Comprehensive Annual Financial Report. Clark County Department of Aviation. An Enterprise Fund of Clark County, Nevada

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3 Comprehensive Annual Financial Report Clark County Department of Aviation An Enterprise Fund of Clark County, Nevada Prepared by the Department of Aviation McCarran International Airport Las Vegas, Nevada

4 CLARK COUNTY DEPARTMENT OF AVIATION Clark County, Nevada Board of County Commissioners Steve Sisolak, Chairman Larry Brown, Vice-Chairman Susan Brager Chris Giunchigliani Marilyn Kirkpatrick Mary Beth Scow Lawrence Weekly County Manager's Office Donald G. Burnette, County Manager Jeffrey M. Wells, Assistant County Manager Randall J. Tarr, Assistant County Manager Yolanda King, Assistant County Manager Department of Aviation Rosemary A. Vassiliadis, Director James Chrisley, Deputy Director - Operations Saeed Bonabian, Deputy Director - Support Services Joseph M. Piurkowski, Airport Chief Financial Officer

5 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal... 1 Certificate of Achievement for Excellence in Financial Reporting... 3 Organization Chart... 4 FINANCIAL SECTION Independent Auditor s Report... 7 Management's Discussion and Analysis Financial Statements: Statements of Net Position Statements of Revenues, Expenses, and Changes in Net Position Statements of Cash Flows Notes to Financial Statements Required Supplementary Information: Schedule of Other Postemployment Benefits Funding Progress Schedule of Proportionate Share of Net Pension Liability Schedule of Defined Benefit Plan Contributions Notes to Required Supplementary Information Supplementary Information: Schedule of Insurance Coverage Schedule of Airport Revenue Bond Debt Service Coverage Schedule of Cash Receipts and Disbursements - Restricted Accounts Schedule of Operating Revenues and Expenses by Cost Center STATISTICAL SECTION Overview of Information Provided in Statistical Section Summary of Changes in Net Position Schedule of Revenues, Expenses, and Changes in Net Position Budget vs. Actual Summary of Non-operating Income and Expenses Schedule of Airport Revenue Bond Debt Service Coverage Summary of Operating Revenues Summary of Restricted Revenues Ratios of Airport Revenue Bond Debt Service to Total Operating Revenues and Expenses Outstanding Debt Principal Balance by Type Summary of Operating Expenses Passenger and Operating Statistics Visitor, Convention, and Room Statistics Market Share of Air Carriers Per Passenger Calculations Schedule of Net Position Demographic and Economic Statistics Principal Employers Full Time Equivalent Employees Nature, Volume, and Usage of Capital Assets COMPLIANCE SECTION Independent Auditor s 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 Auditor s Comments...154

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8 October 31, 2016 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 ("Department") for the fiscal year ("FY") ended June 30, 2016, is submitted herewith. The Finance Division of the Department prepared this report. The financial statements were audited, as required by Nevada Revised Statues NRS , by Eide Bailly, LLP., independent certified public accountants, whose unmodified audit report is contained herein. The Department comprises a single enterprise fund of Clark County, Nevada ("County"), and operates as a separate, selfsufficient enterprise fund of the County. The seven-member Board of County Commissioners ("Board") is responsible for governing the affairs of the Department. The Director of Aviation is appointed by the Board and reports directly to the County Manager. The County owns and the Department operates and maintains McCarran International Airport ("Airport"), the eighth 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, behind only Los Angeles at the end of the first quarter of calendar year ("CY") 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 state-of-the-art terminal, private hangar facilities, and a Federal Aviation Administration 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 aviation purposes. All the airports operated and maintained by the Department are collectively referred to as the Airport System. Users of the Airport System's facilities provide all the revenues necessary to acquire, operate, and maintain the necessary services and facilities. The Department is not subsidized by any tax revenues of the County and has been a self-sustaining entity since The metropolitan area of Las Vegas has experienced economic growth since the economic recession, which began in The growth started in 2011 and continues into Through August of CY 2016, 28.8 million visitors made their way to Las Vegas, increasing by 1.7 percent compared to 28.3 million visitors for the first eight months of CY In CY 2015, the Las Vegas metropolitan area s population increased by 8.4 percent since 2010 to over 2.1 million residents, according to the U.S. Census Bureau. Convention attendance for the first eight months of CY 2016 is up 11.6 percent over the same period in 2015 to over 4.4 million delegates. The number of conventions in the first eight months of CY 2016 increased 5.1 percent over the previous year. Clark County gaming revenues for the first eight months of CY 2016 remained flat compared to the same period a year ago. Through August of 2016, gaming revenues in Clark County totaled $6.4 billion. Hotel/motel occupancy rates increased slightly to 89.7 percent for the first eight months of CY 2015 and through the same period for CY The Airport System brought 43% of the visitors to the Las Vegas area in CY The Airport has experienced several years of increases since the economic downturn of FY Enplanements for FY 2016 were up 15.2 percent compared to FY Enplanements for FY 2016 saw an increase of 6.7 percent from FY For the first nine months of CY 2016, total passenger enplanements increased 5.0 percent over the same period one year ago. 1

9 Airline-generated revenues for FY 2016 increased from FY 2015 by 1.6 percent. Non-aeronautical revenues for FY 2016 were up 5.4 percent over FY 2015 levels. Total operating revenues at the Airport increased from $521.7 million in FY 2015 to $540.2 million in FY 2016, an increase of $18.5 million. Operating expenses increased 2.0 percent over FY 2015 levels from $234.4 million in FY 2015 to $239.1 million in FY 2016, an increase of $4.7 million. The increase in operating revenues can primarily be attributed to providing more upscale and a better variety of services to Airport passengers, along with the increase in passenger traffic. The increase in operating expenses was mainly attributable to increases in salaries and benefits. The Department made all scheduled debt service payments. On July 1, 2016, the Department fully redeemed the outstanding principal and interest of the 2006A Subordinate Lien Bonds. The Department continues to be committed to maintaining System-wide cost containment measures. The Department is current on all outstanding bond obligations. The bonds were issued to provide funding for capital assets to be acquired or constructed. As of June 30, 2016, the current bond proceeds available are anticipated to be used for airfield projects. The Department does not anticipate issuing any new debt to fund its current capital improvement plan. All outstanding bonds are secured by pledges of Airport System revenues, except Passenger Facility Charge ( PFC ) and Jet A bonds, which, in addition to being secured by pledges of Airport System revenues, are primarily secured by PFC and Jet A fuel tax revenues, respectively. The Department'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, in all material respects, the Department 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 Department's accounting system, consideration is given to the adequacy of internal controls. The objective of internal controls is 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 are properly recorded 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 from it and 2) the evaluation of costs and benefits requires estimates and judgments by management. Airport System management believes the Department s internal control processes adequately safeguard assets and provide reasonable assurance that financial transactions are properly recorded. This letter of transmittal should be read in conjunction with the Management s Discussion and Analysis contained in the financial section. The extraordinary success of the Department is a direct result of the leadership and support of the Board and the County Manager. Also recognized for making a tremendous effort in promoting the success of the Airport System are the employees of the Department and the airlines as well as the tenants of the Airport System. We thank the Board for its continuing support of the Department, for its efforts to conduct its financial operations in a responsible and progressive manner, and for its commitment to making the Department a global leader in its industry. The preparation of this report is the product of the dedicated service and professionalism of the Department s Finance Staff. We also thank all other members of the Department's staff who contributed to the preparation of the CAFR. Sincerely submitted, Rosemary A. Vassiliadis Director of Aviation Joseph M. Piurkowski Airport Chief Financial Officer 2

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14 Independent Auditor s Report To the Honorable Board of County Commissioners Clark County Department of Aviation Clark County, Nevada Report on the Financial Statements We have audited the accompanying financial statements of Clark County Department of Aviation, Clark County, Nevada (the Department), as of and for the years ended June 30, 2016 and 2015, and the related notes to the financial statements, as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 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 of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Department as of June 30, 2016 and 2015, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America W. Sunset Rd., Ste. 204 Las Vegas, NV T F EOE 7

15 Emphasis of Matter As discussed in Note 1, the financial statements of the Department are intended to present the financial position, the changes in financial position and cash flows of only that portion of the business-type activities and each major fund of Clark County, Nevada that is attributable to the transactions of the Department. They do not purport to, and do not, present fairly the financial position of Clark County, Nevada as of June 30, 2016 and 2015, the changes in its financial position, or where applicable, its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, Schedule of Other Postemployment Benefits Funding Progress, Schedule of Proportionate Share of Net Pension Liability, and Schedule of Defined Benefit Plan Contributions and the related notes on pages 10 through 37 and pages 121 through 123 be presented to supplement the accompanying financial statements. Such information, although not a part of the financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the financial statements. We do not express an opinion or provide any assurance on the required supplementary information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the Department s financial statements. The introductory section, supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The Schedule of Insurance Coverage, Schedule of Airport Revenue Bond Debt Service Coverage, Schedule of Cash Receipts and Disbursements Restricted Accounts, and Schedule of Operating Revenues and Expenses by Cost Center are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United State of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audits of the financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2016 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 8

16 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 is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Department s internal control over financial reporting and compliance. Las Vegas, Nevada October 31,

17 Management s Discussion and Analysis The following is Management s Discussion and Analysis ("MD&A") of the financial performance and activity of the Clark County Department of Aviation ("Department"). The MD&A provides an introduction to and understanding of the financial statements of the Department for the fiscal years ended June 30, 2016 and 2015, 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. The Department is an enterprise fund of Clark County, Nevada ("County"), and it acquires, operates, and maintains the necessary services and resources for the aviation facilities owned and operated by the County ("Airport System"). The Airport System comprises McCarran International Airport ("Airport"), the eighth largest airport in the United States in terms of passenger volume; North Las Vegas Airport, which caters to general aviation activity and is the second largest airport in the State of Nevada in terms of aircraft operations; Henderson Executive Airport, a premier corporate aviation facility that features a state-of-the-art terminal and private hangar facilities as well as a new control tower designed to meet the needs of the business aviation community; and Jean Sports Aviation Center and Overton-Perkins Field, which are primarily used for aviation-related recreational purposes. The Department is a self-supporting entity which generates revenues from Airport System users to fund operating expenses and debt service requirements. Capital projects are funded by bond issuances, Passenger Facility Charges, federal awards, and internally generated cash flows from net operating income. The Department is not subsidized by any tax revenues of the County. Activity Highlights Introduction For the fiscal year ("FY") ended June 30, 2016, passenger enplanements totaled 23,343,172, compared to 21,879,137 in FY 2015 and 21,224,639 in FY The FY 2016 enplanements represent an increase of 6.7 percent over FY By comparison, according to the United States Department of Transportation Bureau of Transportation Statistics, domestic and international airline passenger traffic in the United States for the same 12-month period ended June 30, 2016, increased 5.0 percent over the prior 12-month period. Aircraft landed weights in FY 2016 totaled 25,836,770 thousand pounds, compared to 24,682,869 thousand pounds in FY 2015 and 24,431,409 thousand pounds in FY The FY 2016 landed weights represent a 4.7 percent increase compared to FY The number of departures for domestic and international flights increased 1.2 percent over the prior fiscal year from 219,172 departures in FY 2015 to 221,746 in FY

18 The following schedule presents the Airport's activities for FY 2016 and the previous nine fiscal years. Passenger and Operating Statistics Last Ten Fiscal Years (Unaudited) Percentage Percentage Total Percentage Percentage Fiscal Aircraft Operations of Increase/ Landed Weight of Increase/ Enplaned of Increase/ Cargo of Increase/ Year Departures Decrease (000 lbs.) Decrease Passengers Decrease Tons Decrease , % 28,831, % 23,628, % 104, % , % 28,941, % 23,525, % 100, % , % 25,973, % 20,739, % 90, % , % 24,306, % 19,952, % 90, % , % 24,288, % 20,266, % 95, % , % 24,855, % 20,962, % 96, % , % 24,314, % 20,872, % 105, % , % 24,431, % 21,224, % 104, % , % 24,682, % 21,879, % 109, % , % 25,836, % 23,343, % 108, % Average Annual Increase/Decrease -1.7% -1.2% -0.1% 0.4% Airline Rates and Charges Effective July 1, 2010, the Department entered into a new Airline-Airport Use and Lease Agreement ("Agreement") with Airlines serving the Las Vegas market. The Agreement has a five-year term with a two-year extension option, and it incorporates the lease and use of the terminal complex, apron areas, and airfield at the Airport. On November 5, 2014, the Clark County Board of County Commissioners ("Board") approved an amendment ("Amendment") to the Agreement which extended the terms of the Agreement through June 30, As of June 30, 2016, and June 30, 2015 a total of 15 signatory airlines have executed the Agreement and the Amendment extending the terms, with one airline pending final approval. The Agreement establishes a residual rate-making methodology for the Airport System through both direct and indirect cost centers. The net revenues or net expenses of each indirect cost center are reallocated, as specified in the Agreement, to direct cost centers to establish a residual rate-making approach for calculating landing fees, terminal building rental rates, and gate use fees. The net cash flows from the Airport s gaming fees and the Consolidated Rental Car Facility are set aside in a capital improvement account, the balance of which may be used to pay the costs of future capital projects or pay down outstanding Department debt. Capital projects funded from the capital improvement account are amortized back to the associated cost center on a straight-line basis over the assets' useful lives and are included in the residual rental rate at 50 percent of the amortized amount. The Agreement provides for non-signatory carriers to pay a premium rate of 25 percent over the signature rates for all terminal rentals and gate use fees. 11

19 Rates and charges are calculated annually at the beginning of each fiscal year pursuant to budgeted revenues, expenses, and debt service requirements. The established rates and charges are reviewed and adjusted, if necessary, throughout each fiscal year to ensure that sufficient Department revenues are generated to satisfy all the requirements of the Master Indenture of Trust dated May 1, 2003, as amended, which governs the issuance of certain debt. At the end of each fiscal year, the Department tallies the revenues collected through the established rates and charges and compares them to the residual rent requirement for each direct cost center. If the revenue collected from the Signatory Airlines exceeds the residual rental requirement, the excess amounts are maintained in a rate stabilization account (up to a maximum of 18.5 percent of the current fiscal year operating budget). The balance in the rate stabilization account may be used for the purpose of funding any residual rental shortfalls in future fiscal years, recovering any uncollected amounts related to an airline bankruptcy or discontinued service, paying down outstanding Department debt, or other similar uses as identified during the term of the Agreement. As of June 30, 2016, the account balance totaled $42.5 million. At the close of each fiscal year, audited financial data in conjunction with the balance in the rate stabilization account will be used to determine if any additional amount is due to or from the Signatory Airlines in accordance with the Agreement. In the event an overpayment is due, the Department will refund such overpayment to the Signatory Airlines, or, in the event an underpayment is owed, the Department will invoice the Signatory Airlines the underpayment within thirty days of such determination. For the fiscal year ended June 30, 2016, there was no amount due to or from the Signatory Airlines. The table below summarizes passenger airline landing fees, terminal building rentals, gate use fees, passenger fees, and the cost per enplaned passenger for FY 2016 and FY Cost per enplaned passenger is a standard industry metric, and the goal of the Department is to maintain a competitive cost per enplanement. The actual cost per enplanement for FY 2016 was $11.05, compared to the budget estimate of $ The variance between the actual and budgeted cost per enplanement was due to the fact that actual enplanements were 6.0 percent higher than budgeted enplanements. Total airline rents and fees collected in FY 2016 increased by $4.0 million, an increase of 1.6 percent over FY 2015 airline rents and fees. The Department is committed to managing airline rates and charges in an attempt to keep the cost per enplanement at levels comparable to other major U.S. airports in order to attract and retain air service in the Las Vegas market. The Department continuously looks for ways to maximize non-airline revenues and minimize operating expenses and debt service costs. 12

20 Passenger Airline Costs FY 2016 FY 2016 vs. FY 2016 FY 2016 FY 2015 Actual vs. FY 2015 Actuals Budget Actuals Budget Actuals Airline Cost Category (000) (000) (000) (000) (000) Landing fees $ 50,905 $ 50,641 $ 54,342 $ 264 $ (3,437) Terminal building rentals 160, , ,760 (1,480) 4,212 Gate use fees 26,874 24,943 24,682 1,931 2,192 Passenger fee - Ticketing & CIT 19,096 18,543 18, ,016 Total airline rental and fee revenue $ 257,847 $ 256,579 $ 253,864 $ 1,268 $ 3,983 Enplaned passengers 23,343 22,012 21,879 1,331 1,464 Cost per enplaned passenger $ $ $ $ (0.61) $ (0.55) Overview of Financial Statements The Department's financial statements are prepared using the accrual basis of accounting; therefore, revenues are recognized when earned, and expenses are recognized when incurred. Capital assets resulting from projects are capitalized when substantially complete and depreciated over their estimated useful lives. Refer to Note 1, "Summary of Significant Accounting and Reporting Policies," for a summary of the Department s significant accounting policies. Following this MD&A are the financial statements, notes to the financial statements, required supplementary information ("RSI"), and supplementary schedules of the Department. These statements, notes, RSI, and schedules, along with the MD&A, are designed to provide readers with an understanding of the Department s financial position. The Statements of Net Position presents information on all the Department s assets, deferred outflows of resources, liabilities, and deferred inflows of resources as of June 30, 2016 and The Statements of Revenues, Expenses, and Changes in Net Position presents financial information showing how the Department s net position changed during the fiscal years ended June 30, 2016 and The Statements of Cash Flows relates the inflows and outflows of cash and cash equivalents as a result of the financial transactions that occurred during these two fiscal years and also includes a reconciliation of operating income to net cash provided by operating activities. 13

21 Governmental Accounting Standards Board ("GASB") recently issued GASB Statement No 72, Fair Value Measurement and Application ("GASB 72"), effective for fiscal years beginning after June 15, 2015, and retroactive for all fiscal periods presented. GASB 72 addresses accounting and financial reporting issues related to fair value measurements and defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." GASB 72 impacts the fair value measurement of financial instruments. The determination of fair value is established by valuation techniques which should be applied consistently using one or more of three approaches: (1) the market approach, (2) the cost approach, and (3) the income approach. The market approach measures fair value using prices and other relevant information generated by market transactions involving similar assets or liabilities. Quoted market price is consistent with this technique. The cost approach reflects the amount required to replace the asset. The income approach converts future cash flows to a current valuation using a discounted present value technique. When using one or more of the valuation techniques to determine the fair value of the asset or liability, the desire is to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. GASB 72 provides three levels of inputs. Level 1 inputs are observable for assets and liabilities using quoted prices (unadjusted) in active markets. Level 2 inputs are observable for an asset or liability, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets or identical or similar assets or liabilities not in active markets, inputs other than quoted prices such as interest rates or yield curves observable at commonly quoted intervals, or market-corroborated inputs. Level 3 inputs are unobservable inputs for assets and liabilities. The Department maintains various instruments that are impacted by GASB 72. These include investment instruments held in the investment pool of the Clark County Treasurer, investment instruments held with Bank of New York Mellon ("Trustee"), and derivative instruments. The majority of the investments instruments with the Clark County Treasurer and the Trustee are valued using the market approach. These instruments are categorized as Level 1 and Level 2. Some investments with the Trustee are valued using unobservable inputs classified as Level 3 inputs. The valuation techniques for the investments with the Clark County Treasurer and Trustee have been consistent throughout the life of these investments with the Trustee, and, therefore, the Department s Net Position has not been restated for the implementation of GASB 72. Refer to Note 2, "Cash and Investments" for further details. The fair values of the interest rate swap derivative instruments were estimated using an independent pricing service. The valuations provided were derived from proprietary models based upon well-recognized principles and estimates about relevant future market conditions. The instruments' expected cash flows are calculated using the zero-coupon discount method, which takes into consideration the prevailing benchmark interest rate environment as well as the specific terms and conditions of a given transaction and which assumes that the current forward rates implied by the benchmark yield curve are the market s best estimate of future spot interest rates. The income approach is then used to obtain the fair value of the instruments by discounting future expected cash flows to a single valuation using a rate of return that takes into account the relative risk of nonperformance associated with the cash flows and the time value of money. This valuation technique is applied consistently across all instruments. Given the observability of inputs that are significant to the entire sets of measurements, the fair values of the instruments are based on inputs categorized as Level 2. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for further details. 14

22 GASB Statement No. 68, Accounting and Financial Reporting for Pensions ("GASB 68") and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date ("GASB 71"), are effective for fiscal years beginning after June 15, Under GASB 68, an employer in a cost-sharing, multiple-employer defined benefit pension plan is required to record its proportionate sharing of the net pension liability of the pension plan as determined at the measurement date. The net pension liability of the pension plan is determined by actuarial valuation of the total pension liability less the amount of the pension plan s fiduciary net position. The measurement date must be no more than 30 months and 1 day prior to the employer s most recent fiscal year end. Based on assumptions in computing the total pension liability, certain items that qualify as deferred outflows of resources or deferred inflows of resources are ascertained and determined to be recorded. These include differences between expected and actual experiences, net differences between projected and actual investment earnings on pension plan investments, and changes in assumptions. The amounts are to be amortized using a systematic and rational method over a closed period starting at the measurement date. Also, in determining the net pension liability under a cost-sharing, multiple-employer defined benefit pension plan, there may be a deferred outflow of resources or a deferred inflow of resources related to certain changes in proportions. These amounts are also to be amortized using a systematic and rational method over a closed period starting at the measurement date. Contributions to the pension plan by employers after the measurement date are recorded as a deferred outflow of resources until the next measurement date. Under GASBs 68 and 71, an entity s net position is to be restated as a cumulative effect of change in accounting principle. With the implementation of GASBs 68 and 71, the Department, as of July 1, 2014, reduced its unrestricted net position by $144.7 million as a cumulative effect of change in accounting principle. GASB 68 information is not available for FY 2014; therefore, the Department s salaries and benefits expense and, correspondingly, its net position as of June 30, 2014, have not been restated for the implementation of GASBs 68 and 71. All financial information included in the MD&A for FY 2014, does not reflect this implementation. Refer to Note 5, "Retirement Plans," for further details. Financial Highlights Net Position Summary Net position serves as an indicator of the Department s financial position. As of June 30, 2016, the Department s assets and deferred outflows of resources exceed its liabilities and deferred inflows of resources by $1,223.4 million, $23.5 million more than in FY As of June 30, 2015, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,199.9 million, a decrease of $107.8 million from FY A summary of the Department s net position for fiscal years 2016, 2015, and 2014 is shown below. 15

23 Summary of the Statements of Net Position As of June 30, 2016, 2015, and 2014 FY FY FY Change 2015 Change 2014 (000) (000) (000) to 2016 to 2015 Assets and deferred outflows of resources: Current assets $ 1,165,428 $ 949,273 $ 973,709 $ 216,155 $ (24,436) Capital assets, net 4,642,096 4,766,349 4,892,573 (124,253) (126,224) Other noncurrent assets 87, ,939 89,544 (115,784) 113,395 Total assets 5,894,679 5,918,561 5,955,826 (23,882) (37,265) Deferred outflows of resources 142, ,810 98,643 25,727 18,167 Total assets and deferred outflows of resources $ 6,037,216 $ 6,035,371 $ 6,054,469 $ 1,845 $ (19,098) Liabilities, deferred inflows of resources and net position: Current liabilities $ 284,849 $ 234,830 $ 228,048 $ 50,019 $ 6,782 Noncurrent liabilities 4,504,656 4,558,903 4,513,163 (54,247) 45,740 Total liabilities 4,789,505 4,793,733 4,741,211 (4,228) 52,522 Deferred inflows of resources 24,294 41,770 5,635 (17,476) 36,135 Net position: Net investment in capital assets 619, , ,098 (47,669) (108,320) Restricted 378, , ,968 55,396 43,247 Unrestricted 225, , ,557 15,822 (42,682) Total net position 1,223,417 1,199,868 1,307,623 23,549 (107,755) Total liabilities, deferred inflows of resources, and net position $ 6,037,216 $ 6,035,371 $ 6,054,469 $ 1,845 $ (19,098) Changes to net position: Operating revenues $ 540,200 $ 521,729 $ 507,055 $ 18,471 $ 14,674 Operating expenses (239,114) (234,368) (233,978) (4,746) (390) Depreciation and amortization (197,738) (198,672) (198,247) 934 (425) Net non-operating expense (99,021) (81,794) (132,746) (17,227) 50,952 Capital contributions 19,222 30,013 9,794 (10,791) 20,219 Total net change in net position $ 23,549 $ 36,908 $ (48,122) $ (13,359) $ 85,030 Current Assets The Department s current assets consist mainly of cash and cash equivalents, investments with a maturity of 12 months or less, and trade accounts receivable. Also included in current assets are various other receivables such as interest income, grant receivables, inventories of parts and supplies, and prepaid operating expenses. The Department s current assets for FY 2016 increased by $216.2 million from FY 2015, primarily due to an increase in cash and cash equivalents of $146.3 million, an increase in short-term investments of $73.2 million, and an increase in trade accounts receivable of $15.6 million. These increases were offset by a decrease in grants receivable of $20.1 million, mostly related to reimbursements received for the grants awarded for the rehabilitation of Runway 7L/25R. Collectively, interest receivable, other receivables, inventories, and prepaid expenses increased by $1.2 million. Unrestricted cash and cash equivalents increased during FY 2016 by $51.7 million as additional operating cash was provided by increases in passenger traffic and non-airline revenues. Restricted cash and cash equivalents increased by $94.6 million in FY Short-term investments increased by $73.2 million. Restricted cash and cash equivalents and short-term investments, when combined, increased by $167.8 million, partly due from transferring unrestricted funds to restricted funds to fund the full redemption of the Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds, Series 2006A ("Series 2006A Bonds"), which were called on July 1, 2016, and also due to investments previously classified as long-term now maturing as short-term. 16

24 The Department s current assets for FY 2015 decreased by $24.4 million from FY 2014, primarily due to a decrease in cash and cash equivalents of $18.2 million and a decrease in short-term investments of $29.2 million. These decreases were offset by increases in trade accounts receivable of $4.1 million and in grants receivable of $19.5 million. The increase in grants receivable mostly relates to reimbursements for the grant awarded for the rehabilitation of Runway 7L/25R. Collectively, interest receivable, other receivables, inventories, and prepaid expenses decreased by $0.7 million. Unrestricted cash and cash equivalents increased during FY 2015 by $96.3 million as additional operating cash was provided by increases in passenger traffic and non-airline revenues. Restricted cash and cash equivalents decreased by $115.0 million in FY Short-term investments decreased by $29.2 million. Restricted cash and cash equivalents and short-term investments, when combined, declined by $47.3 million, mostly due to cost paid for the rehabilitation of Runway 7L/25R. Capital Assets For FY 2016, capital assets, net of depreciation, decreased by $124.3 million, or 2.6 percent, over FY This decrease was due to depreciation of $194.9 million offset by additional capital expenditures of $70.5 million, which included capitalization of the Siegfried and Roy Park and of the final phase of the rehabilitation of Runway 7L/25R, the third longest airport runway in the United States, as well as commencement of construction of the northeast wing/international corridor from the D Gates to the U.S. Custom and Border Protection Facilities in Terminal 3, the baggage claim floor remodel in Terminal 1, and Terminal 1 ticketing counter and floor area remodel. Refer to Note 6, "Changes in Capital Assets," for more detail relating to the Department s capital assets. For FY 2015, capital assets, net of depreciation, decreased by $126.2 million, or 2.6 percent, over FY This decrease was due to depreciation of $195.9 million offset by additional capital expenditures of $70.6 million, which included capitalization of the first of two phases of the rehabilitation of Runway 7L/25R and expenditures for construction of the Siegfried and Roy Park. Other Non-current Assets The Department's other non-current assets consist of restricted investments with a maturity greater than one year, the fair value of the Department's interest rate swaps, and prepaid expenses. Restricted investments represent investments held for capital improvements, debt service, and debt service reserves with the Trustee. Total noncurrent restricted investments decreased by $105.0 million from $151.9 million in FY 2015 to $46.9 million in FY This decrease related to long-term investments advancing to within a year of maturity. Refer to Note 2, "Cash and Investments," for more detail relating to the Department s restricted investments. 17

25 With the implementation of GASB 72, the Department is now required to record its interest rate swaps at fair value. As of June 30, 2016, the interest rate swaps had a fair value of $35.6 million. The information needed to restate the interest rate swaps at fair value as of June 30, 2015, as required under GASB 72, was not available; therefore, the interest rate swaps for FY 2015 are presented at their mark-to-market value, $43.4 million, based on the provisions of GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments ("GASB 53"). Prepaid expenses consist of bond insurance costs for insured bonds and the unamortized lease cost of the Consolidated Rental Car Facility. The bond insurance costs are being amortized over the terms of the bond insurance policies. The unamortized Consolidated Rental Car Facility lease cost entails amounts due from the Signatory Airlines on June 30, 2007, that were forgiven in FY 2008 in exchange for the net revenues (excluding land rent) from the Consolidated Rental Car Facility. The Agreement provides for the Consolidated Rental Car Facility lease cost to be amortized over the period of the lease agreement with the rental car facility tenants, a term of ten years. The balance of prepaid expenses for FY 2016 declined $3.1 million over FY 2015 from $7.7 million to $4.6 million, mostly due to scheduled amortization. Deferred Outflows of Resources As of June 30, 2016, the Department recorded deferred outflow of resources related to the pension plan in the amount of $24.0 million, an increase of $3.2 million, or 15.2 percent, over the prior fiscal year figure of $20.9 million. For FY 2016, the deferred outflow related to the pension plan comprised $21.9 million in contributions to the pension plan and $2.1 million related to changes in proportions as opposed to $19.7 million in contributions to the pension plan and $1.2 million related to changes in proportions for FY The increase in changes in proportions as of June 30, 2016, as compared to June 30, 2015, is attributable to the difference in FY 2015 between employer contributions, and proportionate share of contributions, for a total increase of $2.3 million, and offset by scheduled amortization. The changes in proportions has remaining amortization terms of 4.7 years and 5.55 years for FY 2014 cost and FY 2015 costs, respectively. Refer to Note 5, "Retirement Plans," for more details. Under the provisions of GASB 53, the Department is required to record the changes in the fair value or the mark-tomarket value of its interest rate swaps serving as hedging derivatives. With the implementation of GASB 72, the interest rate swaps that were hedging derivative instruments now are stated at fair value. As of June 30, 2016, the deferred outflows of resources associated with hedging derivative instruments had a fair value of $75.8 million. The information required to restate the interest rate swaps that were hedging derivative instruments at fair value as of June 30, 2015, was not available; therefore, the interest rate swaps are presented at their mark-to-market value for FY As of June 30, 2015, the deferred outflows of resources associated with hedging derivative instruments had a mark-to-market value of $52.3 million. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for additional details. 18

26 Other deferred costs, which consist of unamortized losses on refunded debt and deferred losses on imputed debt, are being amortized over their remaining terms. The balance of these other deferred outflows decreased from $43.6 million at June 30, 2015, to $42.7 million at June 30, The change between these two years was the unamortized loss on the refunding of the 2007 Series A-2 PFC Bond of $5.5 million, offset by scheduled amortization. Current and Non-current Liabilities At June 30, 2016, current liabilities payable from unrestricted assets increased $15.3 million from FY This increase resulted from increases in both unrestricted accounts payable of $13.2 million due to construction payables and rents received in advance of $2.4 million, offset by a decline in other accrued expenses of $0.3 million. Current liabilities payable from restricted assets increased by $34.7 million from FY 2015 to FY This increase was due to an increase in the current portion of long-term debt of $42.2 million, driven mainly by the increase in current scheduled maturities of long-term debt and the call for full redemption of the Series 2006A Bonds. These increases were offset by decreases in restricted accounts payable and other current liabilities of $6.4 million and in accrued interest of $1.1 million related to a reduction in outstanding principal. Non-current liabilities for FY 2016 decreased by $54.2 million over FY Long-term debt decreased by $122.7 million from the end of FY 2015 to FY This decline related to two factors. In addition to paying down scheduled debt principal of $96.7 million, the Department called for full redemption the Series 2006A Bonds with long-term outstanding principal of $29.2 million. Liability for other postemployment benefits increased by $9.0 million, from $50.2 million in FY 2015 to $59.2 million in FY The Department made no contributions to the OPEB Trust for FY Net pension liability increased by $12.5 million, from $130.3 million in FY 2015 to $142.8 million in FY Refer to Note 5, "Retirement Plans," for more detail related to pension and other postemployment benefit costs. Under GASB 72, the Department is now required to record its interest rate swaps at fair value. As of June 30, 2016, the interest rate swaps have a fair value of $143.3 million. The information needed to restate the interest rate swaps at fair value as of June 30, 2015, as required under GASB 72, was not available; therefore, the interest rate swaps for FY 2015 are presented at their mark-to-market value, $96.6 million, based on the provisions of GASB

27 Deferred Inflows of Resources As of June 30, 2016, the Department recorded deferred inflows of resources related to the pension plan in the amount of $19.0 million, which comprises $10.7 million for its proportionate share of the difference between expected and actual experience, $7.8 million for its proportionate share of the difference between projected and actual investment earnings on pension plan investments, and $0.5 million for change in proportion. This change in proportion relates to prior year net pension liability and net deferred inflows adjusted for the change in proportionate share based on FY 2014 and FY 2015 contributions. As of June 30, 2015, the Department recorded deferred inflows of resources related to the pension plan in the amount of $33.6 million, which comprised $6.2 million for its proportionate share of the difference between expected and actual experience and $27.4 million for its proportionate share of the difference between projected and actual investment earnings on pension plan investments. The difference between expected and actual experience has remaining amortization terms of 4.7 years and 5.55 years for FY 2014 and FY 2015 costs, respectively. The net difference between projected and actual earnings on investments has remaining amortization on terms of 3.0 and 4.0 years for FY 2014 and FY 2015, respectively. The changes in proportion and differences between actual contributions and proportionate share on contributions have a remaining amortization term of 5.55 years for FY 2015 costs. Refer to Note 5, "Retirement Plans," for more details. Under the provisions of GASB 53, the Department is required to record the changes in the fair value or the mark-tomarket value of its interest rate swaps serving as hedging derivatives at the end of the each fiscal year. With the implementation of GASB 72, the interest rate swaps that were hedging derivative instruments as of June 30, 2016, now are stated at fair value. As of June 30, 2016, the deferred inflows of resources associated with hedging derivative instruments had a fair value of $0.9 million. As of June 30, 2016, the information required to restate the interest rate swaps that were hedging derivative instruments at fair value as of June 30, 2015, was not available; therefore, the interest rate swaps for FY 2015 are presented at their mark-to-market value. As of June 30, 2015, the deferred inflows of resources associated with hedging derivative instruments had a mark-to-market value of $2.7 million. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for additional details. Also included as deferred inflows of resources is the total of unamortized gains on refunded bonds, which are amortized over the remaining terms of the bonds. The balance of these other deferred outflows decreased from $5.5 million at June 30, 2015, to $4.4 million at June 30, 2016, as a result of scheduled amortization. Highlights of Changes in Net Positions The following table is a condensed summary of net positions for the fiscal years ending June 30, 2016, 2015, and

