Fresno pays off $8 million Gap settlement – to itself

The $8 Million Question

I conclude with the obvious question: What did all that Gap Settlement money buy?

I emailed city Controller Mike Lima with that question. If anyone knows the settlement’s history, it’s Lima. He was the Airports’ finance manager for 12 years before getting a promotion to City Hall in 2014.

“There’s no easy ‘The Gap Settlement money paid for X’ answer,” Lima replied in an email. “I can say with certainty that all the Gap settlement money was deposited in the Airports’ Surplus Fund. None of the money was deposited in FYI’s (Fresno Yosemite International’s) Operations Fund.

“However, allow me to provide a bit of background/history. There have been four items/events in the past 15 years that have had the combined effect of radically changing the Airports’ finances. Those items are:

“1) Increasing the Passenger Facility Charge (PFC) from $3/person to $4.50/person; 2.) The GAP Settlement; 3) The introduction of air service to Mexico; 4) The 2013 refinancing of the bonds used to build the new concourse.

“The combined effect of those four items allowed the Airports to pay legal costs associated with the Old Hammer Field environmental remediation settlement (a settlement which also capped the Airports’ exposure to environmental remediation costs in the future). They also provided monies for Airports’ funded capital projects that couldn’t be funded from other sources, like the recent construction of a new employee parking lot.

“But, most of the impact can be found in the Airports’ unrestricted cash balance. Airports’ unrestricted cash at the end of FY 13 was $1,575 – not a typo. At the end of FY 16, unrestricted cash was $16.8 million. Given their revenue/expense trends, they will likely be over $20 million in unrestricted cash at the end of FY 17. That cash balance will probably be used for future major capital expansion (think, new set of gates or a new Federal Inspection Station), either by paying cash for the construction or reducing the amount that will need to be borrowed in the form of a bond.

“At the end of the day, the combined effect of these four items/events has provided Airports with the financial flexibility to address operational/capital challenges or take advantage of new opportunities that may arise in the future. That enhanced financial flexibility was a reason why S&P bumped up the Airports’ credit rating by a notch a couple of months ago.”