PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
ANNUAL FINANCIAL REPORT
FISCAL YEARS ENDED JUNE 30, 2014 AND 2013

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
TABLE OF CONTENTS
Fiscal Years Ended June 30, 2014 and 2013

Page
Independent Auditors’ Report

1

Management’s Discussion and Analysis

3

Basic Financial Statements
Statements of Net Position – Proprietary Fund

10

Statements of Revenues, Expenses and Changes in Fund Net Position Proprietary Fund

11

Statements of Cash Flows – Proprietary Fund

12

Notes to the Basic Financial Statements

15

Supplementary Information
Statement of Revenues and Expenses (Budget Basis)

33

INDEPENDENT AUDITORS' REPORT

Board of Directors
Phoenix-Mesa Gateway Airport Authority
Mesa, Arizona
Report on the Financial Statements
We have audited the accompanying financial statements of the business-type activities of PhoenixMesa Gateway Airport Authority (PMGAA), as of and for the years ended June 30, 2014 and 2013, and
the related notes to the financial statements, which collectively comprise the PMGAA’s basic 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.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free 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 auditors’ judgment, including the
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 PMGAA’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 PMGAA’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 opinion.

1
An independent member of Nexia International

Board of Directors
Phoenix-Mesa Gateway Airport Authority

Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the business-type activities of Phoenix-Mesa Gateway Airport Authority
as of June 30, 2014 and 2013, and the respective changes in financial position and, where applicable,
cash flows thereof for the years then ended in accordance with accounting principles generally
accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 3 – 8 be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the basic 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 basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do
not express an opinion or provide any assurance on the 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 financial statements that
collectively comprise Phoenix-Mesa Gateway Airport Authority’s basic financial statements. The
Statement of Revenues and Expenses (Budget Basis) are presented for purposes of additional analysis
and is not a required part of the basic financial statements. This information has not been subject to the
auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not
express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
September 30, 2014, on our consideration of the Phoenix-Mesa Gateway Airport Authority's internal
control over financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the
result 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 Town’s internal control over financial reporting and compliance.

a
Phoenix, Arizona
September 30, 2014

2

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Years Ended June 30, 2014 and 2013
The management of Phoenix-Mesa Gateway Airport Authority (PMGAA) offers readers this overview and
analysis of PMGAA’s financial statements and activities for the fiscal years ended June 30, 2014 and June 30,
2013.
Financial Highlights
 PMGAA’s assets exceeded liabilities at the end of the fiscal year by $132,225,738 (net position).
Total net position included $113,319,675 in capital assets and $14,610,265 in unrestricted net
position. During the year, total net position decreased by $1,904,755.
 PMGAA earned $2,771,132 in Passenger Facility Charges.
 During the year, member government loans to PMGAA increased by $4,460,000 to $84,523,977
principal, and accrued interest relating to that debt increased by $3,155,066 to $28,259,952, for a total
of $112,783,929. (The first of these notes comes due in the year 2020.)
 Total liabilities increased by $6,811,523 (5.2%), to $139,050,978. Most of this was due to the
member government loans.
 Sales in PMGAA’s fueling operation were up 2% in dollars to $7,756,174. The number of gallons
uploaded was down 3%, due primarily to decreased passenger service. Gross margin for all fueling
sales (gross revenues less cost of goods sold) was down 1%.
 PMGAA’s operations produced a loss of $9,042,112 for the fiscal year. Much of this loss is
attributable to non-cash depreciation expense on assets that were contributed by the federal
government or acquired with the aid of grants. Beyond that, PMGAA relies on its member
governments to supplement the revenues it earns from providing airport services.
Overview of the Financial Statements:
This discussion and analysis serves to introduce PMGAA’s financial statements. PMGAA’s basic financial
statements have two components, 1) fund financial statements, and 2) notes to the financial statements.
Since PMGAA has only one fund, separate government-wide financial statements are not presented.
Fund financial statements.
A fund is a grouping of related accounts used to maintain control over resources that have been segregated
for specific activities or objectives. Like other state and local governments, PMGAA uses fund accounting to
ensure and demonstrate compliance with finance-related legal requirements. Unlike most other governments,
which have multiple funds, all of PMGAA’s activities are business-type activities and are accounted for in a
single proprietary fund.
Proprietary funds. PMGAA maintains its accounting records in a single enterprise fund. An enterprise fund is a
type of proprietary fund used to report business-type activities.
The proprietary fund financial statements can be found on pages 10 - 13 of this report.
The statement of net position presents information on PMGAA’s assets and liabilities, with the difference
between the two being shown as net position. Over time, increases or decreases in net position may serve as a
useful indicator of whether the financial position of PMGAA is improving or deteriorating.
The statement of revenues, expenses and changes in fund net position presents information on how PMGAA’s net
position changed during the fiscal year. All changes in net position are reported as soon as the underlying
events giving rise to the changes occur, regardless of the timing of the related cash flows. Thus, revenues and
expenses are reported in this statement for some items that will result in cash flows in future fiscal periods.
The statement of cash flows presents PMGAA’s cash flow (sources and uses) related to operating activities, noncapital financing activities, capital and financing activities, and investing activities during the year.

3

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Years Ended June 30, 2014 and 2013
Notes to Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the
fund financial statements. The notes to the financial statements can be found on pages 15 - 30 of this report.
Financial Analysis
Net position may serve as a useful indicator of a government’s financial position. At the end of the fiscal
year, PMGAA’s assets exceeded liabilities by $132,225,738.
Airports are capital-intensive enterprises. 86% of PMGAA’s net position is invested in capital assets (net of
any outstanding debt used to acquire those assets). PMGAA uses these assets to provide aviation access and
services to the flying public and the surrounding community, consequently these assets are not available for
future spending. Although PMGAA’s investment in its capital assets is reported net of related debt, the
resources needed to pay such debt must be provided from other sources, since the capital assets themselves
cannot be used to liquidate these liabilities.
Phoenix-Mesa Gateway Airport Authority’s Net Position
2014
Current and other assets
Capital assets, net of accumulated depreciation
Total assets

$

24,750,299
246,526,417
271,276,716

2013
$

22,430,373
243,939,575
266,369,948

2012
$

34,014,117
225,893,569
259,907,686

Long-term liabilities
Other liabilities
Total liabilities

135,128,423
3,922,555
139,050,978

127,903,277
4,336,178
132,239,455

121,182,363
4,607,085
125,789,448

Net position:
Net investment in capital assets
Restricted
Unrestricted
Total net position

113,319,675
4,295,438
14,610,625
132,225,738

118,600,334
4,031,356
11,498,803
134,130,493

119,339,487
878,777
13,899,974
134,118,238

$

$

$

$14,610,265 (11.0%) of PMGAA’s net position is unrestricted and represents funds available for PMGAA’s
ongoing operations. The remaining net position is invested in capital assets and restricted net position.
Capital assets are shown net of any unpaid debts used to purchase capital assets, including member
governments’ investments in both the operations and infrastructure of the airport. Member loans and
accrued interest are payable beginning June 30, 2020.
Net position decreased by $1,904,755 (1.4%) from the previous fiscal year-end. This was primarily due to a
decrease in capital grant revenues. Member loans increased in fiscal year 2013-14 by $4,460,000, which is
$540,000 more than the amount received in fiscal year 2012-13.
Net position for PMGAA’s net investment in capital assets decreased by 4.5%. New investments in capital
assets (less asset dispositions) were $2,586,842 more than the year’s depreciation expense on capital assets.
Business-type activities
All of PMGAA’s activities are classified as business-type activities. Significant changes in the financial
operations of PMGAA included decreases in capital grants and contributions, which were down 25%
($2,680,762). (Grant funds are recognized as revenue when all eligibility requirements imposed by the

