PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2015

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PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
TABLE OF CONTENTS
FISCAL YEAR ENDED June 30, 2015

Page
Independent Auditors’ Report

1

Management’s Discussion and Analysis

5

Basic Financial Statements
Statement of Net Position – Proprietary Fund

13

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

14

Statement of Cash Flows – Proprietary Fund

15

Notes to the Basic Financial Statements

17

Required Supplementary Information Other Than MD&A
Schedule of PMGAA’s Proportionate Share of Net Pension Liability and Contributions

38

Notes to Required Supplementary Information

40

Supplementary Information
Statement of Revenues and Expenses (Budget Basis)

42

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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 year ended June 30, 2015, and the related
notes to the financial statements, which collectively comprise 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 an opinion 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.

An independent member of Nexia International

1

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
financial position of the business-type activities of PMGAA as of June 30, 2015, and the change in
financial position and cash flows thereof for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of a Matter
During fiscal year ended June 30, 2015, PMGAA adopted GASB Statement No. 68, Accounting and
Financial Reporting for Pensions and GASB Statement No. 71 Pension Transition for Contributions
Made Subsequent to the Measurement Date—An Amendment of GASB Statement No. 68. As a result
of the implementation of GASBS No. 68 and 71, PMGAA reported a restatement for the change in
accounting principle (see Note 1.D.13.) Our auditors’ opinion was not modified with respect to the
restatement.
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 5 – 10 and the schedule of PMGAA’s proportionate
share of the net pension liability and contributions on page 39 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 PMGAA’s basic financial statements. The Statement of Revenues and Expenses
(Budget Basis) is 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.

2

Board of Directors
Phoenix-Mesa Gateway Airport Authority

Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 9, 2015, on our consideration of the PMGAA'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 Authority’s internal
control over financial reporting and compliance.

a
CliftonLarsonAllen LLP
Phoenix, Arizona
October 9, 2015

3

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4

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2015
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, 2015 and June 30,
2014.
Financial Highlights
 PMGAA’s assets exceeded liabilities at the end of the fiscal year by $244,355,824 (net position).
Total net position included $230,167,724 in capital assets and $7,290,629 in unrestricted net position.
During the year, total net position increased by $121,784,959.
 Member governments forgave $112,783,929 in loans made through June 30, 2014, including
principal and interest, to PMGAA. These amounts are reported as an extraordinary gain and account
for most of the increase in net position.
 Total liabilities decreased by $103,196,834 (74.2%), to $35,854,145. Most of this was attributable to
the member loan recharacterization.
 PMGAA adopted GASB 68, Accounting and Financial Reporting for Pensions, and recognized a
prior period adjustment of $9,654,873, a pension liability in the amount of $7,855,199, deferred
outflows of resources of $913,469, and deferred inflows of resources of $2,309,090.
 During the current year, member governments contributed an additional $4,060,000.
 PMGAA earned $2,851,116 in Passenger Facility Charges.
 Sales in PMGAA’s fueling operation were down 2% in dollars to $7,585,338. The number of gallons
uploaded was down 1%, due primarily to decreased government operations. Gross margin for all
fueling sales (gross revenues less cost of goods sold) was up 1%.
 PMGAA’s operations produced a loss of $9,220,742 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 three components, 1) fund financial statements, 2) notes to the financial statements, and 3)
required supplementary information. 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 13 - 16 of this report.
The statement of net position presents information on PMGAA’s assets, deferred outflows of resources,
liabilities, and deferred inflows of resources, with the difference 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
5

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2015
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.
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 17 - 35 of this report.
Required Supplementary Information
Required supplementary information includes pension related information required by the Governmental
Accounting Standards Board (GASB) to supplement information in the notes to the financial statements.
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 $244,355,824.
Airports are capital-intensive enterprises. 94.2% 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
2015
Current and other assets
Capital assets, net of accumulated depreciation
Total assets

$

Deferred outflows of resources
Long-term liabilities
Other liabilities
Total liabilities
Deferred inflows of resources
Net position:
Net investment in capital assets
Restricted
Unrestricted
Total net position

$

29,286,792
250,009,708
279,296,500

2014
$

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

913,469

-

29,555,797
3,989,258
33,545,055

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

2,309,090

-

230,167,724
6,897,471
7,290,629
244,355,824

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

$

$7,290,629 (3.0%) 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.

