I want to welcome Houston Airport System Director Jim Sisniak and Clint Stevens to present the proposed Houston Airport Systems Department budget presentation.

Before you start, I have gone through this.

And I also attend regularly the economic development committee meetings.

So, in the most polite way I can say, you don't have to go through every slide of things that we've just seen at economic development if we want to just focus on the numbers.

Okay.

So I'm going to I'll I'll whiz through the whiz through that.

You're doing great work, but I feel like we've all heard that pretty recently.

Okay.

So next slide, please.

And then next slide, please.

I'll kind of whiz through.

One of the ones key things, just a refresh of what we did with last year's budget.

62 million passengers came through our airport systems.

Next slide, please.

And then, you know, again, the general economic impact of the airport.

It's about 40 billion dollars annually.

Importantly for y'all, it's about 2.4 billion in state and local taxes that we generate and zero dollars from the city of Houston general fund.

Next slide, please.

Again, growth.

So our our key thing ultimately is that as the region continues to grow, the airport continues to grow.

Next slide, please.

Again, but we are making you know significant improvements in customer satisfaction at the airport, so that's a good thing for us as we spend our money wisely.

Next slide, please.

This is a key one though that's a little bit new that we haven't really brought uh I don't think before you all uh before.

Um this year's looking like a record year for us as far as the fact that we've we're gonna you know collectively between the HAS and the airline projects that we're working at the airport, about 1.7 billion dollars is getting poured into the uh local economy uh between what we've doing, we're doing as the airport, and then also the Terminal B project at United, and then United's um flight kitchen and then GSE, and then also the hobby project.

So I'm very very proud of that.

Next slide, please.

Uh again, opening the new facilities, that's a wonderful thing for everybody.

Uh next slide.

And then just again, some pictures of the Terminal B project that's gonna be opening in this fiscal year, uh, the hobby project that's gonna open in this fiscal year.

Next slide, please.

Um, hobby concourse expansion, the big thing that's really gonna change there for the general travel public, besides the um the new gates is gonna be the bag hall.

That's gonna be great.

Next slide, please.

Uh and importantly, because again, Mayor Whitmeyer is very uh um focused on making sure we got a good experience there.

The restrooms continue to get renovated over there, so again, completing a lot of renovations at hobby, and then also Bush just opened a new set on Friday over by American Airlines and continue to do restroom upgrades.

Next slide, please.

Uh, and then airfield improvements.

You know, we've always got to make sure that we've got a safe safe operating environment for for the traveling public.

Next slide.

Uh very proud of the team.

Again, we do we do keep track of some of our accomplishments, but really particularly uh and uh proud of the hobby team.

They were actually named uh hobby was named cleanest airport in North America this year, so very excited for the team over there.

I told them they were essentially national champions.

Um, so they're very excited.

Um next slide, please.

Okay, so now we get to the numbers.

Um just want to talk about revenue for the year.

So again, if we are projecting a revenue increase um for some to about 779 uh million dollars, um and so that's again an increase for us uh over last year.

Next slide, please.

Um that is driven by um the fact that we're gonna receive additional money in landing fees and terminal rents, um, and that's because of the fact that we're opening new facilities and now we can actually charge back the airlines.

Um, also the uh runways um we're anticipating some upgauging aircraft there, so we're gonna get some larger airplanes in there versus the smallers.

Um parking revenue.

We'll see in uh we're anticipating that we're gonna see an increase in parking revenue, um, and that's because of the fact that thank you.

Thank you for helping us fund it.

Uh, but we've increased customer satisfaction uh from our parking operation because of the fact that we've got new systems in there that ease the in and out.

We've solved the traffic issues that used to cause problems at Bush uh from a parking perspective.

Uh and then we're gonna be opening um some uh employee parking.

Um that's gonna be able to free up some space in the terminal core area, so it's gonna give us more net positions uh at the airport.

Uh we are also gonna see uh a modest increase in in automobile concessions rental and then other associated rentals and uh fees that we charge at the airport.

Next slide, please.

Uh revenues.

Again, you can see though the the increases on the right percent change on the airline landing fees, our terminal rents, and then again our garage and surface parking is anticipated to go up about six percent, our uh retail and concessions and ground transportation fees about 13%.

