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Home My WebLink AboutSecond Supplement Bond Resolution Augusta Richmond GA DOCUMENT NAME: S IE eo....\:) b "pP c..e;\'1l E;,J TJI'lL. lSOl'lI:l ee Se>L-017b I\J DOCUMENT TYPE: <\<.~ So l-UlIO 10 YEAR: ~ E> f) S- BOX NUMBER: ~ S- FILE NUMBER: 115 C; g>" NUMBER OF PAGES: ~31 A RESOLUTION TO SPECIFY THE PRINCIPAL AMOUNT TO MATURE IN EACH YEAR AND THE OPTIONAL AND MANDATORY REDEMPTION PROVISIONS OF THE SERIES 2005A BONDS, THE SERIES 2005B BONDS, AND THE SERIES 2005C BONDS BEING ISSUED PURSUANT TO THE FIRST SUPPLEMENTAL BOND RESOLUTION ADOPTED BY THE AUGUSTA-RICHMOND COUNTY COMMISSION ON FEBRUARY 1, 2005 AND BY THE AUGUSTA AVIATION COMMISSION ON JANUARY 20, 2005; TO AUTHORIZE AND APPROVE THE EXECUTION OF THE BOND PURCHASE AGREEMENT WITH RESPECT TO THE SERIES 2005A BONDS, THE SERIES 2005B BONDS AND THE SERIES 2005C BONDS; TO PROVIDE FOR THE DELIVERY OF THE SERIES 2005A BONDS, THE SERIES 2005B BONDS, AND THE SERIES 2005C BONDS; TO RATIFY, AUTHORIZE AND APPROVE THE PREPARATION, USE AND DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT IN CONNECTION WITH THE OFFER AND SALE OF THE BONDS; TO PROVIDE FOR THE APPLICATION OF THE PROCEEDS OF THE SERIES 2005A BONDS, THE SERIES 2005B BONDS, AND THE SERIES 2005C BONDS; AND FOR OTHER PURPOSES. SECOND SUPPLEMENTAL BOND RESOLUTION ADOPTED FEBRUARY 17,2005 BY THE AUGUSTA-RICHMOND COUNTY COMMISSION ADOPTED FEBRUARY 17, 2005 BY THE AUGUSTA AVIATION COMMISSION PROVIDING FOR THE ISSUANCE OF $8,990,000 Airport Passenger Facility Charge and General Revenue Bonds. Series 2005A (Non-AMT) $4,415,000 Airport Passenger Facility Charge and General Revenue Bonds Series 2005B (AMT) $6,200,000 Airport General Revenue Bonds Series 2005C (AMT) AO 1267257.3 A RESOLUTION TO SPECIFY THE PRINCIPAL AMOUNT TO MATURE IN EACH YEAR AND THE OPTIONAL AND MANDATORY REDEMPTION PROVISIONS OF THE SERIES 2005A BONDS, THE SERIES 2005B BONDS, AND THE SERIES 2005C BONDS BEING ISSUED PURSUANT TO THE FIRST SUPPLEMENTAL BOND RESOLUTION ADOPTED BY THE AUGUSTA-RICHMOND COUNTY COMMISSION ON FEBRUARY 1, 2005 AND BY THE AUGUSTA AVIATION COMMISSION ON JANUARY 20, 2005; TO AUTHORIZE AND APPROVE THE EXECUTION OF THE BOND PURCHASE AGREEMENT WITH RESPECT TO THE SERIES 2005A BONDS, THE SERIES 2005B BONDS AND THE SERIES 2005C BONDS; TO PROVIDE FOR THE DELIVERY OF THE SERIES 2005A BONDS, THE SERIES 2005B BONDS, AND THE SERIES 2005C BONDS; TO RATIFY, AUTHORIZE AND APPROVE THE PREPARATION, USE AND DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT IN CONNECTION WITH THE OFFER AND SALE OF THE BONDS; TO PROVIDE FOR THE APPLICATION OF THE PROCEEDS OF THE SERIES 2005A BONDS, THE SERIES 2005B BONDS, AND THE SERIES 2005C BONDS; AND FOR OTHER PURPOSES. WHEREAS, pursuant to the Master Bond Resolution (the "Master Bond Resolution") and the First Supplemental Bond Resolution (the "First Supplemental Bond Resolution") adopted by the Augusta-Richmond County Commission on February 1,2005 and by the Augusta Aviation Commission on January 20,2005, the Consolidated Government has been authorized to issue not to exceed $14,500,000 aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) (the "Series 2005A Bonds") and Series 2005B (AMT) (the "Series 2005B Bonds"; the Series 2005A Bonds and the Series 2005B Bonds are sometimes collectively referred to as the "Series 2005A/B Bonds") and its not to exceed $7,000,000 aggregate principal amount of its Airport General Revenue Bonds, Series 2005C (the "Series 2005C Bonds" and, together with the Series 2005NB Bonds, the "Series 2005 Bonds"); and WHEREAS, the First Supplemental Bond Resolution provides that the Series 2005NB Bonds and the Series 2005C Bonds are to be dated not later than the date of issuance and delivery, to be initially issued as book-entry only bonds in fully registered form without coupons, transferable to subsequent owners as therein provided, in the denomination of $5,000 or any integral multiple thereof, numbered from RA-I, RB-l or Rc-l upwards, as applicable, bearing interest from date at a rate or rates not exceeding 7.00 percent per annum, all interest payable July 1, 2005 and semiannually thereafter on January 1 and July 1 in each year, and the principal maturing on January 1 in the year or years not later than 2035, in such principal amounts such that the highest principal and interest coming due on the Series 2005NB Bonds in any Sinking Fund Year shall not exceed $3,200,000 and the highest principal and interest coming due on the Series 2005c Bonds in any Sinking Fund Year shall not exceed $2,700,000; and WHEREAS, the Consolidated Government wishes to approve the execution and delivery by the Mayor of an agreement with Merrill Lynch & Co., Inc. (the "Underwriter"), pursuant to which the Underwriter, subject to certain terms and conditions, agree to purchase all but not part of the Series 2005NB Bonds and the Series 2005C Bonds (the "Bond Purchase Agreement"); and AO 1267257.3 '. WHEREAS, the rates of interest. offered by the Underwriter for each series of the Series 2005 Bonds do not exceed the maximum rate of interest for any year over the life of the respective series of the Series 2005 Bonds as set forth in the First Supplemental Bond Resolution, the maximum annual principal and interest requirements on the Series 2005NB Bonds or the Series 2005C Bonds at such rates do not exceed $3,200,000 or $2,700,000; respectively, and the Series 2005A/B Bonds and the Series 2005C Bonds shall bear interest from date at the rates per annum hereinafter set forth, and the sale of the Series 2005 Bonds at such prices will provide the Consolidated Government with sufficient funds to finance or refinance the 2005 Project, including capitalized interest during the period of construction of the 2005 Project and to pay expenses necessary to accomplish the foregoing, all as set forth in the First Supplemental Bond Resolution; and WHEREAS, it was provided in the First Supplemental Bond Resolution that, subsequent to the negotiated sale of the Series 2005 Bonds, the Consolidated Government and the Augusta Aviation Commission would adopt a supplemental resolution specifying, among other things, the interest rate or rates per annum which the Series 2005 Bonds would bear, the principal amount of Series 2005 Bonds to mature in each year, the optional and mandatory sinking fund redemption provisions applicable to the Series 2005 Bonds; would provide for the application of the proceeds of the Series 2005 Bonds, and would provide for the actual issuance and delivery of the Series 2005 Bonds upon payment therefor by the Underwriter; and WHEREAS, the Consolidated Government and the Augusta Aviation Commission wish to proceed with the authorization of the sale of the Series 2005 Bonds and to provide for their delivery in accordance with the terms set forth in the First Supplemental Bond Resolution; and WHEREAS, the Consolidated Government and the Augusta Aviation Commission wish to make certain minor amendments to the Master Bond Resolution to clarify that any required deposits to the Renewal and Replacement Fund shall be made before deposits to the Subordinate Securities Fund; and WHEREAS, the Series 2005 Bonds should now be executed, issued and delivered. NOW, THEREFORE, BE IT RESOLVED by the Augusta-Richmond County Commission and the Augusta Aviation Commission, and it is hereby resolved by authority of the same, as follows: Section 1.1 Definitions. Capitalized terms used in this Second Supplemental Bond Resolution and not otherwise defined herein are used with the meanings assigned to such terms by the First Supplemental Bond Resolution and the Master Bond Resolution. Section 1.2 Issuance of Series 2005A/B Bonds. There are hereby authorized to be issued pursuant to the First Supplemental Bond Resolution $8,990,000 aggregate principal amount of Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non- AMT) and $4,415,000 aggregate principal amount of Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT). The Series 2005NB Bonds shall be dated the date of issuance and delivery, numbered from RA-l or RB-l upward, as applicable, and shall be initially issued in book-entry only form as fully-registered bonds without coupons. The Series -2- AO 1267257.3 , 2005A Bonds shall'bear interest from date at the rate of 5.15 percent per annum, all interest payable July 1, 2005 and semiannually thereafter on January 1 and July 1 in each year, and shall mature on January 1, 2035. The Series 2005B Bonds shall bear interest from date at the rate of 5.35 percent per annum, all interest payable July 1, 2005 and semiannually thereafter on January 1 and July 1 in each year, and shall mature on January 1, 2028. The Series 2005NB Bonds are General Revenue Bonds and PFC Revenue Bonds as set forth in the First Supplemental Bond Resolution and, pursuant to the Master Bond Resolution, are payable from and secured by a Senior Lien on PFC Revenues and Net General Revenues. Section 1.3 Issuance of Series 2005C Bonds. There are hereby authorized to be issued pursuant to the First Supplemental Bond Resolution $6,200,000 aggregate principal amount of Airport General Revenue Bonds, Series 2005C (AMT). The Series 2005C Bonds shall be dated the date of issuance and delivery, be numbered from RC-l upward, shall be initially issued in book-entry only form as fully-registered bonds without coupons, shall bear interest from date at the rate of 5.45 percent per annum, all interest payable July 1, 2005 and semiannually thereafter on January 1 and July 1 in each year, and shall mature on January 1, 2031. The Series 2005C Bonds are General Revenue Bonds as set forth in the First Supplemental Bond Resolution and pursuant to the Master Bond Resolution constitute Senior Lien Bonds only as to Net General Revenues. Section 1.4 Optional Redemption of the Series 2005 Bonds. The Series 2005 Bonds, may be redeemed at the option of the Consolidated Government in whole or in part at any time in any year not earlier than January 1,2015, from any moneys which may be available for such purpose and deposited with the Paying Agent on or before the date fixed for redemption. Any optional redemption of any series of Series 2005 Bonds shall be made by the payment of the principal amount of the related series of Series 2005 Bonds to be redeemed and accrued interest thereon to date of redemption, at par without a premium. If any series of the Series 2005 Bonds is called for optional redemption in part, then any Series 2005 Bonds so called for redemption shall be called in such maturities as may be specified by the Consolidated Government and if less than a full maturity by lot or in such other manner as may be designated by the Bond Registrar. , Section 1.5 Mandatory Redemption of the Series 2005 Bonds. The Series 2005A Bonds shall be subject to mandatory redemption prior to maturity on January 1, 2031 and on each succeeding January 1 to and including January 1, 2035 (the last maturity to be paid rather than redeemed), in part, by lot in such manner as may be designated by the Bond Registrar, at par plus accrued interest to the redemption date, in the following years and principal amounts: Year Amount 2031 $ 540,000 2032 1,955,000 2033 2,055,000 2034 2,165,000 2035 2,275,000 -3- AO 1267257.3 The Series 2005B Bonds shall be subject to mandatory redemption prior to maturity on January 1, 2025 and on each succeeding January 1 to and including January 1, 2028 (the last maturity to be paid rather than redeemed), in part, by lot in such manner as may be designated by the Bond Registrar, at par plus accrued interest to the redemption date, in the following years and principal amounts: Year Amount 2025 $1,355,000 2026 1,425,000 2027 1,505,000 2028 130,000 The Series 2005C Bonds shall be subject to mandatory redemption prior to maturity on January 1, 2028 and on each succeeding January 1 to and including January 1, 2031 (the last maturity to be paid rather than redeemed), in part, by lot in such manner as may be designated by the Bond Registrar, at par plus accrued interest to the redemption date, in the following years and principal amounts: Year Amount 2028 $1,455,000 2029 1,670,000 2030 1,760,000 2031 1,315,000 Section 1.6 Provisions Relative to Redemption. If less than all of the Series 2005 Bonds of a single maturity within any series are to be redeemed, the Bond Registrar shall treat any Series 2005 Bond of such maturity and such series outstanding in a denomination of greater than $5,000 principal amount as two or more separate Series 2005 Bonds in the denomination of $5,000 each and shall assign separate numbers to each for the purpose of determining the Series 2005 Bonds or the portion of such Series 2005 Bonds in a denomination greater than $5,000 to be redeemed by lot. With respect to any Series 2005 Bond called for partial redemption, the registered owner thereof shall surrender such Series 2005 Bonds to the Bond Registrar in exchange for one or more Series 2005 Bonds in the denomination of $5,000 principal amount or any integral multiple thereof in the aggregate equal to the unredeemed principal amount of such ' Series 2005 Bonds so surrendered. The Bond Registrar shall furnish to the Consolidated , Government on or before the sixty-fifth day next preceding each mandatory redemption date (or optional redemption date if such option is exercised) with its certificate setting forth the Series 2005 Bonds that have been selected for mandatory redemption (or optional redemption) either in whole or in part on such date. Not less than 30 days and not more than 60 days before any date upon which any such redemption is to be made a notice of redemption signed by a duly authorized signatory of the Bond Registrar designating the Series 2005 Bonds to be redeemed (in whole or in part) shall be mailed, postage prepaid, to all registered owners of the Series 2005 Bonds to be redeemed (in whole or in part) at addresses which appear upon the bond registration book as of the date of giving such notice. It is expressly provided, however, that the failure so to mail any such notice of the optional or mandatory redemption of the Series 2005 Bonds shall not -4- AO 1267257.3 affect the validity of the proceedings for such redemption or cause the interest to continue to accrue on the principal amount of the Series 2005 Bonds so designated for redemption after the redemption date. The redemption of the Series 2005 Bonds shall be in accordance with the provisions of Article III of the Master Bond Resolution. The Series 2005 Bonds subject to optional redemption may be made subject to Conditional Redemption as provided in Section 305 of the Master Bond Resolution. Notice having been given in the manner and under the conditions 'hereinabove provided, the Series 2005 Bonds so designated for redemption shall,' on the redemption date designated in such notice, become and be due and payable at the redemption price hereinabove specified, and from and after the date of redemption so designated, unless default shall be made in the payment of any series of the Series 2005 Bonds so designated for redemption, interest on the Series 2005 Bonds so designated for redemption shall cease to accrue after the redemption date. Notwithstanding the provisions of the Master Bond Resolution relating to Balloon Bonds, in the event of an optional redemption, in whole or in part, of Balloon Bonds, amounts on deposit within the Balloon Bonds Reserve Account and the PFC Balloon Bonds Reserve Account may be used to pay principal of and interest on the redeemed Balloon Bonds. Section 1.7 Provisions Relatine to Flow of Funds. (a) Sections 406 and 407 of the Master Bond Resolution are hereby amended as set forth below to clarify that any required deposits to the Renewal and Replacement Fund shall be made prior to any deposits to the Subordinate Securities Fund. Sections 404(g) and 409(t) of the Master Bond Resolution are hereby amended as set forth below to clarify the calculation of required deposits to the Balloon Bonds Reserve Account and the PFC Balloon Bonds Reserve Account, provided that deposits required with respect to the Series 2005 Bonds shall be determined in accordance with Section 1.7(t) hereof. (b) The first sentence of Section 406 of the Master Bond Resolution shall be deleted in its entirety and the following substituted in lieu thereof: "After all deposits are made as required pursuant to Sections 403, 404, 405 and 407, there shall be deposited sufficient moneys to be paid in periodic installments from the Revenue Fund into the Subordinate Securities Fund for the purpose of paying Subordinate Bonds and Other Airport Obligations as they become due and payable." (c) The third sentence of Section 407 of the Master Bond Resolution shall be deleted in its entirety and the following substituted in lieu thereof: "If at any time during a Fiscal Year, moneys on deposit in the Renewal and Replacement Fund are less than the Required Amount, there shall be deposited, beginning with the first month of the Fiscal Year following the Fiscal Year in which such deficiency occurred and within a period of 12 months thereafter, on the last business day of each month, amounts into the Renewal and Replacement Fund from moneys on deposit in the Revenue Fund, after making the required deposits to the Debt Service Fund, so that not less than the Required Amount will be on deposit in the Renewal and Replacement Fund." -5- AO 1267257.3 (d) The first sentence of Section 404(g) of the Master Bond Resolution shall be deleted in its entirety and the following substituted in lieu thereof: "On or before January 1 of each Sinking Fund Year beginning with the January 1 immediately following the date of beneficial occupancy of projects financed with a series of Balloon Bonds, there is required to be deposited in the Balloon Bonds Reserve Account an amount equal to the average annual debt service on the respective series of Balloon Bonds less the principal of and interest on such Balloon Bonds for the Sinking Fund Year ending on the next January 1, taking into account any earnings on deposit in the Balloon Bonds Reserve Account. For this purpose, average annual debt service for any series of Balloon Bonds is the aggregate principal and interest from the date of issuance until maturity divided by the full number of years such Balloon Bonds will be Outstanding from the date of issuance until maturity (without taking into account partial years)." (e) The first sentence of Section 409 (f) of the Master Bond Resolution shall be deleted in its entirety and the following substituted in lieu thereof: "On or before January 1 of each Sinking Fund Year beginning with the January 1 immediately following the date of beneficial occupancy of projects financed with a series of Balloon Bonds, there is required to be deposited in the PFC Balloon Bonds Reserve Account an amount equal to the average annual debt service on the respective series of Balloon Bonds less the principal of and interest on such Balloon Bonds for the Sinking Fund Year ending on the next January 1, taking into account any earnings on deposit in the PFC Balloon Bonds Reserve Account. For this purpose, average annual debt service for any series of Balloon Bonds is the aggregate principal and interest from the date of issuance until maturity divided by the full number of years such Balloon Bonds will be Outstanding from the date of issuance until maturity (without taking into account partial years)." (f) Each series of the Series 2005 Bonds constitute Balloon Bonds. Deposits to the Balloon Bonds Reserve Account with respect to the Series 2005C Bonds and the PFC Balloon Bonds Reserve Account with respect to the Series 2005NB Bonds shall be made at the times and in the amounts set forth on Schedule 1 attached hereto, and shall not be calculated in accordance with Section 404(g) and Section 409 (f) of the Master Bond Resolution, as amended by Sections 1.7(d) and 1.7(e) of this Second Supplemental Bond Resolution. However, all other provisions of Section 404(g) and Section 409(f) of the Master Bond Resolution shall apply to the Series 2005C Bonds and the Series 2005A/B Bonds, respectively. Such required deposits may be calculated taking into account any earnings on deposit in the Balloon Bonds Reserve Account and PFC Balloon Bonds Reserve Account. Section 1.8 Authorization of Bond Purchase Aereement. The execution, delivery and performance of the Bond Purchase Agreement providing for the sale of the Series 2005 Bonds, by and between the Consolidated Government and the Underwriter, a copy of which has been presented to the Augusta-Richmond County Commission at its meeting and considered by the Augusta-Richmond County Commission and which is attached hereto, marked Exhibit A and made a part hereof, is hereby ratified, authorized and approved. The Bond Purchase Agreement shall be in substantially the form as presented, subject to such minor changes, insertions or omissions as may be approved by the Mayor or the Mayor Pro Tem and the execution of the -6- AO 1267257.3 Bond Purchase Agreement by the Mayor or the Mayor Pro Tem as hereby authorized shall be conclusive evidence of any such approval. Section 1.9 Debt Service Reserve Account. (a) Pursuant to the First Supplemental Bond Resolution, there has been created the 2005NB Subaccount of the PFC Debt Service Reserve Account. Simultaneously with the issuance of the Series 2005NB Bonds, a deposit of $1,316,720.28 derived from available Airport revenues shall be made to the 2005A/B Subaccount of the Debt-Service Reserve Account upon the issuance of the Series 2005A/B Bonds for the benefit of the holders of the Series 2005NB Bonds. . (b) Pursuant to the First Supplemental Bond Resolution, there has been' created the 2005C Subaccount of the Debt Service Reserve Account. Simultaneously with the issuance of the Series 2005C Bonds, a deposit of $620,000 derived from available Airport revenues shall be made to the 2005C Subaccount of the Debt Service Reserve Account for the benefit of the holders of the Series 2005C Bonds. Section 1.10 Application of Proceeds of Series 2005A/B Bonds. From the proceeds derived from the sale of the Series 2005A/B Bonds, the following payments shall be made, simultaneously with the issuance and delivery of the Series 2005A/B Bonds, to the extent and in the manner herein set forth: (a) The sum of $1,077,726.19, or such other amount as shall be necessary, derived from the sale of the Series 2005A Bonds shall be deposited into the Capitalized mterest Account of the 2005 Project Fund and shall be used and applied toward the payment of interest on the Series 2005A Bonds during the construction of the 2005 Project. (b) The sum of $549,826.93, or such other amount as shall be necessary, derived from the sale of the Series 2005B Bonds shall be deposited into the Capitalized Interest Account of the 2005 Project Fund and shall be used and applied toward the payment of interest on the Series 2005B Bonds during the construction of the 2005 Project. . (c) The sum of $11,509,346.88, or such other amount as shall be necessary, shall be deposited into the Construction Account of the 2005 Project Fund and used to pay Costs of the 2005 Project. (d) The sum of $268,100, or such other amount as shall be necessary, shall be paid to the Underwriter from the proceeds of the Series 2005A/B Bonds, representing the underwriter's discount for the Series 2005NB Bonds. ( e) The remaining expenses incurred in connection with the issuance of the Series 2005A/B Bonds shall be paid from available Airport revenues, which may be deposited into the Costs of Issuance Account. Section 1.11 Application of Proceeds of Series 2005C Bonds. From the proceeds derived from the sale of the Series 2005C Bonds, the following payments shall be made, -7- AO 1267257.3 simultaneously with the issuance and delivery of the Series 2005C Bonds, to the extent and in the manner herein set forth: (a) The sum of $786,556.11, or such other amount as shall be necessary, derived from the sale of the Series 2005C Bonds shall be deposited into the Capitalized Interest Account of the 2005 Project Fund and shall be used and applied toward the payment of interest on the Series 2005C Bonds during the construction of the 2005 Project. (b) The sum of $5,289,443.89, or such c;>ther amount as shall be necessary, shall be deposited into the Construction Account within the 2005 Project Fund and used to pay Costs of the 2005 Project. (c) The sum of $124,000, or such other amount as shall be necessary, shall be paid to the Underwriter from the proceeds of the Series 2005C Bonds, representing the underwriter's discount for the Series 2005C Bonds. (d) The remaining expenses incurred in connection with the issuance of the Series 2005C Bonds shall be paid from available Airport revenues, which may be deposited into the Costs of Issuance Account. Section 1.12 Offerine: Materials. The preparation, use and distribution of that certain Preliminary Official Statement dated February 9, 2005, with respect to the Series 2005 Bonds (the "Preliminary Official Statement"), is hereby authorized, ratified and approved. The preparation and distribution of a final Official Statement with respect to the Series 2005 Bonds in substantially the form as the Preliminary Official Statement but containing the information with respect to the Series 2005 Bonds set forth in this Second Supplemental Bond Resolution is hereby authorized and approved. The Mayor of the Consolidated Government, the Airport Finance Officer and the Airport Director are authorized to execute such final Official Statement on behalf of the Consolidated Government. Section 1.13 Public Hearine:. Willis Boshears, Executive Director of the Airport, or such delegate as may be designated by the Executive Director of the Airport, is hereby authorized and directed to serve as the hearing officer for purposes of conducting the public hearing for the Series 2005 Bonds as required by Section 147(f) of the Code. Section 1.14 Mavor Pro Tern Mav Act. The Mayor Pro Tem is authorized, empowered and directed to prepare, execute, file and deliver such instruments, certificates or other documents, including this Second Supplemental Bond Resolution and the Bond Purchase Agreement, and the Mayor Pro Tern is further authorized to acknowledge service and to make answer on behalf of the Consolidated Government in the validation proceedings for the Series 2005 Bonds and to take such other and further action as may be necessary or desirable to consummate the issuance of the Series 2005 Bonds and to give full force and effect to the Bond Resolution. Section 1.15 Repealer. Any and all resolutions or parts of resolutions in conflict with this Supplemental Resolution this day adopted be and the same are hereby repealed, and this Supplemental Resolution shall be in full force and effect from and after its adoption. -8- AO 1267257.3 Adopted February 17,2005. .. ;- ~ t, t ...:-.... ~ ~. ,-.,. /y. &TTESr: . '. '..: _ .';(" ... . ... ~ "! .,;'.". '" 7". . ~-;;l~ ATTEST: AO 1267257.3 AUGUSTA, GEORGIA ~- By: ~ Mayor Tern , 'I/I!' -fAY. tJLf(L~ j.( ~ , 5~~( AUGUSTA AVIATION COMMISSION BY.~' ~ Chairman -9- ~4r f:-4~ , EXHIBIT A BOND PURCHASE AGREEMENT AO 1267257.3 $19,605,000 AUGUSTA, GEORGIA AIRPORT REVENUE BONDS, SERIES 2005 $8,990,000 Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $4,415,000 Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,200,000 Airport General Revenue Bonds, Series 2005C .(AMT) BOND PURCHASE AGREEMENT February 17, 2005 Augusta, Georgia 530 Greene Street Augusta, Georgia 30911 Ladies and Gentlemen: On the basis of the representations, warranties, and covenants contained in this Bond Purchase Agreement, and upon the terms and conditions contained in this Bond Purchase Agreement, the undersigned, Merrill Lynch & Co., Inc. (the "Underwriter"), hereby offers to purchase from Augusta, Georgia (the "Consolidated Government") $19,605,000 in aggregate principal amount of its Airport Revenue Bonds, Series 2005, consisting of $8,990,000 in aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) (the "Series 2005A Bonds"), $4,415,000 in aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) (the "Series 2005B Bonds"), and $6,200,000 in aggregate principal amount of its Airport General Revenue Bonds, Series 2005C (AMT) (the "Series 2005C Bonds") (collectively the "Bonds"), and hereby offers to enter into this Bond Purchase Agreement with the Consolidated Government, which will become binding upon the Consolidated Government and upon the Underwriter upon the Consolidated Government's validly authorized acceptance by execution of this Bond Purchase Agreement and its delivery to the Underwriter at or prior to 9:00 p.m., Atlanta, Georgia time, on February 17,2005. . SECTION 1. BACKGROUND. Pursuant to a Master Bond Resolution adopted by the Augusta-Richmond County Commission, the governing body of the Consolidated Government, on February 1, 2005 and by the Augusta Aviation Commission on January 20, 2005, as ratified, reaffirmed, supplemented, and amended by a First Supplemental Bond Resolution adopted by the Augusta-Richmond #1894702.v3 County Commission on February 1,2005 and by the Augusta Aviation Commission on January 20, 2005 and a Second Supplemental Bond Resolution adopted by the Augusta-Richmond County Commission and the Augusta Aviation Commission on February 17, 2005 (collectively the "Bond Resolution"), the Consolidated Government has authorized the issuance, delivery, and sale ofthe Bonds. The Bonds will be issued under and secured by the Bond Resolution. . The Consolidated Government will use the proceeds of the sale of the Bonds, after payment of the costs of issuing the Bonds, to pay the costs of acquiring, constructing, and installing a new airline passenger terminal and certain other capital improvements (the "Project") for Augusta Regional Airport at Bush Field (the "Airport"). The Series 2005A Bonds and the Series 2005B Bonds (collectively the "Series 2005NB Bonds") will constitute special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on (1) revenues derived by the Consolidated Government from the ownership and operation of the Airport, remaining after the payment of expenses of operating, maintaining, and repairing the Airport (''Net General Revenues"), and (2) those passenger facility charge revenues that are allocable to the Project ("PFC Revenues"). The Series 2005C Bonds will constitute special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on Net General Revenues only; the Series 2005C Bonds will not be secured by or payable from PFC Revenues. The Bonds will be equally and ratably secured on a parity with any additional revenue bonds of the Consolidated Government hereafter issued on a parity with the Bonds under the Bond Resolution. On November 3, 2004, the Commission adopted an: ordinance (the "Rate Ordinance") requiring the Aviation Commission to establish rates, rents; fees, and other charges for airlines operating at the Airport that do not have operating agreements with the Consolidated Government. With the consent of the Consolidated Government, the Underwriter has distributed a Preliminary Official Statement, dated February 9, 2005 (the "Preliminary Official Statement"), relating to the Bonds in connection with the marketing of the Bonds. The Bonds will be offered for sale by the Underwriter pursuant to a definitive Official Statement, to be dated February 17, 2005 (the "Official Statement"), relating to the Bonds. The Consolidated Government will undertake, pursuant to the Bond Resolution and a Continuing Disclosure Certificate (the "Disclosure Certificate"), to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. Capitalized terms used herein and not defined shall have the meaning assigned to such terms in the Bond Resolution. SECTION 2. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF THE CONSOLIDATED GOVERNMENT. By the Consolidated Government's acceptance hereof it hereby represents and warrants to, and covenants and agrees with, the Underwriter that: -2- (a) It is a political subdivision of the State of Georgia (the "State") duly created and validly existing under the laws of the State as a consolidated city-county government. The Consolidated Government has all of the governmental and corporate powers of both municipal corporations and counties and is authorized by virtue of the laws of the State, including Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, to issue the Bonds to provide funds to be used to pay the costs of acquiring, constructing, and installing the Project and to pay all expenses necessary to accomplish the foregoing, to be the pledgor as provided in the Bond Resolution, to execute and deliver the Official Statement, and to enter into and execute, deliver, and perform this Bond Purchase Agreement and the Disclosure Certificate. (b) It has complied with all provisions of the Constitution and laws of the State with respect to the consummation of, and has full power and authority to consummate, all transactions contemplated by this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and any and all other agreements relating thereto and to issue, sell, and deliver the Bonds to the Underwriter on behalf of the Consolidated Government as provided herein, subject to the Bonds being validated by the Superior Court of Richmond County, Georgia. (c) By the Bond Resolution duly adopted by it at meetings duly called and held, it has duly and validly authorized the issuance and sale of the Bonds and the execution and delivery of the Disclosure Certificate, this Bond Purchase Agreement, and any other agreements relating thereto. (d) The information contained in the Preliminary Official Statement and in the Official Statement, and in any amendment or supplement that may be authorized for use by the Consolidated Government with respect to the Bonds (including the information contained in Appendix A) is, and as of the Closing Time (as hereinafter defined) and the End of the Underwriting Period (as determined in Section 9 hereof) will be, complete, accurate, true, and correct and does not contain and will not contain any untrue statement of a material fact and does not omit and will not omit to state a material fact required to be stated therein or necessary in order to make the statements therein made, in light of the circumstances under which they were made, not misleading. The Consolidated . Government has reviewed the Preliminary Official Statement and consents to the use of the Official Statement by the Underwriter to offer and sell the Bonds. (e) It has duly and validly authorized all necessary action to be taken by it for: (1) the issuance and sale of the Bonds upon the terms set forth herein and in the Bond Resolution, (2) the passage and approval of the Bond Resolution providing for the issuance of and security for the Bonds (including the pledge by the Consolidated Government of the Net General Revenues and the PFC Revenues, in the case of the Series 2005NB Bonds, and the Net General Revenues, in the case of the Series 2005C Bonds) and appointing SunTrust Bank, Atlanta, Georgia, as paying agent and bond registrar for the Bonds, (3) the execution, delivery, receipt, and due performance of this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and any and all such other agreements and documents as may be required to be executed, delivered, or received by the Consolidated Government in order to carry out, give effect -3- to, and consummate the transactions contemplated hereby and by the Bond Resolution, (4) the approval of the Preliminary Official Statement and the Official Statement and their use by the Underwriter in the public offering and sale of the Bonds and the execution of the Official Statement by the Mayor of the Consolidated Government or other authorized officials of the Consolidated Government, and (5) the carrying out~ giving effect to, and consummation of the transactions contemplated hereby and by the Bond Resolution, the Disclosure Certificate, and the Official Statement. This Bond Purchase Agreement, when executed by the other parties hereto, will have been duly and validly executed and delivered by the Consolidated Government, will be in full force and effect as to the Consolidated Government, and will constitute the legal, valid, binding, and enforceable obligation of the Consolidated Government, enforceable in accordance with its terms. The Bonds, when issued, delivered, and paid for as herein and in the Bond Resolution provided, will have been duly and validly authorized and issued and will constitute valid and binding special or limited obligations of the Consolidated Government enforceable in accordance with their terms and provisions and entitled to the benefits and security of the Bond Resolution. Original executed counterparts of this Bond Purchase Agreement and the Disclosure Certificate, a certified copy of the Bond Resolution, and ten (10) manually executed counterparts of the Official Statement will be delivered to the Underwriter by the Consolidated Government at the Closing Time (as hereinafter defined). (t) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation at law or in equity or before or by any court, public board, or body pending or, to the knowledge of the Consolidated Government, after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government (or to its knowledge, after making due inquiry with respect thereto, any basis therefor), wherein an unfavorable decision, ruling, or fmding would adversely affect the transactions contemplated hereby or by the Official Statement, the levy or collection of any rates, fees, and other charges for the services and facilities furnished by the Airport, or the validity of the Bonds, this Bond Purchase Agreement, the Bond Resolution, the Disclosure Certificate, or any other agreement or instrument to which the Consolidated Government is a party or by which the Consolidated Government is bound and which is used or contemplated for use in the consummation of the transactions contemplated hereby or by the Official Statement or which might result in any material adverse change in the operations, properties, assets, liabilities, or condition (financial or other) of the Airport, or which affects the information contained in the Official Statement. (g) The Consolidated Government is not in material violation of its organic documents or any existing law and is not in violation of any material provision of or in breach of or default under any court or administrative regulation, decree, judgment, or order in any proceeding in which the Consolidated Government was a party, or any agreement, note, resolution, ordinance, indenture, mortgage, security deed, lease, indebtedness, lien, instrument, plan, or other restriction to which it is a party or by which it or its property is subject or bound, which materially and adversely affects the transactions contemplated hereby and by the Official Statement or the operations, properties, assets, liabilities, or condition (financial or other) of the Airport. The consent -4- to the use of the Official Statement and the execution and delivery of this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and the other agreements contemplated hereby and by the Bond Resolution and the compliance with the provisions thereof will not conflict with or violate or constitute on the Consolidated Government's part a breach of or a default under any of the restrictions described in the first sentence of this Section 2(g). Subject to the Bonds being validated by the Superior Court of Richmond County, Georgia, no approval, authorization, consent, or other action by any governmental authority is required in connection with the execution and delivery by it of the Bonds, the Bond Resolution, the Disclosure Certificate, or this Bond Purchase Agreement, or in connection with the performance by it of its obligations hereunder or thereunder, which has not been previously obtained or accomplished. (h) The Consolidated Government has complied with all applicable laws, regulations, and requirements for the collection and expenditure of passenger facility charges ("PFC") as authorized by the Aviation Safety and Capacity Expansion Act of 1990, as amended, and all other applicable laws (collectively, the "PFC Enabling Acts"), and has obtained all requisite approvals, including but not limited to approval of the Federal Aviation Administration, for the imposition and use of the PFC proceeds for the portion of the Project to be financed with the proceeds of the Series 2005NB Bonds. (i) The Consolidated Government will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Bond Resolution or which would cause the interest on the Bonds to become includable in the gross income of the owners thereof for federal income tax purposes. (j) Any certificate signed by any of the Consolidated Government's authorized officials and delivered to the Underwriter shall be deemed a representation and warranty by the Consolidated Government to the Underwriter under this Bond Purchase Agreement as to the statements made therein. (k) The Consolidated Government will cooperate with the Underwriter in the qualification of the Bonds for offering and sale and the determination of their eligibility , for investment under the laws of such jurisdictions as the Underwriter shall designate; provided, however, the Consolidated Government shall not be required to register as a dealer or broker in any such jurisdiction, nor execute a general consent to service of process or qualify to do business in connection with any such qualification of the Bonds in any such jurisdiction. (1) The Consolidated Government will notify the Underwriter for the period from the date hereof until the expiration of 90 days after the End of the Underwriting Period (as determined in Section 9 hereof) of any material adverse change in the operations, properties, or condition (financial or other) of the Airport, and of any event which occurs and comes to the Consolidated Government's attention, which event materially and adversely affects the Consolidated Government or the transactions contemplated by the Official Statement and which would cause the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact which should be included -5- therein for the purposes for which the Official Statement was to be used or which is necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and, if in the opinion of the Underwriter, a change in the information contained in the Official Statement is required in order to make the statements therein made true and not misleading or to make the Official Statement. comply with any applicable state securities law in connection with the offering of the Bonds, such change shall be made, and the corrected information shall be supplied to the Underwriter in sufficient quantity for distribution to the purchasers of the Bonds. If such change occurs subsequent to the Closing Time, the Consolidated Government shall furnish to the Underwriter such legal opinions, certificates, instruments, and documents as the Underwriter may reasonably request to evidence the truth and accuracy of such corrected information. Thereafter, this Bond Purchase Agreement shall refer to such corrected information. (m) Prior to the execution of this Bond Purchase Agreement, the Consolidated Government delivered to the Underwriter copies of the Preliminary Official Statement which the Consolidated Government "deemed final" as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended, except for the permitted omissions described in paragraph (b)(I) of Rule 15c2-12. There have been no instances in the previous five years in which the Consolidated Government failed to comply, in any material respects, with any previous undertakings in a written contract or agreement specified in Rule 15c2-12(b)(5)(i). (n) To the best knowledge of the Consolidated Government, no legislation, ordinance, resolution, rule, or regulation has been enacted by any governmental body, dep~ent, or agency of the State nor has any decision been rendered by any court of competent jurisdiction in the State, which would materially and adversely affect the transactions contemplated by the Official Statement. (0) Subsequent to the respective dates as of which information is given in the Official Statement, and prior to the Closing Date, except as set forth in or contemplated by the Official Statement, (1) the Consolidated Government has not incurred and shall not have incurred any material liabilities or obligations relating to the Airport, direct or contingent, except in the ordinary course of business, and has not entered and will not have entered into any material transaction relating to the Airport not in the ordinary course of business, (2) there has not been and will not have been any increase in the long-term debt payable from Net General Revenues or PFC Revenues or decrease in the fund equity of the fund of the Consolidated Government relating to the Airport, (3) there has not been and will not have been any material adverse change in the business or the financial position or results of operations of the Airport, (4) no loss or damage (whether or not insured) to the property of the Airport has been or will have been sustained which materially and adversely affects the operations of the Airport, and (5) no legal or governmental proceeding affecting the Airport or the transactions contemplated by this Bond Purchase Agreement has been or will have been instituted or threatened which is material. -6- (P) The Consolidated Government will furnish to the Underwriter, upon request, for so long as the Bonds remain outstanding, annual audited financial statements of the Airport as soon as such financial statements become available. (q) The Rate Ordinance has been duly adopted by the Consolidated Government and is in full force and effect in the form in which it was adopted. No action has been taken or to the knowledge of the Consolidated Government is contemplated questioning the terms, conditions, validity, or legality of the Rate Ordinance. (r) As of the Closing Date, the Consolidated Government will haye good and marketable title to the Airport, the owners of the Series 2005NB Bonds will have a valid and effective first priority lien on the Net General Revenues and the PFC Revenues, and the owners of the Series 2005C Bonds will have a valid and effective first priority lien on the Net General Revenues. (s) The Consolidated Government has no reason to believe after review that the certifications, assumptions, and conclusions in the Report of the Airport Consultant dated February 2, 2005 prepared by Ricondo & Associates, Inc. (the "Airport Consultant") included as Appendix B to the Official Statement, including the forecasts therefrom included in the body of the Official Statement, are not reasonable. The Consolidated Government believes that the capital construction program information, aviation activity data, and accounting and other financial documents furnished by the Consolidated Government to the Airport Consultant in connection with the preparation of the Report of the Airport Consultant are accurate in all material respects. Further, the Consolidated Government has no knowledge, after due inquiry, of any fact or circumstance that would have a material adverse effect on the assumptions, findings, projections, or conclusions in the Report of the Airport Consultant that the Consolidated Government has not disclosed to the Airport Consultant and the Underwriter; and (t) The Consolidated Government acknowledges and agrees that these representations and warranties are made to induce the Underwriter to purchase the Bonds, and that such representations and warranties and any other representations and warranties made by the Consolidated Government to the Underwriter are made for the benefit of the . ultimate purchasers of the Bonds and may be relied upon by such purch~ers. SECTION 3. PURCHASE, SALE, AND DELIVERY OF THE BONDS. On the basis of the representations, warranties, and covenants contained herein and in the other agreements referred to herein, and subject to the terms and conditions herein set forth, the Underwriter hereby agrees to purchase from the Consolidated Government at the Closing Time and the Consolidated Government hereby agrees to sell to the Underwriter at the Closing Time, (a) the Series 2005A Bonds at a price of 98.00% of the aggregate principal amount thereof ($8,810,200 (consisting of the par amount of the Series 2005A Bonds less $179,800 underwriting discount)), (b) the Series 2005B Bonds at a price of 98.00% of the aggregate principal amount thereof ($4,326,700 (consisting of the par amount of the Series 2005B Bonds less $88,300 underwriting discount)), and (c) the Series 2005C Bonds at a price of 98.00% of the aggregate principal amount thereof ($6,076,000 (consisting of the par amount of the Series 2005C Bonds -7- less $124,000 underwriting discount)). The Underwriter, in its discretion, may permit other securities dealers who are members of the National Association of Securities Dealers, Inc. to assist in selling the Bonds. If the Underwriter permits other securities dealers who are members of the National Association of Securities Dealers, Inc. to assist in selling the Bonds, the Underwriter shall enter into a selected dealers agreement or selling agreement with such other securities dealers. The Bonds shall be issued under and secured as provided in the Bond Resolution, and the Bonds shall have the maturities and interest rates, be subject to redemption, and shall be otherwise as described and as set forth in the Bond Resolution and the Official Statement. Payment of the purchase price for the Bonds shall be made by wire in immediately available funds payable to the order of the Consolidated Government at the offices of Sutherland Asbill & Brennan LLP in Atlanta, Georgia, at 10:00 a.m., local time, on March 3, 2005, or such other place, time, or date as shall be mutually agreed upon by the Consolidated Government and the Underwriter, against delivery of the Bonds to the Underwriter or the persons designated by the Underwriter. The date of such delivery and payment for the Bonds is herein called the "Closing Date," and the hour and date of such delivery and payment is herein called the "Closing Time." The delivery of the Bonds shall be made in definitive form bearing CUSIP numbers (provided neither the printing of a wrong CUSIP number on any Bond nor the failure to print a CUSIP number thereon shall constitute cause.to refuse delivery of any Bond) and registered in the name(s) of such owner(s) as the Underwriter shall designate to the Consolidated Government, at least forty-eight (48) hours prior to the Closing Time. The Bonds shall be available for examination and packaging at the offices of The Depository Trust Company in New York, New York by the Underwriter or its representatives at least twenty-four (24) hours prior to the Closing Time and at the Closing Time shall be delivered to the Underwriter or the persons designated by Underwriter. SECTION 4. CONDITIONS TO THE UNDERWRITER'S OBLIGATIONS. The Underwriter's obligations hereunder shall be subject to the due performance in all material respects by the Consolidated Government of its obligations and agreements to be performed hereunder at or prior to the Closing Time and to the accuracy of and compliance with in all material respects its representations and warranties contained herein, as of the date hereof and as of the Closing Time, and are also subject to receipt of the following evidence and documents and satisfaction of the following conditions, as appropriate, at or prior to the Closing Time: (a) The Bonds, the Bond Resolution, and the Disclosure Certificate shall have been duly authorized, executed, and delivered by the respective parties thereto in the forms heretofore approved by the Underwriter with only such changes therein as shall be mutually agreed upon by the parties thereto and the Underwriter, and shall be in full force and effect on the Closing Date. The Rate Ordinance shall be in full force and effect on the Closing Date. (b) There shall not have occurred, in the sole opinion of the Underwriter, any material adverse change, or any material adverse development involving a prospective -8- change, in or affecting the business, condition (financial or other), results of operations, prospects, or properties of the Airport. (c) At or before the Closing Time, the Underwriter shall receive: (1) The opinions, dated as of the Closing Date, of (A) Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP, counsel to the Consolidated Government, in substantially the form attached hereto as Exhibit A, (B) Sutherland Asbill & Brennan LLP, Bond Counsel, in substantially the forms attached hereto as Exhibit B, and (C) Kilpatrick Stockton LLP, counsel to the Underwriter, in substantially the form attached hereto as Exhibit C, all as may be in form and substance satisfactory to, and approved by, the Underwriter. (2) A closing certificate of the Consolidated Government, satisfactory in form and substance to the Underwriter, executed by the Mayor of the Consolidated Government, attested by the Consolidated Government Clerk, or any other of the Consolidated Government's duly authorized officials satisfactory to the Underwriter, dated as of the Closing Date, to the effect that: (A) the Consolidated Government has duly performed and satisfied hereunder or complied with all of its obligations and conditions to be performed and satisfied hereunder at or prior to the Closing Time and each of its representations and warranties contained herein have not been amended, modified, or rescinded and is in full force and effect and is true and correct in all material respects as of the Closing Time, (B) the Consolidated Government has duly authorized, by all necessary action, the execution, delivery, receipt, and due performance of the Bonds, the Bond Resolution, the Disclosure Certificate, this Bond Purchase Agreement, and any and all such other agreements and documents as may be required to be executed, delivered, received, and performed by the Consolidated Government to carry out, give effect to, and consummate the transactions contemplated hereby and by the Bond Resolution and the Official Statement, (C) there is no action, suit, proceeding, or inquiry or investigation at law or in equity or before or by any public board or body pending or, to his knowledge after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government or its property or, to his knowledge after making due inquiry with respect thereto, any basis therefor, wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated hereby or by the Bond Resolution or the validity or enforceability of the Bonds, the Bond Resolution, the Disclosure Certificate, or this Bond Purchase Agreement, which have not been previously disclosed in writing to the Underwriter and which is not disclosed in the Official Statement, (D) all information furnished to the Underwriter for use in connection with the marketing of the Bonds and the information contained in the Preliminary Official Statement and the Official Statement, including the information contained in Appendix A, were, as of the respective dates thereof and are as of the Closing Date, true in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, (E) the execution, -9- delivery, receipt, and due performance of the Bonds, the Bond Resolution, the Disclosure Certificate, this Bond Purchase Agreement, and the other agreements contemplated hereby and by the Bond Resolution and the Official Statement under the circumstances contemplated hereby and thereby and the Consolidated Government's compliance with the provisions thereof will not conflict with or be. in violation of the Consolidated Government's organic documents or any existing law or court or administrative regulation, rule, decree, judgment, or order or conflict with or constitute on the Consolidated Government's part a breach of or a default under any agreement, note, indenture, mortgage, security deed, resolution, ordinance, lease, indebtedness, lien, plan, instrument, or other restriction to which the Consolidated Government is subject or by which the Consolidated Government is or may be bound, and (F) since the date hereof there has not been any material adverse change in the operations, properties, financial position, or results of operations of the Airport, whether or not arising from transactions in the ordinary course of business, other than as previously disclosed in writing to the Underwriter and as disclosed in the Official Statement, and except in the ordinary course of business, the Consolidated Government has not suffered or incurred any material liability relating to the Airport, other than as previously disclosed in writing to the Underwriter and as disclosed in the Official Statement. (3) An Agreed Upon Procedures Letter and a Consent Letter, dated the date of the Official Statement, of Cherry, Bekaert & Holland, L.L.P., and a Bring- Down Letter, dated the Closing Date, of Cherry, Bekaert & Holland, L.L.P., in substantially the forms attached hereto as Exhibit D. (4) Letters confirming the BBB-/Baa3 ratings of Fitch Inc. and Moody's Investors Service, Inc., respectively, with respect to the Bonds. (5) A Consent Letter, dated the Closing Date, of the Airport Consultant, in substantially the form attached hereto as Exhibit E. (6) Such additional certificates and other documents, agreements, and opinions as the Underwriter and Underwriter's counsel may reasonably request to evidence performance of or compliance with the provisions hereof and the transactions contemplated hereby and by the Bond Resolution and the Official Statement, all such certificates and other documents to be satisfactory in form and substance to the Underwriter. All opinions shall be addressed to the Underwriter and may also be addressed to such other parties as the giver of such opinion agrees to. All certificates, if addressed to any party, shall also be addressed to the Underwriter. All such opinions, letters, certificates, and documents shall be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Underwriter and Underwriter's counsel, as to which both the Underwriter and Underwriter's counsel shall act reasonably. If any condition of the Underwriter's obligations hereunder to be satisfied prior to the Closing Time is not so satisfied, this Bond Purchase Agreement may be terminated by the Underwriter by notice in writing or by telegram to the Consolidated Government. The Underwriter may waive in writing compliance by the -10- Consolidated Government of anyone or more of the foregoing conditions or extend the time for their performance. SECTION 5. THE UNDERWRITER'S RIGHT TO CANCEL. The Underwriter shall have the right to cancel the Underwriter~s obligations hereunder (and such cancellation shall not constitute a default of the Underwriter for purposes of this Bond Purchase Agreement) by notifying the Consolidated Government in writing or by telegram of its election so to do between the date hereof and the Closing Time, if at any time hereafter and prior to the Closing Time: (a) A committee of the House of Representatives or the Senate of the Congress of the United States of America (the "United States") shall have pending before it legislation, or a tentative decision with respect to legislation shall be reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported by such a committee or be introduced, by amendment or otherwise, in, or be passed by, the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted by the Congress of the United States, or an announcement or a proposal for any such legislation shall be made by a member of the House of Representatives or the Senate of the Congress of the United States, or a decision by a court established under Article III of the Constitution of the United States or the Tax Court of the United States shall be rendered, or a ruling, regulation, or order of the Treasury Department of the United States or the Internal Revenue Service shall be made or proposed having the purpose or effect of imposing federal income taxation, or any other event shall have occurred which results in or proposes the imposition of federal income taxation, upon