Clark County, Nevada

Transcription

1 Clark County, Nevada Las Vegas McCarran International Airport Passenger Facility Charge Revenue Bonds 2007 Series A Series A-2 (AMT) (Non-AMT) Las Vegas McCarran International Airport Clark County Department of Aviation

2 Randall H. Walker, Director of Aviation Rosemary A. Vassiliadis, Deputy Director of Aviation The Clark County Board of Commissioners Left to right: Rory Reid, Chair, Lawrence Weekly, Susan Brager, Chris Giunchigliani, Bruce Woodbury, Chip Maxfield, Vice Chair, and Tom Collins

3 NEW ISSUE-BOOK ENTRY ONLY RATINGS: See RATINGS herein $218,985,000 Clark County, Nevada Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds 2007 Series A $113,510,000 $105,475, Series A Series A-2 (AMT) (Non-AMT) Dated: Date of Delivery Due: as shown on the inside front cover The 2007A PFC Bonds are being issued to provide funds for certain capital improvements at the Airport, to reimburse the Airport for previous amounts expended on certain capital improvements at the Airport, to make a cash deposit in the reserve fund, and to pay certain costs of issuance thereof. The 2007A PFC Bonds are payable from, and secured by a pledge of and lien upon, Pledged PFC Revenues derived from a portion of a Passenger Facility Charge which has been imposed by Clark County under authorization of the Federal Aviation Act and regulations promulgated thereunder and all moneys and securities in certain accounts created under the Master Indenture and 2007 PFC Series A Indenture, such pledge of and lien on Pledged PFC Revenues being on a parity with outstanding PFC Bonds and any Parity PFC Bonds issued in the future, as described herein. The 2007A PFC Bonds are additionally secured by and are payable from Net Revenues of the Airport System subordinate and junior to the lien thereon of outstanding Senior Bonds, certain other amounts described herein and any additional Senior Bonds which may be issued in the future, and are on a parity with outstanding Subordinate Lien Bonds, exclusive of PFC Bonds, and certain other amounts described herein and any securities hereafter issued on a parity therewith, all as more particularly described herein. The 2007A PFC Bonds will be issued in book-entry form, without coupons, initially registered in the name Cede & Co., as nominee of The Depository Trust Company, New York, New York. Purchasers of the 2007A PFC Bonds will not receive physical certificates representing their interests in the 2007A PFC Bonds purchased. DTC will act as securities depository for the 2007A PFC Bonds. The principal of and interest on the 2007A PFC Bonds, which interest is payable semiannually on January 1 and July 1 of each year commencing January 1, 2008, will be paid directly to DTC, by The Bank of New York Trust Company, N.A., as trustee, so long as DTC or its nominee is the registered owner of the 2007A PFC Bonds. Upon receipt of payments of such principal and interest, DTC is to remit such principal and interest to the participants in DTC for subsequent disbursement to the beneficial owners of the 2007A PFC Bonds. Individual purchases of 2007A PFC Bonds will be made in principal amounts of $5,000 and integral multiples thereof. The 2007A PFC Bonds do not constitute a debt of Clark County within the meaning of any constitutional or statutory provision or limitation, and neither the full faith and credit nor the taxing power of Clark County is pledged to the payment thereof. The 2007A PFC Bonds will be subject to optional and mandatory redemption prior to maturity as described herein. Payment of the principal of and interest on the 2007A PFC Bonds as the same shall become due, not including payment upon acceleration or redemption (except mandatory sinking fund redemption), will be guaranteed by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with the delivery of the 2007A PFC Bonds, as described herein. In the opinion of Swendseid & Stern, a Member in Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the 2007A PFC Bonds (other than interest on any 2007A-1 PFC Bonds for any period during which it is held by a substantial user of the facilities financed with the 2007A-1 PFC Bonds or a related person as such terms are used in Section 147(a) of the Internal Revenue Code of 1986, as amended to the date of delivery of the 2007A PFC Bonds ( Tax Code )) is excluded from gross income pursuant to Section 103 of the Tax Code however, interest on the 2007A-1 PFC Bonds is an item of tax preference for calculating alternative minimum taxable income as defined in Section 55(b)2) of the Tax Code Interest on the 2007A-2 PFC Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations. Also in the opinion of Bond Counsel, under present laws of the State of Nevada, the 2007A PFC Bonds, their transfer, and the income thereon are free and exempt from taxation by the State of Nevada or any subdivision thereof except the State estate tax and the State tax on generation skipping transfers. See TAX MATTERS herein. THIS COVER PAGE IS NOT INTENDED TO BE A SUMMARY OF THE TERMS OF OR SECURITY FOR THE 2007A PFC BONDS. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIALTOTHE MAKING OF AN INFORMED INVESTMENT DECISION. The 2007A PFC Bonds are offered when, as and if issued, subject to the approval of their validity and enforceability by Swendseid & Stern, a Member in Sherman & Howard, L.L.C., Las Vegas and Reno, Nevada, Bond Counsel. Certain legal matters will be passed upon for Clark County by the County District Attorney, Las Vegas, Nevada, for the Underwriters by Underwriters Counsel, Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, and for the Insurer by its counsel. It is expected that the 2007A PFC Bonds in, book-entry form will be available for delivery through the facilities of The Depository Trust Company on or about April 27, UBS Investment Bank Dated: April 17, Series A Series A-2 Citi UBS Investment Bank Siebert Brandford Shank & Co., LLC Citi Siebert Brandford Shank & Co., LLC

4 $218,985,000 Clark County, Nevada Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds 2007 Series A Maturity Schedule $113,510, Series A-1 (AMT) Due (July 1) Amount Interest Rate Yield 2011 $1,305, % 4.02% ,225, ,355, ,355, * ,855, * ,475, * ,820, * $10,120, % Term Bonds Due July 1, 2022 Yield 4.45% * $105,475, Series A-2 (Non-AMT) Due (July 1) Amount Interest Rate Yield 2026 $50,005, % 4.33% * ,470, * * Priced to par call on July 1, 2017.

5 CLARK COUNTY, NEVADA 500 South Grand Central Parkway Las Vegas, Nevada BOARD OF COUNTY COMMISSIONERS Rory Reid, Chairman Chip Maxfield, Vice Chair Susan Brager Tom Collins Lawrence Weekly Chris Giunchigliani Bruce L. Woodbury COUNTY OFFICIALS Virginia Valentine, Manager Laura B. Fitzpatrick, Treasurer George W. Stevens, Chief Financial Officer Edward M. Finger, Comptroller Shirley B. Parraguirre, Clerk David Roger, District Attorney OFFICIALS OF McCARRAN INTERNATIONAL AIRPORT Randall H. Walker, Director of Aviation Rosemary A. Vassiliadis, Deputy Director of Aviation Alan W. Stewart, Assistant Director of Aviation/Finance FINANCIAL ADVISORS Hobbs, Ong & Associates, Inc. Las Vegas, Nevada Public Financial Management, Inc. San Francisco, California BOND COUNSEL Swendseid & Stern, a Member in Sherman & Howard, L.L.C. Las Vegas and Reno, Nevada TRUSTEE The Bank of New York Trust Company, N.A. Los Angeles, California

6 No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations by the County or the Underwriters, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the County or the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2007A PFC Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The County maintains a website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2007A PFC Bonds. This Official Statement is not to be construed as a contract with the purchasers of the 2007A PFC Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The Underwriters has provided the following sentence for inclusion in this Official Statement: The Underwriters has reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters does not guarantee the accuracy or completeness of such information. The information set forth herein has been furnished by the County and includes information which has been obtained from other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriters. The information and expression of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implications that there has been no change in the affairs of the County since the date hereof. IN CONNECTION WITH THIS OFFERING OF THE 2007A PFC BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2007A PFC BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE 2007A PFC BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE 2007A PFC BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, project, budget or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption THE AIRPORT and FINANCIAL FACTORS.

7 TABLE OF CONTENTS Page INTRODUCTION... 1 Introduction... 1 THE FINANCE PLAN... 3 DESCRIPTION OF THE 2007A PFC BONDS... 4 General... 4 Redemption of the 2007A PFC Bonds... 4 ESTIMATED SOURCES AND USES OF FUNDS... 6 SECURITY FOR THE 2007A PFC BONDS... 6 Pledge of Pledged PFC Revenues... 6 Covenant to Comply With the Federal Act... 7 Subordinate Lien Pledge of Airport Revenues A PFC Debt Service Reserve Fund Additional PFC Securities Additional Subordinate Lien Bonds Limited Liability PASSENGER FACILITY CHARGE Imposition of Passenger Facility Charge by County Termination of Authority to Impose a Passenger Facility Charge Insufficiency of Passenger Facility Charge Revenues and Availability of Net Revenues of the Airport System BOND INSURANCE Payment Pursuant to Financial Guaranty Insurance Policy...23 The Insurer Available Information Incorporation of Certain Documents by Reference FINANCIAL FACTORS Financial Statements Historical PFC Revenues Historical Operating Results and Projected Future Operating Results Management Discussion of Operating Results and Projections Outstanding Airport Indebtedness County Investment Policy Factors Affecting Airport Operations and Revenues THE AIRPORT Airport Management Board of County Commissioners Department of Aviation Employees and Pension Matters Other Post-Employment Benefits Budget Process Department Insurance Description of Existing Airport Facilities and Current Construction Future Airport Improvements Service Area i-

8 TABLE OF CONTENTS (continued) Page Airport Operations Airline Agreements; Rates and Charges Airport Concessions LITIGATION RATINGS UNDERWRITING FINANCIAL ADVISORS TRUSTEE TAX MATTERS LEGAL MATTERS CONTINUING DISCLOSURE MISCELLANEOUS APPENDIX A - CERTAIN INFORMATION RELATING TO THE COUNTY...A-1 APPENDIX B - REPORT OF PIERCY, BOWLER, TAYLOR & KERN AND FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2005 AND B-1 APPENDIX C - DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE... C-1 APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE...D-1 APPENDIX E - DTC AND BOOK-ENTRY ONLY SYSTEM... E-1 APPENDIX F - FORM OF OPINION OF BOND COUNSEL...F-1 APPENDIX G - SPECIMEN INSURANCE POLICY...G-1 -ii-

9 TABLE OF CONTENTS (continued) Page TABLES ESTIMATED SOURCES AND USES OF FUNDS... 6 CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Subordinate Lien Bonds CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Interest Rate Swap Agreements CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Historical PFC Collections **(1) CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Statement of Historical and Projected Revenues and Expenses **(1) CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION PFC Bond Debt Service CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Debt Service Requirements for Outstanding Senior Securities, Subordinate Securities and PFC Bonds HISTORICAL AIRLINE TRAFFIC McCarran International Airport Fiscal Year 1975-Fiscal Year 2006 ** HISTORICAL AIRLINE LANDED WEIGHT McCarran International Airport AIRLINE MARKET SHARES McCarran International Airport Fiscal Years 2006, 2005, 2000, and 1990 ** ** To be updated annually pursuant to the County s Continuing Disclosure Certificate. (1) Historical information only in these tables to be updated pursuant to the County s Continuing Disclosure Certificate. -iii-

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11 SUMMARY STATEMENT This Summary Statement is subject in all respects to more complete information contained elsewhere in this Official Statement, including all reports contained herein. Unless otherwise defined below, all capitalized terms used in the Summary Statement shall have the meanings set forth in this Official Statement. Purpose of the 2007A PFC Bonds The 2007A PFC Bonds are being issued by Clark County, Nevada, to provide funds for certain capital improvements at the Airport, to reimburse the Airport for previous amounts expended on certain capital improvements at the Airport, to make a cash deposit in the reserve fund, and to pay certain costs of issuance of the 2007A PFC Bonds. The Airport and Its Economic Base McCarran International Airport serves Las Vegas and the surrounding communities of southern Nevada, as well as portions of California, Utah and Arizona. Between Fiscal Years 1980 and 2006, the annual number of airline passengers enplaned at the Airport increased from 5,406,216 to 22,546,814. The number of airline passengers enplaned at the Airport was 22,546,814 in Fiscal Year 2006, as compared to 21,439,652 in Fiscal Year 2005, for an increase of approximately 5.2%. According to Airports Council International, for calendar year 2005, the Airport was the fifth busiest airport in the nation in terms of passenger volume in the United States, and the second largest origin and destination airport after Los Angeles International. The Airport is currently served by over 33 scheduled carriers, which enplaned approximately 97.7% of all enplaned passengers at the Airport in Fiscal Year As of July 1, 2006, the County had an estimated population of approximately 1,874,000, representing an approximately 153% increase between 1990 and The economy of the County is heavily dependent on the tourist industry, which is based in great part on legalized gambling. For additional information relating to the County, see APPENDIX A CERTAIN INFORMATION RELATING TO THE COUNTY. Security for the 2007A PFC Bonds General. The 2007A PFC Bonds are being issued pursuant to the Nevada Municipal Airports Act (Nevada Revised Statutes et seq.), the Nevada Local Government Securities Law (Nevada Revised Statutes et seq.) and the Nevada Registration of Public Securities Law (Nevada Revised Statutes et seq.), the Master Indenture and the 2007 PFC Series A Indenture. The 2007A PFC Bonds are secured by a pledge of and lien upon certain pledged PFC Revenues derived from $3.00 of a $4.00-perqualifying-enplaned-passenger Passenger Facility Charge which has been imposed by the County under authorization of the Federal Aviation Act (49 United States Code 40117) and regulations promulgated thereunder, together with all moneys and securities held in certain accounts created under the Master Indenture and the 2007 PFC Series A Indenture, such pledge of and lien on Pledged PFC Revenues being on a parity with the pledge and lien thereon of $506,570,000 principal amount of currently outstanding 2005A PFC Bonds, 2002A PFC Bonds, 1998 PFC Bonds and 1992A PFC Bonds, and any Parity PFC Bonds hereafter issued. Any additional collections of Passenger Facility Charges resulting from charges exceeding $3.00 per qualifying enplaned passenger are not pledged to payment of the 2007A PFC Bonds and may be used by the County for any lawful purpose permitted for such PFC Revenues. Currently, the Airport collects a Passenger Facility Charge of $4.00 per qualifying enplaned passenger, however, only revenues derived from $3.00 per qualifying enplaned passenger are pledged to the payment of the 2007A PFC Bonds. In addition, the 2007A PFC Bonds are secured by and are payable from Net Revenues of the Airport System subordinate and junior to the lien thereon of $245,490,000 principal amount of currently outstanding Senior Bonds and to the lien thereon of certain County obligations under an interest rate swap agreement entered into with respect to certain Senior Bonds and any additional Senior Bonds which may be issued in the i

12 future. The 2007A PFC Bonds are secured by and are payable from Net Revenues of the Airport System on a parity with approximately $1,197,785,000 principal amount of currently outstanding Subordinate Lien Bonds, exclusive of PFC Bonds, and to the lien thereon of certain County obligations under interest rate swap agreements entered into with respect to certain Subordinate Lien Bonds (as described under the caption SECURITY FOR THE 2007A PFC Bonds Subordinate Lien Pledge of Airport Revenues ), and certain amounts which may be payable by the County with respect to interest rate swap agreements which may be entered into in the future, and any Subordinate Lien Bonds which may be issued in the future. Financial Guaranty Insurance Policy. Ambac Assurance Corporation has committed to issue, simultaneously with the issuance of the 2007A PFC Bonds, a financial guaranty insurance policy insuring the payment of the principal of and interest on the 2007A PFC Bonds as the same shall become due (not including acceleration or redemption, except mandatory sinking fund redemption). Debt Service Reserve Fund At the time of delivery of the 2007A PFC Bonds, cash from the proceeds of the 2007A PFC Bonds will be deposited in the 2007A PFC Debt Service Reserve Fund, in an amount equal to the initial Debt Service Reserve Fund Requirement for the 2007A PFC Bonds. Additional Parity PFC Bonds, Senior Bonds and Subordinate Lien Bonds The PFC Instruments authorizing the issuance of the various issues of Parity PFC Bonds permit the issuance of additional Parity PFC Bonds payable from and constituting a lien on Pledged PFC Revenues on a parity with the 1992A PFC Bonds, the 1998 PFC Bonds, the 2002A PFC Bonds, the 2005A PFC Bonds and the 2007A PFC Bonds, subject to the satisfaction of certain conditions as provided in the PFC Instruments. In addition, the PFC Instruments permit the issuance of additional Senior Bonds secured by and payable from Net Revenues of the Airport System senior to the lien thereon of the Parity PFC Bonds upon satisfaction of certain conditions as provided in therein. Additional Subordinate Lien Bonds secured by and payable from Net Revenues of the Airport System on a parity with the lien thereon of the Parity PFC Bonds may be issued by the County upon satisfaction of certain conditions as provided in the PFC Instruments, and other Subordinate Lien Bond ordinances. See SECURITY FOR THE 2007A PFC Bonds Additional PFC Securities and Additional Subordinate Lien Bonds. The PFC Instruments do not limit the issuance of bonds payable from Pledged PFC Revenues or other PFC revenues or Net Revenues of the Airport System subordinate to the lien thereon of the PFC Bonds. Limited Liability Notwithstanding anything contained in the 2007 PFC Series A Indenture, the County shall not be required to advance any moneys derived from any source of income other than the Pledged PFC Revenues and Net Revenues of the Airport System available for deposit in the Subordinate Securities Fund after payment of the Senior Bonds and the other funds provided in the 2007 PFC Series A Indenture for the payment of debt service on the 2007A PFC Bonds or for the performance of any agreements or covenants required to be performed by it contained in the 2007 PFC Series A Indenture. THE OBLIGATION OF THE COUNTY TO PAY DEBT SERVICE ON THE 2007A PFC BONDS DOES NOT CONSTITUTE AN OBLIGATION OF THE COUNTY FOR WHICH THE COUNTY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE COUNTY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE 2007A PFC BONDS DO NOT CONSTITUTE A DEBT OF THE COUNTY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION, OR A PLEDGE OF THE FULL FAITH, CREDIT AND TAXING POWER OF THE COUNTY. ii

13 The 2007A PFC Bonds are not secured by, and the 2007A PFC Bond Owners have no security interest in or mortgage on, the PFC Projects, the Airport System or any other real property of the County. Default by the County will not result in loss of the PFC Projects or the Airport System. Should the County default, the Trustee may proceed, and if the owner or owners of not less than 10% in principal amount of the Parity PFC Bonds then Outstanding so request, then the Trustee will proceed, against the County and its agents, officers and employees to protect and to enforce the rights of any owner of Parity PFC Bonds by mandamus or by other suit, action or special proceedings in equity or at law, in any court of competent jurisdiction, either for the appointment of a receiver or for the specific performance of any covenant or agreement contained in the Master Indenture and the 2007 PFC Series A Indenture or in an award of execution of any power granted in the Master Indenture and the 2007 PFC Series A Indenture for the enforcement of any proper, legal or equitable remedy as the Trustee or the owner or owners may deem most effectual to protect and to enforce the rights aforesaid, or thereby to enjoin any act or thing which may be unlawful or in violation of any right of any owner of any Parity PFC Bond, or to require the County to act as if it were the trustee of an express trust, or any combination of such remedies. See APPENDIX C DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE 2007 PFC SERIES A INDENTURE Privileges, Rights and Remedies. Continuing Disclosure The County has covenanted for the benefit of the holders and beneficial owners of the 2007A PFC Bonds to provide certain financial information and operating data by April 1 of each year, commencing April 1, 2008 for the County Annual Report for Fiscal Year 2007 and to provide notices of the occurrence of certain enumerated events, if material. A form of document specifying the nature of the information to be contained in the County Annual Report or the notices of material events is set forth in APPENDIX D hereto. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Except as described under the caption CONTINUING DISCLOSURE herein, the County has never failed to materially comply with any undertakings previously entered into pursuant to Rule 15c2-12(b)(5). Other Information Brief descriptions of the 2007A PFC Bonds, the security for the 2007A PFC Bonds, the County, and the Airport, among other topics, are included in this Official Statement together with summaries of certain provisions of the 2007A PFC Bonds and certain other documents. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Subordinate Lien Bond ordinances, the Master Indenture, the 2007 PFC Series A Indenture, the PFC Ordinances, the 2007A PFC Bonds and other documents and instruments are qualified in their entirety by reference to such documents or instruments or the forms thereof, copies of which are available for inspection at the office of the Assistant Director of Aviation Finance, Las Vegas-McCarran International Airport, telephone (702) iii

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15 OFFICIAL STATEMENT Relating to $218,985,000 Clark County, Nevada Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds 2007 Series A $113,510, Series A-1 (AMT) INTRODUCTION $105,475, Series A-2 (Non-AMT) Introduction The purpose of this Official Statement, which includes the cover page, Summary Statement and Appendices hereto, is to furnish information concerning Clark County (the County ), Nevada (the State ), the County s McCarran International Airport (the Airport ), as well as four smaller airfields owned and operated by the County used primarily for private aircraft, known as North Las Vegas Air Terminal, Henderson Executive Airport, Overton Airport and Jean Airport (collectively with the Airport, the Airport System, as more fully described herein), and certain other information in connection with the sale of the $218,985,000 aggregate principal amount of Clark County, Nevada, Las Vegas - McCarran International Airport Passenger Facility Charge Revenue Bonds, 2007 Series A (the 2007A PFC Bonds). Proceeds of the 2007A PFC Bonds will be used to provide funds for certain capital improvements at the Airport and to reimburse the Airport for previous amounts expended on certain capital improvements at the Airport, to make a cash deposit in the reserve fund, and to pay certain costs of issuance thereof, all as more particularly described under the caption THE 2007A PFC PROJECT. The 2007A PFC Bonds, consisting of 2007 Series A-1 (AMT) (the 2007A-1 PFC Bonds ) and 2007 Series A-2 (Non-AMT) (the 2007A-2 PFC Bonds ), are to be issued pursuant to the Nevada Municipal Airports Act (Nevada Revised Statutes et seq.) (the Project Act ), the Nevada Local Government Securities Law (Nevada Revised Statutes et seq.) (the Bond Act ) and the Nevada Registration of Public Securities Law (Nevada Revised Statutes et seq.) (the Supplemental Bond Act ). The 2007A PFC Bonds are to be issued and secured pursuant to the Master Indenture of between the County and The Bank of New York Trust Company, N.A. (the Trustee ) dated May 1, 2003 (the Master Indenture ), the 2007 PFC Series A Indenture between the County and Trustee, dated as of April 1, 2007 (the 2007 PFC Series A Indenture ), and ordinances authorizing various issues of PFC Bonds (the PFC Ordinances together with the Master Indenture and the 2007 PFC Series A Indenture, the PFC Instruments ). The 2007A PFC Bonds are secured by a pledge of and lien on Passenger Facility Charge revenues ( PFC Revenues ) derived from $3.00 of a $4.00-per-qualifying-enplaned-passenger passenger facility charge (the Pledged PFC Revenues ) imposed under the authorization of the Federal Aviation Act (49 United States Code Appendix 40117) and regulations promulgated thereunder (together, the Federal Act ), together with all moneys and securities held in certain accounts created under the PFC Instruments, such pledge and lien on Pledged PFC Revenues being on a parity with $12,580,000 principal amount of outstanding Clark County, Nevada, Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds, 1992 Series A (the 1992A PFC Bonds ), $209,345,000 principal amount of outstanding Clark County, Nevada, Las Vegas- McCarran International Airport Passenger Facility Charge Refunding Revenue Bonds, 1998 Series A (the 1998 PFC Bonds ) and $24,745,000 principal amount of outstanding Clark County, Nevada, Las Vegas- McCarran International Airport Passenger Facility Charge Refunding Revenue Bonds, 2002 Series A (the 2002A PFC Bonds ) and the $259,900,000 principal amount of outstanding Clark County, Nevada, Las Vegas-McCarran International Airport Passenger Facility Charge Refunding Revenue Bonds, 2005 Series A 1

16 (the 2005A PFC Bonds ). The 2007A PFC Bonds, 2005A PFC Bonds, the 2002A PFC Bonds, 1998 PFC Bonds and the 1992A PFC Bonds are referred to herein as the Parity PFC Bonds. See SECURITY FOR THE 2007A PFC BONDS Pledge of Pledged PFC Revenues and Covenant to Comply With the Federal Act and PASSENGER FACILITY CHARGE herein. Additional collections of Passenger Facility Charges resulting from charges exceeding $3.00 per qualifying enplaned passenger are not pledged to payment of the 2007A PFC Bonds and may be used by the County for any lawful purpose permitted for such PFC Revenues. Currently, the Airport collects a Passenger Facility Charge of $4.00 per qualifying enplaned passenger. See the caption PASSENGER FACILITY CHARGE Imposition of Passenger Facility Charge by County for a history of the Passenger Facility Charge collected by the Airport. The Parity PFC Bonds, including the 2007A PFC Bonds, are also secured by and are payable from Net Revenues of the Airport System subordinate and junior to the lien thereon of $245,490,000 principal amount of currently outstanding revenue bonds (the Senior Bonds ) and to the lien thereon of certain County obligations under an interest rate swap agreement entered into with respect to certain Senior Bonds and any additional Senior Bonds which may be issued in the future. The Parity PFC Bonds, including the 2007A PFC Bonds, are on a parity with approximately $1,197,785,000 principal amount of currently outstanding revenue bonds (the Subordinate Lien Bonds ), with a letter of credit or liquidity facility securing certain Subordinate Lien Bonds, and with certain amounts payable by the County with respect to certain interest rate swap agreements and certain amounts with respect to certain interest rate swap agreements which may be entered into in the future, all as more particularly described under SECURITY FOR THE 2007A PFC Bonds Subordinate Lien Pledge of Airport Revenues. The County has authorized and expects to issue Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds, Series 2007A-1 and Series 2007A-2 (the Series 2007A Bonds) in an amount of $208,640,000 on or about May 16, The 2007A Bonds are expected to be issued as Subordinate Lien Bonds. In addition, the County has authorized, sold, and expects to issue Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds, Series 2011A (the Series 2011A Bonds ) in an aggregate principal amount of $275,000,000. * The Series 2011A Bonds are expected to be issued as Subordinate Lien Bonds on or about July 1, The County has previously authorized $150,000,000 of Clark County, Nevada, Junior Subordinate Lien Revenue Notes Series 2006B-2 (the Series 2006B-2 Notes ), which the County expects to issue at a future date as Third Lien Subordinate Securities. The County has also authorized Clark County, Nevada, Airport System Junior Subordinate Lien Revenue Notes, Series 2007B-1 Notes in an aggregate principal amount of $300,000,000 which the County expects to issue as Third Lien Subordinate Securities at a future date (the Series 2007B-1 Notes and herein collectively with the Series 2006B-2 Notes are referred to as the BANs ). The BANs are expected to be issued to provide interim funding for capital improvements, including certain improvements to existing facilities at the Airport as well as a portion of the costs of Terminal 3. There can be no assurances that the County will actually issue the BANs. The County has also authorized a Series 2007C Tax-Exempt Capital Asset Program Term Extendible Note Shelf ( CAPTENS ) that may be issued from time to time. CAPTENS may be issued to pay the BANs, to fund capital improvements within the Airport System, and to refund outstanding obligations of the Airport. The CAPTENS, if issued, will be issued as Third Lien Subordinate Securities. As currently authorized, the BANs and CAPTENS may not exceed $1,300,000,000 outstanding at any one time. See the caption THE FINANCE PLAN. The Series 2007A Bonds, the BANs, and the CAPTENS are not being offered pursuant to this Official Statement. Preliminary, subject to change. 2

17 Ambac Assurance Corporation (the Insurer ) has committed to issue, simultaneously with the issuance of the 2007A PFC Bonds, a financial guaranty insurance policy (the Policy ) insuring the payment of the principal of and interest on the 2007A PFC Bonds as the same shall become due (not including acceleration or redemption, except mandatory sinking fund redemption). See BOND INSURANCE and a specimen of the Insurer s policy in APPENDIX G. The Bank of New York Trust Company, N.A. has been appointed as Trustee with respect to the 2007A PFC Bonds. The 2007A PFC Bonds are special obligations of the County payable solely from Pledged PFC Revenues derived from a Passenger Facility Charge and from Net Revenues of the Airport System available for deposit in the Subordinate Securities Fund. The 2007A PFC Bonds do not constitute a debt of the County within the meaning of any Constitutional or statutory provision or limitation, and neither the full faith and credit nor the taxing power of the County is pledged to the payment thereof. See SECURITY FOR THE 2007A PFC BONDS herein. The descriptions and summaries of various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each document. Certain capitalized terms used herein and not defined herein shall have the meaning given such terms in APPENDIX C hereto entitled DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE. The Official Statement includes certain changes since the date of the Preliminary Official Statement. These changes are included under the caption SECURITY FOR THE 2007A PFC Bonds 2007A PFC Debt Service Reserve Fund and under the caption APPENDIX C DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE to reflect a change in the Debt Service Reserve Fund Requirement definition, under the caption THE FINANCE PLAN, and FINANCIAL FACTORS Outstanding Airport Indebtedness to reflect a change in the expected sale and closing date for the 2007A Bonds and that the Series 2011A Bonds have been sold, under the caption FINANCIAL FACTORS Statement of Historical and Projected Revenues and Expenses to reflect the Airport s changed expectations with respect to the use of pledged PFC Revenues to pay Second Lien Subordinate Securities, under the caption LEGAL MATTERS to update the description of certain cases, under the caption CONTINUING DISCLOSURE to reflect recent filings of certain information by the County, and under the caption APPENDIX A CERTAIN INFORMATION RELATING TO THE COUNTY to reflect updated gaming revenues and taxes. THE FINANCE PLAN The County expects to use proceeds from the 2007A PFC Bonds to fund certain capital improvements, including certain improvements to existing facilities at the Airport and to reimburse the Airport for previous amounts expended on certain capital improvements at the Airport (collectively, the 2007A PFC Project ). The 2007A PFC Project consists of the following future components: heating, ventilation and air conditioning upgrade; Henderson terminal; Henderson tower; central plant upgrade; pedestrian bridge between Concourse C and Concourse A/B; taxiway B; Russell Road Park; Terminal 3 design; and certain other improvements to the runways and taxiways. The County has authorized and expects to issue the 2007A Bonds in the amount of $208,640,000 on or about May 16, The 2007A Bonds are expected to be issued as Subordinate Lien Bonds. In addition, the County has authorized, sold, and expects to issue the 2011A Bonds as Subordinate Lien Bonds in an aggregate principal amount $275,000,000 on or about July 1, Preliminary, subject to change. 3

18 The County has previously authorized $150,000,000 of Series 2006B-2 Notes, which the County expects to issue at a future date as Third Lien Subordinate Securities. The County has also authorized the Series 2007B-1 Notes in an aggregate principal amount of $300,000,000 which the County expects to issue as Third Lien Subordinate Securities at a future date. The BANs are expected to be issued to provide interim funding for capital improvements, including certain improvements to existing facilities at the Airport as well as a portion of the costs of Terminal 3. There can be no assurances that the County will actually issue the BANs. The County has also authorized CAPTENS that may be issued from time to time. CAPTENS may be issued to pay the BANs, to fund capital improvements within the Airport System, and to refund outstanding obligations of the Airport. The CAPTENS, if issued, will be issued as Third Lien Subordinate Securities. As currently authorized, the BANs and CAPTENS may not exceed $1,300,000,000 outstanding at any one time. General DESCRIPTION OF THE 2007A PFC BONDS The 2007A PFC Bonds will be dated the date of delivery, and will bear interest from their date to their respective maturities or prior redemption dates in the amounts and at the rates set forth on the inside cover page of this Official Statement. Interest on the 2007A PFC Bonds will be payable semiannually on January 1 and July 1 of each year, commencing on January 1, Except as described under DESCRIPTION OF THE 2007A PFC BONDS DTC and Book-Entry Only System and in Appendix E DTC AND BOOK-ENTRY ONLY SYSTEM, the 2007A PFC Bonds will be issued in fully registered form in the denomination of $5,000 and any integral multiples thereof. The principal of and redemption premium, if any, on any 2007A PFC Bond, will be payable to the registered owner thereof as shown on the registration records kept by the Registrar, upon maturity or prior redemption thereof and upon presentation and surrender to the designated office of the Paying Agent. If any 2007A PFC Bond shall not be paid upon presentation and surrender at or after maturity, it will continue to draw interest at the interest rate borne by the 2007A PFC Bond until the principal thereof is paid in full. Except as described in Appendix E DTC AND BOOK-ENTRY ONLY SYSTEM, payment of interest on any 2007A PFC Bond will be made to the registered owner thereof by check or draft mailed by the Paying Agent, by first-class mail on or before each interest payment date (or, if such interest payment date is not a business day, on or before the next succeeding business day), to the registered owner thereof at his or her address as shown on the registration records kept by the Registrar at the close of business on the 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 principal of, premium, if any, and interest on the 2007A PFC Bonds may, at the option of any registered owner of 2007A PFC 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 Trustee acting as the registrar as of the Regular Record Date upon prior payment of the Trustee s applicable wire transfer fees. Redemption of the 2007A PFC Bonds Optional Redemption. The 2007A PFC Bonds maturing on and after July 1, 2022 are subject to redemption prior to their respective maturities, at the option of the County, on and after July 1, 2017 in whole or in part at any time from such maturities as are selected by the County, and if less than all of the 2007A PFC Bonds of a maturity are to be redeemed, by lot within such maturity (giving proportionate weight to 2007A PFC Bonds in denominations larger than $5,000), in such manner as the Trustee may determine, at par without premium. Mandatory Sinking Fund Redemption. The 2007A-1 PFC Bonds maturing on July 1, 2022 are subject to mandatory sinking fund redemption, in part each year, by lot as determined by the Trustee, for 4

19 redemption prior to their paid maturity dates, at a price equal to the principal amount and each 2007A-1 PFC Bond so redeemed and accrued interest thereon to the prior redemption date so paid but no premium from mandatory sinking fund payments on the first day of July in each of the years designated below as follows: *Final Maturity Sinking Fund Payment Date (July 1) 2007A-1 PFC Bonds Due July 1, 2022 Sinking Fund Payment Amount 2014 $1,115, ,155, ,130, ,115, ,130, ,060, ,210, ,060, * 1,145,000 Partial Redemption. If any 2007A PFC Bond is in a denomination larger than $5,000, a portion of such 2007A PFC Bond ($5,000 of principal amount thereof, or any integral thereof) may be redeemed, as appropriate, in which case the Registrar, except as provided under DESCRIPTION OF THE 2007A PFC BONDS DTC and Book-Entry Only System and in Appendix E DTC AND BOOK-ENTRY ONLY SYSTEM, will without charge to the owner of such 2007A PFC Bond, authenticate and issue a replacement 2007A PFC Bond or 2007A PFC Bonds for the unredeemed portion thereof. In the case of a partial redemption of 2007A PFC Bonds of a single maturity, the Trustee will select the 2007A PFC Bonds to be redeemed by lot at such time as directed by the County (but at least 30 days prior to the redemption date), and if such selection is more than 60 days before a redemption date, will direct the Trustee to appropriately identify the 2007A PFC Bonds so called for redemption by stamping them at the time any 2007A PFC Bond so selected for redemption is presented to the Trustee for stamping or for transfer or exchange, or by such other method of identification as is deemed adequate by the Trustee and any 2007A PFC Bond or 2007A PFC Bonds issued in exchange for, or to replace, any 2007A PFC Bond so called for prior redemption will likewise be stamped or otherwise identified. The Trustee will not select the 2007A PFC Bonds for mandatory redemption more than 60 days prior to the redemption date. Notice of Redemption. Unless waived by any registered owner of a 2007A PFC Bond to be redeemed, notice of prior redemption will be given by the Registrar, by first class, postage prepaid mail, at least 30 days but not more than 60 days prior to the redemption date to the purchasers and to the registered owner of any 2007A PFC Bond (initially Cede & Co.) all or a part of which is called for prior redemption at his or her address as it last appears on the registration records kept by the Registrar. The notice will identify the 2007A PFC Bonds and state that on such date the principal amount thereof, and premium, if any, thereon will become due and payable at the designated office of the Paying Agent (accrued interest to the redemption date being payable by first-class mail or as otherwise provided in the 2007 PFC Series A Indenture), and that after such redemption date interest will cease to accrue. After such notice and presentation of said 2007A PFC Bonds, the 2007A PFC Bonds called for redemption will be paid. Actual receipt of mailed notice by the purchasers or any registered owner of 2007A PFC Bonds will not be a condition precedent to redemption of such 2007A PFC Bonds. Failure to give such notice by mailing to the registered owner of any 2007A PFC Bond designated for redemption, or any defect therein, will not affect the validity of the proceedings for the redemption of any other 2007A PFC Bond. A certificate by the Registrar that notice of call and redemption has been given as provided in the 2007 PFC Series A Indenture will be conclusive as against all parties; and no owner whose 2007A PFC Bond is called for redemption or any other owner of any 2007A PFC Bond may 5

20 object thereto or may object to the cessation of interest on the redemption date on the ground that he failed actually to receive such notice of redemption. To the extent that Cede & Co. is the registered owner for The Depository Trust Company ( DTC ) as described in APPENDIX E hereto, DTC will be responsible for notifying the DTC Participants of any notice of redemption, which in turn will be responsible for notifying the Beneficial Owners. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds from proceeds of the 2007A PFC Bonds. 2007A-1 PFC Bonds 2007A-2 PFC Bonds Sources (1) Principal Amount of 2007A PFC Bonds $113,510,000 $105,475,000 Net Original Issue Premium 4,717,958 5,713,395 Total Sources $118,227,958 $111,188,395 Uses (1) Deposit to Acquisition Fund $105,885,259 $98,895,741 Deposit to 2007A PFC Debt Service Reserve Fund 10,829,453 11,069,047 Underwriters Discount 789, ,368 Costs of Issuance (2) 723, ,239 Total Uses $118,227,958 $111,188,395 (1) (2) All amounts rounded to nearest $1. Amounts may not independently add due to rounding. Includes fees of Financial Advisors, Trustee, Bond Counsel, and Certified Public Accountants, Policy premium, and miscellaneous fees and expenses. Pledge of Pledged PFC Revenues SECURITY FOR THE 2007A PFC BONDS Pledged PFC Revenues consisting of $3.00 of a $4.00-per-enplaned-passenger facilities charge, together with all moneys and securities paid or to be paid to or held or to be held in any account under the 2007 PFC Series A Indenture, are pledged to secure the payment of Bond Requirements of the 2007A PFC Bonds, subject only to the application of such moneys for the purposes and on the terms and conditions of the PFC Instruments. Such pledge will be valid and binding from and after the date of the first delivery of any 2007A PFC Bonds, and the moneys received or receivable by the County and pledged by the 2007 PFC Series A Indenture will immediately be subject to the lien of such pledge without any physical delivery thereof, any filing, or further act. The lien of such pledge and the obligation to perform the contractual provisions made by the 2007 PFC Series A Indenture will be on a parity with the lien and pledge under the PFC Instruments securing Parity PFC Bonds and will have a priority over any or all other obligations and liabilities of the County. The lien of such pledge will be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the County (except as otherwise provided in the 2007 PFC Series A Indenture) irrespective of whether such parties have notice thereof. Any additional collections of Passenger Facility Charges resulting from any increase in such charges exceeding $3.00 per qualifying enplaned passenger are not pledged to payment of the 2007A PFC Bonds and may be used by the County for any lawful purpose permitted for such Passenger Facility Charges. Currently, the Airport collects a Passenger Facility 6

21 Charge of $4 per qualifying enplaned passenger, however only revenue derived from $3.00 per qualifying enplaned passenger are pledged to the payment of the 2007A PFC Bonds. Covenant to Comply With the Federal Act The County, acting by and through the Director, the Governing Body or otherwise, has covenanted in the PFC Instruments to faithfully and punctually perform or cause to be performed all duties with respect to Pledged PFC Revenues and the projects financed with the proceeds of the Parity PFC Bonds (collectively, the PFC Projects ) required by the Constitution and laws of the State and the various resolutions, ordinances and other instruments of the County, including, without limitation, the proper segregation of the proceeds of the 2007A PFC Bonds and Pledged PFC Revenues and their application from time to time to the respective accounts provided therefor. The County has covenanted in the 2007 PFC Series A Indenture that it will comply with all provisions of the PFC Act and the PFC Regulations applicable to the County, as defined in APPENDIX C DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE, and that it will not take any action or omit to take any action with respect to the Pledged PFC Revenues, the PFC Projects or otherwise if such action or omission would, pursuant to the PFC Regulations, cause the termination of the County s authority to impose passenger facility charges or prevent the use of the Pledged PFC Revenues as contemplated by the 2007 PFC Series A Indenture. Without limiting the generality of the foregoing, the County has covenanted in the 2007 PFC Series A Indenture that, to the extent necessary to comply with the foregoing covenant: it will diligently seek approval to use Pledged PFC Revenues for the 2007A PFC Project within the time periods set forth in the PFC Regulations and will begin implementation of the 2007A PFC Project within the time periods set forth in the PFC Regulations; it (1) will impose a passenger facility charge to the full extent authorized, (2) will not unilaterally decrease the level of the passenger facility charge to be collected from any passenger, (3) will unilaterally increase the total approved passenger facility charge revenue pursuant to PFC Regulations (a) to the extent necessary to pay the Bond Requirements of the Parity PFC Bonds and any other PFC Bonds now or hereafter outstanding; (4) will apply for an additional increase in total approved passenger facility charge revenue pursuant to PFC Regulations (b) to the extent the County projects such increase may be necessary to pay the Bond Requirements of the 2007A PFC Bonds and any PFC Bonds now or hereafter outstanding; (5) will not impose any noise or access restriction not in compliance with the Airport Noise and Capacity Act of 1990, Pub. L , Title IX, Subtitle D; (6) will take all action reasonably necessary to cause all collecting air carriers to collect and remit to the County all passenger facility charges required by the PFC Regulations to be so collected and remitted; (7) will contest any attempt by the Federal Aviation Administration to terminate or suspend the County s authority to impose, receive or use passenger facility charges prior to the charge expiration date or the date total approved passenger facility charge revenue has been collected; and (8) will not modify the 2007A PFC Project in such manner as would cause the remaining amount of the PFC Revenues that may be collected by the County pursuant to the PFC Regulations, together with amounts on deposit in the Bond Fund, the Debt Service Reserve Fund, similar funds for Outstanding Parity PFC Bonds, and any unencumbered amounts on deposit in the Capital Fund, to be less than the remaining aggregate debt service payable on the 2007A PFC Bonds and any other securities payable from PFC Revenues. See PASSENGER FACILITY CHARGE Termination of Authority to Impose a Passenger Facility Charge for a description of the circumstances in which the Administrator (the Administrator ) of the FAA may terminate the County s authority to impose a Passenger Facility Charge. So long as any of the Parity PFC Bonds are Outstanding, as to any Bond Requirements, the County is required under the PFC Instruments to set aside the entire Pledged PFC Revenues, upon their receipt from time to time by the County, in the Income Fund which is required to be maintained by the County Treasurer separate and apart from all other County funds, including the Acquisition Fund. 7

22 Administration of Income Fund. So long as any of the 2007A PFC Bonds shall be Outstanding, as to any Bond Requirements, during each Fiscal Year the Income Fund shall be administered, and the moneys on deposit therein shall be applied in the following order of priority, all as provided in the 2007 PFC Series A Indenture; provided, that, anything therein to the contrary notwithstanding, amounts payable by the County under the Policy shall be payable at the times and in the priority provided in the Policy. Bond Fund Payments. First, from any moneys in the Income Fund, the following transfers will be credited to the Bond Fund concurrently with any transfers from the Income Fund to the 1992 Bond Fund, the 1998 Bond Fund, the 2002 Bond Fund and the 2005 Bond Fund and the bond funds for any Outstanding Parity PFC Bonds: A. Monthly, commencing on May 1, 2007, an amount in equal monthly installments necessary, together with any other moneys from time to time available therefor from whatever source, to pay the next maturing installment of interest on the 2007A PFC Bonds, and monthly thereafter, commencing on each interest payment date, one-sixth of the amount necessary, together with any other moneys from time to time available therefor and on deposit therein from whatever source, to pay the next maturing installment of interest on the 2007A PFC Bonds then Outstanding. B. Monthly, commencing on the first day of the month that is one year prior to the first principal payment date, an amount in equal monthly installments necessary, together with any other moneys from time to time available therefor from whatever source, to pay the next installment of principal of the 2007A PFC Bonds coming due at maturity, and monthly thereafter, commencing on each principal payment date, one-twelfth of the amount necessary, together with any other moneys from time to time available therefor and on deposit therein from whatever source, to pay the next installment of principal of the 2007A PFC Bonds coming due at maturity or pursuant to the 2007 PFC Series A Indenture. Debt Service Reserve Fund Payments. Second, but subsequent to the payments into the Bond Fund required above, and in addition to the moneys required to be deposited from proceeds of the 2007A PFC Bonds in the Debt Service Reserve Fund, from any moneys remaining in the Income Fund there will be credited by the County to the Debt Service Reserve Fund concurrently, on an equitable and prorated basis, with any transfers from the Income Fund to the 1998 Debt Service Reserve Fund, the 2002 Debt Service Reserve Fund, the 2005 Debt Service Reserve Fund and the debt service reserve funds for any Outstanding Parity PFC Bonds, an amount which is sufficient to make the amount on deposit in the Debt Service Reserve Fund plus the available amount of any Reserve Policy on deposit therein equal to the Debt Service Reserve Fund Requirement. If amounts in the Income Fund are insufficient for such purpose, the deficiency shall be payable from the Subordinate Securities Fund created by the Master Indenture from the first Net Revenues of the Airport System available for that purpose. No payment need be made into the Debt Service Reserve Fund so long as the moneys therein, together with the available amount of any Reserve Policy on deposit therein, shall equal not less than the Debt Service Reserve Fund Requirement. The moneys in the Debt Service Reserve Fund will be accumulated or reaccumulated and maintained as a continuing reserve to be used, except as otherwise provided in the 2007 PFC Series A Indenture, only to prevent deficiencies in the payment of the Bond Requirements of the 2007A PFC Bonds resulting from the failure to deposit into the Bond Fund sufficient funds to pay such Bond Requirements as the same accrue. Any available balance in the Capital Fund will be used to pay those Bond Requirements before amounts in the Debt Service Reserve Fund are so used, but amounts in the Debt Service Reserve Fund will be used to pay those Bond Requirements before the use of moneys derived from the Subordinate Securities Fund. If a Reserve Policy is substituted for moneys then held in the Debt Service Reserve Fund, such moneys in an amount equal to the available amount of such Reserve Policy will be transferred to the Capital Fund. If any other moneys are withdrawn from the Debt Service Reserve Fund (other than any amounts the withdrawal of which does not reduce the reserve to an amount less than the Debt Service Reserve Fund Requirement) or if payment is made under any Reserve Policy in the Debt Service Reserve Fund to pay the Bond Requirements of any Parity PFC Bonds, the amount so withdrawn, except to the extent any such Reserve Policy is reinstated as may be provided therein or in connection 8

23 therewith, will be restored therein from Pledged PFC Revenues available therefor or, if insufficient Pledged PFC Revenues are available therefor, from the first Net Revenues of the Airport System available therefor in the Subordinate Securities Fund as provided in the Master Indenture. If any amounts are transferred from the Capital Fund to the Debt Service Reserve Fund as provided in the 2007 PFC Series A Indenture to replace moneys previously transferred from the Master Indenture, an equal amount will be transferred from the Debt Service Reserve Fund, first to the Subordinate Securities Fund to the extent any amounts are then required to be accumulated therein as provided in the Master Indenture, second to the Working Capital and Contingency Reserve Fund to the extent any amounts are then required to be accumulated therein as provided in the Master Indenture, and third to the Capital Fund maintained in accordance with the Master Indenture. Whenever the moneys credited to the Debt Service Reserve Fund, together with the available amount of any Reserve Policy therein, exceed the Debt Service Reserve Fund Requirement, the amount of such excess may be withdrawn from the Debt Service Reserve Fund and (i) to the extent such excess constitutes Pledged PFC Revenues, may be transferred to the Income Fund, the Bond Fund, the Acquisition Fund or the Capital Fund, or any combination thereof, as the Director may determine (as shown in the budget or otherwise) and (ii) to the extent such excess does not constitute Pledged PFC Revenues, shall be transferred to the Revenue Fund. In the absence of any such determination, any such excess constituting Pledged PFC Revenues shall be transferred to the Income Fund. Payment of Rebate. Third, and subject to the provisions above, there will be transferred into the Rebate Fund, after making in full the monthly deposits as described above, but prior to the transfer of any Pledged PFC Revenues to the payment of Subordinate PFC Bonds, such amounts as are required to be deposited therein to meet the County s obligations under the tax covenant contained in the 2007 PFC Series A Indenture, in accordance with 148(f) of the Tax Code. Amounts in the Rebate Fund will be used for the purpose of making the payments to the United States required by such covenant and 148(f) of the Tax Code. Any amounts in the Rebate Fund in excess of those required to be on deposit therein by the 2007 PFC Series A Indenture and 148(f) of the Tax Code may be withdrawn therefrom and used for any lawful purpose relating to the PFC Projects permitted by the PFC Act and the PFC Regulations. The Rebate Fund will be maintained by the County Treasurer separate and apart from all other County funds and shall not be or deemed to be part of the Airport System Fund under the Master Indenture. Payment of Subordinate PFC Bonds. Fourth, and subject to the provisions above, but either concurrently with or subsequent to the payments required for the Bond Fund and Debt Service Reserve Fund, as provided in the 2007 PFC Series A Indenture, any moneys remaining in the Income Fund may be used by the County for the payment of Bond Requirements of Subordinate PFC Bonds authorized to be issued in accordance with the 2007 PFC Series A Indenture and any other provisions in the 2007 PFC Series A Indenture supplemental thereto, including reasonable reserves for such securities, as the same accrue, unless and to the extent such use is prohibited by the PFC Act or the PFC Regulations. Capital Fund. After the payments described above are made, any remaining Pledged PFC Revenues or other amounts in the Income Fund will be transferred to the Capital Fund previously created by the County. Amounts in the Capital Fund shall not be or deemed to be part of the Airport System Fund under the Master Indenture. Amounts in the Capital Fund will be used whenever necessary to make the payments required by the 2007 PFC Series A Indenture into the Bond Fund (and any similar fund established for Parity PFC Bonds) prior to use of amounts in the Debt Service Reserve Fund (or any similar fund for Parity PFC Bonds) for that purpose and will be used whenever necessary to make the payments required by the 2007 PFC Series A Indenture into the Debt Service Reserve Fund (or any similar fund for Parity PFC Bonds) prior to the use of amounts derived from the Subordinate Securities Fund for that purpose. Amounts in the Capital Fund may be used at any time during any Fiscal Year whenever in the Fiscal Year there shall have been credited to the Bond Fund, to the Debt Service Reserve Fund, to the Rebate Fund, and to each other bond fund and reserve fund, if any, for the payment of any Parity PFC Bonds, all amounts required to be deposited in those special accounts for the Fiscal Year, as described above, for any one or any combination of lawful purposes relating to the PFC Projects, or otherwise, as the County may from time to time determine, and as shall be permitted by the PFC 9

24 Act and the PFC Regulations. Unencumbered amounts in the Capital Fund will be transferred by the County to the Debt Service Reserve Fund, or to the reserve fund for any other securities payable from Pledged PFC Revenues, to replace moneys previously transferred to the Debt Service Reserve Fund or such other reserve fund from the Master Indenture. Notwithstanding the above, amounts in the Capital Fund will not be used or encumbered for any purpose other than the payment of debt service on the Parity PFC Bonds or other securities payable from Pledged PFC Revenues or such transfers to the Debt Service Reserve Fund or other reserve fund, to the extent that the remaining amount of passenger facility charge revenues that may be imposed by the County pursuant to the PFC Regulations is less than the aggregate debt service payable on the Parity PFC Bonds and any other such securities. Subordinate Lien Pledge of Airport Revenues Subordinate Lien Pledge. In addition to the lien on Pledged PFC Revenues, the 2007A PFC Bonds are Subordinate Lien Bonds secured by and are payable from the Net Revenues of the Airport System subordinate and junior to the lien thereon of the outstanding Senior Bonds and the lien thereon with respect to payments due from the County under the 1993 Swap Agreement described below, and any other Senior Bonds hereafter outstanding. Such subordinate lien on the Net Revenues is also on a parity with the lien thereon of the outstanding Parity PFC Bonds and the lien thereon of approximately $1,197,785,000 Subordinate Lien Bonds, consisting of the Series 1998A Bonds (the 1998A Bonds ), the Series 2001C Bonds (the 2001C Bonds ), the Series 2004A Bonds (the Series 2004A Bonds ), the Series 2005B Bonds (the Series 2005B Bonds ), the Series 2005C Bonds (the Series 2005C Bonds ), the Series 2005D Bonds (the Series 2005D Bonds ), the Series 2005E Bonds (the Series 2005E Bonds ), the Series 2006A Bonds (the Series 2006A Bonds ), plus amounts payable by the County pursuant to certain interest rate swap agreements described below, and any other additional Subordinate Lien Bonds hereafter issued, including the proposed Series 2007A Bonds, with a lien thereon on a parity with the lien thereon of the 2007A PFC Bonds. See FINANCIAL FACTORS Outstanding Airport Indebtedness for a description of the Senior Bonds and Subordinate Lien Bonds currently outstanding. 10