28 Net Position As of June 30, 2016, 2015, and 2014 FY FY FY Net Position (000) (000) (000) Net investment in capital assets $ 619,109 $ 666,778 $ 775,098 Restricted net position: Capital projects 59,445 64,783 37,846 Debt serv ice 242, , ,940 Other 76,349 76,906 75,182 Total restricted net position 378, , ,968 Unrestricted net position 225, , ,557 Total net position $ 1,223,417 $ 1,199,868 $ 1,307,623 Discussion of FY 2016 Operating Revenues The following table is a summary of the Department's operating revenues for the fiscal years ending June 30, 2016, 2015, and Operating Revenues For the Fiscal Years Ended June 30, 2016, 2015, and 2014 FY FY FY Percentage Percentage Change Change Operating Revenue Category (000) (000) (000) Terminal building and use fees $ 194,284 $ 185,886 $ 180, % 3.1% Terminal concession fees 67,009 66,586 65, % 1.0% Landing fees and other aircraft fees 57,620 60,917 61, % -0.5% Public and employee parking fees 38,852 36,034 33, % 6.9% Rental car facility fees 37,285 35,727 35, % 0.5% Rental car concession fees 35,600 33,853 31, % 7.0% Gate use fees 30,139 27,892 27, % 3.3% Gaming fees 29,516 27,657 25, % 8.2% Ground rents and use fees 22,020 22,122 21, % 2.4% Ground transportation fees 19,273 16,797 15, % 5.6% General aviation fuel sales (net of cost) 5,033 4,508 4, % 10.8% Other operating income 3,569 3,750 4, % -18.2% $ 540,200 $ 521,729 $ 507, % 2.9% The Agreement with the Signatory Airlines uses a residual rate-making methodology for the Department through various cost centers by establishing a residual rental requirement in calculating a rate for landing fees, terminal building rental rates, and gate use fees. The residual rental requirement is determined by the allocation of the operating expenses and debt service of the Department to various cost centers, and those costs which are not recovered from revenues generated by non-airline and non-signatory Airline sources are to be recovered through Signatory Airline landing fees, terminal building rental rates, and gate use fees. 21

29 For FY 2016, airline revenues accounted for 47.7 percent of all operating revenues. In FY 2016, airline revenues totaled $257.8 million, an increase of $3.9 million, or 1.6 percent, over the prior fiscal year total of $253.9 million. Nonairline revenues totaled $282.4 million, up by $14.5 million, or 5.4 percent, over FY 2015 non-airline revenues of $267.9 million. Airline Revenues For FY 2016, revenues from airline landing fees and other aircraft fees were $57.6 million as compared to $60.9 million in FY 2015, a decrease of $3.3 million, or 5.4 percent. The decrease in landing fee revenues from FY 2015 to FY 2016 can be mostly attributed to a decrease in the residual rental revenue rate of 8.6 percent for FY 2016 offset by an increase in landed weights of 4.7 percent. Terminal building and use fees consist of signatory and non-signatory ticketing area fees, baggage system fees, baggage claim fees, common use fees, and fees from hold rooms along with certain operation and storage areas. The Agreement requires that the terminal building rentals be set each fiscal year based on a residual rate-making approach of leased space. Terminal building and use fees were up from $185.9 million in FY 2015 to $194.3 million in FY 2016, a 4.5 percent increase. This increase in terminal building rental revenue was mostly attributable to an increase in the terminal building rental rate of 2.7 percent over the prior year, along with increases to cargo building rentals. Gate use fees were up from $27.9 million in FY 2015 to $30.1 million in FY 2016, an increase of 8.1 percent. The increase in gate use fee revenue is attributable to an increase in the number of aircraft turns of 7.7 percent, combined with a rate increase of 4.2 percent for narrow body turns and a rate increase of 4.1 percent for wide body turns. This increase was offset by a reduction in the leased gate rate of 6.4 percent. Pursuant to the Agreement, the Department collects from the Signatory Airlines 50 percent of the amount of total amortization on assets acquired or constructed from the proceeds of the capital improvement account and used to benefit the terminal complexes. During FY 2016, the amount collected was $21.9 million, of which $10.9 million was deposited to the rate stabilization account (50 percent included in the residual rental rates) with the remaining $10.9 million deposited into the capital improvement account, as provided by the Agreement. The Agreement also provides that any amount due to airlines for which adequate funds are available within the amortization due from airline account shall be deposited into the capital improvement account. For FY 2016, the amount deposited was $23.3 million. 22

30 Non-Airline Revenues Non-airline revenues, consisting primarily of concession related fees, increased from $267.9 million in FY 2015 to $282.4 million in FY 2016, an increase of 5.4 percent. The largest source of non-airline revenues is terminal concession fees, which are generated from an agreed-upon percentage of gross sales from various concessionaire-related sources, including the food and beverage concessionaire, news and gift concessionaires, specialty retail outlets, advertising revenue, and passenger services revenue. Percentage rents paid to the Airport from terminal concessionaire-related sources increased from $66.6 million in FY 2015 to $67.0 in FY 2016, an increase of 0.4 percent. Revenues from terminal food and beverage sales increased 10.6 percent, from $22.1 million in FY 2015 to $24.5 million in FY 2016, due mainly to new restaurants and increases in enplanements. However, revenues from news and gift sales and specialty retail sales decreased slightly, from $28.7 million in FY 2015 to $28.3 million in FY 2016, due to duty-free concession revenues impacted by the strength of the U.S. dollar. In-terminal advertising during FY 2016 was down by 13.9 percent from the prior fiscal year to a total of $11.0 million. Advertising has been impacted by hotels and casinos in the resort corridor increasing advertising at their sites and therefore reducing advertising inside the Airport. The Department is developing plans to provide dynamic advertising signage within the terminal baggage claim areas to improve advertising revenue. Revenues from passenger services in the terminal increased from $2.6 million in FY 2015 to $2.8 million FY 2016, an increase of 5.5 percent. This increase resulted primarily from the increase in passenger traffic. Building rental fees associated with the Consolidated Rental Car Facility increased during FY 2016 from $35.7 million to $37.3 million, an increase of 4.4 percent. These fees consist of rental of operational space as well as the Customer Facility Charge ("CFC"), which is a charge of $3.75 that car rental customers pay each day they rent a vehicle and that is collected by the car rental companies on behalf of the Airport System. CFC revenue for FY 2016 totaled $30.9 million, an increased of $1.2 million, or 4.2 percent, over FY 2015, which resulted from an increase in the number of transaction days from the prior year. For FY 2016, the Department charged $6.4 million in space rental payments, up by 0.3 million, or 5.2 percent, over $6.1 million in FY This increase resulted from a 6.3 percent increase in the rental car facility rate. Total parking revenues at the Airport during FY 2016 increased by 7.8 percent over FY Public parking provided at the Airport includes short-term, long-term, and valet parking in two parking structures comprising 10,274 parking spaces as well as economy parking at a remote surface parking lot. Public parking revenue from short-term, longterm, and economy parking increased by 7.8 percent due to an increase in the number of parking exits as well as an increase in the duration of parking stays. Parking revenues from these sources for FY 2016 totaled $30.7 million versus $28.5 million in FY Valet parking revenue for FY 2016 increased from $2.7 million to $2.8 million, for an increase of 1.8 percent, as a result of longer duration of valet parking stays. Finally, employee parking revenue for FY 2016 increased from $4.5 million to $4.9 million, an increase of 7.4 percent. Rental car concession fees increased from $33.9 million in FY 2015 to $35.6 million in FY 2016, an increase of 5.2 percent. This increase is attributable to an increase in gross revenues generated by the rental car companies in FY 2016 over FY

31 Ground rentals charged by the Department for private hangar tenants, fixed-base operators, and concessionaires remained flat, nominally declining from $22.1 million in FY 2015 to $22.0 million FY Ground transportation fees charged by the Department increased by 14.7 percent from $16.8 million in FY 2015 to $19.3 million in FY Ground transportation fees consist of percentage fees or trip charges paid to the Airport by limousine operators, courtesy van operators, bus operators, taxicabs, and newly established transportation network companies, which began servicing the airport in late calendar year The increase in revenue is fueled by an increase of 4.8 percent in the number of trips made by taxicab companies coupled with the new operations of transportation network companies. The increase in revenue of $2.7 million generated by the transportation network companies was slightly offset by a decrease in bus and limousine fees of $0.4 million. Gaming revenue at the Airport during FY 2016 increased by 6.7 percent over FY 2015, from $27.7 million to $29.5 million. The increase in gaming revenue can be attributed to the increase in passenger traffic coupled with the strategic placement of newer gaming machines in higher traffic areas. Profits from general aviation fuel sales increased from $4.5 million during FY 2015 to $5.0 million during FY 2016, an increase of 11.6 percent. This increase relates to an increase of 8.3 percent in gross profit percentages on fuel sales. Other operating revenue for FY 2016 decreased by $0.2 million compared to FY Discussion of FY 2015 Operating Revenues Airline Revenues For FY 2015, airline revenues accounted for 48.7 percent of all operating revenues. Airline revenues totaled $253.9 million of total operating revenues, and non-airline revenues totaled $267.9 million. For FY 2015, the airline landing fee and other aircraft fees were $60.9 million as compared to $61.2 million in FY 2014, a decrease of $0.3 million, or 0.5 percent. The decrease in landing fee revenues from FY 2014 to FY 2015 can be attributed to the decrease in the residual rental revenue rate for FY The actual landing fee rate decreased from $2.39 per 1,000 lbs. in FY 2014 to $2.33 per 1,000 lbs. in FY 2015, a decrease of 2.6 percent. The decrease in the landing rate was offset by an increase in landed weights of 1.0 percent in FY Terminal building and use fees consist of signatory and non-signatory ticketing area fees, baggage system fees, baggage claim fees, common use fees, and fees from hold rooms along with certain operation and storage areas. The Agreement requires that the terminal building rentals be set each fiscal year based on a residual rate-making approach of leased space. Terminal building and use fees were up from $180.3 million in FY 2014 to $185.9 million in FY 2015, a 3.1 percent increase. This increase in terminal building rental revenue is mostly attributable to an increase in the terminal building rental rate of 2.2 percent over the prior year. Gate use fees were up from $27.0 million in FY 2014 to $27.9 million in FY 2015, an increase of 3.3 percent. The increase in gate use fee revenue is attributable to an increase in the number of turns of 9.4 percent. This increase was offset by a reduction in the leased gate rate of 6.5 percent. 24

32 The total amortization amount collected during FY 2015 was $11.3 million, of which $1.2 million was deposited to the rate stabilization account (50 percent included in the residual rental rates) with the remaining $10.1 million deposited into the capital improvement account, as provided by the Agreement. The Agreement also provides that any amount due to airlines for which adequate funds are available within the amortization due from airline account shall be deposited into the capital improvement account. For FY 2015, the amount deposited was $11.6 million. Non-Airline Revenues Non-airline revenues, consisting primarily of concession related fees, increased from $258.0 million in FY 2014 to $267.9 million in FY 2015, an increase of 3.8 percent. The largest source of non-airline revenues is terminal concession fees, which are generated from an agreed-upon percentage of gross sales from various concessionaire-related sources, including the food and beverage concessionaire, news and gift concessionaires, specialty retail outlets, advertising revenue, and passenger services revenue. Percentage rents paid to the Airport from terminal concessionaire-related sources increased from $65.9 million in FY 2014 to $66.6 in FY 2015, an increase of 1.0 percent. Revenues from terminal food and beverage sales increased 6.3 percent, from $20.8 million in FY 2014 to $22.1 million in FY 2015, due mainly to new and improved concepts which were made by the Airport s food and beverage concessionaire. Revenues from news and gift sales and specialty retail sales also increased, from $28.6 million in FY 2014 to $28.7 million in FY 2015, due to a combination of increased percentage rental rates being assessed the news and gift concessionaires and the continued introduction of nationally branded specialty retail stores. In-terminal advertising during FY 2015 was down by 7.5 percent from the prior fiscal year for a total of $12.8 million. This decrease was due to the existence of a temporary advertising campaign in the prior year at the south baggage claim area in Terminal 1. Revenues from passenger services in the terminal increased from $2.3 million in FY 2014 to $2.6 million FY 2015, an increase of 13.0 percent. This increase resulted from the provision of additional services for passengers. Building rentals associated with the Consolidated Rental Car Facility increased slightly during FY 2015 from $35.6 million to $35.7 million, an increase of 0.5 percent. Building rents are paid from the car rental companies that occupy the facility together with the proceeds of a $3.75 Customer Facility Charge ("CFC"), which is collected by the car rental companies from car rental customers for each day they rent a car. For FY 2015, the car rental companies paid $6.1 million in space rental payments, and CFC revenue for FY 2015 totaled $29.6 million. CFC revenue increased by $1.1 million over FY 2014, an increase of 3.8 percent, due to an increase in the number of transaction days from the prior year. The annual rental requirement declined by $0.9 million in FY 2015, a decrease of 13.2 percent. This decrease resulted from a reduction in the facilities reserve deposits. 25

33 Total parking revenues at the Airport during FY 2015 increased by 6.9 percent over FY Public parking provided at the Airport includes short-term, long-term, and valet parking in two parking structures comprising 10,274 parking spaces as well as economy parking at a remote surface parking lot. Public parking revenue from short-term, longterm, and economy parking increased by 7.2 percent due to an increase in the number of parking exits. Parking revenues for FY 2015 from these sources totaled $28.5 million versus $26.6 million in FY Valet parking revenue for FY 2015 increased by 5.6 percent as a result of additional use of valet parking services, as the number of valet parking exits increased by 4.5 percent in FY 2015 over FY Employee parking revenue for FY 2015 increased from $4.3 million to $4.5 million, an increase of 4.7 percent. Percentage rents paid to the Department from the rental car companies increased from $31.6 million in FY 2014 to $33.9 million in FY 2015, an increase of 7.0 percent. This increase is attributable to an increase in gross revenues generated by the rental car companies in FY 2015 over FY Ground rentals charged by the Department for private hangar tenants, fixed-base operators, and concessionaires increased to $22.1 million in FY 2015 from $21.6 million in FY 2014, an increase of 2.4 percent. This increase can be attributed to amended lease agreements generating additional rental revenues. Ground transportation fees charged by the Airport increased by 5.6 percent from $15.9 million in FY 2014 to $16.8 million in FY Ground transportation fees consist of percentage fees or trip charges paid to the Airport by limousine operators, courtesy van operators, bus operators, and taxicabs. Taxicab trip fee revenues increased from $7.4 million to $7.9 million, an increase of 6.1 percent. This increase can be attributed to an increase in the number of trips. Percentage fees for limousines, courtesy vehicles, and buses increased by 5.2 percent during FY 2015 to $8.9 million. This increase is due to an increase in revenue earned by the limousine companies. Gaming revenue at the Airport during FY 2015 increased by 8.2 percent over FY 2014, from $25.6 million to $27.7 million. The increase in gaming revenue can be attributed to the increase in passenger traffic and the strategic placement of new gaming machines in higher traffic areas. Profits from general aviation fuel sales increased from $4.1 million during FY 2014 to $4.5 million during FY 2015, an increase of 10.8 percent. This increase relates to an increase of 5.7 percent in gross profit percentages on fuel sales. Other operating revenue for FY 2015 decreased by $0.8 million compared to FY The majority of this decrease is attributable to a decline in revenues generated from modifications of deed restrictions in connection with land parcels that were formerly situated within noise contours. The majority of these modifications of deed restrictions occurred during the first phase of the modification program, which was completed in FY The second phase of the program was completed in FY Note that the majority of these parcels are located within the Co-operative Management Area ("CMA"). Refer to Note 16, "Airport Land Transfers," for further details. 26

34 Discussion of FY 2016 Operating Expenses Operating Expenses For the Fiscal Years Ended June 30, 2016, 2015, and 2014 FY FY FY Percentage Percentage Change Change Operating Expense Category (000) (000) (000) Salaries and benefits $ 119,653 $ 118,498 $ 117, % 0.5% Professional services 54,687 52,610 54, % -2.9% Repairs and maintenance 21,176 21,421 21, % -1.6% Utilities and communications 24,338 25,666 24, % 5.2% Materials and supplies 12,844 11,349 10, % 9.4% Administrative 4,021 2,357 2, % -14.0% Insurance 2,395 2,467 2, % -4.3% $ 239,114 $ 234,368 $ 233, % 0.2% For FY 2016, the Department's total operating expenses increased by $4.7 million, or 2.0 percent, from FY 2015, from $234.4 million to $239.1 million. Most major operating expense categories experienced increases, such as salaries and benefits, up $1.2 million; professional services, up $2.1 million; materials and supplies, up $1.5 million; and administrative expenses, up $1.7 million. The increases were offset by decreases in repairs and maintenance, down $0.2 million; utilities and communications expenses, down $1.3 million; and insurance expense, down $0.1 million. Salaries and benefits is the single largest operating expense of the Department. Salaries and benefits made up approximately 50 percent of the overall Department's operating expenses in FY For FY 2016, the Department had 1,377 full-time employees and 34 part-time employees. For FY 2015, the Department had 1,364 full-time employees and 39 part-time employees. This increase of 0.9 percent in the number of full-time employees resulted from the Department s close monitoring of staffing and decisions to reallocate resources and replace only certain vacancies as they arise. For FY 2016, total salaries and benefits increased by $1.2 million over FY Salaries and wages, excluding benefits, increased by $2.0 million, or 2.6 percent. Contributing to this increase was the cost of living increase of 2.0 percent scheduled in FY 2016 in the agreement with the Service Employees International Union. As of June 30, 2016 and 2015, the Airport had 195 and 270 vacancies, respectively, a 13.0 and 16.5 percent vacancy factor, also respectively. Benefit costs for FY 2016 were down $0.9 million, or 2.1 percent, from FY This decline was a result of a decrease of $1.5 million in benefit costs associated with pension expense. Refer to Note 5, "Retirement Plans," for more detail related to employee benefit programs and their associated costs. 27

35 Professional services costs during FY 2016 increased by 3.9 percent, or $2.1 million, over FY 2015, with the majority of the increase occurring in fees for bond issuance services, security services costs, and shuttle service costs. The increase in bond issuance costs of $0.7 million relates to the issuance of the Airport System Junior Subordinate Lien Revenue Notes Series 2015B, which refunded the Series 2013 C-1 Junior Subordinate Lien Revenue Notes, and to the issuance of the Passenger Facility Charge Refunding Revenue Bonds Series 2015C, which refunded the Series 2007 A-2 (Non-AMT) Passenger Facility Charge Revenue Bonds. Security services increased by $1.3 million, or 4.3 percent, with the increase attributable to enhanced security regulations. Also contributing to the increase in professional services was an increase of $0.4 million, or 5.2 percent, in costs for shuttle services provided between the Airport and the rental car facility. This increase was impacted by the increase in passenger volume along with additional route times related to road construction between the Airport and the rental car facility. Repairs and maintenance expenses for FY 2016 decreased by $0.2 million, or 1.1 percent, from FY The majority of the decrease was related to a general reduction in needed repairs and maintenance. Utility and communication expenses for FY 2016 decreased over FY 2015 by $1.3 million, or 5.2 percent. The majority of the decrease related to electricity costs, which were down by $1.7 million, or 9.2 percent, from FY Natural gas expense decreased by $0.1 million, or 7.8 percent, from FY These decreases related to reductions in rates. Communication expense increased by $0.2 million, or 8.0 percent, from FY 2015 to FY Water, sewage, and waste disposal expenses increased by $0.3 million, or 7.4 percent, compared to FY Water expenses increased due to an increase water volume resulting from more car rentals using the "Quick-Turn-Around" facilities at the Consolidated Rental Car Facility, and disposal expenses increased as a result of an increase in rates. Materials and supplies expense for FY 2016 was up $1.5 million, or 13.2 percent, over FY The majority of this increase related to the installation of carpet in various locations within Terminal 1, at a cost of approximately $0.7 million, and related to purchases of charging tables and chairs in the amount of $0.2 million. Administrative expense increased from $2.4 million in FY 2015 to $4.0 million in FY 2016 due to an Arbitration Decision and Award of $1.6 million in lost profits to Bombardier Transportation Holdings USA, Inc. Refer to Note 11(c), "Commitments and Contingencies; Litigation and Claims," for further details. Insurance expense decreased by 2.9 percent, from $2.5 million in FY 2015 to $2.4 million in FY 2016, due to a general decline in premiums. Discussion of FY 2015 Operating Expenses For FY 2015, the Department's total operating expenses experienced a modest increase of $0.4 million, or 0.2 percent, from FY Most major operating expense categories experienced increases, such as salaries and benefits, up $0.6 million; utilities and communication, up $1.3 million; and materials and supplies, up $1.0 million. The increases were offset by decreases in professional services, down $1.6 million; repairs and maintenance, down $0.4 million; and administrative expense, down $0.4 million. 28

36 Salaries and benefits is the single largest operating expense of the Department. Salaries and benefits made up over 50 percent of the overall Department's operating expenses in FY For FY 2015, the Department had 1,364 fulltime employees and 39 part-time employees. For FY 2014, the Department had 1,400 full-time employees and 14 part-time employees. This decrease of 2.6 percent in the number of full-time employees resulted from the Department s evaluation and implementation of additional cost containment measures. For FY 2015, total salaries and benefits increased by $0.6 million over FY Salaries and wages, excluding benefits, increased by $2.6 million, or 3.5 percent. Contributing to this increase was the fact that, effective July 1, 2014, all non-management staff earned a 2.5 percent cost of living increase. Also contributing to the increase in salaries and wages was an increase in longevity pay for existing staff, which amounted to $0.5 million over FY For FY 2015 and FY 2014, the Airport had 270 and 234 vacancies, respectively, a 16.5 and 14.3 percent vacancy factor, also respectively. Benefit costs for FY 2015 were down $2.1 million, or 4.8 percent, over FY This decline was a result of two contributing factors. First, the implementation of GASB 68 resulted in a decrease of $0.8 million in benefit costs associated with pension expense. No information was available to restate FY 2014 pension expense for GASB 68 and, therefore, pension expense for FY 2014 was not restated. Second, other postemployment benefits declined by $0.9 million. Refer to Note 5, "Retirement Plans," for more detail related to employee benefit programs and their associated costs. Professional services costs during FY 2015 decreased by 2.9 percent, or $1.6 million, over FY 2014, with the majority of the reduction occurring in fees for bond issuance services and legal services. Bond issuance costs incurred during FY 2015 declined by $1.3 million, from $2.5 million in FY 2014 to $1.2 million in FY 2015, a reduction of 52.0 percent. This reduction resulted from fewer bond refundings and letter of credit agreements executed in FY Costs for legal services incurred during FY 2015 were $1.0 million, a decrease of $0.9 million over FY In FY 2014, these fees included legal services in connection with the settlement of avigation easement litigation. The settlement was accrued in FY 2013 and paid in FY The decrease in professional services costs was offset by an increase of $0.4 million, or 1.7 percent, over FY 2014 in the cost of security services. Repairs and maintenance expenses for FY 2015 decreased 1.6 percent, or $0.4 million, over FY The majority of the decrease was related to a general reduction in services needed. Utility and communication expenses for FY 2015 increased over FY 2014 by $1.3 million, or 5.2 percent. The majority of the increase related to electricity costs, which were up $0.8 million, or 4.4 percent, over FY Natural gas expense increased by $0.3 million, or 25.7 percent, over FY These increases related to rate increases as well as usage increases. Communication expense increased by $0.2 million, or 9.6 percent, from FY 2014 to FY Water, sewage, and waste disposal expenses essentially remained flat, with only a 0.3 percent decrease compared to FY Materials and supplies expense for FY 2015 was up $1.0 million, or 9.4 percent, over FY The majority of this increase related to the installation of carpet in various locations within Terminal 1. 29

37 Administrative expense decreased from $2.7 million in FY 2014 to $2.4 million in FY 2015, which resulted from a onetime expense of $0.4 million incurred in FY 2014 to sponsor the 19th World Route Development Forum, which was held in Las Vegas, Nevada, in October Insurance expense decreased by 4.3 percent, from $2.6 million in FY 2014 to $2.5 million in FY 2015, due to a general decline in premiums. Discussion of FY 2016 Non-operating Revenues and Expenses Non-Operating Revenues and Expenses For the Fiscal Years Ended June 30, 2016, 2015, and 2014 FY FY FY Percentage Percentage Change Change Non-operating Revenue/Expenses Category (000) (000) (000) Passenger Facility Charge revenue $ 89,567 $ 83,921 $ 79, % 5.5% Jet A Fuel Tax rev enue 11,337 10,542 10, % 1.5% Interest and investment income (loss) Unrestricted interest income 7,368 2,634 2, % 13.2% Restricted interest income 2,988 2,251 4, % -50.8% PFC interest income 1, % 1.1% Unrealized gain (loss) on inv estment - deriv ative instruments (29,192) 1,174 (16,575) 2,586.5% % Interest expense (183,010) (193,252) (213,922) -5.3% -9.7% Net gain from disposition of capital assets 62 10, % -5,258.9% $ (99,021) $ (81,794) $ (132,746) 21.1% -38.4% Passenger Facility Charge ("PFC") revenues for FY 2016 increased by $5.6 million, or 6.7 percent. As there were no changes in the effective rate, this increase for FY 2016 can be attributed to an increase in passenger traffic. Effective July 1, 1991, the County enacted an ordinance imposing a tax of $0.02 per gallon on jet aviation ("Jet A") fuel to be allocated to the Department to help facilitate the expansion of air transportation facilities in the region. This tax has been an important source of funding to address capacity, security, safety, and noise matters throughout the Airport System. On May 1, 2012, the Board unanimously approved an increase in the Jet Aviation Fuel Tax from $0.02 to $0.03 per gallon, which went into effect on July 1, Jet A Fuel Tax revenue increased by $0.8 million from $10.5 million in FY 2015 to $11.3 million in FY 2016 as a result of an increase in the number of gallons of Jet A fuel purchased. Interest income increased during FY 2016 by percent, from $5.6 million in FY 2015 to $12.2 million in FY This increase can be attributed to a rise in investment rates and the fair value of investments held in the County's pooled cash and to an increase in funds held by the Trustee. The average investment rate of return for the County's pooled cash increased from 0.85 percent in FY 2015 to 1.04 percent in FY The average investment rate of return for the Trustee cash and cash investments was 0.56 percent in FY 2016 as compared to 0.41 percent in FY

38 Interest expense on the Department's outstanding bonds and interest rate swaps declined by $10.3 million, or 5.3 percent, to $183.0 million in FY 2016 from $193.3 million in FY This decline was due to a general decrease in interest payments in accordance with scheduled bond payments and interest amortization. The Department made all its required debt service payments in FY 2016, which included scheduled principal repayments of $68.1 million. The Department continues to closely monitor and evaluate its debt portfolio. With the implementation of GASB 72, the interest rate swaps determined to be investment derivative instruments were required to be stated at fair value. As of June 30, 2016, these derivative instruments have a net balance of $(17.2) on the Statements of Net Position. The information required to restate the interest rate swaps that were hedging derivative instruments at fair value as of June 30, 2015, as required under GASB 72, was not available; therefore, the investment interest rate swaps for FY 2015 are presented at their mark-to-market value and have a net balance of $12.0 million on the Statements of Net Position. For FY 2016, the unrealized gain or loss on investments in derivative instruments of $(29.2) million represents the change in these two values. In FY 2016, the Department recognized $62.4 thousand in net gain from the disposition of capital assets. These dispositions occurred in connection with normal asset turnover. The decline in net gain from disposition of capital assets of $10.1 million from FY 2015 to FY 2016 was attributable to the sale of land parcels in FY Discussion of FY 2015 Non-operating Revenues and Expenses Interest income decreased during FY 2015 by 26.3 percent, from $7.6 million in FY 2014 to $5.6 million in FY This decrease can be attributed to a decline in investment rates and the fair market value of investments held in the County's pooled cash and to a decline in funds held by the Trustee. The average investment rate of return for the County's pooled cash increased slightly from 0.81 percent in FY 2014 to 0.85 percent in FY The average investment rate of return for the Trustee cash and cash investments was 0.41 percent in FY 2015 as compared to 0.85 percent in FY Interest expense on the Department's outstanding bonds and interest rate swaps declined by $20.6 million, or 9.7 percent, to $193.3 million in FY 2015 from $213.9 million in FY Partially contributing to this decline was the full termination of interest rate swap #12B and the partial termination of interest rate swap #14B, both of which occurred in FY Prior to the terminations, these two swaps incurred $8.3 million of interest expense in FY Also contributing to this decline was a general decrease in interest payments in accordance with scheduled bond payments and interest amortization. The Department made all its required debt service payments in FY 2015, which included scheduled principal repayments of $63.1 million. The Department continues to closely monitor and evaluate its debt portfolio. 31

39 Passenger Facility Charge ("PFC") revenues for FY 2015 increased by $4.4 million, or 5.5 percent. As there were no changes in the effective rate, this increase for FY 2015 can be attributed to an increase in passenger traffic and to timing differences between the collection of PFCs by the airlines and actual enplanements. Effective July 1, 1991, the County enacted an ordinance imposing a tax of $0.02 per gallon on jet aviation ("Jet A") fuel to be allocated to the Department to help facilitate the expansion of air transportation facilities in the region. This tax has been an important source of funding to address capacity, security, safety, and noise matters throughout the Airport System. On May 1, 2012, the Board unanimously approved an increase in the Jet Aviation Fuel Tax from $0.02 to $0.03 per gallon, which went into effect on July 1, Jet A Fuel Tax revenue increased by $0.1 million from $10.4 million in FY 2014 to $10.5 million in FY This increase relates to a reduction in FY 2014 revenues, which resulted from a vendor overpayment of Jet A Fuel Tax revenues collected in FY The unrealized gain or loss on investments in derivative instruments is specified by GASB 53. The Department is required to recognize, measure, and disclose the changes in the mark-to-market of its interest rate swaps. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for additional details. In FY 2015, the Department recognized $10.2 million in net gain from the disposition of capital assets. These dispositions occurred in connection with normal asset turnover and the sale of County land parcels. Discussion of Income before Capital Contributions Income Before Capital Contributions For the Fiscal Years Ended June 30, 2016, 2015, and 2014 FY FY FY Change Change (000) (000) (000) Operating revenues $ 540,200 $ 521,729 $ 507,055 $ 18,471 $ 14,674 Operating expenses 239, , ,978 4, Income before depreciation 301, , ,077 13,725 14,284 Depreciation and amortization 197, , ,247 (934) 425 Income (loss) from operations 103,348 88,689 74,830 14,659 13,859 Non-operating expenses (99,021) (81,794) (132,746) (17,227) 50,952 Income (loss) before capital contributions 4,327 6,895 (57,916) (2,568) 64,811 Capital contributions 19,222 30,013 9,794 (10,791) 20,219 Increase (decrease) in net position 23,549 36,908 (48,122) (13,359) 85,030 Net position beginning of year 1,199,868 1,307,623 1,355,745 (107,755) (48,122) Cumulative effect of change in accounting principle - (144,663) - 144,663 (144,663) Net position end of year $ 1,223,417 $ 1,199,868 $ 1,307,623 $ 23,549 $ (107,755) 32

40 For FY 2016, income before capital contributions totaled $4.3 million, a $2.6 million decrease over the FY 2015 income before capital contributions of $6.9 million. Operating income before depreciation in FY 2016 was $301.1 million, an increase of $13.7 million over the previous fiscal year and the result of a $18.5 million increase in operating revenues offset by a $4.7 million increase in operating expenses. Depreciation and amortization expense essentially remained flat, declining by only $0.9 million. Non-operating expenses increased by $17.2 million from FY 2015 to FY 2016, primarily due to the change in the methodology of valuation of investment derivative instruments from mark-to-market value to fair value pursuant to the implementation of GASB 72. This change in these valuations of $(29.2) million was offset by an increase in interest income of $6.6 million and an increase in Passenger Facility Charges of $5.6 million. The decrease of $10.1 million in the net gain on the disposition of capital assets offset was essentially offset by the reduction in interest expense of $10.2 million. For FY 2015, income before capital contributions totaled $6.9 million, a $64.8 million increase over the FY 2014 loss before capital contributions of $57.9 million. Operating income before depreciation in FY 2015 was $287.4 million, an increase of $14.3 million over the previous fiscal year and the result of a $14.7 million increase in operating revenues offset by a $0.4 million increase in operating expenses. Depreciation and amortization expense essentially remained flat, increasing by only $0.4 million. Non-operating expense decreased by $51.0 million. This decline in part was due to a change in the value of investment derivative instruments of $17.8 million. The values of the investment derivative instruments for both FY 2015 and FY 2014 were recorded at their mark-to-market values, since these valuations preceded the implementation of GASB 72 and since, as of June 30, 2015, the information required to value the investment derivative instruments at fair value was not available for FY 2015 or FY The decline in nonoperating expense was also due to a reduction in interest expense of $20.6 million and an increase in the net gain on the disposition of capital assets of $10.0 million. These increases were offset by a decrease in interest income of $2.0 million. Capital Contributions During FY 2016, the Department requested reimbursements of $19.2 million in grants from the Federal Aviation Administration ("FAA") for approved capital projects within the Department. These FAA grants represent the Department s portion of entitlement funds allocated to airports in the United States based on an enplanement formula plus any discretionary grants obtained by the Department. The $10.8 million decrease in FAA grant funding for FY 2016 over FY 2015 can be attributed to several grant-funded projects ending in FY The major grantfunded project for FY 2016 was the rehabilitation of Runway 7L/25R. During FY 2015, the Department requested reimbursements of $30.0 million in grants from the Federal Aviation Administration ("FAA") for approved capital projects within the Department. These FAA grants represent the Department s portion of entitlement funds allocated to airports in the United States based on an enplanement formula plus any discretionary grants obtained by the Department. The $20.2 million increase in FAA grant funding for FY 2015 over FY 2014 can be attributed to several grant-funded projects under construction in FY The major grant-funded project in progress in FY 2015 was the rehabilitation of Runway 7L/25R. 33

