Okaloosa County BOCC — August 6, 2013 — Resolution for Airport Revenue Refunding Bonds, Series 2013 — reading text

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. Customer Facility Charges The Second Supplemental Indenture pledges the County's receipts from a Customer Facility Charge ("CFC") to secure the Series 2007 Bonds. The CFCs do not secure the Series 2013 Bonds. 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, and increased to $3.75 per transaction day effective December 1, 2010. The CFC has no stated expiration date. 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 and Ordinance No. 10-16 of the County enacted November 16, 2010 (collectively, the "CFC Ordinance"). Under the terms of the CFC Ordinance, the CFC is defined as a charge of $3.75 per Rental Car Transaction Day. "Rental Car Transaction Day" is defined as each 24-hour 35, period, or fraction thereof, within a rental period under or pursuant to a Rental Car 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. Set forth below is a table showing historical CFCs received by the County. CFC revenues have been sufficient since 2007 to pay debt service associated with the Series 2007 Bonds. Fiscal Year CFC Revenue 2006 $781,260 2007 1,025,781 2008 1,282,388 2009 1,175,375 2010 1,072,591 2011 1,485,337 2012 1,495,728 (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 36 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 2008 through 2012, inclusive. Fiscal Year 2013 partial-year data is based on unaudited financial information. OPERATING REVENUES Charges for Services Miscellaneous TOTAL OPERATING REVENUES OPERATING EXPENSES Personal Services Contractual Services Supplies Utilities Other Operating Expenses Depreciation TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NON-OPERATING REVENUES (EXPENSES) Intergovernmental Revenues Investment Income Other Non-Operating Income Interest Expense Other Debt Service Costs PFC/CFC Gain/Loss on Disposal of Fixed Assets TOTAL NON-OPERATING REVENUES (EXPENSES) INCOME (LOSS) BEFORE OPERATING TRANSFERS Capital Contributions’? Operating Transfers In Operating Transfers Out NET INCOME (LOSS) 2013 ( months 2008 2009 010 011 012 ending ) $7,605,726 $8,202,533 $8,656,082 $9,451,744 $9,208,230 860 908 101,441 2,393 802 $7,606,586 $8,203,441 $8,757,523 $9,454,137 $9,209,032 1,309,867 1,336,415 1,425,680 1,395,918 1,840,328 1,376,796 1,644,117 1,608,640 1,920,115 2,118,909 305,203 381,504 565,966 797,664 828,649 729,604 827,692 785,564 876,743 808,259 1,411,235 1,484,741 1,651,014 2,903,169 2,459,902 2,272,496 2,806,403 3,182,841 3,320,226 3,524,789 $7,405,201 $8,480,872 $9,219,705 $11,213,835 $11,580,836 201,385 (277,431) (462,182) (1,759,698) (2,371,804) 347,780 367,054 267,673 47,941 9,553 432,527 353,769 361,149 148,620 293,061 95,785 30,276 5,500 15,210 12,000 (826,860) (776,553) (1,199,270) (1,172,013) (1,208,154) (130,989) (166,581) (152,531) (141,510) (133,120) 2,741,829 2,553,688 2,539,493 3,217,536 2,910,080 608 (380,398) (1,800) 558 (4,617) $2,660,680 $1,981,255 $1,820,214 $2,116,342 $1,878,803 2,862,065 1,703,824 1,358,032 356,644 (493,001) 8,500,606 2,476,460 4,513,934 12,217,146 8,916,994 100,000 (1,067,100) (1,013,427) (1,119,595) (1,039,095) (460,785) $10,295,571 $3,166,857 $4,552,371 $11,534,695 $8,063,208 “) Represent grant funds received by the County. Source: Okaloosa County, Florida audited financial statements (2008-2012), Okaloosa County finance department (2013) 37 Management Discussion of Financial Results Northwest Florida Regional Airport derives its revenues from landing fees and rentals charged to the airlines serving the Airport and from a variety of non-airline sources. In addition, a $4.50 Passenger Facility Charge (PFC) on each sold ticket is collected by airlines on behalf of the Airport and $4.39 is remitted on a monthly basis. PFCs are used to fund the Airport’s current debt service on its 2003 Bonds (part of the Refunded Indebtedness), and have been approved to assist with local matching of federal and state grants. The Airport also collects a $3.75 per.rental car day Customer Facility Charge to fund the Series 2007 Bonds for the construction of a consolidated rental car service facility on 22.6 acres leased from the Air Force. The total leasehold is just over 130 acres for which the Airport paid $357,912 in Fiscal Year 2012, up 3% from the $347,487 paid in Fiscal Year 2011. Landing Fees for the joint use of the Air Force flying facilities amounted to $118,485 in Fiscal Year 2012 based on 15,652 operations. This reflected reduced usage from 2011 of $153,355 for 20,502 operations due to the unexpected departure of Vision Airlines. Airline Revenue: Landing fees, terminal space rental, security fees, baggage