Uh, again, the rental concessions about 2.6%, and then the other um is gonna go down a little bit, and that's again the asterisk in there is because of the fact that we had an unbudgeted uh windfall from a land sale that we did in this fiscal year.

Um, so that kind of skews that number a little bit.

Um, but in general, uh again, a good revenue uh increase for the airport uh system going forward is what we're projecting for this uh coming year.

Next slide, please.

Uh I want to turn this over now to my CFO to talk about some of the uh expenditures so he can he can talk to specifically to those.

Sure.

Um when we look at uh expenditures, they're increasing a little bit higher pace than the revenue on the 8001 on the OM side.

That's primarily due to that land sale that we just talked about, reducing the increase in revenue because it was a one-timer, we don't have another one timer in FY 2027.

We're budgeted uh end up at about 510.4 million, an increase of about 37 million or almost 8% over our FY26 estimate.

Um personnel budget increased by 17 million, it's 11.2%, and that's directly related to the increase caused by the facilities.

We've got to have more custodians.

We're opening almost a million square feet and almost two miles a curb, which have to be managed and cleaned and staffed, by the way.

So we're decreasing our vacancy factor for this very same reason in FY27.

Also health insurance and the hope increase, which you guys have seen across other budget presentations.

Supplies and non cap equipment are budgeted increase by about 1.1 million or 8.6% again, directly correlated to the additional space that we have.

Contracted services or budgeted increase 19 million or 6.1%, and that's primarily due to scheduled uh contractual increases and a parking contract increase, and a lot of those in our inflationary uh by contract.

Um our share of the uh general fund uh interfund payments is about 141.2 made up.

Uh you know, the following we've got a pretty significant increase in police services you guys are aware, um, utilities uh increased a little bit, 5.9 percent.

Technology and calm as we switch to uh a pay by user rather than buy a software, uh we switched to a licensing.

We're seeing more IT cost for a lot of the programs that we have to use related to gate management and related to uh prop works, our property management and and those things.

So we're seeing some more increases there than we would otherwise see or have seen in the past.

Our property insurance uh increase significantly, almost 10 percent.

Um, and then we saw a decrease in in the R for the firefighting, and that was primarily due to the one timer that we hit last year for their adjustment.

If you turn to the next page, you can see it all in summary.

What I what I just talked about again.

Personnel is um aligned with the other thing I want to point out is that uh debt service and other uses looks like it's down a little bit, and that's primarily due to less utilization of commercial paper and the debt service associated with commercial paper utilization.

So we funded some more things.

So our AIF is actually going up a little bit next year.

So we'll uh the airport improved improvement funds so that we'll have more monies to do some of the capital projects we have lined up.

Looking down at um 80 12, 80 12 is a little bit interesting.

Uh seven almost seven million of that is carry over uh from the prior year.

So we budgeted almost or just over 20 million this year, and as you see, we're projected only hit 13 million, so 7 million of that is transferring in, and then you add uh one RF truck and one bucket truck uh that we need to replace uh existing equipment, and then that drives the uh the difference in the AD 12 account.

So uh next slide, please.

If you look, this is just uh a summary is Jim showed before it's gonna match the the revenue in terms.

Next slide, please.

And this is just a graphic representation of what we did and what I mentioned on the uh 80 12.

So if you see the our our projected is coming in much lower than what we budgeted for the year, we just haven't been able to receive the deliveries.

Next slide, please.

On the personnel versus non-personnel uh basis, personnel accounts for 33% of our total expenditures while the non personnel accounts for $342 million or 67%, and then on the non-personnel side, you can see that it's split by the predominantly covers other contracted services 188 million or 55 percent.

Uh interfund at 141, and then supplies at a much lower percent, and non-capital is relatively small relative to the other spending.

Next slide, please.

You can see the uh the change in our interfund budget year over year.

Uh it's about two percent overall.

Next slide, please.

And so, you know, with the funding that we're anticipating for this year.

Our kind of goals for what we're gonna do with the money this year is continue to grow our air service development.

So, again, we're at a 209 destinations right now.

That's actually gonna change to 210 because yesterday uh United announced that they're gonna bring back Caracas.

Um, and so we'll continue to focus on nonstop flights out of Houston to new markets.

Uh next slide, please.

Um, again, what we're also gonna be again continue to do the terminal upgrades.