revenues or other income of the general character to be derived by state and local governmental units or by any similar body or upon interest received on obligations of the general character of the Bonds, which, in the Underwriter's sole opinion, materially and adversely affects the market price of the Bonds. (b) Any legislation, ordinance, resolution, rule, or regulation shall be introduced in or be enacted or imposed by any governmental body, department, or agency of the . United States or of any state, or a decision by any court of competent jurisdiction within the United States or any state shall be rendered which, in the Underwriter's sole opinion, materially adversely affects the market price of the Bonds. (c) A stop order, ruling, regulation, or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering, or sale of obligations of the general character of the Bonds, or the issuance, offering, or sale of the Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in violation of any provisions of the federal securities laws, including without limitation the registration provisions of the Securities Act of 1933, as amended and as then in effect, or the registration provisions of the Securities Exchange Act of 1934, as amended and as then in effect, or the qualification provisions of the Trust Indenture Act of 1939, as amended and as then in effect. -11- (d) Legislation shall be introduced by amendment or otherwise in, or be enacted by, the Congress of the United States, or a decision by a court of the United States shall be rendered to the effect that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under or from other requirements of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or that the Bond Resolution is not exempt from qualification under or from other requirements of the Trust Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering, or sale of obligations of. the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement. (e) Any event shall have occurred, or information becomes known, which, in the Underwriter's sole opinion, makes untrue in any material respect any statement or information furnished to the Underwriter by the Consolidated Government for use in connection with the marketing of the Bonds or any material statement or information contained in the Preliminary Official Statement or the Official Statement as originally circulated contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;' provided, however, that the Consolidated Government shall be granted a reasonable amount of time in which to cure any such untrue or misleading statement or information. (f) Additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange. (g) The New York Stock Exchange or any other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or a change to the net capital requirements of, the Underwriter. (h) A general banking moratorium shall have been established by federal, New York, or Georgia authorities. (i) A default has occurred with respect to the obligations of, or proceedings have been instituted under the federal bankruptcy laws or any similar state laws by or against, any state of the United States or any city or county located in the United States having a population in excess of one million persons or any entity issuing obligations on behalf of such a city, county, or state. -12- G) Any proceeding shall be pending, or to the knowledge of the Underwriter, threatened, to restrain, enjoin, or otherwise prohibit the issuance, sale, or delivery of the Bonds by the Consolidated Government or the purchase, offering, sale, or distribution of the Bonds by the Underwriter, or for any investigatory or other proceedings under any federal or state securities laws or the rules and regulations of the National Association of Securities Dealers, Inc. relating to the issuance, sale, or delivery of the Bonds by the Consolidated Government or the purchase, offering, sale, or distribution of the Bonds by the Underwriter. (k) A war involving the United States shall have been declared, or any conflict involving the armed forces of the United States shall have escalated, or any other national emergency relating to the effective operation of government or the financial community shall have occurred, which, in the Underwriter's sole opinion, materially adversely affects the market price of the Bonds. (1) Fitch Inc. or Moody's Investors Service, Inc. shall withdraw their respective BBB-/Baa3 ratings on the Bonds prior to the Closing Time. SECTION 6. CONDITIONS OF THE CONSOLIDATED GOVERNMENT'S OBLIGATIONS. The Consolidated Government's obligations hereunder are subject to the Underwriter's performance of its obligations hereunder. The Underwriter represents that it is duly authorized to execute and deliver this BOIld Purchase Agreement and that upon execution and delivery of this Bond Purchase Agreement by the other parties hereto, this Bond Purchase Agreement shall constitute a legal, valid, and binding agreement of the Underwriter enforceable in accordance with its terms. The Consolidated Government covenants to use its best efforts to accomplish, or cause to be accomplished, the conditions set forth herein to the Underwriter's obligations. To the extent to which the Consolidated Government is not in breach of this covenant, the Consolidated Government shall not be liable to the Underwriter for its lost profits, if any. SECTION 7. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS TO SURVIVE DELIVERY. All of the Consolidated Government's representations, warranties, and . agreements shall remain operative and in full force and effect (unless expressly waived in writing by the Underwriter), regardless of any investigations made by the Underwriter or on its behalf, and shall survive delivery of the Bonds to the Underwriter and the resale by the Underwriter of the Bonds. SECTION 8. PAYMENT OF EXPENSES. Whether or not the Bonds are sold by the Consolidated Government, the Underwriter shall be under no obligation to pay any expenses incident to the performance of the Consolidated Government's obligations hereunder. Unless the Consolidated Government and the Underwriter otherwise agree, all costs incurred in connection with the issuance or attempted issuance of the Bonds and all expenses and costs to effect the authorization, preparation, issuance, delivery, distribution, and sale of the Bonds (including, without limitation, attorneys', consultants', and accountants' fees, bond registrar's and paying agent's fees, the expenses and costs for the -13- preparation, printing, photocopying, execution, and delivery of the Bonds, the Bond Resolution, this Bond Purchase Agreement, the Disclosure Certificate, the Preliminary Official Statement and any amendments or supplements thereto, the Official Statement and any amendments or supplements thereto, and all other agreements and documents contemplated hereby, and the costs associated with all marketing activities and closing costs with respect to the Bonds, including' travel, advertising, meals, and other miscellaneous disbursements) shall be paid by the Consolidated Government out of the proceeds of the Bonds or, if the Bonds are not sold by the Consolidated Government or if the proceeds of the Bonds are not sufficient, shall be paid by the Consolidated Government. SECTION 9. DELIVERY AND USE OF OFFICIAL STATEMENT. The Consolidated Government authorizes the use and distribution of, and will make available, the Preliminary Official Statement and the Official Statement for the use and distribution by the Underwriter in connection with the sale of the Bonds. The Consolidated Government shall deliver, or cause to be delivered, to the Underwriter copies of the Preliminary Official Statement in sufficient quantity in order for the Underwriter to comply with Rule 15c2-12(b)(2) promulgated under the Securities Exchange Act of 1934. The Consolidated Government shall deliver, or cause to be delivered, to the Underwriter copies of the final Official Statement in sufficient quantity in order for the Underwriter to comply with Rule 15c2-12(b)(4) promulgated under the Securities Exchange Act of 1934, as amended, and the rules of the Municipal Securities Rulemaking Board, upon the earlier of (1) seven (7) business days after this Bond Purchase Agreement is executed and delivered or (2) the date which will allow such final Official Statement to accompany any confirmation that requests payment from any customer. The Underwriter shall promptly notify the Consolidated Government in writing of (a) the date which, in its opinion, is the "end of the underwriting period" within the meaning of Rule 15c2-12(f)(2) ("End of the Underwriting Period") and (b) whether the Underwriter delivered the Official Statement to a nationally recognized municipal securities information repository and, if so delivered, the date on which delivered. The Consolidated Government may request from the Underwriter from time to time, and the Underwriter shall provide to the Consolidated Government upon request, such information as may be reasonably required by the Consolidated Government in order to determine whether the End of the Underwriting Period has occurred. SECTION 10. INDEMNITY AND CONTRIBUTION. (a) To the extent permitted by applicable law, the Consolidated Government hereby agrees to indemnify and hold harmless the Underwriter, together with each officer and member of the Board of Directors of the Underwriter and each person who controls the Underwriter within the meaning of either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including, without limitation, fees and disbursements of counsel and other expenses incurred by them or either of them in connection with investigating or defending any loss, claim, damage, or liability or any suit, action, or proceeding, whether or not resulting in -14- liability), joint or several, to which they or any of them may become subject under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable statute or regulation, whether federal or state, or at common law or otherwise, insofar as such losses, claims, damages, liabilities, costs, and expenses (or any suit, action, or proceeding in respect thereof) arise out of or are based upon any untrue or misleading statement or alleged untrue or misleading statement of a material fact contained in the Preliminary Official Statement or the Official Statement, including the information contained in Appendix A, or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a fact required to be stated therein or necessaiy to make the statements therein, in light of the circumstances under which such statements were made, not misleading, provided, however, the Consolidated Government will not be liable in any such case to the extent that any such loss, claim, damage, liability, cost, or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein. in reliance upon and in conformity with written information furnished by the Underwriter specifically for use in connection with the preparation thereof. This indemnity agreement will be in addition to any liability which the Consolidated Government may otherwise have. (b) Promptly after receipt by any party entitled to indemnification under this paragraph of notice of the commencement of any suit, action, or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this paragraph, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this paragraph or from any liability under this paragraph unless the failure to provide notice prejudices the defense of such suit, action, or proceeding. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall be entitled, but not obligated, to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party, promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, however, if the defendants iri any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be legal defenses available to it or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party shall not be liable to such indemnified party under this paragraph for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more I than one separate counsel representing the indemnified parties under this paragraph who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if -15- clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii). (c) The Consolidated Government shall not be liable for any settlement of any such action effected without its consent, but if settled with its consent, the Consolidated Government agrees to indemnify and hold the Underwriter, such officer or director, or such controlling person harmless from and against any loss or liability, including reasonable legal and other expenses incurred in connection with the defense of the action, by reason of such settlement to the extent of the indemnification provided for in paragraph (a)., (d) In the event and to the extent that any indemnified party is entitled to indemnification from the Consolidated Government under the terms of paragraph (a) above in respect of any of the losses, claims, damages, liabilities, costs, or expenses referred to therein, but such indemnification is unavailable to such indemnified party in respect of any such losses, claims, damages, liabilities, costs, or expenses due to such indemnification being impermissible under applicable law or otherwise, then the Consolidated Government shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, costs, or expenses in such proportion as is appropriate to reflect the relative benefits received by the Consolidated Government and such indemnified party, respectively, from the offering of the Bonds, the relative fault of the Consolidated Government and such indemnified party, respectively, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities, costs, or expenses, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact related to information supplied by the Consolidated Government or the indemnified party and the relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission of the Consolidated Government or the indemnified party. The Consolidated Government and the Underwriter, respectively, agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above in this paragraph (d). The amount paid or payable by any indemnified party as a result of the losses, claims, damages, liabilities, costs, or expenses referred to above in this paragraph (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with defending any such action or claim. This paragraph (d) shall not apply in the event of losses, claims, damages, liabilities, costs, or expenses caused by or attributable to the willful misconduct or gross negligence of an indemnified party. Notwithstanding anything to the contrary contained in this paragraph (d), it is understood and agreed that this paragraph (d) is not intended, and shall not be construed, to expand, broaden, or increase in any way, whether in terms of scope, amount, or otherwise, the liability of the Consolidated Government in respect of any of the losses, claims, damages, liabilities, costs, or expenses referred to in paragraph (a) or otherwise, as that liability is set forth in paragraph (a) above. SECTION 11. NOTICES. Any notice or other communication to be given to the Consolidated Government under this Bond Purchase Agreement may be given by mailing or delivering the same in writing to -16- Augusta, Georgia, 530 Greene Street, Augusta, Georgia 30911, Attention: Consolidated Government Administrator, and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by mailing or delivering the same in writing to Merrill Lynch & Co., Inc., 4 World Financial Center, 9th Floor, New York, New York 10080, Attention: Michael L. Wheet. SECTION 12. APPLICABLE LAW; NONASSIGNABILITY. This Bond Purchase Agreement shall be governed by the laws' of the State. This Bond Purchase Agreement shall not be assigned by the Consolidated Government. SECTION 13. PARTIES IN INTEREST. This Bond Purchase Agreement shall be binding upon, and has been and is made for the benefit of, the Consolidated Government and the Underwriter, and to the extent expressed, any person controlling the Underwriter and their respective executors, administrators, successors, and assigns, and no other person shall acquire or have any right or interest under or by virtue hereof. The term "successors and assigns" shall not include any purchaser, as such, of any Bond. SECTION 14. EXECUTION OF COUNTERPARTS. This Bond Purchase Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Very truly yours, MERRILL LYNCH & CO., INC. as Underwriter By: Authorized Officer Accepted as of the date first above written: AUGUSTA, GEORGIA .... ., i ( ~"'i U c...f.' t ) -17- EXHIBIT A Form of Consolidated Government's Counsel Opinion [Attached] [Letterhead of Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP] , 2005 Merrill Lynch & Co., Inc. New York, New York Sutherland, Asbill & Brennan LLP Atlanta, Georgia Re: $8,990,000 Augusta, Georgia Airport Passenger Facility Charge aild General Revenue Bonds, Series 2005A (Non-AMT) $4,415,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,200,000 Augusta, Georgia Airport General Revenue Bonds, Series, 2005C (AMT) Ladies and Gentlemen: We have acted as counsel to Augusta, Georgia (the "Consolidated Government") preliminary to and in connection with the issuance and sale by the Consolidated Government of the above-captioned bonds (the "Bonds"). In so acting, we have examined, among other things, Paragraph I of Section VI of Article IX of the Constitution of the State of Georgia, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, Acts of the General Assembly of the State of Georgia (1995 Ga. Laws 3648 to 3675, inclusive, as amended by 1996 Ga. Laws 3607 to 3608, inclusive, 1997 Ga. Laws 4024 to 4025, inclusive, 1997 Ga. Laws 4690 to 4693, inclusive, 1999 Ga. Laws 4143 to 4145, inclusive, and 2002 Ga. Laws 3769 to 3782, inclusive) (collectively the "Consolidation Act"), and originals, executed counterparts, or certified copies of the following: 1. The proceedings, including a Master Bond Resolution adopted by the Augusta-Richmond County Commission (the "Commission") on February 1, 2005 and by the Augusta Aviation Commission (the "Aviation Commission") on January 20,.2005, as ratified, reaffirmed, supplemented, and amended by a First Supplemental Bond Resolution adopted by the Commission on February 1, 2005 and by the Aviation Commission on January 20, 2005 and a Second Supplemental Bond Resolution adopted by the Commission and the Aviation Commission on February 17, 2005 (collectively the "Bond Resolution"), authorizing, among other things, the issuance and delivery of the Bonds and the execution, delivery, receipt, and approval of a Bond Purchase Agreement (the "Bond Purchase Agreement"), dated February 17, 2005, between the Consolidated Government and Merrill Lynch & Co., Inc. (the "Underwriter"), a Preliminary Official Statement dated January 18, 2005 (the "Preliminary Official Statement"), and an Official Statement dated February 17, 2005 (the "Official Statement"). Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP , 2005 Page 2 2. The Bond Purchase Agreement, the Preliminary Official Statement, and the Official Statement and a specimen Bond. 3. An ordinance (the ''Rate Ordinance") adopted by the Commission on November 4,2004, requiring the Aviation Commission to establish rates, rents, fees, and other charges for airlines operating at Augusta Regional Airport at Bush Field (the "Airport"). Based upon the foregoing and an examination of such other information, papers, and documents as we believed necessary or advisable to enable us to render this opinion, we are of the opinion, as of the date hereof, that: 1. The Consolidated Government is a political subdivision of the State of Georgia duly created and validly existing under and by virtue of the Constitution and laws of the State of Georgia, and a consolidated city-county government created on January 1, 1996 pursuant to the Consolidation Act. The Consolidated Government has all of the governmental and corporate powers of both municipal corporations and counties under Georgia law, including all requisite power and authority to adopt the Bond Resolution and perform its obligations thereunder, to issue, sell, and deliver the Bonds, to enter into and perform its obligations under the Bond Purchase Agreement, to execute and deliver the Official Statement to the Underwriter for distribution to the general public in connection with the offering by the Underwriter of the Bonds, and to secure the Bonds as provided in the Bond Resolution. 2. The Consolidated Government has taken all action legally required to authorize the issuance, sale, and delivery of the Bonds and has duly authorized the adoption and performance of the Bond Resolution, the execution, delivery, and performance of the Bond Purchase Agreement and the approval of the Official Statement. 3. The adoption by the Consolidated Government of the Bond Resolution, the authorization by the Consolidated Government of the Official Statement, the issuance and delivery by the Consolidated Government of the Bonds, the execution and delivery by the Consolidated Government of the Bond Purchase Agreement and the other agreements and documents described in the Bond Purchase Agreement, and the performance by the Consolidated Government of its obligations under and the consummation of the transactions described in all of the foregoing instruments and documents do not and will not conflict with or constitute, on the part of the Consolidated Government, a material breach or violation of or default under, any of the terms and conditions of the Consolidation Act, any existing constitution, statute, law, or court or administrative rule or regulation, decree, order, or judgment to which the Consolidated Government is Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP , 2005 Page 3 subject or by which the Consolidated Government or any of its properties is bound or any agreement, indenture, mortgage, lease, security deed, note, resolution, ordinance, contract, commitment, or other instrument or agreement to which the Consolidated Government is a party or by which the Consolidated Government or any of its properties is bound. ' 4. Each of the officials of the Consolidated Government was on the date of execution of each of the instruments relating to the Bonds, was on the date of the execution of the Bonds, and is on the date hereof the duly elected or appointed qualified incumbent of his or her office of the Consolidated Government. 5. The notices given prior to the meetings of the Commission and the Aviation Commission at which the Bond Resolution was adopted comply with the applicable notice requirements of Georgia law, and such meetings were conducted in accordance with the applicable requirements of Georgia law. 6. Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation, at law or in equity, by or before any court or public board or body pending or, to the best of our knowledge and belief, after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government, nor to our knowledge is there any basis therefor, which in any way questions the creation or existence of the Consolidated Government referred to in Section 2(a) of the Bond Purchase Agreement or the powers of the Consolidated Government referred to in Section 2(b) of the Bond Purchase Agreement, or the validity of the proceedings resulting in the issuance and delivery of the Bonds, or which might result in a material adverse change in the condition (financial or other), business, or affairs of the Airport, or wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated by the Bond Purchase Agreement or which in any way would adversely affect the validity or enforceability of the Bonds, the Bond Resolution, the Bond Purchase Agreement, or any other agreement or instrument to which the Consolidated Government is a party and which is used or contemplated for use in connection with the consummation of the transactions contemplated by the Bond Purchase Agreement or which in any way would adversely affect the setting, charging, or collection of any rates, fees, and other charges for the services and facilities furnished by the Airport. 7. All permits, consents, permissions, approvals, or licenses and authorizations or orders of any court or governmental or regulatory bodies that are required to have been obtained as of the date hereof by the Consolidated Government in connection with the ownership and operation of Airport or any part thereof, as contemplated by the Official Statement, the Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP , 2005 Page 4 issuance, sale, and delivery of the Bonds, the adoption, execution, delivery, and performance of the Bond Resolution, the Bond Purchase Agreement, and the consummation of the transactions contemplated by the Official Statement have been duly obtained and remain in full force and effect. We have no reason to believe, after making due inquiry, that the Consolidated Government will not be able to maintain all such permits, consents, permissions, approvals, and licenses described in the preceding sentence or to obtain all such additional permits, consents, permissions, approvals, or licenses and authorizations or orders of any court or governmental or regulatory bodies as may be required on or prior to the date the Consolidated Government is legally required to obtain the same. Except as disclosed in the Official Statement, no additional or further approval, consent, permission, authorization, or order of any court or any governmental or public agency or authority not already obtained is required by the Consolidated Government as of the date hereof in connection with the ownership and operation of the Airport or any part thereof, as contemplated by the Official Statement, the issuance, sale, and delivery of the Bonds, or the adoption, execution, delivery, and performance of the Bond Purchase Agreement, or the Bond Resolution. The opinion expressed in this paragraph 7 shall not extend to or otherwise cover any approvals that may be required by any federal or state securities laws. 8. The Bond Resolution has been duly adopted by the Consolidated Government, is in full force and effect in the form in which it was adopted, and constitutes the valid, binding, and legally enforceable obligation of the Consolidated Government according to its import. The Bond Purchase Agreement has been duly authorized, executed, and delivered by the Consolidated Government and is in full force and effect and constitutes the valid, binding, and legally enforceable obligation of the Consolidated Government according to its import. The Bonds have been duly authorized, executed, issued, and delivered by the Consolidated Government and, assuming the due authentication thereof by SunTrust Bank, Atlanta, Georgia, as bond registrar, constitute the valid and legally binding special or limited obligations of the Consolidated Government, are entitled to the benefit and security of the Bond Resolution, and are enforceable in accordance with their terms. 9. The Bonds and the security therefor have been validated by the Superior Court of Richmond County, and no valid intervention or objection was raised and no appeals are pending with respect to such validation. 10. The Official Statement has been duly authorized, executed, and delivered by the Consolidated Government, and the Consolidated Government has duly approved the use Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP , 2005 Page 5 of the Preliminary Official Statement and the Official Statement by the Underwriter in connection with the offering of the Bonds. 11. As general counsel to the Consolidated Government, we have rendered legal advice and assistance to the Consolidated Government in the course of the financing. Such assistance involved, among other things, discussions and inquiries concerning various legal matters and review of various documents relating to the offering and the preparation of the Preliminary Official Statement and the Official Statement and participation in conferences during which the contents of the Preliminary Official Statement and the Official Statement and related matters were discussed and reviewed. To the bes,t of our knowledge, after making due inquiry with respect thereto, the statements contained in the Preliminary Official Statement and the Official Statement under the captions "INTRODUCTION - The Consolidated Government, The Aviation Commission, and - The Airport," "PLAN OF FINANCING - The 2005 Project," "THE CONSOLIDATED GOVERNMENT - Introduction and - Consolidated Government Administration and Officials," "THE AVIATION COMMISSION - Introduction and - Aviation Commission Administration and Officials," "THE AIRPORT - Introduction, - Airport Facilities, - Air Trade Area, - Competition, - Airlines Providing Service, - Aviation Activity, - Origin and Destination Information, - Airline and Other Revenue Sources, and - Employees, Employee Relations, and Labor Organizations," "AIRPORT FINANCIAL INFORMATION - Insurance Coverage," and "LEGAL MATTERS - Pending Litigation and - Validation Proceedings" (other than the financial and statistical data included therein, as to which we express no view) are accurate statements or ~ummaries of the matters set forth therein and fairly represent the information purported to be shown and ,do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. In addition, while we do not pass upon or assume responsibility for the accuracy, completeness, or fairness of the Preliminary Official Statement or the Official Statement (other than the opinion given in the preceding sentence), nothing has come to our attention which leads us to believe that any portions of the Preliminary Official Statement or the Official Statement contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 12. To the best of our knowledge and belief, after making due inquiry with respect thereto, the Consolidated Government has never issued, assumed, guaranteed, or otherwise become liable in respect of any bonds, notes, or other obligations which are presently Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP ,2005 Page 6 outstanding and which are secured in any manner by the Airport or by the revenues to be received from the ownership and operation thereof, other than as set forth in the Bond Resolution or the Official Statement, and the Consolidated Government has not entered into or issued any instrument, resolution, ordinance, agreement, mortgage, security agreement, indenture, contract, or arrangement of any kind which might, on or after the date hereof, give rise to any lien or encumbrance on the Airport or the revenues derived from the ownership and operation thereof, other than as described in the Official Statement or the Bond Resolution. 