So I got 15 minutes to pep you up.

And what's again, I want to thank, I want to thank you for the opportunity and privilege of being here.

This is such an important institution that this region is headed.

I want to thank Mario for his leadership.

He also serves on our advisory board at the Indiana Business Research Center.

We're working closely to help position this great airport to drive us forward in the region.

So what I'm gonna do for the next 15 minutes is I'm gonna wear different hats.

The first hat is to give you reflection on the economic impact data that you at the high level, and then and then I'm gonna I'm gonna switch take my economist hat on, and I'm gonna put my business professor hat on, as if I what we would be if if we had a if I had a group of airport board members in a in a in a in a classroom, how would we approach strategically thinking about this type of decision making that you're you're doing?

So first and foremost, again, I'm gonna keep this high level, gonna keep it energetic, right?

Because uh I know I know you have a lot to talk about later, but but my but I want to give you just sort of maybe a strategic and very long-term perspective on how to look at your numbers and how to reflect on this very the very important uh decisions that you have to make as you as you face this budget.

You know, basically, if you look at your numbers, I'm just gonna do round numbers, right?

So we can remember, you know, basically we've got a we've got an 800 million dollar institution if you look at spent at the high level.

And when you I'm sorry, 400 million, based on what the numbers I saw.

So the 400 million dollars, if you look at your economic impact study, generates 800 million in impact.

That's basically for every dollar today that you approve to spend, it's gonna generate $2 for this regional economy.

It's almost a billion dollars, y'all.

Now, from my perspective, what economists look at is multiplier, right?

We look at the effective of a of any institution, any associated public institution like this in terms of that multiplier.

A multiplier of two is at the top of the bell curve.

And so that's one kudos to what we have.

Again, we have a special airport, and those economic impact numbers reflect it.

There are very few public institutions that can brag of a multiplier of two.

Most places would be about 1.5.

And we explain why the Indianapolis Airport is able to achieve this very high level of of economic impact through what we call income multiplication in the closed doors of the economists.

A number that's even more impressive that you should look at is if you take that 800 million dollars of impact and you divide it by basically the 7,000 jobs that your decisions create and support an annual basis, 8 million, 800 million divided by 7,000 jobs, that's uh a number of every job, every every position, every person that's working related to the decisions you're making, are generating per person 114,000.

That's their impact from their job.

Compare that to the average what the average salary would be, maybe somewhere between 50 and 70,000 dollars.

So that there you're looking at at least every every the work that people are doing relative to what they're paid, they're getting that that work that they're doing is paying their paycheck and making sure the families need and their kids go to school because of making up security, that's also 50 to 80 percent of value that they're giving back to the region here.

So extraordinary productivity, extraordinary economic impact, dollar spent.

You might say, Well, Phil, why is that?

There's three reasons based upon what my observation is.

First of all, the load your local sourcing strategy is driving that higher multiplier.

Okay, when you contract with local providers, that money stays in Indianapolis and it recycles more instead of instead of leaking out, right?

Secondly, you have a very well diversified sourcing strategy.

Uh we run a small business accelerator at the Kelly School of Business under the research center, work really closely with with the airport team here, and we know how committed and how successful the airport has been in providing the diverse opportunity all over the region.

What that does is it not only generates income multiplication, but that contribution to economic equity strengthens the region.

Because when economic equality, when economic opportunity is more accessible, when there's more you know opportunity for everyone, especially in those communities that especially historically have not had access to it, it calms communities down, it lowers crime rates, and it actually speeds up development.

So your impact's not just in terms of the aggregate numbers, but in the way that that those opportunities are spread across geographically, across different communities.

So I just applaud the airport for its its approach there.

You guys do a great job giving small businesses and new entrepreneurs opportunity to earn a great income, make a profit, serve a great customer, but also to to enliven and enrich our regional economy.

Lastly, the other thing is the high labor productivity that you've got, why is it 114,000 for every job that you're funding?

What does this reflect?

This reflects first of all, a high social rate of return, all right.

As a public enterprise, I'll get back to the objective here, but when we talk about social rate of return, it's not just the rate of return of the airport, it's not just the rate of return to the PL of the airport, but it's it's those, it's that it's those economic impact dollars, right?

Social rate of return.

You've got a high social rate of return, that reflects really good management.

You've got a well managed, well-oiled machine here.

Guess what?

That's the cheapest and most powerful way to increase productivity in any organization.

For those of you know, in a well-led organization where morale is high, people know what they need to do, there's good communication, there's good transparency, there's a sense of esprit de corps, like we have at the airport, that's gonna naturally increase productivity.

We feel it here, also the high labor productivity allows the airport to be a social mission in its mission to maximize social rate return.

That's what allows it to sort of spread the opportunity and be and and be a good client, and to make sure that the contracts that come in competitive, but also fair and generous, and those contracts also allow your vendors to pay their workers really well.

When an organization when the client's productive, a productive client allows the vendor to be productive, the workers to be productive, everybody's generating more value in a day.

Everybody, then you can you can pay folks more, make more money, and actually decreases your unit costs.

So what you've seen at the Indianapolis Airport is sort of the new mantra that we're preaching at the Kelly School, and that is in this day and age of AI, it's about productivity.

It's about the bottom line, but if you've got a culture and an organization and processes that set you up to continuously increase productivity, not only to achieve a high level of productivity but to grow it, those are the organizations that are going to excel in the 21st century, and so what the airport becomes is actually this living breathing example of what it means to do and manage an enterprise really well.

Textbook example, the data shows it.

This gets down to the end of to this gets down to the airport's objective, right?

So if you're in a business school classroom, at the end of the day, it's about strategy and objective, right?

The airport now, a lot of people look at the airport and go, well, it's a public asset.

Public enterprise, like, you know, just like infrastructure.

No, it's not.

I would challenge us to think of the airport not as a public enterprise, it is a public enterprise, it's governance standards.

But I encourage y'all, as the board and I encourage the leadership team to think of this as a social enterprise.

There's a very big difference in business schools, concept of social enterprise is about 20 years old.

What does a social enterprise do?

A social enterprise manages itself like a business, but it judges investments based upon social rate of return.

You serve the social mission, but you manage yourself and you have the discipline of business.

You have your cake and eat it too.

Those of you familiar with you know sort of business governance, there's you know, uh there's uh B Corpse, they've heard of B Corpse, right?

So, so I now you might say, well, Phil, what is that?

What does that mean to be a social enterprise, right?

You're you're more than a public asset, and that thought is already at work given the success that we've seen here at INT.

I'm gonna put that in perspective in just a minute.

But in terms of how you make decisions, if you're if you're a social enterprise, you want to, you know, what are your objectives, right?

If you're a business, your objective is to make decisions that maximize profit, right?

To increase the private rate of return to your stockholders.

That's not your objective here.

If I was to define your objective, it's to manage operations to guarantee financial solvency and sustainability, which the airport's already at.

If you look at your financials, investments to maximize social rate of return.

So when you look at when you when you when you when you evaluate these decisions that you have to have important deliberate on, I would encourage you to ask yourself two questions, right?

Does this, does it does it check the box on on financial solvency, right?

And again, if you've got strong reserves, you can take more risks.

And secondly, is this maximizing social rate of return?

Not the rate of return to the airport.

You're you're not you're not a profit maximizer, you're here as an asset to maximize economic impact.

And those economic impact measures are the footprint of social rate of return.

This means that as you whittle through, we do allocate a dollar there, do we allocate a dollar there?

I know it's more than a dollar.

Have a very sophisticated understanding between what is an expense and what is an investment, right?

Be open to what you might think is an expense to be an investment, because in a social enterprise, a lot of times what would be an expense to a business is actually an investment that fulfills the mission.

Also, this means when you're when your objective is to maximize social rate of return versus maximizing private rate of return, when you're when your mission is to maximize economic impact in a region versus maximizing return to the stockholder, you have to do that, meet your objective, you have to adopt a longer time horizon.

This is obvious, I know, but I just stated here, you want to you want to adopt a longer time horizon than if you're just running a business.

So longer time horizon, maximize social rate of return, and have a sophisticated understanding of the difference between expense and investment.

All that said, all that said, I would argue that actually the most important economic impact, the most important social impact of the airport is not in the numbers.

I would argue that the most important variable in terms of impact is the emotion that you create for people that walk through this place.

That's not captured in the numbers, right?

But I'm gonna I'm gonna I got about five more minutes here, I'm gonna I'm gonna close the loop on what I mean by this, right?

This is not a feel-good argument, right?

You think about your most successful businesses.

You think about your most successful brands that are out there, there is a very positive emotional component to doing business.

For the airport, it's not just about appreciating the airport, it's about that emotional connection that people fill the airport that then has what spillover effect and how people make economic and business decisions in this region.

So as a social enterprise, I would challenge us to think about that you're if we were put into words, your your mission is not just to get the job done, our mission at I and D is not just to click the box on a functioning airport, your mission is to electrify appreciation of Indianapolis, right?

As long as a project, as long as an investment ticks the box on acceptable financial risk, and again, I know we have huge reserves that allow us to maybe be a little bit bolder.

I want to checks the box on this.

I would invite you.

Your lens should be: does this electrify appreciation of Indianapolis?

Let me let me let me let me drive this argument home.

How does this relate to economic development?

