Moody's assigns Aa2 rating to Salina Authority's $11.9 M Taxable GO Bonds Series 2011-A, $2.5 Million GO Bonds Series 2011-B
Moody's assigns Aa2 rating to Salina Authority's $11.9 M Taxable GO Bonds Series 2011-A, $2.5 Million GO Bonds Series 2011-B Aa2 long-term rating applies to $12.9 M of tax backed GO Bond Debt New York, (July 18, 2011)- Moody's Investors Service has assigned an Aa2 rating to the Salina Airport Authority's $11.9 million Taxable General Obligation Bonds Series 2011-A and $2.5 million General Obligation Bonds Series 2011-B. The Aa2 rating applies to the Authority's outstanding general obligation unlimited tax-backed debt of $12.9 million. "Moody's reaffirming and assigning the Aa2 credit rating for the Salina Airport Authority is something we are proud to report," said Jeff Thompson, Board president. "The Moody's rating is confirmation to Salina citizens and municipal investors that the Salina Airport Authority is financially strong." Issue General Obligation Bonds Series 2011-B Sale Amount $2,470,000 Expected Sale Date 07/20/11 Rating Description: General Obligation Taxable General Obligation Bonds Series 2011-A Aa2 Sale Amount $11,895,000 Expected Sale Date 07/20/11 Rating Description: General Obligation Summary ratings rationale Proceeds of the Series 2011-B will provide long term financing for certain capital improvements at the Salina Airport and the Airport Industrial Center, including pavement rehabilitation; costs of a new aircraft rescue and firefighting station; and relocating a waterline. A portion of the bond proceeds will retire the outstanding Series 2010 Temporary Notes, which provided temporary financing for the aforementioned capital improvements. The Aa2 rating reflects the Authority's role as a regional economic center; satisfactory financial operations despite recent revenue pressures and narrow cash reserves; and moderate but manageable debt levels. Strengths Challenges Detailed credit discussion Moderately sized tax base serves as regional economic center Located in Saline County 95 miles north of Wichita (rated Aa1/ stable outlook), the Salina Airport Authority's taxing boundaries are coterminous with those of the City of Salina (rated Aa2). The city serves as a regional retail, commercial, industrial, and medical hub for the largely agricultural communities of north central Kansas. The City of Salina's medium-sized tax base reached $2.9 billion in 2010; the pace of tax base growth has stagnated, tax base declined by 0.2 percent in 2010 compared to a 7.5 percent increase in 2006. The decline in 2010 is partially due to overall decline in valuations as well as the state's recent exemption of machinery and new equipment. Resident income levels approximate state and national medians with per capita and median family incomes at 90.7 percent and 91.6 percent, respectively. Despite recent layoffs, the city's unemployment rate of 6.2 percent continues to trend below those of the state (6.3 percent) and nation (8.7 percent) for April 2011. The Salina Airport Authority is located on the former site of the Schilling Air Force Base, which was closed by the U.S. Department of Defense in 1965. In 1965, the Airport Authority was created on 2,900 acres of the closed base. By statute, the Salina City Commission appoints a five-member Authority board of directors, but the Authority approves its own budget (subject to city consent for any operating tax levy) and is responsible for repaying its own debt. The Authority has two primary functions, one of which is to manage airport operations. With a 12,300-foot runway and with its central geographic location, the airport sees a variety of aviation use. Daily commercial service to Kansas City is provided and the airport is available for corporate, military, air freight, and flight training activity. Popular as a mid-continent fuel stop, the Authority benefits from a fuel surcharge collected on each gallon of fuel purchased from two providers, Flower Aviation and America Jet. The Authority's second role is to act as a landlord and a facilitator of economic growth at the Salina Airport Industrial Center, Salina Municipal Airport and Airport Industrial Center is home for more than 70 businesses and organizations (45 of the businesses/ organizations were tenants of the Authority) at the close of 2010. The Authority's top tenant, the Kansas Military Board, accounts for nearly 14 percent of total revenues (based on 2010 figures). Favorably in January 2010, the Kansas Military Board expanded their facility for additional unit trainings in the Salina area. The Authority's second largest tenant, Hawker Beechcraft, accounted for more than 6.25 percent of total revenues in 2010. Hawker Beechcraft announced plans to close their Salina Airport Authority facility no later than February 2012, leaving more than 484,000 of square feet of space that generated lease revenue of approximately $424,000. Officials report that significant future improvements will occur to attract companies to the space that Hawker Beechcraft occupies. Future economic growth is expected to be driven by aircraft maintenance and related technology services. We believe the Authority's role as a regional economic center will offset some job losses resulting from the Hawker closing and provide a level of stability to the greater region. We will closely monitor prospects of new tenants at the facility. Satisfactory financial operations despite recent revenue pressures and narrow cash reserves With strong management, we expect the Salina Airport Authority's financial operations to remain satisfactory, despite narrow unrestricted cash reserves. As the Authority has used cash on hand to finance capital improvements, unrestricted cash levels have decreased in recent years, from $3.4 million in fiscal 2002 to $386,000 in fiscal 2007. Management intends to increase the unrestricted cash balance to between $1.3 million and $1.5 million