handling and loading bridge fees charged to Airlines comprised 31 percent of the Airport’s operating revenues in Fiscal Year 2012. The overall result was a 2.6% percent increase in airline revenue compared with Fiscal Year 2011 despite a 20% reduction in enplanements due to the departure of Vision Airlines. Non-Airline Revenues: These revenues are derived primarily from commissions and space rental from rental car companies and public parking. These two sources accounted for about 54 percent ($5.0 million) of all Airport operating revenue in Fiscal Year 2012. There was no increase in parking rates in 2012, but parking revenue decreased 15 percent largely reflecting the decrease in enplanements due to Vision’s untimely departure. In addition to rental car and parking revenue in Fiscal Year 2012, the Airport received an additional $580,000 in non-airline revenue primarily from food, beverage and other terminal concession-related revenue. Non-operating Revenues: Passenger Facility Charge revenue decreased 13 percent in 2012, while Customer Facility Charges from rental cars decreased 0.7 percent, which reflected the reduction in passenger traffic upon Vision's early departure from the market. Operating Expenses: Operating expenses of $11,580,836 (including depreciation) increased 4.7 percent over Fiscal Year 2011 primarily due to increased promotional activity driven by increases in personnel and contractual services related to the Vision Airlines ramp-up, additional debt service for Bob Sikes Airport, one-time start-up costs for the new Airport police function, and additional overlapping costs during the transition from the sheriff's security force. 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 2013 Bonds. The following 38 discussion is not meant to be an exhaustive list of the risks associated with the purchase of the Series 2013 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 2013 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. Dependence on Levels of Airline Traffic and Activity. The Series 2013 Bonds are payable solely from and secured by a pledge of the Net Revenues of the Airport System and the Pledged PFC Revenues. Gross Revenues are dependent primarily on the level of aviation activity and enplaned passenger traffic at the Airport. Several factors, including (1) the challenging global and national economic environment that began in late 2007, (2) weakened demand for air travel, (3) reduced airline passenger capacity, and (4) increased airline pricing have adversely impacted levels of passenger traffic and associated revenues at the Airport. Future levels of aviation activity and enplaned passenger traffic at the Airport will be dependent upon many local, regional, national and international factors, including the national and local unemployment rate, the prolonged weak global and national economic conditions, political conditions, aviation security and public health concerns, the financial health of the airline industry and of individual airlines, airline service and routes, airline competition and airfares, airline mergers, the sale of airlines, alliances and consolidations, availability and price of aviation and other fuel, employee cost and availability and labor relations within the airline industry and capacity of the national air traffic control system and of the Airport, some of which are discussed in further detail hereafter in this section. Concentration of Airline Market Share. The major air carriers operating at the Airport, by local market share, are Delta, American, US Airways and United/Continental, as discussed above under the heading "NORTHWEST FLORIDA REGIONAL AIRPORT -— Airline Market Share". These airlines have also been involved in recently completed or pending mergers and consolidations that could affect their future market shares at the Airport to an extent that cannot currently be predicted. Delta, at present, has the largest market share of all air carriers at the Airport, followed by American. No assurances can be given with regard to the future level of activity of Delta, 39 American, US Airways or United/Continental at the Airport, or that, in the event that the operations of these airlines at the Airport are reduced or discontinued, for whatever reason, such operations would be replaced by other carriers. See "Risk of Airline Bankruptcies" below. Current Economic Conditions. Historically, airline passenger traffic nationwide has correlated closely with the state of the U.S. economy and levels of real disposable income. Previous recessions and periods of stagnant economic conditions in the U.S. and Florida contributed to reduced passenger traffic at the Airport. Further, the 2008-2009 recession and associated high