25 Set forth below are the current outstanding principal amounts of Subordinate Lien Bonds and the final maturity of each series of Subordinate Lien Bonds, including the anticipated principal amount of Subordinate Lien Bonds which have been authorized but not yet issued. CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Subordinate Lien Bonds Name of Bonds Principal Amount Outstanding (1) Final Maturity (July 1) 1998A Bonds $90,775, C Bonds 115,560, A Bonds 361,155, B Bonds 50,850, C Bonds 215,150, D Bonds 205,375, E Bonds 58,920, A Bonds 100,000, A Bonds * 208,640, A Bonds * 150,000, B Bonds * 150,000, A Bonds * 200,000, B Bonds * 350,000, A Bonds * 150,000, A Bonds * 275,000, A PFC Bonds 12,580, PFC Bonds 209,345, A PFC Bonds 24,745, A PFC Bonds 259,900, A PFC Bonds 218,985, (1) * As of March 1, Preliminary, subject to change. The Series 2008A Bonds and the Series 2008B Bonds, the Series 2009A Bonds and the 2009B Bonds, the Series 2010A Bonds, and the Series 2011A Bonds have been authorized and sold by the County and have scheduled delivery dates on or about July 1, 2008, July 1, 2009, July 1, 2010, and July 1, 2011, respectively. Source: Clark County Department of Aviation. Interest Rate Swap Agreements. The County has entered into the following interest rate swap agreements, the County payments under which are payable from Net Revenues of the Airport System Swap Agreement. In connection with the issuance of the County s Airport System Refunding Bonds, Series 1993A (the Series 1993A Bonds ) the County entered into an Interest Rate Swap Agreement, dated as of September 1, 1993 (the 1993 Swap Agreement ), with AIG Financial Products Corp. ( AIG-FP ) pursuant to which the County has fixed its effective interest obligation on the Series 1993A Bonds at 6.69% per annum for the term of the Series 1993A Bonds. Under the 1993 Swap Agreement, the County is obligated to make a payment to AIG-FP calculated on the basis of a fixed rate of 6.69% per annum and the principal amount of the Series 1993A Bonds outstanding (the County Swap Payment ) and AIG-FP is obligated to make reciprocal payments to the County equal to the interest due on the Series 1993A Bonds, except as described below (the AIG-FP Swap Payment ). The County s obligation to make the County Swap Payment to AIG-FP from Net Revenues is on a parity with the County s obligation to pay principal of and interest on Senior Bonds. Under certain circumstances, AIG-FP may be obligated to make an AIG-FP Swap Payment that is less than the interest due on the Series 1993A Bonds. In such an event, the AIG-FP Swap Payment received by the 11

26 County would be insufficient to pay interest due on the Series 1993A Bonds and such interest due on the Series 1993A Bonds may exceed the 6.69% per annum interest rate scheduled to be paid by the County as the County Swap Payment. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 1993 Swap Agreement may be terminated and the County may be required to make a termination payment to AIG-FP. Any such termination payment owed by the County would be payable from Net Revenues on a parity with the Senior Bonds Basis Swap Agreement. The County entered into an interest rate swap agreement with Citigroup Financial Products Inc. ( Citigroup Financial ) (the 2001 Basis Swap Agreement ). Pursuant to the 2001 Basis Swap Agreement, the County makes payments to Citigroup Financial based on the Bond Market Association Municipal Swap Index, with certain adjustments, and will receive from Citigroup Financial an amount equal to a percentage of the London InterBank Offering Rate, with certain adjustments. The obligation of the County to make payments from Net Revenues to Citigroup Financial under the 2001 Basis Swap Agreement is on a parity with the County s obligation to make payments on the 2007A PFC Bonds. Under certain circumstances, the 2001 Basis Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues on a basis that is subordinate to the 2007A PFC Bonds. 2001C Swap Agreement. The County entered into an Interest Rate Swap Agreement (the 2001C Swap Agreement ) with Citigroup Financial whereby the County will effectively make fixed the interest rate on the 2001C Bonds. The obligation of the County to make payments from Net Revenues to Citigroup Financial under the 2001C Swap Agreement is on a parity with the County s obligation to make payments on the 2007A PFC Bonds. Under certain circumstances, the 2001C Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues on a basis that is subordinate to the 2007A PFC Bonds. Under certain circumstances, Citigroup Financial may be obligated to make a payment to the County under the 2001C Swap Agreement that is less than the interest due on the 2001C Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. 2005A Swap Agreement. The County entered into an Interest Rate Swap Agreement (the 2005A Swap Agreement ), with Citigroup Financial pursuant to which the County will fix its effective interest obligation on the 2005A PFC Bonds for the term of the 2005A PFC Bonds. Under the 2005A Swap Agreement, the County is obligated to make a payment to Citigroup Financial calculated on the basis of a fixed rate and the principal amount of the 2005A PFC Bonds outstanding (the County 2005 Swap Payment ) and Citigroup Financial is obligated to make reciprocal payments to the County equal to the interest due on the 2005A PFC Bonds, except as described below (the Citigroup Financial Swap Payment ). The County s obligation to make the County 2005 Swap Payment to Citigroup Financial from Net Revenues is on a parity with the County s obligation to pay principal of and interest on 2007A PFC Bonds. Under certain circumstances, Citigroup Financial may be obligated to make a Citigroup Financial Swap Payment that is less than the interest due on the 2005A PFC Bonds. In such an event, the Citigroup Financial Swap Payment received by the County would be insufficient to pay interest due on the 2005A PFC Bonds and such interest due on the 2005A PFC Bonds may exceed the fixed rate scheduled to be paid by the County as the County 2005 Swap Payment. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2005A Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues on a basis which is subordinate to the 2007A PFC Bonds Fixed Spread Basis Swap Agreement. The County entered into an interest rate swap agreement with Citigroup Financial (the 2003 Fixed Spread Basis Swap Agreement ). Pursuant to the 2003 Fixed 12

27 Spread Basis Swap Agreement, the County makes payments to Citigroup Financial based on the Bond Market Association Municipal Swap Index and will receive from Citigroup Financial an amount equal to a percentage of the London InterBank Offering Rate, with certain adjustments. The obligation of the County to make payments from Net Revenues to Citigroup Financial under the 2003 Fixed Spread Basis Swap Agreement is subordinate to the County s obligation to make payments on the 2007A PFC Bonds. Under certain circumstances, the 2003 Fixed Spread Basis Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds Basis Swap Agreement. The County entered into an interest rate swap agreement with Citigroup Financial (the 2003 Basis Swap Agreement ). Pursuant to the 2003 Basis Swap Agreement, the County makes payments to Citigroup Financial based on the Bond Market Association Municipal Swap Index, with certain adjustments, and will receive from Citigroup Financial an amount equal to a percentage of the London InterBank Offering Rate, with certain adjustments. The obligation of the County to make payments from Net Revenues to Citigroup Financial under the 2003 Basis Swap Agreement is on a parity with the County s obligation to make payments on the 2007A PFC Bonds. Under certain circumstances, the 2003 Basis Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds Fixed Spread Basis Swap Agreement. The County entered into an interest rate swap agreement with Citigroup Financial (the 2004 Fixed Spread Basis Swap Agreement ). Pursuant to the 2004 Fixed Spread Basis Swap Agreement, the County makes payments to Citigroup Financial based on the Bond Market Association Municipal Swap Index and will receive from Citigroup Financial an amount equal to a percentage of the London InterBank Offering Rate, with certain adjustments. The obligation of the County to make payments from Net Revenues to Citigroup Financial under the 2004 Fixed Spread Basis Swap Agreement is on a parity to the County s obligation to make payments on the 2007A PFC Bonds. Under certain circumstances, the 2004 Fixed Spread Basis Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds. 2005B Swap Agreement. The County entered into an interest rate swap agreement (the 2005B Swap Agreement ), with Citigroup Financial pursuant to which the County will fix its effective interest obligation on the 2005B Bonds for the term of the 2005B Bonds. Under the 2005B Swap Agreement, the County is obligated to make a payment to Citigroup Financial calculated on the basis of a fixed rate and the principal amount of the 2005B Bonds outstanding (the County 2005B Swap Payment ) and will receive from Citigroup Financial an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Citigroup Financial 2005B Swap Payment ). The County s obligation to make the County 2005B Swap Payment to Citigroup Financial from Net Revenues is on a parity with the 2007A PFC Bonds. Citigroup Financial may be obligated to make a Citigroup Financial 2005B Swap Payment that is less than the interest due on the 2005B Bonds. In such an event, the Citigroup Financial 2005B Swap Payment received by the County would be insufficient to pay interest due on the 2005B Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2005B Swap Agreement may be terminated and the County may be required to make a termination payment to Citigroup Financial. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds. 2005C Swap Agreement. Simultaneously with the issuance of the Series 2005 Bonds, the County entered into interest rate swap agreements, with each of Citigroup Financial, JPMorgan Chase Bank, N.A. and UBS AG (collectively referred to as the 2005C Swap Agreement ) pursuant to which the County fixed its effective interest obligation on the 2005C Bonds for the term of the 2005C Bonds. Under the 2005C Swap Agreement, the County is obligated to make a payment to the applicable counterparty calculated on the basis 13

28 of a fixed rate and the principal amount of the 2005C Bonds outstanding (the County 2005C Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2005C Swap Payment ). The County s obligation to make the County 2005C Swap Payment to the applicable counterparty from Net Revenues is on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2005C Swap Payment that is less than the interest due on the 2005C Bonds. In such an event, the Counterparty 2005C Swap Payment received by the County would be insufficient to pay interest due on the 2005C Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2005C Swap Agreement may be terminated and the County may be required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds. 2005D Swap Agreement. Simultaneously with the issuance of the Series 2005 Bonds, the County entered into interest rate swap agreements, with each of Citigroup Financial, JPMorgan Chase Bank, N.A. and UBS AG (collectively referred to as the 2005D Swap Agreement ) pursuant to which the County fixed its effective interest obligation on the 2005D Bonds for the term of the 2005D Bonds. Under the 2005D Swap Agreement, the County is obligated to make a payment to the applicable counterparty calculated on the basis of a fixed rate and the principal amount of the 2005D Bonds outstanding (the County 2005D Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2005D Swap Payment ). The County s obligation to make the County 2005D Swap Payment to the applicable counterparty from Net Revenues is on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2005D Swap Payment that is less than the interest due on the 2005D Bonds. In such an event, the Counterparty 2005D Swap Payment received by the County would be insufficient to pay interest due on the 2005D Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2005D Swap Agreement may be terminated and the County may be required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds. 2005E Swap Agreement. Simultaneously with the issuance of the Series 2005 Bonds, the County entered into interest rate swap agreements, with each of Citigroup Financial, JPMorgan Chase Bank, N.A. and UBS AG (collectively referred to as the 2005E Swap Agreement ) pursuant to which the County fixed its effective interest obligation on the proposed 2005E Bonds for the term of the 2005E Bonds. Under the 2005E Swap Agreement, the County is obligated to make a payment to the applicable counterparty calculated on the basis of a fixed rate and the principal amount of the 2005E Bonds outstanding (the County 2005E Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2005E Swap Payment ). The County s obligation to make the County 2005E Swap Payment to the applicable counterparty from Net Revenues is on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2005E Swap Payment that is less than the interest due on the 2005E Bonds. In such an event, the Counterparty 2005E Swap Payment received by the County would be insufficient to pay interest due on the 2005E Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2005E Swap Agreement may be terminated and the County may be required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds. 14

29 2008 Forward Swap Agreements. The County entered into forward interest rate swap agreements, with each of JPMorgan Chase Bank, N.A. and UBS AG (collectively referred to as the 2008 Forward Swap Agreement ) pursuant to which the County fixed its effective interest obligation on a portion of the proposed 2008A Bonds for the term of the 2008A Bonds. Under the 2008 Forward Swap Agreement, the County is obligated to make a payment to the applicable counterparty calculated on the basis of a fixed rate and the principal amount of the 2008A Bonds outstanding (the County 2008 Forward Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2008 Forward Swap Payment ). The County s obligation to make the County 2008 Forward Swap Payment to the applicable counterparty from Net Revenues is on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2008 Forward Swap Payment that is less than the interest due on the Series 2008A Bonds. In such an event, the Counterparty 2008 Forward Swap Payment received by the County would be insufficient to pay interest due on the 2008A Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2008 Forward Swap Agreement may be terminated and the County may be required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds Forward Swap Agreements. The County entered into forward interest rate swap agreements with Citigroup Financial (collectively referred to as the 2009 Forward Swap Agreement ) pursuant to which the County fixed its effective interest obligation on a portion of the proposed 2009A Bonds for the term of the 2009A Bonds. Under the 2009 Forward Swap Agreement, the County is obligated to make a payment to the applicable counterparty calculated on the basis of a fixed rate and the principal amount of the 2009A Bonds outstanding (the County 2009 Forward Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2009 Forward Swap Payment ). The County s obligation to make the County 2009 Forward Swap Payment to the applicable counterparty from Net Revenues is on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2009 Forward Swap Payment that is less than the interest due on the Series 2009A Bonds. In such an event, the Counterparty 2009 Forward Swap Payment received by the County would be insufficient to pay interest due on the 2008A Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2009 Forward Swap Agreement may be terminated and the County may be required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds Forward Swap Agreement. The County entered into a forward interest rate swap agreement with Citigroup Financial (the 2010 Forward Swap Agreement ) pursuant to which the County fixed its effective interest obligation on a portion of the proposed 2010A Bonds for the term of the 2010A Bonds. Under the 2010 Forward Swap Agreement, the County is obligated to make a payment to the applicable counterparty calculated on the basis of a fixed rate and the principal amount of the 2010A Bonds outstanding (the County 2010 Forward Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2010 Forward Swap Payment ). The County s obligation to make the County 2010 Forward Swap Payment to the applicable counterparty from Net Revenues is on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2010 Forward Swap Payment that is less than the interest due on the Series 2010A Bonds. In such an event, the Counterparty 2010 Forward Swap Payment received by the County would be insufficient to pay interest due on the 2010A Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2010 Forward Swap Agreement may be terminated and the County may be 15

30 required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues subordinate to the 2007A PFC Bonds Forward Swap Agreements. The County expects to enter into forward interest rate swap agreements with Citigroup Financial and UBS AG in April 2007 (the 2011 Forward Swap Agreements ) pursuant to which the County expects to fix its effective interest obligation on a portion of the proposed 2011A Bonds for the term of the 2011A Bonds. Under the 2011 Forward Swap Agreements, the County will be obligated to make payments to the applicable counterparty calculated on the basis of a fixed rate and the principal amount of the 2011A Bonds outstanding (the County 2011 Forward Swap Payment ) and will receive from the applicable counterparty an amount equal to a percentage of the London InterBank Offering Rates with certain adjustments (the Counterparty 2011 Forward Swap Payment ). The County s obligation to make the Counterparty 2011 Forward Swap Payment to the applicable counterparty from Net Revenues will be on a parity with the 2007A PFC Bonds. The applicable counterparty may be obligated to make a Counterparty 2011 Forward Swap Payment that is less than the interest due on the Series 2011A Bonds. In such an event, the Counterparty 2011 Forward Swap Payment received by the County would be insufficient to pay interest due on the 2011A Bonds. In such event, the County would be obligated to pay such insufficiency from Net Revenues of the Airport System. Under certain circumstances, the 2011 Forward Swap Agreement may be terminated and the County may be required to make a termination payment to the applicable counterparty. Any such termination payment owed by the County would be payable from Net Revenues on parity with the 2007A PFC Bonds. Set forth below is a summary of interest rate swap agreements entered into by the County payable for Net Revenues of the Airport. CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Interest Rate Swap Agreements Name of Swap Notional Amount Nature of Swap 1993 Swap Agreement $175,900,000 Variable to fixed 2001C Swap Agreement 115,560,000 Variable to fixed 2001 Basis Swap Agreement 279,490,000 Variable to variable 2003 Fixed Spread Basis Swap Agreement 200,000,000 Fixed to variable 2003 Basis Swap Agreement 42,550,000 Variable to variable 2004 Fixed Spread Basis Swap Agreement 300,000,000 Fixed to variable 2005A Swap Agreement 259,900,000 Variable to fixed 2005B Swap Agreement 50,850,000 Variable to fixed 2005C Swap Agreement 215,150,000 Variable to fixed 2005D Swap Agreement 205,375,000 Variable to fixed 2005E Swap Agreement 58,920,000 Variable to fixed 2008 Forward Swap Agreements 300,000,000 Variable to fixed 2009 Forward Swap Agreements 550,000,000 Variable to fixed 2010 Forward Swap Agreement 150,000,000 Variable to fixed 2011 Forward Swap Agreements 275,000,000 Variable to fixed Source: Clark County Department of Aviation The Airport is considering converting one or more of the existing variable rate to fixed rate swaps from a LIBOR-based index to a BMA index or terminating all or a portion of certain existing variable rate to variable rate swaps. There can be no assurance whether any such swaps will be converted or terminated or the timing thereof. 16

31 Future Interest Rate Swap Agreements. The Airport has been an active participant in the interest rate swap market. The Airport may, from time-to-time, enter additional interest rate swap agreements with security and payment provisions as permitted under the PFC Instruments and other applicable agreements. Rate Maintenance Covenant. Pursuant to the Master Indenture the County must at all times fix, charge, and collect rentals, rates, fees, and other charges for the use of the Airport System, and must revise such as may be necessary or appropriate, in order that in each Fiscal Year the Gross Revenues, together with any Other Available Funds, will at all times be at least sufficient to provide for the payment of Operation and Maintenance Expenses for such Fiscal Year, and to provide for the larger of either (1) the amounts needed for making the required cash deposits in such Fiscal Year to the credit of the Bond Fund, the Debt Service Reserve Fund, the Subordinate Securities Fund, the Working Capital and Contingency Reserve Fund and the Capital Fund, in each case established under the Master Indenture, or (2) an amount not less than 125% of the Aggregate Debt Service Requirements for the Comparable Bond Year for the Senior Bonds then outstanding: 2007A PFC Debt Service Reserve Fund At the time of delivery of the 2007A PFC Bonds, the County will cause the Trustee to deposit a portion of the proceeds of the 2007A PFC Bonds in the 2007A PFC Debt Service Reserve Fund equal to the initial Debt Service Reserve Fund Requirement for the 2007A PFC Bonds. The Debt Service Reserve Fund Requirement for the 2007A PFC Bonds is (a) initially, $21,898,500, and (b) thereafter, as of each July 1, with respect to the 2007A PFC Bonds, the lesser of (i) the amount stated in clause (a) above and (ii) the least of (A) 10% of the stated principal amount of the 2007A PFC Bonds (or, if the 2007A PFC Bonds are issued with more than 2% of original issue discount, 10% of the original proceeds of the 2007A PFC Bonds), (B) the maximum Annual Principal and Interest Requirements for the 2007A PFC Bonds, or (C) 125% of the average Annual Principal and Interest Requirements for the 2007A PFC Bonds. Additional PFC Securities Parity PFC Securities. The 2007 PFC Series A Indenture, subject to the limitations stated therein, permits the issuance by the County of additional Parity PFC Bonds payable from Pledged PFC Revenues (including investment earnings thereon for all purposes under this caption) and constituting a lien thereon on a parity with, but not prior nor superior to, the lien thereon of the 1995 PFC Bonds, the 1998 PFC Bonds and the 2007A PFC Bonds. Prior to the issuance of any such additional Parity PFC Bonds (excluding any refunding Parity PFC Bonds other than any Parity PFC Bonds which refund bonds payable from Pledged PFC Revenues subordinate to the Parity PFC Bonds, as permitted as described below) the County is required to file the following with the Trustee: Absence of Default. A certification of the Director or Assistant Director that at the date of the issuance of the additional Parity PFC Bonds (i) the County is not in default in making any payments required by the 2007 PFC Series A Indenture with respect to the 2007A PFC Bonds or any Parity PFC Bonds, and (ii) if the Bond Requirements of such additional Parity PFC Bonds are secured by a subordinate pledge of the Net Revenues of the Airport System, the County is in compliance with the rate maintenance covenant in the Master Indenture; and Earnings Test. (1) A certification of the Director or Assistant Director that (a) the Pledged PFC Revenues (adjusted as described below) received (i) in the most recent Fiscal Year preceding the date of the issuance of the additional Parity PFC Bonds for which audited financial statements are available, or (ii) for any period of 12 consecutive calendar months out of the 18 calendar months next preceding the date of issuance of the additional Parity PFC Bonds, were at least sufficient to pay an amount equal to 135% of the average annual principal and interest requirements (calculated for the period beginning on the date of issuance of the proposed Parity PFC Bonds and ending on the final maturity date of the then Outstanding 2007A PFC Bonds, any other Outstanding Parity PFC Bonds and the proposed Parity PFC Bonds) of the Outstanding 2007A PFC Bonds, any other Outstanding 17

32 Parity PFC Bonds and the Parity PFC Bonds proposed to be issued (excluding the reserves therefore), and (b) the aggregate approved Pledged PFC Revenues to be received after the issuance of the additional Parity PFC Bonds plus the amount of Pledged PFC Revenues then held in the Bond Fund, the Debt Service Reserve Fund (and any similar funds for outstanding Parity PFC Bonds) and the unencumbered balance in the Capital Fund exceeds the aggregate unpaid Bond Requirements of the 2007A PFC Bonds, any outstanding Parity PFC Bonds and the Parity PFC Bonds proposed to be issued, accrued and unaccrued to maturity, but less any such Bond Requirements which were capitalized from the proceeds of any Parity PFC Bonds; or (2) A certification of the Director or Assistant Director setting forth (a) the Net Revenues and any Other Available Funds for, and (b) the Pledged PFC Revenues (adjusted as provided below) received in, (i) the most recent Fiscal Year preceding the date of the issuance of such additional Securities for which audited financial statements are available, or (ii) any period of 12 consecutive calendar months out of the 18 calendar months next preceding the date of the issuance of such additional Securities and demonstrating: (x) that such Net Revenues and Other Available Funds at least equal 110% of the maximum amount of Bond Requirements payable in any Bond Year (occurring from the date of calculation through the final maturity of the 2007A PFC Bonds) of the then outstanding Subordinate Lien Bonds, the Outstanding 2007A PFC Bonds, any additional Subordinate Lien Bonds to be issued having a lien on the Net Revenues on a parity with the lien thereon of the 2007A PFC Bonds which are not secured by and expected to be paid from Pledged PFC Revenues, and any other Outstanding Subordinate Lien Bonds having a lien on the Net Revenues on a parity with the lien thereon of the 2007A PFC Bonds (provided that the Bond Requirements of the Outstanding 2007A PFC Bonds or other Outstanding Subordinate Lien Bonds need not be taken into account in the foregoing calculation to the extent that Net Revenues and any Other Available Funds were not used in the most recent Fiscal Year to pay the Bond Requirements of the Outstanding 2007A PFC Bonds or other Outstanding Subordinate Lien Bonds), and (y) that the sum of such Net Revenues and Other Available Funds plus such Pledged PFC Revenues at least equals 135% of the maximum amount of Bond Requirements payable in any Bond Year (occurring from the date of calculation through the final maturity of the 2007A PFC Bonds) of the then outstanding Senior Bonds, the Outstanding 2007A PFC Bonds, any other Outstanding Parity PFC Bonds which are Subordinate Lien Bonds and any additional Parity PFC Bonds to be issued which are Subordinate Lien Bonds; or (3) A certification of the Airport Management Consultant setting forth (a) the Pledged PFC Revenues (adjusted as provided below) received (i) in the most recent Fiscal Year preceding the date of issuance of such additional Securities for which audited financial statements are available, or (ii) for any 12 consecutive calendar months out of the 18 calendar months next preceding the date of issuance of the additional Securities and (b) for each of the five Fiscal Years following the date of issuance of the additional Securities (or, if interest is capitalized on such securities, following the last Fiscal Year for which any of such interest is capitalized), estimates of the Net Revenues and Other Available Funds, and concluding that for each such Fiscal Year: (x) the estimated Net Revenues and Other Available Funds for that Fiscal Year at least equal 110% of the Aggregate Debt Service Requirements or the Bond Requirements, as the case may be, to be accumulated in the Fiscal Year and expended in the Comparable Bond Year for the then outstanding Senior Bonds, the Outstanding 2007A PFC Bonds, any additional Subordinate Lien Bonds to be issued having a lien on the Net Revenues on a parity with the lien thereon of the 2007A PFC Bonds which are not secured by and expected to be paid from Pledged PFC Revenues, and any other Outstanding Subordinate Lien Bonds having 18

33 a lien on the Net Revenues on a parity with the lien thereon of the 2007A PFC Bonds (provided that the Bond Requirements of the Outstanding 2007A PFC Bonds or other Outstanding Subordinate Lien Bonds need not be taken into account in the foregoing calculation to the extent that Net Revenues and any Other Available Funds were not used in the most recent Fiscal Year to pay the Bond Requirements of the Outstanding 2007A PFC Bonds or other Outstanding Subordinate Lien Bonds), after giving effect, among other factors, to the increase in rates, fees, rentals or other charges (or any combination thereof) under the rate maintenance covenant in the Master Indenture and (y) the sum of such Pledged PFC Revenues plus the estimated Net Revenues and Other Available Funds for that Fiscal Year at least equal 135% of the Aggregate Debt Service Requirements or the Bond Requirements, as the case may be, to be accumulated in the Fiscal Year and expended in the Comparable Bond Year for the then outstanding Senior Bonds, the Outstanding 2007A PFC Bonds, any other Outstanding Parity PFC Bonds which are Subordinate Lien Bonds and any additional Parity PFC Bonds to be issued which are Subordinate Lien Bonds, after giving effect, among other factors, to the increase in rates, fees, rentals or other charges (or any combination thereof) under the rate maintenance covenant in the Master Indenture. Paragraphs (2) or (3) of this earnings test may be used only if the additional Parity PFC Bonds to be issued are additionally secured by a subordinate pledge of the Net Revenues of the Airport System. In the computation of any earnings test under paragraph (1), (2) or (3) above as to whether or not additional Parity PFC Bonds may be issued, the amount of the Pledged PFC Revenues for the computation period will be decreased and may be increased by the amount of any loss or gain conservatively estimated by the Director or Assistant Director, which loss or gain results from any change in the rate of the levy of passenger facility charges constituting a part of the Pledged PFC Revenues which change took effect during the computation period or thereafter prior to the issuance of such Parity PFC Bonds, as if such modified rate shall have been in effect during the entire computation period. Subordinate PFC Bonds. The 2007 PFC Series A Indenture permits the County to issue additional bonds or other additional securities payable from Pledged PFC Revenues or other PFC revenues having a lien thereon subordinate, inferior and junior to the lien thereon of the Parity PFC Bonds; provided, that no additional bonds or other additional securities with a lien or right of payment on PFC Revenues subordinate, inferior and junior to the lien thereon of the 2007A PFC Bonds but superior to the lien thereon of the Junior Lien Obligations may be issued. Refunding PFC Bonds. The County may refund any Outstanding 2007A PFC Bonds or other Outstanding securities payable from and constituting a lien upon any Pledged PFC Revenues, subject to the following requirements: Requirements Not Increased: The refunding securities do not increase for any Bond Year the annual principal and interest requirements evidenced by the refunding securities and by the Outstanding securities not refunded on and before the last maturity date or last Redemption Date, if any, whichever is later, if any, of the unrefunded securities, and unless the lien of any refunding bonds or other refunding securities on Pledged PFC Revenues is not raised to a higher priority than the lien thereon of the bonds or other securities thereby refunded; or Subordinate Lien: The lien on any Pledged PFC Revenues for the payment of the refunding securities is subordinate to each such lien for the payment of any securities not refunded; or Default and Earnings Test: The refunding bonds or other refunding securities are issued in compliance with the provisions set forth above under SECURITY FOR THE 2007A PFC Bonds -- Additional PFC Securities -- Parity PFC Securities. 19

34 No Superior PFC Securities. The 2007 PFC Series A Indenture prohibit the County from issuing additional PFC Bonds or other additional PFC securities payable from Pledged PFC Revenues and having a lien thereon prior and superior to the lien thereon of the 2007A PFC Bonds. Additional Subordinate Lien Bonds The 2007 PFC Series A Indenture further provides that additional Subordinate Lien Bonds with a lien on Net Revenues of the Airport System on a parity with the lien thereon of the 2007A PFC Bonds may be issued, only if the County files with the Trustee: A. The certificates required as described above under Absence of Default and meeting either of the last two tests described under Earnings Test. B. If the proposed additional Subordinate Lien Bonds constitute Refunding Revenue Bonds (including Subordinate Lien Bonds which are issued to refund other Subordinate Lien Bonds which have a lien on Net Revenues on a parity with the lien thereon of the 2007A PFC Bonds, but not including any Subordinate Lien Bonds which are issued to refund Securities with a lien on Net Revenues which is junior to the lien thereon of the 2007A PFC Bonds), a certificate of the County Treasurer setting forth (i) the Bond Requirements of the Refunding Subordinate Lien Bonds proposed to be issued for each Bond Year while the 2007A PFC Bonds are Outstanding and (ii) the Bond Requirements of the Subordinate Lien Bonds refunded by the proposed Refunding Subordinate Lien Bonds for each of those Bond Years, and showing that for each of those Bond Years the Bond Requirements described in clause (i) are not greater than the Bond Requirements described in clause (ii). Limited Liability Notwithstanding anything contained in the 2007 PFC Series A Indenture, the County shall not be required to advance any moneys derived from any source of income other than the Pledged PFC Revenues and Net Revenues of the Airport System available for deposit in the Subordinate Securities Fund after payment of the Senior Bonds and the other funds provided in the 2007 PFC Series A Indenture for the payment of debt service on the 2007A PFC Bonds or for the performance of any agreements or covenants required to be performed by it contained in the 2007 PFC Series A Indenture. THE OBLIGATION OF THE COUNTY TO PAY DEBT SERVICE ON THE 2007A PFC BONDS DOES NOT CONSTITUTE AN OBLIGATION OF THE COUNTY FOR WHICH THE COUNTY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE COUNTY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE 2007A PFC BONDS DO NOT CONSTITUTE A DEBT OF THE COUNTY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION, OR A PLEDGE OF THE FULL FAITH, CREDIT AND TAXING POWER OF THE COUNTY. The 2007A PFC Bonds are not secured by, and the 2007A PFC Bond Owners have no security interest in or mortgage on, the PFC Projects, the Airport System or any other real property of the County. Default by the County will not result in loss of the PFC Projects or the Airport System. Should the County default, the Trustee may proceed, and if the owner or owners of not less than 10% in principal amount of the Parity PFC Bonds then Outstanding so request, then the Trustee will proceed, against the County and its agents, officers and employees to protect and to enforce the rights of any owner of Parity PFC Bonds by mandamus or by other suit, action or special proceedings in equity or at law, in any court of competent jurisdiction, either for the appointment of a receiver or for the specific performance of any covenant or agreement contained in the 2007 PFC Series A Indenture or in an award of execution of any power granted in the 2007 PFC Series A Indenture for the enforcement of any proper, legal or equitable remedy as the Trustee or the owner or owners may deem most effectual to protect and to enforce the rights aforesaid, or thereby to enjoin any act or thing 20

35 which may be unlawful or in violation of any right of any owner of any Parity PFC Bonds, or to require the County to act as if it were the trustee of an express trust, or any combination of such remedies. See APPENDIX C DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE 2007 PFC SERIES A INDENTURE -- Privileges, Rights and Remedies. Imposition of Passenger Facility Charge by County PASSENGER FACILITY CHARGE The Administrator of the FAA granted the County approval to impose and use a Passenger Facility Charge of $3.00 per qualifying enplaned passenger in 1992 up to a total amount of $944,028,500 to pay for certain road improvements, including a tunnel underneath an existing runway, and certain other improvements to the Airport and certain other Airport System costs (the 1992 Project ) which approvals have been modified from time to time ( 1992 Imposition and Use Approval ). Pursuant to the terms of the 1992 Imposition and Use Approval, the County approved the imposition of a Passenger Facility Charge of $3.00 per qualifying enplaned passenger and the use of Pledged PFC Revenues to pay for eligible projects. Collection of the Passenger Facility Charge commenced at the Airport on June 1, In September 1992, the County issued the 1992 PFC Bonds to finance the implementation of certain components of the Airport s Master Plan, including construction of roadway improvements and certain land acquisition and other approved projects. Substantial completion of all components of the 1992 Project (other than land acquisition) occurred in December The land acquisition component of the 1992 Project is ongoing. On March 5, 1995, the Administrator of the FAA granted the County an additional approval to impose and use a Passenger Facility Charge up to a total (including prior approvals) of $1,585,238,500 (the 1995 Imposition and Use Approval ) for certain projects. In July 1995, the County issued the 1995 PFC Bonds to finance a portion of the cost of a new concourse, Satellite D, an automated transit system connecting Satellite D to the main terminal, runway improvements, and certain other improvements. From the proceeds of the 1995 PFC Bonds, the County also reimbursed itself for earlier improvements to the international terminal, the North Las Vegas Air Terminal, the west rotunda of the Airport, expansion of baggage handling facilities and land acquisition. The 1992 Imposition and Use Approval and the 1995 Imposition and Use Approval are collectively referred to as the Imposition and Use Approval. No additional County approval is necessary to use PFC Revenues to pay for the PFC Projects or the Parity PFC Bonds. The Imposition and Use Approval currently extends until the earlier of March 2025 or the date on which the total Passenger Facility Charge revenue plus interest thereon equals the allowable cost of the projects approved pursuant to the Imposition and Use Approvals. Pursuant to the Federal Act, the County may, without consultation or approval by the Administrator, institute an increase in the total approved PFC Revenues of 15 percent or less. On August 16, 2004, the County received authorization from the FAA to increase Passenger Facility Charge from $3.00 per qualifying enplaned passenger to $4.50 per qualifying enplaned passenger effective November 1, The amendment to increase the PFC level did not change the Imposition and Use Approval amount of $1,585,238,500. The County currently estimates the Imposition and Use Approval will expire in December, PFC revenues derived from the $1.50 increase were not pledged to payment of the PFC Bonds. Effective September 1, 2006, the Passenger Facility Charge collection rates decreased from $4.50 to $3.00 and such rates remained in effect until January 1, Effective January 1, 2007, the Passenger Facility Charge collection rates increased from $3.00 to $4.00 and such rates will remain in effect until the estimated date of July 1, Only $3.00 of the $4.00 of the Passenger Facility Charge is pledged to the payment on the PFC Bonds. After July 1, 2009, the Passenger Facility Charge collection rate is projected to increase to $4.50 and to remain at that level until the estimated Passenger Facility Charge expiration date of 21

36 March 1, Notwithstanding the Passenger Facility Charge increase to $4.50, only $3.00 will be pledged to the payment on the PFC Bonds. While the maturities of the PFC Bonds may extend past the date on which the Imposition and Use Approval expires or the date on which the total Passenger Facility Charge revenue plus interest thereon equals the allowable cost of the projects approved pursuant to the Imposition and Use Approvals, the Airport anticipates to accumulate PFC revenues in reserves to pay for the interest and principal on the PFC Bonds outstanding after such dates. Termination of Authority to Impose a Passenger Facility Charge The Administrator may terminate the County s authority to impose the Passenger Facility Charge (1) if the Administrator determines the County is in violation of certain provisions of the Airport Noise and Capacity Act of 1990 relating to noise and access restrictions, or (2) if the Administrator determines that the Passenger Facility Charge revenue is excessive or cannot determine that such revenue is being used for approved projects in accordance with the Imposition and Use Approval or with the Federal Act, or (3) if project implementation does not commence within the time period specified in the Federal Act or, (4) if the County is otherwise in violation of the Federal Act. If any approval in connection with the County s authority to use the Passenger Facility Charge for a specific project is withdrawn or terminated, the FAA could terminate the County s authority to use the Passenger Facility Charge for that project. The FAA termination provisions provide a variety of procedural safeguards, including an informal resolution procedure before commencement of proceedings to terminate the County s authority to impose a Passenger Facility Charge, which the FAA will commence only if the FAA determines that informal resolution is not successful. In addition, termination proceedings include a period of time to allow the County to correct any defect the FAA has identified or to attempt to work out a compromise with the FAA that will allow the Passenger Facility Charge revenue stream to continue uninterrupted. The County s authority to impose a Passenger Facility Charge and use Passenger Facility Charge revenues will continue for at least 130 days from the commencement of the informal resolution procedures. The regulations under the Airport Noise and Capacity Act also contain significant procedural safeguards to ensure that the County s authority to impose a Passenger Facility Charge would not be summarily terminated. Most significantly, the County can under any circumstance prevent termination of its Passenger Facility Charge authority by suspending the effectiveness of any noise or access restriction in question, until the legal sufficiency of the restriction, and its impact on the County s Passenger Facility Charge authority, has been determined. If the Administrator determines that revenue derived from a Passenger Facility Charge is excessive or is not being used in accordance with the Federal Act, the Administrator may set off such amounts as may be necessary to ensure compliance with the Federal Act against federal grants otherwise payable to the County under the Airport and Airway Improvement Act of See SECURITY FOR THE 2007A PFC BONDS Covenant to Comply with the Federal Act for a description of the covenant by the County to comply with the Federal Act. Insufficiency of Passenger Facility Charge Revenues and Availability of Net Revenues of the Airport System In the event that Pledged PFC Revenues received by the County are less than the amount needed to pay debt service on the Parity PFC Bonds, principal of and interest on the Parity PFC Bonds would be payable from Net Revenues of the Airport System deposited in the Subordinate Securities Fund. In addition, in the event the County is prohibited from charging the Passenger Facility Charge for any reason, principal of and interest on the Parity PFC Bonds would be payable from and secured solely by a pledge of and lien on Net Revenues of the Airport System deposited in the Subordinate Securities Fund. See SECURITY FOR THE 22

37 2007A PFC BONDS Subordinate Lien Pledge of Airport Revenues, and APPENDIX C DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE Definitions and Revenue Bond Ordinance for a description of the Net Revenues of the Airport System available for deposit in the Subordinate Securities Fund. BOND INSURANCE The following information has been furnished by the Insurer for use in this Official Statement. Such information has not been independently confirmed or verified by the County. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained and incorporated herein by reference is correct. Reference is made to APPENDIX G for a specimen of the Insurer s Policy. Payment Pursuant to Financial Guaranty Insurance Policy The Insurer has made a commitment to issue the Policy relating to the 2007A PFC Bonds effective as of the date of issuance of the 2007A PFC Bonds. Under the terms of the Policy, the Insurer will pay to The Bank of New York, New York, New York or any successor thereto (the Insurance Trustee ) that portion of the principal of and interest on the 2007A PFC Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the Policy). The Insurer will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which the Insurer shall have received notice of Nonpayment from the Trustee. The insurance will extend for the term of the 2007A PFC Bonds and, once issued, cannot be canceled by the Insurer. The Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the 2007A PFC Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding 2007A PFC Bonds, the Insurer will remain obligated to pay principal of and interest on outstanding 2007A PFC Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the 2007A PFC Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration, except to the extent that the Insurer elects, in its sole discretion, to pay all or a portion of the accelerated principal and interest accrued thereon to the date of acceleration (to the extent unpaid by the Obligor). Upon payment of all such accelerated principal and interest accrued to the acceleration date, the Insurer's obligations under the Policy shall be fully discharged. In the event the Trustee has notice that any payment of principal of or interest on a 2007A PFC Bond which has become Due for Payment and which is made to a holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from the Insurer to the extent of such recovery if sufficient funds are not otherwise available. The Policy does not insure any risk other than Nonpayment, as defined in the Policy. Specifically, the Policy does not cover: 1. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity. 2. payment of any redemption, prepayment or acceleration premium. 23

38 3. nonpayment of principal or interest caused by the insolvency or negligence of the Trustee, Paying Agent or Bond Registrar, if any. If it becomes necessary to call upon the Policy, payment of principal requires surrender of the 2007A PFC Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such 2007A PFC Bonds to be registered in the name of the Insurer to the extent of the payment under the Policy. Payment of interest pursuant to the Policy requires proof of holder entitlement to interest payments and an appropriate assignment of the holder s right to payment to the Insurer. Upon payment of the insurance benefits, the Insurer will become the owner of the 2007A PFC Bond, appurtenant coupon, if any, or right to payment of principal or interest on such 2007A PFC Bond and will be fully subrogated to the surrendering holder s rights to payment. In the event that the Insurer were to become insolvent, any claims arising under this Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. The Insurer The Insurer is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $10,015,000,000 (unaudited) and statutory capital of $6,371,000,000 (unaudited) as of December 31, Statutory capital consists of the Insurer s policyholders surplus and statutory contingency reserve. Standard & Poor s Credit Markets Services, a Division of The McGraw-Hill Companies, Moody s Investors Service and Fitch Ratings have each assigned a triple-a financial strength rating to the Insurer. The Insurer has obtained a ruling from the Internal Revenue Service to the effect that the insuring of a bond by the Insurer will not affect the treatment for federal income tax purposes of interest on such bond and that insurance proceeds representing maturing interest paid by the Insurer under policy provisions substantially identical to those contained in its Policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Obligor of the 2007A PFC Bonds. The Insurer makes no representation regarding the 2007A PFC Bonds or the advisability of investing in the 2007A PFC Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by the Insurer and presented under APPENDIX G SPECIMEN INSURANCE POLICY. Available Information The parent company of the Insurer, Ambac Financial Group, Inc. (the Company ), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the SEC ). These reports, proxy statements and other information can be read and copied at the SEC s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C Please call the SEC at SEC-0330 for further information on the public reference room. The SEC maintains an internet site at that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the NYSE ), 20 Broad Street, New York, New York

39 Copies of the Insurer s financial statements prepared in accordance with statutory accounting standards are available from the Insurer. The address of the Insurer s administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York, and (212) Incorporation of Certain Documents by Reference The following document filed by the Company with the SEC (File No ) is incorporated by reference in this Official Statement: The Company s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and filed on March 1, All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above under the caption Available Information. Financial Statements FINANCIAL FACTORS A copy of the most recent audited financial statements of the Department of Aviation audited by Piercy Bowler Taylor & Kern, Las Vegas, Nevada (the Auditor ) are included as APPENDIX B hereto (the Financial Statements ). The Auditor s letter concludes that the audited financial statements present fairly, in all material respects, the financial position of the Department of Aviation as of June 30, 2005 and 2006 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. The summary operating results for Fiscal Years 2005 and 2006 contained under FINANCIAL FACTORS Historical Operating Results and Projected Future Operating Results are derived from these financial statements (excluding certain non-cash items and after certain other adjustments) and are qualified in their entirety by reference to such statements, including the notes thereto. 25

40 Historical PFC Revenues Set forth below is a summary of historical Passenger Facility Charge collections by the County since the first collection of Passenger Facility Charge charges by the County in June The information set forth below has been excerpted from the Audited Financial Statements of the Department. The table below has not been audited by the Department s Auditor. CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Historical Passenger Facility Charge Collections Fiscal Year Ended June 30 Passenger Facility Charge Collections 1992 $1,596,820 (1) ,326, ,125, ,141, ,122, ,052, ,274, ,596, ,158, ,188, ,932, ,945, (2) 50,757, ,389, ,969,290 Estimated 2007 (3)(4) 91,307, ,885,000 (1) (2) Represents one month of collections. Passenger Facility Charge increased from $3.00 to $4.50 per qualifying enplaned passenger as of November 1, (3) As of September 1, 2006, the Passenger Facility Charge decreased from $4.50 to $3.00 per qualifying enplaned passenger. (4) As of January 1, 2007, the Passenger Facility Charge increased from $3.00 to $4.00 per qualifying enplaned passenger. Source: Clark County Department of Aviation. The decline in Passenger Facility Charge collections in Fiscal Year 2002 reflects reduced enplanements at the Airport after the terrorist attacks on September 11, Passenger Facility Charge collections were insufficient in Fiscal Year 2003 and Fiscal Year 2004 to pay debt service on PFC Bonds. The Airport used accumulated Passenger Facility Charge revenues to pay such debt service shortfall of the PFC Bonds in Fiscal Year 2003 and Fiscal Year Passenger Facility Charge collections in Fiscal Year 2005 and 2006 were sufficient to pay debt services on PFC Bonds. Effective September 1, 2006, the Passenger Facility Charge collection rates decreased from $4.50 to $3.00 and such rates remained in effect until January 1, Effective January 1, 2007, the Passenger Facility Charge collection rates increased from $3.00 to $4.00. Only $3.00 of the Passenger Facility Charge is pledged to the payment on the PFC Bonds. Historical Operating Results and Projected Future Operating Results Set forth below is a statement of historical revenues and expenses for the Clark County, Nevada Department of Aviation (the Department ) as well as debt service coverage as calculated in accordance with the provisions of the Master Indenture for the three Fiscal Years ended June 30, 2004, 2005 and Fiscal 26

41 Year 2004, 2005 and 2006 information presented below has been excerpted from the audited Financial Statements of the Department. In each case certain non-cash items have been excluded and certain other adjustments have been made. Also set forth below are estimates of operating results for Fiscal Year ending June 30, 2007 and estimates of projected future operating results for Fiscal Year ending June 30, 2008, in each case prepared by Airport management. These estimates are subject to uncertainties and, inevitably, some assumptions used to develop the estimates will not be realized and unanticipated events and circumstances will occur. Therefore, the actual results achieved during the estimate periods will vary, and the variations may be material. 27

42 The chart set forth below has not been audited by the Department s Auditor. CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Statement of Historical and Projected Revenues and Expenses (1) Projected Results Fiscal Years Ending June 30, Historical Results Fiscal Years Ended June 30, 2008 (2) 2007 (2) Operating Revenues: Landing fees $31,954,000 $35,529,619 $23,946,944 $32,496,055 $29,877,738 Other aircraft fees 5,907,000 5,032,379 5,458,415 4,616,569 4,676,652 Building rentals 96,996,000 88,559,988 88,036,824 70,466,702 68,356,004 Land rentals 16,969,000 16,218,418 15,134,054 13,992,039 13,119,060 Transportation concessions 46,992,000 41,650,621 38,373,595 34,882,161 29,870,500 Slot machine concessions 44,000,000 41,540,069 39,625,879 37,607,161 37,560,133 Terminal concession 51,870,000 38,484,566 45,111,627 39,132,316 34,348,673 Parking concessions 29,682,000 25,521,758 26,260,245 22,316,748 19,077,384 Reliever Airports 6,490,000 5,077,089 4,706,226 4,694,054 4,294,644 Miscellaneous 1,352,000 1,375,631 4,325,215 1,362,558 1,861,662 Total Operating Revenues: $332,212,000 $298,990,138 $290,979,024 $261,566,363 $243,042,450 Operating Expenses: Salaries, wages and benefits $95,034,000 $97,151,500 $67,127,722 $63,328,730 59,232,876 Contract maintenance 17,011,000 26,105,914 14,205,480 8,102,808 8,320,196 expenses Professional services 47,202,000 40,191,367 33,536,251 32,347,307 25,298,393 Utilities 23,305,000 22,678,288 15,972,585 14,816,234 14,179,879 Miscellaneous 30,625,000 27,961,403 26,136,754 21,751,576 15,915,866 Total Operating Expenses: $213,177,000 $214,088,472 $156,978,792 $140,346,655 $122,947,210 Net Operating Revenues $119,035,000 $84,901,666 $134,000,232 $121,219,708 $120,095,240 Allowable interest income 19,527,000 22,049,853 12,320,000 6,555,000 2,538,256 Net Revenues $138,562,000 $106,951,519 $146,320,232 $127,774,708 $122,633,496 Other available funds for purposes of Senior Securities debt service (3) Other available funds for purposes of Second Lien Subordinate Securities debt service (4) $10,064,750 $10,100,500 $10,701,750 $8,739,535 $8,752,313 $5,306,300 $5,964,000 $4,076,000 $3,293,018 $2,246,942 Total debt service for Senior $40,259,000 $40,402,000 $42,807,000 $34,958,140 $35,009,250 Securities outstanding (5) Coverage Ratio for Senior Securities Based on Net Revenues (6) Coverage Ratio for Senior Securities Based on Total Funds Available pursuant to the Rate Maintenance Covenant Under the Master Indenture (Required covenant is 1.25) Debt Service on Second Lien $52,529,825 $59,097,983 $40,760,000 $32,930,182 $22,469,416 Subordinate Securities (7)(8) 28

43 Coverage Ratio for Second Lien Subordinate Securities Based on Net Revenues After Payment of Senior Securities (6)(7) Coverage Ratio for Senior and Second Lien Subordinate Securities Based on Total Funds Available (Required covenant is 1.10) Projected Results Fiscal Years Ending June 30, Historical Results Fiscal Years Ended June 30, 2008 (2) 2007 (2) PFC Revenues (9) $93,885,000 $91,307,190 $85,969,290 $73,390,000 $50,757,621 PFC Related Interest Income 4,215,000 4,108,824 4,617,000 1,661, ,399 Total PFC Revenues Available for Debt Service $98,100,000 $95,416,014 $90,586,290 $75,051,000 $51,709,020 Debt Service on PFC Bonds (10) $77,227,986 $58,160,000 $50,442,000 $43,756,336 $54,984,220 Coverage Ratio for PFC Bonds Based Solely on PFC Revenues (6)(9) (1) (2) (3) Totals may not add due to independent rounding. Projected by Airport management. Under the Master Indenture Other Available Funds is defined to mean for any Fiscal Year the smallest amount of unencumbered funds at any time in the Fiscal Year on deposit in the Capital Fund in excess of the Minimum Capital Reserve; but in no event shall such amount exceed 25% of the Aggregate Debt Service Requirements for the Senior Securities then Outstanding for the Comparable Bond Year. (4) Under the bond ordinances authorizing the Second Lien Subordinate Securities Other Available Funds is defined to mean for any Fiscal Year the smallest amount of unencumbered funds at any time in the Fiscal Year on deposit in the Capital Fund in excess of the Minimum Capital Reserve; but in no event shall such amount exceed the sum of (i) 25% of the Aggregate Debt Service Requirements for the Parity Bonds then Outstanding for the Comparable Bond Year, and (ii) 10% of the Aggregate Debt Service Requirements of the Second Lien Subordinate Securities then Outstanding for the Comparable Bond Year. (5) See FINANCIAL FACTORS Outstanding Airport Indebtedness for debt service on Senior Securities. (6) For illustrative purposes only; not required under financing documents. (7) Excludes Debt Service on the 2005B Bonds which was paid from PFC Revenues in Fiscal Year Excludes Debt Service on certain 2004A-1 Bonds which is assumed to be paid from moneys which have been set aside by the Airport in a revocable escrow fund. Excludes Debt Service on the remaining 2004A-1 Bonds, the 2004A-2 Bonds and the 2005B Bonds which is projected to be paid from PFC Revenues in Fiscal Years 2007 and (8) Debt service on the 2004A-1 Bonds and 2004A-2 Bonds is net of capitalized interest. Interest on the 2001C Bonds is 6% based on the fixed rate under the 2001C Swap Agreement (as such term is defined under the caption FINANCIAL FACTORS Outstanding Airport Indebtedness 2001C Swap Agreement ). Interest on the Series 2005B Bonds is 3.60% based on the fixed rate under the 2005B Swap Agreement (as such term is defined under the caption FINANCIAL FACTORS Outstanding Airport Indebtedness ). Interest on the 2005C Bonds is 3.56% based on the fixed rate under the 2005C Swap Agreement (as such term is defined under the caption FINANCIAL FACTORS Outstanding Airport Indebtedness ). Interest on the 2005D Bonds is 3.35% based on the fixed rate under the 2005D Swap Agreement (as such term is defined under the caption FINANCIAL FACTORS Outstanding Airport Indebtedness ). Interest on the 2005E Bonds is 3.45% based on the fixed rate under the 2005E Swap Agreement (as such term is defined under the caption FINANCIAL FACTORS Outstanding Airport Indebtedness ). (9) The Passenger Facility Charge for Fiscal Year 2004 was $3.00 per qualifying enplaned passenger until November 1, 2004 when the Passenger Facility Charge was increased to $4.50 per qualifying enplaned passenger. Effective September 1, 2006, the Passenger Facility Charge collection decreased from $4.50 to $3.00 per qualifying enplaned passenger and such rates remained in effect until January 1, Effective January 1, 2007, the Passenger Facility Charge increased to $4.00 per qualifying enplaned passenger. Revenue derived from the $3.00 per qualifying enplaned passenger is pledged to the payment on the PFC Bonds. (10) Debt Service on PFC Bonds paid from PFC Revenues (funds other than Net Revenues); net of capitalized interest; includes interest income. Interest on the 2005 PFC Bonds is 4.47% based on the fixed rate under the 2005A Swap Agreement (as such term is defined under the caption FINANCIAL FACTORS Outstanding Airport Indebtedness ). Debt Service on the 29

