Fiscal Year 2018 Preliminary Budget. Los Angeles World Airports Board of Airport Commissioners June 1, 2017

Transcription

1 Fiscal Year 2018 Preliminary Budget Los Angeles World Airports Board of Airport Commissioners June 1, 2017

2 Budget Review By Airport Focus areas Operating revenue Sources Projections Operating expense Categories Notable changes Income and metrics Schedule 1

3 Focus Areas for FY In formulating the FY budget, staff has placed additional emphasis on the following goals and objectives as outlined in LAWA s Strategic Plan: Expect and Support Organizational Excellence Hire, develop and retain great staff Organize to deliver key outcomes Build a culture of collaboration, communication, and creativity Innovate to Enhance Security, Efficiency and Effectiveness Reinvent processes to improve focus and increase speed Innovate to keep airports safe and secure Deliver Facilities and Guest Experiences that are Exceptional Plan collaboratively to improve guest experience while delivering capital improvements Upgrade every element of the guest experience Develop, maintain, and operate first class facilities Sustain a Strong Business Diversify and grow revenue sources, and manage costs Operate sustainably balancing economic, social and environmental responsibilities 2

4 LAX Net Revenue Projected Net Revenue and Metrics FY2017 Estimate* FY2018 Prelim Budget* Revenues $ 1,325 $ 1,399 Expenses (budget) (724)... (779)... Interest Earnings on Cash and Other** Net Revenue (before Depreciation and amortization) $ 612 $ 658 Debt Service (Princ. & Int.) Debt Service paid by PFC's (118)... (136)... Net Debt Service Estimated Debt Service Coverage 2.9x 3.0x Available for capital reinvestment $ 402 $ 438 *Preliminary estimate before accounting adjustments, dollars in millions **Includes Build America Bond subsidy Debt service coverage exceeds indenture requirements Net revenue and debt service coverage consistent with Series 2016 Revenue Bond feasibility forecasts 3

5 Budget Components LAX Revenue FY2018 Projected Operating Revenue Distribution Aeronautical $ 942 (67%) Non-Aeronautical $ 458 (33%) Total Revenue $1,399 (Preliminary, in millions) Cost Recovery Based Fees Terminal Rents 35% Landing Fees 20% Land and Building Rents 12% Terminal Concessions 14% Parking and Ground Transportation 18% Other Aeronautical 1% Other Non- Aeronautical 1% 4

6 Budget Components LAX Revenue Aeronautical Revenue ($ in millions) FY2016 FY2017 FY2018 Actual Est.* Projected* Landing Fees $ $ $ Land and Building Rents Other Aeronautical *Preliminary $ $ $ % increase 11.0%.. 6.8%.. Increases in landing fee revenue are primarily driven cost recovery of higher operating expense associated with public safety services, airfield busing and legal fees Building rent increases: Final year of phased-in increase of rental rates under Terminal Rate Agreement Capital cost recovery on recently constructed and acquired terminal facilities Increases in terminal maintenance and operations expenses recovered under terminal Rate Agreement 5

7 Budget Components LAX Revenue Non-Aeronautical Revenue ($ in millions) FY2016 FY2017 FY2018 Terminal Concessions Actual Est.* Projected* Food and Beverage/Gift & News $ 77.. $ 80.. $ 85.. Duty Free Advertising Other (ATM, foreign exch., etc.) Parking and Ground Transportation Parking Rental Car Concession Ground Transportation (incl. TNCs) Other Non-Aeronautical Total Non-Aeronautical Revenue Total Operating Revenue $ 1,197.. $ 1,325.. $ 1,399.. % increase 10.7%.. 5.6%.. *Preliminary estimate, before accounting adjustments 6

8 Budget Components LAX Expenses FY2018 Projected Operating Expense Distribution Contract Svcs (Trans/Parking) 9% Other Contract and Prof. Svcs 11% Materials & Supplies 7% Utilities 6% Administrative Services 1% Contract Svcs (City Services) 9% Salary/Benefits 54% Public Relations and Advertising 1% Other Operating Expense 2% LAWA and City personnel costs total approximately 63% of the budget 7

9 Budget Components LAX Expenses Operating Expense ($ in millions) FY2016 FY2017 FY2018 Actual Est.* Projected* Salaries and Benefits** $ 388 $ 407 $ 418 Contractual Services (including city services, transportation & parking and professional services) % %. 242 Materials and Supplies Administrative Services Utilities Advertising and Public Relations Other Operating Expenses Administrative offset (9)... (5)... (5)... Total Expenses*** $ 661 $ 724 $ 779 % Increase 9.5% 7.6% *Preliminary estimate, before accounting adjustments **Net of capitalized salaries and benefits ***Totals may not add up due to rounding 8