6

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2015
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.
Net position increased by $112,130,085 (84.8%) from the previous fiscal year-end. This was primarily due to
the recharacterization of $112,783,929 of member government loans to contributions. Member contributions
increased in fiscal year 2014-15 by $4,060,000.
Net position for PMGAA’s net investment in capital assets increased by 1.4%. New investments in capital
assets (less asset dispositions) were $3,483,292 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 increases in capital grants and contributions, which were up 79%
($6,199,657). (Grant funds are recognized as revenue when all eligibility requirements imposed by the
provider have been met.) Capital contributions increased by $6,199,657 due to activity on several grantfunded runway and taxiway projects and current year capital-related member contributions. Other income
was up 48% ($1,643,017), mostly because current year member contributions not used for capital expenses
were recorded as other non-operating income. An extraordinary item of $112,783,929 was recognized as a
result of member governments recharacterizing loans as contributions. Previously, loans had been
documented by formal promissory notes stating that payments were to be repaid on specified dates or at such
later time as PMGAA’s board of directors deemed appropriate, with 3% interest (compounded annually).
During fiscal year 2015 all member loans and accrued interest were formally forgiven by each member
government. 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
2015
2014
Revenues:
Charges for sales and services (gross)
$
14,171,046
$
13,889,440
Lease income
4,454,244
4,252,868
Capital grants and contributions
14,079,298
7,879,641
Other
5,058,947
3,415,930
Total revenues
37,763,535
29,437,879
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
Extraordinary Item
Restatement of prior year
Net position at prior year-end
Net position at year-end

7

2,887,601
11,662,130
13,296,301
912,166
4,307
28,762,505

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

9,001,030
112,783,929
(9,654,873)
132,225,738
244,355,824

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

$

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2015
Revenues:
Charges for sales and services increased by $281,606 and lease income increased $201,376. Fuel sales were
down 2%, and related costs of sales were down 6.7%.

Revenues
Capital grants and
contributions
37%
Lease income
12%

Other
13%

Charges for sales and
services (gross)
38%

Expenses:
Other operating expenses increased by $93,434 (1%). This is due mostly to increased repair and maintenance
and professional services costs, offset by decreased personnel costs. Interest expense decreased $87,349 (9%)
mostly because of the capitalization of interest on construction-type projects. (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 decreased $211,182 (7%) due to decreased fuel sales and fuel prices.

Expenses
Depreciation
41%

Cost of sales
10%

Interest expense other
3%

Other operating and
nonoperating expenses
46%

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 42 for a presentation of the budget as supplementary information.

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PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2015
Capital Assets and Debt Administration
Capital assets (net of depreciation)
At June 30, 2015, PMGAA’s capital assets totaled $250,009,708 (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 1.4% during the fiscal
year.
Capital assets (net of depreciation)
2015
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Total capital assets, net

$

$

2014

86,128,271
153,093,555
5,158,524
5,629,358
250,009,708

$

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

$

Major capital asset events during the current fiscal year included the following:
 Runway 30L 3,000’ Reconstruction: Spent in FY15: $6.0 million
 Runway 12R 1,000’ Reconstruction: Spent in FY14: $3.3 million
 Administrative Building Renovation: Spent in FY15: $1.4 million
Long-term debt.
At the end of the current fiscal year, PMGAA had total debt outstanding of $22,038,632. During the year,
$112,783,929 in member government loans were recharacterized as contributions.
Phoenix-Mesa Gateway Airport Authority's Outstanding Debt
2015
Loans from Member Governments
(including accrued interest)
ADOT Loan
(including accrued interest)
Capital Leases
Bonds payable
(including bond premium)

$

2014
-

$

2,474,835
162,460

$

19,401,337
22,038,632

112,783,929
2,569,339
199,631

$

19,847,482
135,400,381

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.

9

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2015
Additional information on PMGAA’s long-term debt can be found in note 3.D. on pages 26 - 27.
Economic Factors
PMGAA depends on annual contributions 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.
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.