41 Capital Improvement Program Each fiscal year, the Department updates its five-year capital improvement plan. As of June 30, 2016, the Department s comprehensive five-year capital improvement plan, including projects funded by bonds, notes, and federal awards, totaled $421.4 million. The following is a summary of the five-year capital improvement plan. Five-year Capital Plan As of June 30, 2016 Federal Capital Improvement Bond Total Funds Account Funds Budget (000) (000) (000) (000) Airfield improvements $ 21,263 $ 64,188 $ 14,864 $ 100,315 Terminal improvement projects 30, ,274 6, ,164 Reliever airport projects 9,675 1, ,417 McCarran support facilities - 123,691 19, ,539 Total $ 61,328 $ 318,513 $ 41,594 $ 421,435 Percent 14.6% 75.6% 9.9% 100.0% The Signatory Airlines serving the Department have approved all the projects listed above. All PFC projects have been approved. Federal grants include the Department s entitlements. The capital improvement account monies consist of the Department s gaming revenue, the net cash flow from the Consolidated Rental Car Facility, and net operating cash flows. Based on current five-year projections, it is anticipated that future gaming revenues and future cash flows from the rental car facility coupled with existing funds will adequately fund the capital improvement account requirements. For the periods FY 2017 through FY 2021, it is projected that revenues from gaming, deposits from the Co-operative Management Area program, and net rents from the Consolidated Rental Car Facility will generate $242.7 million. These sources of revenue plus grant contributions and current available funds will be utilized to fund the Airport System's five-year capital improvement plan. Debt Management At June 30, 2016, the Department had $4.2 billion in outstanding debt. This amount was made up of $941.0 million in senior lien debt, $1,946.2 million in subordinate lien debt, $900.7 million in PFC-pledged debt on parity with the subordinate lien debt, $339.5 million in third lien debt, and $76.0 million in fourth lien debt. All the current outstanding debt is naturally or synthetically fixed interest rate debt, with an average interest rate for FY 2016 of approximately 4.4 percent. Refer to Note 9, "Long-term Debt," for more detail relating to the Department s outstanding long-term debt. 34

42 On July 8, 2016, the Irrevocable Transferable Letter of Credit with Bank of America, N.A., for the Series 2008 D-3 Bonds was extended through July 8, Also on July 8, 2016, the Irrevocable Transferable Direct-Pay Letter of Credit with Union Bank, N.A. for the Series 2010 F-2 PFC Bonds was extended through August 7, Refer to Note 17, "Subsequent Events," for further details. On May 2, 2016, the County published a Notice of Full Redemption to the holders of the Clark County, Nevada Airport System Subordinate Lien Revenue Bonds, Series 2006A. The outstanding principal balance on the bonds, $31.1 million, has been called for full redemption on July 1, 2016, along with all outstanding interest due. Refer to Note 17, "Subsequent Events," for further details. On July 22, 2015, the Department issued $99.0 million of Series 2015C Passenger Facility Charge (PFC) Non-AMT Refunding Revenue Bonds ("Series 2015C PFC Bonds"). The Department used the issuance proceeds to execute an advance refunding of the Series 2007 A-2 PFC Non-AMT Bonds, to purchase a reserve fund surety policy for the Series 2015C PFC Bonds, and to pay for certain costs of issuance. The Series 2015C PFC Bonds bear a fixed interest rate of 5.00 percent and have staggered maturities through July 1, On July 1, 2015, the County issued the Series 2015B Airport Junior Subordinate Lien Revenue Notes ("Series 2015B Notes") for $165.1 million. The proceeds were used to satisfy the outstanding principal and interest balance of the 2013 C-1 Airport System Junior Subordinate Lien Notes and to pay certain issuance costs. The Series 2015B Notes mature on July 1, 2017, and bear annual interest rates of 3.00 percent and 5.00 percent. Refer to Note 9, "Long-term Debt," for more detail relating to the Department s outstanding long-term debt. At June 30, 2015, the Department had $4.3 billion in outstanding debt. This amount was made up of $958.1 million in senior lien debt, $1,964.8 million in subordinate lien debt, $939.6 million in PFC-pledged debt on parity with the subordinate lien debt, $146.9 million in third lien debt, and $277.7 million in fourth lien debt. All the current outstanding debt is naturally or synthetically fixed interest rate debt, with an average interest rate for FY 2015 of approximately 4.5 percent. Refer to Note 9, "Long-term Debt," for more detail relating to the Department s outstanding long-term debt. On April 30, 2015, the County issued the Senior Series 2015A Airport System Revenue Bonds ("Series 2015A Bonds") for $59.9 million. The proceeds from this issuance, along with $3.4 million in excess debt service reserve from the Series 2008E Airport System Senior Lien Revenue Bonds, were used to refund the outstanding principal and interest balance of the Senior Series 2005A Airport System Revenue Bonds, to purchase a reserve fund policy for the Series 2015A Bonds, and to pay for certain costs of issuance. The Series 2015A Bonds bear a fixed interest rate of 5.00 percent with staggered maturities through July 1,

43 On January 5, 2015, the Board approved a reoffering of the Clark County, Nevada General Obligation (Limited Tax)(Additionally Secured by Pledged Airport System Revenues) Airport Bonds Series 2008A ("Series 2008A Bonds") and Airport System Subordinate Lien Revenue Bonds, Series 2008 C-2 and Series 2008 C-3 ("Series 2008 C-2 Bonds" and "Series 2008 C-3 Bonds," respectively). The reoffering of the Series 2008A Bonds, which closed on February 18, 2015, occurred to replace the expiring Standby Bond Purchase Agreement with Landesbank-Baden Wurttemberg with a new Standby Bond Purchase Agreement with State Street Bank and Trust Company. The succeeding agreement is irrevocable and expires on February 15, The reoffering of the Series 2008 C-2 and C-3 Bonds, which closed on February 18, 2015, occurred to replace the expiring Letter of Credit agreement with Landesbank- Baden Wurttemberg with a new Irrevocable Direct-Pay Letter of Credit agreement with State Street Bank and Trust for the Series 2008 C-2 Bonds and a new Irrevocable Direct-Pay Letter of Credit agreement with Sumitomo Mitsui Banking Corporation for the Series 2008 C-3 Bonds. Both of the succeeding Letters of Credit expire on February 15, On January 5, 2015, the Board approved extending the Irrevocable Direct-Pay Letter of Credit with State Street Bank and Trust Company for the Airport System Subordinate Lien Revenue Bonds Series 2008 A-2 and Series 2008 B-2 Bonds. The extended agreements were executed on February 18, 2015, and expire on February 15, On July 1, 2014, the Department issued the $103.4 million Series 2014B Junior Subordinate Lien Revenue Notes ("Series 2014B Notes") to refund the Series 2013 C-2 Junior Subordinate Lien Revenue Note and to pay certain costs of issuance thereof. The Series 2014B Notes has a stated interest rate of 5.00 percent and a maturity date of July 1, Refer to Note 9, "Long-term Debt," for more detail relating to the Department s outstanding long-term debt. The Department continually reviews strategies to minimize debt service and keep airline costs as reasonable as possible. The ability to adapt to rapidly changing market demands, as has been seen the last several years, will be a critical element to achieving reasonable borrowing costs and maintaining the Department s healthy credit rating. For instance, the Department took full advantage of the provisions under the American Recovery and Reinvestment Act of 2009 ("ARRA"), being the first airport to issue Build America Bonds in the United States in September The Department s bonds are rated by these two major credit rating agencies. The current ratings are as follows: Moody's S&P Senior Lien Revenue Bonds Aa3 AA- Subordinate Lien Revenue Bonds A1 A+ PFC Revenue Bonds A1 A+ Junior Subordinate Lien Debt and Jet A Bonds A2 A+ General Obligation Bonds Aa1 AA 36

44 The Master Indenture of Trust, dated May 1, 2003, which governs the issuance of senior and subordinate lien debt, requires the Department to have net revenues available for bond debt service coverage equal to 1.25 times the amount of debt service on senior lien debt and 1.10 times the amount of debt service on aggregate senior and subordinate lien debt. PFC bonds have no debt service coverage requirement due to the fact that any debt service not payable from PFC proceeds is payable as debt service subordinate to the senior lien bonds. As of June 30, 2016, the coverage on the senior lien debt was 4.52, and the coverage of aggregate senior and subordinate lien debt 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 In FY 2016, passenger enplanements increased by 6.7 percent. The Airport System has experienced an increase of 4.0 percent in passenger growth into FY 2017 through September The Department will continue its Systemwide cost containment measures, explore ways to increase non-aeronautical revenues, manage its outstanding debt, and defer any capital spending not already committed in an effort to keep the cost for users of the Airport System as low as possible. Additional Information Further information on the results of the Department's financial position is provided in the accompanying audited financial statements and notes for the fiscal years ended June 30, 2016 and This financial report provides the Department's 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. For questions about this report or additional financial information, please contact the Finance Division, Clark County Department of Aviation, at P.O. Box 11005, Las Vegas, NV Financial and statistical information for the Department may also be found on its website at 37

45 Financial Statements Clark County Department of Aviation Clark County, Nev ada Statements of Net Position As of June 30, 2016 and Assets and Deferred Outflows of Resources (000) (000) Assets Current assets: Cash and cash equivalents $ 449,362 $ 397,662 Cash and cash equivalents, restricted 457, ,956 Investments, restricted 180, ,983 Accounts receiv able, net of allowance for doubtful accounts of $554 and $428, respectively 63,819 48,266 Interest receivable 2,455 2,005 Grants receiv able ,303 Other receivables 2,414 2,338 Inventories 8,617 7,894 Prepaid expenses Total current assets 1,165, ,273 Non-current assets: Capital assets: Property and equipment: Land 596, ,908 Land improvements 1,736,583 1,682,445 Perpetual avigation easement 332, ,557 Buildings and improvements 3,541,488 3,540,903 Furniture and fixtures 48,802 48,993 Machinery and equipment 488, ,691 Construction in progress 54,444 46,095 6,799,600 6,729,592 Accumulated depreciation (2,157,504) (1,963,243) Capital assets, net 4,642,096 4,766,349 Other non-current assets: Investments, restricted 46, ,888 Derivative instruments - interest rate swaps 35,619 43,368 Prepaid expenses 4,598 7,683 Total other non-current assets 87, ,939 Total non-current assets 4,729,251 4,969,288 Total assets 5,894,679 5,918,561 Deferred outflows of resources: Pension 24,020 20,855 Hedging derivative instruments 75,786 52,310 Other deferred costs 42,731 43,645 Total deferred outflows of resources 142, ,810 Total assets and deferred outflows of resources $ 6,037,216 $ 6,035,371 See accompanying notes to financial statements. 38

46 Clark County Department of Aviation Clark County, Nevada Statements of Net Position As of June 30, 2016 and Liabilities, Deferred Inflows of Resources, and Net Position (000) (000) Liabilities: Current liabilities: Payable from unrestricted assets: Accounts payable and other current liabilities $ 33,249 $ 20,030 Other accrued expenses 19,301 19,553 Rents received in advance 8,756 6,402 Total payable from unrestricted assets 61,306 45,985 Payable from restricted assets: Accounts payable and other current liabilities 2,303 8,669 Accrued interest 95,310 96,456 Current portion of long-term debt 125,930 83,720 Total payable from restricted assets 223, ,845 Total current liabilities 284, ,830 Non-current liabilities: Payable from unrestricted assets: Other postemployment benefit liabilities 59,190 50,223 Net pension liability 142, ,301 Derivative instruments - interest rate swaps 143,266 96,581 Deposits 1, Total payable from unrestricted assets 346, ,948 Payable from restricted assets: Long-term debt, net of current portion 4,158,222 4,280,955 Total payable from restricted assets 4,158,222 4,280,955 Total non-current liabilities 4,504,656 4,558,903 Total liabilities 4,789,505 4,793,733 Deferred inflows of resources: Pension 18,965 33,604 Hedging derivative instruments 885 2,651 Unamortized gain on bond refundings 4,444 5,515 Total deferred inflows of resources 24,294 41,770 Net position: Net investment in capital assets 619, ,778 Restricted for: Capital projects 59,445 64,783 Debt service 242, ,526 Other 76,349 76,906 Total restricted 378, ,215 Unrestricted 225, ,875 Total net position 1,223,417 1,199,868 Total liabilities, deferred inflows of resources, and net position $ 6,037,216 $ 6,035,371 See accompanying notes to financial statements. 39

47 Clark County Department of Av iation Clark County, Nev ada Statements of Revenues, Expenses, and Changes in Net Position (000) (000) Operating revenues: Terminal building and use fees $ 194,284 $ 185,886 Landing fees and other aircraft fees 57,620 60,917 Terminal concession fees 67,009 66,586 Rental car facility fees 37,285 35,727 Rental car concession fees 35,600 33,853 Public and employee parking fees 38,852 36,034 Gaming fees 29,516 27,657 Ground rents and use fees 22,020 22,122 Gate use fees 30,139 27,892 Ground transportation fees 19,273 16,797 General av iation fuel sales (net of cost) 5,033 4,508 Other 3,569 3,750 Total operating rev enues 540, ,729 Operating expenses: Salaries and benefits 119, ,498 Professional services 54,687 52,610 Repairs and maintenance 21,176 21,421 Utilities and communication 24,338 25,666 Materials and supplies 12,844 11,349 Administrativ e 4,021 2,357 I nsurance 2,395 2,467 Total operating expenses 239, ,368 Operating income before depreciation 301, ,361 Depreciation and amortization 197, ,672 Operating income 103,348 88,689 Non-operating revenues (expenses): Passenger Facility Charge 89,567 83,921 Jet A Fuel Tax 11,337 10,542 Interest and investment income (loss) (16,977) 6,813 I nterest expense (183,010) (193,252) Net gain from disposition of capital assets 62 10,182 Total non-operating rev enues (expenses) (99,021) (81,794) Income before capital contributions 4,327 6,895 Capital contributions 19,222 30,013 Change in net position 23,549 36,908 Net position, beginning of year 1,199,868 1,307,623 Cumulativ e effect of change in accounting principle - (144,663) Net position, end of year $ 1,223,417 $ 1,199,868 See accompanying notes to financial statements. 40

48 Clark County Department of Av iation Clark County, Nev ada Statements of Cash Flows (000) (000) Cash flows from operating activities: Cash received from operations $ 537,030 $ 522,083 Cash paid to employees (116,396) (122,862) Cash paid to outside vendors (118,914) (114,898) Net cash provided by operating activities 301, ,323 Cash flows from capital and related financing activities: Passenger Facility Charges received 89,335 83,431 Jet A Fuel Tax received 11,150 10,673 Acquisition and construction of capital assets (74,284) (70,845) Federal Aviation Administration grants received 39,272 10,517 Bond proceeds 290, ,334 Deposit to refunding escrow (288,971) (187,900) Proceeds from capital asset disposal 69 11,137 Bond issuance costs (247) - Debt serv ice payments: Principal (68,050) (63,100) Interest (net of capitalized costs) (197,941) (211,546) Net cash used in capital and related financing activities (199,090) (230,299) Cash flows from investing activities: Interest and investment income received 11,915 6,684 Proceeds from maturities of investments 274, ,161 Purchase of investments (242,623) (316,048) Net cash provided by (used in) investing activities 43,674 (72,203) Increase (decrease) in cash and cash equivalents 146,304 (18,179) Cash and cash equiv alents, beginning of year 760, ,797 Cash and cash equiv alents, end of year $ 906,922 $ 760,618 Cash and cash equivalent balances: Unrestricted cash and cash equivalents $ 449,362 $ 397,662 Restricted cash and cash equivalents 457, ,956 Cash and cash equivalents, end of year $ 906,922 $ 760,618 See accompanying notes to financial statements. 41

49 Clark County Department of Av iation Clark County, Nev ada Statements of Cash Flows (000) (000) Reconciliation of operating income to net cash provided by operating activ ities: Operating income $ 103,348 $ 88,689 Depreciation and amortization 197, ,672 (Increase) decrease in accounts receivable-operations (5,831) 775 (Increase) decrease in other receivables-operations 112 (59) (Increase) decrease in inventories (723) (461) (Increase) decrease in prepaid expenses (Increase) decrease in deferred outflows-pension (3,165) (20,855) Increase (decrease) in accounts payable-operations 997 (3,999) Increase (decrease) in accrued payroll and benefits 8,602 3,813 Increase (decrease) in deferred income 2,354 (1,740) Increase (decrease) in deposits Increase (decrease) in net pension liability 12,461 (14,362) (Increase) decrease in deferred inflows-pension (14,639) 33,604 Net cash provided by operating activities $ 301,720 $ 284,323 Non-cash capital and related financing and investing activities: Gain (loss) on inv estment income $ (29,192) $ 1,174 With the implementation of GASBs 68 and 71 in FY 2015, the assumptions made by the actuary, the changes in proportions, the deferral of pension contributions, and the changes in net pension liability impacted the Statements of Net Position and the Statements of Revenues, Expenses, and Changes in Net Position as follows: Liabilities: Net Pension Liability $ - $ 144,663 Net Position: Unrestricted - (144,663) $ - $ - See accompanying notes to financial statements. 42

50 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 1.) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (a) Reporting Entity The Clark County Department of Aviation ("Department") is a department of Clark County ("County"), a political subdivision of the State of Nevada ("State"). The Department, under the supervision of the Board of County Commissioners ("Board") and the County Manager, is established to operate McCarran International Airport ("Airport") and the four other general aviation facilities owned by the County: North Las Vegas Airport, Henderson Executive Airport, Jean Sports Aviation Center, and Overton-Perkins Field (collectively referred to as the "Airport System"). The Board is the governing body of the County. The seven members are elected from County commission election districts to four-year staggered terms. The Board appoints the Director of Aviation, who is charged with the day-to-day operation of the Department. Only the accounts of the Department are included in the reporting entity. The Airport System is owned and operated as an enterprise fund of the County and is included as part of the County s governmentwide financial statements and Comprehensive Annual Financial Report ("CAFR"). (b) Basis of Accounting The accounting principles used are similar to those applicable to a private business enterprise 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. All tabular dollar amounts are presented in thousands. The financial statements of the Department, an enterprise fund, are presented applying the accrual basis of accounting. Revenues are recorded when earned. The Department s operating revenues are derived from fees earned by airlines, concessionaires, tenants, and others. The fees are based on usage fees established by the Department and approved by the Board or in accordance with the Airline Airport Use and Lease Agreement ("Lease") dated July 1, The initial term of the Lease is five years with an option to extend for an additional two years upon mutual agreement between the parties. On November 5, 2014, the Board approved amending the Agreement by extending its terms through June 30, Expenses are recognized when incurred. Non-operating income consists of interest income, gains and losses on derivative instruments, Passenger Facility Charge ("PFC") proceeds, Jet A Fuel Tax revenues, and non-operating expenses primarily consisting of interest expense on outstanding Department debt. 43

51 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Governmental Accounting Standards Board ("GASB") Statement No 72, Fair Value Measurement and Application ("GASB 72"), addresses accounting and financial reporting issues related to fair value measurements and defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." GASB 72 is effective for fiscal years beginning after June 15, 2015, and retroactive for all financial statement periods presented. The determination of fair value is established through valuation techniques which should be applied consistently using one or more of three approaches: (1) the market approach, (2) the cost approach, and (3) the income approach. When using one or more of the valuation techniques to determine the fair value of the asset or liability, the objective is to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. GASB 72 provides three levels of inputs. Level 1 inputs are observable using quoted prices in active markets. Level 2 inputs are observable for an asset or liability, either directly or indirectly, and include quoted prices for similar assets or liabilities in active markets or identical or similar assets or liabilities not in active markets; inputs other than quoted prices, such as interest rates or yield curves observable at commonly quoted intervals; and market-corroborated inputs. Level 3 inputs are unobservable inputs for assets and liabilities. (c) Cash and Cash Equivalents, Investments Cash and 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. Refer to Note 2, "Cash and Investments," for further details. Investments Investments, consisting of federal government obligations and repurchase agreements, guaranteed investment certificates, and collateralized investment agreements, are stated at fair value. Investments in the County s pooled Treasurer s cash account are adjusted to market. Refer to Note 2, "Cash and Investments," for further details. 44

52 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (d) Accounts Receivable Accounts receivable are reported at their gross value when earned. The Department s collection terms are generally 20 days. The allowance for uncollectible accounts is based on a percentage of open aged receivables at June 30 of each fiscal year. As a customer s balance is deemed uncollectible, the receivable is cleared, and the amount is written off. If the balance is subsequently collected, payments are applied to the allowance account. Accounts receivable are shown net of the allowance for doubtful accounts in the amount of $554.5 thousand for FY 2016 and $428.1 thousand for FY (e) Inventories Inventories held for resale are valued at the lower of cost or market and consist primarily of jet fuel to be consumed by customers at the general aviation facilities as well as airline baggage tags and maintenance supplies at the Airport System. Expendable parts and supplies held for consumption over the course of the next fiscal year are valued at cost. (f) Capital Assets Capital assets with a useful life of more than one year are capitalized and are stated at historical cost. The capitalization threshold is $5,000. 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 useful lives currently estimated as follows: Land Improvements Buildings Furniture and Fixtures Machinery and Equipment years years 15 years 3-20 years Repairs and maintenance are charged to operations as incurred unless they have the effect of improving or extending the life of an asset, in which case they are capitalized as part of the cost of the asset. Refer to Note 6, "Changes in Capital Assets," for further details. 45

53 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (g) Capitalized Interest The Department capitalizes interest costs on Airport System construction projects. The amount capitalized is adjusted based on the costs associated with the Airport System s construction in progress and interest expense. For FY 2016 and FY 2015, capitalized interest was $0.7 million and $0.3 million, respectively. (h) Deferred Outflows of Resources and Deferred Inflows of Resources - Pension GASB Statement No. 68, Accounting and Financial Reporting for Pensions ("GASB 68"), requires actuarial assumptions be made, based on the measurement date, in computing deferred outflows of resources and deferred inflows of resources determined in connection with recording total pension liability. These deferred outflows of resources and deferred inflows of resources include valuations pertaining to changes in proportions, differences between actual contributions and proportionate share of contributions, differences between expected and actual experience, differences between the projected and actual investment earnings on pension plan investments, and the effects of changes in assumptions. These items are to be amortized using a systematic and rational method over a closed period starting at the measurement date. Also included in deferred outflows of resources are contributions to the pension plan after the measurement date. Refer to Note 5, "Retirement Plans"; Note 8, "Deferred Outflows of Resources"; and Note 11, "Deferred Inflows of Resources," for further details. (i) Deferred Costs Deferred costs, which include losses on bond refundings, are amortized over the shorter of the life of the related refunding bond or refunded bond using the proportionate-to-stated interest method. Deferred costs also include deferred losses incurred on the re-association and revaluation of interest rate swaps paired to certain bonds that were refunded. These deferred losses are amortized on a straight-line basis against corresponding imputed debt over the life of the swap. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for further details. 46

54 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (j) Derivative Instruments The Department is required to follow the guidelines of GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments ("GASB 53"), for reporting its derivative instruments. GASB 53 addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state or local governments. GASB 53 requires all derivatives be categorized into two basic types: (1) hedging instruments and (2) investment instruments. In addition, GASB 53 required that all derivative instruments be reported on the Statements of Net Position at their mark-tomarket value. With the implementation of GASB 72, the interest rate swaps now are stated at fair value. However, the information required to restate the interest rate swaps at fair value as of June 30, 2015, was not available; therefore, the interest rate swaps for FY 2015 are presented at their mark-to-market value. The changes from mark-to-market value in FY 2015 to fair value in FY 2016 of derivative instruments which, in accordance with GASBs 53 and 72, serve as valid hedges are recorded in the Statements of Net Position as either deferred inflows of resources or deferred outflows of resources. Corresponding changes to the fair value of derivative instruments which are no longer considered valid hedges are recorded in the Statements of Revenues, Expenses, and Changes in Net Position. The fair value of the Department s swap portfolio recorded at fair value as of June 30, 2016, is $(107.6) million as compared to the mark-to-market value of $(53.2) million as of June 30, Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for further details on the fair values and classifications of the Department s derivative instruments. (k) Federal Grants Federal Aviation Administration ("FAA") grants are restricted for certain capital improvements and are reported as capital contributions in accordance with Governmental Accounting Standards Board ("GASB") Statement No. 33, Accounting and Financial Reporting for Non-exchange Transactions, as amended by GASB Statement No. 36, Recipient Reporting for Certain Shared Nonexchange Revenues. 47

55 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (l) Passenger Facility Charge ("PFC") The FAA authorized the County to impose a 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. Effective September 1, 2006, the PFC rate decreased from $4.50 per qualifying enplaned passenger to $3.00 pursuant to authorization from the FAA. Effective January 1, 2007, the PFC rate increased from $3.00 per qualifying enplaned passenger to $4.00 through the fiscal year ended June 30, Effective October 1, 2008, the PFC rate increased to $4.50 per qualifying enplaned passenger. 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 an aggregate amount of $4.6 billion. Collections during the fiscal year ended June 30, 2016, were $89.3 million, and aggregate collections including interest from inception through June 30, 2016, were $1,475.9 million. All the PFC collections are used to pay debt service on PFC-pledged bonds or subordinate lien bonds issued to fund FAA-approved projects. (m) Restricted Assets and Liabilities Restricted assets consist of cash, investments, and other resources that are legally restricted to certain uses pursuant to the Master Indenture of Trust dated May 1, Capital program funds are restricted to pay the cost of certain capital projects as defined in various bond ordinances. PFC program funds are restricted to pay the cost of FAA-approved capital projects and any debt service incurred to finance these projects. Debt service funds are restricted to sourcing payments for principal, interest, sinking funds, and coverage as required by specific bond covenants. (n) Budgetary Control As an enterprise fund of the County, the Department is subject to the budgetary requirements of the State of Nevada ("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 using the accrual basis of accounting, and actual expenses cannot exceed total budgeted operating expenses without action pursuant to the State s budgetary requirements. Appropriations for operating expenses lapse at the end of each fiscal year. 48

56 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (o) Legal Defense Costs The Department does not accrue for estimated future legal costs and related defense costs, if any, to be incurred in connection with outstanding or threatened litigation and other disputed matters; instead, it records these costs as period costs when the related services are rendered. (p) Use of Estimates The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles requires the Department to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates and assumptions. (q) Accounting Changes and Restatements GASB 72 is effective for fiscal years beginning after June 15, 2015, and is retroactive for all fiscal periods presented. The Department maintains various instruments impacted by GASB 72. Investment instruments held with the Clark County Investment Pool and Bank of New York Mellon ("Trustee") have been consistently presented at fair value prior to the implementation of GASB 72. The Department maintains derivative instruments in the form of interest rate swaps. Under GASB 53, these derivative instruments had a value equal to the mark-to-market value. The mark-to-market value did not incorporate the risk adjusted valuation which would be necessary to convert the derivative instruments to fair value under GASB 72. As of June 30, 2016, the derivative instruments for FY 2016 are stated at fair value as required under GASB 72. However, the necessary information required to restate the derivative instruments as of June 30, 2015, to fair value under GASB 72 was not available; therefore the derivative instruments for FY 2015 were stated at mark-to-market value. The Department did not restate the beginning net position in the Statements of Revenues, Expenses, and Changes in Net Position as it relates to GASB 72 for either FY 2016 or FY As a result of implementing GASB 68 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date ("GASB 71"), the Department restated for FY 2015 the beginning net position in the Statements of Revenues, Expenses, and Changes in Net Position, effectively reducing the net position as of July 1, 2014, by $144.7 million. The reduction in net position resulted from establishing the net pension liability of the Department and the deferral of FY 2014 pension contributions paid to the State of Nevada Public Employees Retirement System. Refer to Note 5, "Retirement Plans," for further details. 49

57 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 2.) CASH AND INVESTMENTS According to State statutes, County monies must be deposited with federally insured banks, credit unions, or savings and loan associations within the County. The County is authorized to use demand accounts, time accounts, and certificates of deposit. State statutes do not specifically require collateral for demand deposits, but do specify that collateral for time deposits may be of the same type as those described for permissible investments. Permissible investments are similar to the allowable County investments described below, except that the statutes permit a longer term and include securities issued by municipalities within Nevada. The County's deposits are fully covered by federal depository insurance or collateral held by the County's agent in the County's name. The County has written custodial agreements in force with the various financial institutions' trust banks for demand deposits and certificates of deposits. These custodial agreements pledge securities totaling 102 percent of the deposits with each financial institution. The County has a written agreement with the State Treasurer for monitoring the collateral maintained by the County's depository institutions. The majority of all cash and investments of the Department are included in the investment pool of the Clark County Treasurer ("Treasurer") and the Department s Trustee, the Bank of New York Mellon. As of June 30, 2016 and 2015, these amounts were distributed as follows: Cash and Investments: FY 2016 FY 2015 (000) (000) Clark County Inv estment Pool $ 651,031 $ 558,466 Cash and Investments with Trustee 480, ,388 Cash On Hand or In Transit 2,573 11,635 Total $ 1,134,034 $ 1,019,489 (a) Clark County Investment Pool The Treasurer invests monies held both in individual funds and through a pooling of monies. The pooled monies, referred to as the Clark County Investment Pool, are invested as a whole and not as a combination of monies from each fund belonging to the pool. In this manner, the Treasurer is able to invest the monies at a higher interest rate for a longer period of time. Interest is apportioned to each participating department or agency on a monthly basis and is based on the average daily cash balance of the fund for the month in which the investments mature. 50

58 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Nevada Revised Statutes ("NRS") do not specifically require collateral for demand and time deposits, but do specify that collateral for time deposits may be of the same type as that 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 the State of Nevada. Due to the nature of the investment pool, it is not possible to separately identify any specific investment as being that of the Department. Instead, the Department owns a proportionate share of each investment, based on the Department s participation percentage in the investment pool. Once a year, the County records the investments in the Treasurer Investment Pool at market and then apportions the corresponding adjustment to the various participants for the year. The Department's apportioned share of the fair value adjustment made at year end was $7.2 million. The Department's share of the investments held in the investment pool as of June 30, 2016, was $651.0 million; the respective allocation percentages of the investments held in the investment pool are provided in the table below. Percentage Share of Investment Maturities (in years) Investment Type Fair Value Less than 1 1 to 3 3 to 5 5 to 10 U.S. Treasury Obligations 34.3% 3.0% 51.0% 46.0% 0.0% U.S. Agency Obligations 35.1% 14.8% 55.4% 29.8% 0.0% Corporate Obligations 17.9% 35.8% 59.2% 5.0% 0.0% Money Market Funds 0.3% 100.0% 0.0% 0.0% 0.0% Commercial Paper 2.5% 100.0% 0.0% 0.0% 0.0% Negotiable Certificates of Deposit 1.2% 100.0% 0.0% 0.0% 0.0% Collateralized Mortgage Obligations 0.6% 0.0% 50.9% 27.5% 21.6% Asset Backed Securities 3.0% 1.0% 12.5% 79.8% 6.7% NV Local Gov ernment Inv estment Pool 0.8% 100.0% 0.0% 0.0% 0.0% Repurchase Agreements 4.3% 100.0% 0.0% 0.0% 0.0% 100.0% 25.3% 47.5% 26.7% 0.5% As of June 30, 2015, the $558.5 million of the Department's investments held in the investment pool were allocated as indicated in the table below. Percentage Share of Investment Maturities (in years) Investment Type Fair Value Less than 1 1 to 3 3 to 5 5 to 10 U.S. Treasury Obligations 28.3% 4.9% 55.3% 39.8% 0.0% U.S. Agency Obligations 42.9% 31.6% 42.5% 25.9% 0.0% Corporate Obligations 15.0% 17.2% 68.7% 14.1% 0.0% Money Market Funds 0.2% 100.0% 0.0% 0.0% 0.0% Commercial Paper 10.0% 100.0% 0.0% 0.0% 0.0% Collateralized Mortgage Obligations 0.6% 0.2% 36.6% 24.9% 38.3% Asset Backed Securities 3.0% 0.0% 15.9% 55.0% 29.1% 100.0% 27.7% 44.9% 26.3% 1.1% 51

59 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (b) Interest Rate Risk Interest rate risk is defined as the risk that changes in interest rates will adversely affect the fair value of an investment. Through its investment policy, the County manages its exposure to fair value losses arising from increasing interest rates by limiting the average weighted duration of its investment pool to fewer than 2.5 years. Duration is a measure of the present value of a fixed income security s cash flows and is used to estimate the sensitivity of a security s price to interest rate changes. (c) Interest Rate Sensitivity As of June 30, 2016, the County invested in the following types of securities that have a higher sensitivity to interest rates: Callable securities are directly affected by the movement of interest rates. Callable securities allow the issuer to redeem, or call, a security before maturity, either on a given date or, generally, on coupon dates. Asset Backed Securities are financial securities backed by a loan, lease, or receivable against assets other than real estate and mortgage backed securities. These securities are subject to interest rate risk in that the value of the assets fluctuates inversely with changes in the general levels of interest rates. A Corporate Note Floater is a note with a variable interest rate that is usually, but not always, tied to an index. Step-up or step-down securities have fixed rate coupons for a specific time interval that will step up or step down a predetermined number of basis points at scheduled coupon dates or other reset dates. These securities are callable either one time or on their coupon dates. (d) Credit Risk Credit risk is defined as the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The County s investment policy applies the prudent-person rule: "In investing the County s monies, there shall be exercised the judgment and care under the circumstances then prevailing which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived." The County s investments were rated by Moody s Investors Service ("Moody's") and Standard & Poor s ("S&P") as follows: 52

60 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Moody's S&P U.S. Treasury Obligations Aaa AA+ U.S. Agency Callables Aaa AA+ U.S. Agency Non Callables Aaa AA+ U.S. Agency Discounts P-1 A-1+ Corporate Obligations A3 A- Money Market Funds Aaa AAA Commercial Paper Discount P-1 A-1 Certificates of Deposit P-1 A-1+ Collateralized Mortgage Obligations Aaa AA+ Asset Backed Securities Aaa AAA Agency Mortgage Backed Security Pass-Throughs Aaa AA+ (e) Concentration of Credit Risk Concentration of credit risk is defined as the risk of loss attributed to the magnitude of a government s investment in a single issuer. The County s investment policy limits the amount that may be invested in obligations of any one issuer, except direct obligations of the U.S. government or federal agencies, to no more than five percent of the County Investment Pool. At June 30, 2016, the following investments exceeded five percent of the total cash and investments invested for all entities combined: Federal Home Loan Mortgage Corporation 9.39% Federal National Mortgage Association 18.85% As of June 30, 2015, the following investments exceeded five percent of the total cash, investments, and loaned securities invested for all entities combined: Federal Home Loan Banks (FHLB) 5.83% Federal Home Loan Mortgage Corporation 17.69% Federal National Mortgage Association 17.88% 53