4

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Years Ended June 30, 2014 and 2013
provider have been met.) Fuel sales were up 2%, and related costs of sales were up 6%. The change in net
position came about as indicated by the following elements of the revenues and expenses:
Mesa Gateway Airport Authority’s Changes in Net Position
2014
Revenues:
Charges for sales and services (gross)
Lease income
Capital grants and contributions
Other
Total revenues

$

Expenses
Cost of sales
Depreciation
Other operating expenses
Interest expense on loans from member governments
Interest expense - other
Other nonoperating expenses
Total expenses
Increase (decrease) in net position
Net position at prior year-end
Net position at year-end

2013

13,889,440
4,252,868
7,879,641
3,415,930
29,437,879

$

13,752,785
2,878,236
10,560,403
3,899,225
31,090,649

2012
$

13,672,874
2,572,859
11,153,091
3,400,137
30,798,961

3,098,783
10,882,770
13,202,867
3,155,066
999,515
3,633
31,342,634

2,919,724
10,573,488
13,941,078
2,948,996
337,460
357,648
31,078,394

3,109,399
10,249,230
13,260,629
2,748,928
298,038
325,305
29,991,529

(1,904,755)
134,130,493
132,225,738

12,255
134,118,238
134,130,493

807,432
133,310,806
134,118,238

$

$

Revenues:
Charges for sales and services increased by $136,655 compared to the $79,911 increase in FY13. Lease
income increased $1,374,632 due mostly to payments received from the City of Mesa for lease of the Able
Engineering building. These revenues were used to service the Series 2012 Special Facility Revenue bonds.
Other income decreased by $483,295 mostly because of decreased PFC revenues. Capital contributions
decreased by $2,680,762 due to the completion of several grant funded projects.

Revenues
Lease income
14%

Capital grants and
contributions
27%
Other
12%

Charges for sales and
services (gross)
47%

5

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Years Ended June 30, 2014 and 2013
Expenses:
Other operating expenses decreased by $738,211 (5%). This is due mostly to decreased personnel costs and
repair and maintenance costs. Interest expense on loans from member governments increased by $206,070,
reflecting the accumulation of accrued interest and additional interest relating to annual additions to these
loans from the member governments. (Capital grants and contributions indicated in the chart above are not
included in the chart below because they were spent on assets, not expenses.) Cost of sales increased
$179,059 (6%) due to increased fuel sales and fuel prices.

Expenses
Depreciation
35%

Interest expense other
3%
Interest expense on
loans from member
governments
10%

Cost of sales
10%

Other operating and
nonoperating expense
42%

Budget
PMGAA staff prepares a budget annually. It is submitted to the Board of Directors for approval during the
spring of each year. Although the budget is not legally binding, it is an important management tool used
throughout the fiscal year. During the fiscal year, actual activity is compared to the budget on a monthly
basis to assess operating results. See page 33 for a presentation of the budget as supplementary information.
Capital Assets and Debt Administration
Capital assets (net of depreciation)
At June 30, 2014, PMGAA’s capital assets totaled $246,526,417 (net of accumulated depreciation). The
capital assets include land; runways, taxiways, and apron areas; buildings; improvements; machinery and
equipment. A large majority of these assets were contributed to the airport directly or were purchased with
the aid of federal and state grants. Total capital assets, net of depreciation increased by 1.1% during the fiscal
year.
Capital assets (net of depreciation)
2014
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Total capital assets, net

$

$

86,128,271
148,962,616
5,027,805
6,407,725
246,526,417

6

2013
$

$

86,128,271
145,416,050
4,820,606
7,574,648
243,939,575

2012
$

86,128,271
116,966,901
3,945,023
18,853,374
$ 225,893,569

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Years Ended June 30, 2014 and 2013
Major capital asset events during the current fiscal year included the following:
 Design/Construct West Terminal Expansion Phase III: Spent in FY14: $5.1 million
 Taxiway V Reconstruction: Spent in FY14: $3.3 million
 North Apron Expansion: Spent in FY14: $.8 million
Long-term debt.
At the end of the current fiscal year, PMGAA had total debt outstanding of $135,400,381. $112,783,929
(83%) of the total outstanding debt is principal and interest (at 3% annual rate) on loans made by member
governments to help cover operating expenses and airport improvements. The first of these loans are
nominally due June 30, 2020, more specifically at such time as the PMGAA Board of Directors determines
that PMGAA has sufficient funds for repayments.
Phoenix-Mesa Gateway Airport Authority's Outstanding Debt
2014
Loans from Member Governments
(including accrued interest)
ADOT Loan
(including accrued interest)
Capital Leases
Bonds payable
(including bond premium)

$

112,783,929

2013
$

2,569,339
199,631

$

19,847,482
135,400,381

$

105,168,863

2012
$

98,299,867

2,659,466
-

2,745,420
-

19,873,627
127,701,956

19,873,627
$ 120,918,914

Loans from member governments (principal) increased by $4,460,000 (6%) during the fiscal year, $540,000
more than the $3,920,000 increase in loans during the previous year. The accrued interest component of
member government loans increased by $3,155,066 compared to $2,948,996 in the previous year. Member
loans carry an interest rate of 3% per year. On February 29, 2012, PMGAA issued $19,220,000 in Special
Facility Revenue Bonds Series 2012 at a premium of $653,627. The interest rates on these bonds range from
3% to 5% and they mature between July 1, 2014 and July 1, 2038. These funds were used to construct an
aircraft maintenance repair and overhaul facility which was leased to the City of Mesa. Mesa, in turn,
subleased the building to Able Engineering. These lease payments will be sufficient to pay the principal and
interest on the bonds as they come due. Additionally, the City of Mesa pledged a portion of its excise taxes
as security for payment of the lease payments.
Additional information on PMGAA’s long-term debt can be found in note 3.D. on pages 24 - 27.
Economic Factors
PMGAA depends on annual loans from its member governments to cover some of its operating costs. This
makes PMGAA susceptible to downturns in the economy and other difficulties that could affect member
governments’ abilities to provide this annual funding. However, member government support of this kind
has been consistent over the last several years.
With PMGAA’s largest fueling customer being the federal government, a significant portion of fueling
revenue depends on continuation of military training and other activities that bring government aircraft to the
airport.
PMGAA also depends on capital grants, mostly from the Federal Aviation Administration (FAA) and the
Arizona Department of Transportation (ADOT), to continue its current level of capital improvement and
renewal programs.
7

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Years Ended June 30, 2014 and 2013

Requests for Information
This financial report is designed to provide a general overview of PMGAA’s finances for all those who are
interested. Questions concerning any of the information provided in this report or requests for additional
financial information should be addressed to the Chief Financial Officer, Phoenix-Mesa Gateway Airport
Authority, 5835 S. Sossaman Road, Mesa, AZ 85212.

