01/27/2023

Meeting Minutes for:
Finance Committee Meeting
Yuma International Airport, Conference Room
Friday, January 27, 2023 at 12:00 PM

    Call to Order:
    The Yuma County Airport Authority, Inc. (YCAA) Finance Committee Meeting of the Board of Directors was called to order at 12:00PM on January 27, 2023, in the Yuma International Airport Conference Room, 2191 E. 32nd Street, Suite 218, Yuma, Arizona 85365. The Presiding officer was Stanley Gourley, Chairman.

    YCAA FINANCE COMMITTEE MEMBERS PRESENT WERE:
    Stanley Gourley, Chairman & YCAA Treasurer
    Albert Gardner, Director

    YCAA FINANCE COMMITTEE MEMBERS ABSENT WERE:
    Reetika Dhawan, Director

    ALSO PRESENT WERE:
    Bill Craft, President
    Ken Scott, Director
    Gladys Brown, Airport Director
    Gerald Hinkle, Jr., Chief Financial Officer
    Andrea Lopez, Executive Assistant
    Silvia Gunderman, 1st Bank Yuma

    REGULAR AGENDA
    1) Finance Committee discussion and possible recommendation related to YCAA long-term debt.

    Ms. Brown, the Airport Director briefed the Committee on the most recent financial presentation previously provided the Board of Directors at their January 10, 2023 meeting. Following a brief discussion, Ms. Brown presented a breakdown of the YCAA’s current available working capital. Ms. Brown provided insight as to the source of the YCAA’s significant balance of Capital Reserves, ($4,645,607) and a comparison of these reserves against reserves maintained historically.

    Ms. Brown then provided details about the YCAA’s only remaining debt instrument, a tax-exempt note payable referred to as Note #1713. The information provided included a brief summary of how the note proceeds were utilized, the applicable terms and conditions as well as the current balance. Following this review, the committee then considered a number of options available including paying down the balance significantly or recommending no action be taken.

    Specifically, the Committee evaluated the estimated benefits of reducing the principal balance in full ($2,185,768 lump sum payment), reducing the principal balance by one-half ($1,092,884 lump sum payment), and reducing the balance by one-quarter ($546,442) as opposed to taking no action.

    The Committee discussed the various benefits of each action against the loss of capital which would have to be borrowed for any possible future project at a much higher interest rate since the current terms would increase the annual rate of interest to 8.5% in July of 2025 from the existing rate of 3%.
    After Mr. Gardner and Mr. Scott suggested making no recommendation of significant debt reduction and instead revisiting the issue ahead of the scheduled interest rate reduction in the summer of 2025, Mr. Craft suggested that the Committee consider making a lump sum payment of $546,442, equal to roughly 25% of the remaining balance of Note #1713, which may result in significant principal reduction by 2025 when the current conditions at that time can be considered.

    Ms. Brown, asked Mr. Hinkle, the Chief Financial Officer to estimate the amount of principal reduction by July of 2025 that would result from the $546,442 lump sum payment as opposed to taking no action, and if possible, estimate the amount of interest that could be saved from July 2025 to debt retirement assuming an 8% rate of interest. Ms. Brown suggested that the Committee could move to the next agenda item while the calculations are made.

    Before moving to Agenda Item #2, Ms. Gunderman of 1st Bank Yuma, informed the Committee that her bank, which not only holds the Note Payable but all of the YCAA’s deposits, was willing to offer the YCAA a Certificate of Deposit or “CD” for one or two million dollars at a rate of 3.93% or 4% APR. Ms. Gunderman then described the nature of such a CD which includes a commitment to keep the funds on deposit for the period of time agreed to and a penalty for early withdrawal which would be a calculated three (3) months of interest based on the amount pulled from the CD.

    At 12:27PM the item was tabled at this time to revisit at the end of the meeting.

    2) Finance Committee discussion and possible recommendation related to the YCAA’s effort to obtain Arizona Public Service electricity to Rolle Airfield Airport.