44 2005B Bonds was paid from PFC Revenues in Fiscal Year Assumes that certain 2004A-1 Bonds are paid from moneys which have been set aside by the Airport in a revocable escrow fund rather than from Net Revenues of the Airport System. Assumes the remaining 2004A-1 Bonds, the 2004A-2 Bonds, and the 2005B Bonds will be paid from PFC Revenues rather from Net Revenues of the Airport System in Fiscal Years 2007 and Source: Clark County Department of Aviation. Management Discussion of Operating Results and Projections Effective July 1, 2003, the Airport entered into a Scheduled Airline Operating Agreement and Terminal Building Lease (the Agreement ) with the airlines serving McCarran International Airport, which has a five-year term and provides for a Airport Landing Area residual approach to setting airline rates and charges. In accordance with the Agreement landing fee rates, terminal building rental rates, and apron fees are established each fiscal year based on the approved Airport System operating budget. These rates are reviewed and adjusted, if necessary, throughout each fiscal year to ensure that the rate covenants are being met. At the end of each fiscal year, the Airport recalculates the rates based on actual expenses and revenues and if additional rents or credits are due, the airlines receive these credits or pay additional amounts due in the subsequent fiscal year. For Fiscal Year 2007 the airline rates, based on the approved Fiscal Year 2007 budgets, are $1.23 landing fee, $68.04 per square foot terminal building rental rate, and a $62,780 gate use fee. Once the Fiscal Year 2007 financial statements are audited, these rates will be adjusted to reflect the actual operating expenses and revenues of the Airport. As shown in the Table under the caption above Historical Operating Results and Projected Future Operating Results, the Airport estimates that net operating revenues for Fiscal Year 2007 and Fiscal Year 2008 will be less than the net operating revenues realized in Fiscal Year This is primarily due to projected additional personnel associated with the new in-line baggage system and other facilities, additional professional services associated with these and other new facilities and studies relating to numerous expansion projects included in the Airport s five-year capital program. Airline cost per enplaned passenger was $4.92 for Fiscal Year 2000; $4.81 for Fiscal Year 2001; $5.24 for Fiscal Year 2002; $4.96 for Fiscal Year 2003; $4.76 for Fiscal Year 2004; $4.71 for Fiscal Year 2005 and $4.62 for Fiscal Year The Airport estimates that the cost per enplaned passenger for Fiscal Year 2007 and Fiscal Year 2008 will be $4.65 and $5.26, respectively. Outstanding Airport Indebtedness Senior Bonds. The County currently has outstanding $245,490,000 principal amount of Senior Bonds, which, together with the 1993 Interest Rate Swap Agreement entered into with respect to the Senior Bonds, are the only Senior Bonds currently outstanding. See the caption SECURITY FOR THE 2007A PFC BONDS Subordinate Lien Pledge of Airport Revenues. Subordinate Lien Bonds. The 2007A PFC Bonds are secured by a lien on Net Revenues of the Airport System which is on a parity with the Subordinate Lien Bonds and with the payments to be made by the County pursuant to the 2001 Basis Swap Agreement, the 2001C Swap Agreement, the 2005A Swap Agreement, the 2003 Fixed Spread Basis Swap Agreement, the 2003 Basis Swap Agreement, the 2004 Fixed Spread Basis Swap Agreement, the 2004 Basis Swap Agreement, the 2005B Swap Agreement, the 2005C Swap Agreement, the 2005D Swap Agreement, the 2005E Swap Agreement, the 2008 Forward Swap Agreements, the 2009 Forward Swap Agreements, the 2010 Forward Swap Agreement, and the 2011 Forward Swap Agreements (the Parity Swaps ) (except for certain payments due upon termination); and with any other obligations issued with a lien on Net Revenues on a parity therewith. See the caption SECURITY FOR THE 2007A PFC BONDS Subordinate Lien Pledge of Airport Revenues. Third Lien Subordinate Series Securities. The County currently has outstanding $405,435,000 aggregate principal amount of revenue bonds, which are the only Third Lien Subordinate Securities outstanding other than certain amounts payable by the County pursuant to certain bank credit and liquidity 30

45 agreements as well as certain interest rate swap agreements. See the caption SECURITY FOR THE 2007A PFC BONDS Subordinate Lien Pledge of Airport Revenues. The County has authorized the BANs and CAPTENS to be issued from time to time. The BANS and CAPTENS may be issued to fund capital improvements within the Airport System, and to refund outstanding obligations of the Airport. The BANS and CAPTENS, if issued, will be issued as Third Lien Subordinate Securities. As currently authorized, the BANs and CAPTENS may not exceed $1,300,000,000 outstanding at any one time. See the caption THE FINANCE PLAN. PFC Bonds. The County currently has outstanding $12,580,000 principal amount of 1992A PFC Bonds, $209,345,000 principal amount of 1998 PFC Bonds, $24,745,000 principal amount of 2002A PFC Bonds, and $259,900,000 principal amount of 2005A PFC Bonds. General Obligation Bonds. The County currently has outstanding $37,000,000 aggregate principal amount of Clark County, Nevada General Obligation (Limited Tax) (Additionally Secured by Pledged Airport System Revenues) Airport Bonds, Series 2003B Bonds (the 2003B Bonds ) and $42,550,000 aggregate principal amount of Clark County, Nevada General Obligation (Limited Tax) (Additionally Secured by Pledged Airport System Revenues) Airport Bonds, Series 2003A (the 2003A Bonds ), which are payable from Net Revenues subordinate to the payment of the Third Lien Subordinate Securities. Debt Service Requirements PFC Bond Debt Service. The following table sets forth the annual debt service requirements for the Parity PFC Bonds including the 2007A PFC Bonds. (1) CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION PFC Bond Debt Service Period Ending July 1 (1) Principal 2007A PFC Bonds Interest Total Parity PFC Bonds (2) Total PFC Bond Debt Service $46,376,150 $46,376, $12,865,986 $12,865,986 46,396,910 59,262, ,923,950 10,923,950 46,309,260 57,233, ,923,950 10,923,950 46,329,748 57,253, $1,305,000 10,923,950 12,228,950 44,381,269 56,610, ,225,000 10,871,750 12,096,750 44,517,200 56,613, ,355,000 10,822,750 12,177,750 44,442,181 56,619, ,115,000 10,755,000 11,870,000 44,749,550 56,619, ,155,000 10,699,250 11,854,250 44,744,125 56,598, ,130,000 10,641,500 11,771,500 44,831,775 56,603, ,115,000 10,585,000 11,700,000 44,906,275 56,606, ,130,000 10,529,250 11,659,250 44,951,275 56,610, ,060,000 10,472,750 11,532,750 45,080,275 56,613, ,210,000 10,419,750 11,629,750 44,990,588 56,620, ,060,000 10,359,250 11,419,250 45,177,913 56,597, ,145,000 10,306,250 11,451,250 45,151,588 56,602, ,355,000 10,249,000 56,604, ,604, ,855,000 7,931,250 30,786, ,786, ,475,000 6,788,500 34,263, ,263, ,825,000 5,414,750 58,239, ,239, ,470,000 2,773,500 58,243, ,243,500 Amount shown is for the Fiscal Year ending on the prior June 30 in which principal and interest accrues. (2) Includes scheduled debt service on the 1992A PFC Bonds, 1998 PFC Bonds and 2002A PFC Bonds, and debt service on the 2005 PFC Bonds projected at 4.47%. Excludes debt service on the 2007A PFC Bonds. Source: Clark County Department of Aviation. 31

46 Senior and Subordinate Securities. The following table sets forth the annual debt service requirements for the outstanding Senior Securities, the various issues of Subordinate Securities and the various issues of PFC Bonds. The debt service requirements for the Series 2008A Bonds and the Series 2008B Bonds, the Series 2009A Bonds and the Series 2009B Bonds, and the Series 2010A Bonds, which have been authorized and sold by County but will not be delivered until scheduled dates in 2008, 2009 and 2010, respectively, are not included in the table. The debt service requirements for the Series 2011A Bonds which have been authorized and sold by the County, and have a scheduled delivery date on or about July 1, 2011, are not included in the table. The debt service requirements for the Series 2007A Bonds which have been authorized by the County, have a scheduled sale date on or about May 2, 2007, and have a scheduled delivery date on or about May 16, 2007, are not included in the table. CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Debt Service Requirements for Outstanding Senior Securities, Subordinate Securities and PFC Bonds Period Ending July 1 (1) Requirements on Outstanding Senior Securities (2) Total Requirements on Subordinate Securities (3)(4) Requirements on PFC Bonds (5) Total 2007 $39,817,560 $72,593,098 $46,376,150 $158,786, ,765,130 73,712,583 59,262, ,740, ,905,660 74,649,883 57,233, ,788, ,919,080 75,719,758 57,253, ,892, ,005,390 75,835,318 56,610, ,450, ,051,210 64,287,443 56,613, ,952, ,349,850 64,279,318 56,619, ,249, ,349,850 64,282,556 56,619, ,251, ,349,850 64,110,237 56,598, ,058, ,349,850 60,672,100 56,603, ,625, ,349,850 54,336,725 56,606, ,292, ,349,850 54,415,802 56,610, ,376, ,349,850 53,082,183 56,613, ,045, ,349,850 53,069,670 56,620, ,039, ,349,850 53,091,400 56,597, ,038, ,349,850 53,109,752 56,602, ,062, ,349,850 53,178,748 56,604, ,132, ,349,850 77,650,055 30,786, ,786, ,349,850 74,295,035 34,263, ,908, ,349,850 67,062,129 58,239, ,651, ,349,850 79,584,613 58,243, ,177, ,349,850 84,244, ,594, ,349,850 84,069, ,418, ,349,850 48,418, ,768, ,349,850 66,143, ,493, ,349,850 66,473, ,823, ,349,850 66,799, ,149, ,349,850 67,130, ,480, ,349,850 67,492, ,842, ,029,850 67,820, ,850, ,029,250 38,228, ,257, ,033,000 38,508, ,541, ,030,500 38,819, ,849, ,033,500 39,105, ,138,538 TOTAL $396,666,680 $2,136,271,895 $1,137,578,416 $3,670,516,991 (1) (2) (3) Totals may not add due to independent rounding. Amount shown is for the Fiscal Year ending on the prior June 30 in which principal and interest accrues. Includes interest on the 1993A Bonds calculated at 6.69%, the fixed interest rate payable pursuant to the 1993 Swap Agreement. Exclusive of PFC Bonds, General Obligation Bonds and Jet A Fuel Tax Bonds. 32

47 (4) Interest on the 2001C Bonds is 6% based on the fixed rate under the 2001C Swap Agreement. Interest on the Series 2005B Bonds is 3.60% based on the fixed rate under the 2005B Swap Agreement. Interest on the Series 2005C Bonds is 3.56% based on the fixed rate under the 2005C Swap Agreement. Interest on the Series 2005D Bonds is 3.35% based on the fixed rate under the 2005D Swap Agreement. Interest on the Series 2005E Bonds is 3.45% based on the fixed rate under the 2005E Swap Agreement. (5) Secured by and payable from a portion of certain passenger facilities charges, and in the event the portion of such passenger facilities charges is insufficient to pay the debt service requirements of the PFC Bonds, then from a second lien on the Net Revenues. Interest on the Series 2005 PFC Bonds is 4.47% based on the fixed rate under the 2005A Swap Agreement. See Outstanding Airport Indebtedness PFC Bonds herein. Source: Clark County Department of Aviation. County Investment Policy Nevada Revised Statutes sets forth investments in which the County Treasurer may invest taxes and other County monies, which currently include United States Treasury notes, bonds and bills, certain federal agency securities, bankers acceptances, commercial paper, money market mutual funds, certificates of deposit of local banks, corporate securities, collateralized mortgage obligations, and repurchase agreements ( Authorized Investments for Counties ). Under the current investment policy approved by the Board of County Commissioners (the Investment Policy ), the County Treasurer is required to invest all County monies in accordance with the Investment Policy. Under the Investment Policy, the County Treasurer may invest such moneys in investments described therein, which include certain State Authorized Investments (the County Authorized Investments ). Certain other restrictions are contained in the Investment Policy, including limitations on maturities of certain County Authorized Investments and ratings qualifications on certain categories of investments. A large portion of the money held by the County Treasurer for investment is invested through the Treasurer's general pooled investment fund (the County s Pool ). Unexpected withdrawals could force the sale of some investments prior to maturity and lead to realization of losses. Such unexpected withdrawals are considered highly unlikely by the County Treasurer. The current Investment Policy allocates gains on securities in the County Pool on a pro rata basis and the County Treasurer reports that any losses would be allocated on the same basis. Factors Affecting Airport Operations and Revenues Future traffic at the Airport is sensitive to a variety of factors including (1) the growth in the population and economy of the air trade area, (2) national and international economic conditions, (3) airline economics and air fares, (4) the recent increase in the price of aviation fuel, (5) airline service and route networks, (6) the capacity of the air traffic control system, (7) the capacity of the Airport/Airways system, (8) accessibility of and traffic to the Airport, and (9) the development of new or expansion of existing airports. Slow or negative traffic growth in many areas, increased competition among air carriers, consolidation and mergers among airlines, increased fuel, labor, equipment and other costs, and increases in the requirements for and the cost of debt capital have combined from time to time to reduce profits materially or to cause losses for the airlines, sometimes leading to bankruptcy or reorganization. Most of the major airlines carriers (or their respective parent corporations) are subject to the informational requirements of the Securities and Exchange Act of 1934 and in accordance therewith file reports and other information with the Securities and Exchange Commission (the SEC ). Certain information, including financial information, as of particular dates concerning several of the airlines carriers (or their respective parent corporations), is disclosed in certain reports and statements filed with the SEC. Such reports and statements can be inspected at the Public Reference Room of the SEC at 450 Fifth Street N.W., Washington, D.C , and copies of such reports and statements can be obtained from the SEC at prescribed rates. In addition, each scheduled airline is required to file periodic reports containing certain financial and operating statistics with the Department of Transportation. 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 7th Street S.W., 33

48 Washington, D.C , and copies of such reports can be obtained from the Department of Transportation at prescribed rates. Airport Management THE AIRPORT The Airport is operated as an enterprise fund of the County and is managed by the Department of Aviation of the County under the supervision of the Board of County Commissioners of the County and the County Manager. Board of County Commissioners The Board of County Commissioners is the governing body of the County. The seven members are elected from County commission election districts for four-year staggered terms. The Board members also serve as the directors of the Las Vegas Valley Water District, as trustees of the University Medical Center of Southern Nevada, the Clark County Water Reclamation District, the Big Bend Water District, Kyle Canyon Water District, and as members of the Clark County Liquor and Gaming Licensing Board. The Board is also represented on: the Regional Transportation Commission of Southern Nevada, Clark County Regional Flood Control District, Debt Management Commission, Las Vegas Metropolitan Police Committee of Fiscal Affairs, Parks and Recreation Advisory Commission, Nevada Development Authority, Greater Las Vegas Chamber of Commerce, City of Henderson Chamber of Commerce, Nevada Association of County Commissioners (Board of Directors and Legislative Committee), Las Vegas Convention and Visitors Authority, the Southern Nevada Water Authority, Family and Youth Services Fiscal Advisory Committee, Civilian-Military Council (CMC) of Southern Nevada, Southern Nevada Regional Planning Coalition (formerly known as the Government Efficiency Committee), Regional Jail Commission, Clark County Clearinghouse Council, Clark County District Board of Health, Economic Opportunity Board (EOB), Clark County School District Oversight Panel and Southern Nevada Workforce Investment Board. The current members of the Commission and their terms of office are as follows: Commission Members Expiration of Term Rory Reid, Chairman 2011 Chip Maxfield, Vice Chair 2009 Susan Brager 2011 Tom Collins 2009 Lawrence Weekly 2009 Chris Giunchigliani 2011 Bruce L. Woodbury 2009 The County Manager is the County s chief executive officer and serves at the pleasure of the Board: Virginia Valentine, County Manager. Virginia Valentine was appointed County Manager for Clark County effective August 11, Previously, Ms. Valentine was Assistant County Manager for Clark County since November As Assistant County Manager, Ms. Valentine oversaw numerous County departments including Air Quality & Environment Management, Comprehensive Planning, Development Services, Fire, Public Works, Real Property Management, Redevelopment Agency, Assessor, Recorder and Water Reclamation District. Prior to her employment with the County, Ms. Valentine served as City Manager for the City of Las Vegas, Nevada which has 16 departments, 2,800 employees and fiscal year 2002 combined budget of $740 34

49 million. Ms. Valentine s appointment at the City in 1998 was preceded by her position as Senior Vice President of Post, Buckley, Schuh & Jernigan (PBSJ), a national consulting engineering firm. At PBSJ, Ms. Valentine was principle in charge of the Public Works and Environmental projects. Ms. Valentine was the first Chief Engineer and General Manager of the Clark County Regional Flood Control District, which was created in As General Manager of the newly formed agency, she developed all the District's programs including master planning, capital improvement, regulatory, flood warning and Stormwater Quality programs. Ms. Valentine has a Master of Public Administration degree from the University of Nevada, Las Vegas and a Bachelor of Science degree in engineering from the University of Idaho. Department of Aviation Randall H. Walker, Director of Aviation. Mr. Walker, a native of Henderson, Nevada, was appointed Direction of Aviation in May Prior to his appointment, Mr. Walker served in various governmental positions, including: Assistant County Manager for Clark County, Director of the Clark County Department of Finance, Deputy Director of the Clark County Department of Aviation, and the Deputy City Manager for Administrative Services with the City of Las Vegas. Mr. Walker started his local government career as a budget analyst with Clark County in 1979 and served as Business Manager for the Las Vegas Metropolitan Police Department prior to working for the City of Las Vegas. Upon graduation from Brigham Young University, Mr. Walker was employed by Exxon, USA in Houston, Texas. Mr. Walker graduated with honors (Magna Cum Laude) from Brigham Young University in 1977 with a Bachelors degree in accounting. He is a member of the Executive Committee of the Governing Board of Airports Council International-North America and a member of the World Board of Airports Council International. Rosemary A. Vassiliadis, Deputy Director of Aviation. Ms. Vassiliadis joined the Clark County Department of Aviation as Deputy Director in December, Previously she worked for Clark County as the Director of the Department of Finance and for the City of Las Vegas as the Manager of Finance and Budget. Prior to her government service Ms. Vassiliadis worked for Zenith International Corporation in the Corporate Accounting Department. Ms. Vassiliadis graduated from DePaul University in Chicago with a Bachelor of Science Degree in Accountancy. Alan W. Stewart, Assistant Director of Aviation, Finance. Mr. Stewart joined the Clark County Department of Aviation in June 2004 as Assistant Director of Aviation, Finance. Previously he spent 14 years with the Allegheny County Department of Aviation beginning as the Chief Accountant, promoted to Director of Finance and then promoted to Deputy Director Finance/Administration. Allegheny County Department of Aviation includes Pittsburgh International Airport and Allegheny County Airport. Mr. Stewart left the Allegheny County Department of Aviation in November 1991 and began a consulting career that has included employment with PB Aviation, Booz-Allen Hamilton and most recently Landrum & Brown. Mr. Stewart s consulting career has involved numerous financial feasibility studies, rates and charges analysis and financial planning and analysis for major airports around the country including Los Angeles, Detroit, Cleveland, Phoenix, San Jose and Glendale-Burbank airports. Mr. Stewart graduated from Robert Morris University with a Bachelor of Science Degree in Business Administration and with a major in accounting. Employees and Pension Matters As of January 2007, the Department had approximately 1,316 full time employees and 57 part-time employees. Substantially all of the public employees in Nevada, including those of the Department, are covered under the State s Public Employees Retirement System ( PERS ). The County and other participating 35

50 public employees are not liable for any unfunded liability or other obligations of PERS. The Department s contribution to PERS for the years ended June 31, 2006, 2005 and 2004 were approximately $9,900,000, $9,300,000 and $8,800,000. Other Post-Employment Benefits The County also makes available certain post-retirement health insurance and life insurance benefits ( OPEB ) to employees, including Airport employees, who retire under PERS and elect to receive and pay for these benefits. OPEB are only available to retirees who are then receiving a pension from PERS ( Retirees ). The current OPEB program covers County employees and Retirees and the employees and Retirees of 6 other local governments in Southern Nevada (the University Medical Center of Southern Nevada, Regional Transportation Commission of Southern Nevada, Clark County Regional Flood Control District, Las Vegas Valley Water District, Clark County Water Reclamation District, and Las Vegas Convention and Visitors Authority; collectively, the Other Agencies ). Health Insurance. Retirees can elect to continue to participate in the health insurance benefits provided to employees. For each Retiree, the premium for this insurance benefit is based on the number of persons covered (i.e., the premium is greater for a Retiree who elects to also have dependants covered). The County offers two types of health insurance, a self-funded preferred provider organization plan ( PPO ) and a health maintenance organization ( HMO ) plan. Retirees can elect to continue coverage under either of these plans upon payment of the required premium for themselves and their dependents. The premium payable by the Retiree for the self-funded plan is based on the number of years of service with any of the public entities within the benefit plan, and whether the Retiree (or dependant) receives Medicare insurance benefits. Premiums for the HMO are not dependent on the years of County employment, but vary based upon whether or not the employee receives Medicare insurance benefits. In lieu of participating in one of the County health insurance plans, Retirees can elect to obtain health care coverage for themselves and their dependants under the State administered Public Employees' Benefit Program ( PEBP ). If a Retiree elects this option, the County is required by NRS to pay a statutorilydefined portion of the Retiree s premium for coverage under PEBP; the balance of the premium must be paid by the Retiree. The County s portion of the premium is based on the number of years the Retiree was employed by the County; for employment of 20 years or more, the County is required to pay 100% of the premium subsidy. Life Insurance. The life insurance benefit offered to Retirees currently provides a $20,000 death benefit if the Retiree dies before age 70 and a $1,000 death benefit if the Retiree dies after that age; Retirees who elect to obtain this benefit must pay a subsidized premium of $48 per year if they are under 70 and a premium of $2 per year if they are over 70. Spouses of Retirees can also be covered at additional cost to the Retiree; the death benefit paid on the death of the spouse is $5,000 if the Retiree is under 70 and $1,000 if the Retiree is 70 or older. Valuation of the OPEB Program and County Share. The County historically has funded its OPEB on a pay-as-you-go basis, but beginning in fiscal year , GASB Statement No. 45 will require that the County begin recording a liability for its share of the OPEB Program. The County has discussed the OPEB Program with consulting actuaries and is in the process of conducting a study to determine the actuarial value of the obligations under the OPEB Program. Preliminary results of this study, which remain subject to change, indicate that as of July 1, 2005, the total combined unfunded actuarial accrued liability ( UAAL ) of the OPEB Program was approximately $714.8 million and the annual amount required to be paid to amortize this liability over 30 years and to accumulate an appropriate amount for current employees so that UAAL does not increase (the annual contribution ) is approximately $75.5 million. None of that amount has been funded to date. These valuations are based on several assumptions, including future Retiree contribution rates, a 4% per annum discount rate and a 4% per annum investment rate. 36

51 The County currently expects to allocate the UAAL between it and the Other Agencies. Currently, the County estimates that its share of the UAAL and the annual contribution are approximately $405.4 million and $42.8 million, respectively; the portions of these two County amounts applicable to the Airport are estimated to be $73.1 Million and $7.7 million, respectively. Funding. County financial staff currently do not expect the County to fund the full annual contribution amount during fiscal years or However, the County financial staff expects the County to continue to contribute amounts to the OPEB program on a pay-as-you-go basis during those years. County financial staff currently plans to recommend that the County request that the Nevada Legislature, in its 2007 session, authorize the County to create an irrevocable trust account into which it can begin to accumulate monies to fund its UAAL. The County also may request that the legislation contain a provision that allows the County to invest monies in this irrevocable trust account in a manner that will generate an investment return greater than the currently assumed 4% per annum. If the County is successful in obtaining this legislation, County financial staff expects the County (including the Airport) to fund its annual contribution including a portion of its UAAL in the fiscal year. The Other Agencies will be responsible for determining when to begin funding their allocable share of the UAAL and the funding sources for that funding. Certain employees of the Department are represented by Clark County Nevada Service Employees Union, SEIU Local 1107 under a new contract which was approved on March 6, Nevada law forbids County employees from striking. Budget Process The Department s budget is prepared on the basis of full accrual accounting. As a component unit of the County, the Department budget is prepared by the Director of Aviation and the Department staff, and then submitted to the County and incorporated in its budget as one of the County s enterprise funds. Accordingly, the Department budget is subject to the budgeting requirements of the State of Nevada and the related budget hearings and open public meeting requirements of the County s budget process. The budget is ultimately approved by the Board of County Commissioners. The Board approved the Department s operating budget for the Fiscal Year 2007 on May 15, Department Insurance The Department maintains comprehensive general liability insurance through a policy purchased from ACE USA with per occurrence limits of $750,000,000 for airport operations, and casualty insurance through policies purchased from The Travelers, Lloyds of London, Hartford and Lexington with a total limit of $1,700,000,000. In addition, the Department maintains construction liability and builder s risk insurance for certain capital projects. The Airport currently has in place a comprehensive wrap-up insurance program for construction liability, builder s risk insurance and workers compensation associated with the construction of the $1.9 billion Terminal 3 project. Description of Existing Airport Facilities and Current Construction The County owns and operates an Airport System that includes McCarran International Airport as well as four general aviation airports: North Las Vegas Airport, Henderson Executive Airport, Jean Airport and Overton Airport. McCarran International Airport. The Airport, which occupies approximately 2,800 acres of land, serves Las Vegas and the surrounding communities of southern Nevada, as well as segments of California, Utah, and Arizona. It is located six miles south of downtown Las Vegas and one mile from the Las Vegas Strip, the center of the Las Vegas gambling and entertainment industry. 37

52 In 1979, the County adopted a Master Plan for ongoing Airport expansion and development (the Master Plan ). The County continually reviews and updates the Master Plan. The County has made significant improvement to the Airport pursuant to the Master Plan. A major expansion of the terminal structure, an automated transit system, a satellite terminal building, remodeling of the existing terminal structure, a crash/fire/rescue building, and a major expansion of the roadway system and supporting facilities were completed by Construction of a new parallel east-west runway and associated air field improvements, land acquisition for future expansion and noise compatibility, and various other terminal and property improvement projects at the Airport, as well as improvements to the North Las Vegas Airport, were completed by Construction of roadway improvements and certain projects for which the Federal Aviation Administration has granted the County approval to impose and use a PFC were completed by Construction of an approximately 6,000-space parking garage adjacent to the previously existing Airport parking garage, roadway modifications, Concourse D, an automated transit system connecting Concourse D to the main terminal, runway improvements, improvements to the international terminal, and the west rotunda of the Airport, expansion of baggage handling facilities, and land acquisition were completed by On April 15, 2005, the County completed the construction of the third wing of the Concourse D which resulted in a net increase of 10 gates. Capital improvements currently underway include the design of the fourth and final wing of Concourse D, construction of a consolidated rental car facility, a new security checkpoint to Concourse C, a new pedestrian walkway from Concourse C to Concourses A and B, the design for Terminal 3 and installation of an inline baggage screening facility to meet new security requirements. Main Terminal Building at McCarran International Airport. The terminal building contains approximately 2,951,000 square feet of space, consisting of a seven-story structure, including ticketing and baggage claim lobbies, a bridge and rotunda, central concession area (e.g., restaurants, shops, restrooms, and other passenger amenities), two pier concourses (Concourses A and B), two satellite concourses (Concourses C and D) that are served by automated transit systems, and public and employee parking. The ground level of the central terminal includes an inbound baggage handling system, selected building service functions, and a special entrance facility for tour group buses. The ground level of the concourses provides space for airline operations and ramp equipment storage. The esplanade level of the terminal provides space for concession areas and other public facilities. The four building levels above the esplanade level provide covered employee parking spaces for approximately 1,550 automobiles, accessible from an elevated roadway and two helical ramps, as well as office space occupied by the Department of Aviation. Concourses A and B extend outward from the rotunda to provide aircraft parking positions and accompanying passenger boarding areas. Each concourse branches to provide access to two cluster buildings, which are used for aircraft parking and boarding. There are a total of 33 aircraft gates in Concourses A and B. Concourse C consists of approximately 265,530 square feet of concession area, holdrooms, and public circulation facilities and provides 19 aircraft gates and related support space. Concourse D currently consists of approximately 756,480 square feet of concession area, holdrooms and public circulation facilities and provides 36 aircraft gates and related support space. Terminal 2 at McCarran International Airport. Terminal 2, which is an eight-gate, two-level charter/international facility of approximately 200,000 square feet, opened in December Other Facilities at McCarran International Airport. Other landside facilities at the Airport include an air cargo facility, general aviation and small aircraft sightseeing operations, the Airport traffic control tower and flight standards district office, an aircraft rescue and firefighting station, a central heating and cooling plant, Airport maintenance and engineering buildings, and a fuel storage tank area. Ground vehicular areas 38

53 consist of Airport drives and roadways, public parking lots, taxi staging area, charter bus plaza, and a rental car service and storage area. Runways. There are four runways at the Airport: (1) Runway 7L-25R is 14,505 feet long and 150 feet wide and is the primary air carrier aircraft departure runway; (2) Runway 7R-25L is 10,525 feet long and 150 feet wide and is used primarily for air carrier aircraft arrivals; (3) Runway 1R-19L is 9,770 feet long and 150 feet wide and is used primarily for air carrier arrivals and departures, and (4) Runway 1L-19R is 9,770 feet long and 150 feet wide and is used primarily for air carrier arrivals and departures. Other airside facilities consist of related taxiways and apron parking areas. The four air carrier runways are capable of accommodating the largest widebody aircraft currently in service. North Las Vegas Airport. In October 1987, the County acquired the North Las Vegas Airport. The North Las Vegas Airport is within the corporate limits of the City of North Las Vegas on a 930-acre site about 5 miles northwest of downtown Las Vegas. The airfield has three active runways. A 15,600 square-foot terminal and administration building was dedicated in March In Fiscal Year 2006, approximately 685 aircraft were based at the North Las Vegas Airport, and 229,794 aircraft operations were performed. Henderson Executive Airport. In March 1996, the County acquired Henderson Executive Airport. Henderson Executive Airport is within the corporate limits of the City of Henderson on a 570-acre site near the edge of the Henderson city limits. The airfield has two active runways. In Fiscal Year 2006, approximately 253 aircraft were based at the Henderson Executive Airport, and 66,566 aircraft operations were performed. In June 2006, the Airport opened a new 24,000 square foot terminal complex at Henderson, a new stand alone control tower and 95 new private hangers. Jean Airport. Jean Airport is a general aviation airport in Jean, Nevada, approximately 30 miles south of Las Vegas between Las Vegas and the California/Nevada state line. Jean Airport serves mostly gliders and single-engine aircraft with glider operations predominant. The airport occupies approximately 230 acres and consists of two parallel paved runways, 2L-20R and 2R-20L. 2L-20R is 4,600 feet long and 75 feet wide. 2R-20L is 3,700 feet long and 60 feet wide and is mainly used for gliders and ultralights, and aircraft parking facilities for approximately 50 aircraft. Overton Airport. Overton Airport is a general aviation airport in Overton, Nevada, approximately 70 miles northeast of Las Vegas at the northern end of Lake Mead. The airport serves primarily single-engine general aviation aircraft for personal, recreational, and business uses. The 250-acre airport has one active asphalt surface runway, which is 4,800 feet long by 100 feet wide; tiedown spaces that can accommodate approximately 20 to 25 aircraft; two shade hangars accommodating one aircraft each; a general services building providing public restrooms, telephone and radio transmission equipment; and fueling facilities. Future Airport Improvements The Department continuously updates its long-range plan for development of the passenger terminal facilities and airfield areas to meet anticipated growth in airline passengers and aircraft operations. The current five year capital plan of the Department projects capital expenditures of approximately $3.3 billion, including $512 million in airfield improvements; $224 million in existing terminal facilities; $181 million in Concourse D expansion; $259 million in infrastructure improvements; $20 million in reliever airport improvements and $2.0 billion for Terminal 3. Such costs will be financed through a combination of airport revenue bonds, PFC revenue bonds, federal grants (if available), Jet A fuel tax revenue and internally generated cash, including airline rates and charges and PFC pay-as-you-go. The County is currently paying a portion of the cost of the design of Terminal 3 from proceeds of the existing Airport revenue bonds and the Clark County, Nevada Airport System Junior Subordinate Lien Revenue Notes Series 2006B-1 (AMT). Terminal 3 will provide up to 14 aircraft gates and related support space, concession areas, holdrooms, parking structure and public circulation facilities. The current preliminary 39

54 estimate of the construction cost of Terminal 3 is estimated to cost $2.0 billion, of which $128 million has already been expended to acquire real property, for design costs, to relocate facilities and to construct certain infrastructure for Terminal 3. The County currently projects that Terminal 3 will be completed and occupied by The Airport has acquired 6,500 acres of land in Ivanpah, Nevada for the construction of another airport facility. Such facility would be in addition to the current Airport and would provide facilities to accommodate approximately 30 million enplanements at ultimate build out. The Airport currently expects that the Environmental Impact Study will be completed in The County currently projects that the Ivanpah facility could be completed by Service Area The Airport serves Las Vegas and the surrounding communities of southern Nevada, as well as portions of California, Utah and Arizona. Between Fiscal Years 1980 and 2006, the annual number of airline passengers enplaned at the Airport increased from 5,406,216 to 22,546,814. The number of airline passengers enplaned at the Airport was 22,546,814 for the twelve months of Fiscal Year 2006, as compared to 21,439,652 for the same period during Fiscal Year 2005, for an increase of approximately 5.2%. According to Airports Council International, for calendar year 2005, the Airport was the fifth busiest airport in the nation in terms of passenger volume in the United States and the second largest origin and destination airport market after Los Angeles International. As of July 1, 2006, the County had an estimated population of approximately 1,874,000, representing an approximately 153% increase between 1990 and The economy of the County is heavily dependent on the tourist industry, which is based in great part on legalized gambling. For a discussion of the economy of the County and its relationship with the Airport, see FINANCIAL FACTORS Factors Affecting Airport Operations and Revenues. 40

55 Airport Operations Historical Passenger Traffic and Airport Operations. Set forth below is a table showing airline enplaned passenger and aircraft departure information since Fiscal Year In Fiscal Year 2006 scheduled airlines accounted for approximately 97.7% of total enplanements and charter airlines accounted for approximately 0.9%. The remainder was general aviation. (1) (2) (3) HISTORICAL AIRLINE TRAFFIC McCarran International Airport Fiscal Year Fiscal Year 2006 Average Annual Percent Increase (Decrease) Average Annual Percent Increase (Decrease) Fiscal Year Enplaned Passengers (1) Airline Aircraft Departures (2) ,028,785 --% 52,890 --% ,406, , ,291,761 (0.4) 73,250 (3.6) ,942, , ,875, , ,720, , ,639, , ,945,697 (3) (9.1) 179,564 (7.9) ,641,500 (3) ,223 (0.2) ,449, , ,439, , ,546, , July 2005 January ,987, N/A N/A July 2006 January ,659, N/A N/A Includes all enplaned passengers on scheduled, charter, and commuter and other airlines. Includes passenger airline and cargo airline aircraft departures. Decrease in enplaned passengers resulted from the September 11, 2001 terrorist attacks. Source: Clark County Department of Aviation. In Fiscal Year 2006, approximately 87.0% of enplanements at the Airport represented originating passengers, with the remaining 13.0% representing connecting passengers changing planes at the Airport. 41

56 (1) Historical Airline Landed Weight. Set forth below is a summary of Historical Airline Landed Weight since Fiscal Year HISTORICAL AIRLINE LANDED WEIGHT McCarran International Airport Fiscal Year Pounds per 000. Source: Clark County Department of Aviation. Landed Weight (1) Average Annual Percent Increase (Decrease) 1997 $20,261,573 --% ,772,944 (2.4) ,965, ,073, ,663, ,587,166 (4.4) ,074,743 (2.2) ,878, ,066, ,526, Estimated ,578, ,443, Airlines Serving the Airport. As of June 30, 2006, the Airport was served by over 33 scheduled airlines and over 18 charter passenger airlines that operate at the Airport on a regular basis and several other charter airlines that provide service to the Airport on an occasional basis. In addition, seven airlines provide scheduled all-cargo service at the Airport. The scheduled airlines serving the Airport (excluding charters and air taxis) currently provide approximately 535 scheduled departures per day to 124 nonstop markets. The following table presents the market shares of enplaned passengers for the scheduled airlines serving the Airport in Fiscal Years ended June 30, 2006, 2005, 2000 and America West and Southwest accounted for approximately 52.4% of total enplaned passengers at the Airport in Fiscal Year 2006, as compared to 42.8% in Fiscal Year

57 AIRLINE MARKET SHARES McCarran International Airport FY 2006, FY 2005, FY 2000 and FY 1990 FY 2006 FY 2005 FY 2000 FY 1990 Passengers Percent Passengers Percent Passengers Percent Passengers Percent Scheduled Airlines: Southwest 7,447, % 6,723, % 4,934, % 765, % America West (1) 4,376, ,099, ,646, ,860, United (2) 1,743, ,640, ,722, , Delta (3) 1,243, ,451, ,409, , National (4) , American 1,240, ,294, ,106, , Continental 955, , , , Northwest (5) 862, , , , Alaska 572, , , US Airways (6) 614, , , , Trans World (7) , , Jet Blue 412, , Frontier 249, , , Allegiant 572, , , Airtran 260, , Champion 196, , , ATA (8) 91, , , , Aloha Airlines 22, , Midwest Express 121, , Spirit Airlines 59, , Independence 35, , Other 796, , , , Japan Airlines 31, , , Virgin Atlantic 117, , Reno Air (9) , Subtotal 22,022, ,703, % 16,487, % 7,953, % Charter Airlines 203, , % 911, % 607, % General Aviation and Other 320, % 306, % 321, % 381, % Total 22,546, % 21,439, % 17,720, % 8,942, % (1) (2) (3) (4) (5) (6) (7) (8) (9) Merged with U.S. Airways in September, Filed for Chapter 11 bankruptcy in December, 2002; emerged from Chapter 11 bankruptcy in February, Filed for Chapter 11 bankruptcy in September, Filed for Chapter 11 bankruptcy in December, National Airlines began servicing the Airport in Fiscal Year 2000 and in November 2002, National Airlines ceased operations. Filed for Chapter 11 bankruptcy in September, Filed for Chapter 11 bankruptcy in August, 2002; refiled for Chapter 11 bankruptcy in September, 2004; emerged from Chapter 11 bankruptcy in September, 2005 and merged with America West in September, Trans World Airlines was purchased by American Airlines in 2001 and is no longer operated as a separate entity. Filed for Chapter 11 bankruptcy in October, Reno Air was purchased by American Airlines in 1998 and is no longer operated as a separate entity. Source: Clark County Department of Aviation. Airline Agreements; Rates and Charges Certain of the scheduled airlines serving the Airport have entered into a written Scheduled Airline Operating Agreement and Terminal Building Lease with the County (the Airline Agreements ) which commenced on July 1, 2003 and will terminate on June 30, These airlines are Alaska Airlines, American, America West, Continental Airlines, Delta Air Lines, Northwest Airlines, US Airways, United and Southwest Airlines. The Airline Agreements provide that each airline subject to the Airline Agreements is obligated to pay rentals, fees and charges so that the total amount paid by all subject airlines, after taking into account certain other revenues, will be at least equal to an amount to provide annual revenues sufficient for the County to meet the Rate Maintenance Covenant. The Airline Agreements provide for payment of terminal building rentals and aircraft gate use fees on a compensatory basis and for payment of landing fees on an Airport System residual basis. Such rentals and fees are required to be adjusted annually, based upon the 43

58 Director s estimates for the ensuing Fiscal Year. The County reserves the right to make certain extraordinary adjustments to rentals and fees to assure that costs and expenses of the Airport will be paid. The Airline Agreements provide that all rights of the airlines thereunder are expressly subordinated to the provisions of any pledge made by the County pursuant to the terms of the Master Indenture or the 2007 PFC Series A Indenture. Rates and charges for those airlines at the Airport which are not subject to an Airline Agreement are established by ordinance. Currently, such rates and charges are the same as those charged under the Airline Agreements. Upon entering an Airline Agreement, each airline is required to post a letter of credit to secure certain payments to the Airport. To the extent a letter of credit expires and an airline is unable to post a new letter of credit, such airline is required to operate under a non-conforming permit. Non-conforming permits include a provision that results in a 10% increase in rates and charges for such airlines. No airlines are currently operating at the Airport under non-conforming permits. Airport Concessions The principal concessions at the Airport are gaming, rental car, automobile parking, advertising, news and gift, and food and beverage. The County also derives revenues from specialty shops, telephones, limousines, ground transportation services, building and land rentals, and other concessions. Concessions in general operate under concession agreements providing for payment to the County of a percentage of gross revenue. In Fiscal Year 2006, concession revenues reached record levels of approximately $149,300,000, including gaming revenues of approximately $39,600,000, $45,000,000 in advertising and food/beverage, news/gift and other terminal concession revenues, $28,600,000 in rental car and other transportation revenues and parking revenues of approximately $26,200,000. A discussion of the major concession arrangements follows: Gaming. The gaming concession at the Airport operates under an agreement providing for payment to the County of 86.5% of gross revenues after payment of payroll and tax expenses, which results in the County receiving approximately 66% of gross gaming revenues, subject to guaranteed minimum payments. During Fiscal Year 2005 several improvements were implemented to the gaming concession. The current gaming concession agreement extends to December 31, Rental Cars. Ten rental car companies (Allstate, Avis, Dollar, Enterprise, Hertz, National, Budget, Thrifty, Sav-Mor and US Rentals) are operating at the Airport under new concession agreements and each will be operating from a new consolidated rental car facility that will be completed in spring of The concession agreement requires for the payment of 10% of gross revenues, subject to minimum annual guarantees. The rental car companies are also required to collect from their customers and remit to the Airport a customer facility charge of $3.00 per contract day. The customer facility charge commenced in May, As of June 30, 2006, the rental car companies have submitted customer facility charges totaling over $49.1 million to the Department. These early customer facility charge revenues will be used to pay for certain demolition costs of the current rental car maintenance facility sites, pay for certain tenant finishes in the new facility, and pay for construction costs of the consolidated rental car facility. The on-going customer facility charge collections after date of beneficial occupancy of the facility will provide the Airport with the repayment of the capital costs of constructing the facility with interest over a twenty-five year period and the purchase of the common bus fleet. Automobile Parking. Parking facilities at the Airport are operated by the County and include two existing parking garages containing approximately 7,500 covered parking spaces and three other lots. Advertising. The advertising arrangements in the Main Terminal, Charter/International Terminal, and other areas provide for the payment of advertising commissions to the County of up to 85% of gross revenues, 44

59 with a total minimum annual guarantee of $5,400,000. Agreements for outdoor billboard advertising locations on Airport property provide for the payment of advertising commissions to the County ranging from 25% to 85% of gross revenues, with a total minimum annual guarantee of $3,600,000. Four additional billboard locations have been awarded at the Airport and the total minimum annual guarantee will increase by $700,000. News and Gifts. The Hudson Group purchased W.H. Smith USA in late 2003 and the concession agreement was assigned to the Hudson Group on December 11, The Hudson Group now operates all of the news and general merchandise (gifts) concession at the Airport under an agreement that extends through July 31, According to the terms of the agreement, the County receives 10% of gross revenues on reading material; 15% on the sale of cigarettes, candies, drugs, sundries and snack foods; and 18% on all other items. The Hudson Group is currently in the process of renovating all of the news and gift stores within the Airport. Nuance Global Traders, USA Inc. operates the news and general merchandise and duty free concession at the Charter/International Terminal under an agreement that extends from month-to-month. According to the terms of the agreement for the news and gifts concession, the County receives 10% of the gross revenues on reading material; 15% on the sale of cigarettes, candies, drugs, sundries, and snack foods; and 18% on all other items, for gross revenues of $499,999 or less. For gross revenues between $500,000 and $999,999, the County will receive 10%, 15%, and 27%, respectively, for these items, and for gross revenues in excess of $999,999, the County will receive 10%, 15%, and 34%, respectively. Under the terms of the agreement for the duty free concession, the County receives 16% of all gross revenues up to $999,999; 21% of gross revenues between $1,000,000 and $2,999,999; and 26% of gross revenues thereafter. Food and Beverage. HMS Host Services Corporation has the exclusive concession privilege to operate food and beverage services in the Terminal Building and at the Charter/International Terminal at the Airport, including terminal restaurants, cafeterias, snack bars, and cocktail bars. Under an agreement that extends to November 30, 2018, HMS Host pays the County 11.0% of gross revenues on food and nonalcoholic beverages and 18.0% of gross revenues on liquor sales. HMS Host is currently in the process of rebranding several of their food locations throughout the Airport. Other Terminal Building Concessions. The County also derives revenues from specialty shops and other concessions and services within the Terminal Building according to the terms of various agreements. LITIGATION General Litigation. There is no controversy of any nature now pending against the County or, to the knowledge of its respective officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the 2007A PFC Bonds or in any way contesting or affecting the validity of the 2007A PFC Bonds or any proceedings of the County taken with respect to the issuance of, sale thereof, or the pledge or application of any monies or security provided for the payment of the 2007A PFC Bonds or the use of the 2007A PFC Bond proceeds. Inverse Condemnation Litigation. The County is a party to actions concerning Airport System operations in which inverse condemnation damages and other damages are being sought against the County. Although the facts and circumstances of each case differ, the County believes the ultimate outcomes will all be affected by the recently decided Nevada Supreme Court case, Steve Sisolak v. McCarran International Airport and Clark County, Case No. A described below. A discussion of the individual cases is below. Steve Sisolak v. McCarran International Airport and Clark County, Case No. A and Nevada Supreme Court Case No In Sisolak, the District Court found for plaintiff s inverse condemnation claim, holding that a per se taking had occurred as a result of the County s enactment of airport height zoning ordinances. On appeal, the Nevada Supreme Court on July 13, 2006 affirmed the District Court s ruling that a per se taking had occurred as a result of the County s airport height zoning ordinance. The County petitioned 45

60 the U.S. Supreme Court for a writ of certiorari based on federal law but the petition was denied in February The Airport has set aside a liability reserve of $21,366, for the settlement amount plus interest through March 9, 2007, and on or about that date, the Airport paid such amount to the plaintiff and plaintiff s counsel; however, plaintiff s counsel has filed a motion with the court seeking additional attorney s fees and costs in the amount of approximately $4.4 million. The court has not yet ruled on such motion. Tien Fu Hsu and Lisa Su Family Trust; S.W. Stephen Huang, Peter B. Liao, Lucky Land Company Enterprise, Westgate, West Park, Inc., v. Clark County, Case No. A The plaintiffs alleged inverse condemnation as a result of the Airport s expansion due to increased aircraft operations and the resultant noise, dust, vibration and fumes. The amount of damages claimed is unknown but in a previous case against the County, the plaintiffs were awarded $13 million for inverse condemnation of the same properties allegedly due to zoning height restrictions. While this prior award was overturned by the Nevada Supreme Court, in an unpublished decision, the Sisolak decision calls into question the rational of the prior unpublished decision in Hsu. The Nevada Supreme Court remanded the case to district court to give the plaintiffs the opportunity to apply for a zoning variance. Thereafter, plaintiffs did not apply for a variance because they sold the property. As a result, the district court dismissed the case. Plaintiffs have appealed. Tien Fu Hsu, Lisa Su Family Trust, Lisa Su Trustee, Peter B. Liao, Westpark, Inc., Lucky Land Company, Lucky Land Company Investments, Lucky Land Company Enterprises Limited Partnership, And West Park Company 1 v. County of Clark, Nevada Supreme Court Case No (district court case no. A C). Despite the Sisolak decision, the County believes it has strong defenses in this case, but the ultimate outcome is difficult to predict. Vacation Village, Inc., v. Clark County ex rel Clark County Department of Aviation (Formerly Case No. A328480), Bankruptcy Court Case No. BK-S RCJ, Chapter 11, ADV-S RCJ. The plaintiff, Vacation Village, filed an inverse condemnation action against the Department in December 1993 seeking approximately $17 million in compensation. The Bankruptcy Court issued findings of fact and conclusions of law that the low and frequent flight of aircraft over the plaintiff s property caused a direct, substantial and immediate interference with the enjoyment and use of the plaintiff s property, demonstrated by a significant and immediate decline in market price. The Bankruptcy Court s award to plaintiff (made June 17, 2005 and amended July 7, 2005), plus interest, costs and attorney s fees as of July 30, 2006, is approximately $10,541,000. The County believes the Bankruptcy Court did not have the jurisdictional, factual or legal basis to support its decision and has appealed. Oral argument on the appeal is set before the 9 th Circuit Court of Appeals on April 16, While the County believes there is a strong basis for overturning the decision, the outcome of any appeal and the amount of damages ultimately awarded is difficult for the County to predict. Although the Bankruptcy Court s decision was based on a different theory than the one used by the Nevada Supreme Court in Sisolak, it is uncertain if there will be any possible effect of the outcome of the appeal as a result of the Sisolak decision. The Airport has set aside a liability reserve of $10,541,000 for the settlement amount plus interest through June 30, Hotels Nevada, LLC v. Clark County District of Nevada, Case No. A This case involves the alleged per se taking of the plaintiff s airspace. On or about August 9, 2001, the parties argued crossmotions for summary judgment. The Court denied all motions and the landowners subsequent Motion for Clarification. It is impossible to predict the outcome of this case at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. The County believes there are significant viable defenses available. Mickle v. Clark County District of Nevada, Case No. A Plaintiffs have alleged that the County and the Airport have dramatically increased airplane and helicopter operations causing increased noise, dust, fumes, smoke, and vibrations over and upon their property. Plaintiffs further allege that the County has condemned, purchased, removed and/or demolished properties in the neighborhood of plaintiffs residence, thereby blighting plaintiffs neighborhood such that they can no longer use their property to its highest and best use. The County believes there is a strong potential to prevail on several affirmative defenses, including plaintiffs knowledge of the Airport s future expansion. 46

61 McCarran Plaza Suites, Inc. v. McCarran International Airport and Clark County, a political subdivision of the State of Nevada, Case No. A McCarran Plaza Suites, Inc. ( MPS ) filed its Complaint for Damages by Inverse Condemnation against the Airport and the County on January 2, MPS emerged from a Chapter 11 bankruptcy proceeding and the Bankruptcy Court transferred control of MPS to its original owner. The trustee in the MPS bankruptcy sold the subject property at auction in 2000 and the County has since acquired it from the purchaser. MPS alleges that the County s imposition of height restrictions on buildings on the subject property, and the impact of noise from airport operations, reduced the market value of the subject property at the time of its auction and constituted a taking. Although MPS has not yet placed a dollar value on its damages, the County believes MPS will seek damages in the multi-million dollar range. The County has denied that a taking occurred and believes it has a number of meritorious defenses to MPS s claims. The County has contested the case vigorously, and will continue to do so. It is impossible to predict the outcome of this case at this juncture given the current stage of the litigation and the possible effect of the Sisolak decision. Mohler Trust v. Clark County, District of Nevada, Case No. A The complaint for inverse condemnation for the alleged per se taking of airspace above the plaintiff s property was filed on February 6, At this juncture, it is impossible for the County to predict the likelihood of a successful defense. The County believes there is a strong potential to prevail on several affirmative defenses given the current stage of the litigation and the possible effect of the Sisolak decision. Boueri v. McCarran International Airport and Clark County, Case No. A The plaintiff filed an inverse condemnation complaint on April 19, 2005, alleging that the expansion and modification of runways and the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not yet commenced and the amount claimed is uncertain, but believed to be in the lower range of the inverse condemnation cases that the County is defending. It is impossible to predict the outcome of this case at this juncture given the current stage of the litigation and the possible effect of the Sisolak decision. STT Land, LLC and Doe Landowners I-XX v. McCarran International Airport and Clark County, Case No. A The plaintiffs filed an inverse condemnation complaint on June 28, 2006 alleging the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not commenced and the amount claimed is uncertain. It is impossible to predict the outcome of this case at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. MBP Land, LLC and Doe Landowners I-XX v. McCarran International Airport and Clark County, Case No. A The plaintiffs filed an inverse condemnation complaint on June 28, 2006 alleging the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not commenced and the amount claimed is uncertain. It is impossible to predict the outcome of this case at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. Wykoff Newberg Corporation, International Smelting Company, Inc., and Doe Landowners I-XX v. McCarran International Airport and Clark County, Case No. A The plaintiffs filed an inverse condemnation complaint against the County on February 20, 2007, alleging the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not commenced and the amount claimed is uncertain. It is impossible to predict the outcome of this case at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. Urban Land Nevada v. Clark County, Case No. A The plaintiffs filed an inverse condemnation complaint on March 12, 2007, alleging the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not commenced and the amount claimed is uncertain. It is impossible to predict the outcome of this case at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. 47