8

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENTS OF NET POSITION
PROPRIETARY FUND
June 30, 2014 and 2013
Business-type Activities Enterprise Fund
2014
2013

Assets
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Due from other governments
Prepaid costs
Inventories
Total current assets

$

Noncurrent assets:
Restricted assets
Capital assets:
Nondepreciable
Depreciable
Total noncurrent assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Accrued liabilities
Accrued bond interest payable
Accrued bond principal payable
Vacation benefits payable
Capital lease obligations payable
Retirement sick leave payable
ADOT loan
Unearned revenue
Total current liabilities
Current liabilities payable from restricted assets:
Tenant deposits
Noncurrent liabilities:
Loans payable to member governments
Accrued interest payable to member governments
Bonds payable
ADOT loan
Capital leases
Retirement sick leave payable
Total noncurrent liabilities
Total liabilities
Net position
Net investment in capital assets
Restricted for capital outlay
Unrestricted
Total net position

$

13,747,793
6,237,860
1,050,343
3,016,865
165,977
214,872
24,433,710

$

11,978,989
5,902,243
1,438,594
2,487,457
110,524
170,376
22,088,183

316,589

342,190

92,535,996
153,990,421
246,843,006

93,702,919
150,236,656
244,281,765

271,276,716

266,369,948

1,704,494
245,105
450,200
420,000
454,062
37,172
31,080
94,504
169,349
3,605,966

2,618,621
243,875
450,200
475,048
45,538
90,127
70,578
3,993,987

316,589

342,191

84,523,977
28,259,952
19,427,482
2,474,835
162,459
279,718
135,128,423

80,063,977
25,104,886
19,873,627
2,569,339
291,448
127,903,277

139,050,978

132,239,455

113,319,675
4,295,438
14,610,625
132,225,738

118,600,334
4,031,356
11,498,803
134,130,493

$

The accompanying notes to the basic financial statements are an integral part of this statement.
10

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
PROPRIETARY FUND
FISCAL YEARS ENDED JUNE 30, 2014 AND 2013
Business-type Activities
Enterprise Fund
2014
2013

Operating revenues
Fueling operations
Lease income
Maintenance services
Airport usage fees
Total operating revenues

$

7,756,174
4,252,868
350,512
5,782,754
18,142,308

$

7,630,724
2,878,236
318,037
5,804,024
16,631,021

Operating expenses
Personnel costs
Professional services
Cost of goods sold - fueling operations
Costs of maintenance services sold
Repair and maintenance
Utilities
Insurance
Other expense
Depreciation
Total operating expenses

6,701,600
3,773,606
3,058,427
40,356
561,852
781,033
282,213
1,102,563
10,882,770
27,184,420

7,159,280
3,737,313
2,882,398
37,326
737,994
783,166
272,074
1,251,251
10,573,488
27,434,290

Operating loss

(9,042,112)

(10,803,269)

Nonoperating revenues (expenses)
Investment income
PFC income
CFC income
Other income
Gain/(loss) on disposition of assets
Amortization of bond issuance costs
Intergovernmental revenue
Interest expense - notes payable to member governments
Interest expense - bonds
Interest expense - other
Total nonoperating revenues (expenses)

123,578
2,771,132
412,239
26,668
(3,633)
82,313
(3,155,066)
(874,255)
(125,260)
(742,284)

71,104
3,269,934
430,578
19,971
(2,542)
(355,106)
107,638
(2,948,996)
(208,026)
(129,434)
255,121

Loss before contributions and transfers

(9,784,396)

(10,548,148)

Capital contributions

7,879,641

10,560,403

Change in net position

(1,904,755)

12,255

$134,130,493

134,118,238

Net position, beginning of year
Net position, end of year

$

132,225,738

$

The accompanying notes to the basic financial statements are an integral part of this statement.
11

$134,130,493

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENTS OF CASH FLOWS
PROPRIETARY FUND
FISCAL YEARS ENDED JUNE 30, 2014 AND 2013
Business-type Activities Enterprise Funds
2014
2013

Cash flows from operating activities
Receipts from customers
Payments to employees
Payments to suppliers
Customer deposits
Net cash flows from operating activities

$

18,415,664
(6,747,544)
(9,943,938)
(25,602)
1,698,580

$

16,422,525
(7,230,414)
(9,440,624)
9,043
(239,470)

Cash flows from non-capital financing activities
Operating grants from other governments
Net cash flows from non-capital financing activities

155,981
155,981

104,716
104,716

Cash flows from capital and financing activities
Acquisition of capital assets (net)
Loans from member governments
Payments on loans
Passenger Facility Charges received
Customer Facility Charges received
Principal paid on capital leases
Interest paid on bonds
Interest paid on ADOT loan
Capital grants received
Net cash flows from capital and financing activities

(13,899,493)
4,460,000
(90,127)
3,011,159
419,483
(44,309)
(900,400)
(125,260)
7,241,286
72,339

(28,360,291)
3,920,000
(85,954)
3,278,111
423,185
(755,336)
(129,434)
8,995,176
(12,714,543)

81,496
43,756
26,668
151,920

113,106
74,316
(91,763)
95,659

2,078,820

(12,753,638)

18,223,422

30,977,060

Cash flows from investing activities
Investment income
Investment gain (loss)
Other income/expense
Net cash flows from investing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

$

20,302,242

$

18,223,422

$

11,978,989
6,244,433
18,223,422

RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE BALANCE SHEET
Cash and cash equivalents
Restricted assets
Total

$
$

13,747,793
6,554,449
20,302,242

$

(Continued)
The accompanying notes to the basic financial statements are an integral part of this statement.
12

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENTS OF CASH FLOWS
PROPRIETARY FUND
FISCAL YEARS ENDED JUNE 30, 2014 AND 2013
Business-type Activities Enterprise Funds
2014
2013
(Concluded)
Reconciliation of operating income (loss) to net cash provided by
operating activities
$

Operating loss
Adjustments to reconcile operating income (loss) to net cash
provided (used) by operating activities:
Depreciation
Change in assets/liabilities:
Accounts receivable
Prepaid costs
Inventories
Accounts payable and accrued liabilities
Unearned revenue
Tenant deposits
Compensated absences payable
Net cash provided by operating activities

$

($9,042,112)

$

(10,803,269)

10,882,770

10,573,488

174,585
(55,453)
(44,496)
(242,709)
98,771
(25,602)
(47,174)
$1,698,580

(216,575)
(44,316)
49,506
256,573
8,079
9,043
(71,999)
(239,470)

$

NON-CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES
The Authority recognized $3,155,066 and $2,948,996 of interest payable on loans from member governments during
fiscal years 2014 and 2013, respectively. The Authority acquired an asset for $243,940 through a capital lease agreement.

