PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2016

THIS PAGE BLANK

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
TABLE OF CONTENTS
FISCAL YEAR ENDED June 30, 2016

Page
Independent Auditors’ Report

1

Management’s Discussion and Analysis

3

Basic Financial Statements
Statement of Net Position – Proprietary Fund

11

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

12

Statement of Cash Flows – Proprietary Fund

13

Notes to the Basic Financial Statements

15

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

36

Notes to Required Supplementary Information

38

Supplementary Information
Statement of Revenues and Expenses (Budget Basis)

40

THIS PAGE BLANK

CliftonLarsonAllen LLP
CLAconnect.com

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, 2016, 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.

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, 2016, 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.
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 and the schedule of PMGAA’s proportionate
share of the net pension liability and contributions on page 36 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), presented in the supplementary information section, 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 19, 2016, 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 19, 2016
2

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2016
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, 2016 and June 30,
2015.
Financial Highlights
 PMGAA’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources at the end of the fiscal year by $247,325,417 (net position). Total net position included
$231,124,732 in capital assets and $11,217,035 in unrestricted net position. During the year, total net
position increased by $2,969,593.
 Total liabilities including deferred inflows of resources decreased by $2,385,943 (6.7%), to
$33,468,202. Most of this was attributable to a decrease in accounts payable, payments on the Series
2012 bond, and a decrease in pension related deferred inflows of resources.
 PMGAA recognized under GASB 68, Accounting and Financial Reporting for Pensions, a pension liability
in the amount of $7,988,900, deferred outflows of resources of $774,955, and deferred inflows of
resources of $1,409,760.
 During the current year, member governments contributed an additional $4,060,000.
 Capital grants and contributions decreased $6,256,432 (44%) due mostly to a decrease in grant
expenditures.
 PMGAA earned $3,000,958 in Passenger Facility Charges.
 Sales in PMGAA’s fueling operation were up 6% in dollars to $8,046,782. The number of gallons
uploaded was up 5%, due to increased government and passenger flights. Gross margin for all
fueling sales (gross revenues less cost of goods sold) was up 19%.
 PMGAA’s operations produced a loss of $9,164,899 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 11 - 14 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.

3

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2016
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.
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 - 33 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 and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $247,325,417.
Airports are capital-intensive enterprises. 93.4% 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
2016
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

$

4

29,661,258
250,357,406
280,018,664

2015
$

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

774,955

913,469

29,102,725
2,955,717
32,058,442

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

1,409,760

2,309,090

231,124,732
4,983,650
11,217,035
247,325,417

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

$

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2016
$11,217,035 (4.5%) 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.
Net position increased by $2,969,593 (1.2%) from the previous fiscal year-end. This was primarily due to
increased profits in the fueling operation and airport usage fees. Member contributions in fiscal year 2015-16
were $4,060,000.
Net position for PMGAA’s net investment in capital assets increased by .4%. New investments in capital
assets (less asset dispositions) were $347,698 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 44%
($6,256,432). (Grant funds are recognized as revenue when all eligibility requirements imposed by the
provider have been met.) Capital contributions decreased by $6,256,432 due to the completion of several
grant-funded runway and taxiway projects. 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
2016
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
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

5

15,060,665
4,378,948
7,822,866
5,400,664
32,663,143

2015
$

14,171,046
4,454,244
14,079,298
5,058,947
37,763,535

2,437,789
12,238,552
13,928,171
967,584
121,454
29,693,550

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

2,969,593
244,355,824
247,325,417

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

$

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2016

Revenues:
Charges for sales and services increased by $889,619 and lease income decreased $75,296. Fuel sales were up
6%, and related costs of sales were down 16%.

Revenues
Capital grants and
contributions
24%

Lease income
13%

Other
17%

Charges for sales and
services (gross)
46%

Expenses:
Other operating expenses increased by $631,870 (5%). This is due mostly to the mid-year implementation of
a classification and compensation study, along with increased repairs and maintenance costs. These increases
were offset by savings in rental equipment and lease expense. (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 $449,812 (16%) due to decreased fuel sales and fuel prices.

Expenses
Depreciation
42%
Interest expense
3%
Cost of sales
8%

Other operating and
nonoperating expenses
47%

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 40 for a presentation of the budget as supplementary information.