62 Other possible inverse condemnation/taking litigation. As a result of the Sisolak decision, it is possible that other litigation will be filed based on a similar legal theory by landowners who are affected by the County s airport height zoning ordinance. It is impossible to predict at this time whether any such litigation will be filed or its ultimate outcome. Other Litigation. Vacation Village, Inc., et al. v. Clark County and Nevada Department of Transportation, Case No. A The plaintiff, Vacation Village, filed a Complaint on October 16, 2001 seeking, among other things, damages for a claimed taking of an alleged reversionary right to property which the Nevada Department of Transportation conveyed to the County. The Complaint was dismissed for failure to state a claim. However, plaintiff, Vacation Village, and an intervening plaintiff, VVLV, LLC, who had subsequently purchased the Vacation Village Hotel property, were allowed to file an Amended Complaint, provided they made no claim for reversionary rights. A settlement agreement has been reached with the successor in interest to the intervening plaintiff, VVLV, LLV. The new claim in the Third Amended Complaint filed by Vacation Village on April 22, 2004 includes eight causes of action based upon reversionary rights, a taking of reversionary rights and rights of first refusal, inverse condemnation, unjust enrichment, intentional interference with prospective economic advantage, taking of airspace, misrepresentation and concealment and civil conspiracy. The County does not know the amount of damages the plaintiff will claim, but believes claimed damages will exceed $500,000. The County believes the case has no merit. There is a pending motion asking the Court to dismiss the remainder of the case. The County is a party to numerous other actions and claims in connection with the ownership and operation of the Airport System, including personal injury claims, employment related claims and construction claims, but in the opinion of the District Attorney, the actions and claims described in this paragraph are not expected, in the aggregate, to have a material adverse effect on the financial condition of the Airport System. Certain Investigations. Certain alleged improprieties involving land sale and exchange transactions for land in which the County's Airport System held an interest are being investigated by the County's internal auditors and certain Federal agencies, including the Federal Bureau of Investigation. The results of the federal investigations are not known. The County s internal auditor released an interim report (the Report ) that found, among other things, that various County land transaction procedures were not followed in connection with certain of the subject land sales and exchanges. The Report recommended that (i) the County suspend using the services of a particular appraiser until a more complete investigation is complete, and (ii) that the County deliberate with staff with respect to future land transaction procedures. The Airport released a memorandum responding to some of the findings of the Report. The investigations relating to the land transactions are not expected to have an adverse financial impact on the Airport System. Proposed Constitutional Amendment An initiative petition to amend Nevada s constitution has been filed with the Secretary of State of Nevada known as the Property Owners Bill of Rights. This proposed constitution amendment would in various ways change the way eminent domain and condemnation cases are treated. The County cannot predict the financial effect that the proposed constitutional amendment would have on the County in general or the Airport in particular if approved, however, the proposed constitutional amendment would not have a material, adverse effect on the County s obligations to the holders of the 2007A PFC Bonds. Under the procedure contained in Nevada s constitution for amending Nevada s constitution by an initiative petition, the proposed amendment, which was approved by a majority of the electors voting on the question at the general election in 2006 (November 7, 2006), must also be approved by a majority of the electors voting on the question at the general election in 2008 (November 4, 2008) before it becomes a part of Nevada s constitution. 48

63 RATINGS It is expected that Standard & Poor s, Fitch Ratings and Moody s Investors Service, Inc. will assign their municipal bond ratings of AAA, AAA, and Aaa, respectively, to the 2007A-1 PFC Bonds with the understanding that upon delivery of the 2007A-1 PFC Bonds, the Policy will be issued by the Insurer. It is expected that Standard & Poor s, Fitch Ratings and Moody s Investors Service, Inc. will assign their municipal bond ratings of AAA, AAA, and Aaa, respectively, to the 2007A-2 PFC Bonds with the understanding that upon delivery of the 2007A-2 PFC Bonds, the Policy will be issued by the Insurer. Such ratings reflect only the views of such organizations, respectively, and an explanation of the significance of such ratings may be obtained from Standard & Poor s, 25 Broadway, New York, New York 10004, (212) , Fitch Ratings, One State Street Plaza, New York, New York 10004, (212) and Moody s Investors Service, Inc., 99 Church Street, New York, New York 10007, (212) There is no assurance that either rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of such rating agency, circumstances so warrant. The County undertakes no responsibility either to bring to the attention of the owners the downward revision or withdrawal of any rating obtained or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the 2007A PFC Bonds. UNDERWRITING The 2007A-1 PFC Bonds are being purchased pursuant to a Purchase Contract (the 2007A-1 PFC Purchase Contract ), dated the date hereof, by and between the County and Citigroup Global Markets Inc., acting on behalf of itself, UBS Securities LLC, and Siebert Brandford Shank & Co., LLC (the 2007A-1 PFC Underwriters ), at a purchase price of $117,438, (being the par amount of the 2007A-1 PFC Bonds, plus $4,717, original issue premium and less $789, underwriters discount). The 2007A-1 PFC Purchase Contract provides that the 2007A-1 PFC Underwriters will purchase all of the 2007A-1 PFC Bonds if any are purchased. The 2007A-2 PFC Bonds are being purchased pursuant to a Purchase Contract (the 2007A-2 PFC Purchase Contract ), dated the date hereof, by and between the County and UBS Securities LLC, acting on behalf of itself, Citigroup Global Markets Inc., and Siebert Brandford Shank & Co., LLC (the 2007A-2 PFC Underwriters together with the 2007A-1 PFC Underwriters, the Underwriters ), at a purchase price of $110,681, (being the par amount of the 2007A-2 PFC Bonds, plus $5,713, original issue premium and less $507, underwriters discount). The 2007A-2 PFC Purchase Contract provides that the 2007A-2 PFC Underwriters will purchase all of the 2007A-2 PFC Bonds if any are purchased. The Underwriters of the 2007A PFC Bonds may offer and sell the 2007A PFC Bonds to certain dealers (including dealers depositing the 2007A PFC Bonds into investment trusts) and others at prices lower than the public offering prices stated on the inside cover page hereof. The initial public offering prices may be changed from time to time by the Underwriters. FINANCIAL ADVISORS Public Financial Management, Inc., San Francisco, California, and Hobbs, Ong & Associates, Inc., Las Vegas, Nevada, have served as financial advisors (the Financial Advisors ) to the County in connection with various matters relating to the planning, structuring and execution and delivery of the 2007A PFC Bonds. The Financial Advisors have not audited, authenticated or otherwise verified the information set forth in this Official Statement, or any other related information available to the County and the Board of County Commissioners, with respect to the accuracy and completeness of disclosure of such information. No guaranty, warranty or other representation is made by the Financial Advisors respecting accuracy and completeness of this Official Statement or any other matter related to the Official Statement. The fees being paid to the Financial Advisors are contingent upon the execution and delivery of the 2007A PFC Bonds. 49

64 TRUSTEE The Bank of New York Trust Company, N.A., by acceptance of its duties as Trustee under the 2007 PFC Series A Indenture, has not reviewed this Official Statement and has made no representations as to the information contained herein, including but not limited to, any representations as to the financial feasibility of the 2007A PFC Bonds or related activities. TAX MATTERS In the opinion of Swendseid & Stern, a Member in Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described below, interest on the 2007A PFC Bonds is excluded from gross income pursuant to Section 103 of the Code (other than interest on any 2007A-1 PFC Bond for any period during which it is held by a substantial user of the facilities financed with the 2007A-1 PFC Bonds or a related person as such terms are used in Section 147A of the Internal Revenue Code of 1986, as amended to the date of delivery of the 2007A PFC Bonds (the Tax Code ); however, interest on the 2007A-1 PFC Bonds is an item of tax preference for purposes of calculating alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code. Interest on the 2007A-2 PFC Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations. The Tax Code imposes several requirements which must be met with respect to the 2007A PFC Bonds in order for the interest thereon to be excluded from gross income to the extent described above. Certain of these requirements must be met on a continuous basis throughout the term of the 2007A PFC Bonds. These requirements include: (a) limitations as to the use of proceeds of the 2007A PFC Bonds and as to the use of the facilities financed thereby; (b) limitations on the extent to which proceeds of the 2007A PFC Bonds may be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the 2007A PFC Bonds above the yield on the 2007A PFC Bonds to be paid to the United States Treasury. The County will covenant and represent in the 2007 PFC Series A Indenture that it will take all steps to comply with the requirements of the Tax Code to the extent necessary to maintain the exclusion of interest on the 2007A PFC Bonds from gross income. Bond Counsel s opinion as to the exclusion of interest on the 2007A PFC Bonds from gross income is rendered in reliance on these covenants, and assumes continuous compliance therewith. The failure or inability of the County to comply with these requirements could cause the interest on the 2007A PFC Bonds to be included in gross income or, with respect to the 2007A-2 PFC Bonds, in alternative minimum taxable income, or a combination thereof, from the date of issuance. Under Section 56 of the Tax Code, certain tax preference items are required to be included for purposes of the alternative minimum tax applicable to both individuals and corporations. For purposes of computing the amount of alternative minimum taxable income for any year for which this tax is applicable, the intent on the 2007A-1 PFC Bonds is included as a tax preference item. Under the Tax Code, 75 percent of the excess of a corporation's adjusted current earnings over the corporation's alternative minimum taxable income (computed without regard to this adjustment and the alternative tax net operating loss deduction) is included in calculating the corporation's alternative minimum taxable income for purposes of the alternative minimum tax applicable to the corporation. Adjusted current earnings includes interest on the 2007A-2 PFC Bonds. The Tax Code contains numerous provisions which may affect an investor s decision to purchase the 2007A PFC Bonds. Owners of the 2007A PFC Bonds should be aware that the ownership of tax-exempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and certain subchapter S corporations may result in adverse federal tax 50

65 consequences. Bond Counsel s opinion relates only to the exclusion of interest on the 2007A PFC Bonds from gross income, as described above, and will state that no opinion is expressed regarding other federal tax consequences arising from the receipt or accrual of interest on or ownership of the 2007A PFC Bonds. Owners of the 2007A PFC Bonds should consult their own tax advisors as to the applicability of these consequences. Also, in the opinion of Bond Counsel, under present laws of the State of Nevada, the 2007A PFC Bonds, their transfer, and the income thereon are free and exempt from taxation by the State of Nevada or any subdivision thereof except the State estate tax and the State tax on generation skipping transfers. The opinions expressed by Bond Counsel are based upon existing law as of the delivery date of the 2007A PFC Bonds. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to any pending or proposed legislation. Amendments to federal tax laws may be pending now or could be proposed in the future which, if enacted into law, could adversely affect the value of the 2007A PFC Bonds, the exclusion of interest on the 2007A PFC Bonds from gross income from the date of issuance of the 2007A PFC Bonds or any other date, or which could result in other adverse federal tax consequences. Bondowners are advised to consult with their own tax advisors with respect to such matters. The Internal Revenue Service (the Service ) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether or not the Service will commence an audit of the 2007A PFC Bonds. If an audit is commenced, the market value of the 2007A PFC Bonds may be adversely affected. Under current procedures the Service will treat the County as the taxpayer and the 2007A PFC Bondholders may have no right to participate in such procedure. The County has covenanted in the 2007 PFC Series A Indenture not to take any action that would cause the interest on the 2007A PFC Bonds to lose its exclusion from gross income for federal income tax purposes. None of the County, the Underwriter nor Bond Counsel is responsible to pay or reimburse the costs of any 2007A PFC Bondholder with respect to any audit or litigation relating to the 2007A PFC Bonds. LEGAL MATTERS Certain legal matters incident to the validity and enforceability of the 2007A PFC Bonds are subject to the approval of Swendseid & Stern, a Member in Sherman & Howard L.L.C., Las Vegas and Reno, Nevada, Bond Counsel in the form attached hereto as APPENDIX F. Certain legal matters will be passed upon for the County by the County District Attorney, Las Vegas, Nevada, for the Underwriters by its counsel Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, for the Insurer by its counsel. The fees of Bond Counsel and Underwriters Counsel are contingent upon the issuance of the 2007A PFC Bonds. CONTINUING DISCLOSURE Annual audited financial statements of the Department will be available upon request from the Clark County Department of Aviation. The County has covenanted for the benefit of the holders and beneficial owners of the 2007A PFC Bonds to provide certain financial information and operating data (the County Annual Report ) by April 1 of each year (the Report Date ), commencing April 1, 2008 for the County Annual Report for Fiscal Year 2007 and to provide notices of the occurrence of certain enumerated events, if material. A form of document specifying the nature of the information to be contained in the County Annual Report or the notices of material events is set forth in APPENDIX D hereto. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the Rule ). Except as described below, the County has never failed to materially comply with any undertakings previously entered into pursuant to the Rule. 51

66 The County recently discovered that certain tables required to be updated with respect to two special improvement district financings were not included in its annual continuing disclosure filings for Fiscal Years 2004 and The County has gathered the historical information for those tables and filed them with the Nationally Recognized Municipal Securities Information Repositories at the end of March 2007; those tables will be included in future County Annual Reports. 52

67 MISCELLANEOUS So far as any statements made in this Official Statement involve matters of opinion, forecast or estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the purchasers of any of the 2007A PFC Bonds and the Airport or the County. This Official Statement contains forward-looking statements, including (a) statements containing projections of Airport System Revenues, expenditures and other financial items, (b) statements of the plans and objectives of the County for future operations of the Airport System, (c) statements of future economic performance of the Airport System, and (d) statements of the assumptions underlying or relating to statements described in (a), (b) and (c) above (collectively, Forward-Looking Statements ). All statements other than statements of historical facts included in this Official Statement, including without limitation under FINANCIAL FACTORS and THE AIRPORT regarding the Airport System s financial position, business strategy, capital resources and plans and objectives of the County for future operations of the Airport System are Forward-Looking Statements. Although such expectations reflected in such Forward-Looking Statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from expectations of the County (collectively, the Cautionary Statements ) are disclosed in this Official Statement. All subsequent written and oral Forward- Looking Statements attributable to the County or persons acting on behalf of the County are expressly qualified in their entirety by the Cautionary Statements. There are appended to this Official Statement appendices entitled CERTAIN INFORMATION RELATING TO THE COUNTY, REPORT OF PIERCY, BOWLER, TAYLOR & KERN AND FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2006, DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A INDENTURE, DTC AND BOOK-ENTRY ONLY SYSTEM, FORM OF OPINION OF BOND COUNSEL, SPECIMEN INSURANCE POLICY, and FORM OF CONTINUING DISCLOSURE CERTIFICATE. The Appendices are integral parts of this Official Statement and must be read together with all other parts of this Official Statement. COUNTY OF CLARK, NEVADA By: /s/ Rory Reid Chairman S-1

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69 APPENDIX A CERTAIN INFORMATION RELATING TO THE COUNTY This portion of the Official Statement contains general information concerning the economic and demographic conditions in Clark County (the County ). This information is intended only to provide prospective investors with general information regarding the County s community. The information is historic in nature; it is not possible to predict whether the trends shown will continue in the future. The information presented was obtained from the sources indicated, and the County does not make any representation as to the accuracy or completeness of the data obtained from parties other than the County. The County's Board of County Commissioners recently adopted a resolution appointing a Community Growth Task Force to identify desirable growth policies for the southern Nevada area. The Task Force made recommendations in the following areas: Urban Design, Natural Resource Conservation, Facility Adequacy, Timing and Planning, and Coordinating and Integrating Processes, Plans and Functional Assignments. General The County, a political subdivision of the State of Nevada (the State ), was organized in the year The County has been and is now operating under the provisions of the general laws of the State. The County covers an area of approximately 7,910 square miles in the southern portion of the State. Approximately 92 percent of the land in the County is owned by the United States or other governmental agencies. The County seat and most populous city in the State is the City of Las Vegas. The economy of the County is dependent on tourism (which is based on legalized gaming and related forms of entertainment), federal government activities, industry, finance and retail merchandising. Five incorporated cities are located in Clark County: Las Vegas, Henderson, North Las Vegas, Boulder City, and Mesquite. Clark County continues to be one of the fastest growing metropolitan areas in the country. As of July 1, 2006, the County had an estimated population of approximately 1,874,000, representing an approximately 153% increase between 1990 and The economy of the County is heavily dependent on the tourist industry, which is based in great part on legalized gambling. Population and Age Distribution The table below shows the population growth of the County and the State since Between 1990 and 2000 the County s population increased a total of 85.55%, while the State had a population increase of 61.65% over the same time period. A-1

70 (1) (2) (3) POPULATION Clark County, Nevada Fiscal Year State Percent Increase Clark County Percent Increase 1970 (1) 488,738 --% 273,288 --% 1980 (1) 800, , (1) 1,201, , (1) 1,998, ,375, (2) 2,132, ,485, (2) 2,206, ,549, (2) 2,296, ,620, (2) 2,410, ,715, (2) 2,518, ,796, (3) 2,623, ,874, (3) 2,736, ,981, , 1980, 1990 and 2000 census figures are effective April 1. Years are estimated. Year 2007 is projected. Source: 1970, 1980, 1990 and 2000 figures from the U.S. Bureau of the Census; figures from the Nevada State Demographer. Figures provided by the Nevada State Demographer are effective July 1. The following table sets forth a comparative age distribution profile for Las Vegas, the County, the State and the United States. AGE DISTRIBUTION (1) Percent of Population Age Clark County State United States % 25.8% 24.7% and Older (1) Source: Trade Dimensions International, Inc. Demographics USA 2006, County Edition. A-2

71 Income The following table sets forth annual per capita personal income levels for the County, the State and the United States. (1) (2) Year Clark County PER CAPITA PERSONAL INCOME (1) Percent Change State Percent Change United States Percent Change 2000 $29, $30, $29, , % 30, % 30, % , , , , , , , , , (2) n/a -- 35, , Revised July Preliminary estimate. Source: U.S. Department of Commerce, Bureau of Economic Analysis; United States figures from the Survey of Current Business. Gaming The economy of the County is substantially dependent on the tourist industry, which is based on legalized gambling and related forms of entertainment. The following table shows the gross taxable revenue from gaming in the County as compared to the State. Over the last five years, an average of 82% of the State s total gross taxable gaming revenue has been generated from Clark County. GROSS TAXABLE GAMING REVENUE AND TOTAL GAMING TAXES (1) Clark County, Nevada Fiscal Year Ended Gross Taxable Gaming Revenue (2) % Change Clark State Gaming Collection (3) % Change Clark June 30, State Total Clark County County State Total Clark County County 2002 $9,087,454,724 $7,279,502, $711,578,089 $575,638, ,280,010,626 7,474,484, % 721,835, ,988, % ,927,231,206 8,117,421, ,515, ,506, ,609,995,909 8,742,380, ,122, ,652, ,803,910,824 9,834,841, ,002,447, ,204, July 05 Jan 06 6,723,686,928 5,556,817, ,334, ,241, July 06 Jan 07 7,106,493,037 5,941,328, ,657, ,866, (1) The figures shown are subject to adjustments due to amended tax filings, fines and penalties. (2) The total of all sums received as winnings less only the total of all sums paid out as losses (before operating expenses). (3) Based upon the taxable revenues generated in the previous month. Cash receipts of the State from all sources relating to gaming (General Fund and other revenues) including percentage license fees, quarterly flat license fees, annual license fees, casino entertainment taxes, annual slot machine taxes, penalties, advance fees, and miscellaneous collections. A portion of collections is deposited to the State funds other than the State s General Fund. Source: State of Nevada - Gaming Control Board. California Gaming Measure. On March 7, 2000, California voters approved a constitutional amendment allowing Las Vegas-style slot machines and card games at tribal casinos within California. Tribes in California have established casinos and may establish additional casinos. Nevada gaming industry officials A-3

72 estimate that approximately 30% of Nevada's gambling visitors come from California. Those visitors may elect to visit the more conveniently located tribal casinos, rather than traveling to Nevada's casinos. Different forms of legalized gaming have been authorized by many states, as well as the tribal casinos, across the United States. Other states may authorize gaming in the future in one form or another. The different forms of gaming range from casino gaming to riverboat gambling to lotteries. Various forms of gaming also are available on the internet. The County cannot predict the impact on the State's economy from legalization of state lotteries and casino gaming in other states, or internet gaming. Tourism Tourism is an important industry in the County. Hoover Dam, Lake Mead, Mt. Charleston and other tourist attractions are in Clark County. Attractions such as the Great Basin, Grand Canyon, Yosemite, Bryce and Zion National Parks, and Death Valley National Monument are each within a short flight or day s drive of Southern Nevada. A reflection of the growth of tourism in Southern Nevada is the increase in the number of hotel and motel rooms available for occupancy as shown in the following table. The area s hotels and motels have historically experienced higher occupancy rates than those on a national level. Set forth in the table below is the Las Vegas Convention and Visitors Authority-Marketing Department s estimate of the number of visitors to the Las Vegas Metropolitan Area since Calendar Year VISITOR VOLUME AND ROOM OCCUPANCY RATE Las Vegas Metropolitan Area, Nevada Total Visitor Volume Number of Hotel/Motel Rooms Available Hotel/Motel Occupancy Rate (1) National Occupancy Rate (2) ,017, , % ,071, , ,540, , ,388, , ,566, , ,914, , N/A (1) (2) The sample size for this survey represents approximately 75% of the total hotel/motel rooms available. Source: 2001 through Smith Travel Research, Lodging Outlook. Source: Las Vegas Convention and Visitors Authority. A-4

73 APPENDIX B REPORT OF PIERCY, BOWLER, TAYLOR & KERN AND FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2006 B-1

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76 Comprehensive Annual Financial Report Clark County Department of Aviation An Enterprise Fund of Clark County, Nevada For the Years Ended June 30, 2006 and 2005 Prepared by the Department of Aviation McCarran International Airport Las Vegas, Nevada

77 CLARK COUNTY DEPARTMENT OF AVIATION Clark County, Nevada Board of County Commissioners Rory Reid, Chair Myrna Williams, Vice Chair Tom Collins Yvonne Atkinson Gates Chip Maxfield Lynette Boggs McDonald Bruce L. Woodbury County Manager's Office Virginia Valentine, County Manager Darryl Martin, Assistant County Manager Elizabeth Macias Quillin, Assistant County Manager Christine Robinson, Assistant County Manager Department of Aviation Randall H. Walker, Director Rosemary A. Vassiliadis, Deputy Director Alan W. Stewart, Assistant Director, Finance

78 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2006 AND 2005 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal...1 Certificate of Achievement for Excellence in Financial Reporting...3 Organization Chart...4 FINANCIAL SECTION Independent Auditors' Report on Financial Statements and Supplementary Information...7 Management's Discussion and Analysis...8 Financial Statements: Statements of Net Assets...26 Statements of Revenues, Expenses and Changes in Net Assets...27 Statements of Unrestricted, Restricted and Designated Cash Flows...28 Notes to Financial Statements...29 Supplementary Information: Schedule of Insurance Coverage...69 Schedule of Airport Revenue Bond Debt Service Coverage...70 Schedule of Cash Receipts and Disbursements - Restricted and Designated Accounts...71 Schedule of Operating Revenues and Expenses by Profit Center...72 Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...73 STATISTICAL SECTION Overview of Information Provided in Statistical Section...75 Summary of Operations...76 Schedule of Airport Revenue Bond Debt Service Coverage...77 Summary of Operating Revenues...78 Summary of Restricted Revenues...79 Ratios of Airport Revenue Bond Debt Service to Total Operating Expenses and Revenues...80 Summary of Operating Expenses...81 Passenger and Operating Statistics...82 Visitor, Convention, and Room Statistics...83 Market Share of Air Carriers...84 Per Passenger Calculations...85 Schedule of Net Assets...86

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81 December 1, 2006 To the Board of County Commissioners And County Manager Clark County, Nevada The Comprehensive Annual Financial Report (CAFR) of the Clark County Department of Aviation (Airport) for the year ended June 30, 2006, is submitted herewith. The Finance Division of the Airport prepared this report. The financial statements were audited, as required by NRS , by Piercy Bowler Taylor and Kern, independent certified public accountants whose unqualified audit report is contained herein. The Airport s management is responsible for the accuracy of the data presented in the financial statements along with the completeness and fairness of the presentation, including all disclosures. To the best of our knowledge, and as indicated in the opinion of our independent auditors, this report fairly presents and fully discloses the Airport s financial position, results of operations and cash flows in accordance with generally accepted accounting principles (GAAP) in the United States of America. In developing and evaluating the Airport s accounting system, consideration is given to the adequacy of internal control. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management s authorization and recorded properly to permit the preparation of financial statements in accordance with GAAP. The concept of reasonable assurance recognizes that: 1) the cost of a control should not exceed the benefits likely to be derived; and 2) the evaluation of costs and benefits requires estimates and judgments by management. Airport management believes that the Airport s internal control processes adequately safeguard assets and provide reasonable assurance that financial transactions are recorded properly. The CAFR is comprises of three sections. The Introductory Section includes this letter of transmittal along with the Airport s organizational chart and the fiscal year 2005 Certificate of Achievement for Excellence in Financial Reporting awarded to the Airport by the Government Finance Officers Association of the United Sates and Canada. The Financial Section contains the independent auditors report, the Airport s Management Discussion and Analysis (MD&A), the audited financial statements with footnotes and supplementary information. This section also includes the independent auditors report On Compliance and On Internal Control over Financial Reporting based upon their audit of the Airport Financial Statements performed in accordance with Government Auditing Standards. The Statistical Section includes data prepared from both financial and nonfinancial sources for the purpose of reflecting financial and traffic trends over the past ten years. This letter of transmittal should be read in conjunction with the MD&A contained in the Financial Section. The extraordinary success of the Clark County Department of Aviation is a direct result of the leadership and support of the Clark County Board of County Commissioners and County Manager. Also recognized for making a tremendous effort in promoting the success of the Airport are the employees of the Department and the airlines and other tenants of the Clark County Airport System. 1

82 We thank the Clark County Board of Commissioners for its continuing support of the Department of Aviation and its efforts to conduct its financial operations in a responsible and progressive manner, and for making the Airport a global leader in the airport industry. The preparation of this report is due to the dedicated service and professionalism of the Airport s finance staff. We also thank all members of the Airport staff who contributed to the preparation of this CAFR. Sincerely submitted: Randall H. Walker Director of Aviation Alan W. Stewart Assistant Director Finance 2

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84 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA ORGANIZATION CHART As of June 30, 2006 Clark County Board of Commissioners County Manager County Manager Virginia Valentine Virginia Valentine Director of Aviation Randall H. Walker Deputy Director Rosemary A. Vassiliadis Assistant Director Airside Operations Joseph Kubacki Assistant Director Construction & Engineering Dennis Mewshaw Assistant Director Employee Services Christine Santiago Assistant Director Facilities Robert Kingston Assistant Director Finance Alan Stewart Assistant Director Information Systems Samuel Ingalls Assistant Director Terminal Operations Ralph LePore Assistant Director General Aviation Cecil Johnson Assistant Director Landside Operations Harry Waters

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87 PBTK PIERCY BOWLER TAYLOR & KERN Certified Public Accountants Business Advisors INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION The Honorable Members of the County Commission County Manager and Director of Aviation Clark County, Nevada We have audited the accompanying financial statements of the Clark County Department of Aviation Clark County, Nevada (the Department), as of and for the years ended June 30, 2006 and These financial statements are the responsibility of the Department s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States, and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Clark County Department of Aviation Clark County, Nevada, as of June 30, 2006 and 2005, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. The management s discussion and analysis on pages 8 through 22 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the Department s basic financial statements. The introductory section, statistical section and supplementary information in the financial section are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The supplementary information on pages 66 through 69 has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and 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. In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2006, on our consideration of the Department 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 internal control over financial reporting or on compliance. That report presented on page 70 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. November 15, ELTON AVENUE, STE. 1000, LAS VEGAS NEVADA fax pbtk.com

88 Management s Discussion and Analysis The following management s discussion and analysis (MD&A) of the financial performance and activity of the Clark County Department of Aviation (the Department) provides an introduction and understanding of the financial statements of the Department for the fiscal years ended June 30, 2006, and 2005, with selected comparisons to prior fiscal periods. The information presented should be read in conjunction with the financial statements and accompanying notes in this report. Introduction The Department comprises a single enterprise fund of Clark County (the County), and operates as a separate self-sufficient enterprise of the County. The seven-member Board of County Commissioners is responsible for governing the affairs of the Department. The Director of Aviation is appointed by and reports directly to the County Manager. The County owns and the Department operates and maintains McCarran International Airport (the Airport), the fifth largest airport in the United States in terms of passenger volume, and four general aviation airports. The Airport occupies approximately 2,800 acres and is located six miles from downtown Las Vegas and one mile from the Las Vegas Strip, the center of the Las Vegas gaming and entertainment industry. The Airport is primarily an origination and destination (O&D) airport and is the second largest O&D airport in the United States second only to Los Angeles International Airport in In addition to the Airport, the Department operates North Las Vegas Airport, which caters to general aviation activity and is the second busiest airport in the State of Nevada in terms of aircraft operations and; Henderson Executive Airport, a premier corporate aviation facility that features a new state-of-the-art terminal, private hangar facilities and a new control tower designed to meet the needs of the business aviation community. In addition, the Department operates Jean Sports Aviation Center and Overton-Perkins Field which are primarily used for recreational purposes. All of the airports operated and maintained by the Department are collectively referred to as the Airport System. As an enterprise fund of the County, users of the Department s facilities provide all of the revenues to operate maintain and acquire necessary services and facilities. The Department is not subsidized by any tax revenues of the County. The Department has been a self-sustaining entity since Airport Activity Highlights For the fiscal year ended June 30, 2006, passenger enplanements totaled 22,546,814 compared to 21,439,652 in FY2005 and 19,449,065 in FY2004, increases of 5.2% and 10.2% respectively. By comparison, according to the Federal Aviation Administration (FAA) statistics, domestic U.S. airline passenger traffic for the same 12-month period ending June 30, 2006, increased 1.4% over the prior 12-month period. The total FY2006 passengers of 45,038,216 are another record, exceeding the prior record reached in FY2005 by 2,177,756 passengers. Aircraft landed weights in FY2006 totaled 27,526,493 thousand pounds, compared to 27,066,272 thousand pounds in FY2005 and 24,878,724 in FY2004, increases of 1.7% and 8.8% respectively. The number of landings for domestic and international flights increased 6.8% in FY2006 over the prior fiscal year. These significant increases in passengers and aircraft activities continue to solidify the strong destination market for Las Vegas. 8

89 The following presents the Airport activities for FY2006 and the previous nine fiscal periods: CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA PASSENGER AND OPERATING STATISTICS LAST TEN FISCAL YEARS (Not covered by auditor's report) Total Fiscal Aircraft Operations Landed Weight Enplaned Cargo Year Departures (Pounds per 000) Passengers Tons ,336 20,261,573 15,208,348 72, ,842 19,772,944 15,008,564 79, ,458 20,965,119 15,873,267 88, ,531 24,073,667 17,720, , ,817 24,663,929 18,639, , ,564 23,587,166 16,945,697 88, ,223 23,074,743 17,641,500 89, ,860 24,878,724 19,449,065 92, ,035 27,066,272 21,439, , ,445 27,526,493 22,546, ,352 Average Annual Increase (Decrease) 3.7% 3.5% 4.5% 5.0% This analysis provides trends in passenger enplanements, landed weights and cargo tons for the last ten years of Airport operations. Highlights of the Fiscal Year 2006 Budget The Department s operating budget is prepared on an accrual basis under the direction of the Director of Aviation and is submitted each year to the County and incorporated in its overall budget as one of the County s enterprise funds. Accordingly, the Department s budget is subject to the budgeting requirements of Nevada State Statutes, and the related public budget hearings and open public meeting requirements of the County s budget process. The Board of County Commissioners ultimately approves the budget. On May 16, 2005, the Board of County Commissioners approved the County-wide operating budget, including the Department budget. The FY2006 Department budget continues the goal of keeping airline cost increases to a minimum, maximizing nonairline revenues and maintaining the highest levels of customer service. In the FY2006 budget, the operating revenues were budgeted at $281.0 million and operating expenses were projected at $172.2 million. The operating budget for FY2006 included the addition of 149 Department staff positions primarily to operate and maintain the new $125 million in-line baggage system and the addition of custodial staff due to continued increases in passenger traffic. The FY2006 Capital budget is discussed in the Capital Improvement Program section of the MD&A. 9

90 Summaries of the operating budgets and actual results for FY2006 are shown below. This table is based on and presented in accordance with the Scheduled Airline Operating Agreement and Terminal Building Lease dated July 1, Budget vs. Actual For the Year Ended June 30, Budget Actual Variance (000) (000) (000) Operating Revenues $ 281,031 $ 290,979 $ 9,948 Operating Expenses 172, ,977 (15,214) Debt Service Paid from Operating Revenues 86,925 83,517 (3,408) Capital Improvement Fund Deposit 43,361 53,477 10,116 Airline Prepaid Accounts 16,127 22,030 5,904 Airline Rates and Charges Effective July 1, 2003, the Department entered into a new Scheduled Airline Operating Agreement and Terminal Building Lease (the Agreement) with the signatory airlines serving the Las Vegas market, which has a term of five years and incorporates the lease and use of the terminal complex, apron areas and airfield at the Airport. The Agreement establishes a residual ratemaking methodology for the Airport System in the airfield and a compensatory rate-making methodology for the terminal building square footage rental and apron rental rate. Rates and charges are calculated on an annual basis pursuant to budgeted revenues, expenses and debt service and reviewed and adjusted, if necessary, throughout each fiscal year to ensure that sufficient Airport System revenues are generated to satisfy all of the requirements of the Master Indenture of Trust dated May 1, 2003, as amended. At the end of each fiscal year, the Department recalculates the rates and charges based on audited financial data and any variance of budgeted vs. actual is included in the then current year rates and charges as a credit or additional amount due. The table below summarizes passenger airline terminal building rentals, landing fees, and apron fees and the cost per enplaned passenger for FY2006. Cost per enplaned passenger is a standard industry measurement, and the goal of the Department is to maintain a competitive cost per enplanement at the Airport. The actual cost per enplanement for FY2006 was $4.62, compared to the original budget estimate of $5.00. Airline Costs per Enplaned Passenger For the Year Ended June 30, Budget Actual Variance Airline Cost Category (000) (000) (000) Landing Fees $ 32,887 $ 23,947 $ (8,940) Terminal Building Rentals 62,771 65,680 2,909 Apron Fees 7,481 4,068 (3,413) Gate Usage Fees 3,048 6,228 3,180 Passenger Fee - Ticketing 638 1, CIT Per Passenger Fee 3,795 2,973 (822) Total Airline Fees and Charges 110, ,216 (6,404) Enplaned Passengers 22,103 22, Cost per Enplaned Passenger $ 5.00 $ 4.62 $ (0.38) 10

91 Overview of Financial Statement The Department s financial statement is prepared using the accrual method of accounting. Therefore revenue is recognized when earned and expenses are recognized when incurred. Capital assets are capitalized when substantially complete and depreciated over their useful life. Refer to Note 1 in the accompanying financial statement for a summary of the Department s significant accounting policies. Following this MD&A are the financial statements and supplemental schedules of the Airport System. These statements and schedules, along with the MD&A, are designed to provide the readers with an understanding of the Department s financial position. The statement of net assets presents information on all of the Department s assets and liabilities as of June 30, 2006, and The statement of revenue, expenses, and changes in net assets presents financial information showing how the Department s net assets changed during the fiscal years ended June 30, 2006, and The statement of cash flow relates to the cash and cash equivalent in-flows and out-flows as a result of financial transactions during the two fiscal years and also includes a reconciliation of operating income to the net cash provided by operating activities. Financial Highlights Net Asset Summary Net assets serve as an indicator of the Airport System s financial position. As of June 30, 2006, the Airport System s assets exceed liabilities by $1.3 billion, an increase of $240.0 million over FY2005. As of FY2005, the assets exceeded liabilities by $1.1 billion for an increase of $120 million over FY2004. A summary of the Department s net assets for fiscal years 2006, 2005 and 2004 is shown below: Summary Statement of Net Assets For the Years Ended June 30, 2006, 2005 and Change 2006 Change 2005 (000) (000) (000) to 2005 to 2004 Assets: Current Assets $ 272,845 $ 245,252 $ 101,752 $ 27,593 $ 143,500 Restricted Assets 1,074,137 1,065, ,199 8, ,659 Capital Assets, net 2,276,250 2,019,656 1,868, , ,871 Other Noncurrent Assets 35,282 24,492 19,242 10,790 5,250 Total assets $ 3,658,514 $ 3,355,258 $ 2,861,978 $ 303,256 $ 493,280 Liabilities and Net Assets: Current Liabilities $ 387,888 $ 338,490 $ 284,590 $ 49,398 $ 53,900 Noncurrent Liabilities 1,996,618 1,957,683 1,638,009 38, ,674 Total Liabilities 2,384,506 2,296,173 1,922,599 88, ,574 Net assets Invested in Capital Assets, net of related debt 333,720 95, , ,739 (220,300) Restricted 767, , , , ,934 Unrestricted 172, , ,744 (132,281) 15,072 Total Net Assets 1,274,008 1,059, , , ,706 Total Liabilities and Net Assets $ 3,658,514 $ 3,355,258 $ 2,861,978 $ 303,256 $ 493,280 11

92 Current and Restricted Assets The Department s current assets for FY2006 increased by $27.6 million, or 11.3%, over FY2005 primarily due to increases in federal grants receivable in FY2006 which were up $20.0 million over FY2005. For FY2005, current assets increased $143.5 million, or 141.0%, due to increases in cash and cash equivalents as a result of new bond issues and increases in grants receivable from FAA and TSA. Restricted assets increased in FY2006 by $8.2 million, or 0.8%, over FY2005 due to increases in interest rates on investments. For FY2005, restricted assets increased by $193.7 million, or 22.2%, due to several bond issues being completed during FY2005. Restricted cash, cash equivalents and investments are held by the Department s trustee. Capital Assets For FY2006, capital assets, net of depreciation, increased by $256.6 million, or 12.7%, over FY2005. This increase was due primarily to the completion of certain taxiway construction, apron expansion and ramp improvements. The increase was also due to the completion of several improvements to the terminal facilities including restroom renovations, ticketing area remodel, security expansions and central plant upgrades. For FY2005, capital assets increased by $150.9 million, or 8.1%, due primarily to completion of the third wing of concourse D, ramp and airfield improvements and other Airport System improvements. Current and Noncurrent Liabilities At June 30, 2006, current liabilities payable from unrestricted assets increased $19.2 million, or 23.7%, over FY2005 due largely to the deferral of revenues received from rental car customer facility charges. These revenues are deferred until the Department utilizes these revenues for costs and expenses related to the consolidated rental car facility that will be completed and operational in early Current liabilities payable from restricted assets increased by $30.2 million over FY2005 due largely to a $17.4 million increase in obligations under the County s securities lending program and a $10.1 million increase in accrued interest. Noncurrent liabilities for FY2006 increased by $38.9 million, or 2.0%, over FY2005, due largely to the contingent liabilities recognized for certain land litigation. See Note 9. For FY2005, the noncurrent liabilities increased $319.7 million, or 19.6%, due to the issuance of refunding and new money debt. 12

93 Highlights of Changes in Net Assets The following illustrates a condensed summary of the changes in net assets for FY 2006, 2005 and 2004: Summary Statement of Revenue, Expenses and Changes in Net Assets For the Years Ended June 30, 2006, 2005 and Change 2006 Change 2005 (000) (000) (000) to 2005 to 2004 Operating Revenue $ 290,979 $ 261,566 $ 243,042 $ 29,413 $ 18,524 Operating Expenses 156, , ,947 16,630 17,400 Income before Depreciation 134, , ,095 12,783 1,124 Depreciation 70,853 66,048 64,850 4,805 1,198 Income from Operations 63,149 55,171 55,245 7,978 (74) Net Nonoperating Income/(Expense) 35,587 2,200 (18,099) 33,387 20,299 Income before Capital Contributions 98,736 57,371 37,146 41,365 20,225 Capital Contributions 116,187 62,335 20,847 53,852 41,488 Increase in Net Assets 214, ,706 57,993 95,217 61,713 Net assets beginning of year 1,059, , , ,705 57,993 Net assets end of year $ 1,274,008 $ 1,059,085 $ 939,380 $ 214,923 $ 119,705 Operating Revenues Operating Revenue For the Years Ended June 30, 2006, 2005 and 2004 Percentage Percentage Change Change Revenue Category (000) (000) (000) Landings and other aircraft fees $ 29,405 $ 37,113 $ 34, % 7.4% Building and land rentals 101,631 84,459 81, % 3.7% Ground transportation 9,754 8,565 7, % 7.6% Rental Car 28,585 26,318 21, % 20.1% Gaming 39,626 37,607 37, % 0.1% Terminal concessions 45,047 39,132 34, % 13.9% Parking 26,236 22,317 19, % 17.0% Other Income 4,216 1,363 1, % -27.0% Net Revenue from reliever airports 6,479 4,692 4, % 9.2% $ 290,979 $ 261,566 $ 243, % 7.6% Discussion of FY2006 Operating Revenues The preceding table presents the major operating revenues for FY2006, FY2005 and FY2004. Landing and other aviation fees for FY2006 decreased by 20.8% over FY2005 as a result of a decrease in the signatory landing fee based on actual allocated operating revenues, expenses and debt service of the Airport System. Building and land rents increased by 20.3% due to an increase in signatory terminal building rental rates as a result of actual allocated operating revenues, expenses and debt service to the Terminal Building cost center. During FY2006, the number of flights at the Airport increased by 8.0% from 570,947 in FY2005 to 616,623 in FY2006. Landed weights for all commercial aircraft for FY2006 increased by 1.7% over FY2005. Total passengers for FY2006 increased 5.0% from 42,860,463 in FY2005 to 45,038,216 in FY

94 Concession revenues for FY2006 reached an all-time high at $6.62 per enplaning passenger, 6.0% higher than the previous record of $6.25 achieved in FY2005. The largest single increase in concession revenue came from parking, where revenues for FY2006 increased 17.6% over FY2005. This increase can be attributed to several factors, including, increases in the overall population of the region, a full year of the price increase implemented in March of 2005, and a new valet parking contract which provides for a more lucrative share of revenue. The second largest increase in concession revenues at 15.1% came from terminal concessions, which includes food and beverage, news and gift, specialty retail, advertising, and passenger services. During FY2006, the Airport s master food and beverage operator continued to upgrade facilities and add new national brands to the airport s food and beverage mix. These efforts have increased food and beverage revenues by 16.2%. The advertising revenues for FY2006 increased by 29.2% as a result of additional advertising sites and renegotiations of existing sites. During FY2006, revenues from ground transportation activities increased 13.9% over FY2005. Most of this increase is the result of price increases and the implementation of a $3.00 fuel surcharge by the limousine operators at the Airport. Limousine revenues in FY2006 increased by 23.1% over FY2005. Rental car revenue in FY2006 increased 8.5% over FY2005 due to a continued desire by visitors to have more flexibility to visit other sites within the region, the relative low cost of renting a car in the Las Vegas region and the lack of any overnight parking fees at any of the casino resorts. Revenues from gaming increased 5.4% in FY2006 after relatively flat revenue growth in FY2005. A significant portion of this increase can be attributed to the installation of a new ticket in/ticket out software system in FY2006 that has made the pay-out process more customer friendly. Revenues from the two primary reliever airports, North Las Vegas Airport and Henderson Executive Airport, increased significantly in FY2006, increasing by 38.1% over FY2005. The majority of this increase is attributed to a 66.4% increase in the net sales of Jet A fuel and an 18.9% increase in the net sales of 100 Octane fuel as a result of increases in flight activity and the lower cost of fuel in Nevada as compared to surrounding states. 14

95 Discussion of FY2005 Operating Revenues The 7.4% increase in landing and other aircraft fees for FY2005 is the result of the increase in landed weights due to a 9.0% increase in aircraft flights in FY2005. During FY2005, the significant increase of 10.8% in concession revenues can be attributed to the 10.2% increase in passenger enplanements coupled with the fact that passengers are continuing to spend more time in the Airport due to concerns of being delayed at security checkpoints. As the Department continues to work with the Transportation Security Administration (TSA) to make improvements to security checkpoint processing time, passengers have more free time to spend discretionary dollars on food and retail goods. The Department has also improved concession opportunities throughout the terminal by adding more nationally branded food and retail establishments. During FY2005, the significant increase of 20.1% in rental car revenue can be attributed to several factors, including but not necessarily limited to, the 10.2% increase in passenger traffic; the desire by visitors to have more flexibility to visit other sites within the area, such as golf courses, the Hoover Dam, Death Valley or the Grand Canyon; the relative low cost of renting vehicles in the area; and the absence of overnight parking fees at local hotels and resorts. Revenues from gaming increased only slightly in FY2005 (0.1%), while passenger traffic increased by 10.2%. During FY2005, changes in airline gate assignments and adjustments to accommodate refurbishment projects throughout the terminal facilities adversely effected gaming revenues. In addition, the phased transition from an inefficient hand-pay system to a fully operational ticket in/ ticket out system negatively impacted gaming revenues during the system implementation when groups of slot machines were out of service for a period of time. During FY2005, the gaming revenue per enplaned passenger was $1.75 as compared to $1.93 in FY2004. These compare to the 10-year historical average of $1.68 per enplaned passenger. The 13.9% increase in terminal concession revenue is attributable to several factors, including but not necessarily limited to, the introduction of more nationally recognized food and retail locations; more time spent by passengers in terminal facilities to spend discretionary dollars; the reduction of food service on most airline flights; and inflation. The terminal concession revenue per enplaned passenger increased from $1.77 in FY2004 to $1.83 in FY2005. Public parking revenues for FY2005 increased by 17.0% with the opening of the Economy Parking and the associated adjustment to parking rates in March of 2005 intended to help properly align parking supply and demand. This adjustment resulted in an increase to the long-term rates within the parking structure and a reduction of the parking rates for the long-term Economy Lot. Revenue from the general aviation airports was impacted by fluctuations in aviation activity. At North Las Vegas Airport, aircraft operations decreased by 7.1% in FY2005 as compared to FY2004. Operations at Henderson Executive Airport increased by 5.2%. As a result, revenues at North Las Vegas decreased by 1.0% and revenues at Henderson Executive increased by 56.8% in FY

96 Operating Expenses Operating Expenses For the Years Ended June 30, 2006, 2005 and 2004 Percentage Percentage Change Change Expenses Category (000) (000) (000) Salaries and Benefits $ 67,128 $ 63,329 $ 59, % 6.9% Contract Maintenance 14,206 8,103 8, % -2.6% Professional Services 33,535 32,347 25, % 27.8% Utilities 15,973 14,816 12, % 15.8% Communications 1,759 1,350 1, % -2.2% Repairs and Maintenance 3,442 4,730 1, % 136.6% Materials and Supplies 13,295 7,969 6, % 20.1% Insurance 5,879 5,249 5, % -6.7% Administrative 1,760 2,454 1, % 49.5% $ 156,977 $ 140,347 $ 122, % 14.2% Discussion of FY2006 Operating Expenses At June 30, 2006, the Department employed 1,193 full-time and 52 part-time employees, a 17.1% increase in full-time employment compared to FY2005. The majority of the increase occurred in the custodial and maintenance areas. The salaries and wages for FY2006 increased 4.8% over FY2005. Overtime for FY2006 increased by 34.0%. Fringe benefits for FY2006 increased by 6.9% over FY2005. The largest increase was in workers compensation, where the costs increased by 10.0%, and the group insurance benefits, where the cost of providing medical, dental and life insurance increased by 7.4% in FY2006. The most significant increase in operating and maintenance expenses at the Department occurred in the area of contracted maintenance. Contracted maintenance services increased by 75.3% in FY2006 as compared to FY2005. The primary reason for this increase is twofold. The first relates to the new in-line baggage system. This new $125 million system requires specialized maintenance and during FY2006, the Department contracted with an outside maintenance and repair provider. Secondly, the Department contracted with a new elevator and escalator maintenance company that provides a much improved quality of service at a higher price than in prior years. Utility services at the Airport increased by 7.8% during FY2006. These increases can be attributed to a full year with the northeast wing of Concourse D in operation and a 27.9% increase in the cost of natural gas. Materials and supplies for FY2006 increased by 66.8% over FY2005. A large share of the increase stems from an ongoing effort to develop a Department-wide Enterprise Resource Management System. Computer equipment and software purchases during FY2006 were up by 153.7% over FY2005. Other contributing factors include a 39.5% increase in custodial supplies due to increased traffic and a 71.7% growth in maintenance supplies required by the new in-line baggage systems. Insurance costs increased 12.0% in FY2006 due, in part, to the Department securing Pollution and Remediation Legal Liability coverage for the first time. 16

97 Discussion of FY2005 Operating Expenses As of June 30, 2005, the Department employed 1,019 full-time and 63 part-time employees compared to June 30, 2004, when the Department had 971 full-time and 34 part-time employees. This 5.0% increase in full-time employees, coupled with the annual merit increases and cost of living increases, resulted in the salary and wage increase of 6.0%. Fringe benefits for FY2005 increased by 9.5% over FY2004. The largest increase was in the group insurance benefits where the cost of providing medical, dental and life insurance increased by 15.1% in FY2005. The Department reimburses the County for certain services that it provides to the Department, including but not limited to, police, fire and legal services. Police services provided by the Metropolitan Police increased 20.6% due to the increase in manpower required by new facilities and increases in passenger traffic. Fire services increased 11.4% during FY2005 due to cost of living increases and merit increases. Legal services provided by the County s District Attorney s Office, increased 121.1% in FY2005 due to an increase in litigation cases, primarily involving inverse condemnation cases. Professional services for FY2005 increased 72.5%. The Department created a new Economy Parking Lot in March, 2005, that requires 24 hour shuttle bus service to and from the terminal. This service is provided by a third party bus company. Also, the Department has retained a number of consulting firms to assist in developing strategies and feasibility studies for various capacity enhancement projects throughout the Airport that may be required to meet the growing passenger demand in the next five-year period. Contracted maintenance decreased 2.8% in FY2005 due to a reclassification of expenses from contractual maintenance to professional maintenance. Materials and supplies increased 47.1% during FY2005 as compared to a 7.0% increase in FY2004. The largest single reason for this increase is the introduction of a paving maintenance program designed to maintain the roadway surfaces at the Airport through a regularly scheduled annual program. During FY2005, the first year of this program, the Department spent slightly over $2.0 million. In addition, the custodial staff began keeping working stock inventories throughout the terminal facilities to maintain adequate levels of cleaning products and supplies during peak passenger periods. This strategy has increased custodial supplies and materials by 41.2% for FY2005. Utilities during FY2005 increased an average of 15.7%. The primary reason for this increase are the increased construction at the Airport, the additional space with the opening of the northwest wing of Concourse D, increased passenger traffic, and utility rate increases. During FY2005, electrical costs increased 12.3%, natural gas 67.3% and water 18.5%. During FY2005, the Department saw a 49.5% increase in administrative costs. This increase is attributable to the reclassification of interest rate swap settlements associated with unqualified swap agreements from the debt service expense account to administrative costs. Swap settlements associated with unqualified swap agreements amounted to $881,280 in FY2005. Swap settlements associated with qualified swap agreements continue to be classified as a debt service expenses. Insurance expenses continue to stabilize after the events of September 11, 2001, and the County s insurance expense for FY2005 decreased by 6.7% over FY2004 with no reduction in coverage. 17

98 Non-Operating Revenues and Expenses Non-Operating Revenue and Expenses For the Years Ended June 30, 2006, 2005 and 2004 Percentage Percentage Change Change Revenue/Expenses Category (000) (000) (000) Interest Income $ 36,129 $ 26,866 $ 14, % 82.8% Interest Expense (113,460) (105,806) (89,719) 7.2% 17.9% Passenger Facility Charges 85,969 73,390 50, % 44.6% Jet A Fuel Tax Revenue 9,271 9,362 9, % -1.8% Customer Facility Charges 11,413 Other 6,265 (1,612) (3,362) % -52.1% $ 35,587 $ 2,200 $ (18,099) % % Discussion of FY2006 Non-operating Revenues and Expenses During FY2006, interest income increased by 34.5% due to increases in interest rates and unspent bond proceeds. Interest expense for FY2006 increased 7.2% due to a restructuring of the Department s bond portfolio where certain interest rates on bonds have been increased in the earlier amortization periods and lowered in later periods. Passenger facility charges for FY2006 represent a full year of the $4.50 PFC collection levels which were increased from $3.00 per qualifying passenger on November 1, Effective July 1, 1991, the County enacted an ordinance providing that a two cent per gallon tax on Jet A fuel be imposed and allocated to the Airport to help facilitate the expansion of air transportation facilities in the region. This tax has been an important source of funding to address the capacity, security, safety and noise issues of the Airport. During FY2006 the Department was allocated $9.3 million, approximately the same amount as FY2005. The Jet A Fuel Tax revenues are currently used to pay the principal and interest on the 2003C Jet Aviation Fuel Tax Revenue Bonds. Any revenues in excess of the requirement of the 2003C bonds are currently used to pay the principal and interest on the 2003B General Obligation (Limited Tax) Airport Bonds. Effective May 1, 2004, the County enacted an ordinance requiring all rental car customers, except Clark County residents, to pay a Customer Facility Charge (CFC) of $3.00 for each day they rent a car from an on-airport rental car company. The CFC is collected to pay for a portion of the capital cost of the consolidated rental car facility currently under construction at the Airport. It will also be used to pay for a portion of the operating and maintenance expenses once the facility is open and operational in early As of June 30, 2006, the Department has collected $47.4 million in CFC proceeds. All of this revenue has been deferred until such time as it is used to pay for construction or to subsidize rents. During FY2006, $11.4 million of the CFC proceeds were used to buy a fleet of 41 diesel busses that will be used to transport passengers to and from the facility and the terminal buildings. The balance of the CFC proceeds is held in a deferred revenue account. 18