So those restroom improvements that we need to do.

Um, United is gonna again also they have started their restroom improvements in terminal C and E.

So their first one should be opening sometime in June.

That's E11, and then they will continue to do further upgrades there.

Again, terminal curbs, making sure that we keep them cleaned and coded, and then working on that.

Uh, you know, part part of the the fiscal year has a little bit of the FIFA in there, so the fan experience that we would get for those playoff games.

Uh again, state sustainability wise, we'll continue to work with the airport council international carbon accreditation.

Um, we're currently at level three, uh, and then right now we're gonna be in a level three for a little bit as we work with our stakeholders because that's the next kind of phase that we're in right now.

Um, updated amenities again.

Continue to complete the the transition and hobby for uh uh can uh concessions and food options there.

Uh rehab the court uh food courts at Terminal A.

We're also working on a sensory room at Hobby, and then identifying a path forward to a lounge at Hobby Airport.

Um so that's uh something that we're again working on for this fiscal year.

Um next slide, please.

Um, and then from an airfield perspective, um, we we're completing some regrouping projects that we've got at the airport.

Uh we're gonna have a big runway upgrade to runway 422 at hobby.

Uh that's uh in anticipation of a further upgrade to these big runway 31 right that's gonna follow after that.

So we want to get 422 in the best shape that we can get it when we take um 13 right down for a big improvement.

Um we're also working as a safety management system uh an implementation to that.

So that's a specific kind of aviation program that we work with to try and reduce the the risks that we see throughout the airfield.

Um, and then we're also working on a clearway extension at Ellington Airport.

So, what that is is that uh Ellington Airport has um some you know basically greengrass on the end of the runways, and from a technical standpoint, we can make the runway length a little bit longer that they can put into the computers, so there's no pavement changes in it, it's just a procedural change in there.

Uh, and then I can continuing to do some additional taxiway rehabilitation um on both airports.

Um, and then again, securing the non non-stop no new service is always a focus of the airport.

So very excited that the new Rome flight took off.

It was did uh did a great um service to be able to connect that world capital with Houston, and now with the Caracas service return returning, that's again another world capital um that we're connecting with uh the city of Houston.

So very excited about the the new service that we continue to bring.

Next slide, please.

Um, and now we're ready for questions.

Um, so the shortest all time presentation by the airport director.

We really you you wanted it.

So we are very we are very grateful and very grateful for all of your good work and and thank you.

You've already answered my questions that I submitted in writing.

So I really appreciate that.

I'll go straight to the queue.

Um Vice Chair Castillo.

Thank you, Chair, and thank you, Director, for the presentation.

Very very good information.

On slide twenty-five, you talked about uh some of the initiatives for FY27, actually 26.

Slide 26.

Okay.

Um you talked about some of the initiatives for FY27.

So on the ACI carbon accreditation, we're at level three.

What what is the next step there?

What does that look like?

So when so level one and two, we kind of got through in record pace, and that was kind of our internal, you know, do making sure that we've got ourselves squared away.

When we get to level three, it becomes a little more complicated because of the fact that that's where we actually are starting to coordinate with stakeholders and their emissions.

So working with airlines, ground handlers, those folks.

So to be able to progress out of that three into the next stage, which is called three plus, um, that is is a lot more work because of the fact that it's just not us anymore.

It's we've got a lot more stakeholder engagement on that.

So that's why it's gonna take us a little longer as we kind of go through that process.

Got it.

And then um, do you have any initiatives in FY27 around um integrating or upgrading existing technology at our airport systems?

Yeah, the technology budget is robust.

Um, and so you know, the general things that we'll see in the technology budget.

Um, we're working on upgrading our camera system at the airport.

So we've got a camera system that at the airport, the software behind it.

Um, we're trying to get a more advanced version of that to be able to better um, you know, tactically control what we can see on a camera perspective.

Um, other things that we're working on is the um we're working on a failover site.

So we've got our existing kind of you know mothership of where all our our IT is.

We want to make sure that we build a nice uh redundant system over there.

Um other things that we're doing is in the ceilings right now.

We're using some camera analytics to be able to count our wait times and and do our curbs.

We we're gonna probably be switching to a LIDAR-based system uh because it gets a little more fidelity in there to be able to count the heads uh to make sure that we track all of our our wait times for passengers that uh that are experiencing things in the airport.

