,205
$797,394
199,348
$2,796,653
$2,964,413
$3,727,622
$4,283,315
$4,347,532
$4,470,172
$4,577,191
$4,696,082
$4,820,296
$4,931,561
$795,870
198,968
0
0
331,375
166,667
0
$798,033
199,508
0
0
35,669
0
49,500
$799,413
199,853
554,988
138,747
45,975
0
90,000
$799,213
199,803
891,775
222,944
48,196
0
252,758
$797,950
199,488
887,675
221,919
53,070
0
252,758
$795,575
198,894
892,975
223,244
52,990
0
252,757
$797,394
199,348
887,075
221,769
55,575
0
252,758
$798,144
199,536
890,575
222,644
58,296
0
252,758
$800,819
200,205
892,875
223,219
61,158
0
252,758
$797,394
199,348
888,188
222,047
64,171
0
252,758
TOTAL DEBT SERVICE PAYMENTS, COVERAGE
AND OTHER REQUIREMENTS
$1,492,879
$1,082,710
$1,828,975
$2,414,689
$2,412,859
$2,416,435
$2,413,919
$2,421,952
$2,431,033
$2,423,906
Surplus Funds to be Deposited in Airports General Purpose Fund
$1,303,774
$1,881,703
$1,898,647
$1,868,626
$1,934,672
$2,053,737
$2,163,271
$2,274,130
$2,389,263
$2,507,655
AMOUNTS AVAILABLE FOR DEBT SERVICE
$2,796,653
$2,964,413
$3,727,622
$4,283,315
$4,347,532
$4,470,172
$4,577,191
$4,696,082
$4,820,296
$4,931,561
Series 2003
Series 2007
$795,870
0
$798,033
0
$799,413
554,988
$799,213
891,775
$797,950
887,675
$795,575
892,975
$797,394
887,075
$798,144
890,575
$800,819
892,875
$797,394
888,188
TOTAL REVENUE BOND DEBT SERVICE
$795,870
$798,033
$1,354,400
$1,690,988
$1,685,625
$1,688,550
$1,684,469
$1,688,719
$1,693,694
$1,685,581
3.51
3.71
2.75
2.53
2.58
2.65
2.72
2.78
2.85
2.93
Less: O&M Expenses
Add: CFC Revenues Used for Eligible O&M Expenses
Add: CFC Revenues for Ground Rentals on Other Areas
NET REVENUES
Add: PFC Revenues Pledged to Debt Service
Add: PFC Revenues Pledged for Coverage
AMOUNTS AVAILABLE FOR DEBT SERVICE
B-104
Debt Service Payments, Coverage and Other Requirements
Series 2003 Debt Service Coverage
Series 2007 Debt Service Coverage
O&M Reserve Requirement
R&R Reserve Requirement
Commercial Paper Debt Service
Debt Service
REVENUE BOND DEBT SERVICE COVERAGE
November 30, 2007
Okaloosa County
Table V-12
(Page 1 of 2)
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
$0
2,222,784
5,353,871
59,602
108,193
0
(5,942,634)
(331,375)
(166,667)
0
(1,303,774)
$0
2,353,372
5,557,413
70,424
108,193
34,119
(6,156,649)
(35,669)
0
(49,500)
(1,881,703)
$0
2,445,966
5,778,660
99,162
108,193
35,143
(6,432,501)
(45,975)
0
(90,000)
(1,898,647)
$0
2,645,634
6,245,346
117,788
96,295
36,197
(6,971,680)
(48,196)
0
(252,758)
(1,868,626)
$0
2,857,915
6,495,528
118,582
21,295
37,283
(7,290,101)
(53,070)
0
(252,758)
(1,934,672)
$0
3,032,035
6,756,007
119,788
21,295
38,401
(7,608,042)
(52,990)
0
(252,757)
(2,053,737)
$0
3,204,339
7,027,216
120,695
21,295
39,553
(7,941,494)
(55,575)
0
(252,758)
(2,163,271)
$0
3,382,737
7,309,607
122,073
21,295
40,740
(8,291,268)
(58,296)
0
(252,758)
(2,274,130)
$0
3,570,944
7,603,650
123,545
21,295
41,962
(8,658,218)
(61,158)
0
(252,758)
(2,389,263)
$0
3,769,053
7,909,837
124,423
21,295
43,221
(9,043,245)
(64,171)
0
(252,758)
(2,507,655)
Airport Revenue Fund
BEGINNING BALANCE
DEPOSIT: Airline Revenues
DEPOSIT: Nonairline Revenues
DEPOSIT: Interest Earnings
DEPOSIT: CFCs to Pay O&M
DEPOSIT: CFCs to for Other Areas Ground Rental
TRANSFER: To Operation and Maintenance Fund
TRANSFER: To Operation and Maintenance Reserve Fund
TRANSFER: To Repair and Rehabilitation Fund
TRANSFER: To Subordinated Indebtedness Fund
TRANSFER: To Airports General Purpose Fund
ENDING BALANCE
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Operation and Maintenance Fund
BEGINNING BALANCE
TRANSFER: From Airport Revenue Fund
EXPEND: O&M Expenses
ENDING BALANCE
$0
5,942,634
(5,942,634)
$0
$0
6,156,649
(6,156,649)
$0
$0
6,432,501
(6,432,501)
$0
$0
6,971,680
(6,971,680)
$0
$0
7,290,101
(7,290,101)
$0
$0
7,608,042
(7,608,042)
$0
$0
7,941,494
(7,941,494)
$0
$0
8,291,268
(8,291,268)
$0
$0
8,658,218
(8,658,218)
$0
$0
9,043,245
(9,043,245)
$0
B-105
Bond Fund
BEGINNING BALANCE
TRANSFER: From PFC Fund
TRANSFER: From CFC Fund
EXPEND: Series 2003 (PFC)
EXPEND: Series 2007 (CFC)
ENDING BALANCE
$0
795,870
0
(795,870)
0
$0
798,033
0
(798,033)
0
$0
799,413
554,988
(799,413)
(554,988)
$0
799,213
891,775
(799,213)
(891,775)
$0
797,950
887,675
(797,950)
(887,675)
$0
795,575
892,975
(795,575)
(892,975)
$0
797,394
887,075
(797,394)
(887,075)
$0
798,144
890,575
(798,144)
(890,575)
$0
800,819
892,875
(800,819)
(892,875)
$0
797,394
888,188
(797,394)
(888,188)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$800,825
892,975
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
0
$1,693,800
$1,693,800
$1,693,800
$1,693,800
$1,693,800
$1,693,800
$1,693,800
$1,693,800
$1,693,800
$1,693,800
BEGINNING BALANCE
TRANSFER: From CFC Fund
$659,064
331,375
0
$990,439
35,669
0
$1,026,108
45,975
0
$1,072,083
48,196
41,667
$1,161,947
53,070
0
$1,215,017
52,990
0
$1,268,007
55,575
0
$1,323,582
58,296
0
$1,381,878
61,158
0
$1,443,036
64,171
0
ENDING BALANCE
$990,439
$1,026,108
$1,072,083
$1,161,947
$1,215,017
$1,268,007
$1,323,582
$1,381,878
$1,443,036
$1,507,207
BEGINNING BALANCE
TRANSFER: From PFC Fund (Series 2003 Additional Coverage)
TRANSFER: From CFC Fund (Series 2007 Coverage)
$199,299
(331)
0
$198,968
541
0
$199,508
345
138,747
$338,600
(50)
84,197
$422,747
(316)
(1,025)
$421,406
(594)
1,325
$422,138
455
(1,475)
$421,117
188
875
$422,180
669
575
$423,423
(856)
(1,172)
ENDING BALANCE
$198,968
$199,508
$338,600
$422,747
$421,406
$422,138
$421,117
$422,180
$423,423
$421,395
1/
BEGINNING BALANCE
DEPOSIT: From Series 2007 Bond Proceeds
ENDING BALANCE
Operation and Maintenance Reserve Account
1/
Revenue Coverage Account
1/
FY 2007 beginning balance reflects actual amounts as of September 30, 2006.
November 30, 2007
Okaloosa County
Table V-12
(Page 2 of 2)
Budget
2007
2008
2009
2010
2011
Projected
2012
2013
2014
2015
2016
Repair and Rehabilitation Fund
1/
BEGINNING BALANCE
$333,333
166,667
$500,000
0
$500,000
0
$500,000
0
$500,000
0
$500,000
0
$500,000
0
$500,000
0
$500,000
0
$500,000
0
ENDING BALANCE
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$0
252,758
(252,758)
$0
252,758
(252,758)
$0
252,757
(252,757)
$0
252,758
(252,758)
$0
252,758
(252,758)
$0
252,758
(252,758)
$0
252,758
(252,758)
Subordinated Indebtedness Fund
BEGINNING BALANCE
EXPEND: Commercial Paper Debt Service
$0
0
0
ENDING BALANCE
$0
$0
49,500
(49,500)
$0
$0
90,000
(90,000)
$0
$0
$0
$0
$0
$0
$0
$0
Airports General Purpose Fund
1/
BEGINNING BALANCE
DEPOSIT: From Airport Revenue Fund
EXPEND: Capital Outlays
EXPEND: Capital Expenditures 2
$636,605
1,303,774
(320,259)
(342,193)
$1,277,928
1,881,703
(330,895)
0
$2,828,735
1,898,647
(341,886)
(55,000)
$4,330,496
1,868,626
(353,241)
(140,000)
$5,705,882
1,934,672
(364,973)
(900,000)
$6,375,582
2,053,737
(377,095)
(500,000)
$7,552,224
2,163,271
(389,619)
(500,000)
$8,825,876
2,274,130
(402,559)
(500,000)
$10,197,447
2,389,263
(415,930)
(500,000)
$11,670,780
2,507,655
(429,744)
(500,000)
$1,277,928
$2,828,735
$4,330,496
$5,705,882
$6,375,582
$7,552,224
$8,825,876
$10,197,447
$11,670,780
$13,248,691
BEGINNING BALANCE
DEPOSIT: Current Year Collections
EXPEND: Pay-As-You-Go Expenditures2/
TRANSFER: To Bond Fund
TRANSFER: To Revenue Coverage Account
$4,340,073
1,578,820
326,545
(1,040,495)
(795,870)
331
$4,409,404
1,623,861
339,800
(558,774)
(798,033)
(541)
$5,015,718
1,667,717
392,109
(198,037)
(799,413)
(345)
$6,077,750
1,713,549
476,698
0
(799,213)
50
$7,468,834
1,761,751
583,375
0
(797,950)
316
$9,016,325
1,811,138
696,523
(359,461)
(795,575)
594
$10,369,544
1,863,687
800,316
(359,461)
(797,394)
(455)
$11,876,237
1,917,025
915,844
(359,461)
(798,144)
(188)
$13,551,314
1,973,920
1,044,206
(359,461)
(800,819)
(669)
$15,408,491
2,031,999
1,186,575
(359,461)
(797,394)
856
ENDING BALANCE
$4,409,404
$5,015,718
$6,077,750
$7,468,834
$9,016,325
$10,369,544
$11,876,237
$13,551,314
$15,408,491
$17,471,067
$1,135,560
1,012,885
83,002
(1,132,039)
0
(108,193)
0
0
0
0
$991,215
1,259,828
75,252
(1,132,039)
0
(108,193)
(34,119)
0
0
0
$1,051,944
1,293,852
69,814
(1,132,039)
0
(108,193)
(35,143)
(554,988)
(138,747)
0
$446,501
1,329,410
36,728
0
0
(96,295)
(36,197)
(891,775)
(84,197)
(41,667)
$662,508
1,366,806
56,865
0
0
(21,295)
(37,283)
(887,675)
1,025
0
$1,140,951
1,405,122
93,744
0
0
(21,295)
(38,401)
(892,975)
(1,325)
0
$1,685,821
1,445,890
135,968
0
0
(21,295)
(39,553)
(887,075)
1,475
0
$2,321,231
1,487,271
184,872
0
0
(21,295)
(40,740)
(890,575)
(875)
0
$3,039,889
1,531,411
240,215
0
0
(21,295)
(41,962)
(892,875)
(575)
0
$3,854,809
1,576,471
303,030
0
0
(21,295)
(43,221)
(888,188)
1,172
0
$991,215
$1,051,944
$446,501
$662,508
$1,140,951
$1,685,821
$2,321,231
$3,039,889
$3,854,809
$4,782,778
ENDING BALANCE
PFC Fund
B-106
1/
CFC Fund
1/
BEGINNING BALANCE
DEPOSIT: Current Year Collections
EXPEND: The 2007 Project
EXPEND: Pay-As-You-Go Expenditures
TRANSFER: To Revenue Fund (O&M)
TRANSFER: To Revenue Fund (Ground Rentals)
TRANSFER: To Bond Fund
TRANSFER: To Revenue Coverage Account
TRANSFER: To Operation and Maintenance Reserve Fund
ENDING BALANCE 3/
1/
2/
3/
FY 2007 beginning balance reflects actual amounts as of September 30, 2006.