10

FINANCIAL STATEMENTS

11

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12

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENT OF NET POSITION
PROPRIETARY FUND
JUNE 30, 2015
Business-type Activities Enterprise Fund
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

14,672,646
8,839,385
1,084,477
4,052,108
165,691
172,392
28,986,699
300,093
91,757,629
158,252,079
250,309,801

Total assets

279,296,500

Deferred outflows of resources

913,469

Liabilities
Current liabilities:
Accounts payable
Accrued liabilities
Bond interest payable
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:
Bonds payable
Pension liability
ADOT loan
Capital leases
Retirement sick leave payable
Total noncurrent liabilities

1,871,234
272,191
443,900
430,000
429,444
38,501
26,488
99,093
78,314
3,689,165
300,093
18,971,337
7,855,199
2,375,742
123,959
229,560
29,555,797

Total liabilities

33,545,055

Deferred inflows of resources

2,309,090

Net position
Net investment in capital assets
Restricted for capital outlay
Unrestricted
Total net position

$

230,167,724
6,897,471
7,290,629
244,355,824

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

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
PROPRIETARY FUND
FISCAL YEARS ENDED JUNE 30, 2015
Business-type Activities
Enterprise Fund
Operating revenues
Fueling operations
Lease income
Maintenance services
Airport usage fees
Total operating revenues

$

7,585,338
4,454,244
419,518
6,166,190
18,625,290

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

5,979,993
4,367,625
2,854,378
33,223
766,767
788,091
295,133
1,098,692
11,662,130
27,846,032

Operating loss

(9,220,742)

Nonoperating revenues (expenses)
Investment income
PFC income
CFC income
Other income
Gain/(loss) on disposition of assets
Intergovernmental revenue
Interest expense - bonds
Interest expense - other
Total nonoperating revenues (expenses)

93,578
2,851,116
395,875
1,616,769
(4,307)
101,609
(861,655)
(50,511)
4,142,474

Loss before contributions and extraordinary item

(5,078,268)

Capital contributions

14,079,298

Extraordinary Item

112,783,929

Change in net position

121,784,959

Net position, beginning of year, as restated

122,570,865

Net position, end of year

$

244,355,824

The accompanying notes to the basic financial statements are an integral part of this statement.
14

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENTS OF CASH FLOWS
PROPRIETARY FUND
FISCAL YEAR ENDED JUNE 30, 2015
Business-type Activities Enterprise Funds
Cash flows from operating activities
Receipts from customers
Payments to employees
Payments to suppliers
Customer deposits
Net cash flows from operating activities

$

18,537,353
(6,436,328)
(10,079,922)
(16,496)
2,004,607

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

1,598,505
90,482
1,688,987

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
Cash from sale of equipment
Principal paid on capital leases
Principal paid on bonds
Interest paid on bonds
Interest paid on ADOT loan
Interest paid on capital leases
Capital grants received
Net cash flows from capital and financing activities

(14,907,004)
2,461,495
(94,504)
2,847,600
395,308
2,671
(37,171)
(420,000)
(894,100)
(120,884)
(7,137)
10,478,172
(295,554)

Cash flows from investing activities
Investment income
Other income/expense
Net cash flows from investing activities

93,578
18,264
111,842

Net change in cash and cash equivalents

3,509,882

Cash and cash equivalents, beginning of year

20,302,242

Cash and cash equivalents, end of year

$

23,812,124

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

$
$

$14,672,646
9,139,478
23,812,124

The accompanying notes to the basic financial statements are an integral part of this statement.
15

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENTS OF CASH FLOWS
PROPRIETARY FUND
FISCAL YEAR ENDED JUNE 30, 2015
Business-type Activities Enterprise Funds
(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
Adjustment to pension expense
Allowance for uncollectible accounts
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

($9,220,742)

11,662,130
(404,053)
82,000

$

(78,902)
286
42,480
108,307
(91,035)
(16,496)
(79,368)
$2,004,607

NON-CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES
The Authority recognized $112,783,928 extraordinary gain on extinguishment of debt related to member
government loans.
The Authority amortized $26,145 in bond premiums during the fiscal year.
The Authority received an asset donation in the amount of $82,366

The accompanying notes to the basic financial statements are an integral part of this statement.
16

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

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.

17

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

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, 2015, $4,452,708
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,
2015, $932,283 has been earned under the third application. For the second and third applications, $6,642,737
is reported as restricted assets. These monies are recorded as non-operating revenues.
For the fiscal year ending June 30, 2015, PMGAA implemented GASB 68, Accounting and Financial Reporting
for Pensions. As a result of GASB 68, PMGAA recognized a prior period adjustment of ($9,654,873).
It is PMGAA’s policy to use restricted resources before using unrestricted resources.
D. Assets, deferred outflows of resources, liabilities, deferred inflows of resources, 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 Bills. 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.

18

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

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. In fiscal year 2015, this allowance was 8.5% 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. Deferred outflows of resources
PMGAA recognizes the consumption of net assets that are applicable to a future reporting period as deferred
outflows of resources. Reported amounts are related to the requirements of accounting and financial reporting
for pensions under GASB 68.