99 Discussion of FY2005 Non-operating Revenues and Expenses The 82.8% increase in interest income for FY2005 is due to the investment of net bond proceeds of $350 million received September 1, The 17.9% increase in interest expense was also due to the issuance of the 2004 Bonds. Passenger Facility Charge (PFC) revenue increased 44.6% due to the increase in the PFC collection amount from $3.00 per qualifying enplaned passenger to $4.50. This increase was effective November 1, Currently, the Department uses all of its PFC proceeds to pay debt service on PFC pledged bonds. As of June 30, 2005, the Department had $525 million of outstanding PFC backed bonds. To facilitate the expansion of air transportation facilities in 1991, the Nevada State legislature established statutes enabling local government entities to impose a Jet A Fuel tax of up to four cents per gallon, which, together with a previously existing tax of one cent, created a potential five cent maximum Jet A Fuel tax. The Board of County Commissioners adopted an ordinance effective July 1, 1991, providing for a two cent per gallon tax in addition to the existing one cent tax. Beginning in FY2004, the Nevada State legislature authorized the County to redirect a one-cent portion of the tax to other transportation projects under the direction of the Regional Transportation Commission. As a result, the allocation to the Department was reduced to two cents and has remained at that amount. Fuel tax proceeds have been pledged to pay debt service on the 2003C Bonds. Effective May 1, 2004, the County enacted an ordinance requiring that all rental car customers, except Clark County residents, pay a customer facility charge (CFC) for each day they rent a car from an on-airport rental car company. The CFC is to be collected from the customers by the rental car companies and remitted each month to the Department. As of May 1, 2004, the CFC was $3.00 per day. The CFC is collected to pay for a portion of the rental car tenant improvements in the new $175 million consolidated rental car facility due to open in early The CFC will also be used to pay for a portion of the construction costs and for the demolition of the car rental companies current maintenance facilities. Until such time as the Department starts using the CFCs for the above mentioned purposes, the proceeds have been recognized as deferred income. Income before Capital Contributions For FY2006, the Airport System income before capital contributions from the federal government totaled $98.7 million, a 72.1% increase over FY2005. The primary reason for this increase is the recognition of $11.4 million in CFC revenue collected from the rental car customers at the Airport, in addition to a full year of PFC collections at the $4.50 collection rate. The PFC collection rate increased from $3.00 to $4.50 on November 1, For FY2005, the income before capital contributions increased $20.2 million, a total of 54.4% due to increased interest income from new money bond issues and the PFC collection rate increase from $3.00 to $4.50 for eight months of the fiscal year. 19

100 Capital Improvement Program In FY2005, the Department developed a comprehensive five-year capital plan. Each fiscal year, the Department updates the five-year capital plan. For FY2006, the Department s comprehensive five-year capital improvement plan totals $3.5 billion. The following is a summary of the capital program along with proposed funding sources: Five-Year Capital Plan As of June 30, 2006 Total Federal Capital Improvement New or Existing Jet-A Budget Grants Fund Bonds PFCs Fuel Tax (000) (000) (000) (000) (000) (000) Airfield Improvements $ 730,787 $ 238,592 $ 95,000 $ 396,194 $ 1,001 Terminal 1 and 2 Capacity Enhancement Projects 395,689 77, ,360 60,978 33,017 Concourse D Expansion 188,877 19,749 5,084 14,824 $ 149,220 Construction New Terminal Three 1,824,350 2,395 1,821,955 Reliever Airport Projects 60,980 44,655 6,210 9, Ivanpah Environmental Impact Study 14,200 10,000 4,200 McCarran Support Facilities 273, , ,905 Total $ 3,487,986 $ 390,330 $ 468,447 $ 2,445,803 $ 149,220 $ 34, % 11.2% 13.4% 70.1% 4.3% 1.0% The signatory airlines serving the Airport have approved all projects listed above. All PFC projects have been approved by the Federal Aviation Administration (FAA). Federal grants include the Department s entitlements and an assumed allocation of $20 million in discretionary monies for each fiscal period. The Capital Improvement Fund consists of the Department s gaming revenue and its portion of shared revenues. Based on current projections, it is anticipated that future gaming revenues will adequately fund the Capital Improvement Fund requirements. The financing plan for Terminal 3, the single largest project the Department will undertake to date, is described in detail under the Debt Management section of this report. Debt Management At June 30, 2006, the Department had $2 billion in outstanding debt. This amount is made up of $269 million in senior lien debt, $995 million in subordinate lien debt; $576 million in PFC pledged debt, and $184 million in third lien general obligation debt. All of the current outstanding debt is naturally or synthetically fixed rate debt, with an average interest rate of approximately 4.0%. With an aggressive $3.5 billion five-year capital plan, the Department is continually reviewing strategies to minimize debt service and keep airline costs as reasonable as possible. With interest rates reaching all-time lows during 2005 and 2006, the Department refinanced all of its outstanding variable rate debt and synthetically fixed the debt with interest rate swaps. When these transactions were completed in August of 2005, the outstanding variable rate debt totaled $480.0 million. The Department s variable rate debt capacity will be used to partially fund the new $1.8 billion Terminal 3 project. In addition, the Department entered into three forward starting swap agreements with Citigroup Global Markets, Inc., J.P. Morgan Securities, Inc. and UBS Financial Services, Inc. that will provide $1.0 billion in fixed rate bonds in 2008, 2009, and 2010 at an average interest rate of around 3.65%. All of the fixed rate bonds will be used for the Terminal 3 project. Until such time as the first bond issue is completed in July of 2008, the Department will be utilizing bond anticipation notes to finance Terminal 3 and other projects. The Department currently has the authority to utilize up to $300 million of these notes. In order to complete the entire five-year capital plan, it is anticipated that the Department may need to issue an additional $200 million in bonds in the next three to five years. 20

101 The Department s bonds are rated by three major rating agencies. The most current ratings are as follows: Fitch S&P Moody s General Airport Revenue Bonds Senior Lien AA- AA- Aa2 General Airport Revenue Bonds Subordinate Lien A+ A+ Aa3 General Airport Revenue Bonds Third Lien A A A1 PFC Revenue Bonds A+ A+ Aa3 In addition, Standard & Poor s Rating Service has rated the Department s interest rate swap portfolio, and based on the Debt Derivative Profile (DDP) scores, the Department s swap portfolio was rated the highest possible score. The Department s score of 1 indicates that the impact from debt derivatives on the Department s financial statements is manageable and represents a neutral credit factor. The Master Indenture of Trust, dated May 1, 2004, which governs the issuance of senior lien debt, requires the Department to have net revenues available for bond debt service coverage equal to 1.25 times the amount of senior lien debt service, and 1.10 times the amount of debt service on any subordinate lien bonds. PFC bonds have no debt service coverage requirement due to the fact that any debt service not payable from PFC proceeds is payable as a subordinate lien to the senior bonds. As of June 30, 2006, the actual coverage on the senior lien bonds was 3.76 and the coverage of the subordinate lien debt service was PFC debt service coverage was The Department continues to meet the challenge of providing users of the Airport System with quality facilities that meet the demands of growth, safety and security, while conscientiously and creatively managing the Department s bonding capacity and keeping airline costs as low as possible. Future Outlook For the third straight year, the Department experienced record growth in passengers and non-airline revenues. As a result, the Department s overall financial position has improved during FY2006. The Department uses the Las Vegas Convention & Visitors Authority s (LVCVA) hotel room construction forecasts to estimate airport passenger traffic for the next five years. Based upon new hotel/casino projects and hotel/casino expansion programs that have been approved and financed, the future growth continues to look very strong. In accordance with the LVCVA hotel room construction forecast dated June 2006, 42,557 new hotel rooms will be constructed in Las Vegas through The Department estimates that these new rooms will generate approximately 13.6 million new passengers (6.8 million enplanements) at the Airport. Several new expansion projects have been initiated at the Airport to accommodate this passenger growth, including the fourth and final wing of Concourse D, the Concourse C security expansion, the pedestrian bridge from Concourse C to Concourses A and B, and the construction of Terminal 3, to name a few. The Environmental Impact Study continues for the supplemental Ivanpah Airport that could be constructed and operational as early as

102 Additional Information Further information on the results of the Airport System financial position is provided in the accompanying audited financial statements and notes thereto for the fiscal years ended June 30, 2006, and This financial report provides the Airport System customers, investors, and creditors with a general overview of the Department s financial condition. The report also presents information about funds it receives and monies it spends for the fiscal periods reported. If you should have questions about this report or need additional financial information, please contact the Finance Division, Clark County, Department of Aviation, at P.O. Box 11005, Las Vegas, Nevada You may also find financial and statistical information for the Airport System at our website at 22

103 Financial Statements CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Statements of Net Assets For the Years Ended June 30, 2006 and Assets (000) (000) Liabilities and Net Assets (000) (000) Current assets: Current liabilities (payable from current assets): Cash and cash equivalents $ 211,753 $ 206,504 Accounts payable $ 46,276 $ 42,349 Accounts receivable, net of allowance for doubtful Accrued expenses 14,789 10,421 accounts of $581,992 and $1,125,137 15,080 11,060 Deferred income 39,245 28,334 Interest receivable 589 3,038 Grants receivable 41,607 21,824 Total current liabilities (payable from current assets) 100,310 81,104 Inventories 1,917 1,577 Prepaid expenses 1,898 1,249 Current liabilities (payable from restricted assets): Total current assets 272, ,252 Securities lending 176, ,908 Current portion of long-term debt 40,785 40,120 Restricted assets: Accrued interest 48,999 38,889 Cash and cash equivalents 562, ,977 Contracts payable 21,508 19,470 Investments 499, ,067 Other receivable 1,549 Interest receivable 9,731 3,814 Total current liabilities (payable from restricted assets) 287, ,387 Total restricted assets 1,074,138 1,065,858 Total current liabilities 387, ,491 Capital assets: Noncurrent liabilities: Property and equipment: Long-term debt, net of current portion 1,965,960 1,957,682 Land and land improvements 1,448,171 1,386,259 Other long term liabilities 30,658 Buildings 985, ,168 Furniture and fixtures 14,474 14,121 Total long term liabilities 1,996,618 1,957,682 Machinery and equipment 193, ,394 Construction in progress 490, ,925 Total liabilities 2,384,506 2,296,173 3,131,314 2,803,867 Less accumulated depreciation (855,065) (784,211) Net assets: Total property and equipment, net 2,276,249 2,019,656 Invested in capital assets, net of related debt 333,719 95,981 Deferred charges, net 35,283 24,492 Restricted for: Total long-term assets 2,311,532 2,044,148 Capital projects 385, ,096 Debt service 382, ,192 Unrestricted 172, ,816 Total net assets 1,274,008 1,059,085 Total Assets $ 3,658,514 $ 3,355,258 Total liabilities and net assets $ 3,658,514 $ 3,355,258 See accompanying notes to financial statements 23

104 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Statements of Revenue, Expenses and Changes in Net Assets For the Years Ended June 30, 2006 and (000) (000) Operating Revenues: Landing and other aircraft fees $ 34,112 $ 37,113 Building and land rental 103,171 84,459 Concession fees 149, ,938 Other 4,325 6, , ,567 Operating Expenses: Salaries and related expenses 48,817 46,200 Fringe benefits 18,311 17,129 Operating and Maintenance 82,209 69,315 Administrative 7,640 7, , ,347 Operating income before depreciation 134, ,220 Depreciation 70,853 66,048 Operating Income 63,149 55,172 Non-Operating income (expense): Restricted revenue 106,653 82,752 Interest income 36,129 26,866 Interest expense (113,460) (105,806) Other 6,265 (1,612) 35,587 2,200 Income before capital contributions 98,736 57,372 Capital contributions 116,187 62,335 Increase in net assets 214, ,707 Net assets beginning of year 1,059, ,379 Net assets end of year $ 1,274,008 $ 1,059,085 See accompanying notes to financial statements 24

105 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Statements of Cash Flows For the Years Ended June 30, 2006 and Unrestricted/Undesignated Restricted/Designated Unrestricted/Undesignated Restricted/Designated (000) (000) (000) (000) Cash flows from operating activities: Cash received from customers $ 287,342 $ 261,237 Cash paid to employees (69,208) (62,401) Cash paid for services and supplies (81,910) (73,137) Net cash provided by operating activities 136, ,699 Cash flows from capital and related financing activities: Passenger Facility Charges received $ 85,969 $ 73,390 Jet A Fuel Taxes received 9,271 9,362 Customer Facility Charges Received 23,527 22,038 Acquisition and construction of capital assets (82,335) (272,259) (57,578) (149,491) Federal Aviation Administration grants received 7,241 19,914 9,549 Transportation Safety Administration grants received 50,640 10,318 Transfers to restricted cash for debt service: Principal (41,145) 41,145 (29,960) 29,960 Interest (73,248) 73,249 (36,241) 36,241 Other transfers (to) from restricted and designated cash 55,434 (55,434) 95,535 (95,535) Bond proceeds 547, ,492 Deposit to refunding escrow (251,004) (432,148) Bond issuance costs (5,553) (9,207) Land sale proceeds 8 1,335 CMA land sale and rental proceeds ,605 CMA land expense related payments (718) (14,677) Debt service payments: Principal (130,204) (39,060) Interest (110,571) (4,383) (86,019) Net cash provided by (used in) capital and related financing activities (134,008) 6,693 (12,777) 167,225 Cash flows from investing activities: Purchase of investments (299,924) Maturities of investments 179,964 Interest received 3,032 32,317 3,518 22,390 Net cash provided by (used in) investing activities 3,032 32,317 3,518 (97,570) Increase (decrease) in cash and cash equivalents 5,249 39, ,438 69,655 Cash and cash equivalents, beginning of year 206, ,977 90, ,322 Cash and cash equivalents, end of year $ 211,753 $ 562,987 $ 206,504 $ 523,977 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 63,149 $ 55,172 Depreciation 70,853 66,048 (Increase) in accounts receivable--customers (1,807) (1,417) (Increase) in inventories (340) (641) (Increase) in prepaid expenses (649) (2) Increase in accounts payable--operations 8,929 4,524 Increase (decrease) in accrued payroll (2,080) 927 Increase in deferred income (1,831) 1,088 Net cash provided by operating activities $ 136,224 $ 125,699 See accompanying notes to financial statements 25

106 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements For the Years Ended June 30, 2006 and ) Organization and Summary of Significant Accounting Policies Nature of Operations and Basis of Accounting Clark County Department of Aviation (the Department) comprises a single enterprise fund of Clark County, Nevada (the County) and operates as a separate department within the County structure. The Board of Commissioners of the County (the Board) is responsible for governing the affairs of the Department. The accounting principles used are similar to those applicable to a private business enterprise (accrual basis of accounting), where the costs of providing services to the public are recovered through user fees. The Department is not subsidized by any tax revenues of the County. Pursuant to the Government Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting, the Department elected not to be bound by pronouncements of the Financial Accounting Standards Board issued after November 30, Accordingly, it selects accounting methods among available alternatives when not otherwise required by GASB or earlier applicable FASB standards. All tabular dollar amounts are presented in thousands. Revenues from airline landing fees, terminal building rentals, gate use fees and concession operations are reported as operating revenues. Expenses such as salaries, professional services, materials, utilities and administrative expenses are reported as operating expenses. Interest income, income from Passenger Facility Charges (PFCs), Customer Facility Charges (CFCs) and Jet A fuel tax revenues are reported as non-operating revenues. Expenses such as interest expense and financing related costs are reported as non-operating expenses. Rates charged to airlines that are signatory to the Scheduled Airline Operating Agreement and Terminal Building Lease (the Airline Agreement) are established annually in accordance with the provisions of the Airline Agreement, which expires on July 1, The rates and charges are established to recover the actual costs of operating and maintaining the airfield, terminal facilities, and other areas of the Airport System plus annual debt service after crediting certain non-airline revenues. Rates are based on estimates at the beginning of each fiscal year, and are adjusted based on audited actual revenues and expenses at the end of each year. Cash Equivalents The Department s pooled funds, and short-term investments, with original maturities of three months or less from the date of acquisition, are considered to be cash equivalents (Note 11). 26

107 Investments Investments, consisting of federal government obligations and repurchase agreements, guaranteed investment certificates, and money market funds are stated at cost, including amortized discount or premium. Investments in the County s pooled Treasurer s cash account are adjusted to market (Note 11). Property and Equipment Property and equipment with an acquisition cost in excess of $3,000 are generally capitalized and carried at cost. (See Note 4) Costs related to the alteration or demolition of existing facilities during major expansion programs are capitalized as additional costs of the program. Depreciation is computed using the straight-line method based on their useful lives (in years) currently estimated as follows: Land Improvements Buildings Furniture and Fixtures Machinery and Equipment years years 15 years 3-20 years Deferred Charges Deferred charges (Note 5), consisting primarily of underwriter fees and other costs incurred during the issuance of General Airport Revenue Bonds, are amortized over the life of the related bonds using the interest method. Contributed Capital Federal Aviation Administration (FAA) grants and Transportation Safety Administration (TSA) grants are restricted for certain capital improvements and reported as capital contributions in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Non-exchange Transactions, as amended by GASB Statement No. 36. Passenger Facility Charges The FAA authorized the County to impose a Passenger Facility Charge (PFC) of $3.00 per qualifying enplaned passenger commencing June 1, The PFC continued to be $3.00 until November 1, 2004, when the FAA authorized the County to increase the PFC to $4.50. Net PFC receipts are restricted and can be used only for those capital projects, including debt service, that have been authorized by the FAA. The County has been authorized to collect PFCs in the aggregate amount of $2.8 billion. Collections during the year ended June 20, 2006, are $86.0 million, and aggregate collections from the inception through June 30, 2006, are $636.6 million. 27

108 Budgetary Control As an enterprise fund of the County, the Department is subject to budgetary requirements of the State of Nevada (the State) including budgetary hearings and public meetings as required by the County s overall budget process. Accordingly, the Board approves the Department s annual budget and any subsequent changes thereto. The Department s budget is prepared on the accrual basis of accounting, and actual expenses cannot exceed the total budgeted operating expenses without action pursuant to the State s budgetary requirements. Appropriations for operating expenses lapse at the end of each fiscal period. Legal Defense Costs The Department does not accrue for estimated future legal and related defense costs, if any, to be incurred in connection with outstanding or threatened litigation and other disputed matters but rather, records such as period costs when the related services are rendered. 2.) Grants Receivable Grants receivable include FAA grants in the amount of $8.8 million and TSA grants in the amount of $32.8 million at June 30, ) Restricted and Designated Assets Certain amounts of cash, cash equivalents and investments have been restricted by bond ordinance or designated by management for certain airport expansion programs and are accounted for separately in the statement of cash flows. A summary of the restricted and designated assets is as follows: Restricted and Designated Assets For the Years Ended June 30, 2006 and (000) (000) Assets restricted by Master Indenture of Trust: Restricted for debt service: Cash and investments $ 240,538 $ 158,316 Interest receivable 2,012 1,128 Other receivable 1, , ,444 Restricted for acquisition of property and equipment: Cash and investments 445, ,644 Passenger facility charges 64,935 41,138 Interest receivable 5,022 1, , ,090 Other restricted assets: Debt service reserve Cash and investments - PFC bonds 26,502 25,638 Cash and investments - Other bonds 90, ,382 Market adjustment (4,275) 45 Interest receivable 2, , ,824 Working capital and contingency cash and investments 17,540 30,924 Capital improvement cash and investments 5,000 5, , ,748 Total restricted assets by Master Indenture of Trust 897, ,282 Securities lending collateral 176, ,908 Designated by Management: Cash and investments 140,050 Interest receivable 618 $ 1,074,138 1,065,858 28

109 4.) Changes in Property and Equipment The following schedule details the additions, retirements and transfers of property and equipment during FY2006. The schedule also details changes in accumulated depreciation for FY2006: Schedule of Changes in Property and Equipment For the Years Ended June 30, 2006 and 2005 Balance Additions Deletions Balance July 1, and and June 30, 2005 Reclasses Reclasses 2006 (000) (000) (000) (000) Land and land improvements $ 1,386,259 $ 30,814 $ 31,098 $ 1,448,171 Buildings and improvements 979, ,845 $ 985,103 Furniture and fixtures 14, $ 14,474 Machinery and equipment 167,394 18,105 7,851 $ 193,350 Construction in progress 256, ,836 (47,545) $ 490,216 2,803, ,198 (2,751) $ 3,131,314 Less accumulated depreciation (784,211) (73,412) 2,558 (855,065) Capital assets - net $ 2,019,656 $ 256,786 $ (193) $ 2,276,249 29

110 5.) Deferred Charges Schedule of Deferred Charges For the Years Ended June 30, 2006 and 2005 Bond Issue or Swap Issuance Expenses A $ 901,054 $ 1,160, Series A-1 and A-2 142, Series A 858, , Series B 551, Series A 640, Series B 2,057, Series C 1,143,859 1,196, Series A 122, , PFC 1,972,093 2,043, , , General Obligation Series A 356, , General Obligation Series B 491, , Jet A Fuel Tax Series C 2,910,900 3,034, Series A-1 1,883,848 1,944, Series A-2 3,960,467 4,048, Series B 890, Series C 550, Series A-1 1,426,931 1,461, Series A-2 1,416,200 1,450, Series B 778, , Series C 3,175, Series D 2,488, Series E 731, Series A Senior 990, Forward Swap 2,737, Forward Swap 5,111, Forward Swap 1,462,312 $ 35,282,339 $ 24,492,165 30

111 6.) Long-Term Debt A summary of long-term debt transactions for the FY ended June 30, 2006, follows: Schedule of Long-term Debt Principal Balances Outstanding For the Years Ended June 30, 2006 and 2005 Balance Balance June 30, June 30, 2005 Additions Refunding Pay downs 2006 (000) (000) (000) (000) (000) SENIOR LIEN BONDS: 1993 Series A $ 220,600 $ (21,600) $ 199, Series A $ 69,590 69,590 Sub-Total Senior Lien 220,600 69,590 (21,600) 268,590 SUBORDINATE LIEN BONDS: 1995 Series A-1 and A-2 69,925 $ (68,490) (1,435) 1998 Series A 104,100 (6,505) 97, Series B 50,900 (50,300) (600) 2001 Series A 59,920 (59,920) 2001 Series B 184,805 (184,805) 2001 Series C 115, , Series A-1 128, , Series A-2 232, , Series B 65,000 (65,000) 2004 Series C 39,300 (39,300) 2005 Series C 215, , Series D 205, , Series E 58,920 58,920 Sub-Total Subordinate Lien Bonds 1,050, ,445 (467,815) (8,540) 1,053,755 PFC BONDS: 1992 Series A 21,975 (6,365) 15, PFC 211,420 (1,010) 210, PFC 31,790 (1,599) 30, Series A-1 130, , Series A-2 129, , Series B 60,175 (9,325) 50,850 Sub-Total PFC Bonds 585,260 (18,299) 566,961 THIRD LIEN BONDS: 2003 General Obligation Series A 42,550 42, General Obligation Series B 37,000 37, Jet A Fuel Tax Series C 105,435 (975) 104,460 Sub-Total Third Lien Bonds 184,985 (975) 184,010 Total $ 2,041,510 $ 549,035 $ (467,815) $ (49,414) $ 2,073,316 See Also Note 14 31

112 The Senior Lien and Subordinate Lien General Airport Revenue Bonds are secured by and are payable solely from Net Revenues of the Airport System. The PFC Revenue Bonds are secured by and are payable from PFC proceeds with a subordinate pledge of the Net Revenues of the Airport System. The Third Lien Bonds are secured by and payable from the Jet A fuel tax revenues and the Net Revenues of the Airport System. The County is not obligated to pledge any of its taxing powers for the payment of Airport System bonds. In accordance with the Master Indenture, the Department is required to set aside and credit all Gross Revenues of the Airport System into the Revenue Fund upon receipt. In addition to the deposits to the Revenue Fund and the payments from the Operation and Maintenance Fund, the Department is required to establish and maintain the following funds and accounts: a) Bond Fund for payment of all interest and principal on outstanding debt. b) Debt Service Reserve Fund equal to the maximum annual debt service. c) Working Capital & Contingency Reserve Fund equal to 8.33 percent of the amount designated in the annual Airport System operating and maintenance budget. d) Capital Fund any remaining monies in the Revenue Fund. For FY2006, all funding requirements have been met and related accounts have been maintained at the required levels. Arbitrage Rebate Requirement The Tax Reform Act of 1986 imposes a rebate requirement with respect to bonds issued by the County. Under this act, an amount may be required to be rebated to the United States Treasury, so that all interest on the bonds qualifies for exclusion from gross income for federal income tax purposes. The Department is current on all required arbitrage payments. As of June 30, 2006, the Department has estimated its potential arbitrage rebate liability and has accrued $410,000 to cover such estimated liability. 32

113 Long-term debt consisted of the following at June 30, 2006: Schedule of Long-term Debt Outstanding For the Years Ended June 30, 2006 and (000) (000) Total principal outstanding $ 2,073,316 $ 2,041,510 Less: Current maturities 40,785 40, Series A-1 and A-2 Unamortized discount Series A Unamortized premium Unamortized Refunding loss 2,646 2, Series B Unamortized discount Series C Unamortized Refunding loss 6,876 7, Series A Unamortized discount PFC Unamortized discount and Unamortized Refunding loss 13,788 14, Unamortized premium and Unamortized Refunding loss General Obligation Series A Unamortized Refunding loss 1,043 1, General Obligation Series B Unamortized premium and Unamortized Refunding loss 906 1, Jet A Fuel Tax Series C Unamortized premium (7,178) (7,483) 2004 Series A-1 Unamortized premium (6,165) (6,363) 2004 Series A-2 Unamortized discount and Unamortized Refunding loss 5,542 5, Series B Unamortized Refunding loss (7) Series A-1 Unamortized Refunding loss 8,752 9, Series A-2 Unamortized Refunding loss 8,749 9, Series B Unamortized Refunding loss 3,627 3, Series C Unamortized Refunding loss 2, Series D Unamortized Refunding loss 25, Series E Unamortized Refunding loss Series A Senior Unamortized premium (1,470) Sub-total current maturities, prepayments and unamortized discounts 107,356 83,828 Long-term debt, net of current portion, prepayments and unamortized discount $ 1,965,960 $ 1,957,682 33

114 General Airport Revenue Bonds Series 1993A: In September 1991, the County entered into a Swap financing agreement. Under the terms of the swap agreement, in May 1993, the County issued $339 million of variable rate twenty-year Airport Revenue Bonds, Series 1993A. Upon issuance of the 1993A bonds, $318 million of the 1983 Airport Revenue Bonds were refunded. Furthermore, the County swapped with the counterparty its variable rate debt for a fixed rate debt service payment based on a fixed rate of 6.69%. Interest is due January 1 and July 1, and principal is due annually on July 1. Annual debt service payments range from $25.5 million to $37.2 million through At the time of the refunding of the 1983 bonds, future cash flow savings amounted to $110 million and had a discounted present value of over $65 million. The then applicable accounting principles required the recognition of an extraordinary loss of $24.7 million on the refunding. Series 1998A: In April 1998, the County issued $121 million of Airport System Subordinate Lien Revenue Bonds, Series 1998A, with a premium of $4 million and interest ranging from 3.75% to 5.23%. Interest is due January 1 and July 1, and principal is due annually on July 1. Annual debt service payments range from $1.4 million to $12.0 million through The bond proceeds were used to substantially retire portions of the 1988 bonds, which had interest rates ranging from 6.5% to 8.25%. Future cash flow savings amount to $70.2 million, with a present value savings of $37.8 million. Series 2001C: In August 2001, the County issued $115.6 million of Adjustable Rate Airport System Subordinate Lien Revenue Bonds, Series 2001C. Initially, interest on the bonds is based on a weekly rate and is payable January 1 and July 1. Principal is due from July 2026 through July 2029 ranging from $16.6 million to $35.0 million. The proceeds of the Series 2001C bonds were used to defease $105.2 million of the Series 1999A bonds. The defeasance resulted in a loss of $8.4 million and provided a future cash flow savings of $42.1 million and a present value savings of $16.0 million. Series 2004A: In July 2004, the County issued $361.2 million of Airport System Subordinate Lien Revenue Bonds, Series 2004A. Interest rates for Series 2004A-1 range from 5.00% to 5.25% through maturity at The Series 2004A-2 has a fixed interest rate of 5.125% through 2027 and 5.00% to maturity at Interest is due January 1 and July 1, and principal is due annually on July 1 commencing July for the 2004 A-1 series and July 1, 2024 for the 2004 A-2 series. The Series 2004 bonds were issued to finance the cost of certain capital improvements, refund the $38.8 million in outstanding Series 1999B-2 bonds, fund capitalized interest, and to pay certain issuance costs. 34

115 Series 2005B: In March 2005, the County issued $60.2 million in Airport System Subordinate Lien Revenue Bonds. Interest on the bonds is set at a seven-day auction rate. The 2005B bonds were issued for the purpose of refunding the outstanding 1995A bonds. The refunding provided a future cash flow savings of $13.3 million, with a present value savings of $7.7 million. Series 2005A: In September 2005, the County issued $69.6 million in Airport System Senior Lien Revenue Bonds. $25.9 million of the term bonds mature in 2037 and provide for an interest rate of 4.5%. The balance of the term bonds matures in 2040 at an average interest rate of 5.0%. The 2005A bonds were issued to finance the cost of certain capital improvements to the Airport System, purchase a reserve fund insurance policy and to pay certain costs of issuance. Series 2005C, D, and E: In August 2005, the County issued $479.5 million in Airport System Subordinate Lien Revenue Bonds. The Series 2005C bonds initially were issued as Auction Rate Securities in the aggregate principal amount of $215.2 million. The Series 2005C bonds mature July The Series 2005D bonds in the amount of $205.4 million were issued at the Weekly Interest Rate, which is determined by the Remarketing Agent every Tuesday of each week. The Series 2005E bonds in the amount of 58.9 million were issued at a Weekly Interest Rate, which is determined by the Remarketing Agent on Tuesday of each week. The purpose of the refunding was to synthetically fix all of the Airport System s outstanding variable rate debt with more attractive interest rates. The refunding resulted in a loss of $24.6 million which represents the difference between the refunded bonds adjusted for amortized costs and accrued interest and the face value of the new bonds. The refunding associated with the 2005D bonds provided a negative future cash flow savings of ($13.9) million, with a present value savings of $25.7 million. The 2005C and E bonds were conversions of variable rate to fixed rate debt. Passenger Facility Charge Revenue Bonds: Series 1992A and B: In September 1992, the County issued $269.0 million of Airport Passenger Facility Charge Revenue Bonds, Series 1992A and B at a discount of $19.8 million. Interest on the bonds ranges from 4.95% to 6.5%. Interest is due January 1 and July 1, and principal is due annually on July 1. Annual debt service payments range from $3.9 million to $10.0 million through The bond proceeds were used primarily to fund Airport System improvements. 35

116 Series 1998: In April 1998, the County issued $214.3 million of Airport Passenger Facility Charge Refunding Revenue Bonds, Series 1998 at a discount of $5.4 million. Interest rates on the bonds range from 4.1% to 5.5%. Interest is due January 1 and July 1, and principal is due annually on July 1. Annual debt service payments range from $10.8 million to $22.9 million through The 1998 bonds refunded $202.5 million of the 1992 PFC bonds. The refunding resulted in a loss of $17.2 million which represents the difference between the refunded bonds adjusted for amortized costs and accrued interest and the face value of the new bonds. This refunding provided a future cash flow savings of $11.6 million, with a present value savings of $10.6 million. Series 2002A: In November 2002, the County issued $34.5 million of Airport Passenger Facility Charge Refunding Revenue Bonds, Series 2002A at a premium of $1.6 million. Interest on the bonds ranges from 2.32% to 4.72%. Interest is due January 1 and July 1, and principal is due annually on July 1. Annual debt service payments range from $920 thousand to $7.0 million through The bonds refunded $33.7 million of 1992 PFC bonds. The refunding resulted in a loss of $2.0 million which represents the difference between the refunded bonds adjusted for amortized costs and accrued interest and the face value of the new bonds. This refunding provided a future cash flow savings of $2.7 million, with a present value savings of $2.1 million. Series 2005A: In March 2005, the County issued $260.0 million of Airport Passenger Facility Charge Refunding Revenue Bonds, Series 2005A. The bonds refunded the outstanding 1995A PFC bonds. The refunding resulted in a loss of $18.8 million which represents the difference between the refunded bonds adjusted for amortized costs and accrued interest and the face value of the new bonds. This refunding provided a future cash flow savings of $23.5 million, with a present value savings of $15.7 million. Interest Rate Swap Agreements: As summarized in the chart below, the Department currently has 15 outstanding swap agreements with initial notional amounts totaling over $3 billion. The outstanding notional amount as of June 30, 2006 was $2.9 billion, including $1.0 billion forward starting swaps that become effective in 2008, 2009 and The current market or fair value of each swap is detailed below and the total swap valuation of all outstanding swap agreements is $58.5 million. Excluding the valuations for the forward starting swaps, the valuation as off June 30, 2006 was $20.5 million. The market or fair value for each swap is estimated using the zerocoupon method. Under this method, future payments are calculated assuming that the current forward rates of the appropriate yield curve (Bond Market Association Municipal Swap Index, BMA or London Interbank Offered Rate, LIBOR ) correctly anticipate future spot rates. These payments are then discounted using the spot rates implied by the current LIBOR yield curve for hypothetical zero-coupon rate bonds due on the date of each future net settlement on the swaps. 36

117 All of the swaps entered into by the Department comply with the County s swap policy. Each swap is written under standard International Swaps and Derivatives Association, ISDA, guidelines and documentation. This includes standard provisions for termination events, such as failure to pay or bankruptcy. The Department retains the right to terminate any swap agreement at the market value prior to maturity. The Department has termination risk under the contract particularly if an Additional Termination Event, ATE, was to occur. An ATE occurs if either the credit rating of the bonds associated with a particular swap agreement and the rating of the swap insurer falls below a pre-defined credit rating threshold, or the credit rating of the swap counterparty falls below a threshold as defined in the swap agreement. The Department has purchased swap insurance in order to mitigate termination risk. With regard to credit risk, the potential exposure is mitigated through the use of an ISDA Credit Support Annex, CSA. Under the terms of the CSA, each swap counterparty is required to post collateral to a third party when their credit ratings fall below the trigger level as defined in each swap agreement. As long as the Department retains insurance and its credit rating stays above the established threshold, the Department is not required to post any collateral. This protects the Department from credit risks inherent in the swap agreements. Standard and Poor s Rating Services introduced a Debt Derivative Profile, DDP, scoring system in 2004 to provide public finance markets with a simple measure of the complexities of municipal debt-related derivatives by translating the exposure into an easily understandable measure of risk. The DDP was developed to enhance the transparency of municipal derivative structures and the impact on credit quality. DDP scores range from 1 to 5, with 1 representing the lowest risk and 5 representing the highest risk. Although many factors are considered, the DDP scores principally indicate an issuer s potential financial loss from over-thecounter debt derivatives due to early termination resulting from credit or economic reasons. During FY2006, Standard and Poor s rated the Department s swap portfolio with a score of 1. CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Swap Agreements as of June 30, 2006 Initial Current Notional Market Swap County County Maturity Amount Counterparty Ratings Value Description Pays Receives Date (000) Counterparty Moody's S&P Fitch (000) 01 Floating-to-Fixed Q % Bond Rate 7/1/2012 $259,700 AIG Financial Products Corp. Aa2 AA+ N/A ($16,996) 02 Floating-to-Fixed Q 6.00% to 7/10; 2.28% to maturity 67% of USD LIBOR 7/1/ ,560 Citigroup Financial Products Inc. Aa1 AA- AA+ 5, Basis Swap U BMA Municipal Swap Index % % of USD-LIBOR % 7/1/ ,515 Citigroup Financial Products Inc. Aa1 AA- AA+ (1,909) 04 Basis Swap U BMA Municipal Swap Index % 72.5% of USD LIBOR % 7/1/ ,855 Citigroup Financial Products Inc. Aa1 AA- AA+ (4,270) 05 Floating-to-Fixed Q 5.49% to 7/10, 3.00% to maturity 69% of USD-LIBOR % 7/1/ ,900 Citibank, N.A., New York Aa1 AA AA+ (1,014) 06 Basis Swap U BMA Municipal Swap Index 78.4% of USD-LIBOR % 7/1/ ,550 Citigroup Financial Products Inc. Aa1 AA- AA+ 1, Basis Swap U BMA Municipal Swap Index 68% of USD-LIBOR % 7/1/ ,000 Citigroup Financial Products Inc. Aa1 AA- AA Floating-to-Fixed Q 4.97% to 7/10, 3.00% to maturity 62.6% of USD-LIBOR % 7/1/ ,175 Citigroup Financial Products Inc. Aa1 AA- AA+ 1, Basis Swap U BMA Municipal Swap Index 62.2% of USD-LIBOR + 7/1/ ,000 Citigroup Financial Products Inc. Aa1 AA- AA+ 1, % to 7/10, 1.052% to maturity 10A Floating-to-Fixed Q 4.00% to 7/15, 3.00% to maturity 82% of USD-LIBOR % 7/1/ ,200 Citigroup Financial Products Inc. Aa1 AA- AA+ 12,385 10B Floating-to-Fixed Q 4.00% to 7/15, 3.00% to maturity 82% of USD-LIBOR % 7/1/ ,975 JPMorgan Chase Bank, N.A. Aa2 AA- AA- 2,619 10C Floating-to-Fixed Q 4.00% to 7/15, 3.00% to maturity 82% of USD-LIBOR % 7/1/ ,975 UBS AG Aa2 AA+ AA+ 2,619 11A Floating-to-Fixed Q 4.20% to 7/15, 2.515% to maturity 61.9% of USD-LIBOR % 7/1/ ,815 Citigroup Financial Products Inc. Aa1 AA- AA+ 9,202 11B Floating-to-Fixed Q 4.20% to 7/15, 2.515% to maturity 61.9% of USD-LIBOR % 7/1/ ,780 JPMorgan Chase Bank, N.A. Aa2 AA- AA- 1,907 11C Floating-to-Fixed Q 4.20% to 7/15, 2.515% to maturity 61.9% of USD-LIBOR % 7/1/ ,780 UBS AG Aa2 AA+ AA+ 1,907 12A Floating-to-Fixed Q 5.00% to 7/15, 1.21% to maturity 82% of USD-LIBOR % 7/1/ ,330 Citigroup Financial Products Inc. Aa1 AA- AA+ 3,073 12B Floating-to-Fixed Q 5.00% to 7/15, 1.21% to maturity 82% of USD-LIBOR % 7/1/2036 8,795 JPMorgan Chase Bank, N.A. Aa2 AA- AA C Floating-to-Fixed Q 5.00% to 7/15, 1.21% to maturity 82% of USD-LIBOR % 7/1/2036 8,795 UBS AG Aa2 AA+ AA Floating-to-Fixed Q % to 7/17, 0.25% to maturity 64.7% of USD-LIBOR % 7/1/ ,000 JPMorgan Chase Bank, N.A. Aa2 AA- AA- 4, Floating-to-Fixed Q % to 7/17, 0.25% to maturity 64.7% of USD-LIBOR % 7/1/ ,000 UBS AG Aa2 AA+ AA+ 4, Floating-to-Fixed Q 5.626% to 7/17, 0.25% to maturity 64.70% of USD-LIBOR % 7/1/ ,000 Citibank, N.A., New York Aa1 AA AA+ 5, Floating-to-Fixed Q 6.00% to 7/17, 1.455% to maturity 64.70% of USD-LIBOR % 7/1/ ,000 Citigroup Financial Products Inc. Aa1 AA- AA+ 10, Floating-to-Fixed Q 6.00% to 7/17, 1.913% to maturity 61.90% of USD-LIBOR % 7/1/2040 $150,000 Citigroup Financial Products Inc. Aa1 AA- AA+ 12,924 TOTAL $58,515 Source: The PFM Group 37

118 An analysis of each swap agreement is presented below: $199.0 Million Floating-to-Fixed Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-fixed bond rate swap in connection with its 1993 Series A Variable Rate Bonds. The intention of the swap was to change the Department s variable interest rate on the bonds to a synthetic fixed rate. Terms: Under the swap agreement, the Department pays AIG, the counterparty, a fixed rate with a coupon of percent. In exchange, the Department receives a variable rate equal to the actual bond rate on the 1993 Series A Variable Rate Bonds. The notional amount of the swap matches the amount of the 1993 Series A Variable Rate Bonds outstanding each fiscal year. The bonds and the related swap agreement mature on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of ($16,996,255). Associated Debt: (000) Actual interest payments on debt $ 5,221 Net payment under swap agreement 9,641 Total payments $14,862 Credit Risk: As of June 30, 2006, the Department was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap become positive, the Department would be exposed to credit risk in the amount of the swap s fair value. The counterparty was rated Aa2 by Moody s Investor Service and AA by Standard & Poor s. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis or Tax Risk: The swap does not expose the Department to basis or tax risk as the variable payment received from AIG matches the exact payment due on the 1993 Series A Variable rate Bonds. 38

119 Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value C $115,560,000 MSL Swap Objective: As a means to lower its borrowing costs when compared against fixed-rate bonds at the time of issuance, the Department executed a floating-to-fixed Market Spread Language (MSL) swap in connection with its Series 2001C Variable Rate Bonds. The intention of the swap was to change the Department s variable interest rate on the bonds to a synthetic fixed rate that steps down over time. The swap was structured with step-down coupons in order to shift savings from the early years to the later years of the swap. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, a fixed interest rate of 6.0 percent. On July 1, 2010, the swap coupon steps down to percent until maturity. The percent coupon in the final period reflects the above-market fixed rate required to offset the below-market fixed rate of percent. The effective at-market fixed rate for the entire swap term equals percent. In exchange, the Department receives a variable rate equal to the lesser of 1) the actual bond rate on the Series 2001C bonds, or 2) percent of the one-month LIBOR. The notional amount of the swap matches the amount of the bonds outstanding. The bonds variable-rate coupons are assumed to be based on BMA. The bonds and related swaps mature on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $5,454,678. Associated Debt: (000) Actual interest payments on debt $ 4,969 Net payment under swap agreement 2,049 Total payments $ 7,018 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk in the amount of the swap s fair value of $5,454,678. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. 39

120 Basis Risk: The swap exposes the Department to basis risk should a temporary mismatch occur between the rate the Department pays on the underlying bonds and the percentage of LIBOR received on the swap. In this circumstance, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value C $102,015,000 Basis Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-floating (Basis) swap in connection with its initial Series 1995 A-1 and Series 2004 C Bonds. The intention of the swap was to reduce interest costs. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, a variable rate computed by taking BMA less percent and receiving a variable rate payment by taking percent of LIBOR less percent. The swap has a notional amount of $102,015,000 and the associated fixed rate bonds had a 102,015,000 principal amount outstanding at the time of the swap execution. The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of ($1,909,307). Associated Debt: (000) Actual interest payments on debt $ 450 Net payment under swap agreement (124) Total payments $

121 Credit Risk: As of June 30, 2006, the Department was not exposed to credit risk because the swap had a negative fair value of $1,909,307. However, should the interest rates change and the fair value of the swap become positive, the Department would be exposed to credit risk in the amount of the swap s fair value. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value B $179,655,000 Basis Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-floating (Basis) swap in connection with its initial Series 1995 A-2, 1998B, 2001A and 2004B Bonds. The intention of the swap was to reduce interest costs. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, a variable rate computed by taking BMA less percent and receiving a variable rate payment by taking percent of one-month LIBOR less percent. The swap has a notional amount of $179,655,000 and the associated fixed rate bonds had a similar principal amount outstanding at the time of the swap execution. The swap matures on July 1,

122 Fair Value: As of June 30, 2006, the swap had a fair market value of ($4,269,695). Associated Debt: (000) Actual interest payments on debt $ 1,354 Net payment under swap agreement (252) Total payments $ 1,102 Credit Risk: As of June 30, 2006, the Department was not exposed to credit risk because the swap had a negative fair value of $4,269,695. However, should the interest rates change and the fair value of the swap become positive, the Department would be exposed to credit risk in the amount of the swap s fair value. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to Basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to Termination Risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value $259,900,000 Floating-to-Fixed LIBOR Swap Objective: As a means to lower its borrowing costs and allow the Department to efficiently lock in forward fixed rates, the Department executed a floating-to-fixed swap in connection with its 2005 Series A-1 and A-2 Variable Rate Bonds. The intention of the 42

123 swap was to change the Department s anticipated variable interest rate on the bonds to a synthetic fixed rate. The swap was structured with step-down coupons in order to shift most of the savings from the early years to the later years of the swap. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, a fixed interest rate of percent. On July 1, 2010, the swap coupon steps down to percent until maturity. The percent coupon in the final period reflects the above-market fixed rate required to offset the below-market fixed rate of percent. In exchange, the Department receives a variable rate equal to the lesser of 1) the actual bond rate on the Series 2005 bonds, or 2) percent of the one-month LIBOR plus 0.35 percent. The notional amount of the swap matches the amount of the bonds outstanding. The bonds variable-rate coupons are assumed to be based on BMA. The bonds and related swaps mature on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of ($1,013,595). Associated Debt: Actual interest payments on debt $ 7,864 Net payment under swap agreement 5,577 Total payments $13,441 Credit Risk: As of June 30, 2006, the Department was not exposed to credit risk because the swap had a negative fair value of $1,013,595. However, should the interest rates change and the fair value of the swap become positive, the Department would be exposed to credit risk in the amount of the swap s fair value. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. 43

124 Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value $42,550,000 Basis Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-floating (Basis) swap in connection with its Series 2003 A Bonds. The intention of the swap was to reduce interest costs. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, a variable rate payment computed by taking BMA less percent and receives a variable rate payment by taking percent of one-month LIBOR less percent. The swap has a notional amount of $42,550,000 and the associated fixed rate bonds had a similar principal amount outstanding at the time of the swap execution. The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $1,074,645. Associated Debt: (000) Actual interest payments on debt $1,550 Net payment under swap agreement (188) Total payments $1,362 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $1,074,645. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. 44

125 Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value B $200,000,000 Basis Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-floating (Basis) swap in connection with its Series 2001B, 1998A and 2003B Bonds. The intention of the swap was to reduce interest costs. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, BMA and receives percent of onemonth LIBOR plus percent. The swap has a notional amount of $200,000,000 and the associated fixed rate bonds had a similar principal amount outstanding at the time of the swap execution. The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $571,433. Associated Debt: (000) Actual interest payments on debt $7,027 Net payment under swap agreement (825) Total payments $6,202 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $571,433. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. 45

126 Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value $60,175,000 Floating-to-Fixed LIBOR Swap Objective: As a means to lower its borrowing costs the Department executed a floating-to-fixed LIBOR swap in connection with its 2005B AMT Bonds. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, a fixed interest rate of percent through July 1, 2010 and percent through maturity and receives percent of one-month LIBOR plus percent. The swap has a notional amount of $60.2 million, the same amount of the 2005 B Bonds outstanding at June 30, The swap matures on July 1, 2025 Fair Value: As of June 30, 2006, the swap had a fair market value of $1,230,051. Associated Debt: (000) Actual interest payments on debt $1,806 Net payment under swap agreement 1,157 Total payments $2,963 46

127 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $1,230,051. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value $300,000,000 Fixed Spread Basis Swap Objective: As a means to lower its borrowing costs, the Department executed a fixed spread basis swap in connection with its Series 2004 Series A-1 and 2004 Series A-2 Bonds. The intention of the swap was to reduce interest costs. Terms: Under the swap agreement, the Department pays Citigroup, the counterparty, BMA and receives percent of onemonth LIBOR plus percent through July 1, 2010 and plus thereafter through maturity. The swap has a notional amount of $300,000,000 and the associated fixed rate bonds had a similar principal amount outstanding at the time of the swap execution. The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $1,341,

128 Associated Debt: (000) Actual interest payments on debt $ 18,651 Net payment under swap agreement (157) Total payments $18,494 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $1,341,861. The counterparty was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value $215,150,000 Floating-to-Fixed LIBOR Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-fixed LIBOR swap in connection with its 2005 Series C-1, C-2, C-3 AMT Bonds. Terms: Under the swap agreement, the Department pays Citigroup, JP Morgan Chase, and UBS AG, the counterparties, a fixed interest rate of percent through July 1, 2015 and percent through maturity and receives percent of one-month LIBOR minus percent. The swap has a notional amount of $215,150,000, the same amount of the 2005 C Bonds outstanding at June 30, The swap matures on July 1,

129 Fair Value: As of June 30, 2006, the swap had a fair market value of $17,622,115. Associated Debt: (000) Actual interest payments on debt $5,434 Net payment under swap agreement 1,349 Total payments $6,783 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $17,622,115. The counterparties were rated as of June 30, 2006, as follows: Citigroup was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings; JP Morgan Case Bank was rated Aa2 by Moody s, AA- by S&P, and A+ by Fitch; and UBS AG was rated Aa2 by Moody s, AA+ by S&P, and AA+ by Fitch. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value $205,375,000 Floating-to-Fixed LIBOR Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-fixed LIBOR swap in connection with its 2005 Series D-1, D-2, D-3 Non-AMT Bonds. 49

130 Terms: Under the swap agreement, the Department pays Citigroup, JP Morgan Chase, and UBS AG, the counterparties, a fixed interest rate of percent through July 1, 2015 and percent through maturity and receives percent of one-month LIBOR plus percent. The swap has a notional amount of $205,375,000, the same amount of the 2005 D Bonds outstanding at June 30, The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $13,018,344. Associated Debt: (000) Actual interest payments on debt $5,901 Net payment under swap agreement 1,267 Total payments $7,168 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $13,018,344. The counterparties were rated as of June 30, 2006 as follows: Citigroup was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings; JP Morgan Case Bank was rated Aa2 by Moody s, AA- by S&P, and A+ by Fitch; and UBS AG was rated Aa2 by Moody s, AA+ by S&P, and AA+ by Fitch. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value. 50

131 $58,920,000 Floating-to-Fixed LIBOR Swap Objective: As a means to lower its borrowing costs, the Department executed a floating-to-fixed LIBOR swap in connection with its 2005 Series E-1, E-2, E-3 Non-AMT Bonds. Terms: Under the swap agreement, the Department pays Citigroup, JP Morgan Chase, and UBS AGl, the counterparties, a fixed interest rate of percent through July 1, 2015 and percent through maturity and receives percent of one-month LIBOR minus percent. The swap has a notional amount of $58,920,000, the same amount as the 2005 E Bonds outstanding at June 30, The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $4,380,141. Associated Debt: (000) Actual interest payments on debt $1,506 Net payment under swap agreement 1,024 Total payments $2,530 Credit Risk: As of June 30, 2006, the Department is exposed to credit risk because the swap has a fair value of $4,380,141. The counterparties were rated as of June 30, 2006 as follows: Citigroup was rated Aa1 by Moody s Investor Service, AA- by Standard & Poor s, and AA+ by Fitch Ratings; JP Morgan Case Bank was rated Aa2 by Moody s, AA- by S&P, and A+ by Fitch; and UBS AG was rated Aa2 by Moody s, AA+ by S&P, and AA+ by Fitch. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. Basis Risk: The swap exposes the Department to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings of the swap may not be realized. Tax Risk: The swap exposes the Department to tax risk if a permanent mismatch (shortfall) occurs between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. 51