FY 2007 - FY 2011 reflect County's projected five-year CIP. FY 2012 - FY 2016 expenditures do not reflect specific projects but estimate a reasonable level of expenditures.
Beginning in FY 2009, includes amounts used to fund a Service Facilities Reserve Fund of approximately $500,000 to be funded over a five-year period per the terms of the Rental Car Service Facilities Lease.
November 30, 2007
Okaloosa County
the necessary transfers and expenditures, a deposit to the Airports General Purpose Fund is projected
in each year of the financial analysis.
B-107
November 30, 2007
APPENDIX C
FORMS OF THE MASTER INDENTURE
OF TRUST, THE FIRST SUPPLEMENTAL INDENTURE AND THE SECOND
SUPPLEMENTAL INDENTURE
This Appendix C includes the forms of the Master Indenture of Trust, the First
Supplemental Indenture and the Second Supplemental Indenture for the Series 2007 Bonds in
substantially the forms executed.
C-1
C-2
C-3
C-4
C-5
C-6
C-7
C-8
C-9
C-10
C-11
C-12
C-13
C-14
C-15
C-16
C-17
C-18
C-19
C-20
C-21
C-22
C-23
C-24
C-25
C-26
C-27
C-28
C-29
SECOND SUPPLEMENTAL INDENTURE
To
MASTER INDENTURE OF TRUST
Between
and
THE BANK OF NEW YORK,
As Trustee
Securing
$9,980,000
Dated as of December 1, 2007
C-30
THIS SECOND SUPPLEMENTAL INDENTURE, made and entered into as of the
first day of December, 2007, by and between OKALOOSA COUNTY, FLORIDA (the
"Issuer"), a political subdivision of the State of Florida, and THE BANK OF NEW
YORK, a New York banking corporation organized under the laws of the State of New
York and having its principal place of business in New York, New York, as Trustee (the
'Trustee"),
ARTICLE I
DEFINITIONS
Section 101.
Definitions. Unless the context otherwise requires, the
capitalized terms used in this Second Supplement shall have the meanings specified
in this Section. Capitalized terms not otherwise defined in this Section shall have the
meanings specified in the Master Indenture. Words importing singular number shall
include the plural number in each case and vice versa, and words importing persons
shall include firms and corporations.
WITNESSETH
WHEREAS, pursuant to the Act, as herein defined, the Issuer is authorized to
issue its revenue bonds for the purpose of financing the Cost of Airport Facilities,
within the meaning of the Act and as defined below; and
“Amounts Available to Pay Debt Service” shall mean, for any Fiscal Year of the
Issuer, the Net Revenues for such Fiscal Year, plus Pledged PFC Revenues and Pledged
CFC Revenues for such Fiscal Year of the Issuer, if any, plus legally available
amounts, if any, in the Revenue Fund Coverage Account, the PFC Coverage
Subaccounts and the CFC Coverage Subaccounts at the end of such Fiscal Year.
WHEREAS, the Issuer has entered into a Master Indenture of Trust, dated as of
August 1, 2003 (the "Master Indenture") with JPMorgan Chase Bank, as trustee, as to
which The Bank of New York currently serves as successor trustee, pursuant to which
the Issuer has issued its Airport Revenue Bonds, Series 2003 (AMT) (the "2003
Bonds"), pursuant to a First Supplemental Indenture to Master Indenture of Trust,
dated as of August 1, 2003 (the “First Supplement”), to provide funds to finance,
among other things, the Cost of certain Airport Facilities located at, related to, or in
connection with the Airports, to finance capitalized interest, to refund a Loan incurred
to finance a portion of the Airport Facilities, to fund the Debt Service Reserve Fund,
and to finance a portion of the related costs of issuing the 2003 Bonds; and
"Authenticating Agent" for the 2007 Bonds means the Trustee.
“Bond Purchase Contract” means the Bond Purchase Contract between the
Issuer and the 2007 Original Purchaser for the purchase of the 2007 Bonds.
"CFC Debt Service", as to the 2007 Bonds, means the sum of the amounts
required to be deposited into the 2007 Interest Account, 2007 Principal Account and
2007 Redemption Account during any period pursuant to this Second Supplement,
multiplied by the CFC Debt Service Percentage.
WHEREAS, the Issuer by this Second Supplement intends to issue its Taxable
Airport Revenue Bonds, Series 2007 (the "2007 Bonds") pursuant to the Master
Indenture; and
"CFC Debt Service Percentage" means that percentage determined by dividing
the total Costs of the CFC Eligible Projects funded from proceeds of 2007 Bonds by the
total Costs of the 2007 Project funded from proceeds of 2007 Bonds.
WHEREAS, the Trustee agrees to accept and administer the trusts created
hereby;
NOW,
THEREFORE,
THIS
SECOND
SUPPLEMENTAL
INDENTURE
WITNESSETH: In consideration of the premises, the acceptance by the Trustee of the
trusts hereby created, and of the purchase and acceptance of the 2007 Bonds by the
Holders thereof, and for the purpose of fixing and declaring the general terms and
conditions upon which the 2007 Bonds are to be issued, authenticated, delivered,
secured and accepted by all persons who shall from time to time be or become Holders
thereof, the Issuer and the Trustee agree as follows:
"CFC Eligible Projects" means those components of the 2007 Project the Costs
of which are eligible to be paid from CFC Revenues pursuant to the CFC Ordinance.
“CFC Ordinance” means Ordinance No. 04-64, enacted by the Board of County
Commissioners of Okaloosa County, Florida on October 19, 2004, as amended by
Ordinance No. 07-21 enacted on May 1, 2007, and as further amended from time to
time.
"CFC Revenues", for purposes of this Second Supplement, means revenues
derived from the Customer Facility Charge imposed by the CFC Ordinance from time
to time.
“Customer Facility Charge” means the charge imposed pursuant to the CFC
Ordinance.
“Customer Facility Charge Fund” means the fund established hereby in Article
V hereof, and shall be the account referred to in Section 4 of the CFC Ordinance.
“First Supplement” means the First Supplement as described in the recitals
LFM-12/6/2007-6:02:01 PM-4290-Second Supp-Indenture-CLEAN.doc
1
2
hereto.
ARTICLE II
“Indenture” means, collectively, the Master Indenture, the First Supplement
and this Second Supplement.
2007 PROJECT AND 2007 BONDS
“Master Indenture” means the Master Indenture of Trust between the Issuer
and JPMorgan Chase Bank, as trustee, as to which the Trustee currently serves as
successor trustee, dated as of August 1, 2003, securing Airport Revenue Bonds of the
Issuer.
Section 201.
Authorization of 2007 Project.
The Board hereby
specifically confirms the authorization of the 2007 Project. The Board hereby
specifically ratifies and affirms all actions previously taken in furtherance of the 2007
Project.
“Pledged CFC Revenues” means money deposited in the 2007 Pledged CFC
Account and the 2007 CFC Coverage Subaccount pursuant to Article V hereof.
Section 202.
Authorization of 2007 Bonds. Subject and pursuant to
the provisions of this Second Supplement and the Master Indenture, obligations of the
Issuer, to be known as “Taxable Airport Revenue Bonds, Series 2007” (the "2007
Bonds") are hereby authorized to be issued in the aggregate principal amount of
$9,980,000 for the purpose of financing the Costs of the 2007 Project.
“Revenues”, as defined in the Master Indenture, shall include, pursuant to
clause (K) of such definition, the CFC Revenues, but not, as of any date, in excess of
the Pledged CFC Revenues pursuant to Article V hereof.
Section 2.03.
Description of 2007 Bonds. (a) The 2007 Bonds shall be
Fixed Rate Bonds under the Master Indenture and shall be issued as Taxable Bonds
under the Master Indenture. The 2007 Bonds shall be numbered from R-1 upward;
shall be in the denominations of $5,000 or any integral multiple thereof; shall be in
fully-registered form, payable to “Cede & Co.”, as nominee for The Depository Trust
Company, New York, New York (“DTC”); shall be issued in book-entry only form; shall
be dated as of December 13, 2007; and shall bear interest at the rates, payable on
April 1, 2008, and on each April 1 and October 1 thereafter until maturity and shall
mature on October 1, in the years, and the amounts as set forth below:
“Second Supplement” means this Second Supplemental Indenture to Master
Trust Indenture, dated as of December 1, 2007.
“2007 Bonds” means the Issuer's Taxable Airport Revenue Bonds, Series 2007,
authorized to be issued pursuant hereto.
"2007 CFC Coverage Amount" means 25% of the CFC Debt Service on the 2007
Bonds during any Fiscal Year of the Issuer.
Term Bonds
"2007 Debt Service Reserve Fund Requirement" means the sum of $892,975.00,
which constitutes the least of the following amounts:
(a)
$1,535,000 6.000% Term Bonds Due October 1, 2014, Price $97.275; Yield 6.500%
10% of the original proceeds of the 2007 Bonds;
(b)
the maximum amount of Annual Debt Service on the 2007 Bonds
occurring in any Fiscal Year of the Issuer; and
(c)
(b)
Except as otherwise provided below in Section 206, interest will be
payable by check or draft mailed on the applicable Interest Payment Date to the
Holders thereof at the address shown on the registration books kept by the Registrar
at the close of the business on the fifteenth (15th) day of the calendar month, whether
or not a Business Day, next preceding such Interest Payment Date (the "Regular
Record Date"); provided, however, that payment of the Principal Amount of,
Redemption Premium, if any, and interest on the 2007 Bonds may, at the option of
any Holder of 2007 Bonds in an aggregate principal amount of at least $1,000,000, be
transmitted by wire transfer within the continental United States to such Holder to the
bank account number on file with the Registrar as of the Regular Record Date.
125% of the average Annual Debt Service on the 2007 Bonds.
“2007 Original Purchaser” means, collectively, RBC Dain Rausher Inc., d/b/a
RBC Capital Markets, as senior manager, and Crews & Associates, as co-manager,
and their successors and assigns, as underwriters for the 2007 Bonds.
"2007 Project" means the rental car service facilities located adjacent to the
Regional Airport’s terminal facilities as described in the Report of the Airport
Consultant, dated _______________, 2007, prepared by Ricondo & Associates, Inc.,
Cincinnati, Ohio.
Section 204.
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Redemption of 2007 Bonds.
Optional Redemption. The Series 2007 Bonds maturing on or before
October 1, 2017 are not subject to optional redemption prior to maturity. The Series
2007 Bonds maturing after October 1, 2017 shall be subject to optional redemption
by the County on any date on or after October 1, 2017, in whole or in part in such
order of maturity and manner as the County may determine, at the redemption price
“2007 Subaccounts” means, collectively, the separate accounts established and
maintained pursuant to the provisions of this Second Supplement for the benefit of
the Holders of the 2007 Bonds.
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of par plus interest accrued to the date fixed for redemption, plus the following
premium expressed as a percentage of the par amount redeemed:
Redemption Date
Premium
If redeemed on or after
October 1, 2017 and prior to
October 1, 2018
2%
If redeemed on or after
October 1, 2018 and prior to
October 1, 2019
1%
If redeemed on
October 1, 2019
0%
or
after
2017
2018
2019*
_______________
*maturity
The Series 2007 Bonds maturing on October 1, 2030 and bearing interest at
7.000%, are subject to mandatory redemption in part through sinking fund
installments on October 1 of each year, commencing October 1, 2020, at a
redemption price equal to 100% of the principal amount thereof together with
accrued interest to the redemption date, in the aggregate principal amounts set
forth below:
Mandatory Sinking Fund Redemption. The Series 2007 Bonds maturing on
October 1, 2014, and bearing interest at 6.000% are subject to mandatory
redemption in part through sinking fund installments on October 1 of each year,
commencing October 1, 2009, at a redemption price equal to 100% of the principal
amount thereof together with accrued interest to the redemption date, in the
aggregate principal amounts set forth below:
Year
Principal
Amount
2009
2010
2011
2012
2013
2014*
$220,000
235,000
245,000
265,000
275,000
295,000
2015
2016
$315,000
330,000
Principal
Amount
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030*
$425,000
450,000
485,000
520,000
550,000
595,000
635,000
680,000
725,000
780,000
830,000
Effect of Call for Redemption. On the date designated for redemption by
notice, the 2007 Bonds so called for redemption shall become and be due and
payable at the redemption price provided for redemption of such 2007 Bonds on
such date. If on the date fixed for redemption moneys for payment of the redemption
price and accrued interest are held by the Paying Agent, interest on such 2007
Bonds so called for redemption shall cease to accrue, such 2007 Bonds shall cease
to be entitled to any benefit or security under the Indenture except the right to
receive payment from moneys held therefor by the Paying Agent and the amount of
such 2007 Bonds so called for redemption shall be deemed paid and no longer
Outstanding.