19

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

6. 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.
7. 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.
8. Deferred inflows of resources
PMGAA recognizes the acquisition of net assets that are applicable to a future reporting period as deferred
inflows of resources. Reported amounts are related to the requirements of accounting and financial reporting
for pensions under GASB 68.
9. 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.
10. Pensions
For purposes of measuring the net pension (asset and) liability, deferred outflows of resources and deferred
inflows of resources related to pensions, and pension expense, information about the pension plans’ fiduciary
net position and additions to/deductions from the plans’ fiduciary net position have been determined on the
same basis as they are reported by the plans. 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.
11. 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.
12. 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.

20

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

13. Change in Accounting Principle
Net position as of July 1, 2014, has been restated as follows for the implementation of GASB Statement No.
68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date.
Business-type
Activities
Beginning net position as previously reported at June 30, 2014

$

132,225,738

Restatement adjustment - Implementation GASB 68:
Net pension liability (measurement date as of June 30, 2013)
Deferred outflows - PMGAA contributions made during fiscal
year 2014

(10,166,921)
512,048

Total restatement adjustment

(9,654,873)

Net position as restated, July 1, 2014

$

122,570,865

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.
NOTE 3 - DETAILED NOTES
A. Assets
1. Deposits and investments
Deposits and investments at June 30, 2015 consist of the following:
Cash on hand
Deposits
Cash in bank
Investments
State Treasurer's Investment Pool
U.S. Treasury Bills
Total deposits and investments
Less: restricted cash
Total cash and equivalents
21

$

2015
2,810
16,810,661

$

5,675,904
1,322,749
23,812,124
(9,139,478)
14,672,646

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

Deposits - PMGAA's deposits at June 30, 2015, 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 Pool (LGIP) 700. In addition, some of the funds held by our bond trustee, U.S.
Bank, are invested in U.S. Treasury Bills.
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, 2015. 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.
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
2015.
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.
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, 2015, PMGAA had the following investments:

22

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

Investment Type

Rating

Rating Agency

State Treasurer's Investment Pool 700
US Treasury Bills
Total investments

AAA
AAA

Moody's
Fitch

Amount
$
$

%

5,675,904
1,322,749
6,998,653

81.10%
18.90%
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 Maturities
Investment Type

Less than
1 year

Amount

State Treasurer's Investment Pool 700
US Treasury Bills

$
$

5,675,904
1,322,749
6,998,653

$

1,322,749
1,322,749

$

1-3 Years
$ 5,675,904
$ 5,675,904

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:
2015
Customer deposits
Passenger Facility Charges (PFC's)
Current and Future Debt Service Reserves
Total restricted assets

$

300,093
6,642,737
2,196,648
$ 9,139,478

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

$

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

$

23

$

$

182,272
3,869,836
4,052,108
1,184,626
(100,149)
1,084,477

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

4. Capital assets
Capital asset activity for the year ended June 30, 2015 was as follows:
Beginning
Balance
Capital assets not being depreciated
Land
Construction in progress
Total capital assets not being depreciated

$

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

Increases
$

Ending
Balance

Decreases

14,772,027
14,772,027

$

(15,550,394)
(15,550,394)

$

86,128,271
5,629,358
91,757,629

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

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

15,079,826
850,940
15,930,766

(30,759)
(59,671)
(90,430)

285,712,686
12,690,717
298,403,403

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

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

10,941,909
720,221
11,662,130

(23,781)
(59,671)
(83,452)

132,619,131
7,532,193
140,151,324

Total capital assets being depreciated, net

153,990,421

4,268,636

(6,978)

158,252,079

$ 246,526,417

$ 19,040,663

Business-type activities capital assets, net

$

(15,557,372)

$

250,009,708

Interest expense in the amount of $77,510 was capitalized and applied to construction-type projects based on
the weighted average of the rates on outstanding borrowings during fiscal year 2015.
B. Purchase commitments
As of June 30, 2015, 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.
June 30, 2015
Open purchase commitments (net of cost of goods
and services received against these commitments)

$

5,359,000

Portion of above funded by grants

$

3,880,000

PMGAA had 32 active design or construction projects at June 30, 2015. These projects are expected to cost a
total of $31 million, of which $21.7 million has been committed and $17 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:

24

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

Spent-to-date on
uncompleted
contracts

Project
Design & Construct Rwy 30C
Rwy 12R 1,000 Threshold /Reconstruct
Taxiway C Ph II & III
Eastside Development EA/EIS
WTO & Parking Lot Improvements
Planning Area Study
CR-Hgr 1084 Fire Sprinkler & Riser Replace
Other
Total

C.