    Ms. Brown, the Airport Director, reminded the Committee of the YCAA Board of Directors authorization of an “Off-Budget” Expenditure of up to $800,000 to bring electrical power to the Rolle Airfield Airport, at its December 13, 2022 regular meeting. Subsequent to that meeting, the Airport Director has received some questions by members of the Board of Directors and expressed her desire to obtain some clarification and direction on this approved action item.

    Ms. Brown described some of the inquiries she had received and offered the Committee clarification on these items to include an emphasis on the YCAA’s expectation that there will not be any financial return on investment from bring electricity to Rolle Airfield Airport for a number of years and there is no guarantee of potential development as a direct result of this improvement.

    Ms. Brown then explained to the Committee that the initial investigations into what it would take to bring electricity were a result of a possible development lead from GYEDC which prompted an initial feasibility. The feasibility study examined utilities in the area as well as other important aspects of the property near Rolle Airfield Airport.

    Ms. Brown described how discovering that the cost to bring electrical power to Rolle Airfield was significantly less than it had been estimated in the past and described the impact of reliable electrical power to Rolle Airfield’s current tenant, and of course future development in general.

    Ms. Brown described her intent to move forward with obtaining the utility easements necessary to bring electrical lines from the source to Rolle Airfield property but hold off on constructing the improvements until user demand or future development opportunities arise, certainly after the YCAA’s obtains a lease agreement directly with the BOR which is expected to culminate by the end of 2023.

    Ms. Brown explained a consensus was reached by the Strategic Planning Committee to continue to pursue the necessary utility easements which can take a year or longer, but to hold off on investing in bringing electricity to Rolle Airfield Airport until sufficient development needs arise.

    The Finance Committee expressed support in investing in an expansion of the aircraft storage hangar footprint, insulation, climate control and upgrades to the electrical power generator necessary as a stop gap measure, but only if the existing or a future Lessee was to commit to a 5 year lease term and establishing a based aircraft.

    3) Finance Committee discussion and possible recommendation related to development projects described in the Yuma International Airport and Rolle Airfield Airport Master Plans.

    The Committee discussed a variety of projects outlined in the Yuma International Airport and Rolle Airfield Airport’s Master Plan for the purpose of evaluating the possibility of moving forward using an investment of capital reserves available. There were no questions regarding the master plans for both airports.

    AGENDA ITEM #1: Mr. Hinkle, Chief Financial Officer, rejoined the meeting at 12:52PM. The committee then began to revisit Agenda item number one.

    Mr. Hinkle described the results of his calculations. First, he explained that making the $546,442 lump-sum payment (25% of remaining balance) would reduce the principal balance at July 2025, when the interest rate would be adjusted, by approximately $589,000 as compared to taking no action.

    Mr. Hinkle then explained how this reduction of principal would dramatically reduce the cost of interest over the remaining term at the expected 8% rate of interest effective July of 2025. After describing how it is impossible to project what the actual terms would be through retirement, since there would be numerous interest rate adjustments and the future prime rate of interest cannot be known, Mr. Hinkle told the Committee that his estimate of interest savings of over the remaining term was close to $1.8 million dollars.

    After a discussion of the benefits of making a lump-sum payment, versus the immaterial impact of the payment on reducing the YCAA’s significant amount of Capital Reserves on hand, the Committee came to a consensus to recommend that the Board of Directors authorize the “Off-Budget” expenditure of $546,000 in Capital Reserves to pay down the balance due on Note #1713 held by 1st Bank Yuma, followed by revisiting the issue in the summer of 2025.

    The Committee also directed YCAA staff to meet with Ms. Gunderman to determine the specifics of the banks offer of a Certificate of Deposit and provide insight to the Committee for consideration at a future meeting ahead of the February 14, 2026 meeting of the Board of Directors.

    ADJOURNMENT
    There being no further business before the Committee the meeting adjourned at 1:09PM.



    // Approved //
    Stanley Gourley
    Treasurer, Yuma County Airport Authority; Finance Committee Chairman
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