The Series 2007 Bonds maturing on October 1, 2019 and bearing interest at
6.250%, are subject to mandatory redemption in part through sinking fund
installments on October 1 of each year, commencing October 1, 2015, at a
redemption price equal to 100% of the principal amount thereof together with
accrued interest to the redemption date, in the aggregate principal amounts set
forth below:
Principal
Amount
Year
_______________
*maturity
_______________
*maturity
Year
Method of Selecting Bonds for Redemption. Except when registration of
the 2007 Bonds is maintained pursuant to a book-entry only system, 2007 Bonds
shall be selected for redemption as follows: (a) in the event that less than all of the
2007 Bonds are to be redeemed, the maturities to be redeemed and the method of
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6
their selection shall be determined by the Issuer, (b) in the event that less than all
2007 Bonds of a maturity are to be redeemed, the 2007 Bonds of such maturity to
be redeemed shall be selected by lot in such customary manner as the Trustee shall
determine, and (c) in the event that less than all 2007 Bonds of a term bond are to
be redeemed, the remaining annual amounts of mandatory sinking fund redemption
shall be reduced in such years and amounts as the Issuer shall determine.
comply with the following provisions:
(a)
At least three (3) days prior to all Interest Payment Dates, the Trustee,
will determine whether there will be sufficient funds to pay the principal of or
interest on the 2007 Bonds on such Interest Payment Date. If the Trustee
determines that there will be insufficient funds, the Trustee shall so notify the
Insurance Trustee. Such notice shall specify the amount of the anticipated
deficiency, the 2007 Bonds to which such deficiency is applicable and whether such
2007 Bonds will be deficient as to principal or interest, or both. The Insurer will make
payments of principal or interest due on the 2007 Bonds on or before the first (1st)
day next following the date on which the Insurance Trustee shall have received notice
of nonpayment from the Trustee.
Upon the selection and call for redemption of, and the surrender of, any 2007
Bonds for redemption in part only, and except when registration of the 2007 Bonds
is maintained pursuant to a book-entry only system, the Issuer shall cause to be
executed, authenticated and delivered to or upon the written order of the Holder
thereof, at the expense of the Issuer, new 2007 Bonds in fully registered form of
authorized denominations and like tenor in an aggregate face amount equal to the
unredeemed portion of the 2007 Bonds surrendered.
(b)
The Trustee shall, after giving notice to the Insurance Trustee as
provided in (a) above, make available to the Insurer and the Insurance Trustee, the
registration books of the Issuer relating to the 2007 Bonds maintained by the
Trustee, and all records relating to the funds maintained under the Indenture.
Notice of Redemption. During the period that DTC or Cede & Co. is the
registered owner of the 2007 Bonds, the Trustee shall not be responsible for mailing
notices of redemption to the beneficial owners of the 2007 Bonds.
(c)
The Trustee shall provide the Insurer and the Insurance Trustee with a
list of registered owners of 2007 Bonds entitled to receive principal or interest
payments from the Insurer under the terms of the Policy, and shall make
arrangements with the Insurance Trustee (i) to mail checks or drafts to the
registered owners of 2007 Bonds entitled to receive full or partial interest payments
from the Insurer and (ii) to pay principal upon 2007 Bonds surrendered to the
Insurance Trustee by the registered owners of 2007 Bonds entitled to receive full or
partial principal payments from the Insurer.
Conditional Notice of Redemption. Notice of redemption of the 2007 Bonds
may be conditioned upon and made subject to the irrevocable deposit of sufficient
funds to pay the redemption price after such notice is given and on or before the
redemption date, provided such condition is expressly stated in the notice.
Section 205.
Credit Facility. The Credit Facility for the 2007 Bonds is a
financial guaranty insurance policy to be issued simultaneously with the issuance of
the 2007 Bonds by the Insurer as defined below. As long as the 2007 Bonds are
Outstanding and the Policy, as defined below, is in place, the following provisions are
included herein and in the event of a conflict or inconsistency between the provisions
of this Section 205 and any other provisions of the Indenture the provisions of this
Section 205 shall apply.
(d)
The Trustee shall at the time it provides notice to the Insurance
Trustee pursuant to (a) above, notify registered owners of 2007 Bonds entitled to
receive the payment of principal or interest thereon from the Insurer (i) as to the fact
of such entitlement, (ii) that the Insurer will remit to them all or part of the interest
payments next coming due upon proof of such owner’s entitlement to interest
payments and delivery to the Insurance Trustee, in form satisfactory to the
Insurance Trustee as determined by the Insurer, of an appropriate assignment of
the registered owner's right to payment, (iii) that should they be entitled to receive
full payment of principal from the Insurer, they must surrender their 2007 Bonds
(along with an appropriate instrument of assignment in form satisfactory to the
Insurer to permit ownership of such 2007 Bonds to be registered in the name of the
Insurer) for payment to the Insurance Trustee, and not the Trustee and (iv) that
should they be entitled to receive partial payment of principal from the Insurer,
they must surrender their 2007 Bonds for payment thereon first to the Trustee,
who shall note on such 2007 Bonds the portion of the principal paid by the
Trustee and then, along with an appropriate instrument of assignment in form
satisfactory to the Insurer, to the Insurance Trustee, which will then pay the unpaid
portion of principal.
Definitions
"Insurance Trustee” shall mean The Bank of New York.
"Insurer” shall mean Radian Asset Assurance Inc., a corporation organized
under the laws of the State of New York or any successor thereto.
"Policy" shall mean the financial guaranty insurance policy issued by Insurer
insuring the payment when due of the principal of and interest on the 2007 Bonds as
provided therein.
Payment Procedure
The Trustee shall not make a claim for payment on the Policy until any and
all legally available funds held pursuant to the Indenture have been fully drawn to
pay principal of and interest on the 2007 Bonds.
(e)
In the event that the Trustee has notice that any payment of principal
of or interest on a 2007 Bond which has become due for payment and which is
made to a registered owner by or on behalf of the Issuer has been deemed a
preferential transfer and theretofore recovered from its registered owner pursuant to
As long as the Policy shall be in full force and effect, the Trustee agrees to
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350,000
375,000
400,000
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8
the United States Bankruptcy Code by a trustee in bankruptcy in accordance with
the final, nonappealable order of a court having competent jurisdiction, the
Trustee shall, at the time the Insurance Trustee is notified pursuant to (a) above,
notify all registered owners that in the event that any registered owner's payment is so
recovered, such registered owner will be entitled to payment from the Insurer to the
extent of such recovery if sufficient funds are not otherwise available, and the
Trustee shall furnish to the Insurance Trustee and the Insurer its records
evidencing the payments of principal of and interest on the 2007 Bonds which have
been made by the Trustee and subsequently recovered from registered owners and
the dates on which such payments are made.
pledging, assigning and confirming unto the Holders of the 2007 Bonds or any
Trustee for the Holders of the 2007 Bonds, the Amounts Available to Pay Debt Service
and any other collateral pledged to the payment of the principal of, premium, if any,
and interest on the 2007 Bonds. Except to the extent it is exempt therefrom, the
Issuer will pay or cause to be paid all filing fees incident to such filing and all
expenses incident to the preparation, execution and acknowledgment of such
instruments of further assurance, and all federal or State fees and other similar
fees, duties, imposts, assessments and charges arising out of or in connection with
the execution and delivery of such instruments of further assurance.
Defeasance.
Bonds:
(f)
The Insurer shall, to the extent it makes payment of principal of or
interest on 2007 Bonds, become subrogated to the rights of the recipients of such
payments in accordance with the terms of the Policy, and to evidence such
subrogation (i) in the case of subrogation as to claims for past due interest, the
Trustee shall note the Insurer's rights as subrogee on the registration books of
the Issuer maintained by the Trustee, upon receipt from the Insurer of proof of the
payment of interest thereon to the registered owners of the 2007 Bonds and (ii) in
the case of subrogation as to claims for past due principal, the Trustee shall note
the Insurer's rights as subrogee on the registration books of the Issuer maintained
by the Trustee upon surrender of the 2007 Bonds by the registered owners thereof
together with proof of the payment of principal thereof.
(i)
only moneys and noncallable Government Obligations shall constitute
Defeasance Obligations;
(ii)
a verification report shall be delivered to the Insurer by a verifier
acceptable to the Insurer, which report shall be in form and substance satisfactory
to the Insurer;
(iii)
an opinion of bond counsel shall be rendered to the Insurer to the effect
that all of the requirements of the Indenture for defeasance of the 2007 Bonds have
been complied with; and
Covenants of Further Assurance.
The Issuer represents and warrants that: (i) it has not heretofore made a
pledge of, granted a lien on or security interest in, or made an assignment or sale of
the Amounts Available to Pay Debt Service that ranks on a parity with or prior to
the pledge granted under the Indenture, except to secure the obligations disclosed in
the Indenture that will be outstanding upon issuance of the 2007 Bonds; (ii) the
Issuer shall not hereafter make or suffer to exist any pledge or assignment of, lien
on, or security interest in the Amounts Available to Pay Debt Service that ranks
prior to or on a parity with the pledge granted under the Indenture, or file any
financing statement describing any such pledge, assignment, lien, or security
interest, except as expressly permitted under the Indenture; and (iii) if permissible
under the laws of the State, the pledge of Amounts Available to Pay Debt Service,
and each pledge, assignment, lien, or other security interest made to secure any
prior obligations of the Issuer which, by the terms of the Indenture, rank on a parity
with the pledge granted under the Indenture, is and shall be prior to any judicial lien
imposed on the Amounts Available to Pay Debt Service to enforce a judgment against
the Issuer on a simple contract.
(iv)
no forward delivery agreements, hedge, purchase and resale
agreements or par-put agreements may be used with respect to the investment of any
funds or securities defeasing the 2007 Bonds without the prior written consent of the
Insurer.
Subrogation. In the event that the principal and/or interest due on the 2007
Bonds shall be paid by Insurer pursuant to the Policy, the 2007 Bonds shall remain
Outstanding for all purposes, not be defeased or otherwise satisfied and not be
considered paid by the Issuer, and all covenants, agreements and other obligations of
the Issuer to the registered owners shall continue to exist and shall run to the
benefit of Insurer and Insurer shall be subrogated to the rights of such registered
owners.
Reporting Requirements. The Issuer covenants and agrees with the Insurer to
provide notification in the event of any significant change in the financial condition of
the Issuer or the physical condition of the Airports and to provide the following to the
Insurer:
After the issuance of the 2007 Bonds, the Issuer will, to the extent required
by law, cause the Indenture and all supplements thereto, to be kept, recorded and
filed in such manner and in such places as may be required by law in order to
create, perfect, preserve and protect fully the security of the Holders of the 2007
Bonds in the Amounts Available to Pay Debt Service and any other collateral and the
rights of any Trustee for the Holders of the 2007 Bonds. The Issuer covenants that
it will do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered such further acts, instruments and transfers as may be
required for the better securing, assuring, continuing, transferring, conveying,
(i)
annual audited financial statements within one hundred-fifty (150) days
of the end of the fiscal year of the Issuer unless such period is extended by the Insurer
at the request of the Issuer.
(ii)
a copy of any audit, budget, or other material report of the Issuer
within twenty (20) days of acceptance of such audit, budget or report by the
governing body of the Issuer, and, thereafter, as updated;
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10
(iii)
a copy of any notice or report required to be given to the Insurance
Trustee, the Trustee, the registered owners of the 2007 Bonds or any other party to
the Indenture, including, without limitation, notice of any redemption of or
defeasance of 2007 Bonds, and any certificate rendered pursuant to the Indenture
relating to the security for the 2007 Bonds;
Export-Import Bank of the United States, (b) the Federal Housing
Administration, (c) the Government National Mortgage Association ("GNMA"),
(d) the Rural Economic Community Development Administration (formerly
known as the Farmers Home Administration), (e) the Federal Financing Bank,
(f) the Department of Housing and Urban Development, (g) the General
Services Administration, (h) the U.S. Maritime Administration or (i) the Small
Business Administration.