$

$

931
3,333,943
712,850
630,195
37,538
31,006
994,460
5,740,923

Remaining
Contract
$

$

3,301,179
542,177
99,241
53,402
212,458
162,994
166,299
174,395
4,712,145

Obligations under 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. The leased asset has been recorded at cost.
The asset acquired through this capital lease is as follows:
2015
Asset type:
Machinery and equipment
$
243,940
Less: Accumulated depreciation
(25,825)
Total
$
218,115
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, 2015, the future
minimum capital lease obligations and the net present value of these minimum lease payments were payable
as follows:
2015
Year ending June 30,
2016
2017
2018
2019
Total minimum lease payments
Less: amounts representing interest
Present value of minimum lease payments

$

$

44,309
44,309
44,309
44,309
177,236
(14,776)
162,460

D. Long-term obligations
Long-Term Loans

PMGAA previously had long-term loans payable from its member governments to provide funds for its
shortfall in operating revenues and for capital improvements. During FY2015, these loans were forgiven and
reclassified as contributions. 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.
25

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

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
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, 2015, total principal and interest on the bonds
was $1,314,100 which was equal to the lease income received during the current fiscal year pledged to make the
principal and interest payments.
The maturity schedule for the PMGAA Series 2012 Special Facility Revenue Bonds is as follows:

Purpose

Interest
Rates

Maturity
Date

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

26

Original
Amount

Outstanding
Amount

$ 19,220,000

$ 18,800,000

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

Changes in long-term obligations for the year ended June 30, 2015 are as follows:
June 30, 2014
Loans payable
Principal on member loans
$ 84,523,977
Accrued Interest on member loans
28,259,952
Member loans
112,783,929
Other Loans
2,569,339
Bonds payable - Series 2012
Principal on bonds
19,220,000
Unamortized premium
627,482
Bonds
19,847,482
Other Liabilities
Capital Leases
199,631
Compensated absences
764,860
Business-type long-term liabilities
$ 136,165,241

Increases
$

Decreases
-

$

$

(84,523,977)
(28,259,952)
(112,783,929)
(94,504)

June 30, 2015

Due Within
One Year

$

$

2,474,835

99,093

-

(420,000)
(26,145)
(446,145)

18,800,000
601,337
19,401,337

430,000
430,000

417,078
417,078

(37,171)
(496,446)
(113,858,195)

162,460
685,492
22,724,124

38,501
455,932
$ 1,023,526

$

$

Debt service requirements on long-term debt at June 30, 2015, including future interest based on current
repayment schedules, are as follows:
Loans Payable
Principal
Interest

Year Ending June 30
2016
2017
2018
2019
2020
2021-2025
2026-2030
2031-2035
2036-2039
Total

$

99,093
103,905
108,951
114,241
119,789
692,059
877,222
359,575
$ 2,474,835

$

116,295
111,483
106,437
101,146
95,599
384,880
199,717
17,355
$ 1,132,912

Series 2012 Special Facility Bonds
Principal
Interest
$

$

430,000
445,000
460,000
470,000
490,000
2,770,000
3,505,000
4,465,000
5,765,000
18,800,000

$

874,900
861,550
847,750
828,950
809,350
3,706,200
2,925,000
1,909,000
545,000
$ 13,307,700

E. Contributions from member governments:
Member governments provide contributions to PMGAA to invest in the operation and development of the
airport for the benefit of the citizens of their communities. On October 21, 2014, the Joint Powers Airport
Authority Agreement entered into by the members of PMGAA was amended to recharacterize all previous payments made to PMGAA by the members from loans to contributions. The effective date of this change was
July 1, 2014. Prior to this amendment, loans had been documented by formal promissory notes stating that
payments were to be repaid on specified dates or at such later time as PMGAA’s board of directors deemed
appropriate, with 3% interest (compounded annually). This change was ratified by each respective council or

27

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

community, and the loan agreements and promissory notes were canceled. The total amount of canceled loans
and accrued interest during fiscal year 2015 is as follows:

City of Mesa
City of Phoenix
Gila River Indian Community
Town of Gilbert
Town of Queen Creek
City of Apache Junction
Member government loans canceled

2015
70,907,780
17,545,029
11,112,023
10,162,625
2,526,472
530,000
$ 112,783,929
$

In addition, member governments have by agreement provided annual funding for operations and capital
expenditures for fiscal year 2015 as follows:

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.
F. 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 $1,841,000 of such
contingent rents in the fiscal year ending June 30, 2015.