So, you know, kind of general um customer service to be able to track and and monitor things is what we're gonna spend a lot of time on.

Okay.

One of the issues that came up with the TSA was um when the TSA the lines were long, was that uh Houston had the highest reported times.

What they failed to mention in that report was Houston was the only one still reporting some of the times because their systems couldn't go beyond their weight, their initial weight area, and we found a way to do it.

So, but this slider will help us be more accurate and continue to provide that service for our passengers.

Thank you.

Councilmember Romares.

Thank you, madam chair, and thank you both for the presentation question about uh federal funding that the airport system receives.

Where is that reflected in in the slides?

If it is, it's it's showed primarily as an offset to our debt service.

Um I can send you a detailed sheet that shows um we take our our amortized debt and then uh we offset that with the uh federal funding, the grants received from the FAA and ballpark.

How much do we see uh from the federal government?

Uh I think we're at 109 million year to date, and we we typically forecast about a hundred, it give or take it's a hundred million a year um in in federal funding.

It it really depends uh on the the project the specific projects we're doing and how attractive they are to the FAA for instance.

Jim mentioned some runway work, runway work is very attractive uh for federal funding to the FAA, so we tend to get a little more consideration.

So those kind of things, but it it varies year by year or as we go.

And uh and we and there's kind of like three streams of the federal grants that we get.

So we have what's called our entitlements, so those are ones that are it's a mathematical formula based on our cargo activity and our passenger numbers, and we just get an apportionment of that.

Then we've got our discretionary funds, which is the FAA has their basically pot of money that they can give to certain projects, and so that's the ones where we again the the runway projects score very high on that, and so as we do runway projects, we'll probably get a little bit more money than traditional um, you know, and taxiway projects score well.

So we'll get money from that from the discretionary pot.

And then there's other um FAA funds, and so we've got we have still some remaining grant funding based on the um oh, what was it?

The bill grant the bill grant that was passed a couple years ago, and so being able to put some of that funding um to to work, and then we have others, so we may get some figure out some ways to to you know again look at you know some state grants or some you know electrical, you know, kind of electrical grants, those kind of other ones, but the the bulk of it is the FAA grants that we get.

Okay, appreciate that.

Let me ask you about slide 19, uh which is expenditure highlights a couple of the entries there.

Uh police services project uh 10 percent increase.

Um aircraft rescue and firefighting project uh almost sixteen percent decrease.

Um and those are interfund transfers.

Um either of those figures include uh overtime for police or fire.

They they they both include projections for overtime, and part of the increase in the police um may include some FIFA overtime that they may be hedging against.

Now we reconcile quarterly, and uh until recently, until recent pay adjustments, we've typically reconciled down on the uh the police side, but lately uh we've had some upward adjustments.

All right, I'll go back in the queue.

Councilmember Flickinger.

Thanks for the presentation.

Uh just a comment.

We talked about this before.

I think DC has proven that they're willing to cut off funding for the security.

And if we could look at privatizing that, would I think it'd be a good thing for the future.

Okay, we we are we we'll take a look at it.

Our passenger facility charges 450 still, right?

Correct.

Okay.

And where is that reflected in the budget?

I mean, do we it's not?

In the same place as the uh is the grant funding, so it's an offset to our our debt service.

So that goes straight to debt service.

Yeah, it's it's either used to uh pay go to pay for projects directly, um, but typically it's used for debt service.

Um, and is that the max?

Uh 450, yes.

Yeah, yeah.

We it 450 is the max, it's federally mandated, and we actually receive 439 after an eleven cent uh per PFC administrative charge that the airlines get to keep.

We receive 439 percent.

Okay, got it.

Councilmember Romares.

Thank you, Madam Chair.

Let me ask you about slide number, I think it's 20.

Um towards the bottom of the page, the second uh bar chart.

Vehicles and rolling stock.

Um fairly large percent change there.

I don't know if you covered it in the presentation, maybe you didn't I missed it.

Can you can you tell us what that goes back to the uh the conversation we were having about the deferred almost $7 million, and it primarily relates to uh old RF trucks used a specific kind of firefighting foam that's they've switched out.

Well, turns out you have to figure out a way to use new trucks for the new foam.

You can't use the new foam in the old trucks.