(iv)
a copy of the annual report, or any special reports, prepared from time to
time by the Airport Consultant;
(iii)
Investments in direct obligations in any of the following agencies which
obligations are not fully guaranteed by the full faith and credit of the United States
(a) senior obligations by the Federal Home Loan Bank System, (b) senior debt
obligations and participation certificates (excluding stripped mortgage securities
which are purchased at prices exceeding their principal amounts) issued by the
Federal Home Loan Mortgage Corporation ("FHLMC") or senior debt obligations
and mortgage- backed securities (excluding stripped mortgage securities which
are purchased at prices exceeding their principal amounts) of the Federal
National Mortgage Association ("FNMA") (c) obligations of the Resolution Funding
Corporation ("REFCORP") or (d) senior debt obligations of the Student Loan
Marketing Association ("SLMA") (excluding securities that do not have a fixed par
value/or whose terms do not promise a fixed dollar amount at maturity or call
date).
(v)
a copy of any filing by the Issuer with any NRMSIR under SEC Rule 15c2(12), simultaneously with the filing with such NRMSIR; and
(vi)
The following shall be conditions to defeasance of the 2007
such additional information as the Insurer may reasonably request.
The Issuer will permit Insurer and/or the Insurance Trustee to discuss the
affairs, finances and accounts of the Issuer or any information the Insurer may
reasonably request regarding the security for the 2007 Bonds with appropriate
officers of the Issuer. The Issuer will permit the Insurer and/or the Insurance
Trustee to have access to and make copies of all books and records relating to the
2007 Bonds, and the security therefor at any reasonable time.
Amendment. Any rating agency rating the 2007 Bonds must receive from the
Issuer notice of each amendment to the Indenture and a copy thereof at least fifteen
(15) business days in advance of its execution or adoption. The Insurer shall be
provided by the Issuer with a full transcript of all proceedings relating to the execution
of any such amendment.
(iv)
Investments in (a) U.S. dollar denominated deposit accounts, federal
funds, bankers acceptances, and certificates of deposit of any bank whose short
term debt obligations are rated A-1+ by S&P and P-1 by Moody's and maturing no
more than 360 calendar days after the date of purchase (holding company
ratings are not considered as a rating of the bank) or (b) Certificates of deposit of
any bank, which certificates are fully insured by the Federal Deposit Insurance
Corporation ("FDIC").
Redemption. Redemption of the 2007 Bonds shall be permitted at any time
without the Insurer’s prior written consent so long as funds for such redemption
are irrevocably deposited with the Trustee prior to rendering notice of redemption to
the Bondholders, or in the alternative, the notice expressly states that such
redemption is subject to the deposit of funds by the Issuer.
(v)
Investments in money market funds rated "AAAm" or "AAAm-G" by
S&P.
Investments and Valuation. All funds under the Indenture shall be invested
only in Insurer Allowed Investments set forth below, provided that such investments
must also be described in the definition of Permitted Investments in the Master
Indenture as supplemented. Investments on deposit in all funds and accounts shall
be valued at market value at least quarterly. No forward delivery agreements, hedge,
purchase and resale agreements or par-put agreements may be used with respect
to the investment of any fund or account with respect to the trust estate pledged to
the 2007 Bonds without the prior written consent of the Insurer.
(vi)
Commercial paper which is rated at the time of purchase in the single
highest classification, P-1 by Moody's, Inc. and A-1 + by S&P and which matures
not more than 270 calendar days after the date of purchase.
(vii)
Pre-refunded municipal obligations defined as follows: any bonds or
other obligations rated "AAA" by S&P and "Aaa" by Moody's (based on an
irrevocable escrow account or fund) of any state of the United States of America
or any agency, instrumentality or local governmental unit of any such state
which are not callable at the option of the obligor prior to maturity or as to
which irrevocable instructions have been given by the obligor to call on the date
specified in the notice.
INSURER ALLOWED INVESMENTS
(i)
Certificates or interest-bearing notes or obligations of the United
States, or those for which the full faith and credit of the United States are pledged
for the payment of principal and interest.
(viii) Municipal obligations rated "Aaa/AAA" or general obligations of States
with a rating of "Al /A+" or higher by both Moody's and S&P.
(ii)
Investments in any of the following obligations provided such
obligations are backed by the full faith and credit of the United States (a) the
The value of the above investments (paragraphs i-viii) shall be
determined as follows:
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e)
the repurchase agreement shall state and an opinion of counsel
shall be rendered at the time such collateral is delivered that the Holder of the
Collateral has a perfected first priority security interest in the collateral, and
substituted collateral and all proceeds thereof.
"Value", which shall be determined as of the end of each quarter,
means that the value of any investments shall be calculated as follows:
(a)
for securities:
f)
the repurchase agreement shall provide that if during its term
the provider's rating by either Moody's or S&P is withdrawn or suspended or falls
below "A-" by S&P or "A3" by Moody's, as appropriate, the provider must, at the
direction of the issuer or the trustee (who shall give such direction if so directed by
Radian), within 10 days of receipt of such direction, repurchase all collateral and
terminate the agreement, with no penalty or premium to the issuer or trustee.
(1)
computed on the basis of the bid price last quoted by the
Federal Reserve Bank of New York on the valuation date and printed in the Wall
Street Journal or The New York Times; or
(2)
a valuation performed by a nationally recognized and
accepted pricing service whose valuation method consists of the composite average of
various bid price quotes on the valuation date; or
(x)
Investment agreements with (a) a domestic or foreign bank or
corporation (other than a life or property casualty insurance company) the longterm debt of which, or, in the case of a guaranteed corporation the long term debt is
rated at least "AA" by S&P and "Aa2" by Moody's; or (B) a monoline municipal bond
insurance company or a subsidiary thereof whose claims paying ability is rated at
least "AA" by S&P and "Aa2" by Moody's; provided, that in all cases, by the terms of
the investment agreement:
(3)
the lower of two dealer bids on the valuation date. The
dealers or their parent holding companies must be rated at least investment grade by
S&P and Moody's and must be market makers in the securities being valued.
(b)
as to certificates of deposit and banker's acceptances: the face
amount thereof, plus accrued interest.
a)
interest payments are to be made to the Trustee at least one
business day prior to debt service payment dates on the Bonds and in such
amounts as are necessary to pay debt service (or, if the investment agreement is for
the construction fund, construction draws) on the Bonds;
(ix)
Repurchase agreements with (a) any domestic bank, or domestic
branch of a foreign bank, the long term debt of which is rated at least "A" by S&P
and "A2" by Moody's; or (b) any broker-dealer with "retail customers" or a related
affiliate thereof which broker dealer has, or the parent company (which guarantees
the provider) of which has, long term debt rated at least "A" by S&P and "A2" by
Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors
Protection Corporation; or (c) any other entity rated at least "A" by S&P and "A2" by
Moody's and acceptable to Radian, provided that:
b)
the invested funds are available for withdrawal without
penalty or premium, at any time upon not more than seven days' prior notice
(which notice may be amended or withdrawn at any time prior to the specified
withdrawal date); provided that the [Indenture] specifically requires the Issuer or
the Trustee to give notice in accordance with the terms of the investment agreement
so as to receive funds thereunder with no penalty or premium paid;
a)
the repurchase agreement is collateralized with the obligations
described in paragraphs (i) or (ii) above; or with obligations described in paragraph (iii)
(a) and (b) above.
c)
the investment agreement shall state that it is the unconditional
and general obligation of, and is not subordinated to any other obligation of, the
provider thereof;
b)
the trustee or a third party acting solely as agent therefor will
value the collateral securities at least weekly and will liquidate the collateral
securities if any deficiency in the required collateral percentage in not restored within
(2) business days.
d)
a fixed guaranteed rate of interest is to be paid on invested
funds and all future deposits, if any, required to be made to restore the amount of
such funds to the level specified under the [Indenture];
e)
the term of the investment agreement does not exceed seven years
or such longer term as approved by Radian. A Radian approved investment agreement
for the Debt Service Reserve Fund may extend until the maturity for the Bonds;
c)
the market value of the collateral must be maintained at: 104%
of the total principal of the repurchase agreement for obligations described in
paragraphs (i) and (ii); 105% of the total principal of the repurchase agreement for
obligations described in paragraph (iii) (a) and (b) above.
f)
the Issuer or the Trustee receives the opinion of domestic
counsel (which opinion shall be addressed to the Issuer and Radian) that such
investment agreement is legal, valid, binding and enforceable upon the provider in
accordance with its terms and of foreign counsel (if applicable) in form and substance
acceptable, and addressed to, the Insurer;
d)
the trustee or a third party acting solely as agent therefor or for
the issuer ("the "Holder of the Collateral") has possession of the collateral or the
collateral has been transferred to the Holder of the Collateral in accordance with
applicable state and federal laws (other than be means of entries on the transferor's
books).
g)
the investment agreement shall provide that if during its term:
(1)
the provider's rating by either S&P or Moody's falls below
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14
'AA-' or 'Aa3' respectively, the provider must, at the direction of the Issuer or the
Trustee (which shall give such direction if, but only if, so directed by Radian), within
10 days of receipt of such direction, either (i) collateralize the investment agreement
by delivering or transferring in accordance with applicable state and federal laws
(other than by means of entries on the provider's books) to the Trustee or the
Holder of the Collateral, Permitted Collateral (as defined below) which is free and
clear of any third-party liens or claims at the Collateral Levels set forth below; or (ii)
repay the principal of and accrued but unpaid interest on the investment (the choice
of (i) or (ii) above shall be that of the Issuer or Trustee, as appropriate), and
C.
Collateral levels must be 104% of the total principal deposited
under the investment agreement for U.S. direct Treasury obligations, GNMA
obligations and full faith and credit U.S. government obligations and 105% of the
total principal deposited under the investment agreement for FNMA and FHLMC.
D.
The collateral must be held be a third party, segregated and
marked to market at least weekly.
(xi)
Forward delivery agreements approved in writing by the Insurer
(supported by appropriate opinions of counsel).
(2)
the provider's rating by either Moody's or S&P is
withdrawn or suspended or falls below "A-" or "A3" by S&P or Moody's, as
appropriate, the provider must, at the direction of the Issuer or the Trustee (who
shall give such direction if, but only if, so directed by Radian), within 10 days of
receipt of such direction, repay the principal of and accrued but unpaid interest
on the investment in either case with no penalty or premium to the Issuer or Trustee;
(xii)
(a)
The Issuer covenants that any surplus Revenues shall be used only in
connection with Airports purposes.
h)
The investment agreement shall state and an opinion of
counsel shall be rendered that the trustee has a perfected first priority security
interest in the Permitted Collateral, any substituted collateral and all proceeds
thereof (in the case of bearer securities, this means the trustee is in possession); and
i)
(b)
The Issuer shall maintain the Airports in good repair and working order
and will operate the Airports efficiently and punctually perform all duties required by
state and federal laws.
the investment agreement must provide that if during its term
(1)
the provider shall default in its payment obligations, the
provider's obligations under the investment agreement shall, at the direction of the
Issuer or the Trustee (who shall give such direction if so directed by the Insurer),
be accelerated and amounts invested and accrued but unpaid interest thereon shall
be repaid to the Issuer or Trustee, as appropriate;
(c)
The Issuer shall maintain and carry insurance with respect to the
Airports in an amount necessary to provide for the repair or replacement of the
Airports and shall maintain and carry liability insurance of the kind and in the
amount normally carried by entities, whether publicly or private, engaged in the
operation of airports. The Issuer shall not self-insure without the prior written consent
of the Insurer, except as set forth in subparagraph (i) below.
(2)
the provider shall become insolvent, not pay its debts as
they become due, be declared or petition to be declared bankrupt, etc. ("event of
insolvency"), the provider's obligations shall automatically be accelerated and
amounts invested and accrued but unpaid interest thereon shall be repaid to the
Issuer or Trustee, as appropriate;
(d)
The Issuer shall maintain its rights and titles to the Airports and will
not sell, lease (except in the ordinary course of business), mortgage or otherwise
dispose of the Airports while the 2007 Bonds are outstanding.
(3)
the provider fails to perform any of its obligations under the
Investment Agreement (other than obligations related to payment or rating) and such
breach continues for ten (10) Business Days or more after written notice thereof is
given by the Trustee to the provider, it shall be an event of default; or
(e)
The Issuer shall use its best efforts to enforce any contracts or leases to
which it is a party regarding the use of the Airports.