6

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2016

Capital Assets and Debt Administration
Capital assets (net of depreciation)
At June 30, 2016, PMGAA’s capital assets totaled $250,357,406 (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 0.1% during the fiscal
year.
Capital assets (net of depreciation)
2016
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Total capital assets, net

$

$

2015

86,128,271
152,609,477
5,155,298
6,464,360
250,357,406

$

$

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

Major capital asset events during the current fiscal year included the following:
 Construct Taxiway C Phase 2 J-L: Spent in FY16: $4.9 million
 Runway 30C Threshold Design & Reconstruct: Spent in FY16: $3.0 million
 Detention Mid Drainage Improvements Phase 2: Spent in FY16: $0.7 million
Long-term debt
At the end of the current fiscal year, PMGAA had total debt outstanding of $21,444,893.
Phoenix-Mesa Gateway Airport Authority's Outstanding Debt
2016
ADOT Loan
(including accrued interest)
Capital Leases
Bonds payable
(including bond premium)

$

$

2,375,742
123,959
18,945,192
21,444,893

2015
$

$

2,474,835
162,460
19,401,337
22,038,632

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.

7

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2016
Additional information on PMGAA’s long-term debt can be found in note 3.D. on pages 23 - 25.
Economic Factors
PMGAA depends on annual contributions from its member governments to cover some of its capital 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 customers being the government and commercial airlines, a significant
portion of fueling revenue depends on continuation of military activity and commercial passenger operations.
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.

8

FINANCIAL STATEMENTS

9

THIS PAGE BLANK

10

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENT OF NET POSITION
PROPRIETARY FUND
JUNE 30, 2016
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

20,295,128
6,712,696
1,527,538
526,768
150,985
165,604
29,378,719
282,539
92,592,631
157,764,775
250,639,945

Total assets

280,018,664

Deferred outflows of resources

774,955

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

860,690
220,701
437,450
445,000
495,700
39,877
25,772
103,905
44,083
2,673,178
282,539
18,500,192
7,988,900
2,271,837
84,082
257,714
29,102,725

Total liabilities

32,058,442

Deferred inflows of resources

1,409,760

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

$

231,124,732
4,983,650
11,217,035
247,325,417

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

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
PROPRIETARY FUND
FISCAL YEAR ENDED JUNE 30, 2016
Business-type Activities
Enterprise Fund
Operating revenues
Fueling operations
Lease income
Maintenance services
Airport usage fees
Total operating revenues

$

8,046,782
4,378,948
382,980
6,630,903
19,439,613

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

6,646,929
4,444,822
2,409,705
28,084
959,140
857,617
286,717
732,946
12,238,552
28,604,512

Operating loss

(9,164,899)

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)

134,825
3,000,958
613,462
1,568,744
(121,454)
82,675
(848,755)
(118,829)
4,311,626

Loss before contributions

(4,853,273)

Capital contributions

7,822,866

Change in net position

2,969,593

Net position, beginning of year

244,355,824

Net position, end of year

$

247,325,417

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

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
FISCAL YEAR ENDED JUNE 30, 2016
Business-type Activities Enterprise Funds
2016
Cash flows from operating activities
Receipts from customers
Payments to employees
Payments to suppliers
Customer deposits
Net cash flows from operating activities

$

19,126,214
(7,231,840)
(9,697,812)
(17,554)
2,179,008

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

1,547,570
74,337
1,621,907

Cash flows from capital and financing activities
Acquisition of capital assets (net)
Capital member government contributions
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

(12,649,824)
2,512,430
(99,093)
2,712,399
582,784
5,786
(38,501)
(430,000)
(881,350)
(116,295)
(5,808)
7,928,797
(478,675)

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

134,825
21,174
155,999

Net change in cash and cash equivalents

3,478,239

Cash and cash equivalents, beginning of year

23,812,124
$

Cash and cash equivalents, end of year

27,290,363

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

$
$

20,295,128
6,995,235
27,290,363

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

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
FISCAL YEAR ENDED JUNE 30, 2016
Business-type Activities Enterprise Funds
2016
(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
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

($9,164,899)

12,238,552
(627,115)

$

(279,168)
14,706
6,788
(51,765)
(34,231)
(17,554)
93,694
$2,179,008

NON-CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES

The Authority amortized $26,145 in bond premiums during the fiscal year.
The Authority received an asset donation in the amount of $1,070,661.
The Authority capitalized $3,274 in interest expense during the fiscal year.