132 Termination Risk: The Department has exposure to termination risk on this particular swap. If either the credit rating of the bonds associated with the swap, or the credit rating of the swap counterparty falls below the threshold defined in the swap agreement, then an Additional Termination Event may occur. At the time of the termination, if the swap has a negative value, the Department would be liable to the counterparty for a payment equal to the swap s fair value Forward Starting Swap Objective: As a means to lower its borrowing costs and provides the Department with a favorable fixed interest rate for financing of the Terminal 3 Project. Terms: Commencing with the issuance of the Series 2008A and 2008B bonds in July 1, 2008, and in accordance with the swap agreements, the Department will pay JP Morgan Chase, and UBS AGl, the counterparties, a fixed interest rate of percent through July 1, 2017, and 0.25 percent through maturity and will receive 64.7 percent of one-month LIBOR plus 0.28 percent. The swap has a notional amount of $300 million. The swap matures on July 1, Fair Value: As of June 30, 2006, the swap had a fair market value of $8,647, Forward Starting Swap Objective: As a means to lower its borrowing costs and provides the Department with a favorable fixed interest rate for financing of the Terminal 3 Project. Terms: Commencing with the issuance of the Series 2009A and 2009B bonds in July 1, 2009, and in accordance with the swap agreements, the Department will pay Citigroup Financial, the counterparty, a fixed interest rate of percent on the 2009A bonds through July 1, 2017, and 0.25 percent through maturity and will receive 64.7 percent of one-month LIBOR plus 0.28 percent and a fixed rate of 6.00 percent on the 2009B bonds through July 1, 2017, and percent to maturity and will receive 64.7 percent of one-month LIBOR plus 0.28 percent. The swap has a notional amount of $550 million. The 2009A swap matures on July 1, 2026, and the 2009B swap matures July 1,

133 Fair Value: As of June 30, 2006, the swaps had a fair market value of $16,439, Forward Starting Swap Objective: As a means to lower its borrowing costs and provides the Department with a favorable fixed interest rate for financing of the Terminal 3 Project. Terms: Commencing with the issuance of the Series 2010 bonds in July 1, 2010, and in accordance with the swap agreements, the Department will pay Citigroup Financial, the counterparty, a fixed interest rate of 6.00 percent through July 1, 2017, and percent to maturity and will receive 61.9 percent of one-month LIBOR plus 0.27 percent. The swap has a notional amount of $150 million. The swap matures on July 1, Fair Value: As of June 30, 2006, the swaps had a fair market value of $12,923,981. Jet A Bonds In May 2003, the County issued $105.4 million of Series 2003C AMT Jet Aviation Fuel Tax Revenue Bonds at a premium of $8.0 million. Interest on the bonds ranges from 5.0 % to 5.375%. Interest is due on January 1 and July 1, and principal is due annually on July 1. Annual debt service ranges from $7.2 million to $13.8 million and the bonds mature July 1, Proceeds from the bond issue are being used to design and construct the in-line baggage system at the Airport. Proceeds from the Jet A Fuel Tax are currently projected to be sufficient to pay all debt service payments relating to the 2003C bonds. General Obligation Airport Bonds Series 2003A General Obligation Airport Bonds In May 2003, the County issued $42.6 million in Series 2003A AMT General Obligation (limited Tax) Airport Bonds. The 2003A bonds were issued as variable rate bonds with interest rates being reset by auction every 35 days. The proceeds of the 2003A bonds were used to refund the 1993 General Obligation (limited tax) Airport Bonds. This transaction resulted in a loss of $1.5 million which represents the total funds required to retire the 1993 bonds less the face value of the retired bonds adjusted for unamortized costs of issuance and related accrued interest. A one time principal payment is due at maturity on July 1, Series 2003B General Obligation Airport Bonds 53

134 In May 2003, the County issued $37.0 million in Series 2003B Non-AMT General Obligation (Limited Tax) Airport Bonds at a premium of $933 thousand. The 2003B bonds have a fixed interest rate ranging from 4.75% to 5.0%. Interest is payable January 1 and July 1 of each year and principal is due annually commencing on July 1, The proceeds of the 2003B bonds were used to refund the 1993 General Obligation (limited tax) Airport Bonds. This transaction resulted in a loss of $2.9 million which represents the total funds required for the retirement of the 1993 bonds less the face value of the retired bonds adjusted for unamortized costs of issuance and related accrued interest. The approximate maturities of long-term debt are as follows: Maturities of Long-Term Debt As of June 30, 2006 Principal Payments Total Principal Senior Subordinate PFC Third Lien Due as of June 30, (000) (000) (000) (000) (000) 2007 $ 40,816 $ 23,100 $ 6,820 $ 9,541 $ 1, ,180 24,700 7,195 19,515 1, ,710 26,300 7,595 20,600 2, ,665 28,200 8,050 21,715 2, ,665 30,100 8,470 22,870 3, ,325 66,600 98, ,845 29, ,220 76, ,155 52, , , ,720 45, , ,810 46, ,650 12, , ,950 56, ,040 Total $ 2,073,316 $ 268,590 $ 1,053,755 $ 566,961 $ 184,010 7.) Payments to Clark County The Department reimburses the County for providing the Airport System with fire services, police services, legal, administrative services and certain maintenance services, based on its cost. The total amounts billed for these services for FY2006 was $19.5 million and $21.2 million in FY ) Retirement Plan The Department contributes to the Public Employees Retirement System (PERS), a cost-sharing multiple-employer defined benefit pension plan administered by the Nevada Public Employees Retirement System. PERS provides retirement and disability benefits, cost-of-living adjustments, and death benefits to plan members and beneficiaries. PERS was established by legislation in 1947 and is governed by a Board that is responsible for administration and management of the fund. The autonomous, seven-member Board is appointed by the Governor. PERS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for PERS. The report can be obtained by writing to Public Employees Retirement System of Nevada, 693 W. Nye Lane, Carson City, NV or by calling (775) PERS contribution rates are established by State statute and provide for yearly increases of up to 1% until such time as the actuarially determined unfunded liability is reduced to zero. The current rate in effect is 20.25% of annual covered payroll. The Department s contribution to PERS for the years ended June 30, 2006, 2005, and 2004, were $9.9 million, $9.3 million and $8.8 million, respectively. 54

135 Other Post-Employment Benefits The County makes available certain post-retirement health insurance and life insurance benefits ( OPEB ) to employees who retire under PERS and elect to receive and pay for these benefits. OPEB are only available to retirees who are then receiving a pension from PERS ( Retirees ). The current OPEB program covers County employees and Retirees and the employees and Retirees of six other local governments in Southern Nevada (the University Medical Center of Southern Nevada, Regional Transportation Commission of Southern Nevada, Clark County Regional Flood Control District, Las Vegas Valley Water District, Clark County Water Reclamation District, and Las Vegas Convention and Visitors Authority; collectively, the Other Agencies ). Health Insurance. Retirees can elect to continue to participate in the health insurance benefits provided to employees. For each Retiree, the premium for this insurance benefit is based on the number of persons covered (i.e., the premium is greater for a Retiree who elects to also have dependents covered). The County offers two types of health insurance, a self-funded preferred provider organization plan ( PPO ) and a health maintenance organization ( HMO ) plan. Retirees can elect to continue coverage under either of these plans upon payment of the required premium for themselves and their dependents. The premium payable by the Retiree for the selffunded plan is based on the number of years of service with any of the public entities within the benefit plan, and whether the Retiree (or dependent) receives Medicare insurance benefits. Premiums for the HMO are not dependent on the years of County employment, but vary based upon whether or not the employee receives Medicare insurance benefits. In lieu of participating in one of the County health insurance plans, Retirees can elect to obtain health care coverage for themselves and their dependents under the State administered Public Employees' Benefit Program ( PEBP ). If a Retiree elects this option, the County is required by Nevada Revised Statutes (NRS) to pay a statutorily-defined portion of the Retiree s premium for coverage under PEBP; the balance of the premium must be paid by the Retiree. The County s portion of the premium is based on the number of years the Retiree was employed by the County; for employment of 20 years or more, the County is required to pay 100% of the premium subsidy. Life Insurance. The life insurance benefit offered to Retirees currently provides a $20,000 death benefit if the Retiree dies before age 70 and a $1,000 death benefit if the Retiree dies after that age; Retirees who elect to obtain this benefit must pay a subsidized premium of $48 per year if they are under 70 and a premium of $2 per year if they are over 70. Spouses of Retirees can also be covered at additional cost to the Retiree; the death benefit paid on the death of the spouse is $5,000 if the Retiree is under 70 and $1,000 if the Retiree is 70 or older. Valuation of the OPEB Program and County Share. The County historically has funded its OPEB on a pay-as-yougo basis, but beginning in fiscal year , GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, will require that the County begin recording a liability for its share of the OPEB Program. The County has discussed the OPEB Program with consulting actuaries and is in the process of conducting a study to determine the actuarial value of its obligations under the OPEB Program. Preliminary results of this study, which remain subject to change, indicate that as of July 1, 2005, the total combined unfunded actuarial accrued liability ( UAAL ) of the OPEB Program was approximately $714.8 million. The annual amount required to be paid to amortize this liability over 30 years and to accumulate an appropriate amount for current employees so that UAAL does not increase (the annual contribution ) is approximately $

136 million. None of that amount has been funded to date. These valuations are based on several assumptions, including future Retiree contribution rates, a 4% per annum discount rate and a 4% per annum investment rate. The County currently expects to allocate the UAAL between it and the Other Agencies. Currently, the County estimates that its share of the UAAL and the annual contribution are approximately $405.4 million and $42.8 million, respectively; the portions of these two County amounts applicable to the Airport are estimated to be $73.1 Million and $7.7 million, respectively. Funding. County financial staff currently does not expect the County to fund the full annual contribution amount during fiscal years or However, the County financial staff expects the County to continue to contribute amounts to the OPEB program on a pay-as-you-go basis during those years. County financial staff currently plans to recommend that the County request that the Nevada Legislature, in its 2007 session, authorize the County to create an irrevocable trust account into which it can begin to accumulate monies to fund its UAAL. The County also may request that the legislation contain a provision that allows the County to invest monies in this irrevocable trust account in a manner that will generate an investment return greater than the currently assumed 4% per annum. If the County is successful in obtaining this legislation, County financial staff expects the County (including the Airport) to fund its annual contribution including a portion of its UAAL in the fiscal year. The Other Agencies will be responsible for determining when to begin funding their allocable share of the UAAL and appropriate funding sources. Certain employees of the Department are represented by Clark County Nevada Service Employees Union, SEIU Local 1107, under a contract which expired on June 30, Nevada law forbids County employees from striking. Until a new contract is negotiated and approved, the County will continue to adhere to the provisions of the current contract. 9.) Commitments and Contingencies Federal Grants As of June 30, 2006, the County has remaining commitments from the FAA for grant awards of $43.6 million for land acquisition, certain airport improvements and $32.8 million from the TSA for costs related specifically to the in-line baggage system construction. Such funds are generally available for reimbursement upon the acquisition of the specific asset and are generally accrued as receivables at the time the acquisition costs are incurred. Construction in Progress As of June 30, 2006, the Department s management estimates that construction in progress will require an additional outlay of approximately $2.7 billion to bring the related projects to completion. 56

137 Litigation and Claims Inverse Condemnation Litigation. The County is a party to actions concerning Airport System operations in which inverse condemnation and other damages are being sought against the County. Although the facts and circumstances of each case differ, the County believes the ultimate outcomes will all be affected by the recently decided Nevada Supreme Court case, Steve Sisolak v. McCarran International Airport and Clark County, Case No. A described below. A discussion of the individual cases is below. Steve Sisolak v. McCarran International Airport and Clark County, Case No. A and Nevada Supreme Court Case No In Sisolak, the District Court found for plaintiff s inverse condemnation claim, holding that a per se taking had occurred as a result of the County s enactment of airport height zoning ordinances. As of June 31, 2006, the estimated amount of the Court award (including interest and attorney s fees) was $20,108,000, including interest, costs and attorneys fees. On appeal, the Nevada Supreme Court on July 13, 2006, affirmed the District Court s ruling that a per se taking had occurred as a result of the County s airport height zoning ordinance. The County is exploring a writ of certiorari to the U.S. Supreme Court based on federal law, including federal aviation law. The outcome of this request is difficult for the County to predict, but if the petition to the U.S. Supreme Court is denied, the damages awarded by the District Court would have to be paid. As a result, the Department has recorded $20,108,000 as a liability at June 30, Tien Fu Hsu and Lisa Su Family Trust; S.W. Stephen Huang, Peter B. Liao, Lucky Land Company Enterprise, Westgate, West Park, Inc., v. Clark County, Case No. A The plaintiffs alleged inverse condemnation as a result of the Airport s expansion due to increased aircraft operations and the resultant noise, dust, vibration and fumes. The amount of damages claimed is unknown but in a previous case against the County, the plaintiffs were awarded $13 million for inverse condemnation of the same properties allegedly due to zoning height restrictions. While this prior award was overturned by the Nevada Supreme Court, in an unpublished decision, the Sisolak decision calls into question the rational of the prior unpublished decision in Hsu. The Nevada Supreme Court remanded the case to district court to give the plaintiffs the opportunity to apply for a zoning variance. Thereafter, plaintiffs did not apply for a variance because they sold the property. As a result, the district court dismissed the case. Plaintiffs have appealed. Despite the Sisolak decision, the County believes it has strong defenses in this case, but the ultimate outcome is difficult to predict and it is not possible to estimate a minimum loss to the Department at this time. Vacation Village, Inc., v. Clark County ex rel Clark County Department of Aviation (Formerly Case No. A328480), Bankruptcy Court Case No. BK-S RCJ, Chapter 11, ADV-S RCJ. The plaintiff, Vacation Village, filed an inverse condemnation action against the Department in December 1993 seeking approximately $17 million in compensation. The Bankruptcy Court issued findings of fact and conclusions of law that the low and frequent flight of aircraft over the plaintiff s property caused a direct, substantial and immediate interference with the enjoyment and use of the plaintiff s property, demonstrated by a significant and immediate decline in market price. The Bankruptcy Court s award to plaintiff (made June 17, 2005 and amended July 7, 2005), plus interest, costs and attorney s fees as of June 30, 2006, is approximately $10,458,000. The County believes the Bankruptcy Court did not have the factual or legal basis to support its 57

138 decision and has appealed. While the County believes there is a strong basis for overturning the decision, the outcome of any appeal and the amount of damages ultimately awarded is difficult for the County to predict. As a result, the Department has recorded a liability of $10,458,000 at June 30, Hotels Nevada, LLC v. Clark County District of Nevada, Case No. A This case involves the alleged per se taking of the plaintiff s airspace. On or about August 9, 2001, the parties argued cross-motions for summary judgment. The Court denied all motions and the landowners subsequent Motion for Clarification. It is impossible to predict the outcome of this case, including any estimation of a minimum loss to the Department, at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. The County believes there are significant viable defenses available. Mickle v. Clark County District of Nevada, Case No. A Plaintiffs have alleged that the County and the Airport have dramatically increased airplane and helicopter operations causing increased noise, dust, fumes, smoke, and vibrations over and upon their property. Plaintiffs further allege that the County has condemned, purchased, removed and/or demolished properties in the neighborhood of plaintiffs residence, thereby blighting plaintiffs neighborhood such that they can no longer use their property to its highest and best use. The County believes there is a strong potential to prevail on several affirmative defenses, including plaintiffs knowledge of the Airport s future expansion, but the ultimate outcome is difficult to predict and it is not possible to estimate a minimum loss to the Department at this time. McCarran Plaza Suites, Inc. v. McCarran International Airport and Clark County, a political subdivision of the State of Nevada, Case No. A McCarran Plaza Suites, Inc. ( MPS ) filed its Complaint for Damages by Inverse Condemnation against the Airport and the County on January 2, MPS recently emerged from a Chapter 11 bankruptcy proceeding, and the Bankruptcy Court has transferred control of MPS to its original owner. The trustee in the MPS bankruptcy sold the subject property at auction in 2000, and the County has since acquired it from the purchaser. MPS alleges that the County s imposition of height restrictions on buildings on the subject property, and the impact of noise from airport operations, reduced the market value of the subject property at the time of its auction and constituted a taking. Although MPS has not yet placed a dollar value on its damages, the County believes MPS will seek damages in the multi-million dollar range. The County has denied that a taking occurred and believes it has a number of meritorious defenses to MPS s claims. The County has contested the case vigorously, and will continue to do so. It is impossible to predict the outcome of this case, including any estimation of a minimum loss to the Department, at this juncture given the current stage of the litigation and the possible effect of the Sisolak decision. Mohler Trust v. Clark County, District of Nevada, Case No. A The complaint for inverse condemnation for the alleged per se taking of airspace above the plaintiff s property was filed on February 6, At this juncture, it is impossible for the County to predict the likelihood of a successful defense, including any estimation of a minimum loss to the Department. The County believes there is a strong potential to prevail on several affirmative defenses given the current stage of the litigation and the possible effect of the Sisolak decision. The likelihood of appeal by both parties is very high, regardless of the outcome. Boueri v. McCarran International Airport and Clark County, Case No. A The plaintiff filed an inverse condemnation complaint on April 19, 2005, alleging that the expansion and modification of runways and the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not yet commenced and the amount claimed is uncertain, but believed to be in the lower range of the inverse 58

139 condemnation cases that the County is defending. It is impossible to predict the outcome of this case, including any estimation of a minimum loss to the Department, at this juncture given the current stage of the litigation and the possible effect of the Sisolak decision. STT Land, LLC and Doe Landowners I-XX v. McCarran International Airport and Clark County, Case No. A The plaintiffs filed an inverse condemnation complaint on June 28, 2006, alleging the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not commenced and the amount claimed is uncertain. It is impossible to predict the outcome of this case, including any estimation of a minimum loss to the Department, at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. MBP Land, LLC and Doe Landowners I-XX v. McCarran International Airport and Clark County, Case No. A The plaintiffs filed an inverse condemnation complaint on June 28, 2006, alleging the imposition of zoning height restrictions over the plaintiff s property constitute a per se taking. Discovery has not commenced and the amount claimed is uncertain. It is impossible to predict the outcome of this case, including any estimation of a minimum loss to the Department, at this juncture given the current stage of the present litigation and the possible effect of the Sisolak decision. Other possible inverse condemnation/taking litigation. As a result of the Sisolak decision, it is possible that other litigation will be filed based on a similar legal theory by landowners who are affected by the County s airport height zoning ordinance. It is impossible to predict at this time whether any such litigation will be filed or its ultimate outcome, including any estimation of a minimum loss to the Department. Other Litigation. Vacation Village, Inc., et al. v. Clark County and Nevada Department of Transportation, Case No. A The plaintiff, Vacation Village, filed a Complaint on October 16, 2001, seeking, among other things, damages for a claimed taking of an alleged reversionary right to property which the Nevada Department of Transportation conveyed to the County. The Complaint was dismissed for failure to state a claim. However, plaintiff, Vacation Village, and an intervening plaintiff, VVLV, LLC, who had subsequently purchased the Vacation Village Hotel property, were allowed to file an Amended Complaint, provided they made no claim for reversionary rights. A settlement agreement has been reached with the successor in interest to the intervening plaintiff, VVLV, LLV. The new claim in the Third Amended Complaint filed by Vacation Village on April 22, 2004, includes eight causes of action based upon reversionary rights, a taking of reversionary rights and rights of first refusal, inverse condemnation, unjust enrichment, intentional interference with prospective economic advantage, taking of airspace, misrepresentation and concealment and civil conspiracy. The County does not know the amount of damages the plaintiff will claim, but believes claimed damages will exceed $500,000. The County believes the case has no merit. There is a pending motion asking the Court to dismiss the remainder of the case. The County is a party to numerous other actions and claims in connection with the ownership and operation of the Airport System, including personal injury claims, employment related claims and construction claims, but in the opinion of the District Attorney, the actions and claims described in this paragraph are not expected, in the aggregate, to have a material adverse effect on the financial condition of the Department. (See also Note 14.) 59

140 10.) Rentals and Operating Leases The Department derives a substantial portion of its revenue from fees and charges to air carriers and concessionaires. Charges to air carriers are generated from terminal building rentals, gate use fees, and landing fees in accordance with either the Scheduled Airline Operating Agreement and Terminal Building Lease that expires June 30, 2008, or provisions of the County s annual Ordinance. The Department leases land, buildings and terminal space to various tenants and concessionaires under operating agreements that expire at various times through Under the terms of these agreements, concession fees are based principally on a percentage of the concessionaires gross revenues or stated minimum annual guarantee, whichever is greater; and land and building rents that are based on square footage rates. The Department received $93.8 million in and $77.8 million in the years ended June 30, 2006 and 2005, respectively, for contingent rental payments in excess of the stated annual minimum guarantees. Following is a schedule of minimum future rental income on non-cancelable operating leases as of June 30, 2006: Fiscal Year Contingent Rents 2007 $ 117,825, ,079, ,660, ,867, ,243,799 Thereafter 240,810, ) Cash, Cash Equivalents and Investments All cash (including cash equivalents) and investments of the Department are under the control of the Treasurer of the County. NRS govern the County's deposit policies. County monies must be deposited in insured banks and savings and loan associations within the County. The County is authorized to use demand accounts, time accounts and certificates of deposit. NRS do not specifically require collateral for demand deposits, but does specify that collateral for time deposits may be of the same type as those described for permissible state investments. Permissible state investments are similar to allowable County investments described below except that some state investments are longer term and include securities issued by municipalities outside of Nevada. Securities used to collateralize deposits are usually set aside by the financial institutions' trust departments. Most depository banks submit monthly reports to the County indicating the type, the amount and the market value of the pledged securities. NRS authorize the County to invest in the following: obligations of the U.S. Treasury and U.S. agencies not to exceed ten years maturity; negotiable notes or short-term negotiable bonds issued by other local governments of the State of Nevada; bankers acceptances eligible for rediscount with Federal Reserve Banks, not to exceed 180 days maturity and 20 percent of total investments; commercial paper having an AA-1" rating invested 60

141 only in Federal Government or agency securities or in repurchase agreements fully collateralized by such securities. Certain bond covenants require the County to invest with security dealers who are primary dealers when investing in repurchase agreements. Primary dealers are a group of dealers that submit daily reports of market and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its formal oversight. Securities purchased by the County are delivered against payment and held in a custodial safekeeping account with the trust department of a bank designated by the County and insured by the Federal Deposit Insurance Corporation up to the statutory limit per bank. NRS authorizes the County Treasurer to participate in securities lending transactions, in which the County's U.S. government securities are loaned to broker-dealers and other entities with a simultaneous agreement to return the collateral for the same securities in the future. The County's securities lending agent administers the securities lending program and receives cash equal to at least 102% of the fair value of the loaned securities plus accrued interest as collateral for securities of the type on loan at year end. The collateral for loans is maintained at 102%, and the value of the securities borrowed must be determined on a daily basis. Securities on loan as of June 30, 2006, and 2005, for cash collateral are uncategorized for credit risk purposes. At year end, the County had no credit exposure to borrowers because the amount the County owed to borrowers exceeded the amounts the borrowers owed to the County. The contract with the securities lending agent requires it to indemnify the County for all losses relating to securities lending transactions. There were no losses resulting from borrower default during the period, nor were there any recoveries of prior period losses. There are no restrictions on the amount of securities that can be loaned. Either the County or the borrower can terminate all open securities loans on demand. Cash collateral is invested in accordance with the investment guidelines stated in NRS The maturities of the investments made with cash collateral match the maturities of the securities loans. The fair value of the Department's allocated share of the securities on loan at June 30, 2006, and 2005, was $176.3 million and $158.9 million respectively. These securities had cash collateral which has been invested in U.S. Treasury and agency obligations, commercial paper and repurchase agreements with a fair value totaling $172.0 million and $158.9 million respectively. The Department's cash, cash equivalents, and investments are deposited with the County Treasurer and, in the case of certain restricted cash and investments, held by a trustee bank. Accordingly, the Department's cash balance included in the Treasurer's pooled cash account is not independently available. The County adjusts the investments in the Treasurer's pooled cash account to market and allocates the adjustment to various County departments. The Department's allocated portion of this adjustment resulted in a $4.3 million decrease in the value of the Department's cash deposited with the Treasurer. All cash under the control of the County Treasurer is either covered by Federal Depository Insurance, or by collateral held by the County's 61

142 agent in the County's name, or by collateral held in the bank's trust department in the County's name. Cash in transit and change funds, which are not collateralized or insured, totaled $175,740 and $315,456 at June 30, 2006, and 2005, respectively. Except as noted above, the Department s investments are categorized to give an indication of the level of risk assumed at year end. Category 1 includes investments that are insured or registered or for which the securities are held by the County or its agent in the County s name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counterparty s trust department or agent in the County s name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its trust department or agent, but not in the County s name. All Department investments at June 30, 2006 and 2005, of $360.0 million and $379.0 million, respectively, are in category ) Risk Management The Department is exposed to various risks of loss related to theft of, damage to and destruction of assets, errors and omissions, injuries to employees and customers, and natural disasters. These risks are covered by commercial insurance purchased from independent third parties and County self-insured programs for offairport auto liability, employee medical benefits and workers compensation. The County has established a fund for self-insurance related to medical benefits provided to employees and covered dependents. An independent claims administrator handles all claims procedures. The County also provides an option for employees to select an independent health maintenance organization (HMO) for medical benefits. The County has also established a fund for self-insurance related to workers' compensation claims. The County maintains reinsurance coverage obtained from private insurers for losses in excess of $1,000,000 per claim. The Department reimburses the County a per capita rate for employee medical benefits and a percentage of payroll for workers compensation coverage. Rates for this coverage are uniform for all County Departments and are adjusted based on the overall performance of the self-insured medical benefits fund and the selfinsured workers' compensation fund. As a participant in the County's self-insured programs, the Department is assessed annual fees based on the allocation of each respective fund. These assessments are charged to the Department s expense each year. There is no separate accounting for the Department s claims; accordingly, information regarding claims liability and payments are not presented in this financial report. Settled claims from these risks have not exceeded commercial insurance coverage during the past three years. 62

143 13.) Airport Environs Overlay District Land Transfer The Southern Nevada Public Land Management Act of 1998, Public Law , was enacted by Congress in October A provision of this law provides that the Bureau of Land Management (BLM), an agency of the United States Department of the Interior will transfer approximately 5,000 acres of land to the Department, without consideration, subject to the following: 1) Valid existing rights. 2) The land must be managed in accordance with the law and Section of Title 40, United States Code (relating to airport noise compatibility planning), and regulations promulgated pursuant to that section. 3) If any land is sold, leased, or otherwise conveyed by the Department, such sale, lease, or other conveyance shall contain a limitation that requires uses compatible with the law and such Airport Noise Compatibility Planning provisions. 4) If any land is sold, leased, or otherwise conveyed by the Department, such sale, lease, or other conveyance shall be at fair market value. The Department contributes 85% of the gross proceeds from the sale, lease, or other conveyance of such land directly to the BLM for use in purchasing, improving, or developing other land for environmental purposes. The Department contributes 5% of the gross proceeds from the sale, lease, or other conveyance of such land directly to the State for use in its general education program. The remainder is available for use by the Department for the benefit of airport development and the Noise Compatibility Program. Due to the uncertainty of any future benefit to the Department, a value has not been assigned nor was income reported relating to the land not yet sold or leased under the Southern Nevada Public Land Management Act of Gross proceeds from the sale and lease of any CMA land for the year ended June 30, 2006, were $1.8 million and from inception to that date are $71.7 million. The Department's share of these proceeds is $176.5 thousand for the year ended June 30, 2006, and $7.2 million from inception to that date. At June 30, 2006 and 2005, the Department s liability to the BLM was zero and $150 thousand, respectively, and the amount due the State of Nevada was zero and $8,802 respectively. Certain alleged improprieties involving land sale and exchange transactions for land in which the County held an interest are being investigated by County auditors and those of certain federal agencies, including the Federal Bureau of Investigation. The results of these investigations are not known; however, none are expected to have an adverse financial impact on the Department. 63

144 14.) Subsequent Events Subsequent to June 30, 2006, the following significant events have occurred: On August 30, 2006, the Department issued $100.0 million of Clark County, Nevada, Subordinate Lien Non- AMT Airport System Revenue Bonds. This financing was needed for the costs of certain capital improvement projects to the Airport System. The Series 2006A Bonds are secured by a lien on and are payable solely from net revenues of the Department, subordinate and junior to the lien of the $245.5 million of senior bonds outstanding and any senior bonds that may be issued in the future. On September 14, 2006, the Department issued $300 million of AMT Airport System Junior Subordinate Lien Revenue Notes, Series 2006B-1. The Series 2006B Notes were issued to provide interim funding for capital improvements to the Airport System, including a portion of the costs of designing and constructing Terminal 3. The 2006B Notes are being used to finance improvements to the Airport System in anticipation of proceeds of the Series 2008A and 2008B bonds which have been authorized and sold by the County and have an expected delivery date on or about July 1, The Series 2006B Notes are secured by and are payable from the Net Revenues of the Airport System, subordinate and junior to the lien of the outstanding senior lien bonds and any outstanding second lien securities, and any additional senior or second lien securities that may be issued in the future. 64

145 Accompanying Information 65

146 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Schedule of Insurance As of June 30, 2006 Amount of Coverage Description Insurer Expiration $1.7 billion Blanket policy on property Travelers 10/1/2006 Excess property American Guarantee 10/1/2006 Excess property Federal Insurance 10/1/2006 Excess property Continental Casualty 10/1/2006 Excess property RSUI Indemnity 10/1/2006 $100 million Boiler Policy Hartford Steam 10/1/2006 $250 million Terrorism property Lexington 10/1/2006 Excess terrorism Lloyds of London 10/1/2006 $3 million Employee practices liability Lloyds of London 10/1/2006 $750 million Airport liability Ace Property 10/1/2006 Excess airport liability Lloyds of London 10/1/2006 Excess airport liability Lloyds of London 10/1/2006 $300 million Construction liability Lloyds of London 2/22/2007 $300 million Builders risk Travelers 6/1/2007 $20 million Pollution & Remediation Indian Harbor 3/27/

147 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Schedule of Airport Revenue Bond Debt Service Coverage For the Years Ended June 30, 2006 and 2005 (000) (000) Reference Operating revenue $ 290,979 $ 261,566 Interest income 12,320 6,555 Operating expenses (156,977) (140,347) Net revenue 1 146, ,774 Other available funds: Senior lien coverage 10,702 8,740 Subordinate lien coverage 4,076 3,293 Net revenue and other available funds 2 161, ,807 PFC revenue 85,969 73,390 PFC fund interest income 4,617 1,661 Total PFC revenue 3 90,586 75,051 Senior lien debt service 4 42,807 34,958 Subordinate lien debt service 5 40,760 32,930 Senior and subordinate lien debt service 6 83,567 67,888 Subordinate PFC debt service 7 $ 50,442 $ 43,756 Coverage achieved in FY2006: Net revenue (informational only) 1/ Senior lien including other available funds (1.25 required) 2/ Senior and subordinate lien including other available funds (1.10 required) 2/ Subordinate lien after payment of senior lien (2-4)/ Subordinate PFC bonds (informational only) 3/

148 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Schedule of Cash Receipts and Disbursements - Restricted and Designated Accounts For the Years Ended June 30, 2006 and 2005 Working Capital Capital Improvement Passenger Customer Capitalized Current Debt Service and Contingency and Replacement Construction Facility Charge Facility Charge Interest Debt Service Reserve Reserve Reserve Total (000) (000) (000) (000) (000) (000) (000) (000) (000) Cash and investments, beginning of year $ 510,826 $ 41,138 $ 23,868 $ 28,415 $ 129,901 $ 133,020 $ 30,924 $ 5,000 $ 903,092 Cash Receipts: FAA 7,241 7,241 TSA 50,640 50,640 Transfers in 366,009 64, , ,603 Interest received 11,655 1,501 7,580 10,448 1,132 32,316 Bond proceeds 70, , ,917 Land sale proceeds - Jet Aviation Fuel Tax 9,271 9,271 Customer Facility Charges 23,526 23,526 Passenger Facility Charges 85,969 85,969 Total Receipts 506, ,352 23, ,820 10,448 1,132 1,482,483 Total cash and investments available 1,017, ,218 47,394 28, , ,468 32,056 5,000 2,385,575 Cash disbursements: Transfers to refunding escrows 225, ,012 Bond issuance costs , ,553 Project costs 259, , ,258 Principal payments 116,204 14, ,204 Interest payments 22,358 77,904 10, ,571 Transfers out 275, , ,918 6,437 14, ,128 Total cash disbursements 535, ,555 11,413 22, ,471 30,748 14,516 1,527,726 Cash and investments, end of year $ 481,366 $ 62,663 $ 35,981 $ 6,057 $ 134,250 $ 112,720 $ 17,540 $ 5, ,849 68

149 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Schedule of Operating Revenues and Expenses by Cost Center Actual and Budget for Fiscal Year Ended June 30, 2006 (With Comparative Totals for the Fiscal Year Ended June 30, 2005) Other Year Ended June 30,2006 Actual Terminal Airfield Apron Buildings Terminal Reliever General and Actual Budgeted Year Ended Building Area Area and Areas Area Airports Administrative Total Total June 30, 2005 (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) Operating Revenues: Landing Fees $ 23,947 $ 23,947 $ 32,887 $ 32,496 Other aircraft fees 5,458 $ 4,706 10,164 5,050 4,617 Building rentals $ 74,633 $ 10,309 $ 2, ,037 85,249 70,467 Land rentals 2,673 11, ,132 15,310 13,992 Ground transportation fees 28, $ 9, ,375 33,992 34,882 Gaming revenue 39,626 39,626 40,329 37,607 Terminal concessions 45, ,111 42,414 39,132 Parking 26, ,261 25,651 22,317 Other 4, ,326 3,835 6,056 Total Operating Revenues 187,891 36,294 10,309 14,034 35,972 6, , , ,566 Operating Expenses: Salaries, wages and benefits 26,717 11,546 2,551 2,417 9,868 3,491 $ 10,538 67,128 78,778 63,329 Contracted maintenance 6, ,313 4,238 14,206 16,467 8,103 County services: Fire services 302 4, ,043 6,592 6,400 Security services 5, ,060 2, ,676 11,105 10,650 County District Attorney ,011 1,856 County administration ,366 2,380 5,601 2,310 Professional Fees 1, ,183 14,044 12,835 11,131 Utilities 13,050 1, ,973 15,664 14,816 Communication (6) ,692 1,759 1,394 1,350 Repairs and maintenance 1, ,114 3,442 2,209 4,730 Materials and supplies 1, ,991 13,295 11,589 7,969 Insurance 1,366 1, ,047 1, ,879 5,931 5,249 Administrative expenses ,027 1,760 2,015 2,454 Total Operating Expenses 57,869 19,983 3,924 8,206 15,123 8,123 43, , , ,347 Allocation percentage of general and administrative costs 51.1% 17.6% 3.5% 7.2% 13.4% 7.2% 100.0% Allocation of general and administrative costs 22,359 7,721 1,516 3,171 5,843 3,139 43,749 Total Operating Expenses After Allocation $ 80,228 $ 27,704 $ 5,440 $ 11,377 $ 20,966 $ 11,262 $ 156,977 $ 172,191 $ 140,347 Loss or Gain $ 107,663 $ 8,590 $ 4,869 $ 2,657 $ 15,006 $ (4,783) $ 134,002 $ 112,526 $ 121,219 69

150 PBTK PIERCY BOWLER TAYLOR & KERN Certified Public Accountants Business Advisors INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Members of the County Commission Clark County Manager and Director of Aviation Clark County, Nevada We have audited the financial statements of the Clark County Department of Aviation Clark County, Nevada (the Department) as of and for the years ended June 30, 2006 and 2005, and have issued our report thereon dated November 15, We conducted our audits in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting. In planning and performing our audit, we considered the Department s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the Department s ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements. A reportable condition is described in our separate report, not contained herein, on compliance with requirements applicable to each major program, on internal control over compliance in accordance with OMB Circular A- 133, and on the schedule of expenditures of federal awards, dated November 15, A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe that the reportable condition described above is not a material weakness. Compliance and other matters. As part of obtaining reasonable assurance about whether the Department s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in our separate report, not contained herein, on compliance with requirements applicable to each major program, on internal control over compliance in accordance with OMB Circular A-133, and on the schedule of expenditures of federal awards, and our separate report, also not contained herein, on compliance with requirements applicable to the Passenger Facility Charge program and on internal control over compliance, both dated November 15, This report is intended for the information of management, Clark County and the U.S. Department of Transportation. However, this report is a matter of public record, and its distribution is not limited. November 15, ELTON AVENUE, STE. 1000, LAS VEGAS NEVADA fax pbtk.com

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152

153 Overview of Information Provided in Statistical Section The information contained herein has not been audited. It is intended to provide the reader with a summary of trends in operating revenues, expenses and changes in net assets for the last ten years of airport operations as well as summary information on restricted revenues for the same periods. Schedules of bond debt service coverage are included to provide trends in coverage for senior lien, subordinate lien and passenger facility charge revenue bonds issued by the airport. This section also includes information on operating income before depreciation and non-operating income; revenues by type such as rentals, fees and airport concessions. And operating expenses by type such as wages, maintenance, independent services, security and fire, utilities, repairs and maintenance, insurance and other expenses. Also included in this section is information on passenger enplanements, cargo and landed weights for the last ten years of airport operations along with visitor, room and convention statistics for the surrounding community; along with airline market share information by airline for the last three years of airport operations as well as an analysis of per passenger concession revenues, expenses, bond debt service coverage and airline costs for the last ten years of airport operations. This section is intended to be viewed in conjunction with the financial statements as a whole and to enhance the usefulness of the financial information contained therein to intended readers of such information. 73

154 CLARK COUNTY, DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA SUMMARY OF OPERATION LAST TEN FISCAL YEARS (not covered by auditors report) Income Non Operating Operating Before Operating Interest Operating Change in Fiscal Revenue Expenses Depreciation Depreciation Income Interest Expense and Other Net Assets Year (000) (000) (000) (000) (000) Income (000) (000) (000) 1997 $ 155,949 $ 65,264 $ 90,685 $ 38,754 $ 51,931 $ 30,143 $ 87,896 $ 48,759 $ 42, ,742 71,528 89,214 42,949 46,265 20,646 74,788 48,686 40, ,170 85,584 93,586 54,301 39,285 15,597 81,737 49,129 22, ,797 94, ,185 63,559 46,626 25,843 87,243 56,579 41, , , ,501 64,513 48,988 37,858 87,475 78,970 78, , , ,387 63,809 42,578 45,489 89,222 71,349 70, , , ,376 63,102 37,274 40,621 87,831 79,900 69, , , ,096 64,850 55,246 14,694 89,720 77,773 57, , , ,219 66,048 55,171 26, , , , , , ,002 70,853 63,149 36, , ,653 92,790 Average Annual Increase (Decrease) 7.2% 10.2% 4.4% 6.9% 2.2% 2.1% 2.9% 9.1% 8.9% This summary includes information on operating revenues and expenses, operating income before depreciation, non-operating income and changes in net assets. It provides a summary of trends in operating revenues, expenses and changes in net assets for the last ten years of Airport operations. 74

155 CLARK COUNTY, DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA SCHEDULE OF AIRPORT REVENUE BOND DEBT SERVICE COVERAGE FROM OPERATING REVENUES AND INTEREST INCOME AVAILABLE FOR DEBT SERVICE LAST TEN FISCAL YEARS (not covered by auditors report) (1) (2) (3) Less: (1) minus (2) (5) (3)/(4+5) Total Revenue Operating and Net Revenue (4) (4)/(3) Subordinate Senior and Available for Maintenance Available for Senior Lien Senior Lien Lien Debt Subordinate Fiscal Debt Service Expenses Debt Service Debt Service Coverage Service Lien Coverage Year (000) (000) (000) (000) (1.25 Required *) (000) (1.10 Required*) 1997 $ 169,158 $ 65,264 $ 103,894 $ 48, $ 10, ,462 71,528 99,934 48, , ,008 85, ,424 36, , ,362 94, ,750 36, , , , ,121 36, , , , ,604 36, , , , ,842 36, , , , ,634 35, , , , ,808 34, , $ 318,077 $ 156,977 $ 161,100 $ 42, $ 40, Average Annual Increase(Decrease) 7.3% 10.2% 5.0% -1.4% % 2.02 * Required by Master Bond Indenture dated May, 2003 SCHEDULE OF PASSENGER FACILITY CHARGE (PFC) REVENUE BOND DEBT SERVICE COVERAGE FROM PFC REVENUES AND PFC INTEREST INCOME AVAILABLE FOR DEBT SERVICE LAST TEN FISCAL YEARS (not covered by auditors report) PFC PFC Fiscal Revenue Debt Service PFC Coverage Year (000) (000) (000) 1997 $ 46,108 $ 27, ,858 37, ,203 42, ,802 45, ,499 50, ,155 51, ,185 50, ,709 54, ,390 43, $ 90,586 $ 50, Average Annual Increase(Decrease) 7.8% 7.0% 1.26 This schedule provides trends in coverage requirements for senior lien and subordinate lien debt service as are defined in the Master Indenture of Trust, dated May 1, For illustration purposes, this analysis also provides calcualated coverage for passenger facility charge revenue bonds issued by the Airport. 75

156 CLARK COUNTY, DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA SUMMARY OF OPERATING REVENUE LAST TEN FISCAL YEARS (Not covered by auditor's report) Total Other Concessions Operating Landing Aircraft Building Land Fiscal Revenue Fees Fees Rentals Rentals Transport Gaming Terminal Parking Misc Year (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) 1997 $ 155,949 $ 23,514 $ 1,983 $ 51,246 $ 3,878 $ 20,677 $ 24,979 $ 15,793 $ 9,715 $ 4, ,742 23,260 1,795 51,691 4,501 21,337 24,755 17,800 11,445 4, ,170 24,080 2,518 60,130 4,668 22,693 25,058 22,000 13,641 4, ,797 29,130 3,286 64,771 7,325 25,700 27,592 27,469 15,450 4, ,013 30,018 3,664 66,262 8,279 25,691 28,859 30,654 17,277 4, ,592 28,348 4,010 66,356 10,054 25,822 32,148 29,599 17,117 4, ,042 27,619 4,162 66,683 13,460 26,809 32,881 30,696 17,469 5, ,043 29,878 4,677 68,356 13,119 29,871 37,560 34,349 19,077 6, ,566 32,496 4,617 70,466 13,992 34,883 37,608 39,132 22,317 6, ,977 23,947 10,164 88,037 15,132 38,375 39,624 45,111 26,261 4,326 Average Annual Increase (Decrease) 7.2% 0.2% 19.9% 6.2% 16.3% 7.1% 5.3% 12.4% 11.7% -0.3% This trend analysis provides operating income by revenue type: rentals, fees and concessions for the last ten years of Airport operations. 76

157 CLARK COUNTY, DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA SUMMARY OF RESTRICTED REVENUE LAST TEN FISCAL YEARS (Not covered by auditor's report) Jet A Fuel Tax PFC CFC Jet Aviation Per Enplaned Passenger Per Enplaned Customer Per Enplaned Fiscal Fuel Tax Passenger Facility Charge Passenger Facility Charge Passenger Year (000) (000) (000) (000) (000) (000) 1997 $ 9,707 $ 0.64 $ 39,052 $ , , , , , , , , , , , , , , , , , , $ 11,413 $ 0.51 Average Annual Increase (Decrease) -0.5% -4.8% 9.2% 4.5% 0.0% 0.0% This schedule provides trends in restricted revenues for capital project funding collected from fuel taxes and passenger fees during the last ten years of Airport operations. 77

158 CLARK COUNTY, NEVADA SUMMARY OF AIRPORT REVENUE BOND DEBT SERVICE TO TOTAL OPERATING REVENUES AND EXPENSES LAST TEN FISCAL YEARS (Not covered by auditor's report) Subordinate Senior Lien Lien Total Operating Ratio of Debt Operating Ratio of Debt Fiscal Debt Service Debt Service Debt Service Revenues Service to Expenses Service to Year (000) (000) (000) (000) Revenues (000) Expenses 1997 $ 48,676 $ 10,249 $ 58,925 $ 155, $ 65, ,926 5,806 54, , , ,156 19,987 56, , , ,085 27,007 63, , , ,155 29,275 65, , , ,151 21,611 57, , , ,274 20,987 57, , , ,010 22,911 57, , , ,958 32,930 67, , , $ 42,807 $ 40,760 $ 83,567 $ 290, $ 156, Average Annual Increase(Decrease) -1.4% 16.6% 4.0% 7.2% % 1.72 This schedule provides bond debt service ratio trends for operating revenue and operating expense for the last ten years of Airport operations. 78

159 CLARK COUNTY, NEVADA SUMMARY OF OPERATING EXPENSES LAST TEN FISCAL YEARS (Not covered by auditor's report) Security, Fire Repairs, Fiscal Wages and Contract Independent and Other Supplies and Year Total Benefits Maintenance Services County Services Utilities Maintenance Insurance Other 1997 $ 65,264 $ 34,134 $ 3,597 $ 2,851 $ 10,134 $ 6,003 $ 5,572 $ 1,222 $ 1, ,528 37,982 4,361 3,762 10,324 6,037 5,973 1,203 1, ,583 43,828 6,831 4,319 11,444 7,883 6,678 1,387 3, ,613 50,867 7,440 4,131 13,460 8,458 6,368 1,491 2, ,513 50,643 8,563 6,280 12,532 10,586 8,415 1,740 2, ,205 53,294 7,967 7,030 16,973 12,050 7,097 3,601 3, ,666 56,075 9,130 6,716 17,991 13,305 8,089 4,902 8, ,947 59,233 8,320 8,759 16,555 12,799 8,634 5,624 3, ,346 63,329 8,103 11,130 21,216 16,166 12,699 5,249 2, ,977 67,128 14,206 14,044 19,491 17,732 16,737 5,879 1,760 Average Annual Increase (Decrease) 10.2% 7.8% 16.5% 19.4% 7.5% 12.8% 13.0% 19.1% 0.1% The summary provides trends in operating expenses by type for wages, maintenance, independent services, security and fire, utlities, repairs and maintenance, expenses for the last ten years of Airport operations.insurance and other 79

160 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA PASSENGER AND OPERATING STATISTICS LAST TEN FISCAL YEARS (Not covered by auditor's report) Total Fiscal Aircraft Operations Landed Weight Enplaned Cargo Year Departures (Pounds per 000) Passengers Tons ,336 20,261,573 15,208,348 72, ,842 19,772,944 15,008,564 79, ,458 20,965,119 15,873,267 88, ,531 24,073,667 17,720, , ,817 24,663,929 18,639, , ,564 23,587,166 16,945,697 88, ,223 23,074,743 17,641,500 89, ,860 24,878,724 19,449,065 92, ,035 27,066,272 21,439, , ,445 27,526,493 22,546, ,352 Average Annual Increase (Decrease) 3.7% 3.5% 4.5% 5.0% This analysis provides trends in passenger enplanements, landed weights and cargo tons for the last ten years of Airport operations. 80

161 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA VISITOR, CONVENTION AND ROOM STATISTICS LAST TEN FISCAL YEARS (Not covered by auditor's report) Total Available Fiscal Total Visitor Convention Hotel-Motel Occupancy Clark County Unemployment Year Volume Attendance Rooms Rates Population Labor Source Rates ,636,361 3,305,507 93, % 1,188, , % ,464,635 3,519, , % 1,246, , % ,605,128 3,301, , % 1,321, , % ,809,134 3,772, , % 1,383, , % ,849,691 3,853, , % 1,425, , % ,017,317 4,049, , % 1,485, , % ,071,504 5,105, , % 1,560, , % ,540,126 5,657, , % 1,641, , % ,388,781 5,724, , % 1,747, , % ,566,717 6,166, , % 1,815, , % Average Annual Increase (Decrease) 4.2% 7.2% 3.9% 87.1% 4.8% 3.7% 4.6% Source: Las Vegas Convention and Visitors Authority Clark County Department of Comprehensive Planning Nevada Employment Security Research Division This analysis provides visitor, room and convention statistics for the Las Vegas metropolitan area for the last ten years of Airport operations. Approximately 50.0% of the visitors arriving in Las Vegas arrive through the Airport. In addition, the Airport has seen a strong correlation between hotel room growth and the growth in total Airport passengers. 81

162 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA AIRLINE MARKET SHARE LAST TEN FISCAL YEARS (Not covered by auditor's report) FY 2006 FY 2005 FY 2004 Enplaned Passengers Enplaned Passengers Enplaned Passengers Percent of Percent of Percent of Airline Number Total Number Total Number Total Southwest 7,447, % 6,723, % 6,148, % America West 4,376, % 4,099, % 3,300, % United 1,743, % 1,640, % 1,485, % Delta 1,243, % 1,451, % 1,379, % American 1,240, % 1,294, % 1,202, % Continental 955, % 926, % 917, % Northwest 862, % 836, % 735, % Alaska 572, % 584, % 569, % US Airways 614, % 659, % 615, % JetBlue 412, % 344, % 310, % Frontier 249, % 208, % 177, % Allegiant 572, % 344, % 204, % AirTran 260, % 165, % 117, % Champion 196, % 208, % 205, % ATA 91, % 263, % 361, % Aloha 22, % 42, % 66, % Midwest Express 121, % 111, % 94, % Spirit 59, % 74, % 133, % Independence 35, % 25, % - 0.0% Other 796, % 589, % 458, % Japan 31, % 31, % 31, % Virgin Atlantic 117, % 76, % 65, % Sub-Total 22,022, % 20,703, % 18,582, % Charter Airlines 203, % 430, % 589, % General Aviation & Other 320, % 306, % 276, % Total Enplanements 22,546, % 21,439, % 19,449, % This analysis provides airline market share information for the last three years of Airport operations. 82

163 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA PER PASSENGER CALCULATIONS LAST TEN FISCAL YEARS (Not covered by auditor's report) Concession Operating Airport Airline Fiscal Concessions Revenue per Expenses per Revenue Bond Cost per Year Transport Gaming Terminal Parking Enplanement Enplanement Debt Service Enplanement 1997 $ 1.36 $ 1.64 $ 1.04 $ 0.64 $ 4.68 $ 4.29 $ 3.87 $ $ 1.70 $ 1.76 $ 2.00 $ 1.16 $ 6.62 $ 6.96 $ 3.71 $ 4.62 Average $ 1.50 $ 1.72 $ 1.59 $ 0.92 $ 5.73 $ 5.87 $ 3.46 $ 4.79 This is a trend analysis of per enplaned passenger concession revenues, expenses, bond debt service coverage and airline costs for the last ten years of Airport operations. 83

164 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA SCHEDULE OF NET ASSETS LAST FIVE FISCAL YEARS (Not covered by auditor's report) Invested in capital assets, Restricted for Restricted for Unrestricted net net of related debt capital projects debt service assets Total Net Assets Fiscal Year (000) (000) (000) (000) (000) 2002 $ 118,859 $ 70,186 $ 294,668 $ 327,707 $ 811, ,148 68, , , , ,281 82, , , , , , , ,817 1,059, , , , ,535 1,274,008 Average Annual Increase (Decrease) 29.4% 53.1% 6.7% -14.8% 11.9% This is a trended analysis of Airport net assets restricted for capital projects, debt service and unrestricted net assets since fiscal year ended June 30, 2002 as required by GASB

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167 APPENDIX C DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE 2007 PFC SERIES A BOND INDENTURE DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Following is a summary of certain provisions of the Master Indenture. This summary is not intended to be definitive and is qualified in its entirety by reference to the Master Indenture. DEFINITIONS The terms set forth below have the same meanings in the Master Indenture, this Official Statement and this Appendix except as otherwise noted. Unless the context otherwise requires, the terms defined under this caption will, for all purposes of this Official Statement, have the meanings herein specified. All defined terms used herein and not otherwise defined herein shall have the respective meanings given to such terms in the Master Indenture. Additional Project means (a) any additions, betterments, extensions, other improvements, or equipment of or related to the Airport System, and (b) any airport or airport related facility hereafter constructed, or otherwise acquired, or operated and maintained by the County at any site or sites other than the site of the Airport and any additions, betterments, extensions, or other improvements of any such airport or airport facilities; but excluding any Special Facilities. Aggregate Debt Service Requirements means, for any Bond Year, the sum of the Debt Service Requirements of any Senior Lien Revenue Securities payable from the Net Revenues, which payment is secured by a pledge of and lien on the Net Revenues of the Airport System. Airport Facilities or Airport System means all of the County s airport facilities, including, without limitation (a) the presently existing airport system consisting of the McCarran International Airport, Henderson Executive Airport, North Las Vegas Air Terminal, Overton Airfield and Jean Airfield; (b) all land, buildings, structures, and other facilities of such airports or related thereto of whatsoever character and wherever situated, within the County, and all future enlargements thereof and other improvements thereto, however financed and wherever located, or any substitute facilities; and (c) all properties, real, personal, mixed or otherwise, now owned or hereafter acquired by the County, through purchase, construction or otherwise, and used in connection with the Airport Facilities and in any way pertaining thereto; but excluding (a) Special Facilities until the end of the respective terms of the Net Rent Leases pertaining to such Special Facilities and (b) any additional airfields or other independent airport facilities (other than the Airport System or any part thereof) which are excluded from the Airport Facilities at the option and by order of the Board pursuant to the Master Indenture. Airport Management Consultant means an independent airport management consultant or airport management consulting firm, as from time to time appointed and compensated by the Board on the behalf and in the name of the County, (a) who has a wide and favorable reputation for special skill and knowledge in methods of the development, operation and management of airports and airport facilities and (b) who is selected and retained by the Board, in the name of the County, and is compensated thereby, but who is not in the regular employ or control of the County. Assistant Director means a de jure or de facto assistant director of the Airport System designated as such by the County, or a successor to an assistant director in functions, if any, and means the de jure or de facto chief assistant of an acting assistant director, if any, whenever an assistant director is unable to work in C-1