(f)
The Issuer shall cause to be maintained and kept proper books of
record and account with respect to the Airports separate from all other records and
accounts of the Issuer.
(4)
a representation or warranty made by the provider proves
to have been incorrect or misleading in any material respect when made, it shall be an
event of default under the Investment Agreement.
(g)
The Issuer will pay all taxes, governmental charges and utility fees
when due and will not tolerate the existence of any lien as a result of a failure to pay
to be placed on any of the physical properties of the Airports.
Permitted Collateral for Investment Agreements ("Permitted Collateral"):
A.
U.S. direct Treasury obligations,
(h)
The Issuer shall do all things necessary to maintain its legal existence
and its right to operate the Airports.
B.
Senior debt and/or mortgage backed obligations of GNMA, FNMA
or FHLMC and other government sponsored agencies backed by the full faith and
credit of the U.S. government and approved by the Insurer.
15
Other forms of investments approved in writing by the Insurer.
Airport Related Provisions.
(i)
The Issuer may self-insure without the prior written consent of the
Insurer, so long as the Issuer's self-insurance plan provides for (i) the establishment
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by the Issuer of a separate segregated self-insurance fund funded in an amount
determined (initially and on at least an annual basis thereafter) by an insurance or
actuarial consultant satisfactory to the Insurer employing accepted actuarial
techniques and (ii) the establishment and maintenance of a claims processing and
risk management program. If the Issuer elects to self-insure for professional
liability, the Issuer shall within 150 days after the end of each fiscal year cause an
insurance or actuarial consultant satisfactory to the Insurer to submit a report to
the Trustee and to the Insurer to the effect that such self-insurance plan
maintains adequate reserves and has been adequately funded.
beneficiary) with respect to the Indenture and as a party entitled to (i) notify the Trustee
of the occurrence of an Event of Default, and (ii) request the Trustee to intervene in
judicial proceedings that affect the 2007 Bonds or the security therefor.
Interpretation. Notwithstanding any other provision of the Indenture, in
determining whether the rights of the Bondholders will be adversely affected by any action
taken pursuant to the terms and provisions of the Indenture, the Trustee shall consider the
effect on the Bondholders without regard to the Policy.
(j)
The Trustee shall have no special duty on behalf of the Insurer to
monitor compliance by the Issuer with the provisions of paragraphs (a) through (i)
above, and shall be entitled to the benefit of Article IX of the Master Indenture with
respect thereto.
The Trustee shall not be permitted to resolve ambiguities in the Indenture in any
manner that shall be deemed to be conclusively binding on Bondholders without the
consent of the Insurer. The Insurer shall receive notice of any proposed meetings of
Bondholders held under the Indenture and shall be given the opportunity to attend
and participate in the same.
Defaults. Failure to comply with the Subordination Provisions Applicable to
Subordinated Debt below shall be an immediate Event of Default under the Indenture.
Any legal opinions rendered to any party to the Indenture as to compliance with or
interpretation of, the provisions thereof, shall also be provided to the Insurer.
No waivers of any Event of Default shall be granted by any party to the
Indenture without the prior written consent of the Insurer. Upon an Event of Default
described in Section 801(a) or (b) of the Master Indenture, the Revenue Fund and all
Revenues therein shall be immediately transferred and held by the Trustee under the
Indenture, and applied as provided in the Indenture.
Reimbursement. The Issuer shall pay or reimburse the Insurer for any and all
charges, fees, costs and expenses which the Insurer may reasonably pay or incur in
connection with the (i) administration, enforcement, defense, or preservation of any rights
or security hereunder; (ii) the pursuit of any remedies hereunder or otherwise afforded by
law or equity, (iii) any amendment, waiver, or other action with respect to or related to the
Indenture whether or not executed or completed, (iv) the violation by the Issuer of any law,
rule, or regulation or any judgment, order or decree applicable to it, or (v) any litigation or
other dispute in connection with the Indenture or the transactions contemplated thereby,
other than amounts resulting from the failure of the Insurer to honor its payment
obligations under the Policy. The Insurer reserves the right to charge an administrative fee
(the “Administrative Fee”) of $2,500 as a condition to executing any amendment, waiver or
consent proposed in respect of any document or action taken after closing in connection
with the 2007 Bonds and any Indenture. The Insurer reserves the right to require the
payment of the reasonable fees and expenses of its counsel or other agents as a condition
to executing any amendment, waiver or consent proposed in respect of any document or
action taken after closing in connection with the 2007 Bonds and any Supplemental
Indenture. All requests for any such amendments, waivers or consents shall be in writing
and accompanied by the payment of the Administrative Fee and directed to Radian Asset
Assurance Inc., 335 Madison Avenue, New York, New York 10017, Attention: Risk
Management Department. The obligations of the Issuer to the Insurer shall survive
discharge and termination of the Indenture.
Control. Anything in the Indenture to the contrary notwithstanding, upon the
occurrence and continuance of an Event of Default as defined in the Indenture, the
Insurer shall be entitled to control and direct the enforcement of all rights and
remedies granted to the Holders of the 2007 Bonds or any trustee appointed for
the benefit of the Holders under the Indenture as if the Insurer were the Holder of
the 2007 Bonds insured by it.
Default Rate. Amounts paid by the Insurer in respect of the principal and/or
interest on the 2007 Bonds shall bear interest until repaid to the Insurer at a per annum
rate of interest equal to the rate from time to time announced by the Insurance Trustee at
its base lending rate plus three percent (3%) (the "Default Rate").
Trustee. Prior to an Event of Default, the Insurer shall have the right to remove the
Trustee for cause, and upon the occurrence of an event which constitutes or would, with
the giving of notice or lapse of time, or both, constitute an Event of Default, the Insurer
shall have the right to remove the Trustee for any reason.
Indemnification. To the fullest extent permitted by the laws and Constitution of
the State, the Issuer shall protect, hold harmless and indemnify the Insurer for, from and
against any and all liability, obligations, losses, claims and damages paid or incurred in
connection with the Airport, the Indenture and any related instrument (including all
environmental liabilities regarding the Airport), (except that the Issuer shall not protect, hold
harmless or indemnify the Insurer for the willful or wanton acts or omissions, negligence of
the Insurer, to the extent that such acts, omissions, negligence of such party are
successfully alleged to have caused the liability, obligation, loss, claim or damage) and
expenses in connection herewith including reasonable attorneys' fees and expenses. The
obligations of the Issuer to protect, hold harmless, reimburse and indemnify the Insurer
Consent Requirements. The Insurer's consent shall be required for the following
purposes: (i) execution and delivery of any amendment or supplement to the Indenture
(other than an amendment or supplement for the purpose of authorizing additional
indebtedness in accordance with the terms of the Indenture) or any other document
executed in connection with the issuance of the 2007 Bonds; (ii) removal of the Trustee or
Paying Agent; and (iii) initiation or approval of any action not described in (i) and (ii) above
which requires 2007 Bondholder consent.
Party in Interest. The Insurer shall be included as a party in interest (a third party
17
18
as set forth under this Section shall survive any termination, release, satisfaction and
discharge of the Indenture.
1.
an Airport Consultant has provided to the Trustee a certificate stating
that, for each of the next five (5) full Fiscal Years of the Issuer following issuance of the
Additional Bonds, or each full Fiscal Year of the Issuer from issuance of the Additional
Bonds through three full Fiscal Years of the Issuer following completion of the Project
or Projects financed by the Additional Bonds proposed to be issued, whichever is later,
based upon reasonable assumptions set forth therein, Amounts Available to Pay Debt
Service are projected to be equal to at least 125% of Annual Debt Service on Bonds
(disregarding any Bonds that have been paid or discharged or will be paid or
discharged immediately after the issuance of the Additional Bonds proposed to be
issued); provided, however, that if Capitalized Interest on any Bonds and proposed
Additional Bonds is to be applied the Airport Consultant shall extend the test through
the first three full Fiscal Years of the Issuer for which there is no longer Capitalized
Interest, or
Notices. All notices to the Insurer shall be delivered to Radian Asset
Assurance Inc., 335 Madison Avenue, New York, New York 100017, Attention: Chief
Risk Officer. Email: [email protected]. The obligations of the Issuer to
the Insurer shall survive discharge and termination of the Indenture.
Rate Covenant. (a) The Issuer covenants and agrees that it will take all lawful
and available measures to fix and adjust from time to time the rentals, rates, fees and
other charges for the use of the Airports calculated to be at least sufficient to produce
Amounts Available to Pay Debt Service to provide for the greater of either:
(i)
(To the extent not otherwise paid from other legally available funds of
Issuer) the amounts needed for making the required deposits in the Fiscal Year of
Issuer, to the Principal Accounts, the Interest Accounts, the Redemption Accounts,
Debt Service Reserve Fund, the Operation and Maintenance Reserve Account,
Repair and Rehabilitation Fund, and the Subordinated Indebtedness Fund; or
the
the
the
the
2.
the Issuer has provided to the Trustee a certificate stating that in the
most recent completed Fiscal Year of the Issuer for which an independent audit is
available or for any consecutive twelve-month period out of the last eighteen months
Amounts Available to Pay Debt Service were not less than 125% of (A) Annual Debt
Service on Bonds Outstanding in such Fiscal Year of the Issuer or such period
(disregarding any Bonds that have been paid or discharged or will be paid or
discharged immediately after the issuance of such Additional Bonds proposed to be
issued), plus (B) Maximum Annual Debt Service with respect to such Additional Bonds
proposed to be issued.
(ii)
An amount not less than 125% of the aggregate Annual Debt Service
with respect to Outstanding Bonds for such Fiscal Year of the Issuer.
(b)
The Issuer covenants that if, upon the receipt of the audit report for a
Fiscal Year of the Issuer, the Amounts Available to Pay Debt Service in such Fiscal
Year of the Issuer are less than the amount specified in subsection (a) (i) or (ii) above
of this Section, the Issuer will take all lawful and available measures to revise the
schedule of rentals, rates, fees and charges for the use of the Airports so as to
generate Amounts Available to Pay Debt Service in the amounts specified in
subsection (a) (i) or (ii) of this Section in the Fiscal Year of the Issuer following the
Fiscal Year of the Issuer covered by such audit report.
(b)
With respect to Additional Bonds proposed to be issued as Refunding
Bonds, the Issuer may issue Refunding Bonds upon satisfaction of one of the following
requirements:
either
1.
(c)
In the event that Amounts Available to Pay Debt Service for any Fiscal
Year of the Issuer are less than the amount specified in subsection (a) (i) or (ii) of this
Section, but the Issuer promptly has taken in the next Fiscal Year of the Issuer all
available lawful measures to revise the schedule of rentals, rates, fees and charges for
the use of the Airports so as to generate amounts required by subsection (b) of this
Section, there shall be no Event of Default. Nevertheless, if after taking the measures
required by subsection (b) of this Section to revise the schedule of rentals, rates, fees
and charges for use of the Airports, Amounts Available to Pay Debt Service in the
Fiscal Year of the Issuer during which such adjustments are required to be made (as
evidenced by the audit report for such Fiscal Year of the Issuer) is less than the
amount specified in subsection (a) (i) or (ii) of this Section there shall be an Event of
Default pursuant to Section 801(e) hereof.
(c)
The Issuer may issue Completion Bonds in order to finish the 2007
Project or portion thereof. The aggregate Principal Amount of such Completion Bonds
shall be limited to ten percent (10%) of the amount specified in the Supplemental
Indenture in which the initial Series of Bonds issued to finance such Project was
authorized as the total Principal Amount of any Bonds and Subordinated
Indebtedness originally projected to be required to complete the funding of such
Project. In issuing such Completion Bonds, the Issuer shall not be required to meet
the requirements for Additional Bonds set forth in Section 214 (a) or (b). The
Construction Manager shall provide a certificate stating the total estimated cost to
complete the Project and that the proceeds of the Completion Bonds will not be used
So long as the Issuer is not in default hereunder, as
Additional Bonds. (a)
evidenced by a certificate of no default executed by its Authorized Representative, the
Issuer may issue Bonds ("Additional Bonds"), other than the first issue of Bonds under
the Master Indenture upon satisfaction of one of the following requirements:
19
the requirements set forth in (a) are satisfied, or
2.
the Issuer shall have provided to the Trustee a certificate with an
accompanying schedule indicating that, after issuance of the Refunding Bonds, (i)
there is no increase in Maximum Annual Debt Service with respect to all Bonds
Outstanding and (ii) either (A) there is a decrease in the sum of all Annual Debt
Service payable on all Bonds then Outstanding, or (B) in each Fiscal Year, the Annual
Debt Service with respect to the Refunding Bonds will be equal to or less than the
Annual Debt Service with respect to the Bonds to be refunded.