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

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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 YEAR ENDED JUNE 30, 2016

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 $25,938,413 on October 11, 2013. As of June 30, 2016, $4,688,278
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 $23,927,638 for collection and $18,077,638 for use. 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, 2016, $5,631,749 has been earned under the third application. On August 27,
2015, application 15-04-U-00-IWA was awarded which released $5,850,000 approved under the third
application for use. For the second and third applications, $4,440,357 is reported as restricted assets. These
monies are recorded as non-operating revenues.
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.

16

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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 5.8% to 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 position 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 Governmental Accounting Standards Board 68.

17

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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 position 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 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.

18

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

13. Change in Accounting Principle.
For the year ended June 30, 2016, PMGAA implemented the provisions of GASB Statement No. 72, Fair
Value Measurement and Application. This establishes standards for measuring fair value and applying fair
value to certain investments and disclosures related to all fair value measurements.
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, 2016 consist of the following:
Cash on hand
Deposits
Cash in bank
Investments
State Treasurer's Investment Pool
Commercial Paper
Mortage Backed Securities
U.S. Treasury Note
Total deposits and investments
Less: restricted cash
Total cash and equivalents

$

2016
1,150
20,194,828

$

5,773,695
330,790
659,009
330,891
27,290,363
(6,995,235)
20,295,128

Deposits - PMGAA's deposits at June 30, 2016, were covered by federal depository insurance or by collateral
held by PMGAA's custodial bank in PMGAA's name.
Investments - In determining fair value, PMGAA uses various valuation approaches within the fair value
measurement framework. Fair value measurements are determined based on the assumptions that market
participants would use in pricing an asset or liability.
Fair value measurements framework establishes a hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the
most observable inputs be used when available. Fair value measurements define levels within the hierarchy
based on the reliability of inputs as follows:
19

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

Level 1 – Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2 – Valuations based on quoted prices for similar assets or liabilities or identical assets or liabilities in less
active markets, such as dealer or broker markets; and
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant
value drivers are unobservable, such as pricing models, discounted cash flow models and similar techniques not
based on market, exchange, dealer or broker-traded transactions.
PMGAA’s investments at June 30, 2016, categorized within the fair value hierarchy detailed above were as
follows:
Fair Value Measurements Using
Amount
(Level 1)
(Level 2)
(Level 3)
Investments by fair value level
U.S. Treasury Note
$
330,891 $
- $
330,891 $
Mortgage Backed Securities
659,009
659,009
Commercial Paper
330,790
330,790
Total Investments by fair value level $ 1,320,690 $
- $ 1,320,690 $
External investment pools
measured at fair value
State Treasurer's Investment Pool
Total Investments measured at
fair value

$

5,773,695

$

5,773,695

PMGAA’s investments (detailed on the following page) 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 Notes, mortgage backed securities, and commercial paper.
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, 2016. 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) in U.S. Treasury
securities, backed by the full faith and credit of the U.S. Government. PMGAA consistently utilized the same
investment strategy for the debt service reserve fund monies invested throughout fiscal year 2016.
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.
20

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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, 2016, PMGAA had the following investments:
Investment Type

Rating

Rating Agency

Commercial Paper
Mortgage Backed Securities
State Treasurer's Investment Pool 700
US Treasury Notes
Total investments

N/A
AAA
AAA
AAA

N/A
Moody's
Moody's
Moody's

Amount
$

$

%

330,791
659,009
5,773,695
330,891
7,094,386

4.66%
9.29%
81.39%
4.66%
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
Commercial Paper
Mortgage Backed Securities
State Treasurer's Investment Pool 700
US Treasury Notes

Less than
1 year

Amount
$

$

21

330,791
659,009
5,773,695
330,891
7,094,386

$

$

330,791
330,791

1-3 Years
$

$

659,009
5,773,695
330,891
6,763,595

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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:
2016
Customer deposits
Cash impounded for payroll taxes
Passenger Facility Charges (PFC's)
Current and Future Debt Service Reserves
Total restricted assets

$

282,539
60,120
4,440,357
2,212,219
$ 6,995,235

3. Receivables
Total accounts receivable has been reduced by an allowance for uncollectible accounts:
2016
Trade receivables - governments
Grants receivable
Total due from other governments