61 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (f) Trustee Cash In accordance with the Master Indenture of Trust dated May 3, 2003, as amended, between the County and the Bank of New York Mellon ("Trustee"), the Department uses the Trustee to retain all debt service reserve funds and to make all annual debt service payments to bondholders. As of June 30, 2016 and 2015, the Trustee held $480.4 million and $449.4 million, respectively, of the Department s cash and investments restricted for debt service reserves, bond proceeds, and annual debt service payments. As of June 30, 2016, of the $480.4 million held by the Trustee, $253.3 million in cash and cash equivalents was invested in United States Government Money Market Funds, and $227.1 million was invested in short- and long-term investments with entities as indicated in the table below. Investment Maturities (in Years) Fair Value FY 2016 Investment Type (000) Less Than 1 1 to 3 3 to 5 5 to 10 Over 10 US Treasury Notes $ 67,174 $ 67,174 $ - $ - $ - $ - Federal Farm Credit Bank Discounts 26,482 26, Federal Farm Credit Bank Non-Callables 17,003 17, Federal Home Loan Mortgage Corporation Callables 9,011-9, Federal Home Loan Mortgage Corporation Non-Callables 8,005 8, Federal Home Loan Bank Discounts 19,970 19, Federal Home Loan Bank Non-Callables 30,517 21,506 9, Federal National Mortgage Association Non-Callables 34,082 20,034 14, FSA Collateralized Investment Agreement * 14, ,868 $ 227,112 $ 180,174 $ 32,070 $ - $ - $ 14,868 Investment Ratings Moody's S&P US Treasury Notes Aaa AA+ Federal Farm Credit Bank Discounts P-1 A-1+ Federal Farm Credit Bank Non-Callables Aaa AA+ Federal Home Loan Mortgage Corporation Callables Aaa AA+ Federal Home Loan Mortgage Corporation Non-Callables Aaa AA+ Federal Home Loan Bank Discounts P-1 A-1+ Federal Home Loan Bank Non-Callables Aaa AA+ Federal National Mortgage Association Non-Callables Aaa AA+ FSA Collateralized Investment Agreement * A2 AA- * Series 2007A Debt Service Reserve Fund invested through the life of the bond issue, July 1, 2040, with a maximum scheduled withdrawal of $9.5 million due on July 1, As of June 30, 2015, of the $449.4 million held by the Trustee, $190.5 million in cash and cash equivalents was invested in United States Government Money Market Funds, and $258.9 million was invested in short- and long-term investments with entities as indicated in the table below. 54

62 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Investment Maturities (in Years) Fair Value FY 2015 Investment Type (000) Less Than 1 1 to 3 3 to 5 5 to 10 Over 10 US Treasury Notes $ 80,201 $ 16,108 $ 64,093 $ - $ - $ - Federal Farm Credit Bank Discounts 22,022 22, Federal Home Loan Bank Discounts 84,828 58,853 25, FSA Collateralized Investment Agreement * 14, ,868 Federal Home Loan Mortgage Corporation Callables 34,984-34, Federal National Mortgage Association Callables 21,968 10,000 11, $ 258,871 $ 106,983 $ 137,020 $ - $ - $ 14,868 Investment Ratings Moody's S&P US Treasury Notes Aaa AA+ Federal Farm Credit Bank Discounts P-1 A-1+ Federal Home Loan Mortgage Corporation Callables Aaa AA+ Federal Home Loan Bank Discounts P-1 A-1+ Federal National Mortgage Association Callables Aaa AA+ FSA Collateralized Investment Agreement * A2 AA- * Series 2007A Debt Service Reserve Fund invested through the life of the bond issue, July 1, 2040, with a maximum scheduled withdrawal of $9.5 million due on July 1, (g) Fair Value of Combined Investments and Derivative Instruments GASB 72 addresses accounting and financial reporting issues related to fair value measurements of investments and defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." GASB 72 is effective for fiscal years beginning after June 15, 2015, and retroactive for all financial statement periods presented. The determination of fair value is through valuation techniques which should be applied consistently using one or more of three approaches: (1) the market approach, (2) the cost approach, and (3) the income approach. When using one or more of the valuation techniques to determine the fair value of the asset or liability, the desire is to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. GASB 72 provided three levels of inputs. Level 1 inputs are observable using quoted prices in active markets. Level 2 inputs are observable for an asset or liability, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets or identical or similar assets or liabilities not in active markets, inputs other than quoted prices such as interest rates or yield curves observable at commonly quoted intervals, or market-corroborated inputs. Level 3 are unobservable inputs for assets and liabilities. As of June 30, 2016 the investments and derivative instruments were measured at fair value, as provided in the table below. 55

63 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Fair Value of Combined Investments and Derivative Instruments as of June 30, 2016 Fair Value Measurements Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) Investment Type (000) (000) (000) (000) Debt Securities with Clark County Investment Pool U.S. Treasuries $ 223,304 $ 223,304 $ - $ - U.S. Agencies 228,512 11, ,086 - Corporate Obligations 116, ,535 - Money Market Funds 1,953 1, Commercial Paper 16,276-16,276 - Negotiable CD 7,812-7,812 - NV Local Government Invest Pool 5,208 5, Collateralized Mortgage Obligations 3,906-3,906 - Asset Backed Securities 19,531-19,531 - Repurchase Agreements 27,994-27,994 - Subtotal 651, , ,140 - Debt Securities held by Trustee U.S. Treasuries 67,174 11,605-55,569 Federal Farm Credit Bank Discount 26,482 26, Federal Farm Credit Bank Non-Callables 17,003-17,003 - Federal Home Loan Bank Discounts 24,970 24, Federal Home Loan Bank Non-Callables 30,517-30,517 - Federal Home Loan Mortgage Corporation Callables 9,011-9,011 - Federal Home Loan Mortgage Corporation Non-Callabl 8,005-8,005 - Federal National Mortgage Association Non-Callables 34,083-34,083 - Money Market Funds 247, , FSA Collateralized Investment Agreement * 14, ,868 Subtotal 479, ,553 98,619 70,437 Debt Securities Derivative Instruments Derivative Instruments - Assets 35,619-35,619 - Derivative Instruments - Liability (143,266) - (143,266) - Subtotal (107,647) - (107,647) - Total $ 1,022,993 $ 552,444 $ 400,112 $ 70,437 * Fully collateralized guaranteed investment contracts and forward delivery agreements related to bond proceeds. Securities classified at Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities or offer same-day liquidity at a price of par. Securities classified at Level 2 of the fair value hierarchy are generally valued using a matrix pricing technique. Matrix pricing is the process of estimating the market price of a bond based on the quoted prices of more frequently traded comparable bonds. Collateralized investment agreements are classified at Level 3 and are valued at cost because the agreements are not traded and the liquidation values pursuant to the agreements are at cost. State and Local Government Series are also classified at Level 3, as these securities are purchased from the U.S. Department of Treasury through a subscription process and are not traded on the open market but can be redeemed through the Bureau of Fiscal Service by a redemption request. 56

64 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements With the implementation of GASB 72, the derivative instruments are valued at fair value. The fair values of the interest rate derivative instruments were estimated using an independent pricing service. The valuations provided were derived from proprietary models based upon well-recognized principles and estimates about relevant future market conditions. The instruments' expected cash flows are calculated using the zero-coupon discount method, which takes into consideration the prevailing benchmark interest rate environment as well as the specific terms and conditions of a given transaction and which assumes that the current forward rates implied by the benchmark yield curve are the market s best estimate of future spot interest rates. The income approach is then used to obtain the fair value of the instruments by discounting future expected cash flows to a single valuation using a rate of return that takes into account the relative risk of nonperformance associated with the cash flows and the time value of money. This valuation technique is applied consistently across all instruments. Given the observability of inputs that are significant to the entire sets of measurements, the fair values of the instruments are based on inputs categorized as Level 2. 3.) GRANTS RECEIVABLE Grants receivable as of June 30, 2016 and 2015, comprise FAA grants in the amounts of $0.3 million and $20.3 million, respectively. The decline relates to several grant-funded projects ending in FY ) RESTRICTED ASSETS The Master Indenture of Trust requires segregation of certain assets into restricted accounts. The Department has also included Passenger Facility Charges and Jet A Fuel Tax revenue-related assets as restricted assets because these assets have been pledged for capital projects and debt service. Restricted assets reported in the financial statements consist of the following: 57

65 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements June 30, 2016 June 30, 2015 (000) (000) Restricted for capital projects: Cash and investments - PFC and other bond proceeds $ 82,452 $ 88,217 Cash and investments - PFC 49,507 35,816 Accounts receivable - PFC 8,974 8,742 Grant reimbursements receivable ,635 Interest receivable Subtotal restricted for capital projects 141, ,999 Restricted for debt service: Bond funds: Cash and investments - PFC bonds 55,141 54,241 Cash and investments - other bonds 227, ,889 Subtotal restricted for bond funds 282, ,130 Debt service reserves: Cash and investments - PFC bonds 77,797 76,510 Cash and investments - other bonds 92,351 91,871 Subtotal restricted for debt service reserves 170, ,381 Subordinate and other debt coverage reserves: Cash and investments 36,811 36,394 Interest receivable 46 - Other receivable - Jet A Fuel Tax 1,962 1,774 Subtotal restricted for subordinate and other debt coverage reserves 38,819 38,168 Subtotal restricted for debt service 491, ,679 Other restricted assets: Cash and investments - Working capital and contingency 19,833 19,531 Cash and investments - Capital fund 43,498 44,358 Land - Heliport facility 3,718 3,718 Land - Henderson runway 9,300 9,300 Subtotal other restricted assets 76,349 76,907 Total restricted assets $ 709,636 $ 665,585 Restricted assets by class: Total current assets $ 649,680 $ 500,679 Total capital assets 13,018 13,018 Total non-current assets 46, ,888 $ 709,636 $ 665,585 Restricted assets for FY 2016 increased by $44.1 million over FY 2015, due mostly to the use of unrestricted assets to fund the full redemption of the Non-AMT Airport System Subordinate Lien Revenue Bonds. See Note 17, Subsequent Events, for further details. 58

66 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 5.) RETIREMENT PLANS (a) Pension Plan The Department contributes through the County to the State of Nevada Public Employees Retirement System ("System"). The System was established on July 1, 1948, by the Legislature and is governed by the Public Employees Retirement Board, whose seven members are appointed by the Governor. All public employees who meet certain eligibility requirements participate in the System, which is a cost-sharing, multiple employer defined benefit plan. The County does not exercise any control over the System. NRS states that: "Respective participating public employers are not liable for any obligation of the System." The System is administered by Nevada Public Employees Retirement System ("PERS"). As of June 30, 2016 and 2015, the Department had a net pension liability of $142.8 million and $130.3 million, which represents the Department's respective share, 14.8 percent, of the County's net pension liability. This percentage was determined based on the contributions to PERS by the Department in FY 2015 relative to the total contributions to PERS by the County in FY For FYs 2016 and 2015, the Department had, under GASB 68, a pension expense of $16.6 million and $18.1 million, respectively. State of Nevada Public Employees Retirement System PERS issues a publicly available CAFR that includes the pension plan s fiduciary net position, financial statements, and required supplementary information. PERS also issues the Schedule of Employer Allocations, Schedule of Pension Amounts by Employer, and Related Notes. These reports can be obtained by writing to Public Employees Retirement System of Nevada, 693 W. Nye Lane, Carson City, NV , by calling (775) , or through their website at The following information relating to the pension plan for June 30, 2016 and 2015, was based on the measurement dates of June 30, 2015 and 2014, respectively. The information for the measurement date of June 30, 2016, was not available as of June 30, 2016, and, therefore, is not presented. 59

67 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Plan Description PERS administers a cost-sharing, multiple employer, defined benefit public employees retirement system which includes both Regular and Police/Fire members. The System was established by the Nevada Legislature in 1947, effective July 1, The System is administered to provide a reasonable base income to qualified employees who have been employed by a public employer and whose earnings capacities have been removed or substantially impaired by age or disability. Summary of Significant Accounting and Reporting Policies For purposes of measuring the net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement System of Nevada (PERS) and additions to/deductions from the PERS fiduciary net position have been determined on the same basis as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Basis of Accounting Employers participating in PERS cost-sharing, multiple employer defined benefit plans are required to report pension information in their financial statements for fiscal periods beginning on or after June 15, 2014, in accordance with GASB 68. The underlying financial information used to prepare the pension allocation schedules is based on PERS financial statements. PERS financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") that apply to governmental accounting for fiduciary funds. Contributions for employer pay dates that fall within the PERS fiscal years ending June 30, 2015 and 2014, are used as the basis for determining each employer s proportionate share of the collective pension amounts reported in the Schedule of Employer Allocations. The total pension liability is calculated by the PERS actuary. The plan s fiduciary net position is reported in the PERS financial statements, and the net pension liability is disclosed in the PERS notes to the financial statements. 60

68 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Benefits Provided Benefits, as required by statute, are determined by the member's number of years of accredited service at the time of retirement and the member s highest average compensation in any 36 consecutive months, with special provisions for members entering the system on or after January 1, Benefit payments to which participants may be entitled under the System include pension benefits, disability benefits, and survivor benefits. Monthly benefit allowances for members are computed at 2.5 percent for service credits earned prior to July 1, 2001, and 2.67 percent for service credit earned after July 1, For members entering the system on or after January 1, 2010, there is a 2.5 percent multiplier. The System offers several alternatives to the unmodified service retirement allowance which, in general, allows the retired employee to accept a reduced service retirement allowance payable monthly during the employee s life and various optional monthly payments to a named beneficiary after the employee s death. Regular members are eligible for full retirement benefits at age 65 with five years of service, at age 60 with ten years of service, or at any age with thirty years of service. Post-retirement increases are provided by authority of NRS Vesting Regular members are eligible for retirement at age 65 with five years of service, at age 60 with ten years of service, or at any age with thirty years of service. Regular members entering the System on or after January 1, 2010, are eligible for retirement at age 65 with five years of service, or at age 62 with ten years of service, or at any age with thirty years of service. Police/Fire members are eligible for retirement at age 65 with five years of service, at age 55 with ten years of service, at age 50 with twenty years of service, or at any age with twenty-five years of service. Police/Fire members entering the System on or after January 1, 2010, are eligible for retirement at 65 with five years of service, or at age 60 with ten years of service, or at age 50 with twenty years of service, or at any age with thirty years of service. Only service performed in a position as a police officer or firefighter may be counted toward eligibility for retirement as Police/Fire accredited service. The normal ceiling limitation on monthly benefits allowances is 75 percent of average compensation. However, a member who has an effective date of membership before July 1, 1985, is entitled to a benefit of up to 90 percent of average compensation. Both Regular and Police/Fire members become fully vested as to benefits upon completion of five years of service. 61

69 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Contributions The authority for establishing and amending the obligation to make contributions and member contribution rates is set by statute. New hires in agencies which did not elect the Employer-Pay Contribution ("EPC") plan prior to July 1, 1983, have the option of selecting one of two contribution plans. Contributions are shared equally by employer and employee. Employees can take a reduced salary and have contributions made by the EPC or can make contributions by a payroll deduction matched by the employer. The System s basic funding policy provides for periodic contributions at a level pattern of cost as a percentage of salary throughout an employee s working lifetime in order to accumulate sufficient assets to pay benefits when due. The System receives an actuarial valuation on an annual basis indicating the contribution rates required to fund the System on an actuarial reserve basis. Contributions actually made are in accordance with the required rates established by the Nevada Legislature. These statutory rates are increased/decreased pursuant to NRS and The actuary funding method used is the Entry Age Normal Cost Method. It is intended to meet the funding objective and result in a relatively level long-term contributions requirement as a percentage of salary. For the fiscal year ended June 30, 2014 and June 30, 2015, the Statutory Employer/employee matching rate was percent for Regular and percent for Police/Fire. The EPC rate was percent for Regular and percent for Police/Fire. Investment Policy The System s policies which determine the investment portfolio target asset allocation are established by the Board. The asset allocation is reviewed annually and is designed to meet the future risk and return needs of the System. The following is the target asset allocation adopted by the Board as policy as of June 30, 2015: 62

70 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Long-term Geometric Target Expected Real Rate of Asset Class Allocation Return * Domestic Equity 42% 5.50% International Equity 18% 5.75% Domestic Fixed Income 30% 0.25% Private Markets 10% 6.80% * As of June 30, 2015 and 2014, the PERS long-term inflation assumption was 3.5 percent, respectively. Net Pension Liability The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The employer allocation percentage of the net pension liability was based on the total contributions due on wages paid during the measurement period. Each employer s proportion of the net pension liability is based on their combined employer and member contributions relative to the total combined employer and member contributions for all employers for the fiscal years ended June 30, 2015 and Pension Liability Discount Rate Sensitivity The following presents the Department's share, 14.8 percent, of the County s net pension liability as of June 30, 2015 and 2014, calculated using the discount rate of 8.00 percent, as well as what the PERS net pension liability would be if it were calculated using a discount rate that is one percentage point lower (7.00 percent) or one percentage point higher (9.00 percent) than the current discount rate: 1% Decrease in 1% Increase in Discount Rate Discount Rate Discount Rate Fiscal Year (7.00%) (8.00%) (9.00%) 2014 $ 202,632,080 $ 130,300,856 $ 70,175, ,540, ,761,701 80,578,120 63

71 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Pension Plan Fiduciary Net Position Detailed information about the pension plan s fiduciary net position is available in the PERS CAFR, available on the PERS website. Actuarial Assumptions The System s net pension liability was measured as of June 30, 2015 and 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation rate: 3.50% Payroll growth: 5.00%, including inflation Investment rate of return: 8.00% Productivity pay increase: 0.75% Projected salary increases Regular: 4.60% to 9.75%, depending on service Police/Fire: 5.25% to 14.5%, depending on service Rates include inflation and productivity increases Consumer Price Index: 3.50% Other assumptions: Same as those used in the June 30, 2015 and 2014 funding actuarial valuations Actuarial assumptions used in the valuations of June 30, 2015 and 2014, were based on the results of the experience review completed in The discount rate used to measure the total pension liability was 8.00 percent as of June 30, 2015 and The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rate specified in the statute. Based on that assumption, the pension plan s fiduciary net position at June 30, 2015 and 2014, was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability as of June 30, 2015 and

72 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Pension Expense, Deferred Outflows or Resources, and Deferred Inflows of Resources Related to Pensions As of June 30, 2015 and 2014, PERS reported deferred outflows of resources and deferred inflows of resources related to pensions based on the following categories listed below. The amounts presented below represent the Department s respective amounts for the categories as of June 30, 2016 and Category Deferred Outflows Deferred Inflows of Resources of Resources June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 (000) (000) (000) (000) Differences between expected and actual experience * $ - $ - $ 10,738 $ 6,235 Changes in assumptions Net difference between projected and actual earnings on investments - - 7,733 27,369 Changes in proportion and differences between actual contributions and proportionate share of contributions * 2,095 1, Contributions to PERS after measurement date 21,925 19, $ 24,020 $ 20,855 $ 18,965 $ 33,604 *Average of expected remaining services lives: years ** Amortized over 5.0 years. Number of years remaining: years Net deferred outflows (inflows) of resources related to pension liability are projected to be recognized as follows: Future Impact on Pension Fiscal Year (000) 2017 $ (5,426) 2018 (5,426) 2019 (5,426) , (1,516) Thereafter (492) The contributions to PERS after the measurement date are deferred and will be applied against the net pension liability in FY

73 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (b) Other Postemployment Benefits ("OPEB") Plan Information Retirees of the Department may continue insurance coverage through the Clark County Retiree Health Program ("County Plan"), an agent multiple-employer defined benefit plan, if enrolled as an active employee at the time of retirement. Within the County Plan, retirees may choose between the Clark County Self-Funded Group Medical and Dental Benefits Plan ("Self-Funded Plan") and Health Plan of Nevada ("HPN"), a fully insured health maintenance organization plan. Some retired employees are also enrolled in the State program of insurance. This program, the Public Employees Benefits Program ("PEBP"), is an agent multiple-employer, defined benefit plan. Each plan provides medical, dental, prescription, and vision benefits to eligible active and retired employees and beneficiaries. Except for the PEBP, benefit provisions are established and amended through negotiations between the County and the employee union. PEBP benefit provisions are established by the Nevada State Legislature. The Self-Funded Plan is not administered as a qualifying trust or equivalent arrangement. The Self- Funded Plan is included in the Clark County CAFR as an internal service fund, the Self-Funded Group Insurance Fund, as required by NRS. Effective on March 4, 2014, the Board voted to establish the Clark County, Nevada OPEB Trust Fund ("Trust"). This Trust was created pursuant to NRS and is an irrevocable trust fund. The Trust is administered by a three member Board of Trustees appointed by the Board, with each member s term expiring on June 30, Funding to the Trust will be from contributions to the Self-Funded Plan. During FY 2015, the Department deposited $14.9 million to the Trust. No transfers were made during FY The PEBP issues a publicly available financial report that includes financial statements and required supplementary information. The Self-Funded and PEBP reports may be obtained by writing or calling the plans at the following addresses or phone number: Clark County, Nevada P.O. Box S. Grand Central Parkway Las Vegas, NV

74 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Public Employee Benefit Plan 901 South Stewart Street, Suite 1001 Carson City, Nevada (800) Funding Policy and Annual Other Postemployment Benefit Cost For the Self Funded Plan and HPN, contribution requirements of plan members and the employer are established and may be amended through negotiations between the various unions and the governing bodies of the employers. The Department pays approximately 90 percent of premiums for active employee coverage, an average of $7,983 per active employee for the year ended June 30, Retirees pay the entire cost of their premium. Active and retiree loss experience is combined to create a single, blended premium for each level of coverage (member only, member plus spouse, member plus children, or family), as required by State law. This combining of loss experience creates an implicit subsidy to the retirees who would otherwise pay higher premiums if their loss experience were rated separately. The Department is required to pay the PEBP an explicit subsidy, based on years of service, for retirees who have enrolled in this plan. In 2016, retirees were eligible for a subsidy of $319 per month after five years of service and up to $(160) per month after 20 years of service with a Nevada state or local government entity. The subsidy is set by the State Legislature. The annual OPEB cost for each program is calculated based on the annual required contribution ("ARC") of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The Department s annual OPEB cost for the current year and the related information for each plan are as follows: 67

75 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Contribution rates Self-Funded/Health Plan of Nevada (HPN) Actuarially determined, premium sharing determined by union contracts. PEBP Set by State Legislature. Department Implicit subsidy through blending of active and retiree loss experience. $319 per month after 5 years of service up to $(160) per month after 20 years. Plan Members From $338 per month for individual coverage to $1,544 per month for family coverage, depending on plan. From $796 to $2,574, depending on level of coverage and subsidy earned. FY 2016 FY 2015* FY 2016 FY 2015* Annual Required Contribution (ARC) $ 11,379,383 $ 11,502,360 $ 670,713 $ 678,077 Interest on Net OPEB obligation 1,781,704 2,152, , ,911 Adjustment to ARC (2,575,906) (3,247,079) (151,853) (191,418) Annual OPEB Cost 10,585,181 10,408, , ,570 Contributions made (2,079,004) (15,924,681) (166,447) (1,285,004) Increase (decrease) in net OPEB obligation 8,506,177 (5,516,591) 457,446 (671,434) Net OPEB obligation, beginning of FY 46,160,200 52,795,348 4,062,833 3,615,710 OPEB Trust contribution allocation - (1,118,557) - 1,118,557 Net OPEB obligation, end of FY $ 54,666,377 $ 46,160,200 $ 4,520,279 $ 4,062,833 * For FY 2015, there was a misallocation of contributions to the OPEB Trust for PEBP. This corrects the misallocation. The Department s net OPEB obligation is included on the Statements of Net Position under other noncurrent liabilities. The Department s annual OPEB cost, the percentage of annual cost contributed to the plan, and the net OPEB obligations for 2016, 2015, and 2014 were as follows: Annual % of OPEB Net Year-ended OPEB cost cost contribution OPEB obligation Self-funded/HPN June 30, 2014 $ 10,673, % $ 52,795,348 Self-funded/HPN June 30, ,408, % 46,160,200 Self-funded/HPN June 30, ,585, % 54,666,377 PEBP plan June 30, 2014 $ 909, % $ 3,615,710 PEBP plan June 30, , % 4,062,833 PEBP plan June 30, , % 4,520,279 Funded status and funding progress The funded status of the plans as of the most recent actuarial date, July 1, 2014, was as follows: 68

76 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Self-Funded/ Reference HPN PEBP Actuarial accrued liability (a) $ 109,694,274 $ 12,194,347 Funded ratio 0.0% 0.0% Covered payroll (b) $ 79,827,835 $ - Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll (a)/(b) 137.4% N/A* * PEBP no longer has active employees effective September 1, Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions of the employer are subject to continual revision, as actual results are compared to past expectations and new estimates are made about the future. The required schedule of funding progress presented as required supplementary information provides multi-year trend information that shows, in future years, whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Actuarial methods and assumptions Projections of benefits are based on the substantive plans (the plans as understood by the employer and plan members) and include the types of benefits in force at the valuation date and the pattern of sharing benefit costs between the Department and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in the actuarial value of accrued liabilities and the actuarial value of assets. Significant methods and assumptions are as follows: 69

77 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Self-funded HPN PEBP Actuarial v aluation date 7/1/2014 7/1/2014 Actuarial cost method Entry age normal Entry age normal Amortization method Lev el dollar Lev el dollar Remaining amortization period 30 years, open 30 years, open Asset v aluation method No assets in trust No assets in trust Actuarial assumptions: I nv estment rate of return 4.00% 4.00% Projected salary increase N/A N/A Healthcare cost trend 7.0% initial 7.0% initial 5.0% ultimate 5.0% ultimate Inflation rate N/A N/A 6.) CHANGES IN CAPITAL ASSETS The following schedule details the additions, retirements, and transfers of capital assets, as well as the changes in accumulated depreciation, during FY 2016 and FY

78 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Schedule of Changes in Capital Assets as of June 30, 2016 and 2015 Additions Deletions Balance and and Balance July 1, 2015 Reclasses Reclasses June 30, 2016 (000) (000) (000) (000) Capital assets, not being depreciated: Land $ 595,908 $ 1,046 $ - $ 596,954 Avigation easement 332, ,562 Construction in progress 46,095 68,516 (60,167) 54,444 Total capital assets, not being depreciated: 974,560 69,567 (60,167) 983,960 Capital assets, being depreciated: Land Improvements 1,682,445 54,138-1,736,583 Buildings and improvements 3,540, ,541,488 Machinery and equipment 482,691 6,549 (473) 488,767 Furniture and fixtures 48,993 - (191) 48,802 Total capital assets being depreciated: 5,755,032 61,272 (664) 5,815,640 Less accumulated depreciation: Land improvements (803,367) (63,149) - (866,516) Buildings and improvements (861,787) (97,370) - (959,157) Machinery and equipment (274,138) (31,536) 466 (305,208) Furniture and fixtures (23,951) (2,863) 191 (26,623) Total accumulated depreciation (1,963,243) (194,918) 657 (2,157,504) Total capital assets being depreciated, net 3,791,789 (133,646) (7) 3,658,136 Total capital assets, net $ 4,766,349 $ (64,079) $ (60,174) $ 4,642,096 Additions Deletions Balance and and Balance July 1, 2014 Reclasses Reclasses June 30, 2015 (000) (000) (000) (000) Capital assets, not being depreciated: Land $ 595,091 $ 1,771 $ (954) $ 595,908 Avigation easement 332, ,557 Construction in progress 36,513 68,287 (58,705) 46,095 Total capital assets, not being depreciated: 964,146 70,073 (59,659) 974,560 Capital assets, being depreciated: Land Improvements 1,644,920 37,525-1,682,445 Buildings and improvements 3,530,161 10,742-3,540,903 Machinery and equipment 472,908 10,948 (1,165) 482,691 Furniture and fixtures 49,081 - (88) 48,993 Total capital assets being depreciated: 5,697,070 59,215 (1,253) 5,755,032 Less accumulated depreciation: Land improvements (738,922) (64,445) - (803,367) Buildings and improvements (764,435) (97,352) - (861,787) Machinery and equipment (244,121) (31,181) 1,164 (274,138) Furniture and fixtures (21,165) (2,874) 88 (23,951) Total accumulated depreciation (1,768,643) (195,852) 1,252 (1,963,243) Total capital assets being depreciated, net 3,928,427 (136,637) (1) 3,791,789 Total capital assets, net $ 4,892,573 $ (66,564) $ (59,660) $ 4,766,349 71

79 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 7.) NON-CURRENT PREPAID EXPENSES Non-current prepaid expenses as of June 30, 2016 and 2015 follow. Non-current Prepaid Expenses As of June 30, 2016 and 2015 June 30, 2016 June 30, 2015 Prepaid Bond Insurance Premium (000) (000) 2006 Series A $ 94 $ Series A-1 PFC Series A-2 PFC Series A Series A Series A PFC 1,319 1, Series A Series A Senior Series C PFC Total prepaid bond insurance premium 2,483 2,748 Unamortized Consolidated Rental Car Facility lease cost 2,115 4,935 Total non-current prepaid expenses $ 4,598 $ 7,683 The unamortized Consolidated Rental Car Facility lease cost consists of amounts due from the signatory airlines on June 30, 2007, that were forgiven in FY 2008 in exchange for the net revenues (excluding land rent) from the Consolidated Rental Car Facility during its 10-year lease term. 8.) DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources consist of deferrals associated with pension accounting established under GASB 68, the fair value of hedging derivative instruments for FY 2016 under GASB 72 and the mark-to-market value of hedging derivative instruments for FY 2015 under GASB 53, and other deferred costs related to debt. Deferred outflows of resources related to the Department's pension plan are discussed in detail in Note 5, "Retirement Plans." 72

80 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Deferred outflows of resources also consist of hedging derivative instruments. Under the provisions of GASB, the Department is required to record the changes in the fair value or the mark-to-market value of its interest rate swaps serving as hedging derivatives at the end of the each fiscal year. With the implementation of GASB 72, the interest rate swaps that were hedging derivative instruments as of June 30, 2016, now are stated at fair value. As of June 30, 2016, the deferred outflows of resources associated with hedging derivative instruments had a fair value of $75.8 million. The information required to restate the interest rate swaps that were hedging derivative instruments at fair value as of June 30, 2015, as required under GASB 72, was not available; therefore, the interest rate swaps are presented at their mark-to-market value for FY 2015, based on the provisions of GASB 53. As of June 30, 2015, the deferred outflows of resources associated with hedging derivative instruments had a mark-tomarket value of $52.3 million. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for additional details. Also included in deferred outflows of resources are other deferred costs, which comprise unamortized losses on bond refundings and deferred losses on imputed debt resulting from the revaluation of interest rate swaps pursuant to the refunding of hedged bonds. The unamortized losses on bond refundings are $31.0 million as of June 30, 2016, and $29.9 million as of June 30, The deferred losses on imputed debt are $11.8 million as of June 30, 2016, and $13.7 million as of June 30, The following schedule details these other deferred costs. Other Deferred Costs As of June 30, 2016 and 2015 June 30, 2016 June 30, 2015 Unamortized Losses on Refunded Bonds (000) (000) 2008 Series A-2 $ 22 $ Series A General Obligation Series A PFC Series B Series C 2,580 3, Series D-2 11,932 12, Series D Series F-1 PFC Series F-2 PFC 2,186 2, Series B Series B Series B PFC 2,911 3, Series B General Obligation Series A-2 3,466 3, Series C PFC 4,960 - Total unamortized losses on refunded bonds 30,962 29,914 Deferred losses on imputed debt 11,769 13,731 Total other deferred costs $ 42,731 $ 43,645 73

81 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 9.) LONG-TERM DEBT Long-term Debt as of June 30, 2016 (a) Summary of Long-Term Debt Transactions as of June 30, 2016 and 2015 Balance Balance June 30, June 30, 2015 Additions Refunding Pay downs 2016 (000) (000) (000) (000) (000) SENIOR LIEN BONDS: 2008 Series E $ 11,395 $ - $ - $ 7,570 $ 3, Series B Build America Bonds 300, , Series C Build America Bonds 454, , Series D 132, , , Series A 59, ,915 Sub-Total Senior Lien Bonds 958, , ,045 SUBORDINATE LIEN BONDS: 2006 Series A 31, , Series A-1 103, , , Series A-2 56, , Series A-2 50, ,450 * 2008 Series B-2 50, ,460 * 2008 Series C-1 122, ,900 * 2008 Series C-2 71, ,350 * 2008 Series C-3 71, ,225 * 2008 Series D-1 58, ,920 * 2008 Series D-2A 100, ,000 * 2008 Series D-2B 99, ,605 * 2008 Series D-3 122, ,400 * 2009 Series C 168, , Series B 350, , Series B-1 100, ,100 98,900 * 2011 Series B-2 100, ,085 98,915 * 2014 Series A-1 85, ,760 74, Series A-2 221, ,870 Sub-Total Subordinate Lien Bonds 1,964, ,580 1,946,225 PFC BONDS: 2007 Series A-1 108, , , Series A-2 105, , Series A 65, ,140 50, Series A 449, , Series F-1 46, ,620 31, Series F-2 100, ,000 * 2012 Series B 64, , Series C - 98, ,965 Sub-Total PFC Bonds 939,600 98, ,475 32, ,650 JUNIOR SUBORDINATE LIEN DEBT AND JET A BONDS: 2013 Jet A Fuel Tax Series A 70, , Notes Series C-1 174, , Notes Series B 103, , Notes Series B - 165, ,125 Sub-Total Third Lien Bonds and Notes 348, , , ,455 GENERAL OBLIGATION BONDS: 2008 General Obligation Series A 43, ,105 * 2013 General Obligation Series B 32, ,915 Sub-Total General Obligation Bonds 76, ,020 Total principal outstanding 4,287, , ,760 68,050 4,203,395 Add: Unamortized premiums 84,289 88,169 Imputed debt from termination of hedges 13,731 11,769 Less: Current portion of long-term debt 83, ,930 Unamortized discount 20,460 19,181 Total long-term debt outstanding $ 4,280,955 $ 4,158,222 * Variable Rate Debt Obligations Fixed Rate Bonds Bond Anticipation Notes 74