So we're going through a cycle where we're still using the old foam for a certain amount, but we have to replace so we're and we're in a replacement cycle where we're replacing a couple of those things this year, and that's uh they're about a million and a half each.

So there's another kind of incremental three million bucks that that comes into that rolling stock.

Yeah, and then delivery times on those are they're long lead items.

So that's 18 to 24 months to get on those.

And that's why, by the way, there's there's probably another, well, there is another RF truck in the rollover, and then there's there's some, and there's there are also some, you know, there's one medium value bucket truck.

Um we've rent a lot of bucket trucks and we had somebody do the analysis, and we we rent enough that we could buy one, so that's also in that in that number.

Okay, and last thing I'll ask you about is in the appendix, and I think it's slide 38, although it didn't have a number on the bottom.

It's uh cost effective, cost-effective option compared to peer airports.

Yes.

And um there's uh there's a dollar figure there, like in the first uh uh chart, IAH is ten dollars and sixty-six cents.

What is that?

What does that represent?

So that's cost per employment.

So that's kind of per employment employment.

So that's in general, that's kind of an aviation term that we use to measure the the airports, and so that's kind of what it costs for an average uh person to go through our facilities.

And so it's ten dollars and sixty-six, which is pretty reasonable.

We monitor this because of the fact that we compete with other airports and particularly with the other hub airports for our carriers.

So I'm very sensitive to our cost versus Chicago Hare and Denver due to United, and then from a hobby perspective, you know, the cost that um like uh uh um a St.

Louis and a uh Nashville and a Dallas war uh the Love Field would have.

And so we just want to make sure that again we're we're using our measures to to make sure that we stay competitive, uh, that also like our bond ratings stay high, and so we're you know, it's just another tool that we do, but it's one of those things that it's we actually have you know, we're kind of actually proud of it.

That that we're very reasonable compared to a lot of our peer airports.

Okay, I'll go back in the queue.

I'm still at okay.

Last question on that.

How's how is that computed?

Like Houston IH is ten dollars and sixty-six cents and hobby is eight dollars and one center.

So it's it's literally the cost.

So the FAA has a form, it's FA Form 127, and then all the airlines, airports go and fill out this form, put all their costs and expenses in there, and they basically just take those expenses and they divide it by the amount of employments that you have, and then that's where they come up with their cost per employment number.

Um, it's not exact science because the way that some airports measure certain expenses is always a little different, um, but it's a good general rule of thumb that we use to to you know, basically look for us compared to our peers and where we sit, and then we also use it from a competitive standpoint to look at the analysis of what's going on.

Um, so examples B is if we're doing projects here that may increase our cost per employment.

We have to look at what's going on in other cities.

We've got good news, you know, like the Chicago Hair, what they're spending there, their numbers only going up significantly, and so that makes it more attractive to kind of pump some traffic through us.

If we look at what Austin's doing, their numbers are going to go up.

So that's going to help out hobby and bush um potentially, you know, compared to our competitors and peers.

So, and does that affect a passenger, flying passenger's bottom line, or they they won't really see it.

It's kind of one of those things that is like kind of the charge that is in into everybody's ticket.

Um, you know, so if theoretically you could say that you know, when you buy a ticket from Bush, ten dollars and sixty six cents is in there for basically the airport fee.

Uh, and if you buy one at at New York, you've got thirty-four dollars that's kind of hidden in there.

So it's it's in there, but you won't you would never see it on a ticket.

Um, but that is kind of built into the the um the the expenses that the airlines are paying.

Especially at this moment with debt fuel prices, et cetera, airlines are very concerned about uh cost per employment and they're they're focusing, and we're hoping that that results in us being more attractive to transit uh passengers uh for United and Southwest.

Um we do report this number, an audited number in our pack for every year.

Um I do want you to remember this is an average across our entity or across each airfield.

It's it's not specific.

So there's a there's a little bit different uh cost per employment in each terminal, and it depends on specifically the projects related to that terminal.

For instance, with the new ICP and the new West D West concourse, D's cost per employment's gone up relatively higher than for instance C's cost per employment or A's cost per employment.

So and that is normal among airports if if you if the the international terminals at all airports generally are more expensive than than your average cost on this, but this is it's just a good kind of general gauge to say that we're running a very efficient operation that keeps us cost competitive.