The accompanying notes to the basic financial statements are an integral part of this statement.
13

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of Phoenix-Mesa Gateway Airport Authority (PMGAA) have been
prepared in conformity with accounting principles generally accepted in the United States of America applicable
to governmental units adopted by the Governmental Accounting Standards Board (GASB).
A. Reporting entity
Phoenix-Mesa Gateway Airport Authority was established on May 19, 1994 as a joint powers airport authority
pursuant to Arizona Revised Statutes Title 28, Chapter 25, Article 8. Originally incorporated as Williams
Gateway Airport Authority, the name was officially changed on July 1, 2007. It operates 3,005 acres as
Phoenix-Mesa Gateway Airport (“the Airport”). PMGAA is overseen by a six-person board of directors, which
is comprised of a representative from each of the member governments. The members of PMGAA are the
Gila River Indian Community; Town of Gilbert, Arizona; City of Mesa, Arizona; City of Phoenix, Arizona;
Town of Queen Creek, Arizona; and City of Apache Junction, Arizona.
In addition to PMGAA’s board of directors, a variety of federal, state and local laws, agreements and regulations govern the operations at the airport. The Federal Aviation Administration (FAA) has jurisdiction over
aircraft operations, including aircraft, personnel, facilities and many technical issues, including noise limits and
reasonableness of fees. Under federal law and the FAA’s regulations and grant agreements, PMGAA cannot
legally transfer revenues to its member governments except in exchange for fair value received.
PMGAA is legally separate from other state and local governments. There are no component units combined
with PMGAA for financial statement presentation purposes and PMGAA is not included in any other governmental reporting entity. These financial statements present the financial position and activities of PMGAA
only, for which its governing board is financially accountable.
PMGAA earns revenue from aeronautical and non-aeronautical activities. Fees received for use of the airport
include, but are not limited to, landing fees, tie down fees, terminal usage fees, fuel flowage fees, parking fees,
rental car fees, and concession fees. PMGAA also owns and operates a fixed base fueling operation at the
airport and contracts with various tenants and users of the facilities within the airport area to provide
maintenance services. Major expenses include salaries and fringe benefits, professional services for fire
protection and parking services, legal and development consulting, maintenance and utilities.
B. Government-wide and fund financial statements
Government-wide financial statements are not presented, since PMGAA only engages in business-type
activities. PMGAA has only one fund, an enterprise fund. Accordingly, the statement of net position, the
statement of revenues, expenses and changes in net position and the statement of cash flows report information
for that single enterprise fund only.
C. Measurement focus, basis of accounting, and financial statement presentation
The statement of net position and statement of revenues, expenses and changes in fund net position are
reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded
when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash
flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the
provider have been met. Such revenue is subject to review by the funding agency, which may result in
disallowance in subsequent periods.

15

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

All of PMGAA’s activities are accounted for in a single proprietary or business-type fund.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund's principal ongoing operations. Revenues and expenses not meeting this definition are
reported as nonoperating revenues and expenses.
In accordance with 49 United States Code (U.S.C.) 40117 and paragraph (c)(3) of the Federal Aviation
Extension Act of 2008, the Federal Aviation Administration (FAA) approved PMGAA’s application to impose
a Passenger Facility Charge (PFC) at the $4.50 level on November 1, 2008, PFC number 08-01-C-00-IWA.
Airports are authorized to use PFC’s for projects that must meet at least one of the following eligibility
requirements: (1) preserve or enhance safety, security, or capacity of the national transportation system; (2)
reduce noise or reduce noise impacts resulting from an airport; or (3) furnish opportunities for enhanced
competition between or among carriers. This application expired in May 2011 when the approved amount of
$3,585,510 had been collected. Since PMGAA had already paid for and completed the approved capital
projects, the PFC’s reimbursed past costs and are not shown as current restricted assets. PMGAA received a
second PFC award, number 11-02-C-00-IWA on January 5, 2011 in the amount of $34,555,545 that began
when the first PFC award was fully collected. It expires on July 1, 2017 or as soon as the approved amount has
been collected. This award was revised to $25,693,135 on October 11, 2013. As of June 30, 2014, $4,448,797
has been earned under the second application. On October 11, 2013, PMGAA received a third PFC award,
number 13-03-C-00-IWA in the amount of $24,172,916. It expires on the date on which the total net PFC
revenue collected plus interest thereon equals the allowable cost of the approved projects or the charge
expiration date is reached, whichever comes first. This date is estimated to be January 1, 2023. As of June 30,
2014, $667,133 has been earned under the third application. For the second and third applications, $4,044,221
is reported as restricted assets. These monies are recorded as non-operating revenues.
For the fiscal year ending June 30, 2013, PMGAA implemented GASB 63, Financial Reporting of Deferred
Outflows/Inflows of Resources and Net Position and GASB 65, Items Previously Reported as Assets and
Liabilities. As a result of GASB 65, PMGAA recognized $355,106 of deferred issuance costs related to the
Series 2012 bond as expense. GASB 60, Accounting and Financial Reporting for Service Concession
Arrangements, was also implemented. However, there are currently no Service Concession Arrangements in
existence at PMGAA.
It is PMGAA’s policy to use restricted resources before using unrestricted resources.
D. Assets, liabilities, and net position or equity
1. Deposits and investments
PMGAA’s cash and cash equivalents are comprised of cash on hand, demand deposits, cash and investments
held by the State Treasurer and Wells Fargo Bank, and highly liquid investments with maturities of three
months or less from the date of acquisition. Bond proceeds held by the trustee, U.S. Bank, are comprised of
cash and investments in U.S. Treasury Notes. Some of these investments have maturities of greater than three
months but less than one year.
Arizona Revised Statutes authorize PMGAA to invest public monies in instruments including the following: the
State and County Treasurer's investment pools; U.S. Treasury obligations; specified state, county, and local
government bonds and notes; and interest-earning investment contracts such as savings accounts, certificates of
deposit, and repurchase agreements in eligible depositories.
16

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

2. Receivables
All trade receivables are shown net of an allowance for uncollectible receivables. PMGAA annually reviews the
balance in the reserve account during the budget process to determine if, based on past history, the account is
adequate to cover current trade receivables. If judged to be inadequate, an additional amount is budgeted and
recorded over the course of the year. Receivables from governments are assumed to be entirely collectible and
are not included in this analysis. Over the last two years, this allowance has ranged from 1.7% to 4.5% of
accounts receivable.
3. Inventories and prepaid items
Supply inventories are valued at cost using the first-in/first-out (FIFO) method. The cost of inventory is
reported as an expense at the time the individual items are consumed. Fuel inventories are valued at cost using
the moving average method.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid
items in the financial statements.
4. Capital assets
Capital assets include property, plant, equipment, and infrastructure assets. Capital assets are defined by
PMGAA as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of
one year.
Property, plant, equipment and infrastructure assets purchased or acquired are carried at historical cost or
estimated historical cost. Contributed assets are recorded at fair market value as of the date received.
Additions, improvements and other capital outlays that significantly extend the useful life of an asset are
capitalized. Interest incurred during construction of capital assets is included as part of the capitalized cost of
the assets constructed. Costs incurred for repairs and maintenance are expensed as incurred.
Depreciation on all assets is provided on a straight-line basis over the following estimated useful lives:
Buildings and improvements
Improvements other than buildings
Machinery and equipment

20 – 30 years
5 – 30 years
3 – 10 years

Amortization of leased capital assets is provided using the straight-line method based on the estimated useful
lives of the leased assets. Such amortization is added to accumulated depreciation and depreciation expense for
reporting purposes.
When assets are retired or sold, the costs of those assets and the related accumulated depreciation are
eliminated from the accounts, and any resulting gain or loss is charged to income or expense.
5. Compensated absences
The liability for compensated absences reported in the statement of net position consists of unpaid, accumulated leave balances. The liability has been calculated using the vesting method, in which leave amounts are
included for employees who currently are eligible to receive termination payments.