13. The Rate Ordinance has been duly adopted by the Consolidated Government and is in full force and effect in the form in which it was adopted. No action has been taken or to our knowledge is contemplated questioning the terms, conditions, validity, or legality of the Rate Ordinance. The foregoing opinions are qualified to the extent that the enforceability of the Bonds, the Bond Resolution, or the Bond Purchase Agreement might be limited by (i) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights generally heretofore or hereafter enacted to the extent' of their enforcement, (ii) judicial discretion in the application of principles of equity, and (iii) the valid exercise of the sovereign police powers of the State of Georgia and its governmental bodies and the constitutional powers of the United States of America. The foregoing opinions are also qualified to the extent that any rights to indemnity or contribution contained in the Bond Purchase Agreement might be limited by applicable law. No opinion is given as to the tax-exempt status of the Bonds or the interest thereon. No opinion is given concerning the requirement for registration of the Bonds under the securities laws of any state or the Securities Act of 1933, as amended, nor is an opinion given concerning qualification of any document under the Trust Indenture Act of 1939, as amended. Very truly yours, SHEPARD, PLUNKETT, HAMILTON, BOUDREAUX & TISDALE, LLP By: Partner EXHIBIT B Forms of Bond Counsel Opinions [Attached] [Letterhead of Sutherland Asbill & Brennan LLP] ,2005 Merrill Lynch & Co., Inc. New York, New York Re: $8,990,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $4,415,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,200,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005C (AMT) Ladies and Gentlemen: This opinion is being delivered to you pursuant to Section 4(c)(I)(C) of the Bond Purchase Agreement, dated February 17, 2005, between you and Augusta, Georgia (the "Consolidated Government") relating to the above-referenced bonds (the "Bonds"). We have acted as Bond Counsel in connection with the issuance of the Bonds, and reference is hereby made to our approving opinion of even date herewith addressed to the Consolidated Government and delivered to you concurrently herewith. You may rely upon such opinion as if the same were addressed to you. In connection with the issuance of the Bonds, we have examined the following: (a) the proceedings, documents, and papers described in our opinion of even date herewith addressed to the Consolidated Government; (b) the Preliminary Official Statement, dated February 9, 2005 (the "Preliminary Official Statement"), and the Official Statement, dated February 17, 2005 (the "Official Statement"), relating to the Bonds; and ( c) such other information, papers, and documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In our examination of the aforesaid proceedings and documents, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, the authenticity of the originals of such latter documents, and the correctness of any facts stated in all of such documents. Based upon the foregoing we are of the opinion that the statements in the Preliminary Official Statement and in the Official Statement under the headings "INTRODUCTION Merrill Lynch & Co., Inc. , 2005 Page 2 - Security and Sources of Payment for the Series 2005 Bonds, - Description of the Series 2005 Bonds (except for ,the statements under the headings "Book-Entry Bonds" and "Payments"), - Tax Exemption, and - Legal Authority," "THE SERIES 2005 BONDS ,;, Description, - Redemption, - Legal Authority, and - Investments," "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS," and "LEGAL MATTERS - Opinion of Bond Counsel," and in "APPENDIX C: SUMMARY OF THE BOND RESOLUTION," insofar as such statements constitute summaries of the matters set forth therein, constitute fair and accurate summaries of the matters purported to be summarized; but no further opinion is expressed with respect to the accuracy, completeness, or sufficiency of the Preliminary Official Statement or the Official Statement nor is any opinion expressed with respect to compliance by the Consolidated Government or any other person with any federal or state statute, regulation, or ruling with respect to the sale or distribution of the Bonds. We have acted as Bond Counsel in connection with the issuance of the Bonds and, as such, have reviewed only those documents, opinions, certificates, and proceedings necessary to enable us to render our opinion to the Consolidated Government of even date herewith as to the legality and validity of the Bonds and the tax-exempt status of the interest on the Bonds. We have not prepared or reviewed the Preliminary Official Statement or the Official Statement and have not undertaken to check or confirm the accuracy or completeness of, or verified the information contained in, the Preliminary Official Statement or the Official Statement except to the extent necessary to render the opinion set forth above. This opinion is limited to the matters expressly set forth herein, and no opinion is to be inferred or may be implied beyond the matters expressly so stated. The opinions expressed herein are made only as of the date of this letter. We do not assume responsibility for updating this opinion as of any date subsequent to the date of this letter, and assume no responsibility for advising you of any changes with respect to any matters described in this letter that may occur subsequent to the date of this letter, whether such changes result from events occurring subsequent to the date of this letter or from the discovery subsequent to the date of this letter of information not previously known to us pertaining to events occurring prior to the date of this letter. Very truly yours, SUTHERLAND ASBILL & BRENNAN LLP By: Partner EXHIBIT C Form of Underwriter's Counsel Opinion [Attached] [Letterhead of Kilpatrick Stockton LLP] , 2005 Merrill Lynch & Co., Inc. New York, New York Re: $8,990,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $4,415,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,200,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005C (AMT) Ladies and Gentlemen: We have acted as your counsel in connection with your acting as underwriter on a "firm commitment" basis for the above-captioned bonds (the "Bonds"). In so acting, we have examined originals, executed counterparts, or certified copies of the following: (a) the Master Bond Resolution adopted by the Augusta-Richmond County Commission (the "Commission") on February 1, 2005 and by the Augusta Aviation Commission (the "Aviation Commission") on January 20, 2005, as ratified, reaffirmed, supplemented, and amended by a First Supplemental Bond Resolution adopted by the Commission on February 1,2005 and by the Aviation Commission on January 20, 2005 and a Second Supplemental Bond Resolution adopted by the Commission and the Aviation Commission on February 17,2005 (collectively the "Bond Resolution"), (b) the Bond Purchase Agreement, dated February 17,2005 (the "Bond Purchase Agreement"), between Augusta, Georgia (the "Consolidated Government") and Merrill Lynch & Co., Inc., (c) the Preliminary Official Statement, dated February 9, 2005 (the "Preliminary Official Statement"), relating to the Bonds, (d) the Official Statement, dated February 17, 2005 (the "Official Statement"), relating to the Bonds, (e) the Continuing Disclosure Certificate (the "Disclosure Certificate"), dated the date hereof, ofthe Consolidated Government, (f) a transcript of the proceedings of the Consolidated Government relating to the authorization, issuance, and delivery of the Bonds, and Merrill Lynch & Co., Inc. , 2005 Page 2 (h) the opinions and certificates required to be delivered pursuant to the Bond Purchase Agreement. ' In all such examinations, we have assumed the authenticity of all documents submitted to us as original documents and the authenticity of originals and conformity to original documents of all documents submitted to us as certified, conformed, or photostatic copies. We have assumed, but not independently verified, that the signatures on all documents and certificates that we have examined are genuine, and, as to certificates, we have assumed the same to be properly given and to be accurate. Weare not expressing any opinion or views on the authorization, issuance, delivery, or validity of the Bonds. Based upon the foregoing and an examination of such other information, papers, and documents as we believe necessary or advisable to enable us to render this opinion, we are of the opinion, as of the date hereof, as follows: 1. The Bonds are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and the Bond Resolution is exempt from qualification under Section 304(a)(4) of the Trust Indenture Act of 1939, as amended (the "1939 Act"), to the extent provided in such Acts, respectively, and it is not necessary in connection with the offer and sale of the Bonds to the public to register the Bonds under the 1933 Act, or to qualify the Bond Resolution under, or to issue the Bonds under any indenture qualified under, the 1939 Act. 2. The Bonds are exempted from the registration provisions of the Georgia Securities Act of 1973 by virtue of Section 10-5-8(1) thereof. 3. The Bonds are covered securities within the meaning of Section 18(b)(4)(C) of the 1933 Act, to the extent provided in the 1933 Act, and it is not necessary in connection with the offer and sale of the Bonds to the public to register or qualify the Bonds under the securities or "Blue Sky" laws of any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or any other possession of the United States, or any political subdivision thereof. 4. The Disclosure Certificate complies as to form with the requirements of Rule 15c2- 12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended. Because the primary purpose of our professional engagement as counsel to you was not to establish factual matters and because of the wholly or partially nonlegal character of many determinations involved in the preparation of the Preliminary Official Statement and the Official Statement, we are not passing upon and do not assume any responsibility for the accuracy, Merrill Lynch & Co., Inc. ,2005 Page 3 completeness, or fairness of the statements contained in the Preliminary. Official Statement or the Official Statement, and we have not independently verified the accuracy, completeness, or fairness of such statements. Nevertheless, we have rendered legal advice and assistance to you in the course of the offering and sale of the Bonds, the preparation of the Preliminary Official Statement and the Official Statement, and your investigation of Augusta Regional Airport at Bush Field (the "Airport"). Such assistance involved, among other things, discussions and inquiries concerning various legal matters, the review of the documents referred to above, and discussions with you and with representatives of the Consolidated Government, its counsel, Bond Counsel, Ricondo & Associates, Inc., the Airport Consultant, and Cherry, Bekaert & Holland, L.L.P., auditors for the Airport, in connection with the preparation of the Preliminary Official Statement and the Official Statement and your investigation of the Airport. We have obtained and reviewed the certificates as to factual matters and the legal opinions from these parties and their counsel in regard to the Preliminary Official Statement and the Official Statement and certain information contained therein, which are required to be delivered to you pursuant to the Bond Purchase Agreement. The performance of the services referred to above, the discussions referred to above, and our examination of the factual certifications and legal opinions referred to above did not disclose to us any information which would lead us to believe that the Preliminary Official Statement or the Official Statement (other than the financial statements and related notes and other financial and statistical data included therein, as to which we express no view) contains any untrue statement of a material fact or omits to state a material fact required to be stated or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. We have reviewed the opinions, dated today, of Shepard, Plunkett, H~i1ton, Boudreaux & Tisdale, LLP, Augusta, Georgia, counsel to the Consolidated Government, and Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel, furnished to you in accordance with the provisions of the Bond Purchase Agreement. Such opinions are appropriately responsive to the requirements of the Bond Purchase Agreement. The opinions set forth in paragraphs 2 and 3 above are subject to the existence of broad discretionary powers vested in the administrative authorities administering the securities or "Blue Sky" laws in the jurisdictions named in paragraphs 2 and 3, authorizing them, among other things, to withdraw exemptions accorded by statute, to impose additional requirements, to refuse registration, or to issue stop orders. This opinion does not purport to cover the requirements under the laws of any jurisdiction with respect to the registration or licensing of dealers, brokers, or salesmen, the form or substance of advertising materials or the filing requirements applicable thereto, or the legality of Merrill Lynch & Co., Inc. , 2005 Page 4 investments in the Bonds by any institutional investor which is subject to statutory or other restrictions as to its investments. Weare members of the State Bar of Georgia. Our opinions herein are limited to the laws of the State of Georgia and any applicable federal laws of the United States. We expressly disclaim any duty to update this opinion in the future for any changes of fact or law which may affect any of the opinions expressed herein. As legal counsel to you, we are furnishing this letter to you solely for your benefit and not for dissemination in connection with the offer and sale of the Bonds. This opinion is limited to the matters expressly set forth above, and no opinion is implied or may be inferred beyond the matters expressly so stated. . Very truly yours, KILPATRICK STOCKTON LLP By: Partner EXHIBIT D Forms of Agreed Upon Procedures Letter, Consent Letter, and Bring-Down Letter [Attached] . EXHIBIT E Form of Consent Letter of Airport Consultant [Attached] [Letterhead ofRicondo & Associates, Inc.] ,2005 Augusta, Georgia 530 Greene Street Augusta, Georgia 30911 Merrill Lynch & Co., Inc. 4 World Financial Center, 9th Floor New York, New York 10080 Re: $8,990,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $4,415,000 Augusta, Georgia Airport Passenger Facility Charge and General . Revenue Bonds, Series 2005B (AMT) $6,200,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005C (AMT) Ladies and Gentlemen: The undersigned consents to the inclusion in the Preliminary Official Statement dated February 9, 2005 (the "Preliminary Official Statement") and the Official Statement dated February 17, 2005 (the "Official Statement"), relating to the above-captioned bonds, of our report dated February 2, 2005. In addition, the undersigned consents to the references to our firm under the captions "INTRODUCTION - Professionals Involved in the Offering," "AIRPORT FINANCIAL INFORMATION - Forecasted Debt Service Coverage Ratios," and "MISCELLANEOUS - Independent Professionals" in the Preliminary Official Statement and the Official Statement. . Very truly yours, RICONDO & ASSOCIATES, INC. By: Michael G. Moroney Vice President SCHEDULE 1 AO 1267257.3 I I : 2008 $191,123.61 $150,044.38 $172,529.25 2009 191,123.61 150,044.38 172,529.25 2010 191,123.61 150,044.38 172,529.25 2011 191,123.61 150,044.38 172,529.25 2012 191,123.61 150,044.38 172,529.25 2013 191,123.61 150,044.38 172,529.25 2014 191,123.61 ' 150,044.38 172,529.25 2015 191,123.61 150,044.38 172,529.25 2016 191,123.61 150,044.38 172,529.25 2017 191,123.61 150,044.38 172,529.25 2018 191,123.131 150,044.38 172,529.25 2019 191,123.61 150,044.38 "172,529.25 2020 191,123.61 150,044.38 172,529.25 2021 191,123.61 150,044.38 172,529.25 2022 191,123.61 351 ,427.86 172,529.25 2023 191,123.61 351,427.86 172,529.25 2024 191,123.61 351 ,427.86 172,529.25 2025 191,123.61 298,397.28 112,529.25 2026 218,137.41 271,383.50 112,529.25 2027 192,529.24 2028 51,070.58 561,151.86 2029 217,602.12 581,151.86 2030 217,602.12 .581,151.86 2031 349,233.08 2032 839,662.33 2033 839,662.33 2034 839,668.03 etas ~.__.d_@ ~Airport Deposit Date 1-Jan Schedule 1 Required Deposits To: PFC Balloon Bonds PFC Balloon Bonds Reserve AccountFor Reserve Account For Series 2005kBondsSeries2005B Bonds Balloon Bonds Reserve Account For 'series 2005C ,Bonds ........~ y'oJ": ~,J. . y,G" , ~'Dt?mmn [ii9fi'i!{!3!:M THE AUGUSTA COMMISSION AGENDA CALLED MEETING COMM.ISSION CHAMBER 3:00 P.M. Februarv 17.2005 INVOCATION: PLEDGE OF ALLEGIANCE TO THE FLAG OF THE UNITED STATES OF AMERICA. 1. Consider and approve second Supplemental Bond Resolution for Airport Revenue Bonds 2005 Series and related documents as revised by Bond Counsel through February 17, 2005. 2. Consider and approve Airport Revenue Bond Purchase Agreement 2005 Series and related documents as revised by Bond Counsel through February 17, 2005. OFFICE OF THE CLERK OF COMMISSION TO: Mr. Willis Boshears Augusta Regional Airport FROM: Ora Haugabook Clerk of Commission's Office RECEIVE~ DATE: February 21, 2005 FfB J 5 2005 RE: Document to be Executed ~OON1Na;n~R~~r Attached is an original document. It is as follows: 1. Second Supplemental Bond Resolution for Airport Revenue Bonds 2005 Series and Airport Revenue Bond Purchase Agreement 2005 Series, approved by the Augusta Commission on February 17, 2005 during Special Called Meeting. Please have Augusta Aviation Commission and other authorized parties to sign the above mentioned document and return the original to the Clerk of Commission's Office for the city's official file. If you have any questions or concerns, please call me at 706-821- 1823. UB: owh Attachment: Februaryl7, 2005, Special Called Meeting, (from 2/1/05 Commission #7) CERTIFICATE OF INCUMBENCY OF AUGUSTA AVIATION COMMISSION The undersigned Clerk of the Augusta-Richmond County Commission (the "Commission"), as the authorized attesting officer of the Augusta Av~ation Commission (the "Aviation Commission"), DOES HEREBY CERTIFY: 1. I am the duly appointed attesting officer of the Aviation Commission. 2. The Aviation Commission is an agency of Augusta, Georgia (the "Consolidated Government"), established by ordinance of the Consolidated Government. The Aviation Commission operates and manages the Augusta Regional Airport at Bush Field. a 3. ,t:"" Aviation Commission is composed of 12 members and one ex-officio member. Ther;~ currently ~ "=lt~ ~~viation Commission. 4. The following is a correct list of the present Chairman, Vice Chairman and the members of the Aviation Commission and the Clerk of Commission, who is the attesting officer for the Augusta Aviation Commission, and the dates of the beginning and expiration of their current terms of office: Name/Office Date of Commencement of Term Date of Expiration of Term Cedric J. Johnson Chairman April 16,2002 March 31,2006 Bernard Silverstein Vice Chairman November 10, 2003 March 31, 2006 Grier C. Bovard Commission member April 6, 2004 March 31, 2008 "2 DO+"'" March 31, 2'668' II Venus D. Cain Commission member August 5, 2003 Christopher A. Cunningham Commission member May 7, 2002 March 31, 2006 Kenneth G. Grisko Commission member February 4, 2004 March 31, 2008 Brad Kyzer, Jr. Commission member February 20, 2002 March 31, 2008 Sheila D. Paulk Commission member September 18, 2003 March 31,2006 AD 1269715.1 Name/Office Date of Commencement of Term Date of Expiration of Term Joe L. Scott Commission member April 2, 2002 March 31, 2006 '1.D04 ~ March 31, 2G9& Earnest G. Smith ommission member March 7, 2000 Richard Colclough Ex Officio January 20, 2004 December 31,2006 Lena J. Bonner Clerk of Commission, Augusta-Richmond County Commission . (J _ IJ /I ,n~'tI.~.,~ ~ ~U\l( '" ...~\ "'~~ or ~ h,tttU'O' w..l b-ee., -obO'w\t'.v ~ ~~.t:6;t'dI. 5. All of the foregoing officers have duly filed their oaths of offiH:, and each of them legally required to give bond or undertaking has filed such bond or undertaking in form and amount as required by law, and has otherwise duly qualified and each is the acting officer holding the respective office immediately following his or her name. August 6, 1996 At the pleasure of the Commission 6. The governing body of the Aviation Commission is known as the "Augusta Aviation Commission" and said governing body meets in regular session on the second Thursday of each month at 10 a.m. 7. The official seal of the Aviation Commission, being the only seal used in the execution of bonds, certificates, notes and contracts, is the seal which impression is affixed opposite my signature upon this certificate. [Signatures commence on following page.] , I, l(~(' I +bl'\ iAo~4.('J \Qt~l,h l..',lIp~ (M.4,. tL It) d-CO~ \ -2- AO 1269715.1 WITNESS my hand and the official seal of the Augusta Aviation Commission this March 3, 2005. Lena J. Bonner Clerk Augusta-Richmond County Commission (S E A L) * * * * * * I Cedric J. Johnson, chairman of the Augusta Aviation Commission, do hereby certify that Lena J. Bonner has been duly appointed and is now Clerk of the Augusta-Richmond County Commission and is the attesting officer of the Augusta Aviation Commission. Cedric J. Johnson Augusta Aviation Commission AD 1269715.1 FROM SUTHERLAND ASBILL & BRENNAN LLP (TUE) 3. l' 05 15: 27/8T. 15: 26/NO. 486226730~ ::\:.::'/ CERTl....CATE OF '1 NCl!!\IBENC V Oli' AUGUSTA AVIATION COMMISSION . .......... . .,.. . . .... .. . . '.... , ,. . ..,; " . 'n1t3 undersigned Clerk or. rh: Aug\lsta-Richmo1l9 County Commission (the "Commission"); as the authorized ;;.ltesting of1icer vf the Augusta Aviation Commission (the. "A,"iution Commission"): DOES H'f;)~,EBY CERTIFY: . .... 1 am th~ duiy appoimed attesting officer of the A vi.al-ion Comll1i~sion. ~ .: . , . ;', "', -, .. 'n . .. . .... ..' ...... ..... 2. The Aviation Cl'llnrnission is an agelll:Y uf Augusta. Georgia (Lhe ..CoDso.Jid.a,.ed'...... ';,:" . . .. Government"). e~lablishcd hv nrdill<\l1t:e of the Consolidated (j'ovemment. The Aviati~~ :...:. Conunlssion opera,tes and llHlIlt~g~S the Augusta Regional Airp011 at Bush Field. .....'..,:: ,I" 3. The ^ ,'iatioll Commission is conrpuli~d of 12 mcmhcrs and one ex.om~iQ.:/:.:..::' memher. There is currcm1.y Oi1C :"uct'mcy on the Aviation Comrnission. .... ~.. ~ . ,4. The 1~'Uov,'ing is a :':;(JTTec.: list of th.e present Chalmlan, Vjc~ Chairman and, tite :~:'>: ;n~rnbers ;,f the Aviati'')I" Commjssil1~1 and the Clerk of CommissiulI. Whll is the attesting officer...' far the Augusta Aviatio.: C<.)l1lll~i:;sit'm, :md the dales of the beginning and expiration of Iheir C,U!Tlzm tC1111.s of oflice.: Date of COlllU1eUC~lIum L of Term Hate of' ,Expiration' of Term ' : .., . : ....~:. . . . . .. Name/Orfice Cedric J. Johnson Cho.i r,rtl<Ul Apri..116. 2002 MaTch 3 I, 2,006 . '. . Sem.cu'd SilverSLei.n Vit:~ Chairmmi . .."': . .....;:...... . November 10, 2003 March 31, 2006 ... ,'. Grier C. Hovard Commission mt:l1lb:r April 6, 2004 ....... :.. , .' March 31. 2008 ' .' ,'::' "~", ;:::. .. ~ '. ..:.::. Venus D. Cain COl11miSli.ion member Augtist S, 2003 March 31.2004* ChriSh)pber A. C,;jUlingliarr; Conl!'nis~io1! mcmbe:' .May 7. 2002 j\,1arch 31,2006". '". Kenneth G. Griskc COl'lliTlission memb':l!' Feb':U,aryA. 2004 March 31, 2008 . '. : Brad KYler, :II'. Commil>sion member , febru~ry 20, 200t March 3 J, 2008 .. . .. . " . ,.' -, .. : She.iI2l.). P~lllik Commission m~'.i"i1her Scpternher 1 g, 2003 t\.-J'arch 3 j: 200(; . .~:. , ... .\01:1.69:,:i,; FROM SUTHERLAND ASBILL & BRENNAN LLP (TUE) 3. l' 05 15: 27/ST. 15:26/NO. 486226730~"p"...) , , ' N a llle/Offic.l' Date of Commencement 0,( Term Date of Expiration. .. of Tcr,m Joe L. SC,o[i Commission membe!' April 2, 2002 March 31, 2006 , . .. . . Eamest G. Smith Commissi.on member March 7, 2000 March 31, 2004* ,'. . ,.. " . .... .. . ::;. . .:': .. .. . . . . . . ." . KadWI1 Howard December 21, 2004 March 31,2006 . ........ Richard CClh;lul:gh Ex Ofticio. January 20~ 2004 December 3].2006 Lena J. Bonner Clt:.rk 0; COllll11issjon~ Augusta-Richmond C,Jlmty Commissio'll August 6, 1996 Ai \'h~ plea~ur:e ofthc" .', .:...' . Commissi.on '" ", ;~"l~:~Jnti;)\leS !O se~'l' until his Oi ~;c~ .,llcceSSO! has heen i1ppoillled aDd qualltiL:d. '. '" ." ........... , , 5. All ofthc loregoillg of1ic~r~ have duly filed lh~ir o<.lth~ of office, and e<~ch oft~l~nr': ~::.: legally r~q!:ired to gi...~ bond or :mdertaking has riled such bond 11I L1nde11aking in ronn ~nd':h ,,' ;,", ,: ,.:mount ~~ required by tHW, ~nd h:.,\s crhznvise duly qualilied and ea.ch is ~hc acting offitet::: :.~.: ho}di;~g ~'h~ rCS~Ct;I:VC \~tYce ~i1H,edi(!.tely fuHowil1g his or hel' l1::ln'1~. . . , . " . (;. The governing body O!' Lhe Aviation Commission is known, as th(: "Augu,shl.'::.',: " A,,.im;o,'; CGtm~lissb]':" ':'~."(; .5~:j go'.; ~mir:g ~()dy' meets in regulc:r session Oll rile seccnd ThufSdlf)!:.':. ':' ,..,f each !1101~th. t':~ 1 G ~tr:-:. . " ..... ... The orrh::iai ~t(;i of tile Aviation ConUl,lission, being the only seal used in the',<: e,XCCll!:on :>f bonds. c~rti liCiU,:'S. notes and' con~racts, is the sca~ which impression is affixed. . :::;Jpositl:' r:~:)" Sjg!lutt:;7C 'd:':;~):l th;~ ,-:t:r:l i1 c~.re. (S 19!iC\ll.res com"'e1~c~ on following page, j . ..... . . . 1'1-. .. . ",' . .. . , ':. ",:"" ,,' '" '. .. . . -2- .\(1 !:!6\1:1~,l FROM SUTHERLAND ASBILL & BRENNAN LLP (TUE) 3. I' 05 15: 27/ST. 15: 26/NO. 4862267303 p.. 4, ":'.:',: :.~ ;: .::' ': .. ...... \VITNESS my hnnd Hl1d tile offil~jal seal of t.he .Augn~la Aviation Commission thi"s. March 3, 2005. . ....... '.~ -.'1" ~ .' . ."....... ... . ... .. ... ~. Lena.J. 'Ron.llcr Clerk Augusla-RicJmlond County Comm'isslon '. . :<. ':. ,,; (S E A L) .:,:.. .... . .. .". . ..' . . " '" ~: If. .... ," * . ....:...... 1 Cedric.l. Johnson, chaiil'1:ull oftne Augusta Aviation COllUllission, do hereby certify:, ,... that Lena J. Bonner has been duly appointed and is now Clerk of the Augusta.Richmond COUl1ty'::::....,,:~'.' Coml11i~sjon and is the attesting officer ofth~ Augusta Aviati.on Commission. ..... .. ~ .' "," ..... 0' . . . ."'.~ . Cedric J. Johnson Augusta Aviation Commission ".",'0'.. ~. ,,': . .:.:~ '..:' ," ..... ..:..c::;:<:'..'.' " ....?::.o( . \~ .J,OI:Z[,y,iS,: .. ... ,,;-"",' . 