28

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

The following schedule shows contracted future revenue from noncancelable lease agreements in place at June
30, 2015:
Fiscal Years Ending June 30:
2015
2016
$ 4,361,532
2017
3,625,869
2018
3,241,020
2019
3,050,821
2020
2,899,624
2021 - 2030
28,569,433
2031 - 2040
27,050,497
2041 - 2050
24,496,817
2051 - 2060
7,291,322
2061 - 2070
1,980,549
2071 - 2073
291,997
Totals

$ 106,859,481

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
$50,165,421 in base rent from the City of Mesa that will be used to service the debt on the Series 2012 bonds.

NOTE 4 - OTHER 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.
29

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

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 $98,723,294 (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 $106,929,267 (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.
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
PMGAA
PMGAA
Capital
Collected/
Revenues
Expenses
Projects
Remitted
Fiscal Year ended June 30, 2015
City of Mesa
$ 3,206,683
$ 1,828,832
$
16,927
$ 124,174
Gila River Indian Community
459,807
City of Phoenix
1,300,000
17,193
City of Apache Junction
130,000
1,227
Town of Gilbert
350,000
Town of Queen Creek
130,000
584
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
City of Mesa expenses is $208,731 in accounts payable at June 30, 2015. During the fiscal year ended June 30,
2015, PMGAA member loans and accrued interest were forgiven. See Note 3.E. for a summary of the loan
forgiveness by member.

30

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

D. Retirement plans
PMGAA contributes to the Arizona State Retirement System (ASRS) Plan described below. The plan is a
component unit of the State of Arizona.
At June 30, 2015, PMGAA reported the following aggregate amounts related to pensions for the plan to
which it contributes:
Statement of Net Position and
Statement of Activities
Net pension liabilities
Deferred outflows of resources
Deferred inflows of resources
Pension expense

Business-Type
Activities
$ 7,855,199
913,469
2,309,090
110,192

Arizona State Retirement System – Plan Description
PMGAA employees participate in the Arizona State Retirement System. The ASRS administers a cost-sharing
multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health
insurance premium benefit (OPEB) plan, and a cost-sharing multiple-employer defined benefit long-term
disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the
provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial
report that includes its financial statements and required supplementary information. The report is available on
its Web site at www.azasrs.gov.
Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term
disability, and survivor benefits. State statute establishes benefits terms. Retirement benefits are calculated
on the basis of age, average monthly compensation, and service credit as follows:
ASRS

Years of service
and age required
to receive benefit

Retirement
Initial membership date:
Before July 1, 2011
On or after July 1, 2011
Sum of years and age equals 80
30 years age 55
10 years age 62
25 years age 60
5 years age 50*
10 years age 62
any years age 65
5 years age 50*
any years age 65

Final average
salary is based on

Highest 36 months
of last 120 months

Highest 60 consecutive months
of last 120 months

Benefit percent
per year of service

2.1% to 2.3%

2.1% to 2.3%

*With actuarially reduced benefits.
31

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic
cost-of-living adjustments based on excess investment earning. Members with a membership date on or after
September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a
member’s death. For retired members, the survivor benefit is determined by the retirement benefit option
chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the
member’s contributions and employer’s contributions, plus interest earned.
Contributions – In accordance with state statutes, annual actuarial valuations determine active member and
employer contribution requirements. The combined active member and employer contribution rates are
expected to finance the costs of benefits employees earn during the year, with an additional amount to
finance any unfunded accrued liability. For the year ended June 30, 2015, active ASRS members were
required by statute to contribute at the actuarially determined rate of 11.60 percent (11.48 percent for
retirement and 0.12 percent for long-term disability) of the members’ annual covered payroll, and PMGAA
was required by statute to contribute at the actuarially determined rate of 11.60 percent (10.89 percent for
retirement, 0.59 percent for health insurance premium benefit, and 0.12 percent for long-term disability) of
the active members’ annual covered payroll. In addition, PMGAA was required by statute to contribute at
the actuarially determined rate of 9.57 percent (9.51 percent for retirement and 0.06 percent for long-term
disability) of annual covered payroll of retired members who worked for PMGAA in positions that would
typically be filled by an employee who contributes to the ASRS. Contributions to the pension plan for the
year ended June 30, 2015, were $514,245. PMGAA’s contributions for the current and 2 preceding years for
OPEB, all of which were equal to the required contributions, were as follows:
Years ended June 30,