82 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Long-term Debt as of June 30, 2015 Balance Balance June 30, June 30, 2014 Additions Refunding Pay downs 2015 (000) (000) (000) (000) (000) SENIOR LIEN BONDS: 2005 Series A $ 69,590 $ - $ 69,590 $ - $ Series E 19, ,155 11, Series B Build America Bonds 300, , Series C Build America Bonds 454, , Series D 132, , Series A - 59, ,915 Sub-Total Senior Lien Bonds 975,905 59,915 69,590 8, ,075 SUBORDINATE LIEN BONDS: 2006 Series A 31, , Series A-1 117, , , Series A-2 56, , Series A-2 50, ,000 * 2008 Series B-2 50, ,000 * 2008 Series C-1 122, ,900 * 2008 Series C-2 71, ,350 * 2008 Series C-3 71, ,350 * 2008 Series D-1 58, ,920 * 2008 Series D-2A 100, ,000 * 2008 Series D-2B 99, ,605 * 2008 Series D-3 122, ,865 * 2009 Series C 168, , Series B 350, , Series B-1 100, ,000 * 2011 Series B-2 100, ,000 * 2014 Series A-1 95, ,000 85, Series A-2 221, ,870 Sub-Total Subordinate Lien Bonds 1,988, ,030 1,964,805 PFC BONDS: 2007 Series A-1 109, , , Series A-2 105, , Series A 79, ,420 65, Series A 449, , Series F-1 61, ,875 46, Series F-2 100, ,000 * 2012 Series B 64, ,360 Sub-Total PFC Bonds 970, , ,600 JUNIOR SUBORDINATE LIEN DEBT AND JET A BONDS: 2013 Jet A Fuel Tax Series A 70, , Notes Series C-1 174, , Notes Series C-2 118, , Notes Series B - 103, ,365 Sub-Total Third Lien Bonds and Notes 363, , , ,615 GENERAL OBLIGATION BONDS: 2008 General Obligation Series A 43, ,105 * 2013 General Obligation Series B 32, ,915 Sub-Total General Obligation Bonds 76, ,020 Total principal outstanding 4,374, , ,900 63,100 4,287,115 Add: Unamortized premiums 77,960 84,289 Imputed debt from termination of hedges 15,692 13,731 Less: Current portion of long-term debt 78,045 83,720 Unamortized discount 21,965 20,460 Total long-term debt outstanding $ 4,368,477 $ 4,280,955 * Variable Rate Debt Obligations Fixed Rate Bonds Bond Anticipation Notes 75

83 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (b) Senior Lien Bonds The issuance of senior lien bonds is authorized pursuant to the Nevada Municipal Airports Act (NRS et seq.), the Nevada Local Government Securities Law (NRS et seq.), and the Nevada Registration of Public Securities Law (NRS et seq.). All senior lien bonds are issued in accordance with the Master Indenture of Trust dated May 1, 2003, ("Indenture") between Clark County and The Bank of New York Mellon Trust Company, N.A. Senior lien bonds are secured by and are payable from the net revenues of the Airport System after the payment of all Airport System operating and maintenance expenses. Pursuant to the Indenture, the Department has covenanted to fix, charge, and collect rentals, fees, and charges for the use of the Airport System such that, in any fiscal year, the gross revenues, together with any other available funds, will at all times be at least sufficient (1) to provide for the payment of all Airport System operation and maintenance expenses in the fiscal year and (2) to provide an amount not less than 125 percent of the aggregate debt service requirement ("Senior Lien Coverage") for all the senior lien bonds then outstanding for the fiscal year. The actual senior lien coverage ratios (the ratio of total revenue less operating expenses to debt service) for FY 2016 and FY 2015 were 4.52 and 4.10, respectively. As of June 30, 2016, the Department had $941.0 million in outstanding senior lien bonds. On April 30, 2015, the County issued $59.9 million in fixed rate Airport System Revenue Bonds Senior Series 2015A ("Series 2015A Bonds") at a premium of $8.6 million. The proceeds, along with $3.4 million in excess debt service reserve from the Series 2008E Airport System Senior Lien Revenue Bonds, were used to refund the Airport System Revenue Bonds Senior Series 2005A, purchase a reserve fund policy, and pay for certain costs of issuance. (c) Subordinate Lien Bonds The issuance of subordinate lien bonds is authorized pursuant to the Nevada Municipal Airports Act (NRS et seq.), the Nevada Local Government Securities Law (NRS et seq.), and the Nevada Registration of Public Securities Law (NRS et seq.). All subordinate lien bonds are issued in accordance with the Indenture between Clark County and The Bank of New York Mellon Trust Company, N.A. 76

84 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Subordinate lien bonds are secured by and are payable from the net revenues of the Airport System after the payment of all Airport System operating and maintenance expenses and after the payment of all senior lien debt service. Pursuant to the Indenture, the Department has covenanted to fix, charge, and collect rentals, fees, and charges for the use of the Airport System such that, in any fiscal year, the gross revenues, together with any other available funds, will at all times be at least sufficient (1) to provide for the payment of all Airport System operation and maintenance expenses in such fiscal year and (2) to provide an amount not less than 110 percent of the aggregate debt service requirement ("Subordinate Lien Coverage") for all the senior lien and subordinate lien bonds then outstanding for the fiscal year. The actual subordinate lien coverage ratios for FY 2016 and 2015 were 1.65 and 1.70, respectively. As of June 30, 2016, the Department had $1,946.2 million in outstanding subordinate lien bonds. On February 18, 2015, the Irrevocable Direct-Pay Letters of Credit for the Series 2008 A-2 Bonds and Series 2008 B-2 Bonds were extended through February 15, Also on February 18, 2015, a reoffering occurred on the Series 2008 C-2 and 2008 C-3 Bonds. Concurrent with this reoffering, the Irrevocable Direct-Pay Letters of Credit for the 2008 C-2 and 2008 C- 3 Bonds were replaced, with the new Irrevocable Direct-Pay Letters of Credit having a scheduled termination date of February 15, (d) PFC Bonds The issuance of PFC bonds is authorized pursuant to the Nevada Municipal Airports Act (NRS et seq.), the Nevada Local Government Securities Law (NRS et seq.), and the Nevada Registration of Public Securities Law (NRS et seq.). All PFC bonds are issued in accordance with the Indenture between Clark County and The Bank of New York Mellon Trust Company, N.A. The PFC bonds are secured by a pledge of and lien upon pledged PFC revenues derived from a $4.50 PFC which has been imposed by the County under authorization of the Federal Aviation Act. In addition, the PFC bonds are secured by and are payable from a claim on the net revenues of the Airport System on parity with that of the subordinate lien bonds and junior to that of the senior lien bonds. For FY 2008, the Department collected a PFC of $4.00 per qualifying enplaned passenger. Effective October 1, 2008, the PFC rate increased to $4.50 per qualifying enplaned passenger. As of June 30, 2016, the Department had $900.7 million in outstanding PFC pledged bonds. 77

85 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements In FY 2016 and FY 2015, the Department earned $89.6 million and $83.9 million, respectively, in PFC revenues and earned $1,858.6 thousand and $754.3 thousand, again respectively, in PFC interest income. In FY 2016 and FY 2015, the Department pledged $76.0 million and $76.2 million, respectively, toward debt service payments associated with outstanding PFC bonds and pledged no monies toward debt service payments on certain subordinate lien bonds that were used to fund PFC projects approved by the FAA. No coverage is required for the PFC bonds. On July 22, 2015, the Department issued $ million of the Series 2015C Passenger Facility Charge (PFC) Non-AMT Refunding Revenue Bonds ("Series 2015C Bonds"). The Department used the issuance proceeds to execute an advance refunding of the Series 2007 A-2 PFC Non-AMT Bonds, to purchase a reserve fund surety policy for the Series 2015C Bonds, and to pay for certain costs of issuance. (e) Junior Subordinate Lien Debt and Jet A Bonds The junior subordinate lien debt and Jet A bonds comprise Jet A Fuel Tax bonds and bond anticipation notes issued pursuant to the Nevada Municipal Airports Act (NRS et seq.), the Nevada Local Government Securities Law (NRS et seq.), and the Nevada Registration of Public Securities Law (NRS et seq.). These bonds and notes are issued in accordance with the Indenture between Clark County and The Bank of New York Mellon Trust Company, N.A. The junior subordinate lien debt and Jet A bonds are on parity with each other and are secured by and payable from the net revenues of the Airport System after the payment of all Airport System operating and maintenance expenses and after the payment of all senior lien debt service, subordinate lien debt service, and PFC lien debt service. These bonds and notes do not constitute debt of Clark County within the meaning of any constitutional or statutory provisions or limitations, and neither the full faith and credit nor the taxing power of the County is pledged to the payment thereof. As of June 30, 2016, the Department had $71.0 million in outstanding Jet A bonds and $268.5 million in outstanding bond anticipation notes, for a total of $339.5 million in total outstanding third lien debt. The Jet A Bonds are payable from and secured by a pledge of and lien upon the proceeds of a threecent-per-gallon tax collected by the County on jet aviation fuel sold, distributed, or used in the County. Shortages in debt service from fuel tax collections are funded with Airport System revenues. As of June 30, 2016, there was no shortage of Jet A Fuel Tax revenues to cover the Jet A Bonds debt service. 78

86 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements On July 1, 2015, the County issued the Series 2015B Airport Junior Subordinate Lien Revenue Notes ("Series 2015B Notes") for $ million. The proceeds were used to satisfy the outstanding principal and interest balance of the 2013 C-1 Airport System Junior Subordinate Lien Notes and to pay certain issuance costs. On July 1, 2014, the Department issued the $103.4 million Series 2014B Junior Subordinate Lien Revenue Notes ("Series 2014B Notes") to refund the Series 2013 C-2 Junior Subordinate Lien Revenue Notes ("Series 2013 C-2 Notes") and to pay certain costs of issuance thereof. The Series 2014B Notes have a stated interest rate of 5.00 percent, a yield of 1.14 percent, and a maturity date of July 1, (f) General Obligation Bonds The general obligation bonds were issued pursuant to the Nevada Municipal Airports Act (NRS et seq.), the Nevada Local Government Securities Law (NRS et seq.), and the Nevada Registration of Public Securities Law (NRS et seq.). All general obligation bonds are issued in accordance with the Indenture between Clark County and The Bank of New York Mellon Trust Company, N.A. These bonds constitute direct and general obligations of the County. The full faith and credit of the County is pledged for the payment of principal and interest subject to Nevada constitutional and statutory limitations on the aggregate amount of ad valorem taxes and to certain other limitations on the amount of ad valorem taxes the County may levy. The general obligation bonds are secured by and payable from a claim on the net revenues of the Airport System after the payment of all Airport System operating and maintenance expenses and after the payment of all senior lien debt service, subordinate lien debt service, PFC lien debt service, and junior subordinate lien and Jet A bonds lien debt service. Pursuant to the Indenture, the County has covenanted to fix, charge, and collect rentals, fees, and charges for the use of the Airport System sufficient to pay debt service on the senior lien bonds, the subordinate lien bonds, the general obligation (limited tax) Airport bonds, the PFC bonds, and the junior subordinate lien debt and Jet A bonds. As of June 30, 2016, the Department had $76.0 million in outstanding general obligation bonds. On February 18, 2015, the County elected to effectuate a mandatory tender for purchase of all Series 2008A General Obligation Bonds pursuant to the termination and replacement of the existing Standby Bond Purchase Agreement securing these bonds. The new Standby Bond Purchase Agreement has a scheduled termination date of February 15,

87 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (g) Arbitrage Rebate Requirement Tax-exempt bond arbitrage involves the investment of governmental bond proceeds which are derived from the sale of tax-exempt obligations in higher yielding taxable securities that generate a profit. The Tax Reform Act of 1986 imposes arbitrage restrictions on 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. During FY 2016 and FY 2015, the Department did not make any arbitrage payments and is current on all required arbitrage payments. As of June 30, 2016 and 2015, the Department estimated its potential arbitrage rebate liability and accrued $542.6 thousand and $393.8 thousand, respectively, to cover that estimated liability. (h) Description of Bond Series Issued Senior Lien Bonds Series 2005A: In September 2005, the County issued $69.6 million in Non-AMT fixed rate Airport System Senior Lien Revenue Bonds. $25.9 million of these term bonds had scheduled maturities through 2037 and had a stated interest rate of 4.50 percent with a yield of 4.62 percent. The remaining $43.7 million of the term bonds were scheduled to mature in 2040 and had a stated interest rate of 5.00 percent with a yield of 4.42 percent. Interest payments were due on January 1 and July 1 of each year, and scheduled principal payments were due on July 1. The 2005A Bonds were issued to finance the cost of certain capital improvements to the Airport System, to purchase a reserve fund insurance policy, and to pay certain costs of issuance. The bonds were insured by Ambac Assurance Corp ("Ambac"). No debt service reserve was required. On April 30, 2015, the Series 2005A Bonds were refunded by the Airport System Revenue Bonds Senior Series 2015A. 80

88 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2008E: On May 15, 2008, the County issued $61.4 million in Non-AMT fixed rate Airport System Senior Lien Revenue Bonds. The bonds mature in The stated interest rates range from 4.00 to 5.00 percent, and the yields range from 2.33 to 4.01 percent. Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The 2008E Bonds were issued for the purpose of refunding a portion of the outstanding Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds, Series 1998A, to fund a deposit to the reserve fund for the Series 2008E Bonds, and to pay certain costs of issuance. The bonds are uninsured. Series 2009B: On September 16, 2009, the Department became the first airport in the nation to issue fixed rate Build America Bonds under the provisions of the American Recovery and Reinvestment Act of 2009 ("ARRA") by issuing the Series 2009B Taxable Direct Payment Build America Bonds in the amount of $300.0 million. The interest on these bonds is not excluded from gross income for the purpose of federal income taxation. Under the provisions of ARRA, the Department is to receive, on or about the date of each interest payment, a cash subsidy payment from the United States Treasury equal to 35 percent of the interest payable on the Series 2009B Bonds. The Series 2009B Bonds have a fixed interest rate of 6.88 percent; however when the 35 percent rebate is factored in, the effective interest rate is 4.47 percent. The bonds have staggered scheduled maturities through Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued to fund height restriction settlements and the construction of Terminal 3 ("T3"). No debt service reserve fund was required, and the bonds were not insured. The U.S. Office of Management and Budget reported to the U.S. Congress on the sequestration of federal funds for federal fiscal years 2016 and As part of the federal sequestration, the subsidy payment for Build America Bonds was reduced. For the 2009B Bonds, the reductions amounted to $491.3 thousand and $527.4 thousand in the course of FY 2016 and FY 2015, respectively. 81

89 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2010C: On February 9, 2010, the County issued $454.3 million of fixed rate Taxable Direct Payment Build America Bonds under the provisions of the ARRA. The interest on these bonds is not excluded from gross income for the purpose of federal income taxation. Under the provisions of ARRA, the Department is to receive, on or about the date of each interest payment, a cash subsidy payment from the United States Treasury equal to 35 percent of the interest payable on the Series 2010C Bonds. The Series 2010C Bonds have an interest rate of 6.82 percent; however, when the 35 percent rebate is factored in, the effective interest rate is 4.43 percent. The bonds have staggered scheduled maturities through Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued to fund the construction of T3. No debt service reserve fund was required, and the bonds were not insured. The U.S. Office of Management and Budget reported to the U.S. Congress on the sequestration of federal funds for federal fiscal years 2016 and As part of the federal sequestration, the subsidy payment for Build America Bonds was reduced. For the 2010C Bonds, the reductions amounted to $737.4 thousand and $791.6 thousand in the course of FY 2016 and FY 2015, respectively. Series 2010D: On February 9, 2010, the County issued $132.5 million of fixed rate Senior Lien Non-AMT Private Activity Airport System Revenue Bonds to finance a portion of the T3 project and to pay certain issuance costs. The bonds have stated interest rates between 3.00 percent and 5.00 percent, and the yields range from 2.50 percent to 4.37 percent. The bonds mature in Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were uninsured, and no debt service reserve fund is required. Series 2015A: On April 30, 2015, the County issued $59.9 million in fixed rate Series 2015A Bonds at a premium of $8.6 million. The stated interest rate on the bonds is 5.00 percent, and the yield is 3.33 percent. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The proceeds, along with $3.4 million in excess debt service reserve from the Series 2008E Bonds, were used to refund the Airport System Revenue Bonds Senior Series 2005A Bonds, to purchase a reserve fund policy, and to pay for certain costs of issuance. This refunding resulted in a net present value savings of $8.0 million and a gain on refunding of $1.1 million. The reserve fund policy was issued by Build America Mutual Assurance Company. 82

90 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Subordinate Lien Bonds Series 2006A: In August 2006, the County issued $100.0 million in fixed rate Non-AMT Airport System Subordinate Lien Revenue Bonds. The bonds had fixed interest rates ranging from 4.00 percent to 5.00 percent, and the yields vary from 3.58 to 4.70 percent. The 2006A Bonds had staggered scheduled maturities through July 1, Interest payments were due on January 1 and July 1 of each year, and scheduled principal payments were due on July 1. The 2006A Bond proceeds were used to finance certain runway and apron improvements at the Airport, to fund a debt service reserve, and to pay certain issuance costs. The bonds were insured by Ambac. On July 1, 2016, the outstanding principal balance and interest due on these bonds was called for full redemption. See Note 17, "Subsequent Events," for further details. Series 2007 A-1 and A-2: In May 2007, the County issued $206.7 million in fixed rate Airport System Subordinate Lien Revenue Bonds, $150.4 million as the 2007 A-1 AMT Bonds and $56.3 million as the 2007 A-2 Non-AMT Bonds. Both bonds have a fixed interest rate of 5.00 percent, and the yields range from 3.96 to 4.43 percent. The 2007 A-1 Bond have staggered scheduled maturities through July 1, 2027, and the 2007 A-2 Bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The 2007A Bond proceeds were used to finance the early civil package associated with the T3 project, to fund a debt service reserve, and to pay certain issuance costs. The bonds are insured by Ambac. 83

91 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2008 A-2 and B-2: In June 2008, the County issued $300.0 million in AMT weekly variable rate debt obligations. In particular, the Series 2008A and 2008B Bonds were issued to refund the outstanding Clark County, Nevada, Airport System Junior Subordinate Lien Revenue Notes Series 2006 B-1 and to pay certain costs of issuance. The 2008A and B Series consisted of the Series 2008 A-1 Bonds ($100.0 million), the Series 2008 A-2 Bonds ($50.0 million), the Series 2008 B-1 Bonds ($100.0 million), and the Series 2008 B-2 Bonds ($50.0 million). In August 2011, the Series 2008 A-1 Bonds were refunded by the Series 2011 B-1 Bonds, and the Series 2008 B-1 Bonds were refunded by the Series 2011 B-2 Bonds. Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The Series 2008 A-2 and B-2 Bonds mature on July 1, The Standby Bond Purchase Agreement for the Series 2008 A-2 and B-2 Bonds had a term through On February 20, 2013, the County elected to effect a mandatory tender for purchase of the Series 2008 A-2 and B-2 Bonds. On this date, the existing Standby Bond Purchase Agreement securing the tender for purchase of these bonds was terminated, and letters of credit securing the payment of the principal and interest on these bonds whenever any amount is payable on these bonds were issued. On February 18, 2015, the Letters of Credit for the Series 2008 A-2 and Series 2008 B-2 were extended through February 15, Series 2008C, 2008 D-1, and 2008 D-2: In March 2008, the County issued $524.5 million in weekly variable rate debt obligations, comprising $266.0 million in AMT debt and $258.5 in Non-AMT debt. The Series 2008C, 2008 D-1, and 2008 D-2 Bonds were issued for the purpose of paying the cost of issuance and for the purpose of refunding the outstanding Clark County, Nevada Adjustable Rate Airport System Subordinate Lien Revenue Bonds, Series 2005B; the outstanding Clark County, Nevada Airport System Subordinate Lien Revenue Bonds, Series 2005 C-1A and Series 2005 C-1B, Series 2005 C-2, and Series 2005 C-3; the outstanding Clark County, Nevada Airport System Subordinate Lien Revenue Bonds, Series 2005 D-1, Series 2005 D-2, and Series 2005 D-3; and the outstanding Clark County, Nevada Airport System Subordinate Lien Revenue Bonds, Series 2005 E-1, Series 2005 E-2, and Series 2005 E-3. Final maturity for the 2008 C-1 Bonds issue is July 1, 2040; final maturities for the 2008 C-2 and C-3 Bonds are July 1, 2029; final maturity for the 2008 D- 1 Bond is July 1, 2036; and final maturity for the for the 2008 D-2 Bonds is July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. 84

92 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements On March 18, 2011, a reoffering occurred on the Series 2008 C-1, 2008 D-1, and 2008 D-2 Bonds. Concurrent with this reoffering, the Letters of Credit for the Series 2008 C-1, 2008 D-1, and 2008 D-2 Bonds were replaced, and the new Letters of Credit were set to expire on March 17, Also, as a result of the reoffering, the 2008 D-2 Bond was split into the 2008 D-2A and 2008 D-2B Bonds with $100.0 and $99.6 million in principal value, respectively. In FY 2014, the Series 2008 C-1 Letter of Credit was extended until December 11, On January 1, 2014, a reoffering occurred on the Series 2008 D-1 and 2008 D-2 Bonds. Concurrent with this reoffering, the Letters of Credit for the Series 2008 D-1 and 2008 D-2 Bonds were replaced. The new Letters of Credit expire on January 27, 2017, and the remarketing agreements pertaining to these bonds were also replaced. The Letters of Credit for the 2008 C-2 and 2008 C-3 Bonds had a term effective until March 17, On February 18, 2015, a reoffering occurred on the Series 2008 C-2 and 2008 C-3 Bonds. Concurrent with this reoffering, the Letters of Credit for the 2008 C-2 and 2008 C-3 Bonds were replaced with Irrevocable Direct-Pay Letters of Credit that have a scheduled termination date of February 15, Series 2008 D-3: In March, 2008, the County issued $122.9 million in Non-AMT weekly variable rate debt obligations. The Series 2008 D-3 Bonds were issued for the purpose of refunding the outstanding Clark County, Nevada, 2001C Bonds. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. On March 18, 2011, a reoffering occurred on the series 2008 D-3 Bonds. Concurrent with this reoffering, the Letter of Credit for the 2008 D-3 was replaced. The new Letter of Credit associated with the 2008 D- 3 Bonds had a term through 2015, but the term was extended to November 4, On July 8, 2016, the Letter of Credit was extended through July 8, See Note 17, "Subsequent Events," for further details. Series 2009C: On September 16, 2009, the County issued $168.5 million of fixed rate Non-AMT, Private Activity Airport System Subordinate Lien Revenue Bonds. The bonds have an interest rate of 5.00 percent, and the yield varies from 4.12 to 4.45 percent. The bonds have staggered scheduled maturities through July 1, 2026, and are insured by Financial Security Assurance Inc. Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued to pay for the construction costs of a portion of the T3 project, to fund a capitalized interest account, to pay certain issuance costs, and to purchase a reserve fund surety policy. 85

93 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2010B: On January 22, 2010, the County issued $350.0 million of fixed rate Non-AMT Private Activity Airport System Subordinate Lien Revenue Bonds. The bonds bear stated interest rates from 5.00 percent to 5.75 percent with yields that vary from to 5.35 percent. The bonds have staggered scheduled maturities through Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued to pay for a portion of the T3 project, to fund capitalized interest during construction, to pay certain issuance costs, and to make a cash deposit in the debt service reserve fund. The bonds were not insured. Series 2011B: In August 2011, the County issued $200.0 million in AMT weekly variable rate debt obligations. The Series 2011 B-1 Bonds and the Series 2011 B-2 Bonds each were issued for $100.0 million in principal to refund the outstanding Clark County, Nevada, Airport System Junior Subordinate Lien Revenue Bonds, Series 2008 A-1 Bonds and 2008 B-1 Bonds, each of which had been issued for $100.0 million in principal. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The Irrevocable Direct-Pay Letter of Credit for the 2011 B-1 Bonds carried a term through 2014, but was extended until March 17, The Irrevocable Direct-Pay Letter of Credit for the 2011 B-2 Bonds had a term through 2014, but was extended until December 20, Series 2014A: On April 8, 2014, the Department issued the Series 2014 A-1 (AMT) Bonds and the Series 2014 A-2 Bonds for $96.0 million and $221.9 million with premiums of $9.9 million and $11.5 million, respectively. The Series 2014 A-1 Bonds bear stated interest rates from 4.00 percent to 5.00 percent, with yields that vary from 0.14 percent to 3.34 percent. These bonds have staggered scheduled maturities through 2024 with the first payment due July 1, The Series 2014 A-2 Bonds bear stated interest rates from 4.00 percent to 5.00 percent, with yields that vary from 3.26 percent to 4.43 percent. These bonds have staggered scheduled maturities starting in July 1, 2025 through Interest payments for both series are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The 2014 A-1 and 2014 A-2 Bonds refunded the 2004 A-1 and 2004 A-2 Bonds, respectively. The refunding of the 2004 A-1 resulted in a gain on refunding of $2.7 million, while the refunding of the 2004 A-2 resulted in a loss on refunding of $4.0 million. The refunding of the 2004 A-1 and 2004 A-2 Series each provided a net present value savings of $13.6 million and $18.5 million, respectively. In addition to refunding the Series 2004A Bonds, the 2014 A-1 and A-2 Bonds were issued to fund debt service reserves, to pay bond issuance costs, and to pay the bond insurance premium for the Series 2014 A-2 Bond scheduled to mature on July 1,

94 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Passenger Facility Charge Revenue Bonds Series 2007A: In April 2007, the County issued $219.0 million of fixed rate Airport Passenger Facility Charge Revenue Bonds, Series 2007 A-1 AMT and 2007 A-2 Non-AMT, in the amounts of $113.5 million and $105.5 million, respectively. The bond proceeds were being used to reimburse the Department for certain capital improvements at the Airport, to fund a debt service reserve, and to pay for bond issuance costs. The bonds have interest rates in the range of 4.00 to 5.00 percent with yields that vary from 4.02 to 4.52 percent. The 2007 A-1 Bonds have staggered scheduled maturities through July 1, The 2007 A-2 Bonds had staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds are insured by Ambac. On July 22, 2015, the Series 2007A-2 Bonds were refunded by the Series 2015C Bonds. Series 2008A: In June 2008, the County issued $115.9 million of fixed rate Non-AMT Airport Passenger Facility Charge Revenue Bonds, Series A. The bonds have interest rates of 5.00 to 5.25 percent and yields ranging from 3.06 to 4.52 percent. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued for the purpose of refunding a portion of the Non-AMT Airport Passenger Facility Charge Revenue Bonds Series 1998A and to pay for certain costs of issuance. The bonds are not insured but have a debt service reserve requirement, which was properly funded upon the refunding of the 1998A PFC Bonds with 2012 Passenger Facility Charge Refunding Revenue Bonds. Series 2010A: On January 22, 2010, the County issued $450.0 million of fixed rate Non-AMT Private Activity Passenger Facility Charge Revenue Bonds Series 2010A. The bonds interest rates range between 3.00 percent and percent, and the yields vary from 2.02 to 5.42 percent. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued to finance the costs of the T3 project and to make a deposit in the debt service reserve fund, and to pay certain issuance costs. A portion of the Series 2010A Bonds in the amount of $158.7 million is insured by Assured Guaranty Municipal Corp. 87

95 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2010F: On November 4, 2010, the County issued $204.2 million of Non-AMT Private Activity Passenger Facility Charge Refunding Revenue Bonds, comprising the 2010 F-1 Bonds with a principal of $104.2 million and the 2010 F-2 Bonds with a principal of $100.0 million. The bonds were issued at a premium of $9.8 million and resulted in a loss on refunding of $10.8 million. The 2010 F-1 Bonds have stated fixed interest rates ranging between 2.00 and 5.00 percent, and the 2010 F-2 Bonds have a weekly variable rate; yields vary from 0.54 to 2.63 percent. The F-1 series have staggered scheduled maturities through July 1, 2017, and the F-2 series matures on July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued for the purpose of refunding the 2005A PFC Bonds and to pay for certain costs of their issuance. This refunding resulted in a net present value savings of $2.4 million. Upon issuance of the 2010 F-2 Bonds, an Irrevocable Direct- Pay Letter of Credit was established with a term through November 4, 2013, but the term was extended until August 9, On July 8, 2016, this Letter of Credit was extended through August 7, See Note 17, "Subsequent Events," for further details. Series 2012B: On July 1, 2012, the County issued $64.4 million of Non-AMT Airport Passenger Facility Charge Refunding Revenue Bonds ("Series 2012B") at a premium of $9.0 million. The interest rate on the bonds is fixed at 5.00 percent. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The Series 2012B Bonds refunded $81.7 million of the Series 1998A PFC Bonds. This refunding provided a future cash flow savings of $10.2 million, with a net present value savings of $5.5 million. 88

96 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2015C: On July 22, 2015, the Department issued the Passenger Facility Charge Refunding Revenue Bonds 2015 Series C ("Series 2015C Bonds") for $99.0 million. The Department used the issuance proceeds to execute an advance refunding of the Series 2007 A-2 (Non-AMT) Passenger Facility Charge Revenue Bonds, to purchase a reserve fund surety policy for the Series 2015C PFC Bonds, and to pay for certain costs of issuance. The advance refunding proceeds were deposited in an irrevocable trust to provide for all future debt service of the refunded Series 2007A-2 (Non-AMT) Passenger Facility Charge Revenue Bonds. As a result, the Series 2007 A-2 (Non-AMT) Passenger Facility Charge Revenue Bonds are considered defeased, and the liability has been removed from the accounts. As of June 30, 2016,the outstanding principal of the defeased bonds is $105.5 million. The Series 2015C PFC Bonds bear a fixed interest rate of 5.00 percent, with yields varying from 1.42 percent to 3.24 percent. The Series 2015C Bonds have staggered maturities from July 1, 2019, to July 1, 2027, with interest payments due on January 1 and July 1 of each year and scheduled principal payments due on July 1 of each year. The refunding transaction yielded a net present value savings of $13.4 million and a loss on refunding of $5.5 million. The reserve fund policy is issued by Assured Guaranty Municipal Corporation. Junior Subordinate Lien and Jet A Bonds Series 2013A Jet A Bonds: In April 2013, the County issued $71.0 million of the Series 2013A AMT Jet Aviation Fuel Tax Revenue Bonds at a premium of $9.6 million. Interest on the bonds is 5.00 percent, and the yield varies from 2.15 to 3.77 percent. The bonds have staggered scheduled maturities through July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The Series 2013A Bonds were issued for the purpose of refunding the outstanding 2003C Jet A Bonds and to pay certain costs of issuance. Proceeds from the Jet A Fuel Tax have been projected to be sufficient to pay all debt service payments. This refunding provided a net present value savings of $4.7 million. 89

97 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2013 C-1 and C-2 Notes: On July 1, 2013, the Department issued the $174.3 million, two-year Series 2013 C-1 Non-AMT Junior Subordinate Lien Revenue Notes ("Series 2013 C-1 Notes") to refund the Series 2012 A-1 Junior Lien Revenue Notes and to pay certain issuance costs. The Series 2013 C-1 Notes have a stated interest rate of 2.50 percent and a yield of 0.70 percent. On that same date, the Department also issued the $118.3 million, one-year 2013 C-2 Non-AMT Junior Subordinate Lien Revenue Notes ("Series 2013 C-2 Notes") to refund the Series 2012 A-2 Junior Lien Revenue Notes and to pay certain issuance costs. The Series 2013 C-2 Notes had a stated interest rate of 2.00 percent and a yield of 0.35 percent. On July 1, 2014, the 2013 C-2 Notes were refunded for the Series 2014B Notes, and on July 1, 2015, the 2013 C-1 Notes were refunded for the Series 2015B Notes. Series 2015B Notes: On July 1, 2015, the County issued Airport System Junior Subordinate Lien Revenue Notes Series 2015B ("Series 2015B Notes") for $165.1 million. The Series 2015B Notes consists of two principal components and were issued for the purpose of refunding the Series 2013 C-1 Junior Subordinate Lien Revenue Notes and for paying certain costs of issuance. The first principal component of $60.0 million bears an annual fixed interest rate of 3.00 percent. The second principal component of $105.1 million bears an annual fixed interest rate of 5.00 percent. Both principal components are scheduled to mature on July 1, Interest payments are due on January 1 and July 1 of each year until the scheduled maturity. General Obligation Bonds Series 2008A General Obligation Bonds: In February 2008, the County issued $43.1 million in Series 2008A AMT variable rate General Obligation (Limited Tax) Bonds. The bonds were issued as weekly variable rate debt obligations. The bonds mature on July 1, Interest payments are due on January 1 and July 1 of each year, and scheduled principal payments are due on July 1. The bonds were issued to refund the outstanding principal amount of General Obligation (Limited Tax) Airport Bonds, Series 2003A, and to pay certain costs of issuance. A Standby Bond Purchase Agreement with an expiration date of February 26, 2015, was executed in connection with the issuance of these bonds. On February 18, 2015, the County elected to effectuate the mandatory tender for purchase of all Series 2008A General Obligation Bonds pursuant to the termination and replacement of the existing Standby Bond Purchase Agreement securing these bonds. The new Standby Bond Purchase Agreement has a scheduled termination date of February 15,

98 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Series 2013B General Obligation Bonds: In April 2013, the County issued $32.9 million in the Series 2013B Non-AMT General Obligation (Limited Tax) Airport Bond at a premium of $4.5 million. The Series 2013B Bond has a fixed interest rate of 5.00 percent. Interest payments are due on January 1 and July 1 of each year, and the repayment of principal payments ends on July 1, The County issued the Series 2013B Bond for the purpose of refunding the Series 2003B General Obligation Airport Bonds and to pay certain costs of issuance. This refunding provided a net present value savings of $0.9 million. (i) Schedule of Debt Principal and Interest A schedule of the principal and interest payments of the Airport System's debt follows. 91