$

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

$

345,954
180,814
526,768

$

$

1,621,994
(94,456)
1,527,538

4. Capital assets
Capital asset activity for the year ended June 30, 2016 was as follows:
Beginning
Balance
Capital assets not being depreciated
Land
Construction in progress
Total capital assets not being depreciated

$

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

Increases
$

12,698,329
12,698,329

Ending
Balance

Decreases
$

(11,863,327)
(11,863,327)

$

86,128,271
6,464,360
92,592,631

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

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

11,113,367
765,121
11,878,488

(400,000)
(96,514)
(496,514)

296,426,053
13,359,324
309,785,377

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

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

11,473,445
765,107
12,238,552

(276,000)
(93,274)
(369,274)

143,816,576
8,204,026
152,020,602

Total capital assets being depreciated, net

158,252,079

(360,064)

(127,240)

157,764,775

$ 250,009,708

$ 12,338,265

Business-type activities capital assets, net

22

$

(11,990,567)

$

250,357,406

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

Interest expense in the amount of $3,274 was capitalized and applied to construction-type projects based on the
weighted average of the rates on outstanding borrowings during fiscal year 2016.
B. Purchase commitments
As of June 30, 2016, 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, 2016
Open purchase commitments (net of cost of goods
and services received against these commitments)

$

864,000

Portion of above funded by grants

$

137,000

PMGAA had 16 active design or construction projects at June 30, 2016. These projects are expected to cost a
total of $15.6 million, of which $12.5 million has been committed and $11.6 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
contracts

Project

Eastside Development EA/EIS
$
Construct TWY C Phase 2, TWY J to L
CUSE Upgrade/Replacement/Improvements
Ellsworth Channel Design
Hangar 1084 Fire System Upgrade Ph3
Planning Area Study
Enterprise Reporting Planning ERP/Financial Sy
Hgr 1084 Fire Sprinkler & Riser Replace
Refurbish Elevator in ATC Tower
Parking System Equipment Replacement
Other
Total
$

C.

673,445 $
373,567
362,713
206,000
182,413
182,063
170,381
137,988
98,015
68,076
62,836
2,517,497 $

Remaining
Contract
10,152
3,048
170,080
152,187
3,081
11,937
15,404
5,599
280,044
73,040
139,079
863,651

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:
2016
Asset type:
Machinery and equipment
$
243,940
Less: Accumulated depreciation
(52,081)
Total
$
191,859

23

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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, 2016, the future
minimum capital lease obligations and the net present value of these minimum lease payments were payable
as follows:
2016

Year ending June 30,
2017
2018
2019
Total minimum lease payments
Less: amounts representing interest
Present value of minimum lease payments

$

$

44,309
44,309
44,309
132,927
(8,968)
123,959

D. Long-term obligations
Long-Term Loans

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
amount of the bonds outstanding during such period. The bonds are payable from the future lease revenues
24

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

from the City of Mesa through 2039. 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, 2016, total principal and interest on the bonds
was $1,304,900 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:
Interest
Maturity
Original
Outstanding
Purpose
Rates
Date
Amount
Amount
Business-type Activities:
Special Facility Revenue Bonds:
Series 2012
3.00-5.00% 07/01/14-38

$ 19,220,000

$ 18,370,000

Changes in long-term obligations for the year ended June 30, 2016 are as follows:
June 30, 2015
Loans payable
Bonds payable - Series 2012
Principal on bonds
Unamortized premium
Bonds
Other Liabilities
Capital Leases
Compensated absences
Business-type long-term liabilities

$

Increases

Decreases

June 30, 2016

Due Within
One Year

2,474,835

-

(99,093)

2,375,742

103,905

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

-

(430,000)
(26,145)
(456,145)

18,370,000
575,192
18,945,192

445,000
445,000

162,460
685,492
22,724,124

531,382
531,382

(38,501)
(437,688)
(1,031,427)

123,959
779,186
22,224,079

39,877
521,472
$ 1,110,254

$

$

$

Debt service requirements on long-term debt at June 30, 2016, including future interest based on current
repayment schedules, are as follows:

Year Ending June 30
2017
2018
2019
2020
2021
2022-2026
2027-2031
2032-2036
2037-2039
Total

Loans Payable
Principal
Interest
103,905
108,951
114,241
119,789
125,606
725,665
919,820
157,765
$ 2,375,742