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for Costs related to material changes in the scope of such Project. The Financial
Advisor, in reliance on the Construction Manager's certificate, shall provide a
certificate stating (i) the anticipated total Principal Amount of Bonds and Subordinated
Indebtedness required to finance the Project and the Principal Amount of Completion
Bonds to be issued, and (ii) that the proceeds of the Completion Bonds are projected to
be sufficient to complete the Project.
Issuer, or of any execution, sale, receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization, or other similar proceeding relative to the Issuer or its
property, all principal and interest owing on all Superior Indebtedness shall first be
paid in full before any payment is made upon the Subordinated Indebtedness,
provided, however, that, except for Amounts Available to Pay Debt Service, this
sentence shall not apply to payments made on such Subordinated Indebtedness
from the proceeds of collateral specifically securing such Subordinated
Indebtedness; and in any such event any payment or distribution of any kind or
character from sources other than the proceeds of collateral specifically securing
the Subordinated Indebtedness, except for Amounts Available to Pay Debt Service,
whether in cash, property or securities (other than in securities, including equity
securities, or other evidences of indebtedness, the payment of which is
subordinated to the payment of all Superior Indebtedness which may at the time be
outstanding) which shall be made upon or in respect of the Subordinated
Indebtedness shall be paid over to the holders of such Superior Indebtedness, pro
rata, for application in payment thereof unless and until such Superior Indebtedness
shall have been paid or satisfied in full; and
(d)
Notwithstanding the provisions of paragraph (a) above, no Additional
Bonds may be issued under (a) above without the Insurer’s consent, unless the
requirements of (a) above are met when “150%” is substituted for “125%” in each
place it appears.
(e)
All fixed rate Parity Debt shall have the same principal and interest
payment dates as the 2007 Bonds. Parity Debt bearing interest at variable rate may
have interest payable on a periodic basis other than that required for the payment of
interest on the 2007 Bonds but shall have the same principal payment dates as the
2007 Bonds.
(2)
In the event that the Subordinated Indebtedness is declared or
becomes due and payable because of the occurrence of any Event of Default under
the Indenture or otherwise than at the option of the Issuer, under circumstances
when the foregoing clause (1) shall not be applicable, the holders of the
Subordinated Indebtedness shall be entitled to payments only after there shall first
have been paid in full all Superior Indebtedness outstanding at the time the
Subordinated Indebtedness so become due and payable because of any such event,
or payment shall have been provided for in a manner satisfactory to the holders of
such Superior Indebtedness, provided, however, that, except for Amounts Available
to Pay Debt Service, this sentence shall not apply to payments made on such
Subordinated Indebtedness from the proceeds of collateral specifically securing such
Subordinated Indebtedness.
(f)
Refunding Bonds which do not defease all of the insured 2007 Bonds
may be issued without the consent of the Insurer, provided there is no increase in
maximum annual debt service.
(g)
Short-Term Debt (any debt that has a stated term less than one year)
may be incurred without the Insurer's prior written consent provided such shortterm debt is secured by a subordinate lien in the Revenues.
(h)
Balloon indebtedness (indebtedness of which 25% or more of the
principal amount comes or may come due in any one fiscal year by maturity,
mandatory sinking fund redemption or optional or mandatory tender by the holder
thereof), variable rate indebtedness and non-recourse indebtedness (debt which is not
a general obligation of the Issuer and which is secured solely by the property
acquired or financed with such debt) shall be subject to the prior approval of the
Insurer.
(b)
The Issuer agrees, for the benefit of the holders of Superior Indebtedness,
that in the event that any Subordinated Indebtedness is declared due and payable
before its expressed maturity because of the occurrence of a default hereunder, (i)
the Issuer will give prompt notice in writing of such happening to the holders of
Superior Indebtedness and (ii)) all Superior Indebtedness shall forthwith become
immediately due and payable upon demand, regardless of the expressed maturity
thereof.
(i)
No additional bonds, notes, certificates, contracts or any other
obligations shall be issued by the Issuer unless no Event of Default shall have
occurred and be continuing with respect to the 2007 Bonds.
Subordinate Debt Any debt of the Issuer which is subordinate to the lien of
the Bondholders on the Amounts Available to Pay Debt Service shall have the same
payment dates as the 2007 Bonds and provide that such debt may not be accelerated
without the consent of the Insurer.
(c)
Any default in the covenants contained in this section shall be an
immediate "Event of Default" without regard to any "grace period" otherwise contained
herein.
(a)
Subordination Provisions Applicable to Subordinated Debt.
Subordinated Indebtedness shall at all times be wholly subordinate and
junior in right of payment to any and all indebtedness of the Issuer under the
Indenture or the 2007 Bonds (herein called "Superior Indebtedness"), in the manner
and with the force and effect hereafter set forth:
(d)
If the holder of the Subordinated Indebtedness is a commercial bank,
savings bank, savings and loan association or other financial institution which is
authorized by law to accept and hold deposits of money or issue certificates of
deposit, such holder must agree to waive any common law or statutory right of setoff
with respect to any deposits of the Issuer maintained with or held by such holder.
(1)
Airport Lease Agreement The Issuer hereby covenants to (i) notify the Insurer
In the event of any liquidation, dissolution or winding up of the
21
22
immediately upon receipt by the Issuer of a notice of default from the United States
Air Force (the "Air Force") under the terms of the Okaloosa Regional Airport Lease
Agreement between the Issuer and the Air Force (the "Lease"); and (ii) permit the
Insurer to cure, or direct the Trustee to cure, at the Issuer’s expense, any covenant
defaults on behalf of the Issuer under the terms of the Lease.
Total Uses of Funds by Issuer and Trustee
Section 206.
Book-Entry System of Registration. The 2007 Bonds
shall be issued using the book-entry-only system of registration described in the
Official Statement for the 2007 Bonds.
Section 207.
Form of 2007 Bonds. The 2007 Bonds shall be issued in
the form attached as Exhibit A hereto and by this reference made a part hereof.
Section 208.
Continuing Disclosure.
The Issuer shall provide
continuing disclosure of information relating to the 2007 Bonds as provided in its
Continuing Disclosure Certificate in the form attached as Appendix E to the Official
Statement for the 2007 Bonds.
Section 209.
Authentication of 2007 Bonds.
The Trustee as
Authenticating Agent shall authenticate and deliver to the 2007 Original Purchaser
the 2007 Bonds upon receipt of a written request from the Issuer and receipt of the
items specified in Section 210(a), (b), (c) and (d) and Section 214(a) of the Master
Indenture relating to the 2007 Bonds and compliance with any other requirements in
accordance with the Indenture.
Section 210.
Sources and Uses of Funds. The Issuer shall receive the
funds from the sources and in the amounts specified in (a) below and shall apply them
upon receipt as provided in (b) below. The Trustee shall apply the funds upon receipt
as provided in (c) below.
(a)
(b)
(c)
Sources of Funds:
Purchase Price of 2007 Bonds
Less Bond Insurance Premium paid by
The 2007 Original Purchaser:
Total Sources of Funds
Uses of Funds by the Issuer:
Deposit to 2007 Project Account:
(i)
to the 2007 Cost of Issuance Account:
(ii)
to the 2007 Capitalized Interest Account
for payment of interest
on the 2007 Bonds
through April 1, 2009:
(iii)
to the 2007 Project Account
Total Uses of Funds by Issuer
$9,431,031.35
301,754.71
$9,129,276.64
209,382.30
797,731.84
7,229,187.50
$8,236,301.64
Uses of Funds deposited by the Issuer with the Trustee:
Deposit to 2007 Debt Service Reserve Account
Total Uses of Funds by Trustee
23
892,975.00
$892,975.00
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24
$9,129,276.64
ARTICLE IV
ARTICLE III
PROJECT
APPLICATION OF PROVISIONS OF MASTER INDENTURE
Section 302.
Security for 2007 Bonds. The 2007 Bonds shall be
payable solely from and secured by a pledge of and lien on the Trust Estate, on a
parity with the 2003 Bonds and any Additional Bonds which may be issued under the
Master Indenture, subject to the revised flow of funds provided in Section 505 hereof,
and subject to Section 701 of the Master Indenture.
Section 401.
Project Account. There is hereby created and established
in the Construction Fund created pursuant to Section 401 of the Master Indenture an
Account for the 2007 Bonds to be known as the “2007 Project Account” with a 2007
Capitalized Interest Account and a 2007 Cost of Issuance Account therein. Proceeds
of the 2007 Bonds to be used to pay Costs of the 2007 Project shall be deposited into
the 2007 Project Account and used solely for the purpose of paying Costs of the 2007
Project, subject to the provisions of Article IV of the Master Indenture. Moneys
deposited into the 2007 Capitalized Interest Account and the 2007 Cost of Issuance
Account in the 2007 Project Account shall be derived from proceeds of the 2007 Bonds
or from additional available sources and shall be used to pay (1) eligible capitalized
interest on the 2007 Bonds, as indicated in Section 210(b)(ii) hereof, and (2) costs of
issuance allocable to the 2007 Bonds, respectively.
Section 303.
2007 Accounts.
(a) There are hereby created and
established in the Funds and Accounts created and established pursuant to Section
601 of the Master Indenture the following Series Accounts:
Section 402.
Project Covenants. The Issuer covenants that it will not
take, or allow any person to take, any action that would cause the Issuer to lose the
right to receive any grant-in-aid related to the 2007 Project.
Section 301.
Application of Provisions of the Master Indenture. The
2007 Bonds shall for all purposes be considered to be Bonds issued under the
authority of the Master Indenture and shall be entitled to all the protection and
security provided therein for Bonds. The covenants and pledges contained in the
Master Indenture shall be applicable to the 2007 Bonds herein authorized.
(1)
in the Bond Fund, a 2007 Interest Account, a 2007 Principal Account,
and a 2007 Redemption Account; and
(2)
in the Debt Service Reserve Fund, a 2007 Debt Service Reserve Account.
(b) There is also created and established in the Revenue Fund a Customer
Facility Charge Fund and the accounts and subaccounts described in Section 501
hereof.
(c) There is also created and established in the Airport Construction Fund,
pursuant to Article IV of the Master Indenture, a 2007 Project Account, a 2007 Cost of
Issuance Account and a 2007 Capitalized Interest Account.
Section 304.
Initial Funding of CFC Coverage Subaccount. The 2007
CFC Coverage Subaccount shall be initially funded on the date of issue of the 2007
Bonds, from CFC Revenues on deposit in the Customer Facility Charge Fund, in the
amount of the 2007 CFC Coverage Amount.
Section 305.
Funding Debt Service Reserve Fund Requirement
Deficiency. Pursuant to Section 611(ix) of the Master Indenture, prior to deposit of
any amount to the Airports General Purpose Fund, there shall first be deposited pro
rata to each Account in the Debt Service Reserve Fund for each series of Bonds all
remaining amounts in the Revenue Fund in accordance with the amounts necessary
to fully fund the applicable Series Debt Service Reserve Fund Requirement.
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26
ARTICLE V
(d)
After all 2007 Bonds are no longer Outstanding, the remaining
monies in the Customer Facility Charge Fund, if not provided for in any other
Supplemental Indenture, may be utilized on a pay-as-you-go basis for such capital
projects or other purposes as may be authorized from time to time by the Board and
as are authorized by the CFC Ordinance.
CUSTOMER FACILITY CHARGE FUND
Section 501.
Customer Facility Charge Fund; 2007 Pledged CFC
Account; 2007 CFC Project Account.
Section 503.
Application of Monies in the 2007 Pledged CFC
Account. No later than the same day in each month that monies are transferred from
the Revenue Fund into the Bond Fund pursuant to Section 611 of the Master
Indenture, the Issuer shall transfer
(a)
There is hereby created and established in the Revenue Fund a Customer
Facility Charge Fund to be held by the Issuer pursuant to the CFC Ordinance and this
Second Supplement. The Issuer shall deposit into this Fund all CFC Revenues
promptly upon receipt.