1 ... EXECUTION, SIGNATURE AND NO-LITIGATION CERTIFICATE OF THE AUGUSTA AVIATION COMMISSION We, the undersigned, 1?eing officers of the Augusta Aviation Commission, an agency of Augusta, Georgia (the "Augusta Aviation Commission"), as indicated by the official titles opposite 'our respective signatures, DO HEREBY <::;E~TIFY that the hereinafter described bonds have been officially executed on behalf of the Augusta Aviation Commission by the manual signature of the Chairman of the Augusta Aviation Commission and attested by the use of the manual signature of the Clerk of the Augusta-Richmond County Commission (the "Commission"), said Bonds being $8,990,000 aggregate principal amount of Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) (the "Series 2005A Bonds"), $4,415,000 aggregate principal amount of Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) (the "Series 2005B Bonds"), and $6,200,000 aggregate principal amount of Airport General Revenue Bonds, Series 2005C (AMT) (the "Series 2005C Bonds"; the Series 2005A Bonds, the Series 2005B Bonds and the Series 2005C Bonds are collectively referred to as the "Series 2005 Bonds"). Each series of Series 2005 Bonds is dated as of March 3, 2005, numbered RA-l, RB-l, or RC-l as applicable, and initially issued in book-entry only form as fully-registered bonds without coupons. The Series 2005 Bonds shall bear interest from date at the rate per annum set forth below opposite each principal maturity, all interest payable July 1, 2005 and semiannually thereafter on January 1 and July 1 in each year, and mature on January 1 in the following years and amounts: Series 2005A Bonds Year Amount Rate 2035 $8,990,000 5.15% Series 2005B Bonds' Year Amount Rate 2028 $4,415,000 5.35% Series 200SC Bonds Year Amount Rate 2031 $6,200,000 5.45% AO 1273163.1 -. WE FURTHER CERTIFY that the signatures of the Chairman of the Augusta Aviation Commission and the Clerk of the Commission on the Series 2005 Bonds were authorized and are hereby ratified and approved, that we hereby adopt said signatures as and for our own and that the Series 2005 Bonds have been duly executed by the Augusta Aviation Commission by the signatures of the Chairman of the Augusta Aviation Commission and Clerk of the Commission. WE FURTHER CERTIFY that no litigation of any kind is now pending or threatened, either in state or federal courts, restraining or enjoining the issuance or delivery of the Series 2005 Bonds authorized to be issued pursuant to the Bond Resolution hereinafter referred to in order to provide funds sufficient to provide for the payment of the principal of and interest on the Series 2005 Bonds at maturity, or in any manner questioning the proceedings and authority under which the Series 2005 Bonds are issued, or in any way questioning or affecting the terms and conditions of the Master Bond Resolution adopted by the Commission on February 1, 2005 and by the Augusta Aviation Commission on January 20,2005 (the "Master Bond Resolution"), as ratified, amended and supplemented by a First Supplemental Bond Resolution adopted by the Commission on February 1,2005 and by the Augusta Aviation Commission on January 20,2005 (the "First Supplemental Bond Resolution") and a Second Supplemental Bond Resolution adopted by the Commission and the Augusta Aviation Commission on February 17, 2005 (the "Second Supplemental Bond Resolution" and, together with the Master Bond Resolution and the First Supplemental Bond Resolution, the "Bond Resolution") authorizing the issuance and delivery of the Series 2005 Bonds, or affecting the validity of the Series 2005 Bonds; that neither the existence of the Augusta Aviation Commission nor the titles of the present officers to their respective offices are being contested; and that no authority or proceedings for, the issuance of the Series 2005 Bonds have been repealed, revoked or rescinded. WE FURTHER CERTIFY that the Preliminary Official Statement with respect to the Series 2005 Bonds dated February 9,2005 and the Official Statement with respect to the Series 2005 Bonds dated February 17, 2005 did not as of their respective dates and the Official Statement does not as of the date hereof contain any misrepresentation of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. -2- .. ~ - WITNESS our hands and the official seal of the Augusta Aviation Commission this March 3,2005. SIGNATURE OFFICIAL TITLE EXPIRATION OF TERM Chairman 03/31/2006 Clerk of Commission At the pleasure of the Augusta-Richmond County Commission (S E A L) ********* -3- KS DRAFT 1/6/05 $21,990,000 AUGUSTA, GEORGIA AIRPORT REVENUE BONDS, SERIES 2005 -~/ $7,425,000 Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $8,000,000 Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,565,000 Airport General Revenue Bonds, Series 2005C (AMT) /~ \ BOND PURCHASE AGREEMENT :2-l--0S iIJ [) - ( I I the Augusta-Richmond County t, on , 2005 and by the , eaffirmed, supplemented, and t e Augusta-Richmond County #1894702.v2 Commission and the Augusta Aviation Commission on , 2005 and 2005 (collectively the "Bond Resolution"), the Consolidated Government has authorized the issuance, delivery, and sale of the Bonds. The Bonds will be issued under and secured by the Bond Resolution. The Consolidated Government will use the proceeds of the sale of the Bonds, after payment of the costs of issuing the Bonds, to pay the costs of acquiring, constructing, and installing a new airline passenger terminal and certain other capital improvements (the "Project") for Augusta Regional Airport at Bush Field (the "Airport"). The Series 2005A Bonds and the Series 2005B Bonds (collectively the "Series 2005NB Bonds") will constitute special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on (1) revenues derived by the Consolidated Government from the ownership and operation of the Airport, remaining after the payment of expenses of operating, maintaining, and repairing the Airport ("Net General Revenues"), and (2) those passenger facility charge revenues that are allocable to the Project ("PFC Revenues"). The Series 2OO5C Bonds will constitute special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on Net General Revenues only; the Series 2005C Bonds will not be secured by or payable from PFC Revenues. The Bonds will be equally and ratably secured on a parity with any additional revenue bonds of the Consolidated Government hereafter issued on a parity with the Bonds under the Bond Resolution. On November 3, 2004, the Commission adopted an ordinance (the "Rate Ordinance") requiring the Aviation Commission to establish rates, rents, fees, and other charges for airlines operating at the Airport that do not have operating agreements with the Consolidated Government. With the consent of the Consolidated Government, the Underwriter has distributed a Preliminary Official Statement, dated February _,2005 (the "Preliminary Official Statement"), relating to the Bonds in connection with the marketing of the Bonds. The Bonds will be offered for sale by the Underwriter pursuant to a definitive Official Statement, to be dated February _, 2005 (the "Official Statement"), relating to the Bonds. The Consolidated Government will undertake, pursuant to the Bond Resolution and a Continuing Disclosure Certificate (the "Disclosure Certificate"), to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. Capitalized terms used herein and not defined shall have the meaning assigned to such terms in the Bond Resolution. SECTION 2. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF THE CONSOLIDATED GOVERNMENT. By the Consolidated Government's acceptance hereof it hereby represents and warrants to, and covenants and agrees with, the Underwriter that: -2- (a) It is a political subdivision of the State of Georgia (the "State") duly created and validly existing under the laws of the State as a consolidated city-county government. The Consolidated Government has all of the governmental and corporate powers of both municipal corporations and counties and is authorized by virtue of the laws of the State, including Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, to issue the Bonds to provide funds to be used to pay the costs of acquiring, constructing, and installing the Project and to pay all expenses necessary to accomplish the foregoing, to be the pledgor as provided in the Bond Resolution, to execute and deliver the Official Statement, and to enter into and execute, deliver, and perform this Bond Purchase Agreement and the Disclosure Certificate. (b) It has complied with all provisions of the Constitution and laws of the State with respect to the consummation of, and has full power and authority to consummate, all transactions contemplated by this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and any and all other agreements relating thereto and to issue, sell, and deliver the Bonds to the Underwriter on behalf of the Consolidated Government as provided herein. (c) By the Bond Resolution duly adopted by it at meetings duly called and held, it has duly and validly authorized the issuance and sale of the Bonds and the execution and delivery of the Disclosure Certificate, this Bond Purchase Agreement, and any other agreements relating thereto. (d) The information contained in the Preliminary Official Statement and in the Official Statement, and in any amendment or supplement that may be authorized for use by the Consolidated Government with respect to the Bonds (including the information contained in Appendix A) is, and as of the Closing Time (as hereinafter defined) and the End of the Underwriting Period (as determined in Section 9 hereof) will be, complete, accurate, true, and correct and does not contain and will not contain any untrue statement of a material fact and does not omit and will not omit to state a material fact required to be stated therein or necessary in order to make the statements therein made, in light of the circumstances under which they were made, not misleading. The Consolidated Government has reviewed the Preliminary Official Statement and consents to the use of the Official Statement by the Underwriter to offer and sell the Bonds. (e) It has duly and validly authorized all necessary action to be taken by it for: (1) the issuance and sale of the Bonds upon the terms set forth herein and in the Bond Resolution, (2) the passage and approval of the Bond Resolution providing for the issuance of and security for the Bonds (including the pledge by the Consolidated Government of the Net General Revenues and the PFC Revenues, in the case of the Series 2005A/B Bonds, and the Net General Revenues, in the case of the Series 2005C Bonds) and appointing SunTrust Bank, Atlanta, Georgia, as paying agent and bond registrar for the Bonds, (3) the execution, delivery, receipt, and due performance of this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and any and all such other agreements and documents as may be required to be executed, delivered, or received by the Consolidated Government in order to carry out, give effect to, and consummate the transactions contemplated hereby and by the Bond Resolution, -3- (4) the approval of the Preliminary Official Statement and the Official Statement and their use by the Underwriter in the public offering and sale of the Bonds and the execution of the Official Statement by the Mayor of the Consolidated Government or other authorized officials of the Consolidated Government, and (5) the carrying out, giving effect to, and consummation of the transactions contemplated hereby and by the Bond Resolution, the Disclosure Certificate, and the Official Statement. This Bond Purchase Agreement, when executed by the other parties hereto, will have been duly and validly executed and delivered by the Consolidated Government, will be in full force and effect as to the Consolidated Government, and will constitute the legal, valid, binding, and enforceable obligation of the Consolidated Government, enforceable in accordance with its terms. The Bonds, when issued, delivered, and paid for as herein and in the Bond Resolution provided, will have been duly and validly authorized and issued and will constitute valid and binding special or limited obligations of the Consolidated Government enforceable in accordance with their terms and provisions and entitled to the benefits and security of the Bond Resolution. Original executed counterparts of this Bond Purchase Agreement and the Disclosure Certificate, a certified copy of the Bond Resolution, and ten (10) manually executed counterparts of the Official Statement will be delivered to the Underwriter by the Consolidated Government at the Closing Time (as hereinafter defined). ' (f) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation at law or in equity or before or by any court, public board, or body pending or, to the knowledge of the Consolidated Government, after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government (or to its knowledge, after making due inquiry with respect thereto, any basis therefor), wherein an unfavorable decision, ruling,'or finding would adversely affect the transactions contemplated hereby or by the Official Statement, the levy or collection of any rates, fees, and other charges for the services and facilities furnished by the Airport, or the validity of the Bonds, this Bond Purchase Agreement, the Bond Resolution, the Disclosure Certificate, or any other agreement or instrument to which the Consolidated Government is a party or by which the Consolidated Government is bound and which is used or contemplated for use in the consummation of the transactions contemplated hereby or by the Official Statement or which might result in any material adverse change in the operations, properties, assets, liabilities, or condition (financial or other) of the Airport, or which affects the information contained in the Official Statement. (g) The Consolidated Government is not in material violation of its organic documents or any existing law and is not in violation of any material provision of or in breach of or default under any court or administrative regulation, decree, judgment, or order in any proceeding in which the Consolidated Government was a party, or any agreement, note, resolution, ordinance, indenture, mortgage, security deed, lease, indebtedness, lien, instrument, plan, or other restriction to which it is a party or by which it or its property is subject or bound, which materially and adversely affects the transactions contemplated hereby and by the Official Statement or the operations, properties, assets, liabilities, or condition (financial or other) of the Airport. The consent to the use of the Official Statement and the execution and delivery of this Bond Purchase -4- Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and the other agreements contemplated hereby and by the Bond Resolution and the compliance with the provisions thereof will not conflict with or violate or constitute on the Consolidated Government's part a breach of or a default under any of the restrictions described in the first sentence of this Section 2(g). No approval, authorization, consent, or other action by any governmental authority is required in connection with the execution and delivery by it of the Bonds, the Bond Resolution, the Disclosure Certificate, or this Bond Purchase Agreement, or in connection with the performance by it of its obligations hereunder or thereunder, which has not been previously obtained or accomplished. (h) The Consolidated Government has complied with all applicable laws, regulations, and requirements for the collection and expenditure of passenger facility charges ("PFC") as authorized by the Aviation Safety and Capacity Expansion Act of 1990, as amended, and all other applicable laws (collectively, the "PFC Enabling Acts"), and has obtained all requisite approvals, including but not limited to approval of the Federal Aviation Administration, for the imposition and use of the PFC proceeds for the portion of the Project to be financed with the proceeds of the Series 2005AIB Bonds. (i) The Consolidated Government will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Bond Resolution or which would cause the interest on the Bonds to become includable in the gross income of the owners thereof for federal income tax purposes. CD Any certificate signed by any of the Consolidated Government's authorized officials and delivered to the Underwriter shall be deemed a representation and warranty by the Consolidated Government to the Underwriter under this Bond Purchase Agreement as to the statements made therein. (k) The Consolidated Government will cooperate with the Underwriter in the qualification of the Bonds for offering and sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Underwriter shall designate; provided, however, the Consolidated Government shall not be required to register as a dealer or broker in any such jurisdiction, nor execute a general consent to service of process or qualify to do business in connection with any such qualification of the Bonds in any such jurisdiction. (I) The Consolidated Government will notify the Underwriter for the period from the date hereof until the expiration of 90 days after the End of the Underwriting Period (as determined in Section 9 hereof) of any material adverse change in the operations, properties, or condition (financial or other) of the Airport, and of any event which occurs and comes to the Consolidated Government's attention, which event materially and adversely affects the Consolidated Government or the transactions contemplated by the Official Statement and which would cause the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact which should be included therein for the purposes for which the Official Statement was to be used or which is necessary in order to make the statements therein, in light of the circumstances under -5- which they were made, not misleading, and, if in the opinion of the Underwriter, a change in the information contained in the Official Statement is required in order to make the statements therein made true and not misleading or to make the Official Statement comply with any applicable state securities law in connection with the offering of the Bonds, such change shall be made, and the corrected information shall be supplied to the Underwriter in sufficient quantity for distribution to the purchasers of the Bonds. If such change occurs subsequent to the Closing Time, the Consolidated Government shall furnish to the Underwriter such legal opinions, certificates, instruments, and documents as the Underwriter may reasonably request to evidence the truth and accuracy of such corrected information. Thereafter, this Bond Purchase Agreement shall refer to such corrected information. (m) Prior to the execution of this Bond Purchase Agreement, the Consolidated Government delivered to the Underwriter copies of the Preliminary Official Statement which the Consolidated Government "deemed final" as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended, except for the permitted omissions described in paragraph (b)(1) of Rule 15c2-12. There have been no instances in the previous five years in which the Consolidated Government failed to comply, in any material respects, with any previous undertakings in a written contract or agreement specified in Rule 15c2-12(b)(5)(i). (n) To the best knowledge of the Consolidated Government, no legislation, ordinance, resolution, rule, or regulation has been enacted by any governmental body, department, or agency of the State nor has any decision been rendered by any court of competent jurisdiction in the State, which would materially and adversely affect 'the transactions contemplated by the Official Statement. (0) Subsequent to the respective dates as of which information is given in the Official Statement, and prior to the Closing Date, except as set forth in or contemplated by the Official Statement, (1) the Consolidated Government has not incurred and shall not have incurred any material liabilities or obligations relating to the Airport, direct or contingent, except in the ordinary course of business, and has not entered and will not have entered into any material transaction relating to the Airport not in the ordinary course of business, (2) there has not been and will not have been any increase in the long-term debt payable from Net General Revenues or PFC Revenues or decrease in the fund equity of the fund of the Consolidated Government relating to the Airport, (3) there has not been and will not have been any material adverse change in the business or the financial position or results of operations of the Airport, (4) no loss or damage (whether or not insured) to the property of the Airport has been or will have been sustained which materially and adversely affects the operations of the Airport, and (5) no legal or governmental proceeding affecting the Airport or the transactions contemplated by this . Bond Purchase Agreement has been or will have been instituted or threatened which is material. (p) The Consolidated Government will furnish to the Underwriter, upon request, for so long as the Bonds remain outstanding, annual audited financial statements of the Airport as soon as such financial statements become available. -6- (q) The Rate Ordinance has been duly adopted by the Consolidated Government and is in full force and effect in the form in which it was adopted. No action has been taken or to the knowledge of the Consolidated Government is contemplated questioning the terms, conditions, validity, or legality of the Rate Ordinance. (r) As of the Closing Date, the Consolidated Government will have good and marketable title to the Airport, the owners of the Series 2005AIB Bonds will have a valid and effective first priority lien on the Net General Revenues and the PFC Revenues, and the owners of the Series 2005C Bonds will have a valid and effective first priority lien on the Net General Revenues. (s) The Consolidated Government has no reason to believe after review that the certifications, assumptions, and conclusions in the Report of the Airport Consultant dated , 2005 prepared by Ricondo & Associates, Inc. (the "Airport Consultant") included as Appendix A to the Official Statement, including the forecasts therefrom included in the body of the Official Statement, are not reasonable. The Consolidated Government believes that the 'capital construction program information, aviation activity data, and accounting and other financial documents furnished by the Consolidated Government to the Airport Consultant in connection with the preparation of the Report of the Airport Consultant are accurate in all material respects. Further, the Consolidated Government has no knowledge, after due inquiry, of any fact or circumstance that would have a material adverse effect on the assumptions, findings, projections, or conclusions in the Report of the Airport Consultant that the Consolidated Government has not disclosed to the Airport Consultant and the Underwriter; and (t) The Consolidated Government acknowledges and agrees that these representations and warranties are made to induce the Underwriter to purchase the Bonds, and that such representations and warranties and any other representations and warranties made by the Consolidated Government to the Underwriter are made for the benefit of the ultimate purchasers of the Bonds and may be relied upon by such purchasers. SECTION 3. PURCHASE, SALE, AND DELIVERY OF THE BONDS. On the basis of the representations, warranties, and covenants contained herein and in the other agreements referred to herein, and subject to the terms and conditions herein set forth, the Underwriter hereby agrees to purchase from the Consolidated Government at the Closing Time and the Consolidated Government hereby agrees to sell to the Underwriter at the Closing Time, (a) the Series 2005A Bonds at a price of % of the aggregate principal amount thereof ($ (consisting of the par amount of the Series 2005A Bonds less $ underwriting discount plus $ original issue premium)), (b) the Series 2005B Bonds at a price of % of the aggregate principal amount thereof ($ (consisting of the par amount of the Series 2005B Bonds less $ underwriting discount plus $ original issue premium)), and (c) the Series 2005C Bonds at a price of % of the aggregate principal amount thereof ($ (consisting of the par amount of the Series 2OO5C Bonds less $ underwriting discount plus $ original issue premium)). The Underwriter, in its discretion, may permit other securities dealers who are members of the National Association of Securities Dealers, Inc. to assist in selling the -7- Bonds. If the Underwriter permits other securities dealers who are members of the National Association of Securities Dealers, Inc. to assist in selling the Bonds, the Underwriter shall enter into a selected dealers agreement or selling agreement with such other securities dealers. The Bonds shall be issued under and secured as provided in the Bond Resolution, and the Bonds shall have the maturities and interest rates, be subject to redemption, and shall be otherwise as described and as set forth in the Bond Resolution and the Official Statement. Payment of the purchase price for the Bonds shall be made by wire in immediately available funds payable to the order of the Consolidated Government at the offices of Sutherland Asbill & Brennan LLP in Atlanta, Georgia, at 10:00 a.m., local time, on , 2005, or such other place, time, or date as shall be mutually agreed upon by the Consolidated Government and the Underwriter, against delivery of the Bonds to the Underwriter or the persons designated by the Underwriter. The date of such delivery and payment for the Bonds is herein called the "Closing Date," and the hour and date of such delivery and payment is herein called the "Closing Time." The delivery of the Bonds shall be made in definitive form bearing CUSIP numbers (provided neither the printing of a wrong CUSIP number on any Bond nor the failure to print a CUSIP number thereon shall constitute cause to refuse delivery of any Bond) and registered in the name(s) of such owner(s) as the Underwriter shall designate to' the Consolidated Government, at least forty-eight (48) hours prior to the Closing Time. The Bonds shall be available for examination and packaging at the offices of The Depository Trust Company in New York, New York by the Underwriter or its representatives at least twenty-four (24) hours prior to the Closing Time and at the Closing Time shall be delivered to the Underwriter or the persons designated by Underwriter. SECTION 4. CONDITIONS TO THE UNDERWRITER'S OBLIGATIONS. The Underwriter's obligations hereunder shall be subject to the due performance in all material respects by the Consolidated Government of its obligations and agreements to be performed hereunder at or prior to the Closing Time and to the accuracy of and compliance with in all material respects its representations and warranties contained herein, as of the date hereof and as of the Closing Time, and are also subject to receipt of the following evidence and documents and satisfaction of the following conditions, as appropriate, at or prior to the Closing Time: (a) The Bonds, the Bond Resolution, and the Disclosure Certificate shall have been duly authorized, executed, and delivered by the respective parties thereto in the forms heretofore approved by the Underwriter with only such changes therein as shall be mutually agreed upon by the parties thereto and the Underwriter, and shall be in full force and effect on the Closing Date. The Rate Ordinance shall be in full force and effect on the Closing Date. (b) There shall not have occurred, in the sole opinion of the Underwriter, any material adverse change, or any material adverse development involving a prospective change, in or affecting the business, condition (financial or other), results of operations, prospects, or properties of the Airport. -8- (c) At or before the Closing Time, the Underwriter shall receive: (1) The opinions, dated as of the Closing Date, of (A) Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP, counsel to the Consolidated Government, in substantially the form attached hereto as Exhibit A, (B) Sutherland Asbill & Brennan LLP, Bond Counsel, in substantially the forms attached hereto as Exhibit B, and (C) Kilpatrick Stockton LLP, counsel to the Underwriter, in substantially the form attached hereto as Exhibit C, all as may be in form and substance satisfactory to, and approved by, the Underwriter. (2) A closing certificate of the Consolidated Government, satisfactory in form and substance to the Underwriter, executed by the Mayor of the Consolidated Government, attested by the Consolidated Government Clerk, or any other of the Consolidated Government's duly authorized officials satisfactory to the Underwriter, dated as of the Closing Date, to the effect that: (A) the Consolidated Government has duly performed and satisfied hereunder or complied with all of its obligations and conditions to be performed and satisfied hereunder at or prior to the Closing Time and each of its representations and warranties contained herein have not been amended, modified, or rescinded and is in full force and effect and is true and correct in all material respects as of the Closing Time, (B) the Consolidated Government has duly authorized, by all necessary action, the execution, delivery, receipt, and due performance of the Bonds, the Bond Resolution, the Disclosure Certificate, this Bond Purchase Agreement, and any and all such other agreements and documents as may be required to be executed, delivered, received, and performed by the Consolidated Government to carry out, give effect to, and consummate the transactions contemplated hereby and by the Bond Resolution and the Official Statement, (C) there is no action, suit, proceeding, or inquiry or investigation at law or in equity or before or by any public board or body pending or, to his knowledge after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government or its property or, to his knowledge after making due inquiry with respect thereto, any basis therefor, wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated hereby or by the Bond Resolution or the validity or enforceability of the Bonds, the Bond Resolution, the Disclosure Certificate, or this Bond Purchase Agreement, which have not been previously disclosed in writing to the Underwriter and which is not disclosed in the Official Statement, (D) all information furnished to the Underwriter for use in connection with the marketing of the Bonds and the information contained in the Preliminary Official Statement and the Official Statement, including the information contained in Appendix A, were, as of the respective dates thereof and are as of the Closing Date, true in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, (E) the execution, delivery, receipt, and due performance of the Bonds, the Bond Resolution, the Disclosure Certificate, this Bond Purchase Agreement, and the other agreements contemplated hereby and by the Bond Resolution and the Official Statement -9- under the circumstances contemplated hereby and thereby and the Consolidated Government's compliance with the provisions thereof will not conflict with or be in violation of the Consolidated Government's organic documents or any existing law or court or administrative regulation, rule, decree, judgment, or order or conflict with or constitute on the Consolidated Government's part a breach of or a default under any agreement, note, indenture, mortgage, security deed, resolution, ordinance, lease, indebtedness, lien, plan, instrument, or other restriction to which the Consolidated Government is subject or by which the Consolidated Government is or may be bound, and (F) since the date hereof there has not been any material adverse change in the operations, properties, financial position, or results of operations of the Airport, whether or not arising from transactions in the ordinary course of business, other than as previously disclosed in writing to the Underwriter and as disclosed in the Official Statement, and except in the ordinary course of business, the Consolidated Government has not suffered or incurred any material liability relating to the Airport, other than as previously disclosed in writing to the Underwriter and as disclosed in the Official Statement. (3) A Comfort Letter and a Consent Letter, dated the date of the Official Statement, of Cherry, Bekaert & Holland; L.L.P., and a Bring-Down Letter, dated the Closing Date, of Cherry, Bekaert & Holland, L.L.P., in substantially the forms attached hereto as Exhibit D. (4) Letters confirming the BBB-lBaa3 ratings of Fitch Inc. and Moody's Investors Service, Inc., respectively, with respect to the Bonds. (5) A Consent Letter, dated the Closing Date, of the Airport Consultant, in substantially the form attached hereto as Exhibit E. (6) Such additional certificates and other documents, agreements, and opinions as the Underwriter and Underwriter's counsel may reasonably request to evidence performance of or compliance with the provisions