17

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

6. Long-Term Obligations
In the financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond
premiums and discounts are amortized over the life of the bonds using the straight-line method. Bonds payable
are reported net of the applicable bond premium or discount.
7. Net position
In the statement of net position, net position is reported in three categories: net investment in capital assets,
restricted, and unrestricted. Net investment in capital assets is reported separately because it makes up a
significant portion of total net position. Restricted is the portion of net position restricted by parties outside
PMGAA. PMGAA reports restricted net position for unspent passenger facility charges restricted for capital.
Unrestricted is the remaining net position not included in the previous two categories.
8. Income taxes
PMGAA is exempt from federal and state income taxes as a political subdivision under Section 115 of the
Internal Revenue Code. Accordingly, no provision for income taxes has been recorded.
9. Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Budgetary information
PMGAA uses a budget process that culminates in the adoption of a formal annual budget by the board of
directors. The budget is a planning and control device; it is not legally binding in the sense of appropriations
commonly required in municipal governments. However, certain budget changes require board approval per
certain PMGAA board policies and organizational policies and procedures.

18

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

NOTE 3 - DETAILED NOTES
A. Assets
1. Deposits and investments
Deposits and investments at June 30, 2014 and 2013 consist of the following:
Cash on hand
Deposits
Cash in bank
Investments
State Treasurer's Investment Pool
U.S. Treasury Notes
Total deposits and investments
Less: restricted cash
Total cash and equivalents

$

$

2014
1,050

$

2013
15,833

13,369,706

10,336,241

5,610,456
1,321,030
20,302,242
(6,554,449)
13,747,793

5,513,354
2,357,994
18,223,422
(6,244,433)
11,978,989

$

Deposits - PMGAA's deposits at June 30, 2014, were covered by federal depository insurance or by collateral
held by PMGAA's custodial bank in PMGAA's name.
Investments - PMGAA’s investments (detailed below) include deposits with the Arizona State Treasurer’s
Local Government Investment Pools (LGIP) 700 and 5. In addition, some of the funds held by our bond
trustee, U.S. Bank, are invested in U.S. Treasury Notes.
The State Board of Deposit provides oversight for the State Treasurer's pools, and the Local Government
Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The value of
investments in LGIP 700 has been adjusted to fair market value at June 30, 2014. LGIP shares are not
identified with specific investments held for PMGAA in physical or book entry form. Investments in the State
Treasurer’s Local Government Investment Pools are not insured or collateralized. The LGIP 700 is rated
AA+.
On April 16, 2012 the PMGAA Board of Directors approved Resolution 12-26 authorizing the investment of
proceeds from the PMGAA Series 2012 Special Facility Revenue Bonds (Mesa Project). During April 2012,
various proceeds deposited into the Acquisition and Construction fund were invested in U.S. Treasury Bills and
U.S. Treasury Notes, backed by the full faith and credit of the U.S. Government. PMGAA consistently utilized
the same investment strategy for Acquisition and Construction fund monies invested throughout fiscal year
2014.
PMGAA’s Board of Directors approved Resolution No. 12-42 on June 18, 2012, adopting and authorizing
implementation of a formal PMGAA investment policy. The policy applies to the investment of all PMGAA
funds excluding employee retirement funds and proceeds from bond issues and is consistent with Government
Finance Officers Association’s best practices, where applicable, and in accordance with all appropriate federal
and State of Arizona guidelines including, but not limited to, Arizona Revised Statutes (“ARS”) section 28-8522
defining the Authority as: 1) A special purpose district for purposes of Article IX, Section 19, Constitution of
Arizona, 2) A tax levying public improvement district for purposes of Article XIII, Section 7, Constitution of
Arizona, and 3) A municipal corporation for all purposes, including the purposes of Title 35, Chapter 3, Articles
3.2, 3.3, 4, 5, and 7, as well as ARS Title 35, Chapter 2 titled “Handling of Public Funds,” under which the
definition and investment of public monies is defined.
19

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

Custodial Credit Risk – Custodial Credit risk is the risk that, in the event of the failure of the counterparty,
the government will not be able to recover the value of its investments or collateral securities that are in the
possession of an outside party. PMGAA is not subject to custodial credit risk since its investments are not
identified with specific investments held by others for PMGAA in physical or book entry form. PMGAA does
not have a formal policy regarding credit risk. However, collateralization is addressed in the investment policy.
Concentration Risk – Concentration risk is the increased risk to the organization when a significant portion of
its resources are invested with a single issuer. PMGAA does not have a formal policy for concentration of
credit risk. However, diversification of portfolio assets is addressed in the investment policy. PMGAA
decreased its concentration risk significantly by diversifying its investments between the State Treasurer’s LGIP
700 fund and Wells Fargo Bank’s Business Premium Rate Public Funds savings account. Diversification of
investments is addressed in PMGAA’s investment policy. Concentration percentages are shown below. As of
June 30, 2014, PMGAA had the following investments:
Investment Type

Rating

Rating Agency

State Treasurer's Investment Pool 700
State Treasurer's Investment Pool 5
US Treasury Notes
Total investments

AA+
AA
AAA

S&P
S&P
Moody's

Amount
$

5,595,272
15,184
1,321,030
6,931,486

$

%
80.72%
0.22%
19.06%
100.00%

Interest rate risk – Due to the short maturities of PMGAA’s investments, the risk of losses due to market
interest rate changes is minimal. PMGAA does not have a formal policy regarding interest rate risk. The
following table shows the investment maturities by year and type of security:

Investment Type
State Treasurer's Investment Pool 700
State Treasurer's Investment Pool 5
US Treasury Notes

Investment Maturities
Less than
1 year
1-3 Years

Amount
$

$

5,595,272
15,184
1,321,030
6,931,486

$

$

15,184
1,321,030
1,336,214

$ 5,595,272
$ 5,595,272

2. Restricted assets
Certain assets of PMGAA are classified as restricted assets because their use is restricted by grant or contractual
agreements. Restricted assets include the following:
2014
2013
Customer deposits
Passenger Facility Charges (PFC's)
Current and Future Debt Service Reserves
Total restricted assets
20

$

316,589
4,044,221
2,193,639
$ 6,554,449

$

342,190
3,539,528
2,362,715
$ 6,244,433

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

3. Receivables
Total accounts receivable has been reduced by an allowance for uncollectible accounts:
2014
Trade receivables - governments
Grants receivable
Total due from other governments

$
$

Total accounts receivable
Less allowance for uncollectible accounts
Accounts receivable, net

$
$

2013

204,294
2,812,571
3,016,865

$
$

1,068,492
(18,149)
1,050,343

$
$

313,241
2,174,216
2,487,457
1,505,866
(67,272)
1,438,594

4. Capital assets
Capital asset activity for the year ended June 30, 2014 was as follows:
Beginning
Balance
6/30/2013
Capital assets not being depreciated
Land
Construction in progress
Total capital assets not being depreciated