(a)
first, from the 2007 Pledged CFC Account, and second, if necessary from
the 2007 CFC Coverage Subaccount therein, an amount equal to the CFC Debt Service
for such month on the 2007 Bonds to the Trustee for deposit into the 2007 Interest
Account, 2007 Principal Account and 2007 Redemption Account for payment of each
Account's share of the CFC Debt Service, and
(b)
There are hereby created and established in the Customer Facility
Charge Fund a 2007 Pledged CFC Account and a 2007 CFC Coverage Subaccount
therein, each to be held by the Issuer, pursuant to this Second Supplement. Monies
in the 2007 Pledged CFC Account and the 2007 CFC Coverage Subaccount shall
constitute Pledged CFC Revenues and Revenues (as defined in the Master Indenture)
and are hereby pledged to secure the payment of the Principal Amount of, Redemption
Premium, if any, and Interest on the 2007 Bonds.
Section 502.
(b)
from the 2007 Pledged CFC Account to the Trustee for deposit into the
2007 Debt Service Reserve Account the amount for such month calculated pursuant
to Section 502(a)(1)(ii) hereof.
Application of Monies in Customer Facility Charge
Section 504.
Covenants to Maintain CFC Revenue.
The Issuer
covenants to do all things necessary on its part to continue the imposition of the
Customer Facility Charge in compliance with the CFC Ordinance and any successor
provision of law and to diligently enforce collection of the Customer Facility Charge.
The Issuer will at all times comply with all of the requirements and conditions of the
CFC Ordinance, and take every necessary action to remain qualified under applicable
law to levy the Customer Facility Charge and collect the CFC Revenues; and the Issuer
will not take any action which will jeopardize eligibility for receipt of such funds which
may adversely affect the undertakings provided in this Second Supplement. The
Issuer will not take any action, including amendment or repeal of the CFC Ordinance,
or enter into any agreement which will have the effect of reducing the level of the CFC
Revenues received by the Issuer below an amount sufficient to fully fund the 2007
Pledged CFC Account and the 2007 CFC Coverage Subaccount therein in each Fiscal
Year.
Fund.
(a)
So long as any 2007 Bonds remain Outstanding, CFC Revenues
shall be transferred upon receipt in the Customer Facility Charge Fund as follows:
(1)
into the 2007 Pledged CFC Account until, in each month,
the amount on deposit in the 2007 Pledged CFC Account equals (i) the CFC Debt
Service on the 2007 Bonds for such month and (ii) the product of (I) any required
deposit into the 2007 Debt Service Reserve Account times (II) the CFC Debt Service
Percentage; and
(2)
into the 2007 CFC Coverage Subaccount in the amount
necessary to maintain therein the 2007 CFC Coverage Amount.
Section 505.
Application of Revenues under Master Indenture. Under
Section 611(ii) of the Master Indenture, which is hereby amended to read as follows:
Revenues in the Revenue Fund (other than Revenues constituting Pledged CFC
Revenues) shall be applied on or before the 25th day of each month, commencing in
the month following issuance of the 2007 Bonds, as follows in the following order of
priority:
(b)
CFC Revenue in the Customer Facility Charge Fund in excess of
the amount required to be transferred to the 2007 Pledged CFC Account and the 2007
CFC Coverage Subaccount shall remain in the Customer Facility Charge Fund, and
shall be invested pursuant to Section 612 of the Master Indenture until no 2007
Bonds remain Outstanding.
(c)
While any 2007 Bonds remain Outstanding, the Issuer may utilize
surplus funds in the Customer Facility Charge Fund (i) to pledge to secure and to pay
any Additional Bonds or Subordinated Indebtedness authorized by the CFC
Ordinance, or (ii) on a pay-as-you-go basis for such capital projects or other purposes
as may be authorized from time to time by the Board and as are authorized by the
CFC Ordinance.
27
“(ii)
Indenture:
Except as otherwise provided in any future applicable Supplemental
***
C-37
28
(a)
First, to the applicable Interest Account in the Bond Fund, an
amount, which together with amounts transferred from any Pledged PFC Account
relating thereto and amounts transferred from the Pledged CFC Account relating
thereto, is equal to one-sixth (1/6th) of the next interest payment due after such date
with respect to each Series of Bonds provided, however, that the Issuer shall be
credited with any amount which is on deposit in a Capitalized Interest Account
relating to the next interest payment on such Series in the Construction Fund.
ARTICLE IX
MISCELLANEOUS
Section 601.
Severability.
If any one or more sections, clauses,
sentences or parts hereof shall for any reason be questioned in any court of competent
jurisdiction and shall be adjudged unconstitutional or invalid, such judgment shall
not affect, impair or invalidate the remaining provisions hereof, or the 2007 Bonds
issued pursuant hereto, but shall be confined to the specific sections, clauses,
sentences and parts so adjudged.
(b)
Second, to the applicable Principal Account or Redemption
Account as the case may be in the Bond Fund, an amount, which together with
amounts transferred from any Pledged PFC Account relating thereto and amounts
transferred from the Pledged CFC Account relating thereto, is equal to one-twelfth
(1/12th) of the next principal payment or mandatory sinking fund payment due after
such date with respect to each Series of Bonds.
Section 602.
Governing Law. This Second Supplement and the 2007
Bonds are contracts made under the laws of the State and shall be governed and
construed in accordance with such laws.
Amounts in the applicable Interest, Principal or Redemption Account in the
Bond Fund may be used to reimburse the Credit Provider for amounts paid under a
Credit Facility to or for the benefit of Holders of Bonds for such Interest, Principal or
Redemption Price of Bonds.
Section 603.
Notices.
(a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices, consents or other communications required
or permitted hereunder shall be deemed sufficiently given or served if given in writing,
mailed by first class mail, postage prepaid and addressed as follows:
If such deposits are not sufficient to comply with the provisions of the
applicable Supplemental Indenture with respect to each Series of Bonds, such
deposits shall be made pro rata in accordance with amounts due for each Series of
Bonds.”
(i)
If to the Issuer, addressed to:
c/o County Administrator
1804 Lewis Turner Blvd., Suite 400
Ft. Walton Beach, Florida 32547
with a copy to:
County Finance Director
and
County Airport Director
(ii)
If to the Trustee, sent by registered
or certified mail addressed to:
101 Barclay Street – 7W
New York, New York 10286
(iii)
If to the registered Holder of a 2007 Bond,
addressed to such Holder at the address
shown on the books of the Registrar kept
pursuant hereto.
(b)
The Issuer and the Trustee may from time to time by notice in writing to
each other designate a different address or addresses for notice hereunder.
29
30
Section 604.
Counterparts. This Second Supplement may be executed
in several counterparts, each of which shall be an original and all of which shall
constitute one instrument.
IN WITNESS WHEREOF, the Issuer has caused these presents to be signed in
its name and on its behalf and attested by its duly authorized officers, and, to
evidence its acceptance of the trusts hereby created, the Trustee has caused these
presents to be signed in its name and on its behalf by its duly authorized officer, all as
of the day and year first above written.
Section 605.
Immunity of Individuals. No recourse shall be had for the
payment of the Principal Amount of, Redemption Premium, if any, or Interest on any
of the 2007 Bonds or for any claim based thereon or upon any obligation, covenant or
agreement herein against any past, present or future member, officer, employee, agent
or consultant of the Issuer, whether directly or indirectly and all such liability of any
such individual is such as hereby expressly waived and released as a condition of and
in consideration for the execution hereof and the issuance of the 2007 Bonds.
By:
Don R. Amunds
Chairman, Board of County
Commissioners
Section 606.
Limited Liability; Immunity of Officers of the Issuer.
This Second Supplement does not pledge the full faith, general credit or taxing power
of the State or any of its political subdivisions, including the Issuer. No provision,
covenant or agreement contained in this Second Supplement or in the 2007 Bonds or
in any Additional Bonds or any obligations herein or therein imposed upon the Issuer
or the breach thereof, shall constitute or give rise to or impose upon the Issuer a
pecuniary liability or a charge against its general credit. In making the agreements,
provisions and covenants set forth in this Second Supplement, the Issuer has not
obligated itself except with respect to the Trust Estate and the Pledged CFC Revenues
and the application of the revenues, income and all other property therefrom, as
hereinabove provided.
(SEAL)
Attest:
By: __________________________________
Gary J. Stanford
Deputy Clerk of the Circuit
Court and ex officio Deputy
Clerk and Financial Officer,
The Issuer is not nor are the members of the Board of the Issuer, the agents,
attorneys or employees of the Issuer, or their respective heirs, personal representatives
or successors personally or generally liable in connection with any matter, cause or
thing pertaining to this Second Supplement, or any instruments and documents
executed and delivered by the Issuer in connection with this Second Supplement.
No covenant or agreement contained in this Second Supplement shall be
deemed to be the covenant or agreement of any member of the Board, officer, attorney,
agent or employee of the Issuer in an individual capacity. No recourse shall be had for
the payment of the Principal Amount of or Redemption Premium (if any) or Interest on,
the 2007 Bonds or any claim based thereon against any officer, member of the Board,
agent, attorney or employee of the Issuer past, present or future, or its successors or
assigns, as such, present or future, either directly or through the Issuer, or any
successor entity, whether by virtue of any constitutional provision, statute or rule of
law, or by the enforcement of any assessment or penalty, or otherwise, all of such
liability of such members of the Board, officers, agents, attorneys or employees, being
hereby released as a condition of, and as a consideration for, the execution and
delivery of this Second Supplement.
Section 607.
Binding Effect. This instrument shall inure to the benefit
of and shall be binding upon the parties hereto and their respective successors and
assigns subject to the limitations contained herein.
31
C-38
32
THE BANK OF NEW YORK,
as Trustee
By:
Joanne Adamis
Vice President
33
C-39
APPENDIX D
APPENDIX D
Chairman
$_____________
TAXABLE AIRPORT REVENUE BONDS, SERIES 2007
Dear Sir:
We have acted as bond counsel in connection with the issuance by Okaloosa
County, Florida (the "County"), of its $_________ Taxable Airport Revenue Bonds, Series
2007 (the "Bonds"), pursuant to the Constitution and laws of the State of Florida,
particularly Part I of Chapter 125, Chapter 332, Part VII of Chapter 159, and Section
218.385, all of Florida Statutes, as amended from time to time, and other applicable
provisions of law, and pursuant to a Master Indenture of Trust dated as of August 1,
2003, between the County and JPMorgan Chase Bank, as trustee, as to which The
Bank of New York serves as successor trustee (the “Trustee”), as supplemented by a
First Supplemental Indenture dated as of August 1, 2003 (the First Supplemental
Indenture"), and as supplemented by a Second Supplemental Indenture dated as of
December 1, 2007 (the “Second Supplemental Indenture), and, with the Master
Indenture and the First Supplemental Indenture (the "Indenture"). The Bonds are being
issued to finance the development and construction of a new rental car facility and
related improvements at Okaloosa Regional Airport, as set forth in the Indenture. We
have examined the law and such certified proceedings of the Board of County
Commissioners (the "Board") of the County and other proofs as we deem necessary to
render this opinion.
As to questions of fact material to our opinion, we have relied upon
representations of the County contained in the Indenture and in the certified
proceedings and other certifications of public officials furnished to us, without
undertaking to verify the same by independent investigation.
As of the date hereof, and based on our examination of the foregoing and the
law and proceedings in this matter, we are of the opinion that:
1.
The County is duly created and validly existing as a political
subdivision of the State of Florida, with the power to execute and delivery the
Indenture and to perform the agreements on its part contained therein and to issue
the Bonds pursuant to the Master Indenture and the Second Supplemental Indenture.
2.
The execution and delivery of the Second Supplemental Indenture
and the issuance of the Bonds has been approved by Resolution of the Board duly
adopted on October 2, 2007. The Second Supplemental Indenture has been duly
executed and delivered and constitutes a valid and binding obligation of the County.
The Master Indenture creates a valid lien upon and pledge of the Trust Estate under
the Indenture, and the Second Supplemental Indenture creates a valid lien upon and
D-1
pledge of the Pledged CFC Revenue under the Indenture, each to secure payment of
the Bonds.
3.
The Bonds have been duly authorized, executed and delivered by
the County and are valid and binding special obligations of the County, payable solely
from the sources hereinabove described, as provided in the Indenture.
4.
Under existing laws, regulations, rulings and court decisions, the
interest on the Bonds is NOT excluded from gross income for federal income tax
purposes.
It is to be understood that the rights of the holders of the Bonds, and the
enforceability of the Indenture and the Bonds, may be subject to the exercise of
judicial discretion in accordance with general principles of equity, to the valid exercise
of the sovereign police powers of the State of Florida, and of the constitutional powers
of the United States of America and to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights heretofore or hereafter
enacted.