First of all, as you know, the most important variable in business is people, and the most important variable in economic developments is people, right?

People make economic and business decisions, even if even billionaires, at the end of the day, business decisions are emotional decisions.

You've heard the famous quote, right?

When you hear somebody talk, you don't remember what they said, you remember how they made you feel.

Same thing with the city.

You may not remember the streets and the corners and the buildings that you saw, but you will remember how the city made you feel.

This is the place of first impression and the place of last impression.

And now you embrace that.

I'm just underscoring what you already appreciate.

Having, as you know, is a very emotional event.

And when you are engaged in a experience that's more emotional than other things, you're actually more impressionable, right?

I was asking my wife this morning, so I'm about to present the ID board.

You remember because we traveled a lot.

You remember how airport, I mean she had vivid memories of airports, and in those trips, she didn't have any other memories, but she remembered the airports, the bad and the positive, right?

So let me drive this home.

You may have seen the Indianapolis region is embarking on a brand new strategic vision.

Bio Heartland.

Think of the, you know, it was in the late 70s and early 80s that leaders of the city got together and said, we're gonna be the amateur sports capital of the world.

Well, here we are 40 years later.

That's pretty successful, right?

As Hoosers, as leaders and residents and business people in Indianapolis and folks that play in Indianapolis, we have a track record for the setting of vision.

And so the Indianapolis Research Center, myself had got to be a part of the leadership of the Central Indiana Regional Development Authority along with the governor's office, they've announced the bioheartland strategy.

And this is basically a tripling down on our world-famous advantage in life, plant, and human, well, basically life sciences writ large.

This includes human, animal, and plant sciences, it includes the logistics that goes with it, it includes health services delivery.

This adds up to about 29% of the economy of the region.

So basically, the amateur sports strategy is kind of mature, we'll continue on that, but we need something that charges our new vision of the region of what Indianapolis will be.

And we have a chance, and we have the responsibility to take to embrace that opportunity of being a global hub for life sciences in the 21st century.

And so this is a 30-year regional play.

The airport is an asset that will is an acre institution, right?

You're making decisions that have long-term impact, which is mentioned in the board meeting, right?

This is a the life science plan, the airport plays a huge role in this biohardland strategy.

Because logistics is part of it.

And you're seeing this pop up around the airport, nuclear medicine, right?

We see little startups and medium-sized companies and even big companies coming in and go, wow, FedEx hubs right over there.

We can make a nuclear medicine product that has to get in the patient's 72 hours.

We'll make it across the street from the airport, put on the plane, it's at the patient's plus, it's at the patient's door 24 hours later.

That's it, that's an advantage that no other region has.

And that's just one small example of how this airport can be part of this new strategy.

But here's the big thing about the strategy.

Not just about being able to cater and making sure that we're friendly to life science firms to whom logistics is really important, or to whom getting it to the patient is very important.

More important to your role in executing and making sure the strategy is successful, is the impression that you make on the thousands of people that will walk through this airport, that are being recruited either to work in the expanding life sciences sector, or people that come through this airport, they're going, should we move to Indianapolis?

Should we open?

Should we open a new business in Indianapolis?

They're gonna the that airport is gonna be the first impression and the last impression, and they're gonna make that decision to come to Indianapolis based on their emotions.

So if this airport is electrifying the positive emotion, it's electrifying that positive impression of Indianapolis, you're delivering on your job, and those thousands of people back on a very positive experience from the airport into their how Indianapolis made them feel.

And the airport's important part of that, and that to me is the most important impact you're gonna have on this biohardman scale.

And so, folks, I'll leave you with this.

What does this require us to do?

This requires I and D to do the same thing we just saw from the governor's office.

Part of the biohardland strategy is a billion dollar commitment from the state in investment make off to generate a hundred thousand new jobs in life sciences, and they did that on purpose.

They did that to sort of scream for the mountaintops that Indianapolis is ready to be a global player at a whole new level in this strategy.

It's attracted now the the states, IDC, the regional, a lot of the places that recruit businesses from Indianapolis, their phones are ringing a lot more than they did before that March 17th announcements.

And so the question I encourage you to ask is what bold decisions can we make to amplify that announcement to the world that we're ready for life sciences business in Indianapolis.

And again, if you're doing that, you're focused on the emotional impact that this airport has on those thousands of people that are walking through here, who are gonna come here to work and contribute to that biohardland strategy, or they're gonna move their business or make investment to do it, and at the end of the day, place as you know, basically complacency reduces competitiveness.

You frame yourself as a social enterprise, frame yourself as maximizing social rate of return, and you're doing your job, you're you're give you giving this region what it needs to move forward with this bold new vision that all communities have bought into over the last year period.

But there's consensus among all counties and all city leaders around the strategy.

That was that's been part of the deliberation around the strategy for about nine months.

We've been a part of it.

We went in, I said we sat down with city leaders, we looked at the data, we look at 200, we look at 200 sub-industries in this biohardland, and we identified which industries each county, even Tipton County, look at Tipton County.

Tipton County is only 0.5% of the regional GDP, but I can't I can guarantee you that this bioheartland strategy behind it is a consensus, a geographical consensus, and opportunity has been identified for everyone, and all that opportunity converges here and runs through this.

How's that for Pepto?

Um, thanks for the.

I didn't know if you wanted to look at if there's any questions, and uh that was what we want to do.

We have been discussing, as Mario's been leading, we thought that it would be appropriate just to have that be a backdrop as we talk about projects and the rationale if we get to that.

Um, are there any questions that you would quickly be able to ask?

But uh we're not putting stress.

Is there a distinction between public value and social value?

There's the there's the public finance part of it, right?

But from an economist perspective, no, there's not.

Because you're either it's there's there's basically, the the private organization, and then there's the impact beyond.

Thank you very much.

It was a great presentation.

Thank you.

Next uh part of our presentation will be to go right into the economic impact program of our capital budget.

Oh, you guys want to share?

Rebecca will lead us.

Thank you, guys.

Uh, good morning.

Um, I did want to share before we get started.

Uh Andrea Weston was critical in helping me guide this budget.

She's been a consultant with us for many years, and she actually became a full-time employee in January.

So, this is Christmas available.

I guess she had just one moment.

When it's similar to uh when you guys get on a zoom call today, you start talking, you don't have your microphone.

How can it still happen after six years?

Um, moment, oh, it says someone else is sharing.

So I think there's a spot, so you'll probably either have to try again or stop sharing at all.

Yeah, but for some reason didn't resolve on the screen.

Okay, we'll just stop and we'll have you.

There we go.

Start sharing again.

Bye.

Because you're still sharing.

What it's just sitting on the bottom.

Oh, there it is.

You're there.

It is cleared.

Oh.

Well, while we get it resolved on the screen, we'll go ahead and get started with the paper packet if that's okay.

So um on the first page, we've got the capital improvement fund appropriation.

And so the appropriation, it sets the maximum spending amount for the year.

We've talked about that um in years past.

And so we're proposing the 2027 capital production appropriation be 425 million.

This represents 101 projects.

Um, it's consistent to last year's at 103 projects.

And we have 21 projects listed here on this page, and that represents over 80% of this spend.

So the plan is to actually talk about all of these projects in detail at the end of the presentation.

Um, so what is the 425 million comprised of?

It's 332 million in project costs, 65 million in hotel specific project costs, and then 25 million is our estimated carryover of projects from 2026 into 2027.

When you compare to last year's appropriation of 330 million, that is a 95 million dollar increase.

We kind of we dove into that and said, Well, what makes up that increase?

So the project costs increased 103 million, the hotel cost actually went down by almost 16 million.

The carryover that increased 22 million, and if you remember last year we had a special piece uh in our budget, which is called the acceleration.

So we we had that that have required board approval that if the uh economy took a turn, we could accelerate our capital budget and make that economic impact.

Um, so all that accumulates to the 95 million.

So, really the project cost that increased 228 million to 332, 103 million.

What makes up that?

And it's it's really eight projects driving that increase.

Uh the first one's almost 43 million, and that's the parking garage expansion south.

So that's a new project that came into this budget.

It's the gonna create 1600 uh public parking spaces, it's the expansion south of the garage uh with construction anticipated in 2027 to 2029.

The next one is our baggage handling system that increased 25 million, and this is just uh extra page.

Uh that one increased 25 million, and that is we've had a budget of 176 million, and it increased to 215.

And that's really as we've gotten further into design and really uh fine-tuning the project, getting ready to bid out.

So that's what that increase relates to.

Uh, and the construction timeline shifted out, so that also caused the increase.

The next one is the terminal energy resilience phase two.

So this project was in our five-year program last year, but it was anticipated to start in 2027.

So that's why you are seeing it here in the appropriation.

The next one we have of those eight projects is Taxiway R Reconstruct, and that's about a almost a 14 million dollar change increase.

And this project was designed in 2026, but the budget for 2027 is the first phase of construction.

The next increase is almost 10 million for tax UAP reconstruct.

This project was designed in 2025.

We are actually in the first phase of construction right now.

And so the second second phase will be in 2027.

And that phase is a larger piece to it.

It's also got two intersections with the I don't know, our midfield system.

The last second to last one is the reconstruct and extend runway 725 Indy Regional.

And that's a decrease of 11 million dollars.

So this project has been shifted out in our five-year horizon.