Um, you know, when airlines look at you know operating at Houston, we don't get the attention that a lot of the other airports get um because of the fact that we do run a very uh efficient operation here.

So I know that.

I hope you're publicizing this.

It's pretty impressive.

Yeah.

So we we remind the airlines.

They're the ones that really, you know, they're the you know, they when when they're when you're your cost for employment is really low, that's one of those things that they they really like that, and they don't bother you.

Yeah, and and I'd just add one further thing.

When you asked about the passenger, whether the passengers see it, it's very good question.

The passengers will see it up to the point that the market won't bear it.

So for instance, if if you know airline A is flying from Houston, New York City for $300, and airline B's costs are a little bit higher.

$300 is gonna be plus or minus nine dollars, probably the answer.

So, um it it may or may not be a direct pass through, but you can imply that it's in the cost of the ticket.

Okay, thank you.

Appreciate it.

Very interesting discussion.

Yesterday when we talked to the fleet uh department, they said that they're gonna kind of have you guys contract your three, you have three garages there.

Use contract labor instead of, I mean, obviously you guys can absorb that cost.

Um do you know how much extra that's gonna cost you?

No, we started looking at it.

We don't have a grasp of those numbers, it's pretty recent development uh for us, but um I think that we can it's uh it may be a win-win uh first.

For sure, it sounded like the smart thing to do and and start so that yeah, we can uh okay, great.

I don't see anyone else in the queue.

Great presentation, um, really appreciate all the good work of the Houston Airports.

We love we love going to the airport, yeah.

And and I do want to thank my budget team, yes, Bruce, James, Cheryl, Anna, Darcy's over here, I think.

Yeah, and the metra, and then uh everybody who contributed the budget.

I think all of you, it's a lot of money to account for.

So I oh and Todd and May, they're the best.

Yes, um, really appreciate all of you and and all your good work and thank keep up the it's it's uh the both the airports are looking great.

Yeah, thank you.

Thank you.

Okay, public speakers.

Let's let ladies first this time.

Laura Gallier.

You may want to stay because my question is probably for you.

Um, um, hi again.

Uh last December I notified you that the um US Department of Transportation had announced a one billion dollar grant for um they they're calling it Make Travel Fram Family Friendly again, uh one billion dollars, and I just wanted to check and see uh how much of that Houston got.

So the announcement on that came out, but the um the the grant application process is currently going on, so we have we don't know anything on that yet.

So, okay, I hope we get it.

Can we get all one billion?

Probably not.

Doubtful.

Okay, Doug.

Okay, um page one of their budget talks about long-term goals uh to keep both airports at five star.

And I don't know why I care about that, but it that is important.

I like to see us have the best of everything, and I hope that I guess the question is I think hobby was five star, and what happened to drop it down to wherever it's at.

But anyway, I think that's really important in their performance measures.

I'll talk to them afterward because they have a flip in some of their performance measures.

They're saying that uh uh Bush was down to 4.3.

That's just a flip in the report.

But in any case, that's important, I think.

And then I also wanted to point out that they talk they have they have expenses for finance and technology.

Haven't there been goals to try to wrap both of those departments into either Melissa or Lisa's uh departments?

I'd never have heard that they're trying to get airport into finance because it's so specialized with all their federal grants and you know, I think it's its own world of acronyms and and systems that that they they have to handle.

Okay.

What about technology?

Same thing?

That I don't know.

I mean, I haven't asked specifically about any centralization of technology, but we do have the uh IT coming in tomorrow for a workshop, so we can discuss that with them.

I'll be here for that.

But uh, you know, we've seen some of the departments that tried to do their own technology, and it didn't work out very well.

So, and also that you know, since they're well, but public works is also an enterprise fund, so we and we do some of theirs, but yeah, it's an interesting interesting question.

Right.

Okay, thanks.

Okay, thank you very much.

All right.

Anybody else want to come and talk about the airports?

Seeing none, we are done for the day.

Tomorrow morning we'll start at nine.

Tomorrow's a marathon, guys.

Tomorrow we'll start at 9 a.m.

with health, followed by municipal courts, and in the afternoon we'll have um information technology hits, and then ARA administration regulatory affairs, and then human resources.

Thanks, Sally.

It's gonna be a great time.

See you tomorrow.