111,483
106,437
101,146
95,599
89,782
351,274
157,119
3,778
$ 1,016,618

25

Series 2012 Special Facility Bonds
Principal
Interest

$

445,000
460,000
470,000
490,000
510,000
2,895,000
3,680,000
4,685,000
4,735,000
18,370,000

861,550
847,750
828,950
809,350
788,950
3,572,250
2,741,000
1,674,750
308,250
$ 12,432,800

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

E. Contributions from member governments:
Member governments provide contributions to PMGAA to invest in the development of the airport for the
benefit of the citizens of their communities. Membership on the Board of Directors is governed by the Joint
Powers Airport Authority Agreement, which was most recently amended on October 21, 2014. Per the
Agreement, by April 1 of each fiscal year, the Board of Directors recommends to the members of the Airport
Authority an annual operating budget to be provided by each member. At least thirty days before the annual
budget is recommended to the members of the Airport Authority by the Board of Directors, the Board may
consider adjustments to the amounts of each member contribution or percentage contributions of each
member. Adjustments to the amounts of each member contribution or percentage contributions of any
member must be approved by a unanimous vote. By June 15 of each year, the Board of Directors will, if
necessary due to the addition or withdrawal of members, have decided by a unanimous vote on the amounts of
each member contribution or a reallocation of the percentage contributions among the members or have
assigned each member its pro rata increase or decrease in contribution.
Member governments have by agreement provided annual funding for operations and capital expenditures for
fiscal year 2016 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 contributions at June 30

$

$

2016
1,700,000
1,300,000
450,000
350,000
130,000
130,000
4,060,000

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 $2,001,000 of such
contingent rents in the fiscal year ending June 30, 2016.

26

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

The following schedule shows contracted future revenue from noncancelable lease agreements in place at June
30, 2016:
Fiscal Years Ending June 30:
2016
2017
$ 4,375,915
2018
3,705,284
2019
3,405,439
2020
3,240,811
2021
3,206,112
2022 - 2031
29,377,125
2032 - 2041
27,983,305
2042 - 2051
24,067,521
2052 - 2061
5,506,735
2062 - 2071
1,934,694
2072 - 2073
128,642
Totals

$ 106,931,583

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
$48,842,710 in base rent from the City of Mesa that will be used to service the debt on the Series 2012 bonds.
The amount of this lease income for fiscal year 2016 was $1,319,638.

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, 2016.
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
27

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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 $97,034,463 (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 $110,141,421 (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, 2016
City of Mesa
$ 3,209,541
$ 1,886,228
$
13,745
$ 114,511
Gila River Indian Community
471,133
City of Phoenix
1,300,000
City of Apache Junction
130,000
1,000
Town of Gilbert
350,000
Town of Queen Creek
130,000
500
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 $114,350 in accounts payable at June 30, 2016.

28

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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, 2016, 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
$ 7,988,900
774,955
1,409,760
(69,967)

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.
29

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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, 2016, active ASRS members were
required by statute to contribute at the actuarially determined rate of 11.47 percent (11.35 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 11.47 percent (10.85 percent for
retirement, 0.50 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 9.36 percent (9.17 percent for retirement, 0.13 percent for health insurance
premium benefit, 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, 2016, were $556,955. PMGAA’s contributions
for the current and 2 preceding years for OPEB, all of which were equal to the required contributions, were
as follows:
Health Benefit Long-Term
Years ended June 30, Supplement Disability
Fund
Fund
2016
2015
2014

$25,666
27,861
30,949

$6,160
5,667
11,427

Pension Liability – At June 30, 2016, PMGAA reported a liability of $7,988,900 for its proportionate share
of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2015. 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, 2014, to the measurement
date of June 30, 2015. PMGAA’s proportion of the net pension liability was based on $15,576,438,487. At
June 30, 2015, PMGAA’s proportion was 0.051290 percent, which was a decrease of 0.001798 percent from
its proportion measured as of June 30, 2014.
Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2016,
PMGAA recognized pension expense for ASRS of ($69,967). At June 30, 2016, PMGAA reported deferred
outflows of resources and deferred inflows of resources related to pensions from the following sources:

30

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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

218,000

$

418,626

-

256,027

-

735,107

556,955

-

774,955

$

1,409,760

The $556,955 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, 2017. 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
2017
2018
2019
2020

31

$ (670,067)
(502,746)
(203,766)
184,819

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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