168 that capacity. If there is more than one Assistant Director, Assistant Director shall mean the Assistant Director designated for the purposes of the Master Indenture by the Director. Board means the Board of County Commissioners of Clark County, in the State of Nevada, including any successor of the County. Bond Year means the 12 months commencing on July 2 of any calendar year and ending on July 1 of the next succeeding calendar year. Book-Entry System means the system maintained by the Revenue Securities Depository and described in Appendix E attached hereto. Chairman means the de jure or de facto chairman of the Board, or his successor in functions, if any. Clerk means the de jure or de facto county clerk of the County and designated as such by the County, or his successor in functions, if any. Commercial Bank means a state or national bank or trust company which is a member of the Federal Deposit Insurance Corporation and of the Federal Reserve System, which has a capital and surplus of $25,000,000 or more, and which is located within the United States; and such term includes, without limitation, any Trust Bank. Comparable Bond Year means, in connection with any Fiscal Year, the Bond Year which commences in the Fiscal Year. Consulting Engineer means any registered or licensed professional engineer, any firm of such engineers, any licensed professional architect, or any firm of such architects, as from time to time determined by the County, which Person or Persons (a) have a wide and favorable reputation for skill and experience in the field of designing, preparing plans and specifications for, and supervising construction of, airports and airport facilities, (b) are entitled to practice and are practicing as such under the laws of the State, and (c) are selected, retained and compensated by the Board, in the name and on behalf of the County, and who may be in the regular employ or control of the County. Debt Service Requirements or Securities Requirements, means, for any Fiscal Year, as applied to any series of Senior Lien Revenue Securities, the sum of (a) the amount required to pay the interest on all Outstanding Senior Lien Revenue Securities of such series which is payable during the Comparable Bond Year, but if the Revenue Bonds or Revenue Securities of any series bear interest at a variable rate of interest, then except as provided in the Master Indenture with respect to Revenue Bonds subject to a Qualified Swap, the interest rate used will be the prevailing interest rate on such Revenue Bonds or Revenue Securities at the time of calculation, but neither greater than any maximum interest rate pertaining to such variable interest rate nor less than any minimum interest rate pertaining to such variable interest rate; (b) the amount required to pay the principal of all Outstanding Serial Senior Lien Revenue Securities and any prior redemption premiums due in connection therewith of such series which is payable in the Comparable Bond Year; (c) the Sinking Fund Requirements of the Outstanding Term Senior Lien Revenue Securities of such series for such Bond Year (other than Term Senior Lien Revenue Securities constituting Senior Guaranteed Obligations); and (d) the amount of any Senior Guaranteed Obligation Requirements for any Senior Guaranteed Obligations due in the Comparable Bond Year. Any computation of the Debt Service Requirements is made for the computation of the Senior Lien Revenue Securities as the Debt Service Requirements fall due (other than by a call of securities for prior redemption at the County s option except as specifically provided in the Master Indenture) during any one succeeding Bond Year, but in any computation of the Debt Service Requirements preliminary to the issuance of an additional series of Senior Lien Revenue Securities, the computation may pertain to the 12- month period (as opposed to Fiscal Year) as provided under clause A under Additional Revenue Bonds. (See Master Indenture Issuance of Additional Senior Lien Revenue Securities. ) C-2

169 Defeasance Securities means (a) Federal Securities which are not callable for redemption prior to their maturity by any Person other than the owner thereof and (b) other Investment Securities permitted under the Master Indenture (i) which either are not callable for redemption prior to their maturities by any Person other than the owner thereof or for which an option to redeem prior to maturity has previously been irrevocably exercised (or an irrevocable covenant to exercise such option has previously been made by the Person entitled to exercise such option) and the redemption date of such securities has thereby been irrevocably fixed prior to the use of any such securities as Defeasance Securities, and (ii) which at the time of their initial use as Defeasance Securities are rated in the highest generic rating category by Standard & Poor s or Moody s. Director means the de jure or de facto director of aviation of the County and designated as such by the County, and means the de jure or de facto chief assistant of that official or the acting director of aviation, if any, of the County whenever the director of aviation is unable to act in such capacity, or the successor of the director of aviation in functions, if any. Federal Securities means bills, certificates of indebtedness, notes, bonds or similar securities which are direct obligations of, or the principal and interest of which are unconditionally guaranteed by, the United States. Fiscal Year means the 12 months commencing on July 1 of any calendar year and ending on June 30 of the next succeeding calendar year; and if the Nevada legislature changes the statutory fiscal year relating to the County, the Fiscal Year will conform to such modified statutory fiscal year from the time of each such modification, if any. General Obligation Securities means general obligation bonds, notes or other securities issued for purposes pertaining to the Airport System payable from general (ad valorem) taxes and for the payment of which the County pledges its full faith and credit, which payment may be additionally made from the Net Revenues deposited to the Capital Fund created by the Master Indenture; but if the payment of such General Obligation Securities is additionally secured by a pledge for and lien on the Net Revenues, such Revenue Securities are to be paid from the Subordinate Securities Fund. Governing Body means the Board. Gross Revenues means all income and revenues derived directly or indirectly by the County from the operation and use of and otherwise pertaining to the Airport System, or otherwise, and includes all revenues received by the County from the Airport System, including, without limitation, all rentals, rates, fees and other charges for the use of the Airport System, or for any service rendered by the County in the operation thereof, revenues from any gaming at the Airport System, interest and other realized gain from any investment of moneys accounted for in various accounts of the Airport System Fund, and to the extent provided in the Master Indenture, any account into which revenues are transferred from the Revenue Fund, but excluding (i) any Revenue Bond proceeds and any other money credited to the Construction Fund or any like account for financing the acquisition of capital improvements and pertaining to any Additional Project under the Master Indenture, other than any surplus Revenue Bond proceeds or other unrestricted surplus moneys in the Construction Fund or other such account remaining after the completion of and payment for the project pertaining thereto, (ii) any moneys received as grants, appropriations or gifts, the use of which is limited by the grantor or donor to the construction of capital improvements for the Airport Facilities, except to the extent any such moneys shall be received as payments for the use of the Airport Facilities, (iii) any revenues derived from any Special Facilities (other than ground lease rentals pertaining to such Special Facilities and any moneys paid to the County in lieu of such rentals), (iv) insurance proceeds other than loss of use or business interruption proceeds, (v) interest and other gain from any investment of moneys in the Debt Service Reserve Fund so long as the amount of such Fund is less than the Maximum Aggregate Debt Service Requirements for all Senior Lien Revenue Securities, (vi) the proceeds of any passenger head tax or other per-passenger charge C-3

170 fixed and collected by the County in accordance with law; and (viii) any amounts paid to the County pursuant to a Qualified Swap. Guaranteed Obligation Requirements means, with respect to any Guaranteed Obligations pertaining to any series of Senior Lien Revenue Securities or Subordinate Revenue Securities, regardless of whether any calculation of the designated requirements for inclusion in any Debt Service Requirements for any Bond Year and pertaining to any reserve account, any earnings test for the issuance of additional securities, the rate maintenance covenant in the Master Indenture or any other rate maintenance covenant which in turn pertains to any Subordinate Revenue Securities, is made prior to, on or after the maturity date of such Guaranteed Obligations, the sum of the amounts to be accumulated in the Bond Fund or Subordinate Securities Fund, as the case may be, by the County in each Fiscal Year for payment by the County in the Comparable Bond Year to a Qualified Bank, as compensation for the payment from the proceeds of its Letter of Credit of at least wholly or in part the principal amount of the Guaranteed Obligations in accordance with the related Letter of Credit Agreement, but subject to the following provisions: (a) In the case of any calculation made prior to the fixed maturity date of the Guaranteed Obligations for each Comparable Bond Year, (i) in the calculation for the period from the date of the calculation to and including the fixed maturity date of such obligations, (a) there shall be excluded from the calculation the principal amount of the Guaranteed Obligations, but (b) the interest thereon shall be included in the calculation as a part of the interest as the same becomes due on and before that fixed maturity date, and (ii) for the period after such maturity date there shall be included in the calculation for each Bond Year the maximum amount required to be paid by the County to the Qualified Bank (whether by reason of scheduled payments, payments required to be made at the option or demand of the Qualified Bank or otherwise) pursuant to the Letter of Credit Agreement as if the Letter of Credit had been drawn upon its full amount to pay the Guaranteed Obligations on the fixed maturity date thereof; and (b) In the case of any calculation made on or after the fixed maturity date of the Guaranteed Obligations, there shall be included in the calculation for each Bond Year the amount required to be paid by the County to the Qualified Bank (whether by reason of scheduled payments, payments required to be made at the option or demand of the Qualified Bank or otherwise) as compensation in accordance with the terms of the Letter of Credit Agreement, if at the time of or prior to the calculation the Letter of Credit shall have been drawn upon wholly or in part to pay the principal of the Guaranteed Obligations, or both the principal thereof and the interest thereon, as the case may be. Guaranteed Obligations means either Senior Guaranteed Obligations or Subordinate Guaranteed Obligations, or both of the foregoing, as the context requires. Investment Securities means: (a) Bills, certificates of indebtedness, notes, bonds, or similar securities which are direct obligations of, or the principal and interest of which securities are unconditionally guaranteed by, the United States; (b) If the laws of the State permit any of the following investments to be made at the time the investment is made, any of the following investments: (i) Interest bearing bank time deposits evidenced by certificates of deposit issued by banks incorporated under the laws of any State or the Federal Government, including the State of Nevada, or any national banking association that are members of the Federal Deposit Insurance Corporation, and interest bearing savings and loan association time deposits evidenced by certificates of deposit issued by savings and loan associations which are members of the Federal C-4

171 Deposit Insurance Corporation, if either (a) the capital and surplus of such bank or savings and loan association is at least equal to $10,000,000 or (b) such time deposits in any bank or savings and loan association are secured by obligations described in subparagraphs (a) and (if then so permitted by law) (b) (ii) of this definition or by tax-exempt unlimited general obligation bonds of a state or municipal government rated A or better by one or more nationally recognized rating agencies, in the aggregate having at all times a market value (exclusive of accrued interest) at least equal to such time deposits so secured, including accrued interest (or by any combination of such securities); (ii) Bonds, debentures, or notes, or other evidences of indebtedness issued or guaranteed by any of the following agencies; Federal Farm Credit Banks; the Export-Import Bank of the United States; Federal Land Banks; the Federal National Mortgage Association; the Tennessee Valley Authority; the Government National Mortgage Association; the Federal Financing Bank; the Farmers Home Administration; the Federal Home Loan Bank; or any agency or instrumentality of the Federal Government which shall be established for the purposes of acquiring the obligations of any of the foregoing or otherwise providing financing therefor; (iii) Repurchase agreements or reverse repurchase agreements with banks described in subparagraph (b)(i) of this definition or Sections 603A and 608 hereof and government bond dealers reporting to and trading with the Federal Reserve Bank of New York, which such agreements are secured by securities which are obligations described in subparagraph (a) of this definition; (iv) Repurchase agreements or reverse repurchase agreements with banks described in subparagraph (b)(i) of this definition or Sections 603A and 608 hereof and government bond dealers reporting and trading with the Federal Reserve Bank of New York, which such agreements are secured (if then so permitted by law) by securities which are obligations described in subparagraph (b)(ii) of this definition; (v) Banker s acceptances endorsed and guaranteed by banks described in subparagraph (b)(i) of this definition or Sections 603A and 608 hereof, subject to capital and surplus limitation in paragraph (22) of this Section 101A; (vi) New housing authority bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an Annual Contributions Contract or Contracts with the Federal Government; or project notes issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a requisition or payment agreement with the Federal Government; (vii) Any bond or other obligation the interest on which is excluded from gross income under Section 103 of the Tax Code which has a rating in one of the two highest generic rating categories from Moody s or Standard & Poor s; (viii) Money market funds registered under the Federal Investment Company Act of 1940, as amended, whose shares are registered under the Federal Securities Act of 1933, as amended, and having a rating by Standard & Poor s of AAAm-G, AAAm, or AAm and if rated by Moody s, rated Aaa, Aa1 or Aa2; and (ix) Any other security or account in which the Treasurer of, or any municipality corporation in, the State is from time to time authorized to invest public funds. Letter of Credit means an irrevocable and unconditional letter of credit issued to the Trustee by a Qualified Bank which is issued to secure payment of Guaranteed Obligations on their maturity date or is used to fund all or a portion of the Debt Service Reserve Fund created by the Master Indenture. C-5

172 Letter of Credit Agreement means the agreement between the County and the Qualified Bank pursuant to which the Qualified Bank agrees to issue a Letter of Credit and which sets forth the repayment obligation of the County to the Qualified Bank on account of any draw under the Letter of Credit, which agreement shall be authorized by the County in the Series Indenture which also authorizes the issuance of the Guaranteed Obligations or the funding of all or a part of the Debt Service Reserve Fund created by the Master Indenture with a Letter of Credit. Maximum Aggregate Debt Service Requirements means, as of the date of calculation, the Aggregate Debt Service Requirements as computed for the Bond Year in which the sum is the largest. Moody s means Moody s Investors Service, Inc. or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency (other than Standard & Poor s) as may be designated in writing by the County and, with respect to any particular series of Revenue Bonds, approved in writing by any bond insurer insuring payment of principal of and interest on such Revenue Bonds. Net Rent Lease means a lease of property or facilities pertaining to the Airport System or Special Facilities entered into by the County pursuant to which the lessee or licensee agrees to pay to the County rentals during the term thereof, and to pay in addition all operations and maintenance expenses pertaining to the leased facilities, including, without limitation, maintenance costs, insurance and all property taxes and assessments now or hereafter lawfully levied, commonly known in the real estate business as a 100% net rental lease. Net Revenues means the Gross Revenues remaining after the deduction of the Operation and Maintenance Expenses of the Airport System. NRS means Nevada Revised Statutes. Operation and Maintenance Expenses means all reasonable and necessary current expenses of the County, paid or accrued, of operating, maintaining and repairing the Airport System, including, without limitation, overhead expenses relating to the administration, operation and maintenance of the Airport System; insurance and fidelity bond premiums; payments to pension and certain other funds and to any self-insurance fund not in excess of premiums which would otherwise be required for such insurance; any general and excise taxes or other governmental charges; the reasonable charges of paying agents and depository banks; costs of contractual and professional services, labor, materials and supplies for current operations; cost of issuance of securities relating to the Airport System (except to the extent paid from securities proceeds); fiduciary costs; cost of collecting and refunding Gross Revenues; utility costs; any lawful refunds of any Gross Revenues; and all other administrative, general and commercial expenses, but excluding: (a) any allowance for depreciation; (b) costs of improvements; (c) reserves for major capital replacements, Airport System operations, maintenance or repair; (d) any allowance for redemption of or payment of interest or premium on securities; (e) any liabilities incurred in acquiring or improving properties of the Airport System; (f) expenses of lessees or licensees under Net Rent Leases; (g) Operation and Maintenance Expenses pertaining to Special Facilities; and (h) liabilities based upon the County s negligence or other ground not based on contract. Other Available Funds means, with respect to the Master Indenture, for any Fiscal Year, the smallest amount of unencumbered funds at any time in the Fiscal Year on deposit in the Capital Fund in excess of the Minimum Capital Reserve; but in no event shall such amount exceed 25% of the Aggregate Debt Service Requirements for the Senior Lien Revenue Securities then Outstanding for the Comparable Bond Year. Outstanding when used with reference to any Revenue Bonds or any other designated Revenue Securities and as of any particular date means all the Revenue Bonds or any such other Revenue Securities payable from Gross Revenues or otherwise pertaining to the Airport System, as the case may be, in any manner theretofore and thereupon being executed and delivered: except (a) any Revenue Bond or other C-6

173 Revenue Security canceled by the County, by the Paying Agent or otherwise on the County s behalf, at or before such date; (b) any Revenue Bond or other Revenue Security for the payment or the redemption of which moneys at least equal to its Bond Requirements to the date of its maturity or any Redemption Date, whichever date is earlier, if any, shall have theretofore been deposited with a Trust Bank in escrow or in trust for that purpose, as provided in the Master Indenture; and (c) any Revenue Bond or other Revenue Security in lieu of or in substitution for which another Revenue Bond or other Revenue Security shall have been executed and delivered pursuant to the Master Indenture. Paying Agent means The Bank of New York Trust Company, N.A., or any successor Commercial Bank which may be appointed from time to time as paying agent for Revenue Securities. Person means a corporation, firm, other body corporate (including, without limitation, the federal government, the State, or any other body corporate and politic other than the County) partnership, association or individual, and also includes an executor, administrator, trustee, receiver or other representative appointed according to laws. Project means any Additional Project comprised of the enlargement, other improvement and equipment of the Airport System, including, without limitation, the acquisition of land therefor, or any combination thereof, as the Improvement Project or any other project may be modified pursuant to the Master Indenture, in the absence of the defined term expressly including both an Improvement Project and a Refunding Project as to any series of Revenue Bonds or other Revenue Securities as stated in the proceedings pertaining thereto. Qualified Bank means a Commercial Bank organized and in good standing under the laws of the United States or any state thereof, and, insofar as the Letter of Credit of such bank secures the payment of Senior Guaranteed Obligations, whose most recent debt obligations are rated by Moody s or by Standard & Poor s at least one full rating category above the rating on any Senior Lien Revenue Bonds which are not Guaranteed Obligations and which are then Outstanding, but not less than A by either agency. Qualified Surety Bond means any surety bond or other insurance policy, which has liquidity features equivalent to a Letter of Credit, or any Letter of Credit deposited in the Debt Service Reserve Fund in lieu of or in partial substitution for monies on deposit therein, the issuer of which is rated in the highest rating category by each Rating Agency. Qualified Swap means (a) the Interest Rate Swap Agreement dated as of September 1, 1991 between the County and AIG Financial Products Corp., and (b) any other financial arrangement which, in connection with a particular series of Revenue Bonds, has been approved in writing by any bond insurer insuring payment of principal of and interest on such series of Revenue Bonds (i) that is entered into by the County with an entity that is a Qualified Swap Provider at the time the arrangement is entered into; (ii) which provides that the County shall pay to such entity an amount based on the interest accruing at a fixed rate on an amount equal to the designated principal amount of Revenue Bonds Outstanding as described therein, and that such entity shall pay to the County an amount based on the interest accruing on such principal amount at a variable rate of interest computed according to a formula set forth in such arrangement (which need not be the same as the actual rate of interest borne by such Revenue Bonds) or that one shall pay to the other any net amount due under such arrangement; and (iii) which has been designated in writing to the Trustee by the County as a Qualified Swap with respect to such Revenue Bonds. Qualified Swap Provider means (a) with respect to the Qualified Swap referred to in clause (a) of the definition of Qualified Swap, AIG Financial Products Corp., and (b) with respect to a Qualified Swap referred to in clause (b) of such definition, a financial institution whose senior long term debt obligations, or whose obligations under a Qualified Swap are guaranteed by a financial institution whose senior long term debt obligations, are rated (at the time the subject Qualified Swap is entered into) at least A3, in the case of Moody s and A-, in the case of Standard & Poor s, or the equivalent thereto in the case of any successor C-7

174 thereto, and which is approved in writing by any bond insurer insuring payment of principal of and interest on the series of Revenue Bonds to which such Qualified Swap relates. Registrar means The Bank of New York Trust Company, N.A., or any successor Commercial Bank which may be appointed from time to time as registrar. Revenue Bonds (defined as Bonds in the Master Indenture) means any bond or bonds issued in accordance with the provisions of the Master Indenture which are payable from the Net Revenues of the Airport System and which payment is secured by a pledge of and lien on the Net Revenues. The term Revenue Bonds does not include any special obligation bonds or other special obligation securities designated as Special Facilities Bonds and pertaining to Special Facilities, and such term does not include any Subordinate Revenue Bonds unless the context of the provisions in which the term Revenue Bonds is used clearly indicates that term pertains to Subordinate Revenue Bonds. In connection with Revenue Bonds of a series with respect to which a Qualified Swap is in effect or proposed to be in effect, the term Revenue Bonds includes, collectively, both such Revenue Bonds and either such Qualified Swap or the obligations of the County under such Qualified Swap, as the context requires, but the Qualified Swap Provider shall not be considered to be an owner of Revenue Bonds for purposes of receiving notices, granting consents or approvals, or directing or controlling any actions, restrictions, rights, remedies or waivers under the Master Indenture, except as expressly provided in the Master Indenture. Revenue Securities (defined as Securities in the Master Indenture) means any bond or bonds, note or notes, warrant or warrants, or other similar securities or any book entry obligations, or any certificates whether pertaining to such securities or not or to other securities, authorized by law to be issued by the County in relation to the Airport System and issued in accordance with the Master Indenture which securities are payable from the Net Revenues of the Airport System and which payment is secured by a pledge of and lien on the Net Revenues. Senior Lien Revenue Bonds or Senior Lien Revenue Securities (defined as Parity Bonds and Parity Securities in the Master Indenture) refer to the 1993A Bonds and any other securities or bonds pertaining to the Airport System and payable from Net Revenues on a parity with such Revenue Bonds, including the obligations payable to a Qualified Bank under a Letter of Credit Agreement and in connection with Revenue Bonds or other Revenue Securities with respect to which a Qualified Swap is in effect or proposed to be in effect, the terms Senior Lien Revenue Bonds and Senior Lien Revenue Securities includes, collectively, both such Revenue Bonds and either such Qualified Swap or the obligations of the County under such Qualified Swap, as the context requires, except as otherwise provided in the Master Indenture. Senior Guaranteed Obligations means one or more Senior Term Securities of any series becoming due on one fixed maturity date, the payment of which Senior Lien Revenue Securities is additionally secured by a Letter of Credit issued by a Qualified Bank pursuant to a Letter of Credit Agreement. Serial Senior Lien Revenue Bonds or Serial Senior Lien Revenue Securities means the Revenue Bonds or other Revenue Securities of any series which are stated to mature in consecutive annual installments. Series Indenture means a supplemental instrument providing for the issuance of any particular Series of Bonds or other Securities. Sinking Fund Requirements means, with respect to the Term Bonds or Term Securities for any series other than Guaranteed Obligations and for any Fiscal Year, the amount to be accumulated in the Fiscal Year in the Sinking Fund Account for the payment for the principal amount fixed or computed for the Comparable Bond Year for the retirement of such Term Bonds or Term Securities by purchase, either upon the open market or by calls for tenders for purchase by the County, or by both such types of purchase, or by prior redemption, or by both such purchase and such prior redemption, as follows. The Sinking Fund Requirements C-8

175 for the Term Bonds or Term Securities of each series for each Fiscal Year in which the Sinking Fund Requirements are accumulated in the Sinking Fund Account for payment of Term Bonds or Term Securities are initially the respective principal amounts of the Term Bonds or Term Securities to be redeemed on July 1 of the Comparable Bond Year as fixed in the Series Indenture for such series, or otherwise so retired by purchase not later than 45 days prior to that due date. The aggregate amount of the Sinking Fund Requirements payable for the Term Bonds or Term Securities of each series shall be equal to the aggregate principal amount of the Term Bonds or Term Securities of the series then Outstanding. The Sinking Fund Requirements for the Term Bonds or Term Securities of the same maturity of each series are accumulated by substantially equal monthly deposits in the Sinking Fund Account commencing on the first day of the Fiscal Year which pertains to the Comparable Bond Year on July 1 of which Term Bonds or Term Securities are paid by prior redemption or prior purchase, and ends with the Bond Year which ends one year next preceding the fixed maturity date of each series of such Term Bonds or Term Securities (such final installment being payable on the fixed maturity date). If at the close of any Bond Year the total principal amount of the Term Bonds or Term Securities of any series of the same maturity retired by purchase or prior redemption during the Bond Year shall be greater than the total amount of the Sinking Fund Requirements for such Term Bonds or Term Securities to and including the Bond Year, then the Sinking Fund Requirements for such Term Bonds or Term Securities for all subsequent Bond Years must be reduced by the amount of that excess as determined by the Board. The amount of the reduction in the Sinking Fund Requirements for each subsequent Bond Year shall be as determined by the Board. Once the Board has adjusted the Sinking Fund Requirements for the subsequent Bond Years to reflect the reduction resulting from the excess redemption or purchase in contradistinction to any like excess reduction resulting from an excess redemption or purchase in any of the subsequent Bond Years. If at the close of any Bond Year the total principal amount of the Term Bonds or Term Securities of any series of the same maturity retired by purchase or prior redemption during the Bond Year shall be less than the total amount of the Sinking Fund Requirements for those Term Bonds or Term Securities to and including the Bond Year, then the Sinking Fund Requirement for the Term Bonds or Term Securities expended in the next ensuing Bond Year must be increased by the amount of such deficiency and such event shall be an Event of Default under the Master Indenture. The Board shall, before the first day of each Fiscal Year, recompute, if necessary, the Sinking Fund Requirements for the Comparable Bond Year and all subsequent Bond Years for the Term Bonds or Term Securities of each series then Outstanding. The Sinking Fund Requirements for the Bond Year as recomputed shall continue to be applicable during the Bond Year and no adjustment need be made therein by reason of Term Bonds or Term Securities purchased or called for prior redemption during the Bond Year. Special Facilities means structures, hangars, aircraft overhaul, maintenance or repair shops, heliports, hotels, storage facilities, garages, other facilities, and appurtenances, being a part of or related to the Airport System, the cost of the construction or other acquisition of which Special Facilities is financed with the proceeds of Special Facilities Bonds. Standard & Poor s means Standard & Poor s Corporation or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency (other than Moody s) as may be designated in writing by the County and approved in writing by any bond insurer insuring payment of principal of and interest on such Revenue Bonds. Subordinate Revenue Bonds or Subordinate Revenue Securities (defined as Subordinate Bond and Subordinate Securities in the Master Indenture) means bonds or other securities pertaining to the Airport System and payable from its Net Revenues subordinate and junior to the lien thereon of the Revenue Bonds and include Swap Termination Payments and any other amounts payable by the County under a Qualified Swap entered into in connection with the proposed issuance of a series of Revenue Bonds in the event that no Revenue Bonds of such series are issued by the date provided in such Qualified Swap. Subordinate Guaranteed Obligations means one or more Subordinate Revenue Securities of any series becoming due on one fixed maturity date, the payment of which Subordinate Revenue Securities is additionally secured by a Letter of Credit issued by a Qualified Bank pursuant to a Letter of Credit Agreement. C-9

176 Swap Termination Payment means an amount payable by the County or a Qualified Swap Provider, in accordance with a Qualified Swap, to compensate the other party to the Qualified Swap for any losses and costs that such other party may incur as a result of the early termination of the obligations, in whole or in part, of the parties under such Qualified Swap. Beginning on the date, if any, that a Swap Termination Payment by the County becomes due and payable, the amount of such Swap Termination Payment shall be taken into account in determining the Debt Service Requirements of the series of Revenue Bonds to which such Qualified Swap relates, except as otherwise specifically provided in the Master Indenture. Trustee means The Bank of New York Trust Company, N.A., or any successor Commercial Bank which may be appointed from time to time as trustee for Revenue Securities. Tax Code means the Internal Revenue Code of 1986, as amended. Term Bonds or Term Securities means the Revenue Bonds or Revenue Securities of a series with a fixed maturity date or dates designated as Term Bonds or Term Securities (other than Guaranteed Obligations) in a Series Indenture, but which fixed maturity date or dates do not constitute consecutive annual installments. if any. Treasurer means the de jure or de facto county treasurer of the County, or his successor in functions, MASTER INDENTURE Revenue Pledge Pursuant to the Master Indenture, the County has irrevocably pledged the Net Revenues of the Airport System to the payment of the Senior Lien Revenue Bonds. The facilities comprising the Airport System, however have not been pledged to secure payment of the Senior Lien Revenue Bonds. The Senior Lien Revenue Bonds are also secured by a pledge of all funds and accounts held under the Master Indenture, subject to the provisions of the Master Indenture permitting disbursements of such amounts at the times and in the manner described therein. The Senior Lien Revenue Bonds and other Revenue Securities are special obligations of the County payable solely from Net Revenues generated by the Airport System. The Senior Lien Revenue Bonds and other Revenue Securities do not constitute a debt of the County within the meaning of any Constitutional or statutory provision or limitation, or a pledge of the full faith, credit and taxing power of the County. The Master Indenture creates a special fund designated the Revenue Fund, to which the County is required to set aside and credit all Gross Revenues of the Airport System upon receipt thereof by the County. The Master Indenture requires that moneys or deposits in the Revenue Fund be applied solely in accordance with the order of priorities established by the Master Indenture. The first such priority and charge against the Revenue Fund is the payment of Operation and Maintenance Expenses budgeted and approved pursuant to the Master Indenture, including transfers to the Rebate Accounts established with respect to any series of Revenue Bonds. Rate Maintenance Covenant Pursuant to the Master Indenture, the County must at all times fix, charge and collect rentals, rates, fees and other charges for the use of the Airport System, and must revise such as may be necessary or appropriate in order that in each Fiscal Year the Gross Revenues, together with any Other Available Funds, will at all times be at least sufficient: C-10

177 A. To provide for the payment of Operation and Maintenance Expenses for such Fiscal Year, and B. To provide for the larger of either: (i) Subject to the qualification set forth in the next paragraph, the amounts needed for making the required cash deposits in such Fiscal Year to the credit of the Bond Fund, the Debt Service Reserve Fund, the Subordinate Securities Fund, the Working Capital and Contingency Reserve Fund and the Capital Fund, or (ii) An amount not less than 125% of the Aggregate Debt Service Requirements for the Comparable Bond Year for the Senior Lien Revenue Bonds then Outstanding. In calculating the amount required to be deposited in the Bond Fund and Subordinate Securities Fund in clause B(i) above, (a) in the case of any Senior Term Securities which constitute Senior Guaranteed Obligations, the amount required to be deposited in the Bond Fund in the Fiscal Year immediately preceding the maturity date of the Senior Guaranteed Obligations shall equal the Senior Guaranteed Obligation Requirements for such Senior Guaranteed Obligations for the Comparable Bond Year, and (b) in the case of any Subordinate Term Securities which constitute Subordinate Guaranteed Obligations, the amount required to be deposited in the Subordinate Securities Fund in the Fiscal Year immediately preceding the maturity date of the Subordinate Guaranteed Obligations shall equal the Guaranteed Obligation Requirements for such Subordinate Guaranteed Obligations for the Comparable Bond Year. If Gross Revenues in any Fiscal Year, together with any Other Available Funds, are less than the amounts specified above, the County, upon receipt of the annual audit for such Fiscal Year, shall revise its rentals, rates, fees and other charges, its Operation and Maintenance Expenses or the method of operation of the Airport System in order to satisfy as quickly as practicable the foregoing requirements. If the County complies in good faith with the requirement of the preceding paragraph, it will not constitute an Event of Default pertaining to the County s non-performance of its duties under the Master Indenture if the resulting Gross Revenues, together with any Other Available Funds, are not sufficient to satisfy the Rate Maintenance Covenant. If, however, the County shall fail to comply in good faith with such requirements, the Trustee may, and upon the request of the owners of not less than 10% in aggregate principal amount of the Senior Lien Revenue Bonds of any series then Outstanding and upon being indemnified to its satisfaction, is required to institute and prosecute in a court of competent jurisdiction an appropriate action to compel the County to satisfy such requirements. The County has covenanted that it will adopt and charge rentals, rates, fees and charges and revise its Operation and Maintenance Expenses or the method of operation of the Airport System in compliance with any final order, decree or judgment entered in any such proceeding or any modification thereof. Debt Service Reserve Fund The Debt Service Reserve Fund is required to be funded in an amount equal to the Maximum Annual Debt Service Requirements of the Senior Lien Revenue Bonds. Application of Revenues In addition to the Revenue Fund and the Operation and Maintenance Fund (including the Rebate Accounts of the Operation and Maintenance Fund), which will be held by the County, the Master Indenture creates the following additional funds and accounts held by the County or the Trustee, as the case may be: C-11

178 Fund or Account Bond Fund Interest Account Principal Account Sinking Fund Account Redemption Account Debt Service Reserve Fund Subordinate Securities Fund Working Capital and Contingency Reserve Fund Capital Fund Construction Fund Capitalized Interest Account Held By: Trustee Trustee County County County County Trustee After making the payments each month required to be credited to the Operation and Maintenance Fund, moneys in the Revenue Fund are required to be transferred and credited to the following funds and accounts at the following times and in the following order of priority: (i) Monthly, to the Interest Account of the Bond Fund, an amount, together with other moneys available therefor from whatever source, including moneys in the Capitalized Interest Account set aside for such payment, equal to 1/6 of the next maturing interest installments on the Senior Lien Revenue Bonds then Outstanding, including any amounts due and payable by the County to a Qualified Swap Provider under the related Qualified Swap at such times as are provided in the Qualified Swap; (ii) Monthly, to the Principal Account of the Bond Fund, an amount equal to 1/12 of the next maturing principal on the Serial Senior Lien Revenue Bonds the Outstanding; (iii) Monthly, to the Sinking Fund Account of the Bond Fund, an amount equal to 1/12 of the next Sinking Fund Requirement for the Comparable Bond Year for the Term Bonds then Outstanding; (iv) Monthly, to the Debt Service Reserve Fund, an amount which, if made as one of 60 equal monthly installments, is sufficient to make the sum of the amount on deposit in the Debt Service Reserve Fund plus the available amount of any Qualified Surety Bonds on deposit therein equal to the Maximum Annual Aggregate Debt Service Requirements for the then Outstanding Senior Lien Revenue Bonds; provided that if any moneys are withdrawn from the Debt Service Reserve Fund (other than any amounts the withdrawal of which does not reduce the reserve to an amount less than the Maximum Annual Aggregate Debt Service Requirements) or if payment is made under any Qualified Surety Bond in the Debt Service Reserve Fund to pay the Securities Requirements of any Senior Lien Revenue Securities, the amount so withdrawn, except to the extent any such Qualified Surety Bond is reinstated as may be provided therein or in connection therewith, is to be restored therein from Net Revenues available therefor over a 60 month period; (v) Monthly, to the Subordinate Securities Fund, an amount which is required to provide for the payment of the principal of and interest due on Subordinate Revenue Securities as the same become due, including any reasonable reserves for such securities; (vi) Monthly, to the Working Capital and Contingency Reserve Fund, an amount equal to 1/12 of 8.333% of the amount designated in the annual Airport System C-12

179 budget then in effect as the annual Operation and Maintenance Expenses for the current Fiscal Year (the Minimum Working Capital Reserve ), less any money available in such Fund. If the Board, after consultation with the Airport Management Consultant, determines at any time that the aforesaid percentage provides insufficient or excessive revenues for the purpose for which the Working Capital and Contingency Reserve Fund is established, the Assistant Director of the Airport is to adjust the percentage referred to above as directed by the Board but in no event is such percentage to be reduced below 8.333%. No payment need be made into the Working Capital and Contingency Reserve Fund so long as the moneys therein shall then equal not less than the Minimum Working Capital Reserve. The moneys in the Working Capital and Contingency Reserve Fund are to be accumulated or reaccumulated and maintained as a continuing reserve to be used only to prevent deficiencies in the payment of the Operation and Maintenance Expenses resulting from the failure to deposit into the Operation and Maintenance Fund sufficient funds to pay such expenses as the same accrue and become due. If at any time the moneys credited to the Operation and Maintenance Fund are insufficient to pay Operation and Maintenance Expenses, the County acting by and through the Assistance Director may withdraw such moneys from the Working Capital and Contingency Reserve Fund and transfer them to the credit of the Operation and Maintenance Fund. Any moneys in the Working Capital and Contingency Reserve Fund exceeding the Minimum Working Capital Reserve is to be transferred to the Revenue Fund. In November 1987, by resolution, the Board increased the Minimum Working Capital Reserve to % of annual Operation and Maintenance Expenses. The Board retains discretion to reduce the Minimum Working Capital Reserve to 8.333% at any time; and (vii) To the Capital Fund, from any remaining moneys in the Revenue Fund, (i) equal monthly installments or such greater amounts as required to provide for the payment of the principal of, premium, if any, and interest on any General Obligation Securities, except to the extent the County appropriates other funds therefor, during such Fiscal Year or Comparable Bond Year (the General Obligation Requirements ) and (ii) not less infrequently than annually by the end of each Fiscal Year an amount, but in any event not more than $100,000, necessary to accumulate or to reaccumulate in the Capital Fund a reserve in an amount of not less than $1,000,000 (the Minimum Capital Reserve ). No payment need be made into the Capital Fund during any Fiscal Year so long as the moneys therein shall equal not less than the sum of the Minimum Capital Reserve plus the General Obligation Requirements for such Fiscal Year. In November 1987, by resolution, the Board increased the Minimum Capital Reserve from $1,000,000 to $5,000,000 and made a one-time deposit into the Capital Fund in an amount equal, together with moneys on deposit therein, to $5,000,000. The Board retains discretion to reduce the Minimum Capital Reserve to $1,000,000 at any time. Moneys in the Capital Fund may be withdrawn in any priority for any one, all, or any combination of the following purposes, as the Board may from time to time determine: A. Payment of General Obligation Securities. To pay the Securities Requirements of any General Obligation Securities; B. Capital Costs. To pay the costs of constructing or otherwise acquiring any betterments of, enlargements of, extensions of or any other improvements at the Airport System, or any part thereof, authorized by law; C. Maintenance Costs. To pay costs of extraordinary and major repairs, renewals, replacements or maintenance items pertaining to any properties of the Airport System of a type not recurring annually or at shorter intervals and not defrayed as Operation and Maintenance Expenses; and C-13

180 D. Securities Requirements. To pay any securities payable from the Net Revenues, if such payment is necessary to prevent any default in the payment of such Revenue Securities, or otherwise. If any monthly payment required to be made into any fund or account set forth above is deficient, the County is required to include the amount of such deficiency in the next monthly deposit into such fund or account. At the end of any Fiscal Year or whenever in any Fiscal Year there shall have been credited to the above funds and accounts all amounts required to be deposited in those funds or accounts for all of that Fiscal Year and in satisfaction of any deficiencies in any prior Fiscal Year, any remaining Net Revenues in the Revenue Fund may be used for any lawful purposes pertaining to the Airport System, as the Board may from time to time determine. The Master Indenture requires all interest earned or profit or loss realized on investments or deposits of moneys held for all funds and accounts to be credited or charged to the Revenue Fund, except that such earnings, profits or losses derived from any account in the Construction Fund are to be credited or charged to such fund and any earnings or profits derived from the Debt Service Reserve Fund are to be credited thereto until the amount in such fund shall equal the Maximum Aggregate Debt Service Requirements for the Senior Lien Revenue Bonds the Outstanding. Issuance of Additional Senior Lien Revenue Securities The Master Indenture permits and, in instances where the County has covenanted to complete a Project, requires the County to issue Senior Lien Revenue Securities payable from the Net Revenues of the Airport System on a parity with the Senior Lien Revenue Bonds for the following purposes: (i) paying the cost of completing the Project or any Additional Project for which any series of Senior Lien Revenue Securities has been issued; (ii) paying the cost of any Additional Project; and (iii) refunding all Outstanding Senior Lien Revenue Bonds or Senior Lien Revenue Securities of one or more series, or one or more Outstanding Senior Lien Revenue Bonds or Senior Lien Revenue Securities of one or more series, or one or more maturities within a series, or refunding any Subordinate Revenue Securities. In connection with the issuance of additional series of Senior Lien Revenue Securities, the cost of any Project or Additional Project includes, among other items, the costs of surveys or other plans or specifications, builder s insurance, consultant s fees, construction contingencies, property acquisition costs, the costs of issuance of such series of Senior Lien Revenue Securities, capitalized interest to a date not exceeding one year following the estimated completion date of the Project and the funding of reserves for the payment of the series of Senior Lien Revenue Securities. Completion Bonds. The County may issue one or more series of Senior Lien Revenue Bonds or other Senior Lien Revenue Securities ( Completion Bonds ) to pay the cost of completing the Project or any Additional Project. Prior to the issuance of any series of Completion Bonds, the County is required to have delivered to the Trustee, among other documents: A. A certificate of the Consulting Engineer approved by the Director stating that the Project or Additional Project (as the case may be) has not materially C-14

181 changed (except as permitted in the Master Indenture) from the description of the Project in the report of the Consulting Engineer or from the description of the Additional Project as described in any Series Indenture relating to the series of Additional Senior Lien Revenue Securities issued to finance the Additional Project, and setting forth the aggregate cost of the Project which, in the opinion of the signer, has been or will be incurred and cannot be paid from the moneys available at the date of the certificate in the account within the Construction Fund applicable to the Project; and stating that, in the opinion of the signer, issuance of the Completion Bonds is necessary to provide funds for completion of the Project; and B. A certificate of the Director stating that the previous series of Senior Lien Revenue Securities issued in connection with the Project for which the Completion Bonds are being issued were issued to pay all or the balance of the costs of such Project. Additional Bonds. One or more Series of Additional Bonds, or other Additional Securities, or both such Bonds and such Securities, maybe authorized and delivered for the purpose of paying the Cost of any Additional Project. The Bonds or other Securities of any such Series shall be authorized as Senior Lien Revenue Bonds or other Senior Lien Revenue Securities and pursuant to a Series Indenture; but prior to the delivery of such Series of Bonds or other Securities, the County shall file with the Trustee documents including, without limitation, the following: A. Earnings Test. (1) A certification of the Director or Assistant Director that the Net Revenues, together with any Other Available Funds received (i) in the last audited Fiscal Year preceding the Delivery of the Series of Additional Bonds or other Additional Securities or (ii) for any period of 12 consecutive calendar months out of the 18 calendar months next preceding the delivery of the Series of Additional Bonds or other Additional Securities were at least sufficient to pay amount equal to the larger of either: (x) The amount needed for making the required cash deposits in the 12-month period to the credit of the several accounts in the Bond Fund and to the credit of the Debt Service Reserve Fund, the Subordinate Securities Fund, the Working Capital and Contingency Reserve Fund, and the Capital Fund, or (y) An amount not less than 125% of the Maximum Aggregate Debt Service Requirements (calculated for the period beginning on the date of issuance of the proposed Additional Bonds or other Additional Securities and ending on the final maturity date of the then Outstanding Senior Lien Revenue Bonds and the proposed Additional Bonds or other Additional Securities) of the Outstanding Senior Lien Revenue Bonds and the Additional Bonds or other Additional Securities proposed to be issued; or (2) A certification of the Director or Assistant Director that the Net Revenues, together with any Other Available Funds received (i) in the last audited Fiscal Year preceding the Delivery of the Series of Additional Bonds or other Additional Securities or (ii) for any period of 12 consecutive calendar months out of the 18 calendar months next preceding the delivery C-15

182 of the Series of Additional Bonds or other Additional Securities were at least sufficient to pay amount equal to the larger of either: B. Consulting Engineer s Certificate. If paragraph (A)(2) above is used in connection with the issuance of Additional Bonds, a certificate of the Consulting Engineer setting forth (i) the estimated date of completion for the Additional Project for which such Series of Additional Bonds or other Additional Securities is being issued and for any other uncompleted Project for which the Additional Bonds or other Additional Securities are not being issued, and (ii) an estimate of the Cost of such Additional Project and of any other uncompleted Project; and C. Absence of Default. A certification of the Director and Assistant Director that at the time of the execution and delivery of the supplemental instrument authorizing the Additional Bonds or other Additional Securities, as the case may be, as provided in the Master Indenture, the County shall not have been in default in making any payments required by the Master Indenture. In any computation described above there shall be excluded from Gross Revenues any surplus Bond or other Security proceeds and any capital gain resulting from any sale or revaluation of investments in Investment Securities or bank deposits, or both such securities and such deposits, or both such securities and such deposits. If any one or more of the documents required by subparagraphs A, B and C above can not be given with the required results stated therein, the County must not issue the proposed Senior Lien Revenue Bonds or any other Senior Lien Revenue Securities. Nothing contained in this paragraph obligates the County to take any action in violation of any applicable requirements imposed by law, as to any increase in any rentals, rates, fees, and other charges, or otherwise. Refunding Bonds. Prior to the issuance of any series of Senior Lien Revenue Securities ( Refunding Bonds ) to refund one or more series of Senior Lien Revenue Bonds or Senior Lien Revenue Securities or one or more Senior Lien Revenue Bonds or Senior Lien Revenue Securities within a series, or one or more maturities of a series of Senior Lien Revenue Bonds or any series of Senior Lien Revenue Securities, other than for redeeming at their maturity the Term Bonds or Term Securities of a series which mature within one year of such refunding, the County shall have delivered to the Trustee, among other documents, either of the following: (i) a certificate of the Treasurer setting forth (1) the Aggregate Debt Service Requirements for the then current and each future Bond Year to and including the Bond Year ending on the date of the latest maturity of any series of Senior Lien Revenue Bonds or Senior Lien Revenue Securities of any series then Outstanding (a) with respect to the series of Senior Lien Revenue Bonds and Senior Lien Revenue Securities of all series Outstanding immediately prior to the date of delivery of such Refunding Bonds and (b) with respect to the series of Senior Lien Revenue Bonds and Senior Lien Revenue Securities to be Outstanding immediately thereafter, and (2) that the Aggregate Debt Service Requirements set forth for each Bond Year pursuant to (b) above is no greater than that set forth for such Bond Year pursuant to (a) above; or (ii) the certificates required by clauses A through D under Additional Bonds above evidencing that such series of Refunding Bonds meets the tests provided for all purposes of such certificate and tests applied as if such series of Refunding Bonds was a series of Additional Bonds. Refunding Bonds of each series issued to refund Subordinate Revenue Securities may be delivered in a principal amount sufficient, together with other moneys available therefor (including investment income thereon), to accomplish such refunding, provided that the County delivers, among other documents, the certificates required by clauses A through D under Additional Bonds above if the Subordinate Revenue Securities were originally issued to fund an Additional Project or the certificates required by clauses A and B under Completion Bonds above if such Subordinate Revenue Securities were originally issued to fund completion of a Project, such certificates to be prepared as if such series of Refunding Bonds was a series of Additional Bonds or Completion Bonds, as the case may be. C-16

183 Issuance of Subordinate Revenue Securities and Special Facilities Bonds The Master Indenture provides that the County may issue junior lien (subordinate) securities. The Master Indenture also includes provisions under which the County may issue Special Facilities Bonds for the purpose of constructing Special Facilities at the Airport for lease on a net rent basis. Any such Special Facilities Bonds shall be payable solely from rentals payable to the County pursuant to such Net Rent Leases, and shall not be a charge or claim against the Revenue Fund or any other account designated in the Master Indenture. Acquisition of Additional Facilities The County is not to acquire additional airfields or other independent airport facilities unless, in the written opinion of the Airport Management Consultant, the acquisition, operation and maintenance of such facilities will not materially affect the County s ability to comply with the Rate Maintenance Covenant described above or unless such facilities are excluded from the Airport Facilities at the option of and by order of the Board. Security for Deposits; Investments Until such money is invested pursuant to the last paragraph of this section, all money (not including securities) held by the Trustee may be deposited by the Trustee in demand or time deposits in its banking department or with such other Commercial Banks having their principal offices in the State or the State of New York as may be designated by the County and approved by the Trustee. No such money is to be deposited with any Commercial Bank, other than the Trustee, in an amount exceeding 50% of the amount which an officer of such bank shall certify to the Trustee and to the County as the combined capital and surplus of such bank. No such money is to be deposited or remain on deposit with any Commercial Bank, including the Trustee, in excess of the amount guaranteed by the Federal Deposit Insurance Corporation or other Federal agency: A. unless such bank shall have lodged with the trust department of the Trustee or, with the written approval of the Trustee and of the County, pledged to some other Commercial Bank for the benefit of the County and every owner of any Revenue Securities issued under the Master Indenture, as collateral security for the moneys deposited, Federal Securities or such securities as are provided by law for securing a deposit in a Commercial Bank in the State, having a market value (exclusive of accrued interest) at least equal to 110% of the amount of such moneys; or B. unless, in lieu of such collateral security as to all or any part of such moneys, there shall have been lodged with the trust department of the Trustee for the benefit of the County and every owner of any Revenue Securities issued under the Master Indenture, and remain in full force and effect as security for such moneys or part thereof, the indemnifying bond or bonds of a surety company or companies qualified as surety for deposits of funds of the United States and qualified to transact business in the state in which such Commercial Bank is located in a sum at least equal to the amount of such moneys or part thereof. Any money in any account or subaccount designated in the Master Indenture (other than any account for the refunding, payment and/or discharge of the Securities Requirements of any Outstanding Revenue Bonds or other Revenue Securities under the defeasance provisions of the Master Indenture, or otherwise), and not required for immediate disbursement and withdrawal is to be invested or reinvested by the Treasurer or the Trustee at the direction of the Director or Assistant Director by deposit in one or more Commercial Banks or in C-17

184 Investment Securities (and subject to an appropriate statutory amendment, other investment securities) which Investment Securities either shall be subject to redemption at any time at a fixed value by the holder thereof, at the option of the holder, or shall mature from the date of such investment or reinvestment neither later than such times as moneys are needed for payments from the respective accounts and subaccounts, nor (1) in the case of the Debt Service Reserve Fund, (i) later than 10 years from the date of investment (unless redeemable at the holder s option), or (ii) later than the last fixed maturity date of the Senior Lien Revenue Securities, nor (2) in the case of the Construction Fund later than the estimated completion date of the Project, nor (3) in the case of the Working Capital and Contingency Reserve Fund in securities with an average maturity exceeding 2½ years. The Investment Securities so purchased as an investment or reinvestment of moneys in any such account or subaccount shall be deemed at all times to be a part of the account or subaccount held in trust therefor. Defeasance; Modification of the Master Indenture When all principal, interest and any prior redemption premiums due in connection with Revenue Securities of any series payable from Pledged Revenues have been duly paid, or provision made therefor in accordance with the Master Indenture, the pledge and lien and all obligations under the Master Indenture shall thereby be discharged and such Revenue Securities shall no longer be deemed to be Outstanding. The County may provide for such payment by placing in escrow or in trust with a Trust Bank an amount sufficient, together with the known minimum yield available therefor from any initial investment in Defeasance Securities, to meet all requirements of principal, interest and any prior redemption premiums due, as the same become due to the final maturity of the Revenue Securities or upon any prior redemption date as of which the County shall have exercised or shall have obligated itself to exercise its prior redemption option by the call of the Revenue Securities for payment. The Master Indenture may be amended or supplemented by instruments executed and delivered by the Board in accordance with the laws of the State upon the written consent of the holders of 66% in principal amount of all Senior Lien Revenue Bonds then Outstanding (excluding any Senior Lien Revenue Bonds held by the County), but no instrument shall have the effect of permitting: (1) a change in the maturity or the terms of redemption of any installment of principal, or interest of any Outstanding Senior Lien Revenue Bond; (2) a reduction of the principal, interest rate or prior redemption premium of any Senior Lien Revenue Bond without the consent of the owner of such Senior Lien Revenue Bond; (3) the creation of a lien upon or a pledge of revenues ranking prior to the lien or to the pledge created by the Master Indenture; or (4) a reduction of the principal amount or percentages or otherwise affecting the description of Senior Lien Revenue Bonds or the consent of the owners of which is required for any such modification of or prejudicial effect upon the rights or privileges of the owners of less than all of the Senior Lien Revenue Bonds then Outstanding. Remedies of Senior Lien Revenue Bondholders The Master Indenture defines events of default as follows: (1) the failure to pay when due the principal of any Senior Lien Revenue Bond, or any prior redemption premium in connection therewith, or any failure to pay installment of interest within 30 days after it is due; (2) the County is rendered incapable of fulfilling its obligations under the Master Indenture; (3) the County fails to perform (or begin the performance of) all acts required of it under any contract relating to the Pledged Revenues, the Airport System or any Special Facilities, continuing 60 days after notice of such failure; (4) the County discontinues, delays or fails to carry out reconstruction or replacement of any part of the Airport System which is destroyed or damaged; (5) an order or decree is entered appointing a receiver for the Airport System or the Pledged Revenues derived therefrom, or if such decree was entered without the consent of the County, it is not vacated, discharged or stayed on appeal within 60 days after entry; (6) the County defaults in the due and punctual performance of any other of the covenants, agreements and provisions contained in any Revenue Securities or in the Master Indenture on its part to be performed, if such default continues for 60 days after written notice specifying such default and requiring the same to be remedied has been given to the County by the owners of 10% in principal amount of the Revenue Securities of any series then Outstanding or by the Trustee of the Revenue Securities; C-18