2015
2014
2013

Health Benefit
Supplement
Fund

Long-Term
Disability
Fund

$

$

27,861
30,949
34,098

5,667
11,427
12,590

Pension Liability – At June 30, 2015, PMGAA reported a liability of $7,855,199 for its proportionate share
of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2014. The
total pension liability used to calculate the net pension liability was determined using update procedures to
roll forward the total pension liability from an actuarial valuation as of June 30, 2013, to the measurement
date of June 30, 2014. PMGAA’s proportion of the net pension liability was based on $14,796,602,153. At
June 30, 2014, PMGAA’s proportion was 0.053088 percent, which was a decrease of 0.008069 percent from
its proportion measured as of June 30, 2013.
Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2015,
PMGAA recognized pension expense for ASRS of $110,192. At June 30, 2015, PMGAA reported deferred
outflows of resources and deferred inflows of resources related to pensions from the following sources:

32

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

ASRS

Deferred
Outflows of
Resources

Differences between expected and actual
experience
Changes of assumptions or other inputs
Net difference between projected and
actual earnings on pension plan
investments
Changes in proportion and differences
between PMGAA contributions and
proportionate share of contributions
PMGAA contributions subsequent to the
measurement date
Total

$

$

Deferred Inflows
of Resources

399,224

$

-

-

1,373,632

-

935,458

514,245

-

913,469

$

2,309,090

The $514,245 reported as deferred outflows of resources related to ASRS pensions resulting from PMGAA
contributions subsequent to the measurement date will be recognized as a reduction of the net pension
liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and
deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows:
Year ending June 30
2016
2017
2018
2019

33

$ (576,553)
(576,553)
(413,352)
(343,408)

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

Actuarial assumptions- The significant actuarial assumptions used to measure the total pension liability are
as follows:
ASRS
Actuarial valuation date
Actuarial roll forward date
Actuarial cost method
Investment rate of return
Amortization method:
Plan amendments
Investment gain/loss
Assumption gain/loss
Experience gain/loss
Asset valuation
Discount rate
Projected salary increases
Inflation
Permanent benefit increase
Mortality rates

6/30/2013
6/20/2014
Entry age normal
8%
Immediate
5 years
Average future service lives
Average future service lives
Fair value
8%
3-6.75%
3%
Included
1994 GAM Scale BB

Actuarial assumptions used in the June 30, 2013, valuation were based on the results of an actuarial
experience study for the 5-year period ended June 30, 2012.
The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79 percent
using a building-block method in which best-estimate ranges of expected future real rates of return (expected
returns, net of pension plan investment expense and inflation) are developed for each major asset class. These
ranges are combined to produce the long-term expected rate of return by weighting the expected future real
rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation
and best estimates of arithmetic real rates of return for each major asset class are summarized in the following
table:
ASRS
Asset Class
Equity
Fixed income
Real estate
Commodities
Total

Target
Allocation
63%
25%
8%
4%
100%

Long-Term
Expected Real
Rate of Return
4.43%
0.80%
0.38%
0.18%

Discount Rate—The discount rate used to measure the ASRS total pension liability was 8 percent, which is
less than the long-term expected rate of return of 8.79 percent. The projection of cash flows used to
determine the discount rate assumed that contributions from participating employers will be made based on
the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the
contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary
net position was projected to be available to make all projected future benefit payments of current plan
34

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2015

members. 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.
Sensitivity of the PMGAA’s Proportionate Share of the ASRS Net Pension Liability to Changes in the
Discount Rate—The following table presents PMGAA’s proportionate share of the net pension liability
calculated using the discount rate of 8 percent, as well as what PMGAA’s proportionate share of the net
pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7
percent) or 1 percentage point higher (9 percent) than the current rate:
ASRS
1% Decrease
(7%)
PMGAA's proportionate share of the
net pension liability
$ 9,928,569

Current
Discount Rate
(8%)

1% Increase
(9%)

$

$ 6,730,292

7,855,199

Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net
position is available in the separately issued ASRS financial report.
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.