hereof and the transactions contemplated hereby and by the Bond Resolution and the Official Statement, all such certificates and other documents to be satisfactory in form and substance to the Underwriter. All opinions shall be addressed to the Underwriter and may also be addressed to such other parties as the giver of such opinion agrees to. All certificates, if addressed to any party, shall also be addressed to the Underwriter. All such opinions, letters, certificates, and documents shall be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Underwriter and Underwriter's counsel, as to which both the Underwriter and Underwriter's counsel shall act reasonably. If any condition of the Underwriter's obligations hereunder to be satisfied prior to the Closing Time is not so satisfied, this Bond Purchase Agreement may be terminated by the Underwriter by notice in writing or by telegram to the Consolidated Government. The Underwriter may waive in writing compliance by the Consolidated Government of anyone or more of the foregoing conditions or extend the time for their performance. -10- SECTION 5. THE UNDERWRITER'S RIGHT TO CANCEL. The Underwriter shall have the right to cancel the Underwriter's obligations hereunder (and such cancellation shall not constitute a default of the Underwriter for purposes of this Bond Purchase Agreement) by notifying the Consolidated Government in writing or by telegram of its election so to do between the date hereof and the Closing Time, if at any time hereafter and prior to the Closing Time: (a) A committee of the House of Representatives or the Senate of the Congress of the United States of America (the "United States") shall have pending before it legislation, or a tentative decision with respect to legislation shall be reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported by such a committee or be introduced, by amendment or otherwise, in, or be passed by, the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted by the Congress of the United States, or an announcement or a proposal for any such legislation shall be made by a member of the House of Representatives or the Senate of the Congress of the United States, or a decision by a court established under Article III of the Constitution of the United States or the. Tax Court of the United States shall be rendered, or a ruling, regulation, or order of the Treasury Department of the United States or the Internal Revenue Service shall be made or proposed having the purpose or effect of imposing federal income taxation, or any other event shall have occurred which results in or proposes the imposition of federal income taxation, upon revenues or other income of the general character to be derived by state and local governmental units or by any similar body or upon interest received on obligations of the general character of the Bonds, which, in the Underwriter's sole opinion, materially and adversely affects the market price of the Bonds. (b) Any legislation, ordinance, resolution, rule, or regulation shall be introduced in or be enacted or imposed by any governmental body, department, or agency of the United States or of any state, or a decision by any court of competent jurisdiction within the United States or any state shall be rendered which, in the Underwriter's sole opinion, materially adversely affects the market price of the Bonds. (c) A stop order, ruling, regulation, or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering, or sale of obligations of the general character of the Bonds, or the 'issuance, offering, or sale of the Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in violation of any provisions of the federal securities laws, including without limitation the registration provisions of the Securities Act of 1933, as amended and as then in effect, or the registration provisions of the Securities Exchange Act of 1934, as amended and as then in effect, or the qualification provisions of the Trust Indenture Act of 1939, as amended and as then in effect. (d) Legislation shall be introduced by amendment or otherwise in, or be enacted by, the Congress of the United States, or a decision by a court of the United States shall -11- be rendered to the effect that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under or from other requirements of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or that the Bond Resolution is not exempt from qualification under or from other requirements of the Trust Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering, or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement. (e) Any event shall have occurred, or information becomes known, which, in the Underwriter's sole opinion, makes untrue in any material respect any statement or information furnished to the Underwriter by the Consolidated Government or the Bond Insurer for use in connection with the marketing of the Bonds or any material statement or information contained in the Preliminary Official Statement or the Official Statement as originally circulated contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; provided, however, that the Consolidated Government shall be granted a reasonable amount of time in which to cure any such untrue or misleading statement or information. (t) Additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange. (g) The New York Stock Exchange or any other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or a change to the net capital requirements of, the Underwriter. (h) A general banking moratorium shall have been established by federal, New York, or Georgia authorities. (i) A default has occurred with respect to the obligations of, or proceedings have been instituted under the federal bankruptcy laws or any similar state laws by or against, any state of the United States or any city or county located in the United States having a population in excess of one million persons or any entity issuing obligations on behalf of such a city, county, or state. (j) Any proceeding shall be pending, or to the knowledge of the Underwriter, threatened, to restrain, enjoin, or otherwise prohibit the issuance, sale, or delivery of the' Bonds by the Consolidated Government or the purchase, offering, sale, or distribution of the Bonds by the Underwriter, or for any investigatory or other proceedings under any federal or state securities laws or the rules and regulations of the National Association of Securities Dealers, Inc. relating to the issuance, sale, or delivery of the Bonds by the Consolidated Government or the purchase, offering, sale, or distribution of the Bonds by the Underwriter. -12- (k) A war involving the United States shall have been declared, or any conflict involving the armed forces of the United States shall have escalated, or any other national emergency relating to the effective operation of government or the financial community shall have occurred, which, in the Underwriter's sole opinion,. materially adversely affects the market price of the Bonds. (1) Fitch Inc. or Moody's Investors Service, Inc. shall withdraw their respective BBB-/Baa3 ratings on the Bonds prior to the Closing Time. SECTION 6. CONDITIONS OF THE CONSOLIDATED GOVERNMENT'S OBLIGATIONS. The Consolidated Government's obligations hereunder are subject to the Underwriter's performance of its obligations hereunder. The Underwriter represents that it is duly authorized to execute and deliver this Bond Purchase Agreement and that upon execution and delivery of this Bond Purchase Agreement by the other parties hereto, this Bond Purchase Agreement shall constitute a legal, valid, and binding agreement of the Under~riter enforceable in accordance with its terms. The Consolidated Government covenants to use its best efforts to accomplish, or cause to be accomplished, the conditions set forth herein to the Underwriter's obligations. To the extent to which the Consolidated Government is not in breach of this covenant, the Consolidated Government shall not be liable to the Underwriter for its lost profits, if any. SECTION 7. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS TO SURVIVE DELIVERY. All of the Consolidated Government's representations, warranties, and agreements shall remain operative and in full force and effect (unless expressly waived in writing by the Underwriter), regardless of any investigations made by the Underwriter or on its behalf, and shall survive delivery of the Bonds to the Underwriter and the resale by the Underwriter of the Bonds. SECTION 8. PA YMENT OF EXPENSES. Whether or not the Bonds are sold by the Consolidated Government, the Underwriter shall be under no obligation to pay any expenses incident to the performance of the Consolidated Government's obligations hereunder. Unless the Consolidated Government and the Underwriter otherwise agree, all costs incurred in connection with the issuance or attempted issuance of the Bonds and all expenses and costs to effect the authorization, preparation, issuance, delivery, distribution, and sale of the Bonds (including, without limitation, attorneys', consultants', and accountants' fees, bond registrar's and paying agent's fees, the expenses and costs for the preparation, printing, photocopying, execution, and delivery of the Bonds, the Bond Resolution, this Bond Purchase Agreement, the Disclosure Certificate, the Preliminary Official Statement and any amendments or supplements thereto, the Official Statement and any amendments or supplements thereto, and all other agreements and documents contemplated hereby, and the costs associated with all marketing activities and closing costs with respect to the Bonds, including travel, advertising, meals, and other miscellaneous disbursements) shall be paid by the Consolidated Government out of the proceeds of the Bonds or, if the Bonds are not sold by the -13- Consolidated Government or if the proceeds of the Bonds are not sufficient, shall be paid by the Consolidated Government. SECTION 9. DELIVERY AND USE OF OFFICIAL STATEMENT. The Consolidated Government authorizes the use and distribution of, and will make available, the Preliminary Official Statement and the Official Statement for the use and distribution by the Underwriter in connection with the sale of the Bonds. The Consolidated Government shall deliver, or cause to be delivered, to the Underwriter copies of the Preliminary Official Statement in sufficient quantity in order for the Underwriter to comply with Rule 15c2-12(b)(2) promulgated under the Securities Exchange Act of 1934. The Consolidated Government shall deliver, or cause to be delivered, to the Underwriter copies of the final Official Statement in sufficient quantity in order for the Underwriter to comply with Rule 15c2-12(b)(4) promulgated under the Securities Exchange Act of 1934, as amended, and the rules of the Municipal Securities Rulemaking Board, upon the earlier of (1) seven (7) business days after this Bond Purchase Agreement is executed and delivered or (2) the date which will allow such final Official Statement to accompany any confirmation that requests payment from any customer. The Underwriter shall promptly notify the Consolidated Government in writing of (a) the date which, in its opinion, is the "end of the underwriting period" within the meaning of Rule 15c2-12(e)(2) (''End of the Underwriting Period") and (b) whether the Underwriter delivered the Official Statement to a nationally recognized municipal securities information repository and, if so delivered, the date on which delivered. The Consolidated Government may request from the Underwriter from time to time, and the Underwriter shall provide to the Consolidated Government upon request, such information as may be reasonably required by the Consolidated Government in order to determine whether the End of the Underwriting Period has occurred. SECTION 10. INDEMNITY AND CONTRIBUTION. (a) To the extent permitted by applicable law, the Consolidated Government hereby agrees to indemnify and hold harmless the Underwriter, together with each officer and member of the Board of Directors of the Underwriter and each person who controls the Underwriter within the meaning of either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including, without limitation, fees and disbursements of counsel and other expenses incurred by them or either of them in connection with investigating or defending any loss, claim, damage, or liability or any suit, action, or proceeding, whether or not resulting in liability), joint or several, to which they or any of them may become subject under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable statute or regulation, whether federal or state, or at common law or otherwise, insofar as such losses, claims, damages, liabilities, costs, and expenses (or any suit, action, or proceeding in respect thereof) arise out of or are based upon any untrue or misleading statement or alleged untrue or misleading statement of a material fact contained in the Preliminary Official Statement or the Official Statement, including the information contained in Appendix A, or in any -14- amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading, provided, however, the Consolidated Government will not be liable in any such case to the extent that any such loss, claim, damage, liability, cost, or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished by the Underwriter specifically for use in connection with the preparation thereof. This indemnity agreement will be in addition to any liability which the Consolidated Government may otherwise have. (b) Promptly after receipt by any party entitled to indemnification under this paragraph of notice of the commencement of any suit, action, or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this paragraph, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this paragraph or from any liability under this paragraph unless the failure to provide notice prejudices the defense of such suit, action, or proceeding. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indeninifying party shall be entitled, but not obligated, to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party, promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be legal defenses available to it or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party shall not be liable to such indemnified party under this paragraph for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel representing the indemnified parties under this paragraph who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (Hi) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (Hi). (c) The Consolidated Government shall not be liable for any settlement of any such action effected without its consent, but if settled with its consent, the Consolidated Government agrees to indemnify and hold the Underwriter, such officer or director, or such controlling person harmless from and against any loss or liability, including reasonable legal and other expenses -15- incurred in connection with the defense of the action, by reason of such settlement to the extent of the indemnification provided for in paragraph (a). (d) In the event and to the extent that any indemnified party is entitled to indemnification from the Consolidated Government under the terms of paragraph (a) above in respect of any of the losses, claims, damages, liabilities, costs, or expenses referred to therein, but such indemnification is unavailable to such indemnified party in respect of any such losses, claims, damages, liabilities, costs, or expenses due to such indemnification being impermissible under applicable law or otherwise, then the Consolidated Government shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, costs, or expenses in such proportion as is appropriate to reflect the relative benefits received by the Consolidated Government and such indemnified party, respectively, from the offering of the Bonds, the relative fault of the Consolidated Government and such indemnified party, respectively, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities, costs, or expenses, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact related to information supplied by the Consolidated Government or the indemnified party and the relative intent, knowledge, access to-information, and opportunity to correct or prevent such statement or omission of the Consolidated Government or the indemnified party. The Consolidated Government and the Underwriter, respectively, agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above in this paragraph (d). The amount paid or payable by any indemnified party as a result of the losses, claims, damages, liabilities, costs, or expenses referred to above in this paragraph (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with defending any such action or claim. This paragraph (d) shall not apply in the event of losses, claims, damages, liabilities, costs, or expenses caused by or attributable to the willful misconduct or gross negligence of an indemnified party. Notwithstanding anything to the contrary contained in this paragraph (d), it is understood and agreed that this paragraph (d) is not intended, and shall not be construed, to expand, broaden, or increase in any way, whether in terms of scope, amount, or otherwise, the liability of the Consolidated Government in respect of any of the losses, claims, damages, liabilities, costs, or expenses referred to in paragraph (a) or otherwise, as that liability is set forth in paragraph (a) above. SECTION 11. NOTICES. Any notice or other communication to be given to the Consolidated Government under this Bond Purchase Agreement may be given by mailing or delivering the same in writing to Augusta, Georgia, 530 Greene Street, Augusta, Georgia 30911, Attention: Consolidated Government Administrator, and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by mailing or delivering the same in writing to Merrill Lynch & Co., Inc., 4 World Financial Center, 9th Floor, New York, New York 10080, Attention: Michael L. Wheet. -16- SECTIo.N 12. APPLICABLE LAW; NONASSIGNABILITY. This Bond Purchase Agreement shall be governed by the laws of the State. This Bond Purchase Agreement shall not be assigned by the Consolidated Government. SECTION 13. PARTIES IN INTEREST. This Bond Purchase Agreement shall be binding upon, and has been and is made for the benefit of, the Consolidated Government ilnd the Underwriter, and to the extent expressed, any person controlling the Underwriter and their respective executors, administrators, successors, and assigns, and no other person shall acquire or have any right or interest under or by virtue hereof. The term ",successors and assigns" shall not include any purchaser, as such, of any Bond. SECTION 14. EXECUTION OF COUNTERPARTS. This Bond Purchase Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Accepted as of the date first above written: AUGUSTA, GEORGIA By: Mayor, Augusta-Richmond County Commission Very truly yours, MERRILL LYNCH & CO., INC. as Underwriter By: Authorized Officer -17- ,J $ ei r ~~ ..{ ~% VI w.. i 6 0<J4,/' ~ .~ c:::o r) t ~ _ ~ -0 :t: ~ l~ ~ ~ I~ 1~ 1 ~ cu sJ 'r> 'b~ ~~ ~ I 4- 'A .......-:1 J ~ EXHIBIT A Form of Consolidated Government's Counsel Opinion [Attached] [Letterhead of Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP] , 2005 Merrill Lynch & Co., Inc. New York, New York Sutherland, Asbill & Brennan LLP Atlanta, Georgia Re: $7,425,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $8,000,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,565,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005e (AMT) Ladies and Gentlemen: We have acted as counsel to Augusta, Georgia (the "Consolidated Government") preliminary to and in connection with the issuance and sale by the Consolidated Government of the above-captioned bonds (the "Bonds"). In so acting, we have examined, among other things, Paragraph I of Section VI of Article IX of the Constitution of the State of Georgia, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, Acts of the General Assembly of the State of Georgia (1995 Ga. Laws 3648 to 3675, inclusive, as amended by 1996 Ga. Laws 3607 to 3608, inclusive, 1997 Ga. Laws 4024 to 4025, inclusive, 1997 Ga. Laws 4690 to 4693, inclusive, 1999 Ga. Laws 4143 to 4145, inclusive, and 2002 Ga. Laws 3769 to 3782, inclusive) (collectively the "Consolidation Act"), and originals, executed counterparts, or certified copies of the following: 1. The proceedings, including a Master Bond Resolution adopted by the Augusta-Richmond County Commission (the "Commission") on , 2005 and by the Augusta Aviation Commission (the "Aviation Commission") on , 2005, as ratified, reaffirmed, supplemented, and amended by Supplemental Bond Resolutions adopted by the Commission and the Aviation Commission on , 2005 and , 2005 (collectively the "Bond Resolution"), authorizing, among other things, the issuance and delivery of the Bonds and the execution, delivery, receipt, and approval of a Bond Purchase Agreement (the "Bond Purchase Agreement"), dated February _, 2005, between the Consolidated Government and Merrill Lynch & Co., Inc. (the "Underwriter"), a Preliminary Official Statement dated January 18, 2005 (the "Preliminary Official Statement"), and an Official Statement dated February _, 2005 (the "Official Statement"). Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP ,2005 Page 2 2. The Bond Purchase Agreement, the Preliminary Official Statement, and the Official Statement and a specimen Bond. 3. An ordinance (the "Rate Ordinance") adopted by the Commission on November 4,2004, requiring the Aviation Commission to establish rates, rents, fees, and other charges for airlines operating at Augusta Regional Airport at Bush Field (the "Airport"). Based upon the foregoing and an examination of such other information, papers, and documents as we believed necessary or advisable to enable us to render this opinion, we are of the opinion, as of the date hereof, that; 1. The Consolidated Government is a political subdivision of the State of Georgia duly created and validly existing under and by virtue of the Constitution and laws of the State of Georgia, and a consolidated city-county government created on January I, 1996 pursuant to the Consolidation Act. The Consolidated Government has all of the governmental and corporate powers of both municipal corporations and counties under Georgia law, including all requisite power and authority to adopt the Bond Resolution and perform its obligations thereunder, to issue, sell, and deliver the Bonds, to enter into and perform its obligations under the Bond Purchase Agreement, to execute and deliver the Official Statement to the Underwriter for distribution to the general public in connection with the offering by the Underwriter of the Bonds, and to secure the Bonds as provided in the Bond Resolution. 2. The Consolidated Government has taken all action legally required to authorize the issuance, sale, and delivery of the Bonds and has duly authorized the adoption and performance of the Bond Resolution, the execution, delivery, and performance of the Bond Purchase Agreement and the approval of the Official Statement. 3. The adoption by the Consolidated Government of the Bond Resolution, the authorization by the Consolidated Government of the Official Statement, the issuance and delivery by the Consolidated Government of the Bonds, the execution and delivery by the Consolidated Government of the Bond Purchase Agreement and the other agreements and documents described in the Bond Purchase Agreement, and the performance by the Consolidated Government of its obligations under and the consummation of the transactions described in all of the foregoing instruments and documents do not and will not conflict with or constitute, on the part of the Consolidated Government, a breach or violation of or default under, any of the terms and conditions of the Consolidation Act, any existing constitution, statute, law, or court or administrative rule or regulation, decree, order, or judgment to which the Consolidated Government is subject or by which Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP ,2005 Page 3 the Consolidated Government or any of its properties is bound or any agreement, indenture, mortgage, lease, security deed, note, resolution, ordinance, contract, commitment, or other instrument or agreement to which the Consolidated Government is a party or by which the Consolidated Government or any of its properties is bound. 4. Each of the officials of the Consolidated Government was on the date of execution of each of the instruments relating to the Bonds, was on the date of the execution of the Bonds, and is on the date hereof the duly elected or appointed qualified incumbent of his or her office of the Consolidated Government. 5. The notices given prior to the meetings of the Commission and the Aviation Commission at which the Bond Resolution was adopted comply with the applicable notice requirements of Georgia law, and such meetings were conducted in accordance with the applicable requirements of Georgia law. 6. Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation, at law or in equity, by or before any court or public board or body pending or, to the best of our knowledge and belief, after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government, nor to our knowledge is there any basis therefor, which .in any way questions the creation or existence of the Consolidated Government referred to in Section 2(a) of the Bond Purchase Agreement or the powers of the Consolidated Government referred to in Section 2(b) of the Bond Purchase Agreement, or the validity of the proceedings resulting in the issuance and delivery of the Bonds, or which might result in a material adverse change in the condition (financial or other), business, or affairs of the Airport, or wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated by the Bond Purchase Agreement or which in any way would adversely affect the validity or enforceability of the Bonds, the Bond Resolution, the Bond Purchase Agreement, or any other agreement or instrument to which the Consolidated Government is a party and which is used or contemplated for use in connection with the consummation of the transactions contemplated by the Bond Purchase Agreement or which in any way would adversely affect the setting, charging, or collection of any rates, fees, and other charges for the services and facilities furnished by the Airport. 7. All permits, consents, permissions, approvals, or licenses and authorizations or orders of any court or governmental or regulatory bodies that are required to have been obtained as of the date hereof by the Consolidated Government in connection with the ownership and operation of Airport or any part thereof, as contemplated by the Official Statement, the issuance, sale, and delivery of the Bonds, the adoption, execution, delivery, and Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP ,2005 Page 4 performance of the Bond Resolution, the Bond Purchase Agreement, and the consummation of the transactions contemplated by the Official Statement have been duly obtained and remain in full force and effect. We have no reason to believe, after making due inquiry, that the Consolidated Government will not be able to maintain all such permits, consents, permissions, approvals, and licenses described in the preceding sentence or to obtain all such additional permits, consents, permissions, approvals; or licenses and authorizations or orders of any court or governmental or regulatory bodies as may be required on or prior to the date the Consolidated Government is legally required to obtain the same. Except as disclosed in the Official Statement, no additional or further approval, consent, permission, authorization, or order of any court or any governmental or public agency or authority not already obtained is required by the Consolidated Government as of the date hereof in connection with the ownership and operation of the Airport or any part thereof, as contemplated by the Official Statement, the issuance, sale, and delivery of the Bonds, or the adoption, execution, delivery, and performance of the Bond Purchase Agreement, or the Bond Resolution. The opinion expressed in this paragraph 7 shall not extend to or otherwise cover any approvals that may be required by any federal or state securities laws. 8. The Bond Resolution has been duly adopted by the Consolidated Government, is in full force and effect in the form in which it was adopted, and constitutes the valid, binding, and legally enforceable obligation of the Consolidated Government according to its import. The Bond Purchase Agreement has been duly authorized, executed, and delivered by the Consolidated Government and are in full force and effect and constitute the valid, binding, and legally enforceable obligations of the Consolidated Government according to their import. The Bonds have been duly authorized, executed, issued, and delivered by the Consolidated Government and, assuming the due authentication thereof by SunTrust Bank, Atlanta, Georgia, as bond registrar, constitute the valid and legally binding special or limited obligations of the Consolidated Government, are entitled to the benefit and security of the Bond Resolution, and are enforceable in accordance with their terms. 9. The Bonds and the security therefor have been validated by the Superior Court of Richmond County, and no valid intervention or objection was raised and no appeals are pending with respect to such validation. 10. The Official Statement has been duly authorized, executed, and delivered by the Consolidated Government, and the Consolidated Government has duly approved the use Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP ,2005 Page 5 of the Preliminary Official Statement and the Official Statement by the Underwriter in connection with the offering of the Bonds. 