99 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Maturities of Long-term Debt Jet A Fuel Tax Bonds Total Senior Subordinate PFC Bond Anticipation Notes General Obligation Bonds Fiscal Year Principal Interest Principal Interest * Principal Interest Principal Interest Principal Interest Principal Interest Ended June 30, (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) 2017 $ 125,930 $ 154,014 $ 14,610 $ 42,383 $ 77,255 $ 53,569 $ 34,065 $ 40,463 $ - $ 15,773 $ - $ 1, , ,897 12,055 41,760 47,580 51,311 35,755 38, ,125 12,245-1, , ,731 12,400 41,182 70,370 50,260 37,530 37, ,365 6,132-1, , ,850 11,665 40,613 76,300 49,650 35,590 36,337 5,020 3,423-1, , ,425 12,180 40,036 74,590 48,987 36,815 35,409 5,270 3,166-1, , ,261 63, , , , , ,453 30,580 11,496-9, , ,936 23, , , , , ,300 30,095 3,076 52,045 8, , ,030 46, , , , ,720 83, ,975 1, , , , , ,250 67, ,020 43, ,825 67, ,370 54, ,730 8,672 79,725 4, Total $ 4,203,395 $ 2,456,381 $ 941,045 $ 942,374 $ 1,946,225 $ 832,790 $ 900,650 $ 597,851 $ 339,455 $ 55,311 $ 76,020 $ 28,060 * Interest payments on the 2009B and 2010C Build America Bonds are presented net of the projected 35.0 percent rebate payments from the U.S. Treasury. 92

100 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 10.) DERIVATIVE INSTRUMENTS INTEREST RATE SWAPS (a) Interest Rate Swaps The intention of the Department s implementation of a swap portfolio was to convert variable interest rate bonds to synthetically fixed interest rate bonds as a means to lower its borrowing costs when compared to fixed-rate bonds at the time of issuance. The Department executed several floating-to-fixed swaps in connection with its issuance of variable rate bonds. The Department also executed forward starting swaps to lock in attractive synthetically fixed rates for future variable rate bonds. Some of the Department s swaps are structured with step-down coupons to reduce the cash outflows of the fixed leg of those swaps in the later years of the swap. With the implementation of GASB 72, the derivative instruments are valued at fair value. The fair values of the interest rate derivative instruments were estimated using an independent pricing service. The valuations provided were derived from proprietary models based upon well-recognized principles and estimates about relevant future market conditions. The instruments' expected cash flows are calculated using the zero-coupon discount method, which takes into consideration the prevailing benchmark interest rate environment as well as the specific terms and conditions of a given transaction and which assumes that the current forward rates implied by the benchmark yield curve are the market s best estimate of future spot interest rates. The income approach is then used to obtain the fair value of the instruments by discounting future expected cash flows to a single valuation using a rate of return that takes into account the relative risk of nonperformance associated with the cash flows and the time value of money. This valuation technique is applied consistently across all instruments. Given the observability of inputs that are significant to the entire sets of measurements, the fair values of the instruments are based on inputs categorized as Level 2. As of June 30, 2016, the derivative instruments are stated at fair value as required under GASB 72. Information required to restate the derivative instruments to fair value as of June 30, 2015, as required under GASB 72, was not available, therefore, the derivative instruments were stated at mark-to-market value for FY 2015 in accordance with GASB

101 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements The mark-to-market value for each swap is estimated using the zero-coupon method. Under this method, future cash payments are calculated either based on using the contractuallyspecified fixed rate or based on using the contractually-specified variable forward rates as implied by the SIFMA (Securities Industry and Financial Markets Association) Municipal Swap Index yield curve (formerly known as the Bond Market Association Municipal Swap Index yield curve, or BMA Municipal Swap Index yield curve), as applicable. Each future cash payment is adjusted by a factor called the swap rate, which is a rate that is set, at the inception of the swap and at the occurrence of certain events, such as a refunding, to such a value as to make the mark-to-market value of the swap equal to zero. (For this reason, the swap rate is sometimes referred to as the "at-the-market" rate of the swap.) Future cash receipts are calculated either based on using the contractually-specified fixed rate or based on using the contractually-specified variable forward rates as implied by the LIBOR (London Interbank Offered Rate) yield curve or the CMS (Constant Maturity Swap rate) yield curve, as applicable. The future cash payment, as modified by the swap rate factor, and the future cash receipt due on the date of each and every future net settlement on the swap is netted, and each netting is then discounted using the discount factor implied by the LIBOR yield curve for a hypothetical zero-coupon rate bond due on the date of the future net settlement. These discounted nettings are then summed to arrive at the mark-to-market value of the swap. All the swaps entered into by the Department comply with the County s swap policy. Each swap is written pursuant to guidelines and documentation promulgated by the International Swaps and Derivatives Association ("ISDA"), which include standard provisions for termination events such as failure to pay or bankruptcy. The Department retains the right to terminate any swap agreement at market value prior to maturity. The Department has termination risk under the contract, particularly if an additional termination event ("ATE") were to occur. An ATE occurs either if the credit rating of the bonds associated with a particular swap agreement and the rating of the swap insurer fall below a pre-defined credit rating threshold or if the credit rating of the swap counterparty falls below a threshold as defined in the swap agreement. 94

102 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements With regard to credit risk, potential exposure is mitigated through the use of an ISDA credit support annex ("CSA"). Under the terms of master agreements between the Department and the swap counterparties, each swap counterparty is required to post collateral with a third party when the counterparty's credit rating falls below the trigger level defined in each master agreement. This protects the Department from credit risks inherent in the swap agreements. As long as the Department retains insurance, the Department is not required to post any collateral; only the counterparties are required to post collateral. However, as of June 30, 2015, none of the counterparties are required to post collateral. As of June 30, 2016, the counterparty's credit ratings declined to the respective rating thresholds as defined in the ISDA CSA agreement for swaps #12A and #18, and the counterparty is required to post collateral. The Department and the counterparty negotiated terms for swap #18 and on August 9, 2016, both the counterparty and the Department agreed to terms with the Bank of New York Mellon under a Collateral Account Control Agreement where Bank of New York Mellon would act as the custodian of the collateral. On August 10, 2016, the Department posted its demand to the counterparty for the collateral under the ISDA CSA. On August 11, 2016, the counterparty posted $39.9 million of cash as collateral with the custodian. The Department is negotiating with the counterparty to post collateral for swap #12A. See Note 17, "Subsequent Events," for further details. As summarized in the table below, the initial notional amounts of all active swaps as of June 30, 2016, totaled $1,908.0 million and remained unchanged from June 30, 2015, as did the number of outstanding swap agreements, which remained at 18. The outstanding notional total as of June 30, 2016, was $1,471.2 million and comprised $1,048.8 million in floating-to-fixed swaps, $240.8 million in fixed-to-fixed swaps, and $181.5 million in basis swaps. 95

103 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Interest Rate Swap Analysis As of June 30, 2016 and 2015 Initial Notional Outstanding Notional Interest Rate Swap Associated Variable Rate Bonds County County Effective Maturity Amount Counterparty Ratings June 30, 2016 June 30, 2015 Swap# Description or Amended Swaps Pays Receives Date Date (000) Counterparty Moody's S&P Fitch (000) (000) 02 Basis Swap N/A SIFMA Swap Index % 72.5% of USD LI BOR % 8/23/2001 7/1/2036 $ 185,855 Citigroup Financial Products Inc. Baa1 BBB+ A $ 78,940 $ 79, * Floating-to-Fixed N/A % to 7/2010, % to maturity 69.0% of USD LIBOR % 4/4/2005 7/1/ ,900 Citigroup Financial Products Inc. Baa1 BBB+ A Basis Swap N/A SIFMA Swap Index 68.0% of USD LIBOR % 7/1/2003 7/1/ ,000 Citigroup Financial Products Inc. Baa1 BBB+ A 102, , * Floating-to-Fixed N/A % to 7/2010, % to maturity 62.6% of USD LIBOR % 3/19/2008 7/1/ ,175 Citigroup Financial Products Inc. Baa1 BBB+ A A Floating-to-Fixed 2008 A-2, 2011 B % to 7/2017, % to maturity 64.7% of USD LI BOR % 7/1/2008 7/1/ ,000 JPMorgan Chase Bank, N.A. Aa3 A+ AA- 148, ,000 07B Floating-to-Fixed 2008 B-2, 2011 B % to 7/2017, % to maturity 64.7% of USD LIBOR % 7/1/2008 7/1/ ,000 UBS AG A1 A A 148, ,000 08A Floating-to-Fixed 2008C % to 7/2015, % to maturity 82.0% of 10 year CMS % 3/19/2008 7/1/ ,200 Citigroup Financial Products Inc. Baa1 BBB+ A 151, ,200 08B Floating-to-Fixed 2008C % to 7/2015, % to maturity 82.0% of 10 year CMS % 3/19/2008 7/1/ ,975 JPMorgan Chase Bank, N.A. Aa3 A+ AA- 31,975 31,975 08C Floating-to-Fixed 2008C % to 7/2015, % to maturity 82.0% of 10 year CMS % 3/19/2008 7/1/ ,975 UBS AG A1 A A 31,975 31,975 09A Floating-to-Fixed 2008 D % to 7/2015, % to maturity 82.0% of 10 year CMS % 3/19/2008 7/1/ ,330 Citigroup Financial Products Inc. Baa1 BBB+ A 41,330 41,330 09B Floating-to-Fixed 2008 D % to 7/2015, % to maturity 82.0% of 10 year CMS % 3/19/2008 7/1/2036 8,795 JPMorgan Chase Bank, N.A. Aa3 A+ AA- 8,795 8,795 09C Floating-to-Fixed 2008 D % to 7/2015, % to maturity 82.0% of 10 year CMS % 3/19/2008 7/1/2036 8,795 UBS AG A1 A A 8,795 8,795 10B Floating-to-Fixed 2008 D-2A, 2008 D-2B % to 7/2015, % to maturity 62.0% of USD LI BOR % 3/19/2008 7/1/ ,935 JPMorgan Chase Bank, N.A. Aa3 A+ AA- 29,935 29,935 10C Floating-to-Fixed 2008 D-2A, 2008 D-2B % to 7/2015, % to maturity 62.0% of USD LI BOR % 3/19/2008 7/1/ ,935 UBS AG A1 A A 29,935 29,935 12A Floating-to-Fixed 2008 D-2A, 2008 D-2B, 2008C, 2008 D-3, 2010 F-2 PFC % to 7/2017, % to maturity 64.7% of USD LI BOR % 7/1/2009 7/1/ ,000 Citigroup Financial Products I nc. Baa1 BBB+ A 200, , * Floating-to-Fixed N/A % to 7/2017, % to maturity 61.9% of USD LIBOR % 7/1/2010 7/1/ ,000 Citigroup Financial Products Inc. Baa1 BBB+ A A Floating-to-Fixed 2008 D-3, 2015 B % 64.4% of USD LI BOR % 7/1/2011 7/1/ ,025 UBS AG A1 A A 73,025 73,025 14B ** Floating-to-Fixed 2008 C, 2008 D-2A, 2008 D-2B, 2008A GO, 2010 F-2 PFC % 64.4% of USD LI BOR % 7/1/2011 7/1/ ,150 Citibank, N.A., New York A1 A A+ 145, ,150 Remaining portions of swaps after April 6, 2010 terminations 15 Fixed-to-Fixed swap #03 (amended and restated) % until 7/1/ % starting at 7/1/2010 4/6/2010 7/1/2022 N/A Citigroup Financial Products Inc. Baa1 BBB+ A 40,508 45, Fixed-to-Fixed swap #05 (amended and restated) % until 7/1/ % starting at 7/1/2010 4/6/2010 7/1/2025 N/A Citigroup Financial Products Inc. Baa1 BBB+ A 50,325 50, Fixed-to-Fixed swap #13 (amended and restated) % until 7/1/ % starting at 7/1/2017 4/6/2010 7/1/2040 N/A Citigroup Financial Products Inc. Baa1 BBB+ A 150, ,000 1,908,045 1,471,209 1,489,031 Total $ $ $ Source: The PFM Group * On April 6, 2010, the Department terminated the "on market" (at-market coupon) portion of its floating-to-fixed swaps #03, #05, #11, and #13. To fund the terminations, the Department fully terminated the "off-market" (step-coupon) portion of swap #11 and partially terminated $162.2 million of $229.9 million notional of the "off-market" portion of swap #03. The agreements related to swaps #03, #05, and #13 were amended and restated, and the new terms of the swap agreements are presented in the table above as swaps #15, #16, and #18, respectively. On August 3, 2011, the Department refunded the outstanding principal of its Series 2008 A-1 and B-1 Bonds with the Series 2011 B-1 and B-2 Bonds, respectively. Upon refunding, swap #07B was re-associated with the cash flows of the $100 million of outstanding principal of the Series 2011 B-1 Bonds, and swap #07A was re-associated with the cash flows of the $100 million of outstanding principal of the Series 2011 B-2 Bonds. On November 19, 2013, to better match the principal amortizations, swap #07A was re-associated with the Series 2011 B-1 Bonds, and swap #07B was re-associated with the Series 2011 B-2 Bonds. ** On July 1, 2011, forward swaps #14A and #14B, both with a trade date of April 17, 2007, became effectiv e as scheduled. $4.48 million of the entire notional amount of swap #14A, $ million, was associated with the 2008A General Obligation Bonds, with the excess notional balance classified as an investment derivative. The entire notional amount of swap #14B, $ million, was associated both with the principal of the 2008A General Obligation Bonds remaining after the association of swap #14A and with the 2013 C-1 and 2013 C-2 Notes. Although these Notes are deemed to mature in perpetuity, the 2008A General Obligation Bond matures on July 1, 2027, a date in adv ance of the maturities of swaps #14A and #14B, which occur on July 1, 2030 and July 1, 2037, respectively. Therefore, those portions of swaps #14A and #14B associated with these excess maturities had been classified as investment derivatives. On Nov ember 19, 2013, these swaps were re-associated with variable rate bonds following the termination of swaps noted below. These swaps are fully hedged derivatives. 96

104 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (b) Derivative Instruments As indicated in the previous subnote, the Department entered into various interest rate swap agreements to hedge financial risks associated with the cost of borrowing and the cash flows associated with the Department s variable interest rate debt. In accordance with the provisions of GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, the Department is required to report the value of all derivative instruments on the Statements of Net Position. In addition, GASB 53 requires that all derivatives be classified into two basic categories: (1) hedging and (2) investment. Hedging derivatives are derivative instruments that significantly reduce an identified financial risk by substantially offsetting changes in the cash flows of an associated hedgeable item. Hedging derivatives are required to be tested for their effectiveness. Effectiveness of hedging derivatives is first tested using the consistent critical terms method. If critical terms analysis fails because the critical terms of the hedged item and the hedging instrument do not match, a quantitative method is employed, typically regression analysis. On an annual basis and consistent with the fiscal year end, the Department uses an external consulting firm to perform this evaluation. Investment derivatives are either derivative instruments entered into primarily for income or profit purposes or derivative instruments that do not meet the criteria of an effective hedging derivative instrument. With the implementation of GASB 72, the interest rate swaps now are stated at fair value. The information required to restate the interest rate swaps at fair value as of June 30, 2015, was not available; therefore, the interest rate swaps for FY 2015 are presented at their mark-to-market value. Changes in the fair value of hedging derivative instruments for FY 2016 and changes in the mark-to-market value of hedging derivative instruments for FY 2015 are presented as deferred inflows of resources or deferred outflows of resources on the Statements of Net Position. Changes in the fair value of investment derivative instruments for FY 2016 and changes in the mark-to-market value of investment derivative instruments for FY 2015 are recognized as investment gains or losses on the Statements of Revenues, Expenses, and Changes in Net Position, in accordance with the provisions of GASB 53. The tables below provide the fair values as well as the changes from the mark-to-market values to the fair values of the Department s interest rate swap agreements for the fiscal years ended June 30, 2016 and The valuation of all outstanding swap agreements as of June 30, 2016 and 2015, is $(107.6) million and $(53.2) million, respectively. 97

105 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Interest Rate Swap Changes from Mark-to-Market Value to Fair Value For the Twelve Months Ended June 30, 2016 Fair Value and Classifications Changes from Mark-to-Market Value to Fair Value for the as of June 30, 2016 Twelve Months Ended June 30, 2016 Increase (Decrease) Increase (Decrease) Net Change Outstanding Derivative Instrument Fair Value in Deferred Inflows in Deferred Outflows in Value Swap# Description Notional (000) Classification (000) (000) (000) (000) Hedging derivative instruments 03 * Floating-to-Fixed Interest Rate Swap $ - $ - $ - $ - $ - 05 * Floating-to-Fixed Interest Rate Swap A Floating-to-Fixed Interest Rate Swap 148,350 Non-current liability (4,700) (875) 07B Floating-to-Fixed Interest Rate Swap 148,375 Non-current liability (4,701) (879) 10B Floating-to-Fixed Interest Rate Swap 29,935 Non-current liability (4,414) - 2,973 (2,973) 10C Floating-to-Fixed Interest Rate Swap 29,935 Non-current liability (4,415) - 2,973 (2,973) 12A Floating-to-Fixed Interest Rate Swap 200,000 Non-current asset 884 (1,767) - (1,767) 13 * Forward Floating-to-Fixed Interest Rate Swap A ** Floating-to-Fixed Interest Rate Swap 73,025 Non-current liability (21,702) - 4,620 (4,620) 14B ** Floating-to-Fixed Interest Rate Swap 145,150 Non-current liability (51,438) - 11,155 (11,155) Total hedging derivative activities 774,770 (90,486) (1,767) 23,475 (25,242) Gain (loss) Deferrals on Investment Included in (000) Gain (loss) (000) Investment derivative instruments 02 Basis Rate Swap 78,940 Non-current liability (1,458) Basis Rate Swap 102,596 Non-current asset 1,612 (327) - (327) 08A Floating-to-Fixed Interest Rate Swap 151,200 Non-current liability (33,762) (15,036) - (15,036) 08B Floating-to-Fixed Interest Rate Swap 31,975 Non-current liability (7,140) (3,179) - (3,179) 08C Floating-to-Fixed Interest Rate Swap 31,975 Non-current liability (7,140) (3,179) - (3,179) 09A Floating-to-Fixed Interest Rate Swap 41,330 Non-current liability (1,680) (4,334) - (4,334) 09B Floating-to-Fixed Interest Rate Swap 8,795 Non-current liability (358) (922) - (922) 09C Floating-to-Fixed Interest Rate Swap 8,795 Non-current liability (358) (922) - (922) *Remaining portions of swaps after April 6, 2010 terminations 15 Fixed-to-Fixed Swap (formerly Swap #03) 40,508 Non-current asset 1,796 (568) - (568) 16 Fixed-to-Fixed Swap (formerly Swap #05) 50,325 Non-current asset 2,414 (159) - (159) 18 Fixed-to-Fixed Swap (formerly Swap #13) 150,000 Non-current asset 28,913 (1,146) - (1,146) Total investment derivative activities 696,439 (17,161) (29,192) - (29,192) Total $ 1,471,209 $ (107,647) $ (54,434) * On April 6, 2010, the Department terminated the "on market" (at-market coupon) portion of its floating-to-fixed swaps #03, #05, #11, and #13. To fund the terminations, the Department fully terminated the "off-market" (step-coupon) portion of swap #11 and partially terminated $162.2 million of $229.9 million notional of the "off-market" portion of swap #03. The agreements related to swaps #03, #05, and #13 were amended and restated, and the new terms of the swap agreements are presented in the table above as swaps #15, #16, and #18, respectively. On August 3, 2011, the Department refunded the outstanding principal of its Series 2008 A-1 and B-1 Bonds with the Series 2011 B-1 and B-2 Bonds, respectively. Upon refunding, swap #07B was re-associated with the cash flows of the $100 million of outstanding principal of the Series 2011 B-1 Bonds, and swap #07A was re-associated with the cash flows of the $100 million of outstanding principal of the Series 2011 B-2 Bonds. On November 19, 2013, to better match the principal amortizations, swap #07A was re-associated with the Series 2011 B-1 Bonds, and swap #07B was re-associated with the Series 2011 B-2 Bonds. ** On July 1, 2011, forward swaps #14A and #14B, both with a trade date of April 17, 2007, became effective as scheduled. $4.48 million of the entire notional amount of swap #14A, $ million, was associated with the 2008A General Obligation Bonds, with the excess notional balance classified as an investment derivative. The entire notional amount of swap #14B, $ million, was associated both with the principal of the 2008A General Obligation Bonds remaining after the association of swap #14A and with the 2013 C-1 and 2013 C-2 Notes. Although the Notes are deemed to mature in perpetuity, the 2008A General Obligation Bonds mature on July 1, 2027, a date in advance of the maturities of swaps #14A and #14B, which occur on July 1, 2030 and July 1, 2037, respectively. Therefore, those portions of swaps #14A and #14B associated with these excess maturities had been classified as investment derivatives. 98

106 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Interest Rate Swap Changes in Mark-to-Market Value For the Twelve Months Ended June 30, 2015 Mark-to-Market Values and Classifications Changes in Mark-to-Market Value as of June 30, 2015 for the Fiscal Year Ended June 30, 2015 Increase (Decrease) Increase (Decrease) Net Change in Outstanding Derivative Instrument Mark-to-Market in Deferred in Deferred Mark-to-Market Swap# Description Notional (000) Classification Value (000) Inflows (000) Outflows (000) Value (000) Hedging derivative instruments 03 * Floating-to-Fixed Interest Rate Swap $ - $ - $ - $ - $ - 05 * Floating-to-Fixed Interest Rate Swap A Floating-to-Fixed Interest Rate Swap 150,000 Non-current liability (3,825) - (909) B Floating-to-Fixed Interest Rate Swap 150,000 Non-current liability (3,823) - (909) A * Floating-to-Fixed Interest Rate Swap B Floating-to-Fixed Interest Rate Swap 29,935 Non-current liability (1,442) (723) 10C Floating-to-Fixed Interest Rate Swap 29,935 Non-current liability (1,442) (723) 11 * Floating-to-Fixed Interest Rate Swap A Floating-to-Fixed Interest Rate Swap 200,000 Non-current asset 2,651 2,651 (2,147) 4, * Forward Floating-to-Fixed Interest Rate Swap A ** Floating-to-Fixed Interest Rate Swap 73,025 Non-current liability (17,082) - 1,500 (1,500) 14B ** Floating-to-Fixed Interest Rate Swap 145,150 Non-current liability (40,284) - 5,213 (5,213) Total hedging derivative activities 778,045 (65,247) 2,651 4,194 (1,543) Deferrals Gain (Loss) on Included in Investment derivative instruments Investment (000) Gain (Loss) (000) 02 Basis Rate Swap 79,366 Non-current liability (2,037) 1,543 $ - 1, Basis Rate Swap 111,518 Non-current asset 1, A Floating-to-Fixed Interest Rate Swap 151,200 Non-current liability (18,726) (4,496) - (4,496) 08B Floating-to-Fixed Interest Rate Swap 31,975 Non-current liability (3,960) (951) - (951) 08C Floating-to-Fixed Interest Rate Swap 31,975 Non-current liability (3,960) (951) - (951) 09A Floating-to-Fixed Interest Rate Swap 41,330 Non-current asset 2,654 (193) - (193) 09B Floating-to-Fixed Interest Rate Swap 8,795 Non-current asset 565 (41) - (41) 09C Floating-to-Fixed Interest Rate Swap 8,795 Non-current asset 565 (41) - (41) *Remaining portions of swaps after April 6, 2010 terminations 15 Fixed-to-Fixed Swap (formerly Swap #03) 45,582 Non-current asset 2,364 (630) - (630) 16 Fixed-to-Fixed Swap (formerly Swap #05) 50,450 Non-current asset 2,572 (230) - (230) 17 Fixed-to-Fixed Swap (formerly Swap #10A) Fixed-to-Fixed Swap (formerly Swap #13) 150,000 Non-current asset 30,058 6,234-6,234 Total investment derivative activities 710,986 12,034 1,174-1,174 Total $ 1,489,031 $ (53,213) $ (369) * On April 6, 2010, the Department terminated the "on market" (at-market coupon) portion of its floating-to-fixed swaps #03, #05, #10A, #11, and #13. To fund the terminations, the Department fully terminated the "off-market" (step-coupon) portion of swap #11 and partially terminated $162.2 million of $229.9 million notional of the "off-market" portion of swap #03. The agreements related to swaps #03, #05, #10A, and #13 were amended and restated, and the new terms of the swap agreements are presented in the table above as swaps #15, #16, #17, and #18, respectiv ely. On August 3, 2011, the Department refunded the outstanding principal of its Series 2008 A-1 and B-1 Bonds with the Series 2011 B-1 and B-2 Bonds, respectively. Upon refunding, swap #07B was re-associated with the cash flows of the $100 million of outstanding principal of the Series 2011 B-1 Bonds, and swap #07A was re-associated with the cash flows of the $100 million of outstanding principal of the Series 2011 B-2 Bonds. On November 19, 2013, to better match the principal amortizations, swap #07A was re-associated with the Series 2011 B-1 Bonds, and swap #07B was re-associated with the Series 2011 B-2 Bonds. ** On July 1, 2011, forward swaps #14A and #14B, both with a trade date of April 17, 2007, became effectiv e as scheduled. $4.48 million of the entire notional amount of swap #14A, $ million, was associated with the 2008A General Obligation Bonds, with the excess notional balance classified as an investment derivative. The entire notional amount of swap #14B, $ million, was associated both with the principal of the 2008A General Obligation Bonds remaining after the association of swap #14A and with the 2013 C-1 and 2013 C-2 Notes. Although the Notes are deemed to mature in perpetuity, the 2008A General Obligation Bonds mature on July 1, 2027, a date in advance of the maturities of swaps #14A and #14B, which occur on July 1, 2030 and July 1, 2037, respectively. Therefore, those portions of swaps #14A and #14B associated with these excess maturities had been classified as investment derivatives. On November 19, 2013, the Department fully terminated swaps #06, #12B, and #17, and partially terminated swap #14B. The investment components of swaps #14A and #14B were then re-associated with variable rate bonds, thereby resulting in the full hedging of these swaps. GASB 53 required any deferred inflow or outflow of resources related to a hedged derivative instrument be recognized as a gain or loss upon termination. 99

107 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements On August 3, 2011, the Department refunded the Series 2008 B-1 Bonds and the Series 2008 A-1 Bonds with the Series 2011 B-2 Bonds and the Series 2011 B-1 Bonds, respectively. Upon refunding, $100.0 million in notional of swap #07A and $100.0 million in notional of swap #07B were re-associated with the 2011 B-1 Bonds and the 2011 B-2 Bonds, respectively. This reassociation resulted in a revaluation of swaps #07A and #07B to adjust the overall swap rate of each swap to the market rate, creating a deferred loss on imputed debt for each swap, and an offsetting liability for each swap, imputed debt, in the amounts of $10.7 million for swap #07A and $10.7 million for swap #07B. These deferred losses on imputed debt and corresponding imputed debts are amortized against each other on a straight-line basis over the remaining lives of the swaps. In November 2013, the Department re-associated swap #07A with the 2011 B-1 Bonds and re-associated swap #07B with the 2011 B-2 Bonds. On November 19, 2013, the Department fully terminated swaps #06, #12B, and #17 and partially terminated swap #14B. Because swap #14B was only partially terminated, its outstanding notional value was reduced by $56.8 million from $202.0 million to $145.2 million. At the transaction closing, the fair values of all the terminated swaps or portions thereof, coupled with their related accrued interest, resulted in a net termination payment of $0. The Department executed this transaction to lower overall swap exposure, reduce interest rate risk, increase cash flow, reduce debt service, and tailor its swap portfolio to better match its variable rate bond portfolio. Upon completion of the termination, the Department reassociated the investment component of each of swap derivatives #14A and #14B with variable rate bonds, thereby resulting in the full hedging of these swaps. (c) Hedging Derivative Instruments On June 30, 2016 and 2015, the Department had seven outstanding floating-to-fixed interest rate swap agreements considered to be hedging derivative instruments in accordance with the provisions of GASB

108 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Objective As a means of lowering its borrowing costs when compared against fixed-rate bonds at the time of issuance, the Department executed floating-to-fixed interest rate swaps in connection with its issuance of variable rate bonds. The intention of implementing these swaps was to convert the Department s variable interest rates on the bonds to synthetic fixed rates. As of June 30, 2016 and 2015, the Department had five outstanding hedging swaps that had been structured with step-down coupons to reduce the cash outflows of the fixed leg of those swaps in the later years of the swap. Forward Starting Swap Agreements On January 3, 2006, the Department entered into five swap agreements (swaps #7A, #7B, #12A, #12B, and #13) to hedge future variable rate debt as a means to lower its borrowing costs and to provide favorable synthetically fixed rates for financing the construction of Terminal 3 and other related projects. Swaps #7A and #7B, with a notional amounts of $150 million each, became effective July 1, 2008, while swaps #12A and #12B, with notional amounts totaling $550 million, became effective July 1, Swap #13, with a notional amount totaling $150 million, was scheduled to become effective July 1, However, due to the attractive market rates for fixed rate bonds, together with the favorable provisions of ARRA, the Department chose to refinance its outstanding bond anticipation notes and issue fixed rate bonds to complete financing for the construction of Terminal 3, and, as a result, the planned $550 million of 2009 Series A and B variable rate bonds was not issued on July 1, In addition, to better match its outstanding notional of floating-to-fixed interest rate swaps to the cash flows associated with its outstanding variable rate bonds, on April 6, 2010, the Department terminated $543.3 million in notional amounts of its outstanding floating-to-fixed interest rate swaps (swaps #3, #5, #10A, and #11) and $150 million in the notional amount of the July 1, 2010, forward starting swap #13. On April 17, 2007, the Department entered into two additional forward starting swaps, swaps #14A and #14B, with notional amounts totaling $275 million, which became effective on July 1, 2011, as scheduled. 101

109 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Terms, Notional Amounts, and Fair and Mark-to-Market Values The terms, notional amounts, and fair values (2016) and mark-to-market values (FY 2015) of the Department s hedging derivatives at June 30, 2016 and 2015 are included in the tables below. The notional amounts of the swap agreements match the principal portions of the associated debt and contain reductions in the notional amounts that are expected to follow the reductions in principal of the associated debt, except as discussed in the section on rollover risk. Hedging Derivative Instruments - Terms, Notional Amounts, and Fair Values As of June 30, 2016 Outstanding Notional Fair Interest Rate Swap Associated Effective Amount County County Value Maturity Swap# Description Variable Rate Bonds Date (000) Pays Receives (000) Date 07A Floating-to-Fixed 2008 A-2, 2011 B-1 7/1/2008 $ 148, % to 7/2017, % to maturity 64.7% of USD LIBOR % $ (4,700) 7/1/ B Floating-to-Fixed 2008 B-2, 2011 B-2 7/1/ , % to 7/2017, % to maturity 64.7% of USD LIBOR % (4,701) 7/1/ B Floating-to-Fixed 2008 D-2A, 2008 D-2B 3/19/ , % to 7/2015, % to maturity 62.0% of USD LIBOR % (4,414) 7/1/ C Floating-to-Fixed 2008 D-2A, 2008 D-2B 3/19/ , % to 7/2015, % to maturity 62.0% of USD LIBOR % (4,415) 7/1/ A Floating-to-Fixed 2008 D-2A, 2008 D-2B, 2008C, 2008 D-3, 2010 F-2 PFC 7/1/ , % to 7/2017, % to maturity 64.7% of USD LIBOR % 884 7/1/ A Floating-to-Fixed 2008 D-3, 2015 B 7/1/ , % 64.4% of USD LIBOR % (21,702) 7/1/ B Floating-to-Fixed 2008 C, 2008 D-2A, 2008 D-2B, 2008A GO, 2010 F-2 PFC 7/1/ , % 64.4% of USD LIBOR % (51,438) 7/1/2037 $ 774,770 $ (90,486) Hedging Derivative Instruments - Terms, Notional Amounts, and Mark-to-Market Values As of June 30, 2015 Outstanding Notional Mark-to-Market Interest Rate Swap Associated Effective Amount County County Value Maturity Swap# Description Variable Rate Bonds Date (000) Pays Receives (000) Date 07A Floating-to-Fixed 2008 A-2, 2011 B-1 7/1/ ,000 7/2017, % USD LIBOR $ (3,825) 7/1/2022 $ % to to maturity 64.7% of % 7/1/ B Floating-to-Fixed 2008 B-2, 2011 B-2 7/1/ , % to 7/2017, % to maturity 64.7% of USD LIBOR % (3,823) 10B Floating-to-Fixed 2008 D-2A, 2008 D-2B 3/19/ , % to 7/2015, % to maturity 62.0% of USD LIBOR % (1,442) 7/1/ C Floating-to-Fixed 2008 D-2A, 2008 D-2B 3/19/ , % to 7/2015, % to maturity 62.0% of USD LIBOR % (1,442) 7/1/ A Floating-to-Fixed 2008 D-2A, 2008 D-2B, 2008C, 2008 D-3, 2010 F-2 PFC 7/1/ , % to 7/2017, % to maturity 64.7% of USD LIBOR % 2,651 7/1/ A Floating-to-Fixed 2008 D-3, 2013 C-1 7/1/ , % 64.4% of USD LIBOR % (17,082) 7/1/ B Floating-to-Fixed 2008 C, 2008 D-2A, 2008 D-2B, 2008A GO, 2010 F-2 PFC 7/1/ , % 64.4% of USD LIBOR % (40,284) 7/1/ ,045 (65,247) $ $ Due to an overall increase in variable rates, one of the Department s hedging derivatives had a positive fair value and a positive market-to-market value as of June 30, 2016 and 2015, respectively. The fair values and market-to-market values are estimated using the methodologies discussed above under Subnote (a), "Interest Rate Swaps." Associated Debt Cash Flows The net cash flows for the Department s hedging derivative instruments for the year ended June 30, 2016, are provided in the table below. 102