35

THIS PAGE BLANK

36

REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A

37

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
Required Supplementary Information
Schedule of PMGAA’s Proportionate Share of Net Pension Liability and Contributions
Cost-Sharing Pension Plans
June 30, 2015
Fiscal Year

Arizona State Retirement System

2015
0.053088%
$ 7,855,199
$ 4,761,393
60.61%

PMGAA's proportion of the net pension liability
PMGAA's proportionate share of the net pension liability
PMGAA's covered-employee payroll
PMGAA's proportionate share of the net pension liability as a
percentage of its covered-employee payroll
Plan fiduciary net position as a percentage of the total pension
liability

69.49%

Arizona State Retirement System

2013
through
2014
2006
0.061157% Information
$ 10,166,921 not available
$ 5,245,907
51.60%
63.58%

Fiscal Year

Statutorily required contribution
PMGAA's contributions in relation to the statutorily
required contribution
PMGAA's contribution deficiency (excess)
PMGAA's covered-employee payroll
PMGAA's contributions as a percentage of coveredemployee payroll

38

2015
514,245 $

2014
512,048 $

2013
537,706

514,245
$
$
$ 4,722,184 $
10.89%

512,048
$
4,761,393 $
10.75%

537,706
5,245,907
10.25%

$

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
Required Supplementary Information
Schedule of PMGAA’s Proportionate Share of Net Pension Liability and Contributions
Cost-Sharing Pension Plans
June 30, 2015

Fiscal Year

$

$
$

2012
508,808 $

2011
439,579 $

2010
417,079 $

2009
418,387 $

2008
404,822 $

2007
2006
338,430 not available

508,808
$
5,152,977 $
9.87%

439,579
$
5,130,260 $
8.57%

417,079
$
5,233,951 $
7.97%

418,387
$
5,285,789 $
7.92%

404,822
$
5,016,388 $
8.07%

338,430
$
4,470,664
7.57%

39

-

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
Notes to Required Supplementary Information
June 30, 2015
Note 1 - Actuarially Determined Contribution Rates
Actuarial determined contribution rates for ASRS are calculated as of June 30 one year prior to the end of the
fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the
contribution requirements are as follows:
ASRS
Actuarial valuation date
Actuarial roll forward date
Actuarial cost method
Amortization method:
Plan amendments
Investment gain/loss
Assumption gain/loss
Experience gain/loss
Asset valuation
Discount rate
Projected salary increases
Inflation
Permanent benefit increase
Mortality rates

6/30/2013
6/20/2014
Entry age normal
Immediate
5 years
Average future service lives
Average future service lives
Fair value
8%
3-6.75%
3%
Included
1994 GAM Scale BB

40

SUPPLEMENTARY INFORMATION

41

Phoenix-Mesa Gateway Airport Authority

Statement of Revenues and Expenses
Unaudited (Budget Basis)
Fiscal Year Ended June 30, 2015

AIRPORT - All Operations

2015 Budget

Fiscal
YTD
Actual
YTD =

AERONAUTICAL OPERATING REVS
Aircraft Parking
Fuel Flowage Fees
Landing Fees
Lease Income Aero
Fuel Sales
Services Sold - Aero
NON AERONAUTICAL OPERATING REVS
Concessions
Lease Income Non-Aero
Parking & Ground Transportation
Rental Car Fees
Services Sold - Non Aero

$

158,744
539,400
869,326
2,270,974
4,053,030
3,050,212

626,315
916,456
2,462,747
1,490,512
114,137

$ 221,264
562,284
797,138
2,038,326
4,109,547
3,408,871

544,449
1,101,360 (a)
2,586,950
1,828,288
112,255

% of
Budget
100.0

139%
104%
92%
90%
101%
112%

YTD Actual
Over(Under)
Ann'l Budget

$

62,520
22,884
(72,188)
(232,648)
56,517
358,659

87%
120%
105%
123%
98%

(81,866)
184,904
124,203
337,776
(1,882)

Total operating revenues (net of CGS)

16,551,853

17,310,732

105%

758,879

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

3,170,611
7,145,127
976,850
4,260,598
300,000
398,751
819,636
751,883
17,823,456

2,887,601
6,384,046 (b)
788,091
4,367,625
295,133
455,965
766,767
642,727
16,587,955

91%
89%
81%
103%
98%
114%
94%
85%
93%

(283,010)
(761,081)
(188,759)
107,027
(4,867)
57,214
(52,869)
(109,156)
(1,235,501)

Operating income (loss) before Depreciation

(1,271,603)

722,777

-57%

1,994,380

(a) Non-Aero Lease income on a budget basis does not include $1,314,558 of income designated for Series 2012 bond payments.
(b) Personnel Compensation & Benefits on a budget basis does not include ($404,053) GASB 68 adjustment for pension expense.

42