Entity Staff Report - 7/4/2021CITY COUNCIL OF SALT LAKE CITY
451 SOUTH STATE STREET, ROOM 304
P.O. BOX 145476, SALT LAKE CITY, UTAH 84114-5476
SLCCOUNCIL.COM
TEL 801-535-7600 FAX 801-535-7651
COUNCIL STAFF REPORT
CITY COUNCIL of SALT LAKE CITY
TO:City Council Members
FROM: Russell Weeks
Senior Policy Analyst
DATE:June 1, 2021 at 10:40 PM
RE: RESOLUTION: AIRPORT REVENUE BONDS, SERIES 2021A AND SERIES 2021B
NEW INFORMATION
The City Council received a briefing on this item at its May 18 work session. The Council is scheduled
to formally consider the proposed resolution at its June 1 meeting. Adopting the resolution starts a formal
process to issue the airport revenue bonds, including a July 13 public hearing. A motion sheet is attached to this
report.
To recap, the proposed resolution would authorize the issuance and sale of not more than $1 billion in
airport revenue bonds. Formal Council adoption of the resolution at its June 1 meeting also would do two things:
1) Start publication in a newspaper of record of a notice of the proposed bond issue. The second publication of
the notice would start a 30-day “contest” period pertaining to the bonds. 2) Set a date for a July 13 public
hearing before the City Council to “receive input from the public with respect to (a) the issuance of … the Bonds;
and (b) the potential economic impact that the projects will have on the private sector.”
Page 2 contains a tentative schedule presented by Department of Airports officials at the May 18 work
session:
Item Schedule:
Briefing: May 18, 2021
Set Date: June 1, 2021
Public Hearing: July 13,
2021
Potential Action: June 1,
2021
Page | 2
If the Council takes no further action after the July 13 hearing, Mayor Erin Mendenhall’s
Administration would take several steps to prepare for the bond sale. The bonds tentatively are scheduled to be
sold on July 26, 2021, pending the City Council’s formal consideration of the resolution at its June 1 meeting,
and a July 13 public hearing.1 The same day the bonds are sold the Mayor and City Council Chair will sign a
“certificate of determination” as part of the sale process.
At the May 18 meeting, Department of Airports officials said the assumed interest rate on the bond
issue is 3.5 percent on the based on current market conditions. The resolution contains a not to exceed interest
rate of 6 percent.
State law regulates bond issues, including the sequence of adopting a bond resolution and holding a
public hearing. Under Utah law, a city council adopts a resolution first, then takes public comment at a later
hearing. After the public hearing, a Council could amend a resolution, but amending a resolution is a rare
occurrence.2
Information below this line has appeared in a previous report.
ISSUE AT-A-GLANCE
Goal of the briefing: To inform the City Council about the schedule and particulars of a
proposed issuance of up to $1 billion of airport revenue bonds to continue the project to build
the new Salt Lake City International Airport and supporting facilities.
Mayor Erin Mendenhall’s Administration is scheduled on May 18 to brief the City Council on a
proposed resolution to issue up to $1 billion in airport revenue bonds to continue what is now known as the New
Salt Lake City International Airport project. Project construction has been under way since 2014 and is
scheduled to end in 2024. The bonds would mature over a period no more than 40 years.
The bonds tentatively are scheduled to be sold on July 26, 2021, pending the City Council’s formal
consideration of the resolution at its June 1, and a July 13 public hearing.3 The same day the bonds are sold the
Mayor and City Council Chair will sign a “certificate of determination” as part of the sale process. The public
hearing will focus on the proposed bond issue and the potential economic impact the Airport project will have on
the private sector. The entire transaction tentatively is scheduled to close “on or about August 19, 2021.”4
The resolution before the City Council would:
Page | 3
o Authorize the issuance and sale of “not to exceed” $1 billion aggregate principal of one or more
series of airport revenue bonds.
o Give authority to “certain officials and officers” to approve the final terms and provisions of the
series of 2021 bonds.
o Authorize and approve the delivery of documents related to issuing the bonds.
o Provide for the publication of a July 13, 2021, public hearing notice.
If issued, the bonds would be airport revenue bonds. Bonds like that are limited obligation bonds paid
solely from revenue generated at the Airport including landing fees collected from airlines, rental revenues
collected from airlines and concessionaires operating at the Airport, and parking fees collected at parking
facilities located at the Airport. The revenue bonds do not oblige the City’s taxing power or pledge the City’s “full
faith and credit” to repay the bonds.
It might be noted that the proposed resolution lists an interest rate on the bonds that would “not
exceed 6 percent” a year.5 However, the Administration estimates that the bond will be sold “at a true interest
cost” of about 3.5 percent a year “assuming interest rates remain at their present levels.”6
It also might be noted that the Department of Airports estimates that total construction costs
pertaining to the new airport will be $4.45 billion, including construction funded by the proposed bonds.7
POLICY QUESTIONS
1. Given the available information, including documents pertaining to the May 18 briefing and the
Department of Airports budget presentation for the next fiscal year on April 20, 2021, is the City Council
sufficiently comfortable to formally consider the proposed resolution at its June 1 meeting?
2. Given the continued upward pressure on the cost of construction materials, will the final cost of building
the new airport be within current estimated expenses for the project?
ADDITIONAL & BACKGROUND INFORMATION
According to the department of Airports, “The Series 2021 Bonds are being purchased by Citigroup
Global Markets Inc., Goldman Sachs & Co. LLC, [BofA Securities, Inc. Morgan Stanley & Co. LLC, RBC Capital
Markets, LLC, and ZB National Association] (collectively, the “Underwriters”), for whom Citigroup Global
Markets Inc. (“Citi”), is acting as representative (the “Representative”). The Underwriters have agreed, subject to
certain conditions, to purchase all of the Series 2021 Bonds” …8
The proposed bond sale is scheduled to take place at a fluid time. The Department of Airports draft
Official Statement and draft Report of the Airport Consultant acknowledge and address the effect of the Covid-
19 pandemic on the airport and the airlines. For example, here is a pertinent section from the draft Official
Statement:
“During the first eight months of FY 2020 (the City’s fiscal year ends June 30), prior to the COVID-19
outbreak, the Airport continued to experience strong business activity. Airport Revenues, enplaned passengers,
landed weights and PFCs collected increased each fiscal year from 2016 through 2019, but Revenues were 7%
less in FY 2020 than FY 2019, and enplaned passengers were reduced by 22.9% during the same period. Since
the COVID-19 outbreak, however, the Airport has seen steep declines in many financial and operating metrics,
although many of these same metrics have shown improvement since spring 2020.
April 2020 represented the low point in terms of enplaned passengers, which totaled 87,557 or 8.1% of
April 2019 enplanements. Scheduled seat capacity was reduced starting in April 2020, although actual passenger
traffic was reduced starting mid-March 2020. Decreases in passenger numbers started in mid-March 2020, and
by March 2021 had recovered to 62.4% of those recorded in March 2019. Unlike many U.S. airports, domestic
service at the Airport has begun to rebound and did not dip as substantially as at other airports during the same
period. In particular, Delta has increased seat capacity at the Airport in April and May 2021 compared to the
same months in 2019, before the impacts of the pandemic.”9
Page | 4
As the paragraphs indicate, the amount of air travel has risen from 2020 pandemic levels and may
continue on an upward arc as the pandemic diminishes.
As with previous bond issues, two things besides the project itself and the City’s record of managing of
the project and department appear to make rebuilding the airport an attractive public investment: the market
for origin and destination air passengers, and the airport’s position as a hub for Delta Air Lines.
Here is how Landrum and Brown of Cincinnati describe the area served by Salt Lake City
International in its draft Report of the Airport Consultant:
The region has historically exhibited stronger employment trends than the nation as a whole. As
of March 2021, the region’s unemployment rate is 2.8% as compared to the overall U.S. of 6.2%.
The region is in relatively close proximity to many national parks, state parks, and ski resorts
that offer unique outdoor activities that are more conducive for visitors during the COVID-19
pandemic. Visitor traffic to these areas was robust during the latter portion of 2020 and early
2021.
Passenger traffic at the Airport has not been as impacted as the overall U.S.
Scheduled departing seats for the Airport for May 2021 as compared to May 2019 are up by
4.3%. The seat capacity for the nation is still down as compared to 2019 levels.
As the 4th largest airport for Delta in terms of seat capacity, the Airport is currently scheduled
to have an increase of 7.2% in departing seats for FY 2021 as compared to FY 2020. The Airport
is the only airport within Delta’s ten largest that is scheduled to have an increase in seats.10
Origin and Destination Market
To elaborate, according to the draft Report, “There are 38 Combined Statistical Areas (CSAs) in the U.S.
with a population in excess of 1.5 million people, including the Salt Lake City CSA. According to the U.S. Census
Bureau, population in the Salt Lake City CSA or Air Service Area has increased from 2.3 million in 2010 to an
estimated 2.6 million in 2019. This relatively rapid growth ranked the Salt Lake City CSA as the 11th fastest
growing CSA with a population in excess of 1.5 million people.”11
The draft Report’s assessment of the area’s economic base for air traffic goes on to say:
The Air Service Area has a lower proportion of working age residents (25 to 64 years old) than
the U.S. (48.9% versus 52.1%). However, it does have a higher proportion of population in the
younger working age range or ages 24 to 46. This provides an opportunity for the Air Service
Area to maintain a robust working age population for years to come as the population ages.
Additionally, the Air Service Area has a higher population with college degrees as compared to
the U.S. (45.9% versus 41.7%). Both demographics have historically accounted for a higher
demand for air travel.
The Air Service Area has historically exhibited more favorable employment trends than the
nation; however, both the Air Service Area and U.S. have experienced significant unemployment
increases since March 2020 related to the COVID-19 pandemic. State unemployment claims
have decreased significantly since the peak in April 2020. While unemployment rates are still
relatively high on a national level, the Air Service Area’s unemployment rate for March 2021 was
2.8%. The Congressional Budget Office forecasts that the national unemployment rate will
continue to decrease as the economic recovery continues. It is expected that the Air Service Area
would continue to follow the national trend while continuing to be at a more favorable rate.
The Air Service Area has historically exhibited strong income indicators. It has a higher
proportion of household income greater than $100,000 than the nation, which is indicative of a
higher demand for air travel.
On a per capita basis, the Air Service Area’s gross regional product (GRP) has consistently been
lower than that of the gross domestic product (GDP) for the U.S. It is generally assumed that the
Air Service Area’s lower share of working age population as compared to the U.S. contributes to
GRP per capita being lower. The CBO has forecast GDP recovery for the nation and is currently
estimating that GDP will return to 2019 levels in the third quarter of 2021. It is expected that the
GRP for the Air Service Area would continue to generally trend with that of the U.S. As
described previously, the economy in the Air Service Area is also connected to visitors to the
region, including both leisure and business travelers.
Page | 5
The Air Service Area is in relatively close proximity to many national parks (including the
Mighty 5), state parks, and ski resorts that offer visitors unique and exceptional activities in an
open and outdoor natural setting more conducive to restrictions in place during health
pandemics. Many of these activities have been as popular as ever during the COVID-19
pandemic. While, overall, the associated impacts and restrictions resulting from the COVID-19
pandemic have negatively affected the regional economy, tourism, conventions, and events over
the past year, it is anticipated these will recover as the spread of COVID-19 is controlled and the
U.S. economy continues to recovery and again stimulate demand for air travel.12
It also should be noted that the draft Report says, “All cargo airlines’ landed weights actually
increased during the COVID-19 pandemic and are projected to remain relatively stable.”13
Position within Delta Air Lines System
The draft Report describes Salt Lake City International as providing “Delta a strategic presence in the
western U.S. allowing for connectivity to and from the U.S. mountain-west and Pacific regions.” It goes on to
say, “For Delta’s passengers traveling to and from the west region the Airport served as the connecting point for
25.8% of passengers in FY 2020. This was only second to Delta’s largest airport of Atlanta (ATL) which served
28.4% of west region connections.
Indicative of its connecting share, the Airport provides Delta a strategic presence in the western half of
the U.S., and allows Delta to provide more efficient traffic flows than it could otherwise offer from its other hub
airports to and from connecting markets in the western U.S. The Airport serves a unique purpose in Delta’s
network, as both a north-south and east-west connecting point. The absence of the Airport hub would create a
noticeable void in Delta’s network, as it could not otherwise connect passenger traffic efficiently to key markets
throughout the western U.S.”14
1 Email, Brian Butler, May 13, 2021.
2 Email, Brian Butler, February 11, 2021.
3 Email, Brian Butler, May 13, 2021.
4 Administration Transmittal Letter, May 11, 2021, Bill Wyatt, Page 1.
5 Proposed Resolution, Page 5, Section 3 (b) (iii).
6 Transmittal letter, Page 2.
7 Transmittal letter, Page 2.
8 Draft Preliminary Official Statement of Salt Lake City Utah Relating to Its Airport Revenue Bonds, Page 81.
9 Draft Official Statement, Page 11.
10 Draft Report of the Airport Consultant, Landrum and Brown, Page vi.
11 Draft Report, Page 28.
12Draft Report, Page 47.
13 Draft Report, Page 94.
14 Draft Report, Page 55.
ERIN MENDENHALL
Mayor
OFFICE OF THE MAYOR
P.O. BOX 145474
451 SOUTH STATE STREET, ROOM 306
SALT LAKE CITY, UT 84114-5474
WWW.SLCMAYOR.COM
TEL 801-535-7704
4821-6554-8008.2
CITY COUNCIL TRANSMITTAL
______________________________ Date Received: May 11, 2021
Lisa Shaffer, Chief Administrative Officer
Date Sent to Council: May 11, 2021
TO: Salt Lake City Council DATE: May 11, 2021
Amy Fowler, Chair
FROM: Bill Wyatt, Salt Lake City Department of Airports, Executive Director
SUBJECT: Issuance of Series 2021 Bonds (the “Bonds”) for Financing the Construction of the
New SLC International Airport
STAFF CONTACTS: Bill Wyatt, Executive Director, 801-575-2408
Brian Butler, Airport Chief Financial Officer, 801-575-2923
DOCUMENT TYPE: Resolution
RECOMMENDATION: That the City Council adopt a resolution (the “Bond Resolution”) on
June 1, 2021, authorizing and/or approving: (1) the issuance and sale of up to $1,000,000,000
principal amount of Salt Lake City, Airport Revenue Bonds, Series 2021A and Series 2021B
(collectively the “2021 Bonds”), and the giving of authority to certain officers to approve the final
terms and provisions of and confirm the issuance of the 2021 Bonds within certain parameters set
forth in the attached Bond Resolution; (2) certain documents to be entered into by the City in
connection with the issuance of the 2021 Bonds or to be used in the marketing of the 2021 Bonds,
(3) holding a public hearing on July 13, 2021, with respect to the issuance of the 2021 Bonds and the
continued borrowing under the JPMorgan Chase line of credit at tax-exempt rates, and (4) certain
other related matters associated with the issuance of the 2021 Bonds. This timeline (the adoption of
the Bond Resolution on June 1, 2021, the subsequent publication of the notice of public hearing and
the notice of bonds to be issued, and holding a public hearing on July 13, 2021) accommodates the
required 30-day contest period to price and close the transaction on or about August 19, 2021.
BUDGET IMPACT: This financing will have no impact on the City’s General Fund budget as no
General Fund revenues are pledged toward the repayment of the 2021 Bonds. Further, neither the
full faith and credit nor the taxing power of the City, the State or any political subdivision or agency
of the State is pledged to the payment of the principal of, premium if any, and interest on the 2021
Bonds.
Instead, 100% of the debt service on the 2021 Bonds will be paid from the various types of revenues
generated at Salt Lake City International Airport (the “Airport). Such revenues include the landing
Bill Wyatt (May 11, 2021 10:47 MDT)
Lisa Shaffer (May 11, 2021 17:32 MDT)
ERIN MENDENHALL
Mayor
OFFICE OF THE MAYOR
P.O. BOX 145474
451 SOUTH STATE STREET, ROOM 306
SALT LAKE CITY, UT 84114-5474
WWW.SLCMAYOR.COM
TEL 801-535-7704
4821-6554-8008.2
fees, terminal rentals, and other fees paid by the airlines serving the Airport, as well as various
revenues generated from sources other than the airlines. Such non-airline revenues are derived from
sources such as parking, rental cars, food and beverage concessions, news and gift concessions,
cargo revenues and various types of rental income. The passenger facility charge (“PFC”) revenues
that the Airport receives from the $4.50 charge imposed on passengers boarding planes at the
Airport will also be applied toward the payment of project costs and debt service on the 2021
Bonds, the Airport’s outstanding bonds and any additional Airport bonds issued in the future.
BACKGROUND/DISCUSSION: In 2014, the City entered into a new 10-year Airline Use
Agreement (“AUA”) with the airlines serving the Airport. In the AUA, the airlines authorized the
City to undertake the full Terminal Redevelopment Program (the “TRP”) planned for the Airport.
The Airport offered an extension of the AUA through June 30, 2034, which has been executed by
Delta Air Lines. The Airport is currently in discussion with the other Signatory Airlines regarding
their execution of the AUA extension. The TRP is a comprehensive and integrated series of
projects that will result in the replacement of substantially all of the Airport’s landside and terminal
complex facilities. The TRP has a current estimated cost of $2.72 billion. Further, on April 30,
2015, the airlines that are signatories to the AUA voted unanimously to approve construction of the
North Concourse Project (the “NCP”). The NCP will be undertaken instead of retaining and
renovating the Airport’s existing Concourses B, C and D. The NCP includes an additional
concourse with approximately 31 gates and capacity for future expansion, and a connecting tunnel
to the main terminal complex. The NCP is estimated to cost $1.73 billion.
Phase one of the TRP opened on September 15, 2020, and phase one of the NCP opened on
October 27, 2020. Due to the global pandemic of COVID-19, the Airport, in consultation with the
airlines, decided to accelerate demolition of the existing facilities and advance the schedule for
additional phases of the TRP, including the construction of Concourse A-East. All of the legacy
facilities of the old airport have been demolished and construction has commenced on Concourse
A-East and the central tunnel. Additionally, construction of the next phases of the NCP, including
the central node on Concourse B, as well as eight additional gates, are scheduled to begin in Q1
2022 (July 2021).
Proceeds of the Series 2021 bonds will be used to:0 (1) fund a portion of the costs of both the TRP
and NCP which is now being referred to as the “New SLC”, (2) repay the current outstanding
balance of the Line of Credit, (3) fund capitalized interest on the 2021 Bonds, (4) fund a deposit to
the Common Debt Service Reserve Fund, and (5) pay the costs of issuance on the series 2021
bonds. The Airport currently forecasts that additional bonds will be issued in 2023.
The Airport currently projects that the $4.45 billion of costs to construct the New SLC, as described
above, will be funded from the following sources:
ERIN MENDENHALL
Mayor
OFFICE OF THE MAYOR
P.O. BOX 145474
451 SOUTH STATE STREET, ROOM 306
SALT LAKE CITY, UT 84114-5474
WWW.SLCMAYOR.COM
TEL 801-535-7704
4821-6554-8008.2
Estimated Sources of Funding
Amounts in
(millions)
Proceeds of 2017 Bonds $925
Proceeds of 2018 Bonds 798
Proceeds of 2021 Bonds 900
Proceeds of Future Bonds 683
Pay-as-you-go Passenger Facility Charges (“PFCs”) 333
Customer Facility Charges (“CFCs”) 200
Federal Grants (AIP and TSA) 191
Airport Internally-Generated Funds 421
Total $4,451
The current interest rate environment provides another favorable opportunity for the financing for
the Airport’s very large capital development program. Assuming interest rates remain at their
present levels at the time the 2021 Bonds are sold, the City’s municipal advisor and underwriters
estimate that the 2021 Bonds will be sold at a true interest cost of approximately 3.5% per annum.
The current plan calls for the 2021 Bonds to be sold on or about July 26, 2021. The Designated
Officers defined in the attached Bond Resolution are authorized to approve the principal amounts,
interest rate(s) and other terms and provisions relating to the 2021 Bonds by executing the
Certificate of Determination, a form of which is attached to the Bond Resolution.
The Certificate of Determination will need to be signed by the Mayor and Council Chair or their
respective designees on the afternoon of the date of pricing and sale of the 2021 Bonds, which is
currently scheduled for July 26, 2021.
Included in section 11 of the Bond Resolution is a Declaration of Official Intent (Reimbursement of
Expenditures) that will allow the Airport to seek reimbursement with proceeds of the Series 2021
Bonds, additional Bonds and/or the JPMorgan Chase line of credit for expenditures previously
made with Airport cash related to the TRP and the NCP. This will allow the Airport to have more
flexibility when paying for the construction costs of the TRP and the NCP at those times when
there is a gap between the paying of construction costs and the Airport’s issuance of debt.
The Bond Resolution and draft copies of the Certificate of Determination, the Third Supplemental
Trust Indenture, the Preliminary Official Statement, the Bond Purchase Agreement, the Continuing
Disclosure Agreement, the Notice of Public Hearing and the Notice of Bonds to Be Issued are
included for your review. Please keep in mind that, other than the Bond Resolution, these
certificates, documents and notices are preliminary drafts and are subject to change and completion.
ERIN MENDENHALL
Mayor
OFFICE OF THE MAYOR
P.O. BOX 145474
451 SOUTH STATE STREET, ROOM 306
SALT LAKE CITY, UT 84114-5474
WWW.SLCMAYOR.COM
TEL 801-535-7704
4821-6554-8008.2
Attachments: Bond Resolution
Exhibit A: Certificate of Determination
Exhibit B: Third Supplemental Trust Indenture
Exhibit C: Preliminary Official Statement
Exhibit D: Bond Purchase Agreement
Exhibit E: Continuing Disclosure Agreement
Exhibit F: Notice of Public Hearing
Exhibit G: Notice of Bonds to Be Issued