110 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Hedging Derivative Instruments - Net Cash Flows For the Fiscal Year Ended June 30, 2016 (with Comparative Net Interest Payments for the Prior Fiscal Year) Interest to Interest Rate Swap Associated Counterparty Swap Interest (000) Bondholders (000) Net Interest Payments (000) Swap# Description Variable Rate Bonds (Pay) Receive Net (Pay) A Floating-to-Fixed 2008 A-2, 2011 B-1 $ (6,423) $ 610 $ (5,813) $ (54) $ (5,867) $ (5,971) 07B Floating-to-Fixed 2008 B-2, 2011 B-2 (6,424) 608 (5,816) (58) (5,874) (5,968) 10B Floating-to-Fixed 2008 D-2A, 2008 D-2B (1,068) 249 (819) (9) (828) (1,099) 10C Floating-to-Fixed 2008 D-2A, 2008 D-2B (1,068) 249 (819) (9) (828) (1,099) 12A Floating-to-Fixed 2008 D-2A, 2008 D-2B, 2008C, 2008 D-3, 2010 F-2 PFC (11,252) 815 (10,437) (65) (10,502) (10,610) 14A Floating-to-Fixed 2008 D-3, 2015 B (2,838) 297 (2,541) (5,732) (8,273) (6,965) 14B Floating-to-Fixed 2008 C, 2008 D-2A, 2008 D-2B, 2008A GO, 2010 F-2 PFC (5,633) 590 (5,043) (52) (5,095) (5,190) $ (34,706) $ 3,418 $ (31,288) $ (5,979) $ (37,267) $ (36,902) Credit Risk The Department is exposed to credit risk in the amount of the hedging derivatives positive fair values. Since one of the hedging derivatives had a positive fair value as of June 30, 2016, the Department was exposed to credit risk for this derivative. Nonetheless, as described earlier, a CSA is in place to provide collateral to protect the value of the swaps under specific circumstances. The counterparty credit ratings for the Department s hedging derivative instruments at June 30, 2016, are included in the table below. Credit Risk Interest Rate Swap Counterparty Threshold Ratings Counterparty Ratings Exposure Swap# Description Counterparty Moody's S&P Moody's S&P Fitch (000) 07A Floating-to-Fixed JPMorgan Chase Bank, N.A. Baa1 BBB+ Aa3 A+ AA- $ - 07B Floating-to-Fixed UBS AG Baa1 BBB+ A1 A A - 10B Floating-to-Fixed JPMorgan Chase Bank, N.A. Baa1 BBB+ Aa3 A+ AA- - 10C Floating-to-Fixed UBS AG Baa1 BBB+ A1 A A - 12A Floating-to-Fixed Citigroup Financial Products Inc. Baa1 BBB+ Baa1 BBB+ A A Floating-to-Fixed UBS AG Baa1 BBB+ A1 A A - 14B Floating-to-Fixed Citibank, N.A., New York Baa1 BBB+ A1 A A+ $ As of June 30, 2016, the counterparty to swap #12A was required to post collateral pursuant to the terms of the ISDA CSA Agreement. The credit rating of this counterparty declined to the rating threshold as defined in the ISDA CSA Agreement so the counterparty is required to post collateral. The Department is negotiating with the counterparty on posting collateral. Basis and Interest Rate Risk All the hedging derivative swaps are subject to basis risk and interest rate risk should the relationship between the LIBOR rate and the Department's bond rates converge. If a change occurs that results in the rates moving to convergence, the expected cost savings and expected cash flows of the swaps may not be realized. 103

111 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Tax Policy Risk The Department is exposed 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 changes in tax law such that the federal or state tax exemption of municipal debt is eliminated or its value is reduced. Termination Risk The Department is exposed to termination risk 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, i.e. if an ATE occurs. If at the time of the ATE the swap has a negative fair value, the Department would be liable to the counterparty for a payment equal to the swap s fair value. For all swap agreements, except for swaps #08A and #09A, the Department is required to designate a day between 5 and 30 days to provide written notice following the ATE date. For the exceptions, the designated date is 30 days after the ATE date. Rollover Risk and Other Risk There exists the possibility that the Department may undertake additional refinancing with respect to its swaps to improve its debt structure or cash flow position and that such refinancing may result in hedging swap maturities that do not extend to the maturities of the associated debt, in hedging swaps becoming decoupled from associated debt, in the establishment of imputed debt, or in the creation of losses. Terms, Notional Amounts, and Fair and Mark-to-Market Values The terms, notional amounts, and fair values (FY 2016) and mark-to-market values (FY 2015) of the Department s investment derivatives at June 30, 2016 and 2015, are included in the tables below. 104

112 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Investment Derivative Instruments - Terms, Notional Amounts, and Fair Values As of June 30, 2016 Outstanding Fair Interest Rate Swap Associated Variable Rate Bonds Effective Notional County County Value Maturity Swap# Description or Amended Swaps Date (000) Pays Receives (000) Date 02 Basis Swap N/A 8/23/2001 $ 78,940 SIFMA Swap Index % 72.5% of USD LIBOR % $ (1,458) 7/1/ Basis Swap N/A 7/1/ ,596 SIFMA Swap Index 68.0% of USD LIBOR % 1,612 7/1/ A Floating-to-Fixed 2008C 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (33,762) 7/1/ B Floating-to-Fixed 2008C 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (7,140) 7/1/ C Floating-to-Fixed 2008C 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (7,140) 7/1/ A Floating-to-Fixed 2008 D-1 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (1,680) 7/1/ B Floating-to-Fixed 2008 D-1 3/19/2008 8, % to 7/2015, % to maturity 82.0% of 10 year CMS % (358) 7/1/ C Floating-to-Fixed 2008 D-1 3/19/2008 8, % to 7/2015, % to maturity 82.0% of 10 year CMS % (358) 7/1/2036 Remaining portions of swaps after April 6, 2010 terminations 15 Fixed-to-Fixed swap #03 (amended and restated) 4/6/ , % until 7/1/ % starting at 7/1/2010 1,796 7/1/ Fixed-to-Fixed swap #05 (amended and restated) 4/6/ , % until 7/1/ % starting at 7/1/2010 2,414 7/1/ Fixed-to-Fixed swap #13 (amended and restated) 4/6/ , % until 7/1/ % starting at 7/1/ ,913 7/1/2040 $ 696,439 $ (17,161) Investment Derivative Instruments - Terms, Notional Amounts, and Mark-to-Market Values As of June 30, 2015 Outstanding Mark-to-Market Interest Rate Swap Associated Variable Rate Bonds Effective Notional County County Value Maturity Swap# Description or Amended Swaps Date (000) Pays Receives (000) Date 02 Basis Swap N/A 8/23/2001 $ 79,366 SIFMA Swap Index % 72.5% of USD LIBOR % $ (2,037) 7/1/ Basis Swap N/A 7/1/ ,518 SIFMA Swap Index 68.0% of USD LIBOR % 1,939 7/1/ A Floating-to-Fixed 2008C 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (18,726) 7/1/ B Floating-to-Fixed 2008C 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (3,960) 7/1/ C Floating-to-Fixed 2008C 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % (3,960) 7/1/ A Floating-to-Fixed 2008 D-1 3/19/ , % to 7/2015, % to maturity 82.0% of 10 year CMS % 2,654 7/1/ B Floating-to-Fixed 2008 D-1 3/19/2008 8, % to 7/2015, % to maturity 82.0% of 10 year CMS % 565 7/1/ C Floating-to-Fixed 2008 D-1 3/19/2008 8, % to 7/2015, % to maturity 82.0% of 10 year CMS % 565 7/1/2036 Remaining portions of swaps after April 6, 2010 terminations 15 Fixed-to-Fixed swap #03 (amended and restated) 4/6/ , % until 7/1/ % starting at 7/1/2010 2,364 7/1/ Fixed-to-Fixed swap #05 (amended and restated) 4/6/ , % until 7/1/ % starting at 7/1/2010 2,572 7/1/ Fixed-to-Fixed swap #13 (amended and restated) 4/6/ , % until 7/1/ % starting at 7/1/ ,058 7/1/2040 $ 710,986 $ 12,034 Credit Risk The Department is exposed to credit risk on the seven interest rate swaps with positive fair values totaling $34.7 million. The Department is not exposed to credit risk on the remaining interest rate swaps with negative fair values. Should forward interest rates change such that the fair values of those swaps become positive, the Department would then be exposed to credit risk in the amount of those derivatives fair values. As described earlier, a CSA is in place to provide collateral to protect the value of the swap under specific circumstances. The counterparty credit ratings for the Department s investment derivative swaps at June 30, 2016, are included in the table below. 105

113 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Credit Risk Interest Rate Swap Counterparty Threshold Ratings Counterparty Ratings Exposure Swap# Description Counterparty Moody's S&P Moody's S&P Fitch (000) 02 Basis Swap Citigroup Financial Products Inc. Baa2 BBB Baa1 BBB+ A $ - 04 Basis Swap Citigroup Financial Products Inc. Baa2 BBB Baa1 BBB+ A 1,612 08A Floating-to-Fixed Citigroup Financial Products Inc. Baa2 BBB Baa1 BBB+ A - 08B Floating-to-Fixed JPMorgan Chase Bank, N.A. Baa1 BBB+ Aa3 A+ AA- - 08C Floating-to-Fixed UBS AG Baa1 BBB+ A1 A A - 09A Floating-to-Fixed Citigroup Financial Products Inc. Baa2 BBB Baa1 BBB+ A - 09B Floating-to-Fixed JPMorgan Chase Bank, N.A. Baa1 BBB+ Aa3 A+ AA- - 09C Floating-to-Fixed UBS AG Baa1 BBB+ A1 A A - Remaining portions of swaps after April 6, 2010 terminations 15 Fixed-to-Fixed Citigroup Financial Products Inc. Baa2 BBB Baa1 BBB+ A 1, Fixed-to-Fixed Citigroup Financial Products Inc. Baa2 BBB Baa1 BBB+ A 2, Fixed-to-Fixed Citigroup Financial Products Inc. Baa1 BBB+ Baa1 BBB+ A 28,913 $ 34,735 As of June 30, 2016, the counterparty to Swap #18 was required to post collateral pursuant to the terms of the ISDA CSA agreement. The credit rating of this counterparty declined to the rating threshold as defined in the ISDA CSA agreement so the counterparty therefore was required to post collateral. On August 11, 2016, the counterparty posted $39.9 million of cash as collateral with the custodian. See Note 17, "Subsequent Events," for further details. Interest Rate Risk Swaps #02 and #04 are subject to interest rate risk should the relationship between the LIBOR rate and the SIFMA rate converge. If economic conditions change such that these rates converge, the expected cash flows of the swaps and expected cost savings may not be realized. Swaps #08A, #08B, and #08C and swaps #09A, #09B, and #09C are subject to interest rate risk should the relationship between the 10-year CMS rate (Constant Maturity Swap rate) and the LIBOR rate converge. If economic conditions change such that these rates converge, the expected cash flows of the swaps and expected cost savings may not be realized. The investment components of swaps #15, #16, and #18 are not subject to interest rate risk, since there is no variable rate component. Foreign Currency Risk None of the Department s interest rate swaps are subject to foreign currency risk. 106

114 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (d) Projected Maturities and Interest on Variable Rate Bonds, Bond Anticipation Notes, and Swap Payments Using the rates in effect on June 30, 2016, the approximate maturities and interest payments of the Department s variable rate debt and bond anticipation notes associated with the interest rate swaps, as well as the net payment projections on the floating-to-fixed interest rate swaps, are presented in the following table. Variable Rate Bonds Bond Anticipation Notes Due for the Fiscal Year Principal Interest Principal Interest Net Swap Payments Total Ended June 30, (000) (000) (000) (000) (000) (000) 2017 $ 14,130 $ 4,500 $ - $ 7,056 $ 29,316 $ 55, ,620 4, ,125 3,528 17, , ,195 4, ,816 95, ,675 3, ,003 97, ,705 3, ,183 98, ,700 12, , , ,045 8, , , ,940 4, , , ,220 1, , ,857 Total $ 1,086,230 $ 47,469 $ 165,125 $ 10,584 $ 166,024 $ 1,475, ) DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources consist of deferrals associated with pension accounting established under GASB 68, the fair value of a hedging derivative instrument for FY 2016 under GASB 72 and the mark-tomarket value of the hedging derivative instruments for FY 2015 under GASB 53, and the unamortized gains incurred on refunded bonds. Deferred inflows of resources also consist of the hedging derivative instrument swap #12A. Under the provisions of GASB 53, the Department is required to record the changes in the value of its interest rate swaps serving as hedging derivatives at the end of the each fiscal year. With the implementation of GASB 72, the interest rate swaps that were hedging derivative instruments as of June 30, 2016, now are stated at fair value. As of June 30, 2016, the deferred inflows of resources associated with derivative instrument swap #12A had a fair value of $0.9 million. The information required to restate the interest rate swaps that were hedging derivative instruments at fair value as of June 30, 2015, as required under GASB 72, was not available; therefore, the interest rate swaps are presented at their mark-to-market value for FY 2015 based on the provisions of GASB 53. As of June 30, 2015, the deferred inflows of resources associated with derivative instrument swap #12A had a mark-to-market value of $2.7 million. Refer to Note 10, "Derivative Instruments Interest Rate Swaps," for additional details. 107

115 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements The following schedule details the unamortized gains on bond refundings. Unamortized Gains on Refunded Bonds As of June 30, 2016 and 2015 June 30, 2016 June 30, 2015 (000) (000) 2008 Series D-1 $ 64 $ Series E Jet A Fuel Tax Series A 2,108 2, Series A-1 1,231 1, Series A 1,039 1,086 Total unamortized gains on refunded bonds $ 4,444 $ 5, ) PAYMENTS TO CLARK COUNTY The Department reimburses the County for providing the Airport System with fire services, police services, legal services, administrative services, and certain maintenance services based on its actual cost. The total amounts billed for these services were $33.5 million and $33.2 million for the fiscal years ended June 30, 2016 and 2015, respectively. 13.) COMMITMENTS AND CONTINGENCIES (a) Federal Grants As of June 30, 2016, the County had remaining commitments for grant awards from the FAA of $7.7 million for land acquisitions and certain other airport improvements. Such funds are generally available for reimbursement upon the acquisition of the specific asset or upon the incurrence of costs for a project and are accrued as receivables at that time. (b) Construction in Progress As of June 30, 2016, the Department s management estimates that construction in progress will require an additional outlay of approximately $210.0 million to bring related projects to completion. 108

116 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements (c) Litigation and Claims General Litigation The following discussion relates to litigation against the County that pertains to the Department. There is no controversy of any nature now pending against the Department or the County or, to the knowledge of its respective officers, threatened, seeking to restrain or enjoin the ability to offer notes or bonds or in any way contesting or affecting the validity of existing notes or bonds, nor are there any proceedings against the County with respect to existing notes or bonds. Resolved 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 of all cases summarized below will be affected by the decision rendered by the Nevada Supreme Court in McCarran Int'l Airport v. Sisolak, 122 Nev. 645, 137 P.3d 1110 (2006), affirming Sisolak v. McCarran Int'l Airport and Clark County, Clark County Eighth Judicial District Case No. A In Sisolak, the District Court found for the 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 the U.S. Supreme Court for a writ of certiorari based on federal law, but the petition was denied. 459 U.S (2007). Sisolak is currently the controlling law in Nevada. The County also believes that the ultimate outcomes of all cases summarized below will be affected by the Nevada Supreme Court s 2010 rulings on the statute of limitations in David Johnson, Trustee of the Joseph W. Huntsman 1983 Trust v. McCarran Int'l Airport and Clark County and 70 Limited Partnership, Tertia Dvorchak as Special Administratrix of the Estate of Thomas T. Beam, Deceased v. McCarran Int'l Airport and Clark County, discussed below. 109

117 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements In both Johnson and Dvorchak, the plaintiffs filed complaints alleging that the imposition of zoning height restrictions over the plaintiffs' properties constituted a "per se taking." The County successfully filed motions to dismiss each case based upon the statute of limitations. The Nevada Supreme Court upheld both lower court decisions that per se regulatory takings claims filed more than 15 years after the adoption of airport-related zoning regulations were time-barred. In both Johnson and Dvorchak, all seven Supreme Court justices unanimously decided in favor of affirmance. In particular, the Nevada Supreme Court found that its decision in White Pine Lumber v. City of Reno, 106 Nev. 778, 801 P.2d 1370 (1990), which recognized a 15-year limitations period in inverse condemnation cases, was applicable and that the per se regulatory takings claims accrued upon the adoption of airport-related zoning regulations. Because these decisions were decided unanimously by all seven Supreme Court Justices, there is a strong likelihood that the Nevada Supreme Court would continue to uphold dismissals of other inverse condemnation airspace takings cases that were filed more than 15 years after the adoption of Clark County Ordinance 1221 (adopted August 1, 1990), Clark County Ordinance 1599 (adopted July 6, 1994), or any other airport-related zoning regulation. Nonetheless, because the orders of affirmance in Johnson and Dvorchak were not selected for publication, it must be noted that the orders may not be cited as precedent or legal authority under Nevada Supreme Court Rule 123, making it impossible to predict the legal effect of these orders of affirmance. 110

118 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Pending Inverse Condemnation Litigation North American Properties, a Business Entity Formerly Known as Woodbridge Apartments v. McCarran Int'l Airport and Clark County, Case No. A Outside counsel is handling this litigation on behalf of the County. This case was filed July 6, The plaintiff alleges that the County used airport expansion and the imposition of height restrictions to lower the value of, or take part of, property the plaintiff owns. The County filed a motion to dismiss the plaintiff s amended complaint on January 14, On February 24, 2011, the district court dismissed the plaintiff s Ordinance 1221 airspace takings claims on the basis that the plaintiff was barred by the 15-year limitations period applicable to inverse condemnation takings claims. The plaintiff and the County continued to litigate the plaintiff s Ordinance 1599 airspace takings claims, which were not barred by the 15-year statute of limitations. The County filed numerous pre-trial motions, including, but not limited to, motions for summary judgment regarding the plaintiff s lack of standing to maintain the inverse condemnation claim and a motion to preclude the plaintiff s proposed expert from opining on a "profit entitlement theory." On September 21, 2012, the district court granted summary judgment in the County s favor, finding, among other things, that the plaintiff lacked standing to maintain the action against the County. On October 24, 2012, the plaintiff appealed this action to the Nevada Supreme Court. As is standard, the Nevada Supreme Court assigned the appeal to the settlement conference program. The case was assigned to Department 20 before the Honorable Judge Tao, where oral argument was held on December 8, After oral argument, on February 19, 2016, the Nevada Supreme Court issued an Order of Affirmance, affirming, in light of plaintiff s egregious abuses, the District Court s decision to impose case-ending sanctions against the plaintiff pursuant to its inherent powers. On July 21, 2016, the plaintiff petitioned the Supreme Court of the United States for a writ of certiorari. The County timely filed its brief in opposition. North American Properties then timely filed its brief in reply. The parties are currently awaiting a scheduling order or a hearing from the United States Supreme Court. The County believes that the plaintiff's petition for a writ of certiorari is without merit. On October 11, 2016, the Supreme Court of the United States denied the writ of certiorari. See Note 17, Subsequent Events, for further details. 111

119 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Other Possible Inverse Condemnation/Taking Litigation It is possible that other litigation will be filed 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 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. Cases of note follow. National Federation of the Blind, et al. vs. Clark County, Nevada, et al., U.S. District Court Case No. 2:11-cv Outside counsel handled this litigation on behalf of the County. The plaintiff filed suit claiming the County had violated federal law by owning and operating common use ticketing kiosks at the Airport which did not provide for access by visually impaired persons. On October 17, 2014, both parties entered into a settlement agreement stipulating payment to plaintiffs of $25.0 thousand. All parties have signed the settlement agreement, the payment was made, and the case has been dismissed. Lone Mountain Excavation and Utilities v. Fisk Electric Co. and Clark County Dept. of Aviation, Case No. A C. In this matter, the plaintiff was a subcontractor on the new FAA control tower under construction at the Airport. The plaintiff's suit involves foreclosure on a mechanic's lien. It is the Department's position that the plaintiff improperly named the Department as a defendant in this action. Specifically, it is the Department's position that there is no right to lien public land and that the County is precluded from being labeled as an "owner" according to Nevada statutory lien law. Currently, negotiations are being conducted with the plaintiff to resolve this matter. However, this case has not moved forward for some time, and, if the parties fail to reach an agreement, the Department will look to file the appropriate motion to be removed from this litigation. 112

120 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Clark County v. Coy Church, Case No. A C. This matter involved a lease of property to Las Fuel Worldwide, Inc. that had been held up by the discovery of a four-foot discrepancy in the property line. This problem traced back to a 1973 deed that failed to account for that discrepancy. The property owner at the time the problem originated has passed away. However, his son, the sole child and heir, has been located and has signed a quit claim deed and waiver of rights. The title company required the County to initiate litigation to quiet title as to any unknown heirs. A complaint to quiet title was filed on July 11, 2015, and, upon failure of any interested parties to respond, a default judgment was granted in favor of the County awarding declaratory relief and quiet title to the land in dispute. The matter was officially closed on January 20, Bombardier Transportation (Holdings) USA, Inc. v. Clark County, Nevada, Case No. A J. On or about June 1, 2008, Bombardier Transportation (Holdings) USA, Inc. ("Bombardier") and the County entered into a "Contract for Maintenance of Automated Transit System Equipment CBE-552" ("Contract"), whereby Bombardier agreed to provide maintenance services for the Automated Transit System ("ATS") equipment at the Airport. In early 2010, the Department conducted an analysis to determine whether the County would save money by performing in-house maintenance services on the ATS equipment. The Department s analysis demonstrated that the County could save hundreds of thousands of dollars each year by doing so. As a result, on June 1, 2010, the Board voted to exercise its right of termination for convenience granted to the County by the Contract. While the County and Bombardier were transitioning the work in house, Bombardier submitted a termination claim to the County asserting that Bombardier was entitled to termination costs in the amount of $1.0 million, including $0.7 million in alleged lost profits. Subsequently, Bombardier sent a revised termination claim to the County that totaled $5.5 million, including $1.6 million in alleged lost profits. The County acknowledged its responsibility to reimburse Bombardier for legitimate and documented costs which resulted from the termination, but declined to pay to Bombardier any additional costs, including any alleged lost profits. 113

121 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Unable to resolve their differences, the parties agreed to mediate Bombardier s claims. A mediation session was held on December 5, At the mediation session, the parties reached a tentative agreement which had to be approved or rejected by the Board and by Bombardier on or before January 25, Pursuant to the tentative agreement, the parties agreed that the County would reimburse Bombardier for certain substantiated expenses and that the parties would submit the sole issue of the lost profits that Bombardier would have received had the contract continued in effect through the contract s termination date of June 2013 to binding arbitration conducted by a former judge acting as arbitrator. On January 11, 2016, the arbitrator issued an Arbitration Decision and Award for Bombardier in the amount of $1.6 million, concluding the matter. The Department expensed the cost in FY There are a number of civil actions alleging personal injury and property damage pending against the Department. Pursuant to the Department's liability insurance coverage, the Department has retained counsel to defend these actions. Any monetary exposure above the deductible in those cases of which the Department is aware would be covered by insurance. 14.) 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 the Lease or with the provisions of the applicable County 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 either on a percentage of the concessionaires gross sales or a stated minimum annual guarantee, whichever is greater, or on other land and building rents that are based on square footage rental rates. The Department received $245.2 million and $230.7 million in the years ended June 30, 2016, and 2015, respectively, for contingent rental payments in excess of the stated annual minimum guarantees. The following is a schedule of minimum future rental income on non-cancelable operating leases as of June 30,

122 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements Minimum Future Rents Fiscal Year (000) 2017 $ 258, , , , ,621 Thereafter 391, ) 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 off-airport auto liability, employee medical benefits, and workers compensation. From time-to-time, the Department carries cash and cash equivalents on deposit with financial institutions in excess of federally-insured limits. However, the extent of any future loss to be sustained as a result of uninsured deposits in the event of a failure of a financial institution, if any, is not subject to estimation at this time. 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 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 $1.0 million per claim. The Department reimburses the County at a per capita rate for employee medical benefits and for a percentage of payrolls 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 self-insured workers' compensation fund. 115

123 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 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. 16.) AIRPORT LAND TRANSFERS 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, 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, with 40 B.SC (relating to airport noise compatibility planning), and with 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 be compatible with the law and with Airport Noise Compatibility Planning provisions; and 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 percent 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 percent 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. 116

124 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements The original Cooperative Management Area ("CMA") acreage was established based on the forecasted Decibel Day/Night Noise Level ("DNL") and higher noise contour determined by the noise study established pursuant to Federal Aviation Regulation 14 C.F.R. Part 150 (Airport Noise Compatibility Planning) and adopted in An updated noise study was approved by the FAA in 2008 with forecasted noise contours for 2017, which were codified into the Clark County Development Code on June 4, The 2017 noise contour is significantly smaller than that of the 1992 contour, due in large part to advances in quieter aircraft technology. The smaller noise contour results in approximately 3,600 acres of CMA land falling outside the new 60 Decibel DNL noise contour. On May 7, 2013, the Board approved a policy allowing landowners to apply for modification of certain restrictions on qualifying parcels to reflect the change in the noise contour. Following the change in the noise contour and Board approval, landowners no longer restricted under the old noise contour had the opportunity to modify their deed to eliminate the noise contour restrictions. The second phase of this program was completed in FY In FY 2016, there were no transactions under this program. For FY 2015, $1.5 million of proceeds was generated from these deed modifications, and the Department s share of these proceeds was $0.2 million. Due to the uncertainty of any future benefit to the Department, a value has not been assigned to, nor was income reported relating to, land not yet sold or leased under the Southern Nevada Public Land Management Act of Gross proceeds from the sale and lease of CMA land for the year ended June 30, 2016, were $6.7 million, and from inception to that date were $150.4 million. The Department's share of these proceeds was $669.1 thousand for the year ended June 30, 2016, and from inception to that date was $15.0 million. As of June 30, 2016, the Department has paid the BLM and the State of Nevada all amounts due. 17.) SUBSEQUENT EVENTS Subsequent to June 30, 2016, the following significant events occurred. 1. On May 2, 2016, the County published a Notice of Full Redemption to the holders of the Series 2006A Bonds. The outstanding principal balance on the bonds, $31.1 million, was called for full redemption on July 1, 2016, along with all outstanding interest due. 117

125 CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA Notes to Financial Statements 2. As of June 30, 2016, the 2010 F-2 PFC Bonds were supported by an Irrevocable Direct-Pay Letter of Credit. This Letter of Credit was scheduled to expire on August 9, On July 8, 2016, the Department amended the Letter of Credit to extend the terms to August 7, As of June 30, 2016, the 2008 D-3 Bonds were supported by an Irrevocable Direct-Pay Letter of Credit. This Letter of Credit was scheduled to expire on November 4, On July 8, 2016, the Department amended the Letter of Credit to extend the terms to July 8, As of June 30, 2016, the counterparty to Swap #18 was required to post collateral pursuant to the terms of the ISDA CSA agreement. The credit rating of this counterparty was reduced to below the required threshold level as outlined in the ISDA CSA agreement for Swap #18. Under the terms of the ISDA CSA agreement, the Department may demand that the counterparty post collateral to the Department or to a custodian appointed by the Department to hold the collateral. On August 9, 2016, both the counterparty and the Department agreed to terms with the Bank of New York Mellon under a Collateral Account Control Agreement where Bank of New York Mellon would act as the custodian of the collateral. On August 10, 2016, the Department posted its demand to the counterparty for the collateral under the ISDA CSA. On August 11, 2016, the counterparty posted $39.9 million of cash as collateral with the custodian. 5. On October 11, 2016, the Supreme Court of the United States denied the writ of certiorari filed by North American Properties. 118

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127 Required Supplementary Information 120

128 Clark County Department of Aviation Clark County, Nevada Schedule of Other Postemployment Benefits Funding Progress Actuarial Accrued UAAL as a Actuarial Liability (AAL) Unfunded Covered Percentage of Actuarial Value of Assets Entry Age Normal AAL (UAAL) Funded Ratio Payroll Covered Payroll Valuation Date (a) (b) (b-a) (a/b) (c) (b-a)/c Self-funded/HPN 7/1/2008 $ - $ 60,047,814 $ 60,047,814 $ - $ 77,526, % 7/1/ ,469,098 95,469,098-76,755, % 7/1/ ,026, ,026,574-75,184, % 7/1/ ,694, ,694,274-79,827, % PEBP plan 7/1/2008 $ - $ 17,290,402 $ 17,290,402 $ - $ - N/A* 7/1/ ,417,513 17,417, N/A* 7/1/ ,890,957 19,890, N/A* 7/1/ ,194,347 12,194, N/A* * PEBP no longer has active employees effective 9/1/

129 Clark County Department of Aviation Clark County, Nev ada Schedule of Proportionate Share of Net Pension Liability Last Ten Fiscal Years * FY 2016 FY 2015 Proportion of the Plan's net pension liability 1.25% 1.25% Proportionate share of the net pension liability $ 142,761,701 $ 130,300,856 Covered-employee payroll $ 79,620,533 $ 76,325,674 Proportionate share of the net pension liability as a percentage of the covered-employee payroll % % Plan's fiduciary net position $ 34,610,720,184 $ 33,575,081,157 Plan fiduciary net position as a percentage of the total pension liability 75.10% 76.30% * FY 2015 was the first year of implementation. This schedule is intended to show information over a period of ten years. Information for additional years will be presented as it becomes available Covered-employee payroll is based on prior year PERS eligible payroll cost. 122

130 Clark County Department of Aviation Clark County, Nev ada Schedule of Defined Benefit Plan Contributions Last Ten Fiscal Years * (a) (b) (a)/(b) Contractually Contributions in required relation to the Contributions as a contribution actuarially Contribution percentage of Plan year ending (actuarially determined deficiency Covered covered June 30 determined) contributions (excess) payroll employee payroll 2015 $ 19,683,368 $ 19,683,368 $ - $ 79,620, % ,925,327 21,925,327-82,009, % * FY 2015 was the first year of implementation. This schedule is intended to show information over a period of ten year Information for additional years will be presented as it becomes available. Cov ered-employee payroll is based on current year PERS eligible cost. 123

131 Clark County Department Of Aviation Clark County, Nevada Notes to Required Supplementary Information Pension Plan Schedules Methods and Assumptions Used in Calculations of Actuarially Determined Contributions The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, The following actuarial methods and assumptions were used to determine contribution rates reported in that schedule. Actuarial cost method Amortization method Entry age normal. The unfunded actuarial accrued liability ("UAAL") as of June 30, 2011, shall continue to be amortized over separate 30-year period amortization layers based on the valuations during which each separate layer was previously established. Any new UAAL as a result of actuarial gains or losses identified in the annual valuation as of June 30 will be amortized over a period of equal to the truncated average remaining amortization period of all prior UAAL layers. This would occur until the average remaining amortization period is less than 20 years. At that point, amortization periods of 20 years would be used for actuarial gains and losses. Any new UAAL as a result of change in actuarial assumptions or methods will be amortized over a period equal to the truncated average remaining amortization period of all prior UAAL layers. This would occur until the average remaining amortization period is less than 20 years would be used for assumption or method changes. UAAL layers shall be amortized over "closed" amortization periods so that the amortization period for each layer decreases by one year with each actuarial valuation. UAAL layers shall be amortized as a lever of percentage of payroll. Asset valuation method 5-year smoothed market. Assumed inflation rate 3.5% Payroll growth assumption for future years Assumed investment rate of return 5.0% per year for regular employees. 8.0% (including 3.5% for inflation). Mortality rates: Healthy: Regular RP-2000 Combined Healthy Mortality Table projected to 2013 with Scale AA, set back one year for females (no age for males). Disabled: Regular RP-2000 Disabled Retiree Mortality Table projected to 2013 with Scale AA, set forward three years. 124

132 Clark County Department Of Aviation Clark County, Nevada Notes to Required Supplementary Information Pension Plan Schedules Salary increases Inflation: Productivity pay increases: Promotional and merit salary increases: 3.50% Plus. 0.75% Plus. Years of Service Regular Less than % or more 0.35 Changes of Assumptions There have been no changes in actuarial assumptions or methods since the last valuation. 125

133 Supplementary Information 126

134 Clark County Department of Aviation Clark County, Nevada Schedule of Insurance Coverage As of June 30, 2016 Amount of Coverage Description Limit Insurer Expiration $100 million Airport Liability $100 million Chubb Insurance 10/01/2016 * $650 million Excess Airport Liability $650 million Westchester Fire Insurance 10/01/2016 $150 million Third Party War Liability $150 million Lloyds / Westchester 10/01/2016 $1,000 million Airport Property Liability $1,000 million Lexington 10/01/2016 $350 million Terrorism $350 million Lexington 10/01/2016 $300 million Construction Liability $300 million Lloyds of London 07/01/2017 $77 million Builder's Risk $77 million Travelers 07/01/2017 $40 million Pollution and Remediation $40 million Indian Harbor 03/27/2018 $5 million Employment Practices Liability $5 million Zurich 10/01/2016 $5 million Cyber Liability Insurance $5 million National Union Fire 05/01/2017 *Ace and Chubb Insurance companies merged in 2016 and decided to retain the Chubb name. Coverage is reviewed annually by the insurance provider and is subject to change based on review. This policy has various sublimits such as $2.5 million for regulatory action and $2 million for system failure endorsement. 127

135 Clark County Department of Aviation Clark County, Nevada Schedule of Airport Revenue Bond Debt Service Coverage FY FY Reference (000) (000) Operating revenue $ 540,200 $ 521,729 Build America Bond subsidy payments received 16,840 16,750 Interest income 4,281 1,875 Total revenue (a) 561, ,354 Other available funds: Senior lien coverage 18,850 19,883 Subordinate lien cov erage (b) 14,037 11,855 Total other available funds 32,887 31,738 Total revenue and other available funds 594, ,092 Operating expenses (c) (239,114) (234,368) Net revenues available for debt service (d) 355, ,724 PFC revenue 89,567 83,921 PFC fund interest income 1, Total PFC rev enue (e) 91,425 84,675 Senior lien debt service (f) 75,401 79,533 Subordinate lien debt service 140, ,553 Shortfall / (excess) pledged PFC revenue* - - Total subordinate lien debt service (g) 140, ,553 Senior and subordinate lien debt serv ice (h) 215, ,086 Subordinate PFC debt service (i) 75,977 76,185 (Shortfall) / excess pledged PFC revenue* - - Total subordinate PFC debt service $ 75,977 $ 76,185 Coverage achieved: Net revenue (informational only) (a-c)/f Senior lien including other available funds (1.25 required) (d-b)/f Senior and subordinate lien including other available funds (1.10 required) d/h Subordinate lien after payment of senior lien (d-f)/g Subordinate PFC bonds (informational only) e/i * PFC pledged excess revenues maybe used for subordinate lien debt service on bonds whose proceeds were used for approved PFC projects. 128

