FAA Airport Privatization Program

• Federal law places strict limits on the privatization of airports • Pilot program was established in 1996 to evaluate feasibility of privatization in U.S.

• Five airports may participate – No more than one large hub – At least one must be general aviation – Currently three slots open to airports like COS • Commercial airports may be leased only • Public owner must provide plan for continued operation in case of bankruptcy or insolvency • 65% of air carriers must approve plan including use of revenue for non-airport purposes • Private operator can use profits for non-airport purposes

History of Privatization Program

• Since 1996 six applications have been filed with the FAA – Four were withdrawn or terminated due to privatization deemed unfeasible – Fifth applicant was privatized but program failed – Midway is sixth and only active application • Brown Field • New Orleans Lakefront • Niagara Falls • Rafael Hernandez • Stewart International • Chicago Midway • Additional privatization efforts – Indianapolis entered into management contract with BAA – Program failed and reverted back to City

Midway Privatization Project

• MIDCo pays City $2.52 billion up front for 99 year lease • $1.4 billion used to pay off airport debt and to fund police, fire, construction projects underway and legal costs • $1.1 billion for other uses – 90% toward City’s pension fund and infrastructure projects – 10% unrestricted • Airline rates frozen for six years at 2007 levels – After six years rates adjust at no more than core CPI

Midway Privatization Project

• With airline revenue frozen profit must be generated from passenger concession sales and revenues from other airport users • Midway agreement does not place cap on parking rates – Operator will be allowed to raise them to point that market accepts • Agreement places no restrictions on other revenues – Restaurants – News and gifts – Rental Car – Land rents – Fuel flowage fees

Midway vs. COS

Net Assets Midway COS $282,390,000 $208,304,995 Total Operating Revenue 11.92 21.54

per enplaned passenger Net Income (net depr) (4,029,000) 6,814,275 Debt Service Coverage 1.12 1.62

Concession revenue 5.84 11.78

per enplaned passenger

Chicago Privatization Trends

• Over the past six years, Chicago has been in a privatization mode • Privatization has had an impact on consumers – Chicago parking garage • Resulted in rate increases of 31% since 2006 – Chicago Skyway • Resulted in rate increase of 50% since 2004 • Similar impacts are anticipated at Midway – Investor opportunity is in low yielding concessions and other airport user fees – Consumers will clearly feel an impact

Other Considerations

• Colorado Springs Airport serves as an economic development generator for the City of Colorado Springs and the metro area – Invested $20 million on west side that has spurred $50 million in additional investment and expansion of general aviation (SkyWest) • Generates jobs and income for the City – Invested $2.5 million in planning of Airport Business Park • Has attracted two quality firms that bring high paying jobs into the community • Selection of national company to develop remaining parcels • Generates jobs and income for the City – Able to negotiate land deals with military that help foster civic/military relationship • Private operator would demand market value rents • Potential financial impacts on City – COS pays more than $2 million annually for police service – COS contributes more than $1.7 million annually to City general fund