6/30/2014
6/20/2015
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, 2014, valuation were based on the results of an actuarial
experience study for the 5-year period ended June 30, 2013.
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 as follows:
Expected Return Arithmetic Basis
Long-term
Real
Expected
Target
Return
Portfolio
Asset
Arithmetic Real Rate
Asset Class
Allocation
Basis
of Return
Equity
58%
6.79%
3.94%
Fixed income
25%
3.70%
0.93%
Commodities
2%
3.93%
0.08%
Real estate
10%
4.25%
0.42%
Multi-asset
5%
3.41%
0.17%
Total
100%
5.54%
Inflation
3.25%
Expected arithmetic nominal return
8.79%
32

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2016

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
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
$ 10,468,188

Current
Discount Rate
(8%)

1% Increase
(9%)

$

$ 6,289,774

7,988,900

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 one plan administered by the International
City Management Association.

33

THIS PAGE BLANK

34

REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A

35

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, 2016
Fiscal Year

Arizona State Retirement System

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

2016
2015
0.051290% 0.053088%
$ 7,988,900 $ 7,855,199
$ 4,722,184 $ 4,761,393
59.11%
60.61%
68.35%

69.49%

Arizona State Retirement System

2013
through
2014
2005
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

36

2016
$ 556,955 $

2015
514,245 $

2014
512,048

556,955
$
$
$ 5,133,214 $
10.85%

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

512,048
4,761,393
10.75%

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, 2016

Fiscal Year

$

$
$

2013
537,706 $

2012
508,808 $

2011
439,579 $

2010
417,079 $

2009
418,387 $

2008
404,822 $

2007
338,430

537,706
$
5,245,907 $
10.25%

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%

37

PHOENIX-MESA GATEWAY AIRPORT AUTHORITY
Notes to Required Supplementary Information
June 30, 2016
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
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

6/30/2014
6/20/2015
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

38

SUPPLEMENTARY INFORMATION

39

Phoenix-Mesa Gateway Airport Authority

Statement of Revenues and Expenses
Unaudited (Budget Basis)
Fiscal Year Ended June 30, 2016

AIRPORT - All Operations
Fiscal
YTD
Actual

2016 Budget

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
Total operating revenues
RESERVE FUND - Non Airport
RESERVE FUND-Airport BAI 15-37 (Contractual Services)
RESERVE FUND-Airport-BAI 15-44 (Personnel)
Total revenues available for operating expenses
OPERATING EXPENSES
Costs of Goods Sold
Personnel Compensation & Benefits
Communications & Utilities
Contractual Services
Insurance
Other
Repair & Maintenance
Supplies & Materials
Air Service Incentives
Real Estate Development Reserve
Total operating expenses before Depr

$

185,141
616,080
844,634
2,196,582
4,476,948
3,435,611

649,306
1,000,086
2,874,808
1,627,345
96,384

$

YTD Actual
Over(Under)
Ann'l Budget

% of
Budget
100.0

227,370
587,726
928,136
2,072,837
3,775,104
4,173,055

123%
95%
110%
94%
84%
121%

$

42,229
(28,354)
83,502
(123,745)
(701,844)
737,444

517,649
986,472 (a)
2,875,633
1,889,125
86,868

80%
99%
100%
116%
90%

(131,657)
(13,614)
825
261,780
(9,516)

18,002,925

18,119,975

101%

117,050

2,500,000
80,000
175,000

-

-

(2,500,000)
(80,000)
(175,000)

20,757,925

18,119,975

87%

(2,637,950)

3,428,488
6,960,328
848,050
4,855,667
307,160
269,625
850,325
652,605
2,000,000
500,000
20,672,248

2,437,789
7,273,851 (b)
857,617
4,444,822
286,717
175,485
959,140
557,461
16,992,882 (c)

71%
105%
101%
92%
93%
65%
113%
85%
82%

(990,699)
313,523
9,567
(410,845)
(20,443)
(94,140)
108,815
(95,144)
(2,000,000)
(500,000)
(3,679,366)

1316%

1,041,416

Operating income (loss)

85,677

1,127,093

(a)

Non-Aero Lease income on a budget basis does not include $1,319,638 of income designated for Series 2012 bond payments.

(b)

Personnel Compensation & Benefits on a budget basis adds back 2016 pension contributions and subtracts the reported pension
expense ($626,922).

(c)

Operating expenses exclude depreciation expense.

40