136 Clark County Department of Aviation Clark County, Nev ada Schedule of Cash Receipts and Disbursements - Restricted Accounts As of and for the Fiscal Year Ended June 30, 2016 Working Capital Capital and Passenger Current Debt Service and Contingency Rate Stabilization Construction Facility Charge Debt Service Reserve Reserve Reserve Total (000) (000) (000) (000) (000) (000) (000) Cash and investments, beginning of fiscal year $ 88,217 $ 35,816 $ 229,130 $ 204,775 $ 19,531 $ 44,358 $ 621,827 Cash Receipts: Passenger Facility Charges - 89, ,336 Jet Aviation Fuel Tax , ,149 FAA Grants 34, ,650 Bond proceeds , ,577 Interest received , ,047 Proceeds from capital asset disposal Transfers in , , ,314 Total Cash Receipts 35,389 90, ,861 14, , ,073 Total cash and investments available 123, , , ,485 19,879 55,965 1,383,900 Cash disbursements: Deposits to refunding escrow , ,971 Bond issuance costs - - 1, ,606 Project costs 39, ,448 Principal payments , ,050 Interest payments , ,941 Transfers out 1,706 76,467-12, , ,212 Total cash disbursements 41,154 76, ,568 12, , ,228 Cash and investments, end of fiscal year $ 82,452 $ 49,507 $ 282,423 $ 206,960 $ 19,832 $ 43,498 $ 684,

137 Clark County Department of Aviation Clark County, Nev ada Schedule of Operating Revenues and Expenses by Cost Center Actual and Budget for the Fiscal Year Ended June 30, 2016 (With Comparative Totals for the Fiscal Year Ended June 30, 2015) Other Consolidated Year Ended June 30, 2016 Actual Terminal Airfield Apron Buildings Ivanpah Terminal Reliever Car Rental General and Actual Budgeted Year Ended Building Area Area and Areas Heliport Airport Area Airports Facility Administrative Total Total June 30, 2015 (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) Operating Rev enues: Landing fees $ - $ 50,905 $ - $ - $ - $ - $ - $ - $ - $ - $ 50,905 $ 50,641 $ 54,342 Other aircraft fees - 6, , ,781 11,550 12,076 Building rentals 185, ,072 6, , , , ,757 Land rentals - 7,597 1,703 10, , ,541 22,870 21,722 Ground transportation fees , ,832-54,874 50,155 50,650 Gaming revenue 29, ,516 27,010 27,656 Terminal concessions 64, , ,172 67,625 66,733 Parking , ,852 35,000 36,034 Other ,173 1,820 2,440 1,759 Total Operating Revenues 279,561 65,537 36,045 16, ,697 9,130 73,079 1, , , ,729 Operating Expenses: Salaries, wages and benefits 54,631 8,783 10,675 3, ,298 6,508 1,371 17, , , ,498 Professional fees 18,184 6,640 1,569 4, , ,768 8,779 54,687 59,144 52,610 Repairs and maintenance 13, , , ,247 1,281 21,176 24,458 21,421 Utilities and communication 9, , , ,534 2,152 24,338 28,000 25,666 Materials and supplies 8, ,315 12,844 30,455 11,349 Administrative ,648 4,021 2,855 2,357 Insurance 1, ,395 3,101 2,467 Total Operating Expenses 106,336 17,544 13,656 12, ,692 8,992 14,963 34, , , ,368 Allocation percentage of general and administrative costs 51.9% 8.6% 6.7% 6.1% 0.0% 0.0% 15.0% 4.4% 7.3% 0.0% 100.0% 0.0% 100.0% Allocation of general and administrative costs 17,858 2,946 2,293 2, ,154 1,510 2,513 (34,383) Total Operating Expenses After Allocation 124,194 20,490 15,949 14, ,846 10,502 17, , , ,368 Income (loss)from Operations $ 155,367 $ 45,047 $ 20,096 $ 2,352 $ - $ (29) $ 22,851 $ (1,372) $ 55,603 $ 1,173 $ 301,086 $ 243,516 $ 287,

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139

140 Overview of Information Provided in the Statistical Section The information provided in the statistical section has not been audited. It is intended to provide financial statement users with additional historical perspective, context, and detail to assist in using the information in the financial statements, the notes to the financial statements, and the required supplementary information in order to understand and assess the Department s economic condition. Financial trend data has been provided to assist users in understanding and assessing how the Department s financial position has changed over time. The financial trend data provided includes summaries of trends in operating revenues, expenses, and changes in net positions for the last ten years of the Department s operations. This section also includes detailed information on operating income before depreciation and non-operating income and expenses. Also included in this section is detailed information on operating expenses by type such as wages, maintenance, professional services, security and fire services, utilities, materials and supplies, insurance, and other expenses. Revenue capacity information has been provided to assist users in understanding and assessing the factors affecting the Department s ability to generate its own source revenues. Revenue capacity information provided includes revenues by type such as rentals, fees, and airport concessions as well as summary information on restricted revenues for the same period. Debt capacity information has been provided to assist users in understanding and assessing the Department s debt burden as well as the Department's ability to service existing debt and issue additional debt. Schedules of bond debt service coverage are included to provide trends in coverage for senior lien debt, subordinate lien debt, PFC bonds, junior subordinate lien debt and Jet A bonds, and general obligation bonds issued by the Department. Demographic and economic information has been provided to assist users in understanding the socioeconomic environment within which the Department operates and to provide information that facilitates comparisons of financial statement information over time. Demographic and economic indicators provided include schedules of metropolitan service area visitor volume, room occupancy rates, and convention attendance statistics as well as population, labor source, and unemployment rates of the surrounding community. Operating information has been provided to assist users with contextual information about the Department s operations and resources and to assist the reader in using financial statement information to understand and assess the Department s economic condition. Included in this section is passenger enplanement statistics, cargo tonnage, and aircraft landed weights for the last ten years of the Department s operations; airline market share information by airline for the last three years of airport operations; and an analysis of per passenger concession revenues, expenses, bond debt service coverage, and airline costs for the last ten years of the Department s 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. 133

141 Clark County Department of Aviation Clark County, Nevada Summary of Changes in Net Position Last Ten Fiscal Years (Unaudited) Net Income Depreciation Non-Operating Income Operating Percentage Operating Percentage Before Percentage and Percentage Operating Percentage Income Percentage before Capital Percentage Capital Percentage Change in Percentage Fiscal Revenue of Increase/ Expenses of Increase/ Depreciation of Increase/ Amortization of Increase/ Income of Increase/ (expense) of Increase/ Contributions of Increase/ Contributions of Increase/ Net Position of Increase/ Year (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease 2007 $ 323, % $ 207, % $ 115, % $ 85, % $ 30, % $ 50, % $ 80, % $ 25, % $ 105, % , % 247, % 128, % 81, % 47, % 34, % 81, % 22, % 103, % , % 244, % 134, % 122, % 12, % (40,369) % (28,238) % 41, % 12, % , % 227, % 134, % 134, % % (40,236) -0.3% (39,848) 41.1% 22, % (16,934) % , % 217, % 175, % 136, % 39, % (25,597) -36.4% 13, % 16, % 30, % , % 223, % 132, % 137, % (4,747) % (162,232) 533.8% (166,979) % 36, % (130,227) % , % 236, % 260, % 199, % 60, % (93,200) -42.6% (32,667) -80.4% 10, % (22,200) -83.0% , % 233, % 273, % 198, % 74, % (132,746) 42.4% (57,916) 77.3% 9, % (48,122) 116.8% 2015* 521, % 234, % 287, % 198, % 88, % (81,794) -38.4% 6, % 30, % 36, % 2016* 540, % 239, % 301, % 197, % 103, % (99,021) 21.1% 4, % 19, % 23, % Average of Annual Increase (Decrease) 7.1% 4.9% 11.9% 12.3% 838.1% 27.1% % 13.6% % This schedule provides information on operating revenues and expenses, non-operating income, capital contributions, and changes in net position for the last ten years of the Department's operations. * Fiscal Year incorporates GASB

142 Clark County Department of Aviation Clark County, Nevada Schedule of Revenues, Expenses, and Changes in Net Position Budget vs. Actual for the Fiscal Year Ended June 30, 2016 (With Comparative Totals for the Fiscal Year Ended June 30, 2015) FY 2016 FY 2015 Variance- Positive Budget Actual (Negative) Actual (000) (000) (000) (000) Operating Revenues Landing fees $ 50,641 $ 50,905 $ 264 $ 54,342 Other aircraft fees 6,435 6, ,575 Terminal concessions fees 67,625 67,009 (616) 66,586 Building rental 256, ,708 5, ,505 Public and employee parking fees 35,000 38,852 3,852 36,034 Gaming fees 27,010 29,516 2,506 27,657 Rental car concession fees 33,350 35,600 2,250 33,853 Land rental 22,870 22,020 (850) 22,122 Ground transportation fees 16,805 19,273 2,468 16,797 Other 7,555 8,602 1,047 8,258 Total Operating Revenue 523, ,200 16, ,729 Operating Expenses Salaries and wages 82,074 79,804 (2,270) 77,781 Employee benefits 49,926 39,849 (10,077) 40,717 Contracted and professional services 59,144 54,687 (4,457) 52,610 Repairs and maintenance 24,458 21,176 (3,282) 21,421 Utilities and communications 28,000 24,338 (3,662) 25,666 Materials and supplies 30,455 12,844 (17,611) 11,349 Administrative expenses 5,956 6, ,824 Total Operating Expenses 280, ,114 (40,899) 234,368 Operating income before depreciation 243, ,086 57, ,361 Depreciation/Amortization 200, ,738 (2,262) 198,672 Operating income or (loss) 43, ,348 55,308 88,689 Non-operating Revenues (Expenses) Passenger Facility Charge revenue 82,546 89,567 7,021 83,921 Jet A Fuel Tax 11,196 11, ,542 Interest and investment income (18,125) (16,977) 1,148 6,813 Interest expense (214,456) (183,010) 31,446 (193,252) Capital contributions 28,563 19,222 (9,341) 30,013 Net gain (loss) from disposition of capital assets (138) 10,182 Total non-operating revenues (expenses) (110,076) (79,799) 30,277 (51,781) Change in net position (66,560) 23,549 90,109 36,908 Net position, beginning of year 1,199,868 1,199,868-1,307,623 Cumulative effect of change in accounting principle (144,663) Net position, end of year $ 1,133,308 $ 1,223,417 $ 90,109 $ 1,199,868 This schedule provides information on budget and actual figures for the current year and actual figures for the prior year for revenues, expenses, and changes in net position. 135

143 Clark County Department of Aviation Clark County, Nevada Summary of Non-operating Income and Expenses Last Ten Fiscal Years (Unaudited) Passenger Customer Jet A Interest and Gain/(loss) Other Total Facility Percentage Facility Percentage Fuel Tax Percentage Investment Percentage Interest Percentage Disposition Percentage Income Percentage Non-operating Percentage Fiscal Charges of Increase/ Charges of Increase/ Revenue of Increase/ Income of Increase/ Expense of Increase/ of Assets of Increase/ (Expense) of Increase/ Inc. / (Exp.) of Increase/ Year (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease 2007 $ 89, % $ 10, % $ 9, % $ 54, % $ 112, % $ - 0.0% $ (831) % $ 50, % , % 50, % 9, % 60, % 157, % (8,693) 100.0% % 34, % , % % 8, % 22, % 137, % (8,921) 2.6% (322) % (40,369) % , % - 0.0% 7, % 45, % 164, % (6,622) -25.8% % (40,236) -0.3% , % - 0.0% 7, % 51, % 162, % (35) -99.5% - 0.0% (25,596) -36.4% , % - 0.0% 7, % (59,272) % 157, % (33,000) 94,185.7% - 0.0% (162,232) 533.8% , % - 0.0% 11, % 48, % 232, % (607) -98.2% - 0.0% (93,200) -42.6% , % - 0.0% 10, % (8,927) % 213, % % - 0.0% (132,746) 42.4% , % - 0.0% 10, % 6, % 193, % 10,182 5,258.9% - 0.0% (81,794) -38.4% , % - 0.0% 11, % (16,977) % 183, % % - 0.0% (99,021) 21.1% Average of Annual Increase (Decrease) 0.5% 27.7% 3.2% -92.5% 6.7% N/A N/A N/A This schedule provides information on non-operating income and expenses by source and/or activity. 136

144 Clark County Department of Aviation Clark County, Nev ada Schedule of Airport Revenue Bond Debt Service Coverage From Operating Revenues and Interest Income Available for Debt Service Last Ten Fiscal Years (Unaudited) (a) (b) (c) (d) (e) (a) minus (b) (b) minus (c) Total Revenue Total Revenue Less: Net Revenue Net Revenue (g) (e)/(g) Available for Available for Operating and Available for Available for (f) (d)/(f) Subordinate Senior and Senior Subordinate Maintenance Senior Subordinate Senior Lien Senior Lien Lien Debt Subordinate Fiscal Debt Service Debt Service Expenses Debt Service Debt Service Debt Service Coverage Service Lien Coverage Year (000) (000) (000) (000) (000) (000) (1.25 Required *) (000) (1.10 Required*) 2007 $ 358,586 $ 363,336 $ 207,443 $ 151,143 $ 155,893 $ 40, $ 47, , , , , ,840 39, , , , , , ,656 43, , , , , , ,566 60, , , , , , ,150 63, , , , , , ,050 31, , , , , , ,604 71, , , , , , ,795 70, , ** 560, , , , ,724 79, , ** 580, , , , ,094 75, , Average Annual Increase (Decrease) 5.5% 5.6% 1.6% 9.5% 9.6% 7.2% 2.1% 12.8% -0.8% * Required by Master Indenture of Trust, dated May 1, 2003, as amended ** Fiscal year incorporates GASB 68 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 (Unaudited) PFC PFC Fiscal Revenue Debt Service PFC Coverage Year (000) (000) (none Required) 2007 $ 93,756 $ 79, ,079 95, ,271 89, ,805 81, ,997 82, ,688 76, ,158 76, ,250 76, ,675 76, ,425 75, Average Annual Increase (Decrease) -0.3% -0.6% 0.3% This schedule provides information on coverage requirements for senior lien and subordinate lien debt service as defined in the Master Indenture of Trust dated May 1, For illustrative purposes, this schedule also provides calculated coverage for Passenger Facility Charge revenue bonds issued by the Department. 137

145 Clark County Department of Aviation Clark County, Nev ada Summary of Operating Revenues Last Ten Fiscal Years (Unaudited) Total Operating Percentage Landing Other Concessions Percentage Aircraft Percentage Building Percentage Land Percentage Ground Percentage Percentage Percentage Percentage Percentage Fiscal Revenue of Increase/ Fees of Increase/ Fees of Increase/ Rentals of Increase/ Rentals of Increase/ Transportation of Increase/ Gaming of Increase/ Terminal of Increase/ Parking of Increase/ Misc. of Increase/ Year (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease 2007 $ 323, % $ 32, % $ 9, % $ 106, % $ 16, % $ 40, % $ 40, % $ 48, % $ 28, % $ % , % 35, % 28, % 105, % 15, % 66, % 38, % 54, % 27, % 2, % , % 51, % 29, % 123, % 16, % 40, % 30, % 53, % 27, % 6, % , % 51, % 5, % 138, % 18, % 37, % 25, % 51, % 26, % 6, % , % 57, % 5, % 155, % 18, % 40, % 25, % 53, % 28, % 7, % , % 38, % 6, % 130, % 18, % 43, % 25, % 56, % 28, % 7, % , % 53, % 5, % 248, % 20, % 45, % 23, % 62, % 30, % 7, % , % 54, % 6, % 242, % 21, % 47, % 25, % 65, % 33, % 8, % 2015* 521, % 54, % 6, % 249, % 22, % 50, % 27, % 66, % 36, % 8, % 2016* 540, % 50, % 6, % 261, % 22, % 54, % 29, % 67, % 38, % 8, % Average of Annual Increase (Decrease) 7.1% 10.2% 15.1% 14.2% 3.9% 6.2% -2.4% 4.2% 4.1% 27.8% This schedule provides operating income by revenue type as rentals, fees, and concessions for the last ten years of the Department's operations. * Fiscal Year incorporates GASB

146 Clark County Department of Aviation Clark County, Nevada Summary of Restricted Revenues Last Ten Fiscal Years (Unaudited) Jet A Fuel Tax PFC CFC Jet Aviation Percentage Per Enplaned Passenger Percentage Per Enplaned Customer Percentage Per Enplaned Fiscal Fuel Tax of Increase/ Passenger Facility Charge of Increase/ Passenger Facility Charge of Increase/ Passenger Year (000) Decrease (000) (000) Decrease (000) (000) Decrease (000) 2007 $ 9, % $ 0.41 $ 89, % $ 3.96 $ 10, % $ , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % Average of Annual Increase (Decrease) 3.2% 0.5% This schedule provides information on restricted revenues for capital project funding collected from fuel taxes and passenger fees for the last ten years of the Department's operations. 139

147 Clark County Department of Av iation Clark County, Nev ada Ratios of Airport Revenue Bond Debt Service to Total Operating Revenues and Expenses Last Ten Fiscal Years (Unaudited) 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 2007 $ 40,371 $ 47,505 $ 87,876 $ 323, $ 207, ,934 57,602 97, , , ,066 47,919 90, , , ,674 47, , , , ,194 57, , , , ,670 42,053 73, , , , , , , , , , , , , * 79, , , , , * 75, , , , , Average Annual Increase (Decrease) 7.2% 12.8% 10.5% 5.9% -4.2% 1.6% -8.1% This schedule provides information on bond debt service ratios for operating revenues and operating expenses for the last ten years of the Department's operations. * Fiscal Year incorporates GASB

148 Clark County Department of Av iation Clark County, Nev ada Outstanding Debt Principal Balance by Type Last Ten Fiscal Years (Unaudited) Junior Subordinate Passenger Subordinate General Senior Lien Lien Facility Charge Lien Debt Obligation Fiscal Bonds Bonds Bonds and Jet A Bonds Bonds Total Year (000) (000) (000) (000) (000) (000) 2007 $ 246,933 $ 1,379,704 $ 706,381 $ 413,420 $ 78,068 $ 2,824, ,670 1,576, , ,050 78,548 3,146, ,555 1,563, , ,931 78,633 3,081, ,129,066 2,079,879 1,096, ,231 78,718 4,800, ,087,034 2,060,279 1,068, ,414 78,803 4,699, ,043,717 2,041,597 1,040, ,206 78,888 4,497, ,820 2,019,542 1,002, ,335 78,973 4,476, ,010 2,009, , ,286 80,199 4,430, ,455 1,982, , ,077 79,958 4,350, ,131 1,960, , ,118 79,717 4,272,383 This schedule provides information on bond debt valued at outstanding principal net of unamortized premiums and discounts for the last ten years of the Department's operations. 141

149 Clark County Department of Aviation Clark County, Nev ada Summary of Operating Expenses Last Ten Fiscal Years (Unaudited) Repairs, Percentage Wages and Percentage Professional Percentage Percentage Supplies and Percentage Percentage Percentage Fiscal Total of Increase/ Benefits of Increase/ Services of Increase/ Utilities of Increase/ Maintenance of Increase/ Insurance of Increase/ Administrative of Increase/ Year (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease (000) Decrease 2007 $ 207, % $ 82, % $ 49, % $ 22, % $ 43, % $ 5, % $ 2, % , % 98, % 68, % 22, % 47, % 5, % 4, % , % 112, % 64, % 22, % 39, % 4, % 1, % , % 109, % 56, % 21, % 35, % 2, % 2, % , % 111, % 49, % 20, % 31, % 2, % 3, % , % 111, % 51, % 20, % 34, % 2, % 2, % , % 118, % 56, % 23, % 33, % 2, % 2, % , % 117, % 54, % 24, % 32, % 2, % 2, % 2015* 234, % 118, % 52, % 25, % 32, % 2, % 2, % 2016* 239, % 119, % 54, % 24, % 34, % 2, % 4, % Average Annual Increase (Decrease) 1.6% 4.3% 1.0% 0.8% -2.8% -9.5% 3.4% This schedule provides information on operating expenses by type for wages and benefits; professional services; utilities; repairs, supplies, and maintenance; insurance; and administrative expenses for the last ten years of the Department's operations. * Fiscal Year incorporates GASB

150 Clark County Department of Aviation Clark County, Nevada Passenger and Operating Statistics Last Ten Fiscal Years (Unaudited) Percentage Percentage Total Percentage Percentage Fiscal Aircraft Operations of Increase/ Landed Weight of Increase/ Enplaned of Increase/ Cargo of Increase/ Year (Departures) Decrease (000 lbs.) Decrease Passengers Decrease Tons Decrease , % 28,831, % 23,628, % 104, % , % 28,941, % 23,525, % 100, % , % 25,973, % 20,739, % 90, % , % 24,306, % 19,952, % 90, % , % 24,288, % 20,266, % 95, % , % 24,855, % 20,962, % 96, % , % 24,314, % 20,872, % 105, % , % 24,431, % 21,224, % 104, % , % 24,682, % 21,879, % 109, % , % 25,836, % 23,343, % 108, % Average Annual Increase (Decrease) -1.7% -1.2% -0.1% 0.4% This schedule provides information on passenger and landed weight statistics for the last ten years of the Department's operations. 143

151 Clark County, Nev ada Las Vegas Visitor, Convention, and Room Statistics Last Ten Calendar Years (Unaudited) Percentage Percentage Total Available Percentage Percentage Calendar Total Visitor of Increase/ Convention of Increase/ Hotel-Motel of Increase/ Occupancy of Increase/ Year Volume Decrease Attendance Decrease Rooms Decrease Rates Decrease ,196, % 6,209, % 132, % 90.4% 0.8% ,481, % 5,899, % 140, % 86.0% -4.9% ,351, % 4,492, % 148, % 81.5% -5.2% ,335, % 4,473, % 148, % 80.4% -1.3% ,928, % 4,865, % 150, % 83.8% 4.2% ,727, % 4,944, % 150, % 84.4% 0.7% ,668, % 5,107, % 150, % 84.3% -0.1% ,126, % 5,169, % 150, % 86.8% 3.0% ,312, % 5,891, % 149, % 87.7% 1.0% 2016 not av ailable not av ailable not av ailable not av ailable Av erage Annual Increase (Decrease) to Latest Year of Av ailability 1.0% -0.7% 1.5% -0.4% Source: Las Vegas Convention and Visitors Authority - City of Las Vegas figures This schedule prov ides v isitor, room, and conv ention statistics for the Las Vegas metropolitan area for the last ten years of the Department's operations. In calendar year 2015, 43% of the visitors arriving in Las Vegas arrived through the Airport. In addition, prior to FY 2008, the Airport had seen a strong correlation between growth in hotel rooms and growth in total Airport passengers. 144

152 Clark County Department of Av iation Clark County, Nev ada Market Share of Air Carriers Last Three Fiscal Years (Unaudited) FY FY FY Enplaned Passengers Enplaned Passengers Enplaned Passengers Percent of Increase/ Percent of Increase/ Percent of Increase/ Airline Number Total Decrease Number Total Decrease Number Total Decrease Southwest 9,127, % 4.5% 8,735, % 4.7% 8,343, % 0.7% Delta 2,080, % 4.1% 1,998, % -3.9% 2,079, % 1.5% American 2,050, % 46.9% 1,395, % 5.7% 1,320, % 3.9% United 1,834, % -0.9% 1,850, % -6.6% 1,982, % -2.7% Spirit 1,494, % 22.5% 1,219, % 8.2% 1,127, % 20.2% Allegiant 1,149, % 5.5% 1,090, % -0.9% 1,100, % -2.9% Frontier 829, % 97.6% 419, % 54.4% 271, % -1.9% JetBlue 648, % 24.4% 521, % 17.5% 443, % -13.9% Alaska 637, % -4.5% 667, % 3.8% 643, % 3.5% Virgin America 544, % 25.7% 433, % 11.9% 387, % 19.3% US Airways * 343, % -63.0% 927, % -2.8% 953, % -0.2% Hawaiian Air 252, % 1.4% 248, % -1.1% 251, % -0.4% Sun Country 95, % 2.4% 93, % 6.8% 87, % 9.4% AirTran - 0.0% % 48, % -72.8% 178, % 11.7% International Carriers 1,735, % 1.8% 1,704, % 10.4% 1,543, % 5.8% Charter Airlines 43, % -19.1% 53, % 5.1% 51, % -4.3% General Av iation & Other 474, % 1.1% 469, % 2.0% 459, % 1.6% Total Enplanements 23,343, % 6.7% 21,879, % 3.1% 21,224, % 1.7% * Merger with American Airlines completed October Merger with Southwest completed in December This schedule provides market share information by air carrier for the last three years of the Department's operations. 145

153 Clark County Department of Av iation Clark County, Nev ada Per Passenger Calculations Last Ten Fiscal Years (Unaudited) Concession Operating Airport Airline Fiscal Concessions Revenue per Expenses per Revenue Bond Cost per Year Ground Trsp. Gaming Terminal Parking Enplanement Enplanement Debt Service Enplanement 2007 $ 2.81 $ 1.73 $ 2.04 $ 1.19 $ 7.77 $ 8.78 $ 3.79 $ * Av erage $ 3.55 $ 1.35 $ 2.68 $ 1.42 $ 9.00 $ $ 6.66 $ 9.05 This schedule provides information on concession revenues, operating expenses, bond debt service coverage, and airline cost, all normalized per enplaned passenger for the last ten years of the Department's operations. * In late June of 2012, Terminal 3 became fully operational. Fiscal Year incorporates GASB

154 Clark County Department of Aviation Clark County, Nevada Schedule of Net Position Last Ten Fiscal Years (Unaudited) Net Investment in Restricted for Restricted for Restricted Unrestricted Capital Assets Capital Projects Debt Service for Other Net Position Total Net Position Fiscal Year (000) (000) (000) (000) (000) (000) 2007 $ (309,417) $ 1,101,867 $ 426,797 $ - $ 160,068 $ 1,379, ,074,836 55, ,712 27, ,243 1,508, ,096,995 39, ,390 34, ,584 1,548, ,060,641 32, ,753 20, ,302 1,514, ,021,835 25, ,681 29, ,748 1,544, ,794 29, ,675 50, ,131 1,377, ,622 34, ,972 63, ,659 1,355, ,098 37, ,940 75, ,557 1,307, * 666,778 64, ,526 76, ,875 1,199, * 619,109 59, ,817 76, ,697 1,223,417 Average Annual Increase (Decrease) -6.7% -27.7% -6.1% 13.6% 3.9% -1.3% This schedule provides information on the restricted and unrestricted components of net position for the last ten years of the Department's operations. * Fiscal year incorporates GASB

155 Clark County Department of Aviation Clark County, Nev ada Clark County Demographic and Economic Statistics Last Ten Calendar Years (Unaudited) Percentage Personal Percentage Per Capita Percentage Percentage Percentage Percentage Calendar Clark County of Increase/ Income (2) of Increase/ Personal of Increase/ School of Increase/ Labor of Increase/ Unemployment of Increase/ Year Population (1) Decrease (000) Decrease Income Decrease Enrollment (3) Decrease Force (4) Decrease Rate (4) Decrease ,996, % $ 73,640, % $ 36, % 302, % 951, % 4.5% 12.5% ,986, % 74,026, % 37, % 308, % 980, % 6.6% 46.7% ,006, % 69,457, % 34, % 311, % 967, % 11.5% 74.2% ,036, % 69,328, % 34, % 309, % 984, % 13.8% 20.0% ,966, % 70,652, % 35, % 309, % 995, % 13.3% -3.6% ,008, % 74,886, % 37, % 308, % 1,000, % 11.3% -15.0% ,062, % 75,957, % 36, % 311, % 1,006, % 9.6% -15.0% ,102, % 81,821, % 39, % 314, % 1,019, % 7.8% -18.8% ,147, % not available not available 317, % 1,047, % 6.8% -12.8% 2016 not available not available not available 322,902 * 1.6% 1,051, % 6.2% -8.8% Average Annual Increase (Decrease) to Latest Year of Availability 0.9% 1.5% 1.0% 0.7% 1.1% 3.6% Source: (1) Clark County Department of Comprehensiv e Planning (2) U.S. Bureau of Economic Analysis (3) Clark County School District (in fiscal year format) * Estimated (4) State of Nev ada Department of Employment, Training and Rehabilitation Preliminary numbers This schedule provides information on certain Clark County demographic and economic statistics for the last ten years of the Department's operations. 148

156 Clark County Department of Aviation Clark County, Nevada Principal Employers - Clark County Nevada Current Year and Nine Years Ago (Unaudited) 2016 * 2007 % of Total % of Total Principal Employer Employees Rank Employment Employees Rank Employment Clark County School District 35, % 35, % Clark County, Nevada 8, % 15, % MGM Grand Hotel/Casino 8, % 8, % Wynn Las Vegas, LLC 8, % 8, % Bellagio, LLC 7, % 9, % Mandalay Bay Resort and Casino 7, % 6, % Aria Resort and Casino, LLC 7, % 0.00% Caesars Palace 5, % 5, % University of Nevada-Las Vegas 5, % 6, % Las Vegas Metropolitan Police 4, % 5, % The Mirage Casino Hotel 5, % Total principal employees 97, % 106, % Total employment 1,044, ,549 * As of calendar year 2015 Q4 As of calendar year 2007 Q4 Source: State of Nevada Department of Employment, Training and Rehabilitation Note: Number of employees estimated using midpoint of range. This schedule provides information on the principal employers in Clark County for the current year and the year nine years prior. 149

157 Clark County Department of Av iation Clark County, Nev ada Full Time Equivalent Employees Last Ten Fiscal Years (Unaudited) Fiscal Year Total , , , , , , , , , ,377 Av erage Annual I ncrease (Decrease) 0.2% This schedule provides information on the number of full time equivalent employees for the last ten years of the Department's operations. 150

158 Clark County Department of Aviation Clark County, Nev ada Nature, Volume, and Usage of Capital Assets For the Fiscal Years Ended June 30, (Unaudited) Indicators of the level of demand for services Airlines: Destinations served: nonstop 150 nonstop 158 nonstop 150 nonstop 141 nonstop 146 nonstop 155 nonstop 147 nonstop Daily flight operations: 1,463 1,429 1,432 1,429 1,465 1,423 1,383 1,453 1,685 1,667 Daily commercial operations: Annual passengers: 46,629,208 43,685,099 42,323,363 41,681,296 41,874,993 40,495,125 39,858,750 41,359,585 46,983,189 47,375,064 McCarran International Airport Site: 2,820 acres 2,820 acres 2,820 acres 2,820 acres 2,820 acres 2,820 acres 2,820 acres 2,820 acres 2,820 acres 2,820 acres Runways: 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25R*/7L: 14,510' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 25L*/7R: 10,526' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19R/1L*: 8,985' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' 19L/1R: 9,775' X 150' * ILS equipped * ILS equipped * ILS equipped * ILS equipped * ILS equipped * ILS equipped * ILS equipped * ILS equipped * ILS equipped * ILS equipped Gates Terminal buildings: Rentable Space 2,340,694 2,340,694 2,340,694 2,340,694 2,340,694 1,017,254 1,017, , , ,035 Public Space 1,540,266 1,540,266 1,540,266 1,540,266 1,540, , , , , ,752 Total Usable Space 3,880,960 3,880,960 3,880,960 3,880,960 3,880,960 1,785,059 1,785,059 1,629,787 1,629,787 1,629,787 Administration 510, , , , , , , , , ,991 Mechanical/Utilities 497, , , , , , , , , ,985 Total Space 4,888,478 4,888,478 4,888,478 4,888,478 4,888,478 2,349,202 2,349,202 2,163,763 2,163,763 2,163,763 Parking: Short-term 1,381 1,381 1,381 1,381 1, Valet 857 1,530 1,530 1,530 1, Long-Term 7,363 7,363 7,363 7,363 7,363 3,432 3,432 3,431 3,434 3,434 Surface Lot(s) N/A N/A N/A N/A N/A Terminal 2 Public N/A N/A N/A N/A N/A Economy 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5, Remote 1,954 1,954 1,954 1,954 1,954 1,984 1,954 1,954 4,007 4,007 Total Public Parking Spaces 17,279 17,952 17,952 17,952 17,952 12,511 12,444 12,428 9,473 9,473 Consolidated Car Rental Facility: Customer Service Building (Sq. Ft.) 111, , , , , , , , , ,000 Garage (Sq. Ft.) 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 Vehicle Capacity 5,000+ 5,000+ 5,000+ 5,000+ 5,000+ 5,000+ 5,000+ 5,000+ 5,000+ 5,000+ Shuttle Bus Fleet (units) This schedule provides information on the nature, volume, and usage of the Department's capital assets for the last ten years of the Department's operations. 151

159 Independent Auditor s 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 To the Honorable Board of County Commissioners Clark County Department of Aviation Clark County, Nevada We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of Clark County Department of Aviation, Clark County, Nevada (the Department), as of and for the year ended June 30, 2016, and the related notes to the financial statements, and have issued our report thereon dated October 31, 2016 Internal Control over Financial Reporting In planning and performing our audit, we considered the Department s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Department s internal control. Accordingly, we do not express an opinion on the effectiveness of the Department s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards W. Sunset Rd., Ste. 204 Las Vegas, NV T F EOE 152

160 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Department s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Department s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Las Vegas, Nevada October 31,

161 Auditor's Comments To the Honorable Board of County Commissioners Clark County Department of Aviation Clark County, Nevada In connection with our audit of the financial statements of the Clark County Department of Aviation (the Department) as of and for the year ended June 30, 2016, and the related notes to the financial statements, nothing came to our attention that caused us to believe that the Department failed to comply with the specific requirements of Nevada Revised Statutes cited below. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Department s noncompliance with the requirements of Nevada Revised Statutes cited below, insofar as they relate to accounting matters. CURRENT YEAR STATUTE COMPLIANCE The Clark County Department of Aviation conformed to all significant statutory constraints on its financial administration during the year. PROGRESS ON PRIOR YEAR STATUTE COMPLIANCE The Department monitored all significant constraints on its financial administration during the year ended June 30, PRIOR YEAR RECOMMENDATIONS We noted no material weakness and reported no significant deficiencies in internal controls. CURRENT YEAR RECOMMENDATIONS We noted no material weakness and reported no significant deficiencies in internal controls. Las Vegas, Nevada October 31, W. Sunset Rd., Ste. 204 Las Vegas, NV T F EOE 154

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