Respectfully submitted,
D-2
APPENDIX E
FORM OF
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and
delivered by Okaloosa County, Florida (the “County”) in connection with the issuance by the
County of its $9,980,000 Taxable Airport Revenue Bonds, Series 2007 (the “Bonds”). The Bonds
are being issued pursuant to a Master Indenture dated as of August 1, 2003 between the County and
JP Morgan Chase Bank, New York, New York, as trustee, as supplemented by a Second
Supplemental Indenture between the County and The Bank of New York, as successor trustee,
dated as of December 1, 2007. The County covenants and agrees as follows:
SECTION 1. PURPOSE OF DISCLOSURE CERTIFICATE. This Disclosure
Certificate is being executed and delivered by the County for the benefit of the Bondholders
(including beneficial owners) and in order to assist the underwriters of the Bonds in complying with
the continuing disclosure requirements of Rule 15c2-12 promulgated by the Securities and
Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934 (the “Rule”).
SECTION 2. NATURE OF UNDERTAKING. The County, in accordance with the
Rule, hereby covenants to provide or cause to be provided:
(a)
to each nationally recognized municipal securities information repository
designated from time to time by the SEC (each a “NRMSIR”) and to any state information
depository with which filings are required to be made by the County in accordance with the
Rule (the “SID”), (i) annual financial information and operating data of the type described
under “Annual Information” below for each Fiscal Year ending on or after September 30,
2007, not later than the following April 30, and (ii) when and if available, audited financial
statements of the County for each Fiscal Year ending on or after September 30, 2007; and
(b)
to each NRMSIR or to the Municipal Securities Rulemaking Board
established by the SEC (the “MSRB”), and to the SID, in a timely manner, notice of (i) any
Specified Event described in the section entitled a “Specified Event” if that Specified Event
is material, (ii) the County’s failure to provide the Annual Information on or prior to the date
specified above, and (iii) any change in the accounting principles applied in the preparation
of its annual financial statements, any change in its Fiscal Year, and the termination of the
County’s continuing disclosure obligations.
The County expects that audited annual financial statements will be prepared and will be available
together with the Annual Information identified below. The accounting principles to be applied in
the preparation of those financial statements will be generally accepted accounting principles as
recommended from time to time by the Governmental Accounting Standards Board. In the event
that the audited annual financial statements are not available by the date on which the Annual
Information will be provided, the County will provide unaudited financial statements by the date
specified and audited financial statements when available.
E-1
SECTION 3. ANNUAL INFORMATION AND SPECIFIED EVENTS.
1.
Annual Information to be provided by the County shall consist of an update
of the information under the headings "Historical Operating Results", including the "Management
Discussion of Financial Results" thereunder, the table entitled "Regional Share of Enplanements,"
the table entitled "Total Enplanements", the table entitled "Historical Enplaned Passengers by
Airline", the table entitled "Top 10 Origination and Distribution City Markets," the table entitled
"Commercial Operations," the table entitled "Landed Weight," a calculation of historical debt
service coverage and the annual financial statements of the County of its Airports System Enterprise
Fund.
2.
Specified Events shall include the occurrence of the following events, within
the meaning of the Rule, with respect to the Bonds: principal and interest payment delinquencies;
non-payment related defaults; unscheduled draws on debt service reserves reflecting financial
difficulties; unscheduled draws on the credit enhancement reflecting financial difficulties;
substitution of the credit or liquidity providers, or their failure to perform; adverse tax opinions or
events affecting the tax status of the Bonds; modifications to rights of beneficial owners; Bond
calls; defeasances; release, substitution, or sale of property securing repayment of the Bonds; and
rating changes.
The County may, from time to time, in its sole discretion, choose to provide notice of the
occurrence of certain other events if, in the judgment of the County, such other events are material
with respect to the Bonds, but the County does not specifically undertake to commit to provide any
such additional notice of the occurrence of any material event except those events listed above. Any
voluntary inclusion by the County of supplemental information that is not required hereunder shall
not expand the obligations of the County hereunder and the County shall have no obligation to
update such supplemental information or include it in any subsequent report.
SECTION 4. NRMSIRs AND SIDs. As of the date of issuance of the Bonds, the
NRMSIRs to which the County shall provide the information described in Sections 2 and 3 above,
to the extent required, shall be the following organizations, their successors and assigns:
(A)
Bloomberg Municipal Repositories
P.O. Box 840
Princeton, New Jersey 08542-0840
Phone: 609/279-3200
Fax: 609/279-5962
Email: [email protected]
(B)
Thomson NRMSIR
Attn: Municipal Disclosure
395 Hudson Street
Phone: 212/807-3814
Fax: 212/989-9282
E-2
(C)
Standard & Poor's J.J. Kenny Repository
55 Water Street, 45th Floor
Phone: 212/438-4595
Fax: 212/438-3975
(D)
DPC Data Inc.
One Executive Drive
Fort Lee, NJ 07024
Phone: 201/346-0701
Fax: 201/947-0107
The County is required to provide the information described in Sections 2 and 3 above to
any NRMSIR’s that are subsequently established and approved by the Securities and Exchange
Commission. According to a Securities and Exchange Commission press release dated June 26,
1995, a list of names and addresses of all designated NRMSIRs as of any point in time is available
by calling the SEC’s FAX On Demand Service at (202) 942-8088 from a telecopier machine and
requesting document number 0206.
As of the date of issuance of the Bonds, there are no SIDs in the State of Florida.
SECTION 5. REMEDIES; NO EVENT OF DEFAULT. The County agrees that its
undertaking pursuant to the Rule set forth above is intended to be for the benefit of the holders and
beneficial owners of the Bonds and shall be enforceable by any such holder or beneficial owner;
provided that the right to enforce the provisions of this undertaking shall be limited to a right to
obtain specific performance of the County’s obligations hereunder and any failure by the County to
comply with the provisions of this undertaking shall not be an event of default with respect to the
Bonds under the Indenture.
SECTION 6. SEPARATE BOND REPORT NOT REQUIRED; INCORPORATION
BY REFERENCE. Additionally, the requirements of this Disclosure Certificate do not necessitate
the preparation of any separate annual report addressing only the Bonds. These requirements may
be met by the filing of a combined bond report or the County’s Comprehensive Annual Financial
Report; provided, such report includes all of the required information and is available by April 30.
Additionally, the County may incorporate any information provided in any prior filing with each
NRMSIR or other information filed with the SEC or included in any final official statement of the
County; provided, such final official statement is filed with the MSRB.
SECTION 7. DISSEMINATION AGENTS. The County may, from time to time,
appoint or engage a dissemination agent to assist it in carrying out its obligations under this
Disclosure Certificate, and may discharge any such agent, with or without appointing a successor
dissemination agent.
E-3
SECTION 8. TERMINATION. The County’s obligations under this Disclosure
Certificate shall cease upon the legal defeasance, prior redemption, payment in full of all of the
Bonds, and/or when the County no longer remains an obligated person with respect to the Bonds
within the meaning of the Rule.
SECTION 9. AMENDMENTS. The County reserves the right to amend the provisions of
this Disclosure Certificate as may be necessary or appropriate to achieve its compliance with any
applicable federal securities law or rule, to cure any ambiguity, inconsistency or formal defect or
omission, and to address any change in circumstances arising from a change in legal requirements,
change in law, or change in the identity, nature, or status of the County, or type of business
conducted by the County. Any such amendment shall be made only in a manner consistent with the
Rule and any amendments and interpretations thereof by the SEC. Annual Information containing
any amended operating data or financial information shall explain, in narrative form, the reasons for
any such amendment and the impact of the change on the type of operating data or financial
information being provided. Additionally, in the year in which any change in accounting principles
is made, the County shall present a comparison (in narrative form and also, if feasible, in
quantitative form) between the financial statements as prepared on the basis of the new accounting
principles and those prepared on the basis of the former accounting principles.
SECTION 10. OBLIGATED PERSONS. If any person other than the County becomes
an Obligated Person (as defined in the Rule) relating to the Bonds, the County shall use its best
efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such
Obligated Person.
E-4
Dated: December 13, 2007
By:
Chairman, Board of County
Commissioners
[SEAL]
ATTEST:
______________________________________
Clerk of the Circuit Court, Ex Officio
Clerk of the Board of County
Commissioners
E-5
APPENDIX F
SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL GUARANTY INSURANCE POLICY
Obligor:
Bonds:
Bond Trustee:
Insurance Trustee:
Policy Number:
Premium:
Radian Asset Assurance Inc. ("Insurer"), a corporation organized under the laws of the State of New York, in
consideration of the payment of the premium and subject to the terms of this Policy, hereby unconditionally and
irrevocably guarantees the payment of the Obligation (hereinafter defined) to the Insurance Trustee for the
benefit of the Holders (hereinafter defined) from time to time of the Bonds. This Policy does not insure against
any risk other than nonpayment of the Obligation by or on behalf of the Obligor or any other obligor to the Bond
Trustee. Nonpayment includes recovery from a Holder of Bonds or the Bond Trustee of any portion of the
Obligation pursuant to a final judgment by any court of competent jurisdiction holding that such payment
constituted a voidable preference within the meaning of any applicable bankruptcy law.
Upon receipt by the Insurer of telephonic or telegraphic notice, such notice subsequently confirmed to the
Insurer in writing by registered or certified mail, from the Insurance Trustee that the Obligor (or other obligor
responsible for payment of the Obligation) has failed to provide the Bond Trustee with sufficient funds for
payment of the Obligation on the Due Date (hereinafter defined), the Insurer shall, not later than such Due Date
or the first business day after receipt of such notice, whichever is later, pay to the Insurance Trustee for the
benefit of the Holders of the Bonds an amount which shall be sufficient to pay the Obligation, but only upon
receipt by the Insurer, in a form reasonably satisfactory to it, of (a) evidence of the Holder's right to receive such
payment and (b) evidence, including any appropriate instruments of assignment, that all the Holder's rights with
respect to such payment shall thereupon vest in the Insurer. "Due Date" means, when referring to the principal
of the Obligation, the stated maturity date thereof or the date on which the same shall have been duly called for
mandatory sinking fund prepayment and does not refer to any earlier date on which payment is due by reason
of any other call for redemption, acceleration or other advancement of maturity unless the Insurer shall elect, in
its sole discretion, to pay such principal due upon such redemption, acceleration or other advancement of
maturity together with any accrued interest to the date of redemption, acceleration or other advancement of
maturity. Tendering of payment, to the Bond Trustee, of such principal due upon such redemption, acceleration
or other advancement of maturity, together with any accrued interest to the date of such redemption,
acceleration or other advancement of maturity, shall satisfy the Insurer's obligations under this Policy, in full.
When referring to interest on the Obligation, "Due Date" means the stated date for payment of interest.
Form FMLI-0101
Page 1 of 2
The Insurer shall, to the extent of any payment made by it pursuant to this Policy, be deemed to have acquired
and become the Holder of the Bonds or portions thereof or interest thereon paid from such payment and shall
be fully subrogated to all rights to payment thereof.
As used herein, the term “Holder” or "Holders" means the registered owners of the Bonds as indicated in the
registration books maintained by the Bond Trustee for such purpose at the time of nonpayment of the
Obligation. The terms “Holder” or “Holders” shall not include the Obligor or any person or entity whose direct or
indirect obligation constitutes the underlying security for the Obligation. As used herein, the term "Bond
Trustee" means the Bond Trustee above named and any successor trustee duly appointed. As used herein,
the term "Insurance Trustee" means the Insurance Trustee above named and any successor insurance trustee
duly appointed. As used herein, the term "Obligation" means the payment of principal and interest regularly
scheduled to be paid on the Bonds, which shall have become due for payment but shall be unpaid on the Due
Date, but does not include any premium payable with respect to the Bonds, nor any redemption (except
mandatory sinking fund redemption), acceleration or other advancement of maturity.
This Policy is non-cancelable for any reason. Premiums paid on this Policy are not refundable for any reason
including without limitation the payment prior to maturity of the Bonds.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be issued to the Insurance Trustee for the
benefit of the Holders from time to time of the Bonds and to be executed and delivered by its duly authorized
officer to become effective and binding upon the Insurer by virtue of the execution and delivery thereof on this
____ day of ______ 20___.
RADIAN ASSET ASSSURANCE INC.
By:
_______________________
Name: [ANALYST]
Title: [TITLE]
This Policy is not covered by the Property/Casualty Insurance Security Fund established by Article 76 of the
New York Insurance Law.
Form FMLI-0101
Page 2 of 2
OKALOOSA COUNTY, FLORIDA • Taxable Airport Revenue Bonds, Series 2007
Printed on Recycled Paper
IMAGEMASTER 800.452.5152

9980000 okaloosa county, florida rbc capital markets

Transcription

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