$

86,128,271
7,574,648
93,702,919

Increases
$

13,440,964
13,440,964

Ending
Balance
6/30/2014

Decreases
$

(14,607,887)
(14,607,887)

$

86,128,271
6,407,725
92,535,996

Capital assets being depreciated
Buildings and improvements
Machinery and equipment
Total capital assets being depreciated

256,907,872
11,025,028
267,932,900

13,765,748
874,420
14,640,168

(10,001)
(10,001)

270,663,619
11,899,448
282,563,067

Less accumulated depreciation for:
Buildings and improvements
Machinery and equipment
Total accumulated depreciation

111,491,822
6,204,422
117,696,244

10,215,549
667,221
10,882,770

(6,368)
(6,368)

121,701,003
6,871,643
128,572,646

Total capital assets being depreciated, net

150,236,656

3,757,398

(3,633)

153,990,421

$ 243,939,575

$ 17,198,362

Business-type activities capital assets, net

21

$

(14,611,520)

$

246,526,417

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

Capital asset activity for the year ended June 30, 2013 was as follows:
Beginning
Balance
6/30/2012
Capital assets not being depreciated
Land
Construction in progress
Total capital assets not being depreciated

$

Increases

86,128,271
18,853,374
104,981,645

$

28,485,752
28,485,752

Ending
Balance
6/30/2013

Decreases
$

(39,764,478)
(39,764,478)

$

86,128,271
7,574,648
93,702,919

Capital assets being depreciated
Buildings and improvements
Machinery and equipment
Total capital assets being depreciated

218,475,122
9,574,563
228,049,685

38,439,212
1,461,550
39,900,762

(6,462)
(11,085)
(17,547)

256,907,872
11,025,028
267,932,900

Less accumulated depreciation for:
Buildings and improvements
Machinery and equipment
Total accumulated depreciation

101,508,221
5,629,540
107,137,761

9,987,521
585,967
10,573,488

(3,920)
(11,085)
(15,005)

111,491,822
6,204,422
117,696,244

Total capital assets being depreciated, net

120,911,924

29,327,274

(2,542)

150,236,656

$ 225,893,569

$ 57,813,026

$ (39,767,020)

Business-type activities capital assets, net

$

243,939,575

B. Purchase commitments
As of June 30, 2014, PMGAA had entered into various contracts and commitments for purchases of goods and
consulting and construction/renovation services, both on its own account and under grant programs.
Open purchase commitments (net of cost of goods
and services received against these commitments)
Portion of above funded by grants

June 30, 2014
$ 8,998,088
$ 6,217,000

22

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

PMGAA had 26 active design or construction projects at June 30, 2014. These projects are expected to cost a
total of $42 million, of which $39 million has been committed and $30 million has been spent, including closed
and open commitments. At fiscal year-end, PMGAA's commitments remaining open with contractors relating
to these projects were as follows:
Spent-to-date on
uncompleted
Remaining
Project
contracts
Contract
Rwy 30L 3,000' Reconstruct
$
227,540
$
6,225,228
Construct West Terminal Expansion Ph III
2,548,870
432,767
Drainage Improvements Detention Mid - Ph 1
132,468
770,027
Car Care Center
9,479
622,010
Eastside Development EA/EIS
414,263
241,391
Txy V Reconstruction
3,065,242
76,776
Other
924,788
245,662
Total
$ 7,322,650
$
8,613,861
C. Obligations under leases
Operating leases
PMGAA has leased land to a tenant who constructed a building on the property and in 2000 leased the building
to PMGAA for 15 years. The total rent due from PMGAA over the remaining life of the lease is $199,631 plus
agreed upon escalation factors. PMGAA subleases the space in the building to other airport tenants. The longterm lease agreement is classified as an operating lease. Future rents will include adjustments based on the
Consumer Price Index, which are not projected in the following schedules. Total rent expenses for operating
leases for the years ended June 30, 2014 and 2013 were $239,557 and $239,557 respectively.
The future minimum operating lease payments as of June 30, 2014 were payable as follows:
2014

Year ending June 30,
2015 Minimum operating lease payments

$

199,631

Capital leases
PMGAA has entered into a lease agreement as lessee for financing the acquisition of a fuel truck. This lease
agreement qualifies as a capital lease for accounting purposes. As of June 30, 2014, the leased asset was not
yet ready for use, and costs incurred were recorded in nondepreciable capital assets until it is placed into
service. The asset acquired through this capital lease is as follows:
2014
Asset type:
Machinery and equipment
Less: Accumulated depreciation
Total

$
$

23

243,940
243,940

2013
$
$

-

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

Capital leases result in purchases of capital assets, which are funded by outside entities. Such assets are
pledged as collateral against the full payment of the lease obligations. As of June 30, 2014 and June 30, 2013,
the future minimum capital lease obligations and the net present value of these minimum lease payments
were payable as follows:
2014
Year ending June 30,
2015
2016
2017
2018
2019
Total minimum lease payments
Less: amounts representing interest
Present value of minimum lease payments
D. Long-term obligations

$

$

44,309
44,309
44,309
44,309
44,309
221,545
(21,914)
199,631

Long-Term Loans

PMGAA has long-term loans payable from its member governments to provide funds for its shortfall in
operating revenues and for capital improvements. During FY2006, the Arizona Department of Transportation
(ADOT) loaned PMGAA $3 million at 4.77% interest with a 25 year term to finance construction of a hangar
and teaching facility on the airport for Arizona State University. The quarterly payments began in June 2007.
Series 2012 Special Facility Revenue Bonds
PMGAA issued $19,220,000 in Special Facility Revenue Bonds (Mesa Project) Series 2012 (the Deal), on
February 29, 2012. The bonds are rated A1 by Moody’s and AA+ by Standard & Poor’s. The proceeds were
deposited with U.S. Bank National Association, the Trustee. On March 21, 2011, PMGAA entered into a
Memorandum of Understanding (MOU) with the City of Mesa (the City) and Able Engineering and
Component Services for the development, construction and lease of an aircraft maintenance repair and
overhaul facility at Phoenix-Mesa Gateway Airport. In general, the MOU addresses PMGAA issuing Special
Facility Revenue Bonds, constructing the facility and leasing the facility to the City of Mesa. Mesa, in turn, will
sublease the facility to Able.
A Property and Special Facility Lease Agreement between PMGAA and the City, dated February 1, 2012
(Agreement), stipulates that PMGAA will lease certain real property and improvements comprising the Special
Facility to the City. Under the terms of the lease, the City will pay rent to PMGAA, comprised of Base Rent for
the building and Premises Rent for the property. The City’s Base Rent payments due under the terms of the
Agreement will be in sums sufficient to pay, amongst other things, the principal of and interest on the Series
2012 Special Facility Revenue Bonds as they come due, as well as all charges and expenses of the Trustee. The
City pledged a portion of its excise taxes, defined in the Series 2012 Special Facility Revenue Bond Official
Statement, as security for payment of the Base Rent. The pledge of such excise taxes will be a junior lien,
subordinate to certain outstanding senior obligations. On March 19, 2012 the PMGAA Board of Directors
passed Resolution 12-20 adopting issuance and post-issuance compliance procedures relating to tax exempt
bonds and other tax-exempt financings for PMGAA.
Annual principal and interest payments on the bonds are expected to require 100% of revenues pledged for
base rent less all charges and expenses of the trustee. Interest is paid semi-annually based upon the principal
24