185 and (7) the County files a petition pertaining to its Airport System and seeking a composition of indebtedness under the Federal Bankruptcy Code, or under any other applicable law or statute of the United States of America or the State. In the event of any default, the Trustee may proceed, and if the owners of not less than 10% in principal amount of any series of Senior Lien Revenue Securities then Outstanding so request, then the Trustee is to proceed, against the County to protect and enforce the rights of the owners of the Senior Lien Revenue Bonds under the Master Indenture by suit, action or special proceedings in equity or at law either for the appointment of a receiver or for the specific performance of any covenant or agreement contained in, or by an award of execution of any power granted in, the Master Indenture or for the enforcement of any proper legal or equitable remedy as such bondholders may deem most effectual to protect and enforce such rights. Force Majeure The Trustee shall not be considered in breach of or default in its obligations with respect to any obligations created under the Master Indenture or progress in respect thereto, in the event of enforced delay in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including but not limited to: acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics or other like occurrences beyond the control of the Trustee; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances. DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE 2007 PFC SERIES A INDENTURE The following statements are summaries of certain provisions of the 2007 PFC Series A Indenture but are in addition and complementary to the summaries found under the caption SECURITY FOR THE 2007A PFC BONDS. DEFINITIONS Unless the context otherwise requires, the terms defined under this caption will, for all purposes of this Official Statement, have the meanings herein specified. All defined terms used herein and not otherwise defined herein shall have the respective meanings given to such terms in the 2007 PFC Series A Indenture. 2001C Bonds means the securities designated as the Clark County, Nevada, Adjustable Rate Airport System Subordinate Lien Revenue Bonds, Series 2001C. 2007A PFC Project means and includes additions, betterments, extensions, other improvements of or related to the Airport System or other costs incurred for any airport purpose from time to time, including, without limitation, the acquisition of land. Annual Principal and Interest Requirements means the sum of the principal of and interest on the Outstanding 2007A PFC Bonds and any other Outstanding Parity PFC Bonds to be paid during any Bond Year, but excluding any reserve requirements to secure such payments unless otherwise expressly provided, but if any such other securities bear interest at a variable rate of interest, then except as may be provided with respect to an interest rate swap agreement, the interest rate used in the foregoing determination shall be the Bond Buyer Revenue Bond Index. In calculating this amount, the principal amount of securities required to be redeemed prior to maturity pursuant to a mandatory redemption schedule contained in the instrument authorizing the issuance of such securities shall be treated as maturing in the Bond Year in which such securities are so required to be redeemed, rather than in the Bond Year in which the stated maturity of such securities occurs. Authorized Denominations means $5,000 or any integral multiple thereof. C-19

186 Bond Buyer Revenue Bond Index means the Bond Buyer Revenue Bond Index, published in the Bond Buyer within 2 weeks prior to the date of sale of variable interest rate securities if a calculation of the Bond Requirements or the Annual Principal and Interest Requirements is being made for purposes of that sale, or within 2 weeks prior to the date a calculation of the Bond Requirements or Annual Principal and Interest Requirements is made for any other purpose, but neither greater than any maximum interest rate pertaining to the variable interest rate securities nor less than any minimum interest rate pertaining to such variable interest rate securities. If such index is not published, the County shall endeavor to select a similar index of 30 year tax exempt revenue bonds or an index which the County determines is as similar thereto as is then available. The County s determination shall be conclusive. Bond Insurance Policy means the financial guaranty insurance policy issued by the Bond Insurer that guarantees payment of principal of and interest on the 2007A PFC Bonds. Bond Insurer means Ambac Assurance Corporation, a Wisconsin domiciled stock insurance company, or any successor thereto. Bond Requirements means the principal of, any prior redemption premiums due in connection with, and the interest on the 2007A PFC Bonds, the 1992 PFC Bonds, the 1998 PFC Bonds, the 2002 PFC Bonds, the 2005 PFC Bonds and any additional bonds or other additional securities payable from PFC Revenues and hereafter issued, or such part of such securities or such other securities relating to the Airport as may be designated, as such principal, premiums and interest become due at maturity or on a Redemption Date designated in a mandatory redemption schedule, in a notice of prior redemption, or otherwise, but if any such bonds or other securities (including the 2007A PFC Bonds) bear or are to bear interest at a variable rate of interest, then except as may be provided with respect to an interest rate swap agreement, the interest rate used in the foregoing determination shall be the Bond Buyer Revenue Bond Index. In calculating the Bond Requirements, the principal amount of bonds or other securities (including the 2007A PFC Bonds) required to be redeemed prior to maturity pursuant to a mandatory redemption schedule contained in the instrument authorizing the issuance of such bonds or other securities shall be treated as maturing in the Bond Year in which such securities are so required to be redeemed, rather than in the Bond Year in which the stated maturity of such bonds or other securities occurs. Business Day means any day other than (i) a Saturday or Sunday, (ii) a day on which banks located in the city or cities in which the Principal Office of the Trustee or the principal office of the Bond Insurer are located are authorized or required to remain closed or (iii) a day on which The New York Stock Exchange is closed. Certificate of the County Chief Financial Officer means the certificate signed by the Chief Financial Officer of the County relating to the 2007A PFC Bonds dated on or before the date of delivery of the 2007A PFC Bonds. Commercial Bank means a state or national bank or trust company which is a member of the Federal Deposit Insurance Corporation, which has a capital and surplus of $25,000,000 or more and which is located within the United States; and such term includes, without limitation, any Trust Bank as herein defined. Cost of the 2007A PFC Project means all or any part designated by the County of the cost of the 2007A PFC Project, or interest in the Improvements being acquired, which cost, at the option of the County, except as limited by law, may include all or any part of the incidental costs relating to the 2007A PFC Project, including, without limitation, the following costs and expenses: (1) Preliminary expenses advanced by the County from funds available for use therefor or from any other source, or advanced with the approval of the County from funds available therefor C-20

187 or from any other source by the State, the Federal Government, or by any other Person with the approval of the County (or any combination thereof); (2) The costs in the making of surveys, audits, preliminary plans, other plans, specifications, estimates of costs, and other preliminaries; (3) The costs of premiums on builders risk insurance and performance bonds, or a reasonably allocable share thereof; (4) The costs of appraising, printing, estimates, advice, services of engineers, architects, accountants, financial consultants, attorneys at law, clerical help, or other agents or employees; (5) The costs of making, publishing, posting, mailing and otherwise giving any notice in connection with the 2007A PFC Project, the filing or recordation of instruments, the taking of options, the insurance for and issuance of the 2007A PFC Bonds and any other securities relating to the 2007A PFC Project, and bank fees and expenses; (6) The costs of contingencies; (7) The costs of the capitalization with the proceeds of the 2007A PFC Bonds or other securities of any interest on the 2007A PFC Bonds or other securities for any period not exceeding the period estimated by the County to effect the portion of the 2007A PFC Project financed with the proceeds of the 2007A PFC Bonds or such other securities plus one year, of any discount on the 2007A PFC Bonds or other securities, and of any reserves for the payment of the principal of and interest on the 2007A PFC Bonds or other securities, of any replacement expenses, and of any other cost of the issuance of the 2007A PFC Bonds or other securities relating to the 2007A PFC Project; (8) The costs of amending any instrument authorizing the issuance of or otherwise relating to the Outstanding 2007A PFC Bonds or other securities relating to the 2007A PFC Project; (9) The costs of funding any emergency loans, construction loans and other temporary loans of not exceeding five years relating to the 2007A PFC Project and of the incidental expenses incurred in connection with such loans; (10) The costs of any properties, rights, easements or other interests in properties, or any licenses, privileges, agreements and franchises; (11) The costs of demolishing, removing or relocating any buildings, structures or other facilities on land acquired for the 2007A PFC Project, and of acquiring lands to which such buildings, structures or other facilities may be moved or relocated; (12) such amounts as are required to be paid to the United States to meet the County s obligations under the covenant contained in Section 148(f) of the Tax Code, as directed by the County; (13) costs of issuance of the 2007A PFC Bonds, including of the items of expense payable or reimbursable directly or indirectly by the County and other costs incurred by the County, all related to the authorization, sale and issuance of 2007A PFC Bonds, which costs and items of expense shall include, but not be limited to, the Purchasers compensation, printing costs, costs of developing, reproducing, storing and safekeeping documents and other information processing or storage of materials, equipment and software related to the 2007A PFC Bonds, filing and recording fees, travel expenses incurred by the County in relation to such issuance of 2007A PFC Bonds, initial fees, charges and expenses (including counsel s fees and expenses) of the County, the Trustee, the Bond C-21

188 Insurer, the Registrar and the Paying Agent, legal fees and charges (including, without limitation, the fees and expenses of Bond Counsel, counsel to the Purchasers and counsel to the County), professional consultants fees, accountants fees, costs of bond ratings, fees and charges for execution, transportation and safekeeping of the 2007A PFC Bonds, accrued interest paid in connection with the purchase of any Investment Securities with the proceeds of 2007A PFC Bonds and any other costs, charges and fees in connection with the foregoing; and (14) All other expenses necessary or desirable and relating to the 2007A PFC Project, as estimated or otherwise ascertained by the County. Debt Service Requirements means (a) initially, $21,898,500, and (b) thereafter, as of each July 1, with respect to the 2007A PFC Bonds, the lesser of (i) the amount stated in clause (a) above and (ii) the least of (A) 10% of the stated principal amount of the 2007A PFC Bonds (or, if the 2007A PFC Bonds are issued with more than 2% of original issue discount, 10% of the original proceeds of the 2007A PFC Bonds), (B) the maximum Annual Principal and Interest Requirements for the 2007A PFC Bonds, or (C) 125% of the average Annual Principal and Interest Requirements for the 2007A PFC Bonds. Debt Service Requirements with respect to the Senior Lien Revenue Bonds and Senior Lien Revenue Securities has the meaning given to such term in the Master Indenture. Interest Payment Date means each January 1 and July 1, commencing January 1, 2008, provided, that if the date for making any payment as provided in the 2007 PFC Series A Indenture shall not be a Business Day, such payment may be made on the next succeeding Business Day, with the same force and effect as if done on the nominal date provided in the 2007 PFC Series A Indenture, and no interest shall accrue for the period after such nominal date. Other Available Funds means Other Available Funds as defined in the Master Indenture, except that for purposes of the 2007 PFC Series A Indenture the maximum amount of Other Available Funds taken into account shall be an amount equal to the sum of (i) 25% of the Aggregate Debt Service Payments for the Senior Lien Revenue Bonds then Outstanding for the Comparable Bond Year, plus (ii) 10% of the Bond Requirements of the Parity PFC Bonds and any other Subordinate Revenue Bonds (other than Subordinate Revenue Bonds having a lien on Net Revenues subordinate and junior to the lien thereon of the 2007A PFC Bonds) then Outstanding for the Comparable Bond Year. Parity PFC Bonds means bonds or securities which have a lien on PFC Revenues that is on a parity with the lien thereon of the 2007A PFC Bonds, including without limitation the 1992 PFC Bonds, the 1998 PFC Bonds, the 2002 PFC Bonds and the 2005 PFC Bonds. PFC Act means the Aviation Safety and Capacity Expansion Act of 1990, Pub. L , Title IX, Subtitle B, Sections 9110 and 9111, as amended from time to time. PFC Regulations means Part 158 of the Federal Aviation Regulations (14 CFR Part 158), as amended from time to time, and any other regulation issued with respect to the PFC Act. PFC Revenues means all income and revenue received by or required to be remitted to the County from $3.00 of the $4.00 passenger facility charge per qualifying enplaned passenger imposed by the County pursuant to the PFC Act, the PFC Regulations, County Ordinance No adopted on May 5, 1992 and Ordinance No. adopted on January 3, 2007, including any interest earned after such charges have been remitted to the County as provided in the PFC Regulations, all of which may be pledged to the 2007A PFC Bonds pursuant to the PFC Act and PFC Regulations Section ; provided, that for certain purposes of the 2007 PFC Series A Indenture, the term PFC Revenues also includes any interest or other gain in any of the accounts designated in the 2007 PFC Series A Indenture resulting from any investments and reinvestments of the proceeds of the 2007A PFC Bonds or the proceeds of any other bonds or securities payable from PFC Revenues. PFC Revenues means all or a portion of the PFC Revenues. The designated term indicates sources C-22

189 of revenues and does not necessarily indicate all or any portion or other part of such revenues in the absence of further qualification. Policy Costs means the repayment of any draws under any Reserve Fund Insurance Policy and related reasonable expenses incurred by the Reserve Fund Policy Issuer (together with interest thereon at the rate required by the Reserve Fund Insurance Policy or the agreement pursuant to which the Reserve Fund Insurance Policy has been issued). Principal Office of the Trustee means 700 S. Flower Street, Suite 500, Los Angeles, California 90017, Attention: Lisa Stroud, Vice President, or such other address as the Trustee may designate in writing by the County and the Bond Insurer. Purchasers means, collectively, Citigroup Global Markets Inc., Siebert Brandford Shank & Co., L.L.C. and UBS Securities LLC, as the initial purchasers of the 2007A PFC Bonds. Reserve Fund Insurance Policy means any policy of insurance, surety bond, letter of credit or other financial instrument issued by the Reserve Fund Policy Issuer to the County, the proceeds of which shall be used to prevent deficiencies in the payment of the principal of or interest on the 2007A PFC Bonds resulting from insufficient amounts being on deposit in the 2007A Subordinate Bond Account to make the payment of principal of and interest on the 2007A PFC Bonds as the same become due. Each such policy shall be approved by the Bond Insurer and shall be written by a bank, insurance company or any financial institution experienced in insuring or guaranteeing municipal bonds whose policies of insurance, surety bond, letter of credit or other financial instrument would not adversely affect the rating of the 2007A PFC Bonds by Moody s and/or Standard & Poor s to the extent that the 2007A PFC Bonds are or are to be rated and provided that at the time of the issuance of such policy such bank, insurance company or any financial institution shall have received the highest policy claims rating accorded bond insurers by the A.M. Best Company or any comparable service, if applicable to the provider of the Reserve Fund Insurance Policy, and either of the two highest rating categories of Moody s and Standard & Poor s to the extent that each rating agency provides such a rating and is then rating the 2007A PFC Bonds. Reserve Fund Policy Issuer means the issuer of any Reserve Fund Insurance Policy, or any successor thereto. Each Reserve Fund Policy Issuer must be acceptable to the Bond Insurer. Second Lien Subordinate Securities means the 2001C Bonds, all other Subordinate Securities having a lien on the Net Revenues of the Airport System on a parity with the lien thereon of the 2001C Bonds, the Parity PFC Bonds and any other payments under any interest rate swap agreements executed by the County which by the terms thereof are secured by Net Revenues of the Airport System on a parity with the 2001C Bonds and such other Subordinate Securities, and any other additional Subordinate Securities hereafter issued with a lien thereon on a parity with the lien thereon of the 2001C Bonds and such other Subordinate Securities. Series means the 2007A-1 PFC Bonds or the 2007A-2 PFC Bonds, as the case may be. Tax Code means the Internal Revenue Code of 1986, as amended to the date of issuance of the 2007A PFC Bonds. Trust Bank means a Commercial Bank which is authorized to exercise and is exercising trust powers, and also means any branch of the Federal Reserve Bank. SERIES INDENTURE Set forth below is a summary of certain provisions of the 2007 PFC Series A Indenture. All capitalized terms used under this caption and not otherwise defined herein have the respective meanings given to such terms in the 2007 PFC Series A Indenture. C-23

190 Obligation of County Bonds Equally Secured. The covenants and agreements set forth in the 2007 PFC Series A Indenture to be performed on behalf of the County will be for the equal benefit, protection and security of the Owners of any and all of the Outstanding 2007A PFC Bonds, all of which, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the 2007A PFC Bonds over any other thereof except as otherwise expressly provided in or pursuant to the 2007 PFC Series A Indenture. No Pledge of Property. The payment of the 2007A PFC Bonds is not secured by an encumbrance, mortgage or other pledge of property of the County, except the proceeds of the PFC Revenues, the Net Revenues and any other moneys pledged for the payment of the 2007A PFC Bonds. No property of the County, subject to such exceptions, shall be liable to be forfeited or taken in payment of the 2007A PFC Bonds. No Recourse Against Officers and Agents. No recourse shall be had for the payment of the Bond Requirements of the 2007A PFC Bonds or for any claim based thereon or otherwise upon the 2007 PFC Series A Indenture authorizing their issuance or any other instrument relating thereto, against any individual member of the County or any officer or other agent of the County, past, present or future, either directly or indirectly through the County or otherwise, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any penalty or otherwise, all such liability, if any, being by the acceptance of the 2007A PFC Bonds and as a part of the consideration of their issuance specially waived and released. Revenue Pledge PFC Revenues and all moneys and securities paid or held under the 2007 PFC Series A Indenture are pledged to secure the payment of the Bond Requirements of the 2007A PFC Bonds, subject only to the application of moneys for the purposes and on the terms and conditions of the 2007 PFC Series A Indenture. The 2007A PFC Bonds also constitute Subordinate Securities, the payment of which is secured by and is payable from the Net Revenues of the Airport System subordinate and junior to the lien thereon of the Senior Lien Revenue Securities now or hereafter outstanding. Such subordinate lien on the Net Revenues is on a parity with the lien thereon of the Second Lien Subordinate Securities. The facilities comprising the Airport System have not been pledged to secure payment of the 2007A PFC Bonds. Registration, Transfer and Exchange of Bonds Except as otherwise described in "APPENDIX E -- DTC AND BOOK-ENTRY ONLY SYSTEM": Registration and Transfer. Records for the registration and transfer of the 2007A PFC Bonds will be kept by the Registrar. Upon the surrender for transfer of any 2007A PFC Bond at the Registrar, duly endorsed for transfer or accompanied by an assignment in form satisfactory to the Registrar duly executed by the registered Owner or its attorney duly authorized in writing, the Registrar shall authenticate and deliver in the name of the transferee or transferees a new 2007A PFC Bond or 2007A PFC Bonds of a like aggregate principal amount and of the same Series and maturity bearing a number or numbers not previously assigned to 2007A PFC Bonds. 2007A PFC Bonds may be exchanged at the office of the Registrar for an equal aggregate principal amount of 2007A PFC Bonds of the same Series and maturity of other Authorized Denominations. The Registrar shall authenticate and deliver the 2007A PFC Bond or 2007A PFC Bonds which the registered Owner making the exchange is entitled to receive, bearing a number or numbers not previously assigned to 2007A PFC Bonds. The Registrar shall require the payment by the Owner of any 2007A PFC Bond requesting exchange or transfer, of any tax or other governmental charge required to be paid with respect to such C-24

191 exchange or transfer and of the cost of preparing (excluding printing) and authenticating a new 2007A PFC Bond or 2007A PFC Bonds. Limitations upon Registration. The Registrar will not be required to transfer or exchange (1) any 2007A PFC Bond during a period beginning at the opening of business 15 days before the day of the mailing by the Registrar of any notice of prior redemption of 2007A PFC Bonds and ending at the close of business on the day of mailing or (2) any 2007A PFC Bond after the mailing of the official notice of redemption calling such 2007A PFC Bond, or any portion thereof, for redemption as provided in the 2007 PFC Series A Indenture. Effect of Registration. The Person in whose name any 2007A PFC Bond shall be registered in the registration records kept by the Registrar shall be deemed and regarded as the absolute owner thereof for the purpose of making payment thereof and for all other purposes; and payment of or on account of either principal or interest on any 2007A PFC Bond shall be made only to or upon the written order of the registered Owner thereof or its legal representative, but such registration may be changed upon transfer of such 2007A PFC Bond in the manner and subject to the conditions and limitations provided herein. All such payments shall be valid and effectual to discharge the liability upon such 2007A PFC Bond to the extent of the sum or sums so paid General Administration Places and Times of Deposits. Each of the special accounts designated in the 2007 PFC Series A Indenture will be maintained as a book account and kept separate from all other accounts as a trust account solely for the purposes designated therefor in the 2007 PFC Series A Indenture with the Treasurer in connection with the Income Fund, the Capital Fund and the Rebate Fund and with the Trustee in connection with the Bond Fund and the Debt Service Reserve Fund. The moneys accounted for in such special book accounts will be deposited in one bank account or more in a Commercial Bank or Commercial Banks; but the moneys held by the Trustee will not be combined with any moneys held by the County Treasurer. Nothing in the 2007 PFC Series A Indenture prevents the commingling of moneys accounted for in any two or more book accounts relating to the 2007A PFC Project or any other County accounts in any bank account or any investment in Investment Securities under the 2007 PFC Series A Indenture. Each bank account will be continuously secured to the fullest extent required or permitted by the laws of the State for the securing of public funds and will be irrevocable and not withdrawable by anyone for any purpose other than the respective designated purposes. Each periodic payment will be credited to the proper book account not later than the date therefor designated in the 2007 PFC Series A Indenture, except that when any such date shall be a Saturday, a Sunday or a legal holiday, then the payment will be made on or before the next preceding secular day. Notwithstanding any other provision in the 2007 PFC Series A Indenture to the contrary, moneys sufficient to pay the Bond Requirements then coming due on the Outstanding 2007A PFC Bonds will be deposited with the Paying Agent at least on the day of each interest payment date designated in the 2007 PFC Series A Indenture and, in any event, in sufficient time to make timely payment of such Bond Requirements. Investment of Moneys. Any moneys in any account designated in the 2007 PFC Series A Indenture, and not needed for immediate use, may be invested or reinvested by the County Treasurer or the Trustee, as the case may be, in accordance with written instructions, or verbal instructions promptly confirmed in writing, of the Director or the Assistant Director, except as otherwise expressly stated in the 2007 PFC Series A Indenture: Bank Deposits. By deposit in one or more Commercial Banks as described under Places and Times of Deposits above and Character of Funds below, and Investment Securities. In Investment Securities which: C-25

192 (1) Optional Redemption. Either shall be subject to redemption at any time at a fixed value by the holder thereof at the option of such holder, or (2) Scheduled Maturities. Shall mature not later than on the date or respective dates on which the proceeds are to be expended as estimated by the Director or the Assistant Director upon each date of such investment or reinvestment, and, in the case of accounts under the control of the Trustee and the proposed investment or reinvestment of moneys accounted for therein, stated by the Director or Assistant Director in writing, or verbally promptly confirmed in writing, to the Trustee. Moneys held in the Bond Fund and the Debt Service Reserve Fund will be invested and reinvested to the fullest extent practicable in Investment Securities (to the extent permitted by law) which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made therefrom, and in the case of the Debt Service Reserve Fund neither later than 5 years from the date of investment (unless such securities shall be redeemable at the option of the holder thereof), nor at a date any later than the final fixed maturity date of the 2007A PFC Bonds. Moneys in the Income Fund may be invested or reinvested in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed to provide payments from such account. For the purposes of any such investment or reinvestment, Investment Securities shall be deemed to mature at the earliest date on which the obligor is, on demand, obligated to pay a fixed sum in discharge of the whole of such obligations. In making each such investment or reinvestment, the Treasurer and the Trustee may rely upon such written instructions, or verbal instructions promptly confirmed in writing, and will be under no duty as to the propriety of the investment or reinvestment made in accordance with such instructions and in reliance upon estimates of officers of the County as to the times moneys accounted for in any account will be needed for the purpose or purposes thereof. Required and Permissive Investments. The Director and the Assistant Director will have no obligation to cause the Treasurer or Trustee to make any investment or reinvestment under the 2007 PFC Series A Indenture, unless any moneys on hand and accounted for in any one account exceeds $5,000 and at least $5,000 therein will not be needed for a period of not less than 60 days. In that event, the Director or Assistant Director will cause the Treasurer or Trustee, as the case may be, to invest or reinvest in Investment Securities to the extent practicable not less than substantially all the amount which will not be needed during such 60-day period, except for any moneys on deposit in an interest-bearing account in any Commercial Bank, regardless of whether such moneys are evidenced by a certificate of deposit or otherwise, pursuant to Character of Funds below. The Director or the Assistant Director may request the Treasurer or the Trustee to invest or reinvest any moneys on hand at any time as provided in the 2007 PFC Series A Indenture even though he is not obligated to do so. In the event the Director or the Assistant Director does not direct the Trustee to invest moneys on hand, the Trustee may invest such moneys in any money market fund, including a proprietary money market fund, which constitutes an Investment Security. Accounting for Investments. The Investment Securities purchased as an investment or reinvestment of moneys in any such account will be deemed at all times to be a part of the account and held in trust therefor. Any interest or other gain and any loss in any account resulting from any such investments and reinvestments in Investment Securities and from any deposits of moneys in any Commercial Bank pursuant to the 2007 PFC Series A Indenture will be credited or debited, as the case may be, to (i) the Income Fund, the Bond Fund or the Capital Fund, or any combination thereof, as the Director may determine (as shown in the budget or otherwise), to the extent such interest or other gain constitutes PFC Revenues or such loss is realized on the investment or reinvestment of PFC Revenues, or (ii) the Revenue Fund to the extent such interest or other gain does not constitute PFC Revenues or such loss is realized on the investment or reinvestment of moneys that do not constitute PFC Revenues. No loss or profit in any account on any investments or reinvestments in Investment Securities will be deemed to take place as a result of fluctuations in the market quotations of the investments before the sale or maturity thereof. In the computation of the amount in any account for any purpose under the 2007 PFC Series A Indenture, except as otherwise expressly provided therein, Investment Securities purchased as an investment of moneys therein will be valued at the cost thereof (including any amount paid as accrued interest at the time of purchase of the obligation) or the principal amount thereof, C-26

193 whichever is lower, but otherwise exclusive of accrued interest; and bank deposits will be valued at the amounts deposited, exclusive of any accrued interest or any other gain to the County until such gain is realized by the receipt of an interest-earned notice, or otherwise. The valuation of Investment Securities and bank deposits accounted for in any account under the 2007 PFC Series A Indenture will be made by the County not less frequently than annually. The expenses of purchase, safekeeping, sale and all other expenses incident to any investment or reinvestment of moneys pursuant to the 2007 PFC Series A Indenture will be accounted for as an expense of the 2007A PFC Project and charged to the Income Fund. Redemption or Sale of Investment Securities. The Treasurer or the Trustee, with the approval of the Director or the Assistant Director, except as otherwise provided in the 2007 PFC Series A Indenture, will present for redemption at maturity or sale on the prevailing market at the best price obtainable any Investment Securities and certificates of deposit so purchased as an investment or reinvestment of moneys in any account whenever it shall be necessary to do so in order to provide moneys to meet any withdrawal, payment or transfer from such account. Neither the Treasurer, the Trustee nor any officer of the County will be liable or responsible for any loss resulting from any such investment or reinvestment made in accordance with the 2007 PFC Series A Indenture. The Treasurer or the Trustee will promptly notify each the Director and the Assistant Director of any gain or loss in any account held by the Treasurer or the Trustee, as the case may be. Such notification will be deemed to be performed by the Trustee upon delivery by a monthly accounting statement of such account. Character of Funds. The moneys in any account authorized in the 2007 PFC Series A Indenture will consist either of lawful money of the United States or Investment Securities, or both. Moneys deposited in a demand or time deposit account in or evidenced by a certificate of deposit of any Commercial Bank pursuant to Investment of Moneys above, appropriately secured according to the laws of the State, will be deemed lawful money of the United States. Accelerated Payments. Nothing contained in the 2007 PFC Series A Indenture prevents the accumulation in any account designated in the 2007 PFC Series A Indenture of any monetary requirements at a faster rate than the rate or minimum rate provided in the 2007 PFC Series A Indenture therefor, as the case may be; but no payment will be so accelerated if such acceleration will cause the County to default in the payment of any obligation of the County relating to PFC Revenues. Nothing contained in the 2007 PFC Series A Indenture requires the accumulation in any account for the payment in any Bond Year of Bond Requirements due in connection with any series of bonds or other securities payable from PFC Revenues and authorized in or after the 2007 PFC Series A Indenture, in excess of the Bond Requirements due thereon and of any reserves required to be accumulated and maintained therefor, and of any existing deficiencies, and payable from such account, as the case may be, except as may be otherwise provided in the 2007 PFC Series A Indenture. Termination of Deposits. No payment need be made into the Bond Fund or the Debt Service Reserve Fund, if the amounts in the Bond Fund and the Debt Service Reserve Fund total a sum at least equal to the entire amount of the Outstanding 2007A PFC Bonds as to all Bond Requirements, to their respective maturities, and both accrued and not accrued, in which case moneys in such accounts in an amount at least equal to such Bond Requirements will be used solely to pay such Bond Requirements as the same become due; and any moneys in excess thereof in such accounts and any other moneys derived from PFC Revenues may be used in any lawful manner permitted by the PFC Act and the PFC Regulations determined by the Board or the Director. Amendment of the 2007 PFC Series A Indenture Privilege of Amendments. The 2007 PFC Series A Indenture may be amended or supplemented in accordance with the laws of the State, without receipt by the County of any additional consideration, but (subject to the Rights of Bond Insurer described below) with the written consent of the owners of a majority in aggregate principal amount of the 2007A PFC Bonds Outstanding at the time of the adoption of the C-27

194 amendment or supplement, excluding any 2007A PFC Bonds which may then be held or owned for the account of the County, but including such refunding securities as may be issued for the purpose of refunding any of the 2007A PFC Bonds if the refunding securities are not owned by the County. Limitations upon Amendments. No such amendment or supplement shall adversely affect the owners of any Senior Lien Revenue Bonds then Outstanding. No such instrument shall permit without the written consent of all owners of the 2007A PFC Bonds adversely and materially affected thereby: Changing Payment. A change in the maturity or in the terms of redemption of the principal of any 2007A PFC Bond or any installment of interest thereon; or Reducing Return. A reduction in the principal amount of any 2007A PFC Bond, the rate of interest thereon, or any prior redemption premium payable in connection therewith, without the consent of the owner of the 2007A PFC Bond; or Prior Lien. The creation of a lien upon or a pledge of revenues ranking prior to the lien or to the pledge created by the 2007 PFC Series A Indenture, except as provided in the Master Indenture; or Modifying any Bond. A reduction of the percentages or otherwise affecting the description of 2007A PFC Bonds the consent of the owners of which is required for any modification or amendment; or Priorities between Bonds. The establishment of priorities as between 2007A PFC Bonds Outstanding under the provisions of the 2007 PFC Series A Indenture, except as otherwise permitted thereby; or Partial Modification. The modifications of or otherwise materially and prejudicially affecting the rights or privileges of the owners of less than all of the 2007A PFC Bonds then Outstanding. Notice of Amendment. Whenever the County proposes to amend or modify the 2007 PFC Series A Indenture under the provisions thereof, it is to cause notice of the proposed amendment to be given not later than 30 days prior to the date of the proposed enactment of the amendment by mailing to the purchasers of the 2007A PFC Bonds, the Trustee, the Paying Agent, the Registrar and the owner of each of the 2007A PFC Bonds Outstanding under the 2007 PFC Series A Indenture. The notice is to briefly set forth the nature of the proposed amendment and state that a copy of the proposed amendatory instrument is on file in the office of the County Clerk for public inspection. Time for Amendment. Whenever at any time within one year from the date of the mailing of such notice, there shall be filed in the office of the County Clerk an instrument or instruments executed by the owners of a majority in aggregate principal amount of the 2007A PFC Bonds then Outstanding under the 2007 PFC Series A Indenture, which instrument or instruments will refer to the proposed amendatory instrument described in the notice and specifically consents to and approves the adoption of the instrument, thereupon, but not otherwise, the County may adopt the amendatory instrument and instrument will become effective. Binding Consent to Amendment. If the owners of a majority in aggregate principal amount of the 2007A PFC Bonds Outstanding under the 2007 PFC Series A Indenture, at the time of the adoption of the amendatory instrument, or the predecessors in title of such owners, shall have consented to and approved the adoption thereof as provided in the 2007 PFC Series A Indenture, no owner of any 2007A PFC Bond, whether or not the owner shall have consented to or shall have revoked any consent as provided above, will have any right or interest to object to the adoption of the amendatory instrument or to object to any of the terms or provisions therein contained or to the operation thereof or to enjoin the County from taking any action pursuant to the provisions thereof. C-28

195 Time Consent Binding. Any consent given by the owner of a 2007A PFC Bond pursuant to the provisions of the 2007 PFC Series A Indenture will be irrevocable for a period of 6 months from the date of the mailing of the notice described above, and will be conclusive and binding upon all future owners of the same 2007A PFC Bond during that period. The consent may be revoked at any time after 6 months from the date of the mailing of the notice by the owner who gave the consent or by a successor in title by filing notice of the revocation with the County Clerk, but the revocation will not be effective if the owners of a majority in aggregate principal amount of the 2007A PFC Bonds Outstanding under the 2007 PFC Series A Indenture, before the attempted revocation, consented to and approved the amendatory instrument referred to in the revocation. Unanimous Consent. Notwithstanding anything contained in the foregoing provisions, the terms and the provisions of the 2007 PFC Series A Indenture or of any instrument amendatory thereof or supplemental thereto and the rights and the obligations of the County and of the owners of the 2007A PFC Bonds under the 2007 PFC Series A Indenture may be modified or amended in any respect (other than modifications or amendments that adversely affects the owners of any Senior Lien Revenue Bonds then Outstanding) upon the adoption by the County and upon the filing with the County Clerk of an instrument to that effect and with the consent of the owners of all the then Outstanding 2007A PFC Bonds the consent to be given as provided in the 2007 PFC Series A Indenture; and no notice to owners of 2007A PFC Bonds will be required as provided in the 2007 PFC Series A Indenture, nor will the time of consent be limited except as may be provided in the consent. Notation on Bonds. 2007A PFC Bonds authenticated and delivered after the effective date of any action taken as in the 2007 PFC Series A Indenture provided may bear a notation by endorsement or otherwise in form approved by the County as to the action; and if any 2007A PFC Bond so authenticated and delivered shall bear such notation, then upon demand of the owner of any 2007A PFC Bond Outstanding at such effective date and upon presentation of its 2007A PFC Bond for the purpose at the principal office of the County Clerk, suitable notation will be made on such 2007A PFC Bond by the County Clerk as to any such action. If the County so determines, new 2007A PFC Bonds so modified as in the opinion of the County to conform to such action will be prepared, authenticated and delivered; and upon demand of the owner of any 2007A PFC Bond then Outstanding, will be exchanged without cost to the owner for 2007A PFC Bonds then Outstanding upon surrender of the 2007A PFC Bonds. Amendments Not Requiring Bondholders' Consent. The County, acting by and through the Board, and the Trustee, notwithstanding certain other provisions of the 2007 PFC Series A Indenture, and without the consent of or notice to any owner of any 2007A PFC Bond (but, with respect to paragraph (e) below, with the written consent of the Bond Insurer), will consent to any amendment, change or modification of the 2007 PFC Series A Indenture as may be required (a) by the provisions of the 2007 PFC Series A Indenture; (b) for the purpose of curing any ambiguity or formal defect or omission in the 2007 PFC Series A Indenture; (c) in connection with the issuance and delivery of additional or other securities payable from PFC Revenues; (d) to modify or supplement the 2007 PFC Series A Indenture in such manner as may be necessary or appropriate to qualify the 2007 PFC Series A Indenture under the Trust Indenture Act of 1939 as then amended, or under any similar federal or state statute enacted after the 2007 PFC Series A Indenture, including provisions whereby the Trustee accepts such powers, duties, conditions and restrictions under the 2007 PFC Series A Indenture and the County undertakes such covenants, conditions or restrictions additional to those contained in the 2007 PFC Series A Indenture as would be necessary or appropriate so to qualify the 2007 PFC Series A Indenture; or (e) in connection with any other change in the 2007 PFC Series A Indenture which is not to the prejudice of the Trustee and which would not materially adversely affect the Owners of the 2007A PFC Bonds. Rights of Bond Insurer The Bond Insurer will be treated as the owner of the 2007A PFC Bonds for purposes of: (1) consents to amendments as provided in the 2007 PFC Series A Indenture; and (2) provisions of the 2007 PFC Series A Indenture governing events of default and remedies, except the giving of notice of default to owners of the C-29

196 2007A PFC Bonds so long as the Bond Insurer has not failed to comply with its payment obligations under the Bond Insurance Policy. C-30

197 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by Clark County, Nevada (the County and Issuer ) in connection with the issuance of the Issuer s Clark County, Nevada, Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds, 2007 Series A, in the aggregate principal amount of $218,985,000 (the Bonds ). The Bonds are being issued pursuant to the Master Indenture of Trust, dated as of May 1, 2003, between the Issuer and The Bank of New York Trust Company (the Trustee ), amending and restating as an indenture of trust the County s General Bond Ordinance No (the Master Indenture ), and the 2007 PFC Series A Indenture between the County and Trustee, dated as of April 1, 2007 (the 2007 PFC Series A Indenture, together with the Master Indenture, the Indenture ). The Issuer covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) of the Securities Exchange Commission. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture or parenthetically defined herein, which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Dissemination Agent shall mean, initially, the Issuer, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. Listed Events shall mean any of the events listed in Section 5 of this Disclosure Certificate. National Repository shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Participating Underwriter shall mean any underwriter of the Bonds required to comply with the Rule in connection with an offering of the Bonds. Repository shall mean each National Repository and each State Repository. Rule shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. State Repository shall mean any public or private repository or entity designated by the State of Nevada as a state information depository for the purpose of the Rule. As of the date of this Disclosure Certificate, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The Issuer shall, or shall cause the Dissemination Agent to, not later than nine (9) months following the end of the Issuer s fiscal year of each year, commencing nine (9) months following the end of the Issuer s fiscal year ending June 30, 2007, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than five (5) business D-1

198 days prior to said date, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report. (b) If the Issuer is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the Municipal Securities Rulemaking Board ( MSRB ) and to the State Repository, if any, in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (if the Dissemination Agent is other than the Issuer). (ii) file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The Issuer s Annual Report shall contain or incorporate by reference the following: 1. A copy of its annual financial statements prepared in accordance with generally accepted accounting principles audited by a firm of certified public accountants. If audited annual financial statements are not available by the time specified in Section 3(a) above, unaudited financial statements will be provided as part of the Annual Report and audited financial statements will be provided when and if available. 2. An update of the information of the type contained in the tables identified by a double asterisk (**) under the heading TABLES found on page (iii) of the Official Statement for the Bonds, a copy of which page is attached hereto as Exhibit B. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such document incorporated by reference. SECTION 5. Reporting of Significant Events. The Issuer shall provide or cause to be provided, in a timely manner, to the MSRB and the State Repository, if any, notice of any of the following events with respect to the Bonds, if such event is material: 1) Principal and interest payment delinquencies; 2) Non-payment related defaults; 3) Unscheduled draws on debt service reserves reflecting financial difficulties; 4) Unscheduled draws on credit enhancements reflecting financial difficulties; 5) Substitution of credit or liquidity providers, or their failure to perform; D-2

199 6) Adverse tax opinions or events affecting the tax-exempt status of the Bonds; 7) Modifications to rights of bondholders; 8) Bond calls; 9) Defeasances; 10) Release, substitution or sale of property securing repayment of the Bonds; or 11) Rating changes. SECTION 6. Termination of Reporting Obligation. The Issuer s obligations under this Disclosure Certificate shall terminate upon the earlier of (i) the date of legal defeasance, prior redemption or payment in full of all of the Bonds; (ii) the date that the Issuer shall no longer constitute an obligated person within the meaning of the Rule; or (iii) the date on which those portions of the Rule which require this written undertaking are held to be invalid by a court of competent jurisdiction in a non-appealable action, have been repealed retroactively or otherwise do not apply to the Bonds. SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist the Issuer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, without the consent of the holders of the Bonds, if such amendment or waiver does not, in and of itself, cause the undertakings herein to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule. The Issuer will provide notice of such amendment or waiver to the Repository. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance. D-3

200 SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter, the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. DATE: April, CLARK COUNTY, NEVADA Director of Aviation D-4

201 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Clark County, Nevada Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds, 2007 Series A Date of Issuance: April, NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the abovenamed Bonds as required by the Master Indenture of Trust, dated as of May 1, 2003, between the Issuer and The Bank of New York Trust Company (the Trustee ), amending and restating as an indenture of trust the County s General Bond Ordinance No. 1648, and the 2007 PFC Series A Indenture between the County and Trustee, dated as of April 1, 2007, and the Continuing Disclosure Certificate executed on April, 2007 by the Issuer. The Issuer anticipates that the Annual Report will be filed by. Dated: CLARK COUNTY, NEVADA By: Its: D-5

202 EXHIBIT B TABLES ESTIMATED SOURCES AND USES OF FUNDS CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Subordinate Lien Bonds CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Interest Rate Swap Agreements CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Historical PFC Collections **(1) CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Statement of Historical and Projected Revenues and Expenses **(1) CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION PFC Bond Debt Service CLARK COUNTY, NEVADA, DEPARTMENT OF AVIATION Debt Service Requirements for Outstanding Senior Securities, Subordinate Securities and PFC Bonds HISTORICAL AIRLINE TRAFFIC McCarran International Airport Fiscal Year 1975-Fiscal Year 2006 ** HISTORICAL AIRLINE LANDED WEIGHT McCarran International Airport AIRLINE MARKET SHARES McCarran International Airport Fiscal Years 2006, 2005, 2000, and 1990 ** ** To be updated annually. (1) Historical information only in these tables to be updated. D-6

203 APPENDIX E DTC AND BOOK-ENTRY ONLY SYSTEM General The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the County believes to be reliable, but the County takes no responsibility for the accuracy or completeness thereof. The County cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2007A PFC Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2007A PFC Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2007A PFC Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current Rules applicable to DTC are on file with the Securities and Exchange Commission and the current Procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC 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 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, (respectively, NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), 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 its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of the 2007A PFC Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2007A PFC Bonds on DTC s records. The ownership interest of each actual purchaser of each Security ( 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 2007A PFC 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 the 2007A PFC Bonds, except in the event that use of the book-entry system for the 2007A PFC Bonds is discontinued. E-1

204 To facilitate subsequent transfers, all 2007A PFC 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 the 2007A PFC 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 2007A PFC Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such 2007A PFC 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 among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the 2007A PFC Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2007A PFC Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the 2007A PFC Bonds may wish to ascertain that the nominee holding the 2007A PFC 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 will be sent to DTC. The conveyance of notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect Participants and by DTC Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Any failure of DTC to advise any DTC Participant, or of any DTC Participant or Indirect Participant to notify a Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the 2007A PFC Bonds called for redemption or of any other action premised on such notice. Redemption of portions of the 2007A PFC Bonds by the County will reduce the outstanding principal amount of 2007A PFC Bonds held by DTC. In such event, DTC will implement, through its book-entry system, a redemption by lot of interests in the 2007A PFC Bonds held for the account of DTC Participants in accordance with its own rules or other agreements with DTC Participants and then DTC Participants and Indirect Participants will implement a redemption of the 2007A PFC Bonds for the Beneficial Owners. Any such selection of 2007A PFC Bonds to be redeemed will not be governed by the Indenture and will not be conducted by the County or the Trustee. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2007A PFC Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer 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 the 2007A PFC Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal of, premium, if any, and interest evidenced by the 2007A PFC Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of 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 Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by 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 registered in street name, and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee, the Underwriters or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest evidenced by the 2007A PFC Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the County or the Trustee, disbursement of such payments to Direct E-2

205 Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. NEITHER THE COUNTY, THE UNDERWRITER NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF 2007A PFC Bonds FOR PREPAYMENT. Neither the County, the Underwriters nor the Trustee can give any assurances that DTC, DTC Participants, Indirect Participants or others will distribute payments of principal of, premium, if any, and interest on the 2007A PFC Bonds paid to DTC or its nominee, as the registered Owner, or any redemption or other notice, to the Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in a manner described in this Official Statement. DTC may discontinue providing its services as depository with respect to the 2007A PFC Bonds at any time by giving reasonable notice to the County, the Underwriters or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, security certificates are required to be printed and delivered. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 2007A PFC Bonds, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE OWNERS OR HOLDERS OF THE 2007A PFC Bonds (OTHER THAN UNDER THE CAPTION TAX MATTERS HEREIN) WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS OF THE 2007A PFC Bonds. The foregoing description concerning DTC and DTC s book entry system is based solely on information provided by DTC, which the County believes to be reliable, but the County takes no responsibility for the accuracy thereof and no representation is made herein as to the accuracy or completeness of such information. BENEFICIAL OWNERS WILL NOT RECEIVE PHYSICAL DELIVERY OF 2007A PFC Bonds AND WILL NOT BE RECOGNIZED BY THE TRUSTEE AS OWNERS THEREOF UNDER THE TERMS OF THE BOARD RESOLUTION, AND BENEFICIAL OWNERS WILL BE PERMITTED TO EXERCISE THE RIGHTS OF OWNERS ONLY INDIRECTLY THROUGH DTC AND THE PARTICIPANTS. THE COUNTY WILL HAVE NO RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS. E-3

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207 APPENDIX F FORM OF OPINION OF BOND COUNSEL Upon issuance of the Bonds, Swendseid & Stern, a Member in Sherman & Howard LLC, Bond Counsel, proposes to render its final approving opinion in substantially the following form:, 2007 Clark County, Nevada Clark County Government Center 500 South Grand Central Parkway Las Vegas, Nevada Clark County, Nevada Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds 2007 Series A Ladies and Gentlemen: We have acted as bond counsel to Clark County, Nevada (the County ), in connection with the issuance of its Las Vegas-McCarran International Airport Passenger Facility Charge Revenue Bonds, 2007 Series A-1 in the aggregate principal amount of $113,510,000 (the 2007A-1 Bonds ) and its Las Vegas- McCarran International Airport Passenger Facility Charge Revenue Bonds, 2007 Series A-2 in the aggregate principal amount of $105,475,000 (the 2007A-2 Bonds and, together with the 2007A-1 Bonds, the Bonds ). In such capacity, we have examined the County s certified proceedings and such other documents and such law of the State of Nevada (the State ) and of the United States of America as we have deemed necessary to render this opinion letter. The Bonds are authorized and issued pursuant to the Master Indenture of Trust dated as of May 1, 2003 (the Master Indenture ), as supplemented by the 2007 PFC Series A Indenture dated as of April 1, 2007 (the 2007 PFC Series A Indenture and, together with the Master Indenture, the Indenture ) between the County and The Bank of New York Trust Company, N.A., as trustee (the Trustee ). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Indenture. Regarding questions of fact material to our opinions, we have relied upon the County s certified proceedings and other representations and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon such examination, it is our opinion as bond counsel that: 1. The Bonds constitute valid and binding special, limited obligations of the County and, except as described in paragraph 2 hereof, are payable solely out of and are secured by an irrevocable pledge of the PFC Revenues and all moneys and securities paid or to be paid to or held or to be held in any account under Article VII or under Section 601 of the 2007 PFC Series A Indenture, subject only to the application of moneys for the purposes and on the terms and conditions of the Indenture, and the owner of any Bond may not look to any general or other fund for the payment of the Bond Requirements thereof except for the special funds pledged therefor. The Bonds are equally and ratably secured by a valid lien on the PFC Revenues on a parity with the lien thereon of the outstanding 1992 PFC Bonds, 1998 PFC Bonds, 2002 PFC Bonds, 2005 F-1

208 Clark County, Nevada, 2007 Page 2 PFC Bonds and any additional Parity PFC Bonds hereafter issued. Except as described in this paragraph, we express no opinion regarding the priority of the lien securing the Bonds on PFC Revenues or on funds and accounts created by the Indenture. 2. The Bonds also constitute Subordinate Securities, and as such, the Bonds are additionally secured by a lien on the Net Revenues of the County s Airport System, i.e., the Gross Revenues of the Airport System (which term excludes revenues pertaining to Special Facilities financed with Special Facilities Bonds and certain other revenues as expressly provided in the Master Indenture) after deduction of Operation and Maintenance Expenses of the Airport System. The lien on the Net Revenues of the Airport System for the payment of the Bonds is subordinate and junior to the lien thereon of the Parity Bonds and any other Parity Securities now or hereafter outstanding and on a parity with the lien thereon of certain outstanding and hereafter issued Subordinate Securities. Except as described in this paragraph, we express no opinion regarding the priority of the lien securing the Bonds on Net Revenues. 3. The Indenture has been duly authorized by the County, duly executed and delivered by authorized officials of the County and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and binding obligation of the County enforceable in accordance with its terms. 4. Interest on the Bonds, except for interest on any 2007A-1 Bond for any period during which it is held by a substantial user of the facilities financed with the 2007A-1 Bonds or a related person as such terms are used in Section 147(a) of the Internal Revenue Code of 1986, as amended to the date hereof (the Tax Code ), is excluded from gross income under federal income tax laws pursuant to Section 103 of the Tax Code; however, interest on the 2007A-1 Bonds is an item of tax preference for purposes of calculating alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and interest on the 2007A-2 Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations. The opinions expressed in this paragraph assume continuous compliance with the covenants and representations contained in the County s certified proceedings and in certain other documents or certain other certifications furnished to us. 5. Under laws of the State in effect on the date hereof, the Bonds, their transfer, and the income therefrom are free and exempt from taxation by the State or any subdivision thereof, except for the tax on estates imposed pursuant to Chapter 375A of NRS and the tax on generation skipping transfers imposed pursuant to Chapter 375B of NRS. The opinions expressed in this opinion letter above are subject to the following: The obligations of the County pursuant to the Bonds and the Indenture are subject to the application of equitable principles, to the reasonable exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including, without limitation, bankruptcy powers. We understand that Ambac Assurance Corporation has issued a financial guaranty insurance policy relating to the Bonds. We express no opinion as to the validity or enforceability of such policy or the security afforded thereby. In this opinion letter issued in our capacity as bond counsel, we are opining only upon those matters set forth herein, and we are not opining upon the accuracy, adequacy or completeness of the Official Statement or any other statements made in connection with any offer or sale of the Bonds or upon any federal or state tax F-2

209 Clark County, Nevada, 2007 Page 3 consequences arising from the receipt or accrual of interest on or the ownership or disposition of the Bonds, except those specifically addressed herein. This opinion letter is issued as of the date hereof and we assume no obligation to revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, F-3

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211 APPENDIX G SPECIMEN INSURANCE POLICY G-1

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213 Financial Guaranty Insurance Policy Ambac Assurance Corporation One State Street Plaza, 15th Floor New York, New York Telephone: (212) Obligor: Policy Number: Obligations: Premium: Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to The Bank of New York, as trustee, or its successor (the Insurance Trustee ), for the benefit of the Holders, that portion of the principal of and interest on the above-described obligations (the Obligations ) which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. Ambac will make such payments to the Insurance Trustee within one (1) business day following written notification to Ambac of Nonpayment. Upon a Holder s presentation and surrender to the Insurance Trustee of such unpaid Obligations or related coupons, uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse to the Holder the amount of principal and interest which is then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner of the surrendered Obligations and/or coupons and shall be fully subrogated to all of the Holder s rights to payment thereon. In cases where the Obligations are issued in registered form, the Insurance Trustee shall disburse principal to a Holder only upon presentation and surrender to the Insurance Trustee of the unpaid Obligation, uncanceled and free of any adverse claim, together with an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such Holder s duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation to the Insurance Trustee of proof that the claimant is the person entitled to the payment of interest on the Obligation and delivery to the Insurance Trustee of an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee, duly executed by the Holder or such Holder s duly authorized representative, transferring to Ambac all rights under such Obligation to receive the interest in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders rights to payment on registered Obligations to the extent of any insurance disbursements so made. In the event that a trustee or paying agent for the Obligations has notice that any payment of principal of or interest on an Obligation which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from the Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available. As used herein, the term Holder means any person other than (i) the Obligor or (ii) any person whose obligations constitute the underlying security or source of payment for the Obligations who, at the time of Nonpayment, is the owner of an Obligation or of a coupon relating to an Obligation. As used herein, Due for Payment, when referring to the principal of Obligations, is when the scheduled maturity date or mandatory redemption date for the application of a required sinking fund installment has been reached and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by application of required sinking fund installments), acceleration or other advancement of maturity; and, when referring to interest on the Obligations, is when the scheduled date for payment of interest has been reached. As used herein, Nonpayment means the failure of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in full of all principal of and interest on the Obligations which are Due for Payment. This Policy is noncancelable. The premium on this Policy is not refundable for any reason, including payment of the Obligations prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment. In witness whereof, Ambac has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its duly authorized representative. SPECIMEN President Secretary Effective Date: THE BANK OF NEW YORK acknowledges that it has agreed to perform the duties of Insurance Trustee under this Policy. Form No.: 2B-0012 (1/01) A- Authorized Representative Authorized Officer of Insurance Trustee

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216 I N T E R N A T I O N A L A I R P O R T Clark County Department of Aviation P.O. Box 11005, Las Vegas, NV