10 FY Operating Expenses Areas of notable increase over the FY budget include: Cost of services provided by City of LA (Fire/Police/Central Services) Primarily related to growing City overhead costs Parking operation, shuttle and Flyaway costs Contractual increases plus increased service to support higher level of remote lot/employee lot/flyaway utilization Security officers Manage increasing roadway traffic Personnel resources Coordination of ongoing airport activities to manage impacts of LAMP and other construction Legal Services Outside legal support to assist City Attorney in addressing litigation and claims Airfield busing Support increasing passenger volumes utilizing common-use gates CBP overtime Address robust growth in international passenger traffic and CBP s adjusted customs areas coverage 9

11 Other LAX Financial Metrics - Revenue Total Operating EPAX Estimated 2018 Budget SFO $ $ $ $ LAX $ $ $ $ $ $ DEN $ $ $ $ ATL $ $ $ 9.85 $ 9.40 ORD $ $ $ Total Concession EPAX Estimated 2018 Budget SFO $ $ $ $ DEN $ $ $ $ LAX $ 9.35 $ 9.65 $ 9.80 $ $ $ ORD $ 7.23 $ 7.41 $ 6.90 ATL $ 6.41 $ 6.65 $ 6.58 $ 6.62 Total Operating EPAX Estimated 2018 Budget LAX $ 8.49 $ $ $ $ $ ORD $ 8.76 $ $ 9.88 DEN $ 8.74 $ $ 9.28 $ - SFO $ 7.40 $ 6.31 $ 8.59 $ 8.85 ATL $ 5.49 $ 5.00 $ 4.37 $ 3.79 *FY2017 Estimated and FY2018 Budget data are preliminary and subject to change **Comparable airport data and enplanements obtained from ACI database and labeled as unaudited 10

12 Other LAX Financial Metrics - Expense Total Operating EPAX Estimated 2018 Budget ATL $ 4.83 $ 5.49 $ 5.47 $ 5.61 DEN $ $ $ $ - LAX $ $ $ $ $ $ ORD $ $ $ SFO $ $ $ $ Salaries and EPAX Estimated 2018 Budget ATL $ 1.73 $ 1.94 $ 1.79 $ 1.76 ORD $ 4.87 $ 5.24 $ 5.00 DEN $ 4.78 $ 5.04 $ 5.50 $ 5.90 SFO $ 8.00 $ 8.12 $ 6.99 $ 6.98 LAX $ $ $ $ 9.95 $ 9.85 $ 9.63 Security EPAX Estimated 2018 Budget DEN $ 0.53 $ 0.55 $ - $ - ATL $ 0.67 $ 0.63 $ 0.65 $ 0.69 SFO $ 2.09 $ 2.22 $ 2.05 $ 2.06 LAX $ 3.25 $ 3.32 $ 3.31 $ 3.18 $ 3.12 $ 3.24 *FY2017 Estimated and FY2018 Budget data are preliminary and subject to change **Comparable airport data and enplanements obtained from ACI database and labeled as unaudited 11

13 Considerations beyond FY LAX s long term facility investment program will continue to increase annual debt service obligations, consuming a greater share of it s net operating income. While future passenger growth may reduce some pressure, staff must explore options to responsibly maintain those margins over time Cost recovery aeronautical revenues will continue to grow along with costs in the terminal and airfield rate bases Opportunities for creating new non-aeronautical revenue or growing existing revenues should be explored (parking, ground transportation, real estate transactions, etc.) Manage costs and allocate resources to maintain consistent levels of service Leverage technology and drive innovation to improve efficiency of facilities and staffing 12

14 ONT Staffing Agreement Salaries, benefits and overhead recovered from OIAA FY2018 Projection* Revenues $ 34 Expenses (28)... Net Revenue* 6 * Preliminary, dollars in millions Costs of ONT staffing recovered pursuant to agreement with OIAA Staff and related appropriations will revert to LAX as redundancy notices received 13

15 VNY Net Revenue Projected Net Revenue and Metrics FY2017 Estimate* FY2018 Projection* Revenues $ 18.5 $ 18.6 Expenses (16.4) (18.4) Net Revenue (before depr. & amort.) $ 2.1 $ 0.2 Depreciation and Amortization (nongrant funded improvements) (2.7) (2.7) Income (after depr. & amort.) $ (0.6) $ (2.5) *Preliminary, dollars in millions As VNY has no outstanding debt, net revenue (from operations) and income are monitored rather than debt service coverage FY2018 expenses elevated due to removal to debris on vacant parcels, additional environmental/noise initiatives and increased cost of fire/security services Following a review of the FY2017 actual results, staff expects to bring forward a minor adjustment to the fuel fee at VNY 14

16 Next Steps Early June Incorporate BOAC feedback Finalize expenses/revenue estimates Late June BOAC adopts budget 15