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

amount of the bonds outstanding during such period. The bonds are payable from the future lease revenues
from the City of Mesa through 2038. During that time frame total principal and interest to be paid on the
bonds will be $35,216,300. During the fiscal year ended June 30, 2014, total principal and interest on the bonds
was $900,400 and no revenue was subject to the pledge.
The maturity schedule for the PMGAA Series 2012 Special Facility Revenue Bonds is as follows:
Interest
Rates

Purpose

Maturity
Date

Business-type Activities:
Special Facility Revenue Bonds:
Series 2012
3.00-5.00% 07/01/14-38

Original
Amount

Outstanding
Amount

$ 19,220,000

$ 19,220,000

Changes in long-term obligations for the year ended June 30, 2014 are as follows:
June 30, 2013

Increases

Loans payable
Principal on member loans
$ 80,063,977
Accrued Interest on member loans
25,104,886
Member loans
105,168,863
Other Loans
2,659,466
Bonds payable - Series 2012
Principal on bonds
19,220,000
Unamortized premium
653,627
Bonds
19,873,627
Other Liabilities
Capital Leases
Compensated absences
812,035
Business-type long-term liabilities
$ 128,513,991

$

4,460,000
3,155,066
7,615,066
-

$

June 30, 2014

Due Within
One Year

$

$

Decreases
$

(90,127)

84,523,977
28,259,952
112,783,929
2,569,339

94,504

-

(26,145)
(26,145)

19,220,000
627,482
19,847,482

420,000
420,000

243,940
466,274
8,325,280

(44,309)
(513,449)
(674,030)

199,631
764,860
$ 136,165,241

37,172
485,142
$ 1,036,818

$

Changes in long-term obligations for the year ended June 30, 2013 are as follows:
June 30, 2012
Loans payable
Principal on member loans
$ 76,143,977
Accrued Interest on member loans
22,155,890
Member loans
98,299,867
Other Loans
2,745,420
Bonds payable - Series 2012
Principal on bonds
19,220,000
Unamortized premium
653,627
Bonds
19,873,627
Other Liabilities
Compensated absences
884,034
Business-type long-term liabilities
$ 121,802,948

Increases
$

Decreases

3,920,000
2,948,996
6,868,996
-

$

-

$

516,185
7,385,181

25

(85,954)
-

$

(588,184)
(674,138)

June 30, 2013

Due Within
One Year

$

$

80,063,977
25,104,886
105,168,863
2,659,466

90,127

19,220,000
653,627
19,873,627

-

812,035
$ 128,513,991

520,586
610,713

$

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

Debt service requirements on long-term debt at June 30, 2014, including future interest based on current
repayment schedules, are as follows:
Loans Payable
Series 2012 Special Facility Bonds
Year Ending June 30
Principal
Interest
Principal
Interest
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
Total

$

94,504
99,093
103,905
108,951
114,241
44,913,985
20,880,676
20,777,961

$ 87,093,316

$

120,884
116,295
111,483
106,437
101,146
36,321,149
16,398,100
16,344,620

$

$ 69,620,114

$

420,000
430,000
445,000
460,000
470,000
2,655,000
3,340,000
4,255,000
6,745,000
19,220,000

$

887,800
874,900
861,550
847,750
828,950
3,828,800
3,100,250
2,132,250
833,250
$ 14,195,500

Loans from member governments:
Member governments have by agreement provided annual funding for operations and capital expenditures as
follows:

City of Mesa
City of Phoenix
Gila River Indian Community
Town of Gilbert
Town of Queen Creek
City of Apache Junction

Year Ended
June 30, 2014
38.1%
29.1%
10.1%
7.9%
2.9%
11.9%
100.0%

Year Ended
June 30, 2013
43.4%
33.2%
11.5%
8.9%
3.0%
0.0%
100.0%

Based on the Joint Powers Airport Authority Agreement entered into by the members of PMGAA, all payments made to PMGAA by the members are considered loans to be repaid to the members. The intent of the
members in providing funds to PMGAA is to invest in the operation and development of the airport for the
benefit of the citizens of their communities.
The Federal Aviation Administration has established a “six year rule” limiting retroactive reimbursement of
contributions unless appropriate documented agreements are in place. In order to maintain PMGAA’s right to
eventually repay contributions made by its members, PMGAA and its member governments have drawn up
formal promissory notes stating that previous and future payments are to be repaid on specified dates or at such
later time as PMGAA's board of directors deems appropriate, with 3% interest (compounded annually).
Loans payable to member governments increased by $4,460,000 in principal and $3,155,066 in accrued interest
in fiscal year 2014 and by $3,920,000 in principal and $2,948,996 in accrued interest in fiscal year 2013.

26

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

Amounts due each member government at year-end (including accrued interest) were:
City of Mesa
City of Phoenix
Gila River Indian Community
Town of Gilbert
Town of Queen Creek
City of Apache Junction
Loans Payable to member governments at June 30

2014
70,907,780
17,545,029
11,112,023
10,162,625
2,526,472
530,000
$ 112,783,929
$

2013
67,192,019
15,771,872
10,351,479
9,526,821
2,326,672
$ 105,168,863
$

In addition to the above investments by the member governments, representatives from the City of Mesa, Gila
River Indian Community, City of Phoenix, and Towns of Gilbert, Queen Creek, and Apache Junction provide
time to PMGAA to consult with its management, attend meetings and provide other services.
E. Operating lease revenue
PMGAA leases out various facilities on the airport. Leases are primarily for office buildings and hangars, but
also include ground leases for tenant development. Occasionally PMGAA’s lease agreements provide for rents
based on the tenants’ operating revenues or other criteria. Lease income included $1,664,000 and $1,702,000 of
such contingent rents in the fiscal years ending June 30, 2014 and 2013, respectively.
The following schedule shows contracted future revenue from noncancelable lease agreements in place at June
30, 2014:
Fiscal Years Ending June 30:
2015
2016
2017
2018
2019
2020 - 2029
2030 - 2039
2040 - 2049
2050 - 2059
2060 - 2069
2070 - 2073
Totals

$

2014
4,581,552
4,282,980
3,456,416
3,144,173
2,926,153
28,026,931
26,573,786
24,390,250
8,351,161
1,634,706
455,356

$ 107,823,464

With few exceptions, PMGAA’s leases include escalation clauses, which will result in increases in future rents.
The escalation clauses typically provide for annual rent increases of 5 percent or the change in the Consumer
Price Index. Such increases are not included in the above figures. These future lease revenues include
$51,484,517 in base rent from the City of Mesa that will be used to service the debt on the Series 2012 bonds.