11. As general counsel to the Consolidated Government, we have rendered legal advice and assistance to the Consolidated Government in the course of the financing. Such assistance involved, among.. other things, discussions and inquiries concerning various legal matters and review of various documents relating to the offering and the preparation of the Preliminary Official Statement and the Official Statement and participation in conferences during which the contents of the Preliminary Official Statement and the Official Statement and related matters were. discussed and reviewed. To the best of our knowledge, after making due inquiry with respect thereto, the statements contained in the Preliminary Official Statement and the Official Statement under the captions "INTRODUCTION - The Consolidated Government, The Aviation Commission, and - The Airport," "PLAN OF FINANCING - The 2005 Project," "THE CONSOLIDATED GOVERNMENT - Introduction and - Consolidated Government Administration and Officials," "THE AVIATION COMMISSION - Introduction and - Aviation Commission Administration and Officials," "THE AIRPORT - Introduction, - Airport Facilities, - Air Trade Area, - Competition, - Airlines Providing Service, - Aviation Activity, - Origin and Destination Information, - Airline and Other Revenue Sources, and - Employees, Employee Relations, and Labor Organizations," "AIRPORT FINANCIAL INFORMATION - Insurance Coverage," and "LEGAL MAITERS - Pending Litigation and - Validation Proceedings" (other than the financial and statistical data included therein, as to which we express no view) are accurate statements or summaries of the matters set forth therein and fairly represent the information purported to be shown and do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. In addition, while we do not pass upon or assume responsibility for the accuracy, completeness, or fairness of the Preliminary Official Statement or the Official Statement (other than the opinion given in the preceding sentence), nothing has come to our attention which leads us to believe that any portions of the Preliminary Official Statement or the Official Statement contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 12. To the best of our knowledge and belief, after making due inquiry with respect thereto, the Consolidated Government has never issued, assumed, guaranteed, or otherwise become liable in respect of any bonds, notes, or other obligations which are presently Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP ,2005 Page 6 outstanding and which are secured in any manner by the Airport or by the revenues to be received from the ownership and operation thereof, other than as set forth in the Bond Resolution or the Official Statement, and the Consolidated Government has not entered into or issued any instrument, resolution, ordinance, agreement, mortgage, security agreement, indenture, contract, or arrangement of any kind which might, on or after the date hereof, give rise to any lien or encumbrance on the Airport or the revenues derived from the ownership and operation thereof, other than as described in the Official Statement or the Bond Resolution. 13. The Rate Ordinance has been duly adopted by the Consolidated Government and is in full force and effect in the form in which it was adopted. No action has been taken or to our knowledge is contemplated questioning the terms, conditions, validity, or legality of the Rate Ordinance. The foregoing opinions are qualified to the extent that the enforceability of the Bonds, the Bond Resolution, or the Bond Purchase Agreement might be limited by (i) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights generally heretofore or hereafter enacted to the extent of their enforcement, (ii) judicial discretion in the application of principles of equity, and (iii) the valid exercise of the sovereign police powers of the State of Georgia and its governmental bodies and the constitutional powers of the United States of America. The foregoing opinions are also qualified to the extent that any rights to indemnity or contribution contained in the Bond Purchase Agreement might be limited by applicable law. No opinion is given as to the tax-exempt status of the Bonds or the interest thereon. No opinion is given concerning the requirement for registration of the Bonds under the securities laws of any state or the Securities Act of 1933, as amended, nor is an opinion given concerning qualification of any document under the Trust Indenture Act of 1939, as amended. Very truly yours, SHEPARD, PLUNKETT, HAMILTON, BOUDREAUX & TISDALE, LLP By: Partner EXHIBIT B Forms of Bond Counsel Opinions [Attached] [Letterhead of Sutherland Asbill & Brennan LLP] , 2005 Merrill Lynch & Co., Inc. New York, New York Re: $7,425,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $8,000,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,565,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005C (AMT) Ladies and Gentlemen: This opinion is being delivered to you pursuant to Section 4(c)(1)(C) of the Bond Purchase Agreement, dated February _, 2005, between you and Augusta, Georgia (the "Consolidated Government") relating to the above-referenced bonds (the "Bonds"). We have acted as Bond Counsel in connection with the issuance of the Bonds, and reference is hereby made to our approving opinion of even date herewith addressed to the Consolidated Government and delivered to you concurrently herewith. You may rely upon such opinion as if the same were addressed to you. In connection with the issuance of the Bonds, we have examined the following: (a) the proceedings, documents, and papers described in our opinion of even date herewith addressed to the Consolidated Government; (b) the Preliminary Official Statement, dated January _, 2005 (the "Preliminary Official Statement"), and the Official Statement, dated February _, 2005 (the "Official Statement"), relating to the Bonds; and (c) such other information, papers, and documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In our examination of the aforesaid proceedings and documents, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, the authenticity of the originals of such latter documents, and the correctness of any facts stated in all of such documents. Based upon the foregoing we are of the opinion that the statements in the Preliminary Official Statement and in the Official Statement under the headings "INTRODUCTION Merrill Lynch & Co., Inc. ,2005 Page 2 - Security and Sources of Payment for the Series 2005 Bonds, - Description of the Series 2005 Bonds (except for the statements under the headings "Book-Entry Bonds" and "Payments"), - Tax Exemption, and - Legal Authority," "THE SERIES 2005 BONDS - Description, - Redemption, - Legal Authority, and - Investments," "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS," and "LEGAL MATIERS - Opinion of Bond Counsel and - Original Issue Discount and Premium," and in "APPENDIX C: SUMMARY OF THE BOND RESOLUTION," insofar as such statements constitute summaries of the matters set forth therein, constitute fair and accurate summaries of the matters purported to be summarized; but no further opinion is expressed with respect to the accuracy, completeness, or sufficiency of the Preliminary Official Statement or the Official Statement nor is any opinion expressed with respeot to compliance by the Consolidated Government or any other person with any federal or . state statute, regulation, or ruling with respect to the sale or distribution of the Bonds. We have acted as Bond Counsel in connection with the issuance of the Bonds and, as such, have reviewed only those documents, opinions, certificates, and proceedings necessary to enable us to render our opinion to the Consolidated Government of even date herewith as to the legality and validity of the Bonds and the tax-exempt status of the interest on the Bonds. We have not prepared or reviewed the Preliminary Official Statement or the Official Statement and have not undertaken to check or confirm the accuracy or completeness of, or verified the information contained in, the Preliminary Official Statement or the Official Statement except to the extent necessary to render the opinion set forth above. This opinion is limited to the matters expressly set forth herein, and no opinion is to be inferred or may be implied beyond the matters expressly'so stated. The opinions expressed herein are made only as of the date of this letter. We do not assume responsibility for updating this opinion as of any date subsequent to the date of this letter, and assume no responsibility for advising you of any changes with respect to any matters described in this letter that may occur subsequent to the date of this letter, whether such changes result from events occurring subsequent to the date of this letter or from the discovery subsequent to the date of this letter of information not previously known to us pertaining to events occurring prior to the date of this letter. Very truly yours, SUTHERLAND ASBILL & BRENNAN LLP By: Partner EXHffiIT C Form of Underwriter's Counsel Opinion [Attached] [Letterhead of Kilpatrick Stockton LLP] ,2005 Merrill Lynch & Co., Inc. New York, New York Re: $7,425,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $8,000,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,565,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005C (AMT) Ladies and Gentlemen: We have acted as your counsel in connection with your acting as underwriter on a "firm commitment" basis for the above-captioned bonds (the "Bonds"). In so acting, we have examined originals, executed counterparts, or certified copies of the following: (a) the Master Bond Resolution adopted by the Augusta-Richmond County Commission (the "Commission") on , 2005 and by the Augusta Aviation Commission (the "Aviation Commission") on , 2005, as ratified, reaffirmed, supplemented, and amended by Supplemental Bond Resolutions adopted by the Commission and the Aviation Commission on , 2005 and , 2005 (collectively the "Bond Resolution"), (b) the Bond Purchase Agreement, dated February _,2005 (the "Bond Purchase Agreement"), between Augusta, Georgia (the "Consolidated Government") and Merrill Lynch & Co., Inc., (c) the Preliminary Official Statement, dated January _, 2005 (the "Preliminary Official Statement"), relating to the Bonds, (d) the Official Statement, dated February _, 2005 (the "Official Statement"), relating to the Bonds, (e) the Continuing Disclosure Certificate (the "Disclosure Certificate"), dated the date hereof, of the Consolidated Government, (t) a transcript of the proceedings of the Consolidated Government relating to the authorization, issuance, and delivery of the Bonds, and Merrill Lynch & Co., Inc. ,2004 Page 2 (h) the opinions and certificates required to be deli vered pursuant to the Bond Purchase Agreement. In all such examinations, we have assumed the authenticity of aU documents submitted to us as original documents and the authenticity of originals and conformity to original documents of all documents submitted to us as certified, conformed, or photostatic copies. We have assumed, but not independently verified, that the signatures on aU documents and certificates that we have examined are genuine, and, as to certificates, we have assumed the same to be properly given and to be accurate. We are not expressing any opinion or views on the authorization, issuance, delivery, or validity of the Bonds. Based upon the foregoing and an examination of such other information, papers, and documents as we believe necessary or advisable to enable us to render this opinion, we are of the opinion, as of the date hereof, as follows: 1. The Bonds are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and the Bond Resolution is exempt from qualification under Section 304(a)(4) of the Trust Indenture Act of 1939, as amended (the "1939 Act"), to the extent provided in such Acts, respectively, and it is not necessary in connection with the offer and sale of the Bonds to the public to register the Bonds under the 1933 Act, or to qualify the Bond Resolution under, or to issue the Bonds under any indenture qualified under, the 1939 Act. 2. The Bonds are exempted from the registration provisions of the Georgia Securities Act of 1973 by virtue of Section 10-5-8(1) thereof. 3. The Bonds are covered securities within the meaning of Section 18(b)(4)(C) of the 1933 Act, to the extent provided in the 1933 Act, and it is not necessary in connection with the offer and sale of the Bonds to the public to register or qualify the Bonds under the securities or "Blue Sky" laws of any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or any other possession of the United States, or any political subdivision thereof. 4. The Disclosure Certificate complies as to form with the requirements of Rule 15c2- 12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended. Because the primary purpose of our professional engagement as counsel to you was not to establish factual matters and because of the wholly or partially nonlegal character of many determinations involved in the preparation of the Preliminary Official Statement and the Official Statement, we are not passing upon and do not assume any responsibility for the accuracy, Merrill Lynch & Co., Inc. ,2004 Page 3 completeness, or fairness of the statements contained in the Preliminary Official Statement or the Official Statement, and we have not independently verified the accuracy, completeness, or fairness of such statements. Nevertheless, we have rendered legal advice and assistance to you in the course of the offering and sale of the Bonds, the preparation of the Preliminary Official Statement and the Official Statement, and your investigation of Augusta Regional Airport at Bush Field (the "Airport"). Such assistance involved, among other things, discussions and inquiries concerning various legal matters, the review of the documents referred to above, and discussions with you and with representatives of the Consolidated Government, its counsel, Bond Counsel, Ricondo & Associates, Inc., the Airport Consultant, and Cherry, Bekaert & Holland, L.L.P., auditors for the Airport, in connection with the preparation of the Preliminary Official Statement and the Official Statement and your investigation of the Airport. We have obtained and reviewed the certificates as to factual matters and the legal opinions from these parties and their counsel in regard to the Preliminary Official Statement and the Official Statement and certain information contained therein, which are required to be delivered to you pursuant to the Bond Purchase Agreement. The performance of the services referred to above, the discussions referred to above, and our examination of the factual certifications and legal opinions referred to above did not disclose to us any information which would lead us to believe that the Preliminary Official Statement or the Official Statement (other than the financial statements and related notes and other financial and statistical data included therein, as to which we express no view) contains any untrue statement of a material fact or omits to state a material fact required to be stated or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. We have reviewed the opinions, dated today, of Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP, Augusta, Georgia, counsel to the Consolidated Government, and Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel, furnished to you in accordance with the provisions of the Bond Purchase Agreement. Such opinions are appropriately responsive to the requirements of the Bond Purchase Agreement. The opinions set forth in paragraphs 2 and 3 above are subject to the existence of broad discretionary powers vested in the administrative authorities administering the securities or "Blue Sky" laws in the jurisdictions named in paragraphs 2 and 3, authorizing them, among other things, to withdraw exemptions accorded by statute, to impose additional requirements, to refuse registration, or to issue stop orders. This opinion does not purport to cover the requirements under the laws of any jurisdiction with respect to the registration or licensing of dealers, brokers, or salesmen, the form or substance of advertising materials or the filing ~equirements applicable thereto, or the legality of Merrill Lynch & Co., Inc. ,2004 Page 4 investments in the Bonds by any institutional investor which is subject to statutory or other restrictions as to its investments. We are members of the State Bar of Georgia. Our opinions herein are limited to the laws of the State of Georgia and any applicable federal laws of the United States. We expressly disclaim any duty to update this opinion in the future for any changes of fact or law which may affect any of the opinions expressed herein. As legal counsel to you, we are furnishing this letter to you solely for your benefit and not for dissemination in connection with the offer and sale of the Bonds. This opinion is limited to the matters expressly set forth above, and no opinion is implied or may be inferred bey'?nd the matters expressly so stated. Very truly yours, KILPA TRICK STOCKTON LLP By: Partner EXIDBIT D Forms of Comfort Letter, Consent Letter, and Bring-Down Letter [Attached] EXHIBIT E Form of Consent Letter of Airport Consultant [Attached] [Letterhead of Ricondo & Associates, Inc.] ,2005 Augusta, Georgia 530 Greene Street Augusta, Georgia 30911 Merrill Lynch & Co., Inc. 4 World Financial Center, 9th Floor New York, New York 10080 Re: $7,425,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $8,000,000 Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $6,565,000 Augusta, Georgia Airport General Revenue Bonds, Series 2005C (AMT) Ladies and Gentlemen: The undersigned consents to the inclusion in the Preliminary Official Statement dated January _, 2005 (the "Preliminary Official Statement") and the Official Statement dated February _, 2005 (the "Official Statement"), relating to the above-captioned bonds, of our report dated 2005. In addition, the undersigned consents to the references to our firm under the captions "INTRODUCTION - Professionals Involved in the Offering," "AIRPORT FINANCIAL INFORMATION - Forecasted Debt Service Coverage Ratios," and "MISCELLANEOUS - Independent Professionals" in the Preliminary Official Statement and the Official Statement. Very truly yours, RICONDO & ASSOCIATES, INC. By: Michael G. Moroney Vice President APPENDIX B Augusta Regional Airport Augusta Aviation Commission Revenue Bonds, Series 2005 REPORT OF THE AIRPORT CONSULTANT Ricondo & Associates, Inc. 36 East Fourth Street, Suite 1206 Cincinnati, OR 45202 513.651.4700 (telephone) 513.412.3570 (facsimile) Rating Agency Om!: Ricondo &: Associates 11/29104 [This page intentionally left blank] ~~~~ 0000 I., ~~...,.;.\,.; ,." RleON~~ & A$$OCIAre.s November 29, 2004 Mr. Willis Boshears Executive Director City of Augusta Augusta Aviation Commission 1501 Aviation Way Augusta, Georgia 30906 Re: Augusta Aviation Commission Airport Passenger Facility Charge and General Revenue Bonds, Series 200SA (Non-AMI) & 200SB (AMI) Airport General Revenue Bonds, Series 200SC (AMI) Appendix A: Report of the Airport Consultant Mr. Boshears: This report sets forth fmdings, assumptions, and projections of the air traffic and fmancial analyses developed by Ricondo & Associates, Inc. (R&A), in conjunction with the planned issuance by Augusta, Georgia (the Consolidated Government) of its Airport Passenger Facility Charge and General Series 2005 Revenue Bonds (Series 2005 Bonds) for the Augusta Regional Airport (Airport) owned by the Consolidated Government and operated by the Augusta Aviation Commission (the Aviation Commission). This report is intended for inclusion in the Official Statement for the Series 2005 Bonds as Appendix B: Report of the Airport Consultant. The Series 2005 Bonds will provide funds, along with other available funds of the Consolidated Government, to fund the Capital Improvement Program (CIP) mown as the 2005 Project, and to pay costs of issuance of the Series 2005 Bonds. The 2005 Project is comprised of components of the Aviation Commission's Terminal Building Project as well as two other projects at the Airport - Runway 8-26 Rehabilitation and Taxiway E Crack Sealing. This report includes examinations of the underlying economic base of the Air Trade Area (as defmed in this report) for the Airport, historical and projected air traffic activity at the Airport; a description of existing .Airport facilities; and projected revenues and expenses, with consideration for the anticipated impacts of the CIP through 2012. On the basis of the assumptions and analyses described in this report, R&A is of the opinion that Net.Revenues of the Airport will be adequate to meet the Aviation CQmmission's rate covenant, 36 EAST FOURTH STREET, SUITE 1206, CINCINNATI, OHIO 45202 Telephone (513) 651-4700 Facsimile (513) 412.3570 CHICAGO. CINCINNATI. MIAMI. SAN ANTONIO. SAN FRANCISCO . WASHINGTON, D.C. Mr. Willis Boshears Augusta Aviation Commission November 29, 2004 Page 2 as set forth in the Master Bond Resolution adopted by the Augusta Richmond County Commission on ,2004 and by the Aviation Commission on .2004 (the Bond Resolution), during the projection period 2007 (first year of debt service repayment) through 2012. Additional fmdings of these analyses include the following: Economic Base · Population growth in the Air Trade Area between "1990 and 2003 was equal to that experienced nationwide yet lower than that experienced by the GAlSC Region (as defIned in this report). Population growth in the Air Trade Area is projected to be lower than that for the GAlSC Region and the nation, yet steady through at least 2010. · Per capita effective buying income (EBI) for the Air Trade Area increased at a rate that was equal to that for the GAlSC Region and higher than that for the nation between 1998 and 2003. According to Sales and Marketing Management magazine, continued strong growth in per capita EBI for the Air Trade Area is expected between 2003 and 2008. · Although average annual unemployment rates for the Air Trade Area were higher than those for the GAlSC Region and the nation between 1993 and 2001, they were equal to or lower than the GAlSC Region and the nation in 2002 and 2003. · Nonagricultural employment in the Air Trade Area increased at a compounded annual growth rate of 0.7 percent between 1993 and 2003, compared to 1.6 percent nationwide during this same period. Information and transportation / utilities were the highest growing sectors in the Air Trade Area during this period. · The Air Trade Area offers a variety of cultural, recreational, and educational resources and activities. · The economic base of the Air Trade Area is diversified and capable of supporting increased demand for air travel at the Airport through the projection period. Air Traffic · With the discontinuation of ExpressJet service on October 30, 2004, the Airport has scheduled passenger service provided by two regionals/commuters - US Airways Express and Atlantic Southeast Airlines (ASA). Since Delta's replacement of mainline service .with its regional carrier in December 2000, there has been no service by B-4 Mr. Willis Boshears Augusta Aviation Commission ~ovember29,2004 Page 3 major/national carriers with the exception of limited service during the month of April to serve demand generated by the Masters GolfTournarnent. · As of ~ovember 2004, daily nonstop service is provided to two cities with a total of sixteen daily flights, with nine daily nonstop flights to Atlanta and seven daily nonstop flights to Charlotte. · Total enplanements at the Airport are expected to reach pre-September II, 2001 levels by 2006/2007. Total enplanements are projected to increase from 162,946 in 2003 to approximately 201,800 in 2007, a compounded annual growth rate of 6.7 percent during this period. Much of this increase can be attributed to the 15 percent increase from 2003 to 2004. Following this recovery from the effects of September 11,2001 (September 11) and the economic recession as well as a higher percentage of flights serving the Airport, total enplanements are projected to further increase to 232,100 in FY 2012. The increase between FY 2007 and FY 2012 represents a compounded annual growth rate of 2.8 percent, compared to 3.6 percent projected for the nation by the FAA. This compounded annual growth rate in enplanements for the remainder of the projection period is consistent with long-term historical growth at the Airport when enplanements are correlated with local socioeconomic factors. Financial Analyses · The 2005 Project is feasible in terms of providing modem facilities to serve customer needs at a cost that will produce reasonable levels of rates and charges to the users of the Airport facilities. · Cost per enplanement for the Passenger Airlines is projected to increase from $5.93 in 2004 to approximately $6.70 in 2007, the year in which the 2005 Project is completed. Cost per enplanement is projected to decrease to $6.32 in 2008 and is projected to increase to $6.72 in 2012. · Projected airline rates artd charges together with other Aviation Commission revenues are sufficient to ensure that all Operation and Maintenance (O&M) Expenses, debt service and fund deposit requirements can be generated through reasonable user fees. Starting in 2007, the first year in which debt service will be repaid, revenues are sufficient to generate the rate covenant requirement for debt service coverage of 1.25x. . Except as defined otherwise, the capitalized terms used in this report are as defined in the Master Bond Resolution. The techniques used in this report are consistent with industry practices for similar studies in connection with airport revenue bond sales. While R&A believes the approach and assumptions utilized are reasonable, some assumptions regarding future trends and events may. not B - 5 Mr. Willis Boshears Augusta Aviation Commission ~ovember29,2004 Page 4 materialize. Achievement of projections described in this report, therefore, is dependent upon the occurrence of future events, and variations may be material. Sincerely. j ~ P~AR~,D~ II RlGQNDO ~ "A~SOClAtts~ ThlC... . .. ...... ..' ... -'. .... - . .. .1. B - 6 TABLE OF CONTENTS 1. ECO~OMIC BASE FOR AIR TRANSPORTATIO~ ...................................................................... 11 1.1 Airports Serving Air Trade Area.......................................................................................... 11 1.2 Air Trade Area...................................................................................................................... 11 1.3 Population............................................................................................................................. 12 1.4 Income.................................................................................................................................. 12 1.5 Employment ............................... ..... ........ ..... ....... ..... ............................................................ 16 1.6 Economic Base .................... ......................... ................................. ......... .............................. 19 1.7 Summary................................................................................................................... ........... 29 2. AIR lRAFFIC ....... .............................. .................... ............ .............. ......................... ........................ 31 2.1 Airlines Serving the Airport ................................................................................................. 31 2.2 Historical Passenger Activity ............................................................................................... 33 2.3 Air Service.................. .................... ............................................. ........... ....... ....................... 36 2.4 Historical Aircraft Operations and Landed Weight.............................................................. 40 2.5 Aviation Industry.................................................................................................. ................ 41 2.6 Projections of Aviation Demand ..........................................................................................45 3. TIlE 2005 PROJECT .........................................................................................................................53 3.1 Existing Airport Facilities .................................................................................................... 53 3.2 The 2005 Project ..................................................................................................................54 3.3 The Terminal Building Project.............................................................................................56 4. FINANCIAL ANALYSES ................................................................................................................ 59 4.1 Financial Structure ..................................... .......................................................................... 59 4.2 Financing Plan.................................. .................... ..................................... ........................... 63 4.3 O&M Expenses............. ...................................................... ............................................ ..... 67 4.4 Non-Airline Revenues.......................... ..................... .................... .................... ................... 71 4.5 Airline Revenues .................................................................................................................. 77 4.6 Application of Revenues ...................................... ..... ............... ............................................ 79 Rarina Agency Dmft: Ricondo &: Associates 11/29104 B - 7 LIST OF TABLES Table No. 1.1 Historical & Projected Population.................................................................................................. 14 1.2 Effective Buying Income ................................................................................................................ 15 1.3 Civilian Labor Force & Unemployment Rates ............................................................................... 