by fiscal 2013. To that end, airport officials report that the unrestricted cash balance increased from $460,000 in 2008 to $553,000 in 2009, and was budgeted to further increase to $620,000 in fiscal 2010. However, fiscal 2010 unaudited numbers indicate that the unrestricted cash balance decreased to $400,000 primarily due to the ongoing cost associated with the environmental remediation of the former Schilling Air Force Base property. The Authority is currently in court proceedings seeking reimbursement for remediation related costs. The Authority's two largest revenue sources are property taxes representing 43 percent of total revenues and building and land rent comprising 37 percent of fiscal 2010 total revenues. The Authority's lease rental revenue is highly concentrated, with the top ten tenants accounting for 48 percent of total revenues in fiscal 2010 (based on 2010 unaudited financial statements). Hawker Beechcraft accounted for approximately 6.25 percent of 2010 total revenues. A somewhat mitigating factor in the departure of Hawker Beechcraft is that the company had very low rental rates grandfathered in, which the Authority believes it can raise more than three times and still be competitive. The Authority's largest revenue stream is property taxes. The Authority currently levies 4.055 mills for debt service, a decrease from the 2009 mill levy of 4.315, generating approximately $1.6 million in revenue. The Authority can levy up to 3 mills for operations and an additional one mill to match grants; these levies are not used at this time. These limits do not apply to the authority's ability to levy unlimited taxes for the repayment of its general obligation debt. The Salina Public Entities (Salina Airport Authority, City of Salina, Saline County Unified School District No. 305, and Kansas State University at Salina) filed suit against the United States on May 27, 2010. The suit pertains to the terms, condition and funding associated with the environmental cleanup of contamination on airport grounds. Cost estimates for the project have not yet been finalized, but the four local government entities may collectively be responsible for $2 million to $3 million per year for the next 30 years. Despite this potential expense and concentration in the Authority's revenue stream, we believe that the Authority will be able to increase cash reserves to adequate levels over the long term. However, continued decreases or the inability to meet targeted increases in cash reserves may factor into future credit reviews. Moderate debt levels remain manageable The Authority's debt levels are expected to remain at moderate manageable levels. Historically, Kansas statutes limited the Authority's aggregate general obligation debt issuance to 3 percent of the City of Salina's total assessed valuation. In 2007, the Authority gained approval to increase the limit to 10 percent of assessed valuation. The limit was increased to allow the Authority to issue debt for various projects that officials hope will further stimulate economic activity at the Airport Industrial Center. Officials plan to borrow $4.5 million this year for the rehabilitation of Hangar 959 and an additional $2.5 million for the rehabilitation of Hangar 626. At 0.95 percent, the Authority's current direct debt position is affordable. The Authority's overall debt burden of 4.82 percent is above average and is largely due to the overlapping districts (City of Salina and Saline County Unified School District 305). Principal amortization of the Authority's general obligation debt is somewhat slower than average, with 41.9 percent of debt retired in ten years. What could change the rating - Up What could change the rating - Down Key statistics: Principal methodology The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in August 1999. Please see the Credit Policy page onwww.moodys.com for a copy of this methodology. Regulatory disclosures For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Information sources used to prepare the rating are the following: parties involved in the ratings, [and] public information, [and] confidential and proprietary Moody's Investors Service information, [and] confidential and proprietary Moody's Analytics information. Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history. The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information. Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery. Moody's is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets. Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which offers leading-edge software, advisory services and research for credit analysis, economic research and financial risk management. The Corporation, which reported revenue of $2 billion in 2010, employs approximately 4,500 people worldwide and maintains a presence in 26 countries. Further information is available atwww.moodys.com. The Salina Airport Authority is a body corporate and politic. The Authority was created by the City of Salina in April 1965 pursuant to the authority granted by the City by the surplus property and public airport authority act of the State of Kansas. The Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. The Salina Airport Authority is home to the Salina Municipal Airport, the Salina Aviation Service Center and the Salina Airport Industrial Center. The board of directors and staff are proactive in providing the citizens ofSalina, Saline County and North Central Kansas with a center that support business and industry, which, in turn, provides jobs and payroll that benefit the region. The Salina Municipal Airport is the only commercial service airport serving Salina/Saline County and the 22-county area, which comprises North Central Kansas. The airport also services the corporate, business, private aviation and flight training needs of industry, business and individuals in the area. 
Source: Salina Airport Authority