27

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

NOTE 4 - OTH ER INFORMATION
A. Risk management
In addition to safety efforts, PMGAA’s risk management activities include purchase of commercial insurance
for all significant risks. Risks retained by PMGAA include normal deductibles and the small risk of losses in
excess of insurance coverage. The amounts of settlements have not exceeded insurance coverage for the past
three years. There have been no significant reductions in insurance coverage. The financial statements do not
include any liability for claims at June 30, 2014 and 2013.
Losses arising from claims and judgments are expensed when (1) it is probable that an asset has been impaired
or a liability has been incurred at the date of the financial statements, and (2) the amount of the loss can be
reasonably estimated.
B. Contingencies
1.

Air Force prime lease and deed

In April 1998, the United States Air Force conveyed to PMGAA a quitclaim deed for 2,931 acres of real
property for the purpose of developing a public airport. Since then, portions of the leased property have
been deeded to the airport as environmental clearances have been completed. Less than one acre remains
under the 25-year lease, which PMGAA entered in January 1996. Together, the deed and long-term lease
encompass approximately 3,005 acres of land, which includes the three runways, and 120 buildings or
facilities (such as navigational aids). The real property conveyed in the deed was recorded at estimated fair
market value at the date of the transfer.
Included in Property and Equipment are donated assets (referred to in this note as “the Property”) received
from the U.S. Air Force (Federal government) totaling $100,431,835 (net of accumulated depreciation) that
are subject to certain restrictions contained in an indenture between the United States of America and
PMGAA. Under the terms of the deed, this property is restricted for public airport purposes for the use and
benefit of the public. No land or improvements can be used, leased, sold, salvaged, or disposed of by
PMGAA for other than airport purposes without the written consent of the Administrator of the FAA. The
term "airport purposes" as used in this deed includes the use and/or development of the property, including
hotel development, to produce sources of revenue from nonaviation business.
Noncompliance with the terms of the indenture could, at the option of the Federal government, result in the
Property reverting back to the United States of America.
2.

Arizona Department of Transportation (ADOT)

Property and Equipment includes $101,634,136 (net of accumulated depreciation) in improvements to real
property that were paid for (in part) with funds from ADOT. Such improvements or any real property
necessarily connected or used in conjunction therewith cannot be relocated, sold, transferred, exchanged,
mortgaged or encumbered in any way without the prior written permission of ADOT.
3.

Economic dependence

PMGAA is dependent upon its members to fund its current shortfall in operating activities. Continuation of
construction and improvement activities is dependent upon continued support from the federal government
and other governmental entities.
28

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

C. Related party transactions
PMGAA has earned revenues, incurred expenses and made other payments involving some of its member
governments. Following is a summary of these transactions:
PMGAA
Sales Taxes
Collected/
PMGAA
PMGAA
Capital
Revenues
Expenses
Projects
Remitted
Fiscal Year ended June 30, 2014
$ 1,885,309
$
170
$ 129,240
City of Mesa
$ 1,445,817
City of Phoenix
18,669
City of Apache Junction
1,000
Fiscal Year ended June 30, 2013
City of Mesa

$

19,339

$ 1,584,411

$

150,325

$

142,512

PMGAA revenues above consist of real property leases, utilities billings and minor maintenance work.
PMGAA expenses include airport rescue and firefighting and police protection, water, and permits. Included in
those amounts is $150,857 of accounts payable.
D. Retirement plans
Arizona State Retirement System – Plan Description
PMGAA contributes to a cost-sharing multiple-employer defined benefit pension plan administered by the
Arizona State Retirement System. Benefits are established by state statute and generally provide retirement,
death, long-term disability, survivor, and health insurance premium benefits. The System is governed by the
Arizona State Retirement System Board, according to the provisions of A.R.S. Title 38, Chapter 5, Article 2.
The System issues a comprehensive annual financial report that includes financial statements and required
supplementary information. The most recent report may be obtained by writing to the Arizona State
Retirement System, 3300 North Central Avenue, P.O. Box 33910, Phoenix, AZ 85067-3910 or by calling (602)
240-2000 or (800) 621-3778.
Funding Policy - The Arizona State Legislature establishes and may amend active plan members' and PMGAA's
contribution rates. For the year ended June 30, 2014, active plan members and PMGAA were each required by
statute to contribute at the actuarially determined rate of 11.54 percent (10.65 percent retirement, .65 percent
for health insurance premium, and 0.24 percent long-term disability) of the members' annual covered payroll.
PMGAA's contributions to the System for the years ended June 30, 2014, 2013, and 2012 were as follows:
Years ended June 30,

2014
2013
2012

Retirement
Fund
$507,089
537,706
508,808

29

Health Benefit Long-Term
Supplement Disability
Fund
Fund
$30,949
34,098
32,477

$11,427
12,590
12,372

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
Fiscal Years Ended June 30, 2014 and 2013

Deferred Compensation Plans
PMGAA offers its employees a deferred compensation plan created in accordance with Internal Revenue Code
Section 457. The plan is available to all PMGAA employees and permits them to defer a portion of their salary
until future years. The deferred compensation is not available to employees until termination, retirement, death
or unforeseeable emergency. Trust agreements are in place, making these funds available only to employees
and their beneficiaries. Accordingly, these funds are not reflected in PMGAA financial statements.
PMGAA provides its employees the opportunity to participate in two plans: one administered by ING
Insurance & Annuity Company and the other by the International City Management Association.

30

Phoenix-Mesa Gateway Airport Authority

Statement of Revenues and Expenses
Unaudited (Budget Basis)
Fiscal Year Ended June 30, 2014

AIRPORT - All Operations

2014 Budget

Fiscal
YTD
Actual
YTD =

% of
Budget
100.0

YTD Actual
Over(Under)
Ann'l Budget

AERONAUTICAL OPERATING REVS
Aircraft Parking
Fuel Flowage Fees
Landing Fees
Lease Income Aero
Fuel Sales (net of CGS)
Services Sold - Aero (net of CGS)

149,720
547,920
902,400
1,952,893
878,527
3,061,396

163,108
628,442
764,620
2,033,652
949,839
3,623,647

109%
115%
85%
104%
108%
118%

13,388
80,522
(137,780)
80,759
71,312
562,251

NON AERONAUTICAL OPERATING REVS
Concessions
Lease Income Non-Aero
Parking & Ground Transportation
Rental Car Fees
Services Sold - Non Aero (net of CGS)

551,289
980,557
2,685,675
1,627,980
87,497

540,686
906,248
2,499,051
1,543,372
77,894

98%
92%
93%
95%
89%

(10,603)
(74,309)
(186,624)
(84,608)
(9,603)

Total operating revenues (net of CGS)

13,425,854

13,730,559

102%

304,705

OPERATING EXPENSES
Personnel Compensation & Benefits
Communications & Utilities
Contractual Services
Insurance
Other
Repair & Maintenance
Supplies & Materials
Total operating expenses before Depr

7,049,574
910,172
4,097,777
283,285
464,367
758,896
701,077
14,265,148

6,701,600
781,033
3,773,606
282,213
396,609
561,852
705,954
13,202,867

95%
86%
92%
100%
85%
74%
101%
93%

(347,974)
(129,139)
(324,171)
(1,072)
(67,758)
(197,044)
4,877
(1,062,281)

(839,294)

527,692

-63%

1,366,986

Operating income (loss) before Depreciation

33