So it's no longer in the 2026 uh time frame versus the 2027 budget, and that's a 31 million dollar zoo to scope change and approach.

So that budget increased, and then the last change of that 100 million is the terminal energy resilience phase one, and that project is finishing construction in 2026.

So that's how you get to the 425 million to the 330 that 95 million dollar increase.

Sir, if I can just clarify when you use the word increase, you're not talking about increase from what was initially planned.

Talk about additional projects, correct, or projects that are new to the capital budget.

Right.

You're using the word increase, you're not the same from as originally anticipated or planned, correct?

It's really looking at what was last year's plans to this year.

What are the big projects that change?

It's no, you know, we have that the new project that came in the project.

I just want to clarify that point.

Yes, it's not an increase in individual budget cost, correct?

Project costs, it's an increase of the entire budget because projects you're talking about or the timing of a multi-year and one year, like the hotel mentioned that that this year it was gonna have more spend because we're doing all the construction as next year.

So construction will finish, and then you end up with implementing being able to run it.

So that's a change.

The overall budget for the hotel has changed.

It hasn't changed.

Thanks.

That will go to the next page, the economic impact and local opportunities.

And as Bill mentioned in his presentation, so if you take the full total project cost, including the hotel that's 397 million, so that almost 400 million dollars in project cost, that creates over 7,000 jobs, and it also has an economic impact of 854 million.

And when we further broke that, you know, that economic impact down into professional services, that's that's $110 million, and for construction, um heavy construction, it's $744 million.

So that's the total impact.

Now, when we look at the local economy, you know, our capital budget is consistently at 90% local participation.

So those numbers become you know 6,342 local jobs created by this budget, 760 million local economic impact.

If you look at the hotel just the hotel during the selection process, Barrett ran.

There was a local miner pick, local contractor picked.

So it guarantees that we don't export any of the economic impact of this project, uh, and everything kind of sort of stays in and finance people to rob or brought in or local, so on and so forth.

All right, turning to the next page, we have the sources review of the 2027 capital budget, so the appropriation that's before you, and it's very consistent to what we discussed last year.

So those three light blue pie slices, those all represent debt, so and they've got different patterns to them for what's been issued, what's future and what's contingent, so those contingent components of we have to receive the grant before they move forward.

So the total of those three light blue slices is 217 million dollars of debt funding or about 55%.

Um the next two slices that are those golden colors, and that represents our total grant funding of $79 million or about 20% of the 2027 program.

The next two, which are those dark blue slices, are the total cash funding of sixty-two million or about sixteen percent.

And then we have the final slice, the light green, which is about thirty seven million, and that represents other outside sources of funding.

So that's your CFCs that we collect, and then they directly support projects.

We have our IRS tax credit that we've got on a few projects, and then other outsourced funding sources, such as the hotel key money coming in.

We've got some insurance from some of the spring wind damage that's going to fund projects, and then of course our CIS reserve funded projects.

So turning to the next page is the sources review of the full five-year program that's out there.

Again, those three light blue ply slices, those $702 million of debt funding or about 57% of the program.

The yellow slices $144 million, that's 20% grant funding of the program.

We have our two dark blue, $193 million cash funding or about 16% of the program.

And then that final slice, that one or that green one, that's almost $100 million, the other sources of funds.

So that's full review of the five year turning to the next page.

So we got the total sources and uses review by year of the five-year program.

And the gold line shows the ending balance of the CIF account for each year, and you'll notice it goes negative.

And we've had that in the past, and the philosophy is that we will use short-term financing to provide liquidity if it's needed.

So only in that situation where we would go negative.

Would that only go negative?

The grants don't come in.

If we did every single project, we got every single grant.

Yes, that is what we would assume that we would go negative, but it just never really happens.

We never get it all done.

We never actually get all of the grants.

But part of the grant funding is you have to put it in your budget.

You have to plan for it and say yes, we want this project, we want to do it in order to even get the funding.

So it's just CIA, CIF balance, not the reserve balance.

We still have a substantial operating reserve balance that we could draw.

Yeah.

Turning the page, this is the um review of the debt funding of the capital program.

And we haven't actually issued any new debt since last year's budget.

So this year, so that bottom chart didn't change at all.

But the bar chart at the top, that is um, it picks the dark blue is the post-midfield debt issuances that $435 million that hasn't changed.

And we've got our gold bars, which is what our planned issuances are within this five-year budget.

And then the light blue char bar at the bottom is what's outside of the five year, right?

And I think that's a big thing we talked about a lot this year when we did our rounds of senior staff of what's coming outside this five year, just so we could have the right uh capacity.

Make sure we're not hitting our capacity ceiling.

So that's $447 million that's outside.

We turn to the next page, we've got a debt funded projects bridge.

So when we talked about the debt funded projects in detail last year versus this year, and really there's um five that I want to highlight.

You look down at the bottom.

Last year we had about $800 million in the five-year CIF, and now we're at over a billion.

Part of that is we have a beautiful terminal, but it is hitting 20 years old in this five-year budget.

So we've got substantial things that we need to do, like replacing the boarding bridges, the elevators, escalators, moving walkways, all of that.

So you're seeing some of those big projects now coming in.

That's also why we looked at the 10 years saying, well, what's outside of this?

So we again understand what our capacity is for debt funding.

But those five projects that really are driving this increase from the 800 million to the billion are the baggage handling system, right?

That one increased because as we got closer and fine-tuned our design and really under honed in on that project that again is now at the 215 million.

So that was a $58 million increase from prior year's debt funding bridge to this year's.

The next one is the repair and replace terminal escalators and elevators.

So that was not contemplated as debt funding last year.

We had a much smaller program and we were cash funding it, but as we again we got into that, we did a study and we realized everything needs to be replaced.

So now we have a well-thought out planned approach to you know, systematically taking those offline and completely replacing them.

That's $717 million now debt funded.

And then we have the parking garage expansion south that we we talked about at the very beginning.

That is a brand new project in this five-year.

It is that 1600 spaces that are going to be increasing, and it'll actually increase our garage parking product by about 20 to 25 percent for our customers.

The next one, um the third fourth uh with the most impact is the replacement of passenger boarding bridges.

So we had assumed a refurbishment in prior years for refurbishing those, you know, still keeping in place, but again, we did another study and really looked at those, trying to understand the phasing, and it came back that it's actually better just to replace them.

It's gonna, it's it is going to be a better in the long run to just replace those.

It's really ended up being a very expensive refurbishment process to do.

So that's what that increase is.

Um, and then the final one was actually a decrease.

So reconstruct taxiway C, it pushed out of the five year, so it's no longer in that, but it was in that 10 million dollars, and we do have that captured in that 10 million dollar bar at the bottom.

I don't know if there's any questions on the debt bridge.

Is the South garage expansion similar in size scope to what we did on the north?

It's actually a little bit bigger.

It's bigger, it's got a bigger footprint available out there, and so it's that's why you see a higher cost, partly.

How much of that was just inflation and how much of that scope?

Oh, we went about physical first.

So that was the plans are physically, yeah, and then the current expansion was like 74 million.

76 million was what the north one was.

So, yes, we do have some escalation cost in there, because it is, you know, it happened right around 2021, 2022, but it is a bigger footprint.

We are making more spaces, and that concludes the expansion of that garage.

That's it.

There's no other place, no place to go, no place to go or anything.

Yes.

If no more questions on those, I'm gonna turn it um turn the page to our five-year report.

And really, my plan was just to focus on this page.

Again, those are the 21 projects that we talked about and I showed on the appropriations that represents over 80 percent.

We would just talk about each one individually.

Um, and make it bigger, also.

So the first project up is the new IND hotel.

Right, we're in the middle of construction this year.

We'll finish uh in 2027, so our 2027 spend is 65 million.

The the next one is the economy lot B expansion.

So that's 13 million in 2027, and this is actually the surface lot by the gas station.

It'll create uh 1,900 spaces.

So actually, when you uh include the parking garage expansion south and this economy lot, we're getting about a 15% increase in total parking spaces available for our customers.

The third one is the TNC terminal access lanes, that's 11 million in 2027.

So this is the creation of four lanes and an overhead canopy down at arrivals again uh great for customer service, but also helpful for the TNCs and insurance.

Ubers and lifts, and the next generation of that type of type of pickup and drop off, it's safety.

Also, this would be combined with the parking garage expansion.

South rarely, you would do those two together.

We would coordinate the construction of that because it's easy.

Yeah, the fourth one is the restroom renovations and the terminal and concourses.

We've got 4.5 million dollars spend planned in 2027, and this is the continuation of the ongoing restroom project that we've talked about.

And remember, we broke that up into two components the this non-secure and the secure side, so it's it's uh non-secure continuing.

Then we've got terminal backup water, it's 4.5 million spend in 2027, and that's the redundant water system for um to mitigate any potential customer service or service interruptions.

Next one down, we're now in that planned activity seven.

So that first one is the parking garage expansion south that we've talked about a couple times now.

It's uh almost 43 million dollars in spend in 2027, and again, that's 1600 parking spaces being created.

This is a good example of why the short-term credit facility because at the end of the day, there's gonna be some spend this year.

We're gonna come into next year, and if we were doing a hard bond issue, I'd be trying to figure out how much of that 42 issue, and then we'd be trying to arbitrage that uh debt service.

So the credit facility allows us to take only what we need, fund it up to a point, and then if it's late in the year, then I'd be looking at the spend that is needed for 2027.

I mean, 2028, actually, and putting that in that bond issue as well.

That project, the uh restroom project is similar, but we are embarking on that, but there'll be a reimbursement.

We did the reimbursement resolution two months ago that allows that, and then fund through 27, and then we do the hard takeout and public market bond issue.

We'll do the 28 co construction.

It's very efficient to put it that way.

But so I just wanted to explain.

Because we'll talk about that later.

Wait, right.

So it was just saying that when you issue a bond like that, there's you have to pay the interest with debt.

Yeah.

I think.

So the next one up is the stormwater degeneration control capacity remediation project with $8 million spent in 27.

So this is the remediation of some of the specific components of the stormwater capacity expansion projects that we undertook several years ago.

The next one down is the replacement of boarding bridges.

We've got six million dollars planned in 2027, and that is the full replacement of all 3940 bridges again, done in a phase um systematic approach.

So we have no impacts to customer service.

Next one is our parks hardware replacement.

That's 4.6 million dollars spent in 2027.

And every several years we have to go in and replace that hardware and the software, and it's all related to the parking equipment at the entry and exit lanes.

That's our revenue is accounted for.

Then the next one is the de-icing uh control improvements at Mars Ditch.

We have four million dollars planned in 2027, and this is really just maintaining um the facilities that are required by the NPDS permit and ensures the compliance for our DIC operations.

Next uh is the terminal backup heating and cooling.

So we've got three million dollars spend in 2027, and similar to the water, this is creating a backup source of hot and chilled water again, so we don't have any potential service interruptions that would impact us.

Next one is the hotel terminal pathway, and this is a new project that we hadn't talked about before necessarily in this budget.

There's three million dollars in 2727, and this is being undertaken to undertaken to enhance the customer experience coming from the hotel to the terminal through our parking garage.

Making sure the customers don't freeze to death.

But the hotel will open September 27, right?

Yes, and then just kind of looking at that, so then there's more money allotted in 2028.

Yes, so we are designing it or try doing design this year and starting construction, and yes, it will probably finish in 2028, with the way you know we're not having too many customer service impacts.

Like, are we putting it indoor?

Yes, well, yes, indoor, and I think it's also to get some feedback maybe when we open if there's things that we need to pivot, we can do it in 2028 still.

Uh, next one on the list is the terminal energy resiliency phase two, 25 million dollars spend in 2027.

And this one, I mean it's a completely contingent project.

If we've got, you know, seeking grant funding for it.

If we don't get it, this project will not move forward.

But again, it has to be in our plan in order to go after the fund.

And this is the second phase of that TER project.

Um, it's similar to what's happening now in the park and walk lot with those um covered parking that have solar panels that generate power for our terminal, again, just that redundancy, the resiliency for our facilities.

Next one's our airfield energy resilience north micro grid again, similar to the TER.

It's completely contingent on grant funding, but we're pursuing that, and if we get that project or it's got 12 million dollars spend planned in 2027, and it's for solar panels in the airfield to capture that energy and then put it in battery storage to just make our airfield resilient.

Next one on the list is the install perimeter fence at ND Regional.

We've got three million dollars spent in 2027.

So this project is to put uh 10-foot perimeter fence around the entire airport at ND Regional.

It's for safety, security, and for wildlife prevention, and it is grant funded.

Next on the list is our baggage handling system, you know, our big project that's gonna take us from a consolidated um inline or inline system to a consolidated system.

We've got $63 million planned in 2027.

Next one is the taxiway P reconstruct.

So we've got 30 million dollars in 2027, and again, this is phase two.

It's a larger phase of the project.

We're doing more pavement and we've got the two intersections at taxiway C and taxiway H.

And we partly phased it this way to align with grant funding.

We're in the in the process of submitting those applications and locking in that money for that second phase, which is the final phase.

And then next is taxiway P reconstruct.

So that's $16.5 million spend in 2027.

So this is package one of this.

It's it's a two-part package project.

So we're doing the full length grading and drainage of relocating this taxiway, right?

We're pushing it out into midfield that leaves that open space for um potential apron expansion later in the future.

And then the next package will be the pavement side of it, and that will be in 2028.

And again, we've we've done these packages to align with our grant funding from the FAA.

Then third from the bottom repair, replace terminal garage escalators and elevators, maybe walkways.

We've got $7 million planned in 2027.

And again, it's a full replacement of all of our escalators, elevators, moving walkways, both the parking garage and the terminal.

We've got four million dollars spend in 2027.

And this project is 50% funded by the FAA through those IIJA funds.

Um and this will demo the building that is exists right now at EU Creek that was built out of the early 80s, and we're gonna build a new facility in the same footprint.

It will be slightly larger, it's gonna have three bays and a support space area for the members that work out there.

And then our last one is our runway 1836 reconstruction and taxiway A rehabilitation at Hendricks County.

We've got four million dollars planned in 2027, the full depth reclamation of the runway, and then just a mill and fill of the taxiway.

And that um started this year actually on June 2nd.

So what you see in 2027 is just kind of the close out of that project.

So those are the 21 projects that make 80 percent 80% of the spend in 2027.

Are there any questions?

Any questions from the committee?

So the total budget is 335.

Total budget's the 399.

That's just the ones that I went over.

You go to the smaller ones, yes, they're all small.

We could we could have we're practical or all of a hundred and totally the total project costs the 397 million, seven.

So what is our what is our depth capacity?

Well, capacity would be then, I think really about portability and ultimately we are undertaking or analyzing our analyze, we're analyzing it.

We'll be back to the or because uh this committee is for the rubber edge road.

No, no pun intended, but uh the metric in the industry is like not a very positive metric.

It uses cost per plane passenger, which is all over the place in the internet.

We're gonna do is we're gonna do an analysis, our hypothesis that the debt capacity based on the yield in the market, the airline yield in the mark.

We're gonna do an analysis of it and come back to the board and say, this is what we believe.

Organization's debt capacity is long term.

I'm sorry, is it is it your hypothesis?

Then the debt capacity under this analysis actually goes up.

It's a bigger number than it would have been using the standard.

I think it's a much bigger number.

Well, it's just looking at this terminal complex when it was built, it was built 20 years ago.

Right now it would be worth an excess of three billion dollars.

And our our debt is hovering around a billion plus or minus.

So I I'm not as interested.

I mean, not gonna sell.

No, no, no, no.

Okay, right.

And and so, in terms of the value of the facility, I'm I'm not sure that's the best.

No, no.

It's not working.

We're gonna look at the debt capacity for a very, very valid reason.

We want to make sure that everything is fair and reasonable, including our airlock charges.

So we're gonna make sure we don't trip that fair and readable amount, and I think that's the basis of our calculation, whether it's fair and reachable.

That has to be part of it, correct?

Exactly.

And the hypothesis is not an arbitrary cost per plane passenger because the cost per plane passenger here versus Miami's cost per plane passenger is weight is hovering into the $30, right?

They have it in that level because they yield in the market in Miami is huge.

So we have to go back and calculate what the what they yield, what the airlines are yielding versus what we're going to do in the future and make sure that we keep it fair and reasonable.

That's awesome.

I don't know if that makes any sense.

Well it does.

I'm just I mean, I don't think anybody on this committee is has the same level of sophistication as your management team does, which are you happy about.

But I think all of us can say, you know, we're somewhat dependent on debt right as a source of funds, right?

Which just causes us to want to look at this from sort of an enterprise-wide basis, but also examining what are the all the possible black swan events like it happened right.

And so I'd love to see uh some kind of debt analysis.

Absolutely.

We'll do that, and that's part of work, want to make sure that like I said before, I think everything is fairly public and we generate enough public values, but to the airlines also, which are the economy around.

I want to make sure we don't prick that sort of thing.

I don't even think we're close.

But that's just a I hate to say statements without having data, but when we get the data, we'll share with that.

How much debt did we have 10 years ago?

1.2 billion.

Yeah.

Yeah.

And that's that was remainder of of construction of this correctly.

The terminal and the terminal complex, yeah.

So if we could look at this, part of the discussion is also time bound.

So this is our debt profile.

This was compelling to the rating agencies when I was in New York in May of 2025, talking to them about the 2025 debt issuance, and they got focused on that bullets the wrong word.

The lump sum payment uh that we issued in order to have a affordable uh approach to funding the hotel instead of doing it another 10 years.

That was backing up of that debt while no refund it.

But what was the compelling part is look how much white there is.

The white means that's capacity, so don't just look at the absolute number.

That's part of the affordability analysis is, and that's why Rebecca was looking out 10 years.

We're into and we're past the you know, we're into the 2036, 37, 38 time frame, and understanding that, understanding how we would utilize our customer facility charges, our passenger facility charges, because the midfield and terminal program debt is effectively step down in 2032 or 33 is the first year.

Steps down by almost half of what the original, but then it steps down again.

The midfield program uh debt is 100% paid by 2037, so there are additional new things that we've continued to invest in 2019.

We had the stormwater facility, parking garage, that was the next big one, the hotel now.

So that's that's where those debt investments have been made or those project investments.

So part of what we're looking at, Toby is how what does it look like to and we have looks like a really big number, but the next five years, it was not uh, it didn't have me concerned.

What we're trying to figure out is what does this look like in the next eight years?

But that's what we're gonna do.

But this chart, which is impressive, but it also hasn't anticipate any new projects, correct?

Yeah, it does not that's what I'm saying is but we're looking at new projects right now.

So capacity is also a what are the projects and what's the timing of them, and how do you bridge that because now you get this isn't a mortgage like a house.

You actually can do less principal, so you craft or you sculpt that service.

And so that's part of what the affordability analysis is.

What's the approach to the debt?

What's the approach to the timing of the payment?

We don't have to go in depth on the debt issue now.

But I do think during the course of the rest of this year, we would love to see an analysis.

Absolutely.

And by the way, long term plan, right?

The 10 year plan that Rebecca was talking about.

It's part of it.

Right.

Because to a certain extent, you've anticipated that in this chart.

Yeah.

I mean, your presentation, it looks like is Yes.

I wanted to make sure we were not, you know, not filling up all of the white space, right?

Because we do want to leave capacity pop up and things that happens as our facility ages.

So yes, making sure we weren't using all of the white space staying within it or under it.

Look forward to it.

Go ahead.

Any questions on the capital improvement of capital budget.

Any questions or comments before we go to the operating side?

Alright, so I will start us.

There will be uh uh some opportunities, especially if there's questions for Elias to jump in, it leases here as well.

Uh so it depends on how many questions and how low you go with the uh with the detail of the uh how long you go.

How low you go.

You get to the oh sorry, I grabbed the wrong thing.

So the context I wanted to set is bring us back a year.

We were discussing the economic uncertainty of the economy.

Started last year, very slow as airport industry, and also slow from business environment standpoint that was making us step back and say, it's gonna happen for the rest of the year.

We took a very conservative approach, we had an almost flat budget, so that almost flat budget.

Some of the items we've been able to realize, and others, as we have gone through the budget process, there are escalations that are non-discretionary.

So we're anticipating those, but those are also reflected in our budget.

Um we also have some upsides in revenue that we did not anticipate.

So um want to just go over what the appropriation is and also level set on how the hotel is impacted.

Is the hotel open next year?

There's a question of what date, it is faster than what we had previously said.

I'm not uh yet, I don't believe the date has been settled, so when that's settled, you'll hear Jonathan shouting in front of the house.

Um there is a 5.1 million dollar estimate, and that's based on so many months of operation occupancy uh estimates that I've discussed with the operator wishman partners.

Um, but the end of the day, this budget then, and this is as you know, some budget appropriations.

We don't talk as much about the revenue side.

There'll be a discussion here, but from a legal standpoint, the board is approving the uh airport system fund appropriation of 2632 ninety-two.

That is what's being put forward.

That has a five million dollar uh estimate in for the hotel.

Everything we're gonna look at is apples to apples, so no noise from the estimates of the hotel.

This was just uh summary comparison again of what Rebecca has done, just to put it all in one place, because at the end of the day, that is what you'll be asked to make a recommendation to the full board, and that will be presented.

We really made no big changes uh and deviated from what our assumptions were.

The only deviation is FedEx gave us a plan that we already look at and say it's too aggressive.

First two months of their plan, they're nowhere close, they're way higher.

We have actual data.

So we stepped back and said we're not gonna get aggressive with FedEx's landed weight based on what they gave us.

I first looked at it, I was super excited.

Then when we saw month, ooh, they missed month, they missed.

You know what?

We're gonna stay with the 2025 actuals.

That's what we did.

That'd be the deviation.

Um so coming to look at revenue.

Um, it's gonna say this is I think from my, and this is non-airline revenue.

Remember, we estimate we control, even Phil said, you know, we act as a as a business that is managing uh these non-airline revenue verticals, parking BRL being our largest properties, car rental, concessions.

It's all in non-airline revenue.

So we'll go to the next page, but you see that uh we're saying that there's gonna be a little bit more non-airline revenue than we expected.

I'll explain it on the next page.

Let's go there.

And we're just highlighting all these pages.

We're looking at non-airline revenue.

So you exclude the hotel revenue for 27.

Well, easier to understand.

So our non-airline, well, it's uh after 27.

Hotel revenue will be on the slide.

Correct.

And we'll probably want to separate it out for you because it's gonna be a substantial change.

The hotel operating expense for a full year probably at the 23 to 25 million.

You're gonna have 30, you're gonna have a lot of revenue.

So I think we're gonna have to do a both and so that you can understand it, because you're gonna see some really big increases.

So we gotta do both, but you're right.

The good part is that the hotel will be totally integrated in Caroline Guarantee, any any coverage of shortfall, the thing, right?

So we wanted to just touch on the the drivers, drivers that we have anticipated that looked at whether based on friend, or uh, and a fundamental item that we haven't talked about, it was on the assumptions, and I should have mentioned it, is we're not anticipating any increase in passenger.

We're also not from our budget for 20.

We're not anticipating a decrease either.

Ask yourself, well, wait a minute.

It is because the plan for 26 is conservative, so we are actually ahead of budget right now, 1.5 percent.

We have a budget that is 3.2% lower in passengers, what 25 actual was.

So when we saw spirit go out of the market on that Monday, I received a phone call from one of the airlines.

They asked us, what is your estimate?

They appreciate the way we approach things.

But I'm not changing anything.

Me, not changing anything.

We already have a conservative base.

We were looking at our plan.

Our plan is constructed on the thought of economic uncertainty.

So we did actively what others now are reacting to.

So that's the reality now.

We'll see what we know.

Jeff Blue came in.

Oh, what happens with their uh success.

Avalo just started.

I mean, there's pluses, there's minuses.

I think we're materially gonna be correct.

So that's what's happening with passengers, but from a parking standpoint, we're seeing that there's more transportation network companies.

That's just discussed a little bit, Uber Lyft.

That's a trend based item, and we're looking at parking mix.

So we're public parkers are parking.

So that is informed by uh quite a bit of analysis with Alias, Lisa, Steve Wilson, our director of parking.

But then we come down to concessions.

You want to talk about a home run?

Tavern is a home run, sales, and the what is happening there, it is performing.

So this becomes then the reflection of that percentage rent.

Um rental just trend.

Retail other.

This is looking at the spaces.

So we just in the board meeting approved a parking lot increase.

There's going to be rentals associated to that space as well, um, there's they're they're anticipating a uh rental, uh, uh I think rate increase for some of the parking, and then uh talk to Marsha at length, and we're very excited that uh looks like high possibility, high enough to put it in the budget to have a common use lounge at the end of A.

So there's some revenue in that.

So that ultimately is eight hundred thousand dollar increase.

Um properties.

There is an item that we will be and we've known that's coming, is that there was an expansion of the FedEx apron that was undertaken uh by the authority that was done in the 2006, seven, and eight time frame, and there was a cost recovery on that.

That cost recovery is coming to an end.

It was a 20-year lease, so or C this is the first year, but ultimately that uh supplemental capital charge that's done every month goes away by the end of end of 28.

So that's the decrease that's that first, but it's offset a little bit by clear, clear is uh why don't you just separate that out?

Okay, I can I'll do that.

How much is clear?

And it's on the next page you can see the breakdown.

Okay, well, say that you can see the reduction of 1.4 million in the next page, and then I think you have inside other buildings the clear of like 500 and so yeah, that's that's where you see those two.

So that's what the 522 is.

I think it's mostly that.

Okay.

That's the first year it'll go down because we lump some payment the first year.

Um, I get 250.

But but I think we're gonna be at the 500 for next year, because this is next year.

Yeah, yeah, yeah.

Yeah, 500 for next year.

That's kind of the clear impact in revenue.

Okay.

Um, then most other substantial.

So we have a lot of positives, and then we know that there's uh a change in the use of IMC, something we've continued to work towards.

We have discussions with uh entity that is interested in purchasing the IMC.

The stocks continue to go forward, but for appropriation budget purposes, you can't assume that until uh it is a completed transaction, assuming it does complete.

That's just revenue, correct?

This is the revenue reducing, yes.

Um, and so we can see that on the next page.

Let me just jump.

On the expense side, yeah, and the expense side goes down some, but there's so many fixed expenses to run the facility, it's not it's not correlated linear.

So we're still gonna have to heed the facility, pool portions of it, uh, maintain the systems that are in it.

Um, so there is there's a reduction, but it's not the equivalent three million.

Um, let's just go look at that IMC.

So you asked.

Um, this is expectations or the reality from last year, budget this year, and um, and then we go to 3.6.

We'll see the expense side as we move forward, broken out.

Was there any questions on revenue?

Thank you.

So expenses, there's three things happening.

So, when it comes to route, if I was just gonna summarize, really for the most part, there are no assumptions of significant increases, right?

I mean, I mean, there's nothing in here that's not this is actually it's I would say it's as conservative as last year.

It's very disparate.

Yes, it's conservative.

You don't have to say yes.

No, it it is conservative, but I think it's also realistic.

So that's what we're trying to be is well, let me say the opposite.

What I'm trying not to be is base a whole budget on optimism that doesn't really have a potential to materialize, and that's what the team is trying to do as well.

Look and say, what what's what do we think is real?

Okay.

Although, because of the AUA would get it just takes time to see and the industry, just by nature is volatile.

I think everything is gonna go well, we think fantastic.

But we're not gonna bet on it.

Thank you.

But we have page 10, which you can clearly see, plain wins.

You can clearly see what you're looking at from the conservatism.

You can see what broad route management about the 3.2% reduction of last years versus 2025, and you can see how that they might bend for 27.

You were two patients later, you see also a car with a conservatism or what where we are where we're making the budget.

That's a down there.

Yeah, this is that in plain and uh trend, and you see that that was our estimate last year, and then we're it's zero flow consumption, yeah.

But uh, back up, get the expenses.

Um, so what I started to say is the expense uh summary, gonna get back to it.

Sorry, is got three components.

You start with a very conservative base, we had outperformance last year, and I've discussed this with Toby twice.

That our intent is to appropriately invest out performance in projects that make sense, and so that's what our recommendation is.

That's what I we've been pursuing in prior budgets.

Um, and because of the conservative base back here and those upsides in revenue, um, sorry, just trying to not go too fast here.

We have really looked at fence budget in two ways.

So, for 2026, we were reforecasting, we're looking at saying what should we do to invest those dollars, and what were we not able to a hundred percent uh achieve?

Oh, we have more electric cost than we expected in our budget for 26.

We have many of those items, some we have more contract cost in certain areas, and there are appendices that go through differences, and I think we even did a bridge on that reforecast.

I just want to let you know that that's and that is with the way we're uh positioning the authority to have the largest economic impact, but then also it's sure that we are continuing to strive towards our mission.

Um, so that's what this page indicates, but ultimately when you see such a conservative base, when we look at our budget and say what is the budget change, then we were gonna say since we went down 26 budget, coming back up.

If you look at that over a two-year time period, that's part of what we kind of have to do.

Say, what is really the two-year impact?

What is that annualized?

And we were just talking yesterday about the numbers are big, so when you see a eight, nine, ten million dollar change right away, you go like this, but the percentages are reasonable.

But um, let's get into the details then.

Here's the bridge, bridge is always a lot of detail because the operating budget isn't just uh a couple transactions, thousands of thousands.

Probably just say what are the big items, the biggest item is people that has been vetted, discuss those assumptions, human resource committee has been involved.

What I would say is I look at the operating expense budget that the items that are changing are not discretionary increases.

Some of them are mandatory from the standpoint of hey, it's the year to do the uh audits on stormwater, or there's increases in uh an annual contract for our escalators and elevators.

Part of the reason that we're looking at the replacement on certain systems, because those continue to escalate parts that they're required, continue to be more and more and more, and then there's more downtime.

I don't know if you've experienced that just on that item.

You know how many we've got multiple things that are offline, they're wearing out, and we're trying to maintain them, but it's costing, but that those are the nature.

So, Kobe asked me a question, Robert.

Give me a percentage of this budget that's discretionary.

I I wouldn't characterize these discretionary.

The only other thing I would say is there's a couple couple that I think are operationally uh mandatory.

So there is always gonna be some discretion, just a matter of are we keeping the mission, the customer service, and making sure that we're not diminishing.

Because if we want to diminish, that's the idea, then we would look at the budget process differently.

But we're we are looking at that's not the appropriate way.

If we're gonna be that economic impact, the what was the word Bill used?

The electric electricity of the positive emotions.

So I like that down, did because I've never heard it before.

But uh that's people, professional fees, then a lot of pieces.

But one of the things I wanted uh we we talked about and we've had three projects that have electric solar in them.

2027's budget, the first year we're gonna see offsets to Boston electricity.

So in utilities, we have worked with Todd Cavender, who's on Jared's team, our environmental guy, he's the one who understands kilowatts and what these things are gonna do and how peak shaping's gonna work.

And he gets as excited as Phil does about it.

That'll call them down.

But uh million dollars, what we're anticipating.

I'm always skeptical.

Like, I wanna see the savings.

We're gonna be looking at that, but that's what we believe, and you know that if we're doing something, you know, the number might be bigger.

We're not gonna put the bigger number in.

We're gonna put what we think is conservatively the right number, but it costs money now to uh deal with having microgrids, so we gotta maintain them.

Gotta people that are experts to ensure that the OM work is done, right?

That we're making sure that that's happening.

We've got that in professional fees as a driver for it.

Um the other items that are in contractual services are the nature of those are.

If we went through each one, read them, they're that the the mandatory.

We don't have really discretion to say we're not gonna repair and have the investment in our moving walkways.

Um baggage system, um, that environmental management sustainability implementation, um, those are the mandatory.

The uh a mono upgrade, it's gonna cost us more just because of the new system.

So it's uh software as a service they don't do on-prem.

Um, so there's gonna be it's gonna be an increase in just the operating cost of the parking system that's upgraded.

I think we're gonna have a great functionality from it.

So there's those types of uh items that are in this 3.9, that's the second largest.

Utilities, electric costs keep going up.

We've seen a lot in the news uh over the last uh two weeks about rate increases, a change at uh I URC, the lead, and you know, I mean, again, we'll see where that all comes out, but um that was what we were anticipating from the information that we received.

Um supplies and materials very similar, and the other ones I see is that uh I think Keith will see our last diesel bus running.

It's done, it's gone.

It's gone.

It's gone.

Okay.

The last diesel bus is no longer running, we're full use electric.

That means there's gonna be a change.

Yeah, Karen.

Didn't see you over there.

Um, so those are the items, similar types of things, not ice chemicals, they're petroleum-based.

Um, you're gonna have an increase.

That's what we're anticipating on those, and then the other real significant dollars.

Insurance is another big item.

So as we approach the insurance broker, which is Marsh USA, insurance market is somewhat harder, and and this is what they're anticipating and telling us that uh plan for your property insurance to be at this level.

So that's what we put in.

Um is our expert, she's sitting behind you.

She's shaking her head yes, vigorously.

I think she wants speed for about 10 minutes.

Um, capital.

I know she looks like she wants to.

Operating capital, that's some oxymoron.

What is operating on?

It is actually those uh like mostly rolling stock, but also any kind of uh asset that's less than two hundred and fifty thousand dollars.

And the reason it's operating capital is because we charge the airlines in the year that we we uh do that, we procure that so it is part of use agreements throughout the nation, and ultimately for the books, just so you know, that actually gets credited back off of operating because it can't do that for gap accounting, but we put it in here so you see what's impacting the airport rates and charges, because that is part of what gets into a rates and charges.

We cost recover that that's in the year.

Last year we said flat budget, uncertainty, and that was one of the areas that we said.

Well, we are so well maintained, we're gonna defer.

So this you can't keep deferring.

This is why we're coming back to implementing that plan appropriately, and that's that uh level.

And then talent acquisition initiative.

This is related to the workforce development trajectory that that has been on, all the discussion that we just had that's part of that uh investment.

So it's an 8.4% increase when you take it all together.

Um this then would be the uh look at where are the pieces, how does it roll into uh these items?

And then you asked about IMC, Toby, and we usually put a memo at the bottom, and we're seeing almost a million dollar decrease IMCs.

So the IMC as a and as a unit, if it was broken out as a component unit of the financial statements would be reflecting that loss.

Um, but ultimately that is what we're working diligently and collaboratively with to see if it has a substantial reuse.

Are there any questions on operating expenses?

Any specific items for the approach.

Well, let me just jump then to debt.

This would be the debt profile, um, very level.

Even though we're anticipating issuing debt, there will be cap i, so we cannot charge and this is very specific at the top that says rates and charges.

Um, this isn't the, because the appropriation is higher because we ultimately are gonna have spend dollars, but they're not gonna flow through rates and charges yet.

That's why we show both.

So it's an impact of how does how does that debt?

Because we can only charge once the asset is available, and that's what the FAA says, that's when you recover it.

So we have to borrow, be able to have the dollars.

That's what capitalized interest.

Um, so the thing to understand is we have rates and charges portion that we use to pay debt, but we also have the CFCs and the PFCs.

So the project that was the last one in Jared's item, that parking lot, that is a project that is already the debts issued and will be paid.

That debt will be paid the CFC.

That's where you see it happening.

So PFC and CFC are those are revenues.

They are revenues, but they're also a portion of the revenue that's directly attributable to debt for those projects then.

Yes.

And it's not our it's not an expression of our total revenue of PFC, CFC, it's the part that's allocated to debt repayment.

Um, so PFCs, the use application only allows it to be that.

There's no pay go.

And CFCs, we we have discretion with the CFCs, but it has to benefit the car rentals.

Sure.

And ultimately, we sized the um $6 per day.

It was agreed with the car rentals.

I mean, they're the ones who encourage us to do that.

So we could fund prior debt.

The North Parking Garage Expansion was CFC funded in total.

After discussing the needs of the car rentals, that's why three uh levels of that were allocated space-wise to the car rentals.

We ended up implementing that just a little bit different with the second floor pushing into the second floor space, but the square footage is that uh methodology.

So, so there is a portion of this CFC that is being used for paygo.

We are redoing the QTA quick turnaround, those buildings, that that's being funded with direct payment, not debt.

And that was all part of the plan of finance and use CFCs.

Um, we will see CFCs have some capacity again in about 2032.

So in 2032, based on the way debt is the amortization of it, if there's no change in that six dollars, there'll be some decisions today about what's the next project to fund.

Um, and as we look at the parking garage expansion, our rentals are talking about desiring space in the first floor.

If I can just follow up on Ryan's asked a very good question.

So what you're showing here is essentially how we cover the debt service.

So these are not included in not those revenues because they're not they're considered non-operating revenues.

So when we talk about, but it is a funding source, and ultimately, just so you're aware, my plan, it served us well.

Ario agrees that the we've taken an approach to carry at least one year's debt service on the balance sheet of PFCs and CFCs.

So, you know, as we've collected, we've been judicious in how we have utilized those.

We have a year's PFCs banked and a year of CFCs banked.

When we went into 2020, all my counterparts were really getting wound up because that all of a sudden was where we gonna pay this debt from.

I was looking at the longer term, saying, all right, wait a minute, it's half of those dollars that we've banked, and part of what then we did car rentals, CFC related debt.

We said, hey, if we're gonna have a we're if we're gonna give you some type of break, a rental uh rebate, you know, they were asking for that in 2020.

Those are gonna be CFC eligible dollars as well in the future, and ultimately part of that discussion was getting back up to the CFC um banked one year of bank CFCs as well.

So I don't go through it as a as a revenue item since we really focused on uh what the impacts to rates are, that's what we have been focused on the operating revenues, but um some years uh if PFCs go down because of that banked amount, doesn't impact us uh directly because we're gonna use balance sheet that's we've accumulated so the plan of finance for all debt as CFCs and PFCs and conservatively and appropriately phased in, then that's part of that debt capacity that Toby was asking about because PFCs are gonna play in that our next application.

Rebecca actually has a RFP or Q or Q that we're gonna start the application for the next PFC application.

The two projects or the two areas would be PFCs be used for the baggage system at all, and then as we look at the existing runway, we could actually have some of the debt service for the five right, two, three left, the south runway that we're done with.

Some of it can be funded for that, or if we look forward, it's in the airfield, airfield.

But that's what we're gonna do.

And it's a process to do FC application.

Is there any other things?

That helped okay.

Go through and you want to look the financial update that shows the quarters year to date, you can see PFCs on that in the non-operating section.

So it's on every month's financials, the budget's for that.

Moving, um, in plane passengers we've talked about.

Uh passenger landed weight, we're keeping it flat, passengers flat.

We'll see how the market fills in with the spirit.

So if you ask me, well, what'd you do with spirit?

I would say is let's look at what's happened when ATA went away.

It took three months.

That sand, I think I made the uh statement before you scoop some sand out and you're where the waves are, couple wave, can't find the hole anymore.

It's kind of the way it's worked here in the that is the strength of having a non-hub, multi-diverse uh passenger carrier.

So those and we see that our passengers, our community utilizes this national transportation system that they want to get to where they're getting.

That's that's probably the biggest question I have is, you know, at some point we know that load factors will go up, and then they'll either up gauge or increase airlines will upgauge their equipment or landed weight, or they'll go to uh more frequency.

So stay tuned.

Robert, all your metaphors, I'm not sure that's the strongest.

No, you don't like it.

That one was like very clear.

I have to get a picture that's got the sand, yeah.

The sand, I know, I like it.

Alright, so cargo landed weight, you talked about it.

Why?

We'll see what ends up happening there.

Just in context, we had multiple years of reduction.

So now we'll see a segment of cargo, and this isn't just here.

This is so we're not unusual that that's what happens with cargo.

I'm just like struggling to understand on a macro level why cargo is declining when just it seems like the utilization of cargo is just higher and higher.

More and more people are ordering everything that gets delivered to the door.

I know that's not all in airline carried cargo, but right.

How is it that on the big on the big picture cargo is declining when we seem to be using more of it?

So you also have to look at what FedEx is bread and butter is it's not B2.

FedEx is B2B.

C is the verticals that they're you know pushing into, putting pressure on, yes, um, the post office, but their bread and butter.

The them B2B, um supporting manufacturing, business to business.

Yeah, just I mean, that's ultimately medicine, like you heard, which is very, very high expensive, and they're generating a lot more revenue than before we've less cargo.

So why does that make a difference?

I mean, to Ryan's question.

Um, so that's their bread and butter.

But why why would business to business be down?

But I mean, and Robert could take that, but realistically, make any difference.

Us it could be down, it's self-leveling.

They cover the entire cost, so it's true.

So it doesn't to us, it shouldn't matter much if cargo is up or down.

Uh so in discussions with FedEx, and is Eric still in here?

Yeah, so uh Eric, I mean, just tell me here.

I mean, we've talked to them about their business.

We went through COVID.

What we saw was massive increases in inventories, and then they experienced their post-COVID.

Um, so that was just systemic decrease.

We saw an acceptance to people desiring being willing to wait six months for a refrigerator.

Guess what?

That was unacceptable.

And through COVID, now manufacturers still said, okay, it's gonna be true.

Two months.

So I think there's some behaviors that way from a business standpoint and what they're willing to think they have to do.

Um, I don't know if there's anything else that in our discussions with Bill and Kurt and those guys.

It's a slow moving target.

Well, that you COVID really raised the amount of products that FedEx was UPS as well.

And then market got saturated, so it just wasn't as much movement needed, so that slows down ships, aircraft, etc.

Taking a while, but FedEx is historically.

So the sand is sand is not off.

It's not your strongest metaphor, Toby.

We said it wasn't gonna change.

We just said, hey, guess what?

The way it looks today is what we think it's gonna look like tomorrow.

We'll see.

But that's so what we're seeing.

This year's forecast.

Yeah, this is what our budget was, and we're seeing the same.

We actually brought our budget uh down a little bit because we said, hey, 2020 uh five was lower than our budget.

So I forecast we said we're gonna go to our 25.

Because we didn't have any confidence that there was based on the projections we were given, it's it's in line with where we were 2025 actuals.

Um but I think Marsha would be the best person, and Eric well, um, to say cargo is cyclical mean it and it's sometimes why is it why is it changing um but ultimately cargo has also been a the elite indicator of the economy so when you see things soft you say what's really going on out there is it got some where we see high wages and inflation but also you may want to maybe getting caught with the shiny object which is COVID and you take the COVID anomaly out of the out of the picture yeah it may make a lot of sense to look pre-COVID to way way post COVID and then make that sort of connection so we could do that for you and make that probably a a better conversation if we take the COVID anomaly out of the follow up out okay go ahead we talked about you saw it then head count has gone through human resource committee they've discussed the positions and really their positions that are about maintaining so there was something in the maintenance area safety area that's that's where the investment and that's why it's changing slightly but um so I don't know if there's any questions on head count I would have to go run back to that sheet to exist and say exactly which issues they are Leah's good here.

So ultimately we also look and we always just for ourselves to be oriented so we've had the mind uh exercise of saying what happens if passengers do if we go back to 23 uh level or what if passengers increase by 1.5 percent but what if there were revenues what's stimulated what do we think is gonna be lost we have to think through you know we have minimum annual guarantees those types of things so that's what we do that's what this page is just know we do it setting ourselves up to be thinking about what opportunities are sets ourselves up to say well but what is the what is the thought that we or what are the impacts if we start to see something decline that is really the reason we do it so we present it I wasn't planning to go through each of these assumptions but um at the end of the day you know if we see a 5% reduction in passenger that has impacts so the biggest is would be parking then you'd see the other impacts of CFCs.

If I looked at the PFCs and I went what would I do I would look and say we're fine got 20 million dollars of DFCs on the balance sheet and well that's what having the balance sheet reserves does smooths out the peaks valleys and I should say the airport has that in the first person that inappropriate.

Then there's just uh additional bridges if you would want to go through those but that would be what I would submit to you as management's recommendation for our 2027 operating budget appropriation.

What questions does the committee have so we need a motion to approve and really to recommend the capital budget and the operating budget to the full board.

Correct.

Sir a motion moved second.

Yep.

Any discussion on the motion all in favor say aye.

Aye.

Anyone opposed motions approved well done everybody something of it this is a all management uh process to operate every yeah so and then capital same with capital capital is I mean you have quite a meeting this year it was actually a very difficult uh process this year going through to prioritize.

It's a very meaningful process.

Very meaningful.

I mean, we're looking at that 10-year perspective.

Let's our debt capacity, but make sure we're putting the decent well you did a great job.

Thank you.

Okay.

Let's uh let's move on.

We're going to try to expedite those just because appropriately.

We've taken a lot of time on the budget to but let's let's try to expedite this.

Maria, internal audit plan.

Good morning.

Nothing significant.

If there's any questions, I'll entertain it, but it's the last two months of completed audit work.

That's my kind of report.

She did do like this on the sand.

Yeah.

It's still not working.

So hardly.

Bring in some sand.

Oh no.

Excuse me, budget or uh questions for hurry up, the internal audit plan.

Robert.

Yeah.

Yeah.

That just wanted to uh it's a discussion.

We've already discussed it.

Why are we doing the ordinances?

How are we gonna fund?

So we have those two ordinances.

That's all I wanted to have the ability to discuss if we had.

So how's that?

So that's what it and we have the two components.

Fund what uh we need to do and that opportunity with the 38 million.

So this will be an ongoing project, right?

And that's essentially you're selling when I say project, I mean the analysis for the board.

Yes, I mean we're gonna ask for the supplemental uh ordinances, but yes, the capacity analysis definitely, yeah.

This uh ordinances that were just introduced, and I think that's why Aaron came because we we we issue those through the uh conduit issue in the fund bank or collaboratively to do that.

So um that's but there's the two.

So again, we're gonna fund what the capital budget needs, and most of that was anticipated and is in the approved budget that you did last year.

But the parking garage, if it is goes forward, it's approved, that'll be one of the projects, we'll have to start having the start.

So but it's both, but it will be in the context of what's approved.

For the financial statements, uh the top section, which talk about passengers, we're already talked about how even though we are 1.7 percent favorable here today, we're expecting to be flat budget.

We're being conservative on those conservatives and those assumptions.

When we're looking at revenue, and we'll talk in the next page, is that 1.9 million so far here today, favorable in revenue.

I will try to uh take at the same time staying that page, but also you can flip to almost one of the last pages that that we'll see there.

Page 23 of you of this packet will help you connect the last this page to the financials, but then also if you remember in your budget bridge, it's 23 page 23.

If you remember in your budget bridge, you had an appendix.

We don't do this very often.

We gave you extra pages on the budget packet as well, where they are the other forecast, the it tell you about how we're expecting the the end the end of the year to be where we're expecting 3.9 million extra revenue.

So you could see how out of the 1.9 million that we are here to date, we're expecting for the end of the year, when and Robert has it up there on the screen.

We have to end 3.9 million, and then if you have any questions about a lot of those details, even though we're already covered them when we're talking about the budget, about how some of those agreements that have been taken place in retail, or we or also with uh with current both or different things.

So you could see how this is an impact to 26.

So not only we're putting we're putting in the extra revenue for 27 budget, but when we put the rates and charges forecast uh the way we're gonna present to the airlines, we also increase the revenue by 3.9 million in 2026 versus our budget, and then you're gonna ask is like okay.

Then Elias and management, how are we gonna be using this additional?

Are we are we not gonna use it or are we gonna give it to airlines?

So we're planning to invest, using invest these additional revenues of 3.9 million.

And we've already talked about some of that in his expensive page, but we're planning to invest those these additional revenues.

You see that on the lower on that middle section on the left, you can see the investment of those six point four million dollars, which is the additional three point nine million that is being generated in 23.

But then also, if you remember from the prior meetings, when we were talking about last year, when we're talking about 2025 and how we were gonna have some outperformance from last year, we end up with 3.7 million of our performance last year.

So we're planning, we're using this 3.9 million and their performance for the prior year, the 3.7, and we're investing in 2026, and that's your 6.4 million that you see on your left.

But normally I will not try to combine many pages, I'm not trying to to put confusion on you, but I'm gonna mention some of the pages that can help that can equip you with what are the details.

Mention you have four pages in your operating budget, the last four pages of appendix, two for revenue and two for expenses.

And some of those are like, for example, when you're looking at expenses on those pages, you will see even, for example, in electricity, how electricity is going way up in in the electric expense, is going up in 26, and then you have the savings kicking in 27.

So I hope some of those tools will help later whenever you're looking at some of these.

So, yes, how do those 3.3 of investments impact Rebecca's capital improvement plan?

So it's not is not an impact with the capital improvement plan, but it is a some of it is.

If you remember, we have a we want to mention two different things.

So one of one of the things that we're talking is, whenever some of those capital projects that are taking place in the capital budget, like the energy resilience, we are talking how we are those those are gonna be generating savings that are gonna be built in 2027.

And Robert mentioned also we're gonna have some additional increases in expenses just from the maintenance from those.

So that's that's just some of how you can connect those two budgets.

The other piece that we if you remember from the airline use agreement, we have a flexibility that has been built in for the last year that is very helpful.

We normally budget in the operating budget just items that are up to a hundred thousand dollars.

So in 2026 budget, we budget items that are up to $100,000.

When we have a performance, we go to Drew, to Rebecca, to Jared and mention, hey, what projects do you have that are between a hundred thousand dollars and two hundred and fifty thousand dollars?

Because that's what our agreement allows us to.

And any of those projects that Rebecca will normally put in that other budget, we move them here.

So we use this, we use this six six million dollar performance.

Yes, right.

Yes, so they will not be in the other budget.

We already moved them, yeah.

Okay, go ahead.

Is that helpful?

I didn't mean to get jobs subject.

Okay, go ahead.

Okay.

So now, so this is just where we are year to date.

Year today, we're 1.9 million.

Are we gonna be able to keep that 1.9 million?

Well, yes, most of it is what we're gonna be 3.9 million by the end of the year.

When you're looking at expenses, then you see, okay, we are 1.1 million favorable in expenses.

Most of those, those are from from contractual services.

Some of those are timing.

We are we are gonna we're gonna use those, invest those dollars, and that's some of those what I tried to show in the other page.

If we go to the next page, Robert, and this is just very quick.

So we're seeing this is just uh, and I think it will be page six of the package.

I don't know why.

Yeah.

Calling on the and and that is just uh the total revenue, we just show some of the details of 1.9, and we can see how retail is stronger, parking is stronger, and then also IMC being stronger, which is what we're expecting those sections to stay strong through the end of the year.

If we go to the to the next page, which is page seven, that is expenses.

I talked about that 1.1 million of contractual services, that's timing, it it will be used, it will be invested through the through through the end of the year.

So we're not expecting to be to end up favorable in expenses.

And then if we go to the next page, the next page is uh some items that are normally highlighted is the first one.

In the first in the top section, the first one that I highlight normally is investment income, but I do want to highlight PFCs and CFCs to Ryan's point.

You're like, hey, where are those revenues?

Whenever we're collecting, whenever we get those PFCs and CFCs, this is where you see them.

You can see how PFC so far we have collected or the revenue is 7.5 million, and then the CFC is the non-L, like this is 3.6 million for revenue.

Those are the first two rows, right?

And then investment income, it's a 6.3 million so far.

What we have received, and it's 1.9 million better than budget.

And later when we are looking at investments, you can see we are planning to be better than budget when we're looking at investments as well.

The important piece, the most important piece from this that Rob already covered with in his debt chart is that if you can scroll down, Robert, if you don't mind, is that 1.7 point 1.74 debt service coverage.

That we saw that in that trend uh page on the budget.

That is what we're expecting for the end of the year, and it's better than the requirement of 1.25.

Any questions about financials?

Accounts receivable.

The next the next one, accounts receivable, we see a a difference from what you have been expecting in or seeing in the last years is the first line item, which is spirit.

Even though we have had a fully reserved, much smaller, a small dollar amount of $60,000, but even though it's uh a lot of years have passed, but it's still showing that we have the full reserve.

We don't know for how long spirit this is gonna happen.

That the rest uh for how long we're gonna be having uh this being reserved.

Right now we're still we're still needing to build them.

So there are every bankruptcy is different, so we uh our legal team bro, we're contacting even uh uh using an outside legal firm as well to advise us into when are we gonna stop building them, but we will continue building them and continue reserving for spirit.

Uh the next page, and I know most second rover will we'll talk about it here in a minute, but the next page shows you uh normally what are our write-offs or what are the increases in our reserves, and this is just through April.

So through April 30th, that is the exposure.

So through April 30th, you can see it's 570,000.

But as we if we continue billing, then we will continue reserving it.

So it may be coming greater on on the future on the future presentations we will give.

We know that because this was not at the April 30, this was at the uh 616.

We know we've got billings, and the bankruptcy attorney, um, Eric and I wanted to just give them notice that uh leases that lease actually says if they go into bankruptcy, they stop, we terminate their agreements.

They advised us not to do that because in a bankruptcy like this, it would give them cause to say that they're harmed, and then we get to spend a lot of legal fees.

Defend ourselves, they said, just keep doing it until we tell you or they reject your lease.

I was actually offended by that because I'm like, we have a clause.

It says that's what we can do.

But anyway, so we're unsecured.

Correct.

Is there I I assume in terms of reorganization, it's not positive.

Exactly.

I mean, they are they've like they're like they're working through liquidation.

I mean, they are not, I don't see any way that's coming back.

This is the first, this is the first accounts received.

This is the first receivable we've had over yeah, yeah.

Over 200,000.

Yeah, yeah.

And this is not.

We we couldn't have changed the outcome on this through better administrative practice.

I think this is telling me.

The good news is the ocean is kind of on both on both banks.

Right.

Spirit was really big in some markets.

Markets that I think the community's impacted because it's not enough service there.

That's the first part.

That's what we were talking about, the passenger.

But then airline use agreement, uh rate recovery or cost recovery.

That's where the the agreement provides the funds that are left in that hole.

It's it's a two-step process, but uh in a weird way the airlines will cover this airline bankruptcy.

Yeah, I mean it's because there's less revenue to share with them.

That's what it that's how it that's how it works.

Simply, any questions for uh Lius on his presentation receivable or on the permanence.

Anything else, Robert or Mario?

I think the only other thing would be beneficial just to go over the amount of reserves and just to take a look at them because right now we have about $360 million in reserve, and that's substantial for it.

You just gave it thank you.

Thank you for uh being involved.

That's awesome and helping these guys.

Yeah, I think on the wall, the intern from like the gap.

That was that's a possible one.

I don't know.

I mean, maybe I can do it.

Great night.

Yeah, that's we run it in.

Yeah, and honestly I feel like well, thank you.

Maybe I think it's not like a thing, and