17 1.4 Employment Trends by Major Industry Division........................................................................... 18 1.5 Major Employers ........................................................... ............... ....................................... ........... 20 1.6 Major ~ew & Expanded Business Facilities ..................................................................................21 1.7 Per Capita Retail Sales ................................................................................................................... 24 2.1 Air Carrier Base................................... .................... ...... ........................... ........................... ........... 32 2.2 Historical Enplanements................................................................................................................. 34 2.3 Historical Enplanements by Airline................................................................................................37 2.4 Primary O&D Passenger Markets .................................................................................................. 38 2.5 Nonstop Markets............................................................................................................................. 39 2.6 Historical Aircraft Operations ........................................................................................................ 42 2.7 Historical Landed Weight by Airline (thousand pounds) ............................................................... 43 2.8 Enplanement Projections ............................................................................................. ................... 48 2.9 Operations Projections.............................................................. ............................. ......................... 49 2.10 Landed Weight Projections (thousand pounds) .............................................................................. 51 3.1 2005 Project & Funding Sources.................................................................................................... 55 4.1 Capital Improvement Program - 2004 - 2008 ................................................................................ 64 4.2 Sources & Uses - 2005 Proceeds .................................................................................................... 66 4.3 Projected Debt Service Requirement.............................................................................................. 68 4.4 Projected Operating & Maintenance (O&M) Expenses & Cost Center Allocations...................... 70 4.5 Projected ~on-Airline Revenue...................................................................................................... 73 4.6 Terminal Building Rental Requirement..........................................................................................78 4.7 Apron Fees............... ................................ ..... .................... .............................................................. 80 4.8 Loading Bridge Use Fee ................................................................................................................. 81 4.9 Airline Landing Fee Requirement .................................................................................................. 82 4.10 Application of Revenue .............................................................. .................................................... 83 Raring Agency Dmft: RiclXIdn &: Associates 11/29104 B - 8 LIST OF EXHIBITS Exhibit ~o. 1.1 Air Trade Area and Alternative Facilities....................................................................................... 13 4.1 Flow of Funds Under the Bond Resolution .................................................................................... 60 Rating AgOl\CY Dmft: Ricondn &: Associ.... 11/29104 B-9 [This page intentionally left blank] B - 10 1. ECONOMIC BASE FOR AIR TRANSPORTATION The demand for air transportation is, to a large degree, dependent upon the demographic and economic characteristics of an airport's air trade area (i.e. the geographical area served by an airport). This relationship is particularly true for origin-destination (0&0) passenger traffic, which has been the foremost component of demand at Augusta Regional Airport (Airport). 1 The major portion of demand for air travel at the Airport, therefore, is influenced more by the local characteristics of the area served than by individual air carrier decisions regarding hub and service patterns in support of connecting activity. This chapter presents background information about the Airport and data for the Airport's air trade area that indicates it has an economic base capable of supporting increased demand for air travel during the projection period. 1.1 AIRPORTS SERVING AIR TRADE AREA Located in Augusta, Georgia, the Airport at Bush Field is the primary airport serving the Central Savannah River Area. The Airport is owned by the Consolidated Government and operated by the Augusta Aviation Commission (the Aviation Commission). Daniel Field is a general aviation airport located approximately seven miles from the Airport and serves general aviation aircraft. Daniel Field is owned "by the Consolidated Government and is operated by an appointed commission separate and apart from the Aviation Commission. The Daniel Field Commission is a separate agency of the Consolidated Government. 1.2 AIR TRADE AREA The borders of an air trade area are influenced by the location of other metropolitan areas and their associated airport facilities. For purposes of these analyses, the primary air trade area for the Airport is the Augusta-Richmond County Metropolitan Statistical Area (MSA), as defmed by the federal government's Office of Management and Budget. According to the federal government, an MSA is a geographical area with a large population nucleus (at least 50,000 people), along with any adjacent communities that have a high degree of economic and social interaction with that nucleus as measured by commuting. The Augusta-Richmond County MSA consists of Burke, Columbia, McDuffie, and Richmond counties in the State of Georgia (Georgia); and Aiken and Edgefield counties in the State of South Carolina (South Carolina). The Airport is located in Richmond County. The Hartsfield-Jackson Atlanta International Airport, approximately 160 miles west of the Airport, is the nearest large hub airport to the Airport.2 Other airports that could serve as alternative facilities to the Airport include the small hub facilities of Columbia Metropolitan Airport, which is approximately 85 miles east of the Airport; Charleston Air Force BaselIntemational Airport, which is . approximately 175 miles southeast of the Airport, and Savannah/Hilton Head International Airport, which is approximately 135 miles south of the Airport. The Airport is defmed by the Federal Aviation Administration (FAA) as a non-hub airport. Based on location, accessibility, and services available at other commercial service airports within nearby service areas, it is recognized that the area served by the Airp~rt extends to a secondary air trade area. This secondary air trade area includes an additional seven counties in Georgia and two 1 Based on U.S. DOT ticket sample data, O&D passengers accounted for approximately 88 percent of total passengers at the Airport in FY 2003 (see Table 2.5 in Chapter 2). 2 As defmed by the FAA, a large hub airport enplanes 1.00 percent or more of nationwide enplanements during a calendar year; a medium hub airport enplanes between 0.25 percent to 0.999 percent; a small hub" airport enplanes between 0.05 percent to 0.249 percent; and a non-hub airport enplanes less than 0.05 percent. Rating Ageucy Draft: Riccndo &: Associates 11/29104 B - 11 counties in South Carolina. Combined, the total air trade area for the Airport encompasses a 15- county area. It is the economic strength of the Augusta-Richmond County MSA, however, that provides the primary base for supporting air transportation at the Airport. As a result, only socioeconomic data for the Augusta-Richmond County MSA (hereinafter referred to as the Air Trade Area) were analyzed in conjunction with those for Georgia. and South Carolina combined (the GAlSC Region) and the United States. Exhibit 1.1 presents the geographical location of the Airport's primary and secondary air trade areas, as well as its proximity to altemative facilities. 1.3 POPULA TIO~ Historical population for the Air Trade Area, the GAlSC Region, and the United States is presented in Table 1.1. Population in the Air Trade Area increased from 435,763 people in 1990 to 499,684 people in 2000, and to 511,487 people in 2003. Between 1990 and 2003, population in the Air Trade Area increased at a compounded annual growth rate of 1.2 percent, which was equal to the growth rate experienced nationwide, yet below the 2.0 percent growth for the GAlSC Region during this same period.3 As shown, population growth for the Air Trade Area, the GAlSC Region, and the nation between 2000 and 2003 was not as strong compared to population growth between 1990 and 2000. Historical population trends for the Air Trade Area reflect a nationwide shift from urbanized areas to less populated adjacent areas. Richmond County, the most populated county in the Air Trade Area, experienced a moderate increase in population between 1990 and 2003 with a compounded. annual growth rate of 0.3 percent. During the same period, Columbia County and Edgefield County experienced increases in population at compounded annual growth rates of 3.0 percent and 2.3 percent, respectively, which exceeded the growth rates for the GAlSC Region and the nation. Table 1.1 also presents population projections for the Air Trade Area, the GAlSC Region, and the nation through 2010. As shown, population in the Air Trade Area is expected to increase from 511,487 people in 2003 to 526,373 in 2010. This increase represents a compounded annual growth rate of 0.4 percent during this period, compared to 1.1 percent for the GAlSC Region and 0.9 percent for the nation during this same period. 1.4 INCOME One measure of the relative income of an area is its effective buying income (EBI). EBI is essentially disposable personal income and includes personal income less personal taxes (federal, state, and local), non-tax payments including fines and penalties, and personal contributions for social insurance. EBI is a composite measurement of market potential and indicates the general ability to purchase an available product or service. Of the top 300 metropolitan and micropolitan areas in the nation, the Air Trade Area is ranked 107th in total EBI in 2003.4 Table 1.2 presents per capita EBI for the Air Trade Area, the GAlSC Region, and the nation between 1998 and 2003. As shown, per capita EBI for the Air Trade Area steadily increased from $13,478 in 1997 to $15,773 in 2~03, representing a compounded annual growth rate of 3.2 percent. 3 Strong growth in demographic and economic data included in these analyses for the GAlSC Region is primarily influenced by the growth experienced by the Atlanta-Sandy Springs-Marietta MSA during the years depicted 4 The Office of Management and Budget revised its geographic Census defmitions to include Metropolitan and Micropolitan Statistical Areas, collectively called Core Based Statistical Areas (CBSAs). The CBSA Metropolitan Areas have at least one central urbanized core area of 50,000 people and the CBSA Micropolitan Areas have at least one urbanized core area of at least 10,000 people, but fewer than 50,000. Rating Agency Dmft: RiccDdn &: Associa... 11/29104 B - 12 Augusta Regional Airport ~-.: . '~" " .:' ~ -.; ~', :' .~. :~:~::-I' ~.~. . " ...... ~ ~ '. . . .... .. SOUTH'..CARO'~i N!l' ~,,: . "~ :1 '.. . . .... . :.:' or; . Ii.:'i3I Primary Air Trade Area &5:2:J Secondary Air Trade Area Mileage from AGS Columbia........................... 85 Savannah/Hilton Head...... 135 Atlanta.............................. .160 Charleston....................... .175 Source: Cartesia Software. Map Art, 1998. Prepared by: Ricondo & Associates. Incoo Exhibit 1.1 S:llGraphlcs Ubrary/Mlsc. Maps/AG5-AIr Trade Aree.aJ Air Trade Area and Alternative Facilities B-13 TAlJLE 1.1 Augusta Aviation Commission Augusta Regional Airport Report of the A irport Consultant HISTORICAL & PROJECTED POPULATION Compounded Annual Growth Rate Historical Projected Historical Projec;ted Area 1990 2000 2003 2010 1990-2000 2000-2003 1990-2003 2003-2010 Burke County, GA 20,579 22,243 22,949 24,733 0.8% 1.0% 0.8% l.l% Columbia County, GA 66,031 89,288 97,505 111,179 3.1% 3.0% 3.0% 1.9% McDuffie County, GA 20,119 21,231 21,445 21,433 0.5% 0.3% 0.5% 0.0% Richmond County, GA 189,719 199,775 198,149 190,328 0.5% -0.3% 0.3% -0.6% Aiken County, SC 120,940 142,552 146,736 157,200 1.7% 1.0% 1.5% 1.0% Edgefield County, SC 18,375 24,595 24,703 21,500 3.0% 0.1% 2.3% -2.0% Air Trade Area 435,763 499,684 511,487 526,373 1.4% 0.8% 1.2% 0.4% GNSC Region 9,964,919 12,198,465 12,831,867 13,899,870 2.0% 1.7% 2.0% l.l% United States 248,709,873 281,421,906 290,809,777 308,935,581 1.2% l.l% 1.2% .0.9% . Sources: U.S. Department of Commerce, Bureau of the Census (historical - all areas; projected - U.S.) Georgia Office of Planning and Budget (projected - Georgia and Georgia counties) South Carolina Office of Research and Statistical Services (projected - South Carolina counties) Prepared by: Ricondo & Associates, Inc. B - 14 TABLE 1.2 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant EFFECTIVE BUYING INCOME Per Capita EBI GAlSC United Year Air Trade Area Region States Historical 1998 $13,478 $15,045 $16,895 1999 $14,045 $15,785 $17,691 2000 $14,106 $16,138 $18,426 2001 $14,679 $17,232 $18,491 2002 $15,774 . $17,476 $18,375 2003 $15,773 . $17,597 $18,662 Proiected 2008 $17,592 $19,843 $21,044 Compounded Annual Growth Rate 1998 - 2003 3.2% 3.2% 2.0% 2003 - 2008 2.2% 2.6% 2.7% Percentage of Households in Income Categories (2003 EBI) Less Than $20,000 to $35,000 to $50,000 Area $20,000 $34,999 . $49,999 or more Air Trade Area 26.8% 25.1% 19.0% 29.1% GAlSC Region 23.5% 24.1% 19.3% 33.1% United States 22.4% 23.3% 19.0% 35.4% Sources: Sales & Marketing Management, Survey of Buying Power, 1999-2004 Prepared by: Ricondo & Associates, Inc. B - 15 between 1998 and 2003. This rate of growth was equal to the growth rate for the GNSC Region and higher than the 2.0 percent growth experienced nationwide during this same period. Table 1.2 also presents projections of per capita EBI for 2008, the latest year for which such projections are currently available. According to Sales and Marketing Management magazine, per capita EBI for the Air Trade Area is projected to increase from $15,773 in 2003 to $17,592 in 2008. This increase represents a ,!ompounded annual growth rate of 2.2 percent during this period, compared to 2.6 percent for the GAlSC Region and 2.7 percent for the nation. An additional indicator of the market potential for air transportation demand is the percentage of households in the higher income categories. An examination of this indicator is important in that as personal income increases, air transportation becomes more affordable and, therefore, is used more frequently. Table 1.2 also presents percentages of households in selected EBI categories for 2003. As shown, 29.1 percent of households in the Air Trade Area had an EBI of $50,000 or more in 2003, compared to 33.1 percent for the GAlSC Region and 35.4 percent for the nation. 1.5 EMPLOYME~T Recent employment trends for the Air Trade Area, the GAlSC Region, and the United States are presented in Table 1.3. As shown, the Air Trade Area's civilian labor force remained relatively stable between 1993 and 2003, ranging from a high of 227,000 workers in 2003 to a low of approximately 212,000 workers in 1996. As a result, the civilian labor force in the Air Trade Area increased at a compounded annual growth rate of 0.5 percent between 1993 and 2003, compared to 1.9 percent for ~e GAlSC Region and 1.3 percent for the nation. As also shown in Table 1.3, average annual unemployment rates for the Air Trade Area range from a high of 7.5 percent in 1993 to a low of 4.6 percent in 2000. Between 1993 and 2001 average annual unemployment rates for the Air Trade Area were consistently above those for the GAlSC Region and the nation; however, in 2002 and 2003, average annual unemployment rates for the Air Trade Area were equal to or lower than those for the GAlSC Region and the nation. . An analysis of nonagricultural employment trends by major industry division is presented in Table 1.4, which compares the Air Trade Area's employment trends to those for the nation for 1993 and 2003.s As shown, nonagricultural employment in the Air Trade Area increased from approximately 187,900 workers in 1993 to approximately 201,600 workers in 2003. This increase represents a compounded annual growth rate of 0.7 percent during this period, comp~ed to the 1.6 percent growth experienced nationwide during this same period. With the exception of manufacturing, each of the major industry groups in the Air Trade Area experienced positive growth between 1993 and 2003, with the highest growth occurring in the information and transportation/utilities sectors. Manufacturing employment in the Air Trade Area decreased slightly from approximately 27,100 workers in 1993 to approximately 25,200 workers in 2003. This decrease to the manufacturing base between 1993 and 2003 was not unique to the Air Trade Area, as manufacturing employment nationwide decreased during this same period at a compounded annual rate of 1.4 percent. A slight shifting of the Air Trade Area's industrial mix occurred between 1993 and 2003, as manufacturing employment decreased from 14.4 percent of total employment in 1993 to 12.5 percent in 2003 and services employment increased from 37.6 percent of total employment in 1993 to 39.8 percent in 2003. These trends in the Air Trade Area's industrial mix were consistent with changes in 5 Nonagricultural employment data is not currently available for Burke County. Rating Agency Oral\: Ricnndn &: Associates 11/29/04 B - 16 TABLE 1.3 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant CIVILIAN LABOR FORCE & UNEMPLOYMENT RATES Civilian Labor Force (OOOs) GAlSC United Year Air Trade Area Region States 1993 215 5,328 129,200 1994 213 5,441 131,056 1995 213 5,536 132,304 1996 212 5,658 133,943 1997 217 5,901 136,297 1998 219 6,049 137,673 1999 220 6,121 139,368 2000 221 6,220 142,583 2001 217 6,138 143,734 2002 218 6,224 144,863 2003 227 6,417 146,510 Compounded Annual Growth Rate 1993 - 2003 0.5% 1.9% 1.3% Unemoloyment Rates GAlSC United Year Air Trade Area Region States 1993 7.5% 6.4% 6.9% 1994 6.6% 5.6% 6.1% 1995 6.9% 4.9% 5.6% 1996 7.1% 5.1% 5.4% 1997 6.6% 4.5% 4.9% 1998 5.7% 4.1% 4.5% 1999 5.4% 4.1% 4.2% 2000 4.6% 3.7% 4.0% 2001 5.0% 4.4% 4.7% 2002 5.4% 5.4% 5.8% 2003 5.2% 5.4% 6.0% Source: u.s. Department of Labor, Bureau of Labor Statistics Prepared by: Ricondo & Associates, Inc. B - 17 TABLE 1.4 Augusta Aviation Commission Augusta Reg/oMI Airport Report of the Airport Consultant EMPLOYMENT TRENDS BY MAJOR INDUSTRY DIVISION Compounded Annual Growth Rate 3.0% -1.4% 1.3% 1.8% 1.1% 1.7% 2.8% 1.3% 1.6% Percentage of Total Em]lJo)'\llent 5.6% 11.2% 15.8% 2.5% 3.7% 6.1% 38.6% 16.6% 100.0% United States NonaRricultwal Employment (ooOs) Percentage of Total Compounded Annual Growth Rate 2003 7.293 14,525 20.517 3.198 4.758 7,974 50,092 21.575 129,932 Employmcnl 4.9% 15.1% 16.3% 2.4% 3.8% 6.1% 34.2% 17.1% 100.0% 1993 5.445 16,774 18,114 2.668 4.265 6,709 37.880 18.989 10,843 0.8% -0.7% 0.6% 3.2%' 2.1%1 1.0% 1.3% 0.2% 0.7% Pemmtage of Total Employment 6.4% 12.5% 13.9% 1.6% 2.4% 3.6% 39.8% 19.6% iOo]% Air Trade Area I Nonagricullural Employment 2003 13.000 25,200 28.100 3,300 4,900 7.200 80,300 39.600 201.600 Percentage of Total Employment 6.4% 14.4% 14.1% . 1.3% 2.1% 3.5% 37.6% 20.6% iOO]% 1993 12,000 27.100 26.500 2.400 4.000 6,500 70,700 38,700 187,900 Industry ConsltUclion 2 Manufac1uring Trade Infonnalion ) TransportationlUtilities Financial Services Government Total PERCENT OF 2003 NONAGRICULTURAL EMPLOYMENT Construction 6.4% I 5.6% Manufacturing 12.5% I I 11.2% Trade 13.9% 15.8% Information _1.6"- 2.5"- ----, TransportationlUtilities 14% 3.1% Financial 3.6"- 6.1% Services 39.8% I I 38.6% Govenunent 19.6% 16.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% I IIunited States CAirTrade Area I I t:D I ...... 00 Nonagricu1twal employmcnl data Includes mining employmenL The infonnalion seclor includes communications, publishing. motion piclUre and sound recording, and on-line services. Source: U.S. Department of Lobor, Bureau of Labor Statistics Prepmd by: Ricondo & Associates, Inc. Burke County. currendy available for isnOI the industrial mix nationwide, as manufacturing decreased from 15.1 percent to 11.2 percent. and services increased from 34.2 percent to 38.6 percent during this same period. Major employers in the Air Trade Area, as measured by the number of employees, are presented in Table 1.5. As shown, there are approximately 50 fInns in the Air Trade Area with 350 or more employees. The largest eD:1ployers in the Air Trade Area are the United States Army Signal Center and Fort Gordon (Fort Gordon) with 17,400 employees and Savannah River Site (SRS) with 12,500 employees. Other major employers in the Air Trade Area include: the Medical College of Georgia with 4,660 employees, the Richmond County School System with 4,420 employees, and Avondale Mills with 3,500 employees. In terms of local employment, numerous companies included in the Fortune 500 for 2004 have a significant presence in the Air Trade Area including E-Z-GO/Textron with 1,280 employees, Kimberly-Clark with 1,200 employees, International Paper with 820 employees, Wal-Mart Stores with 740 employees, Murray Biscuit/Kellogg's with 540 employees, BellSouth with 530 employees, Johnson Controls with 460 employees, Advance Auto Parts with 450 employees, Procter & Gamble with 450 employees, and John Deere with 420 employees. 1.6 ECO~OMIC BASE This section reviews the local economy in greater detail to more clearly examine the basis for the economic strength of the Air Trade Area. 1.6.1 Construction Construction employment in the Air Trade Area increased at a compounded annual growth rate of 0.8 percent between 1993 and 2003, compared to 3.0 percent for the nation. In 2003, the construction sector accounted for approximately 13,000 employees in the Air Trade Area, representing 6.4 percent of total nonagricultural employment during this year. Table 1.6 presents major new and expanded businesses in the Air Trade Area' between 1999 and 2004. As shown, new and expanded businesses had a combined investment of approximately $492 million and created approximately 3,000 jobs during this period. The largest investments by year include the $20 million expansion 'of John Deere in 1999, the new $30 million FIAMM facility in 2000, the new $4 million Standard Textile Augusta and Comcast facilities in 200 I, the $200 million expansion of Procter & Gamble in 2002, and the new $9.5 million Augusta Tissue facility in 2003/2004. Major development projects in the Air Trade Area include: · Augusta Canal Restoration. The Augusta Canal Authority and Augusta Tomorrow, Inc. are working together to restore the third level of the historic Augusta Canal. When completed in winter 2005, this $15 million restoration will previde recreational access through green space and stimulate developmental opportunities. · University Hospital Medical Building - Evans. This new $9 million medical professional building is part of the University Health Care System and is located on the Evans satellite medical center campus. The 60,000 square foot building was completed in early 2004. Ra~g Agency Draft: Ricondo &: Associates 11/29104 B - 19 TABLE 1.5 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant MAJOR EMPLOYERS Employer Employees Product or Service U.S. Army Signal Center & Fort Gordon Savannah River Site Medical College of Georgia Richmond County School System Avondale Mills University Hospital Medical College of Georgia Health Augusta-Richmond County Columbia County School System Bechtel Savannah River Augusta VA Medical Center East Central Regional Hospital Doctors Hospital Shaw Industries E-Z-GOrrextron Dixie-Narco Kimberly-Clark Sitel St. Joseph Hospital Advanced Glassfiber Yam Bridgestone/Firestone Aiken Regional Medical Centers Club CarlIngersoll-Rand Tyco Healthcare-Kendall Intemational Paper Morris Communications Columbia County Commission Wal-Mart Stores Quebecor World McDuffie County Schools Augusta State University Mwray Biscuit/Kellogg's BellSouth CSRA Economic Opportunity Authority Shapiro Packing Augusta Sportswear Johnson Controls Advance Auto Parts Procter & Gamble Thennal Ceramics John Deere Kennametal IPG U.S. Department of Energy GIW Industries Castleberry/Snow's Brands Hubbell Power System Augusta Newsprint Carlisle Boral Bricks DSM Chemicals North America McDuffie Regional Medical Center PCS Nitrogen Fertilizer 17,400 12,500 4,660 4,420 3,500 3,200 3,000 2,600 2,500 2,000 1,980 1,800 1,400 1,380 1,280 1,200 1,200 1,100 1,030 1,000 950 900 880 850 820 800 750 740 710 610 540 540 530 500 500 460 460 450 450 440 420 420 400 390 380 380 370 .370 360 350 '350 350 Military Government Nuclear Defense Materials Higher Education Public Education Textile Fabrics Healthcare Services Healthcare Services Municipal Services Public Education Design & Construction Healthcare Services Healthcare Services Healthcare Services Carpet Yams & Plastic Extrusion Golf Cars & Utility Vehicles Vending Machines Consumer Paper Products Call Center Healthcare Services Fiberglass & Roofing Car & Truck Tires Healthcare Services Golf Cars & Utility Vehicles Disposable Medical Supplies Bleached Paperboard Media Municipal Services Discount Stores Printing & Publishirig Public Education Higher Education Cookies Telecommunications Social Services Beef Products Sporting & Athletic Goods Military Contract Services Auto Parts Distributor Soaps & Detergents Ceramic Fiber Tractors Metal Cutting Tools Federal Government Centrifugal Slurry & Dredge Pumps Meat Products High Voltage Insulators & Arresters Newsprint Tires & Wheels Bricks Caprolactam & Cyclohexanone Healthcare Services Inorganic Chemicals & Fertilizer Sources: Augusta Metro Chamber of Commerce Thomson-McDuffie County Chamber of Commerce Greater Aiken Chamber of Commerce Prepared by: Ricondo & Associates, Inc. B- 20 TABLE 1.6 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant MAJOR NEW & EXPANDED BUSINESS FACILITIES Company Products or Service Activity Investment New Jobs' !222 John Deere Tractors Expanded $20,000,000 200 Bill's Dollar Stores Warehouse & Distribution New 16,000,000 300 Sitel Call Center New 3,000,000 500 1999 Total $39,000,000 1,000 2000 FlAMM Batteries New $30,000,000 300 Murray BiscuitlKellogg's . Cookies Expanded 11,000,000 30 Boral Bricks Bricks Expanded 10,200,000 50 Helmac Products Pet Supplies New 10,000,000 300 2000 Total $61,200,000 680 -1lI!!.! Standard Textile Augusta Textiles New $4,000,000 200 Comcast Call Center New 4,000,000 50 Garrett Aviation Airport Maintenance Support Expanded 1,400,000 0 Civic Development Group Call Center New 1,000,000 200 Knology Call Center New 1,000,000 175 2001 Total $11,400,000 625 ~ Procter & Gamble Soaps & Detergents Expanded $200,000,000 '50 Quebecor World Printing & Publishing Expanded 35,000,000 100 Monsanto Medicinal Chemicals Expanded 30,000,000 12 Murray BiscuitlKellogg's Cookies Expanded 30,000,000 100 John Deere Tractors Expanded 23,000,000 20 PCS Nitrogen Fertilizer Inorganic Chemicals & Fertilizer Expanded 14,000,000 0 Solvay Advanced Polymers Plastic Materials Expanded 8,000,000 25 Tyco Healthcare-Kendall Disposable Medical Supplies Expanded 4,000,000 18 General Chemical Inorganic Chemicals Expanded 1,000,000 4 2002 Total $345,000,000 329 2003n004 Augusta Tissue Paper Products New $9,500,000 45 Rutgers Organics Organic Chemicals Expanded 6,600,000 20 FedEx Distribution Center New 4,500,000 70 CRL Warehouse & Logistics Warehouse Expanded 4,000,000 40 FirstCo Tractor Parts New 3,500,000 25 Augusta Auto Auction Auto Auction New 3,400,000 80 Augusta Sportswear Sporting & Athletic Goods Expanded 2,000,000 0 Electrolux Appliances & Equipment Expanded 2,000,000 40 2003n004 Total $35,500,000 320 1999 . 2004 Total $492,100,000 2,954 Source: Augusta Metro Chamber of Commerce Prepared by: Ricondo & Associates, Inc. B - 21 · Mullins Crossing Shopping Center. With approximately 440,000 square feet of retail space, this center will include a Target, Kohl's, and 11 other retail shops. The first phase is expected to be completed by fall 2005, with subsequent phases including restaurants and upscale boutiques. · Hammond's Ferry. Construction will commence in 2004 for the redevelopment of 200 acres' along the Savannah River, which will offer over 800 single-family homes, condominiums, and apartments. The riverfront portion will encompass a riverfront park that will be linked by the ~orth Augusta Greenway Trail System. 1.6.2 Manufacturing Manufacturing employment in the Air Trade Area decreased at a compounded annual rate of 0.7 percent between 1993 and 2003, compared to 1.4 percent nationwide during this same period. In 2003, the manufacturing sector accounted for approximately 25,200 employees in the Air Trade Area, representing 12.5 percent of total nonagricultural employment during this year. The headquarten; of the top two manufacturers of golf cars are located in the Air Trade Area. With 1,280 employees in the Air Trade Area, E-Z-GO is the world's largest manufacturer of golf cars and a leading manufacturer of utility vehicles. E-Z-GO is part of Textron, a Fortune 500 company with a global presence in multiple industries, including operations in aircraft, automotive, industrial, and fmance. With 880 employees in the Air Trade Area, Club Car is the second largest manufacturer of golf cars. Club Car, an Ingersoll- Rand brand, has a global distribution network that includes over 600 distributor, dealer, and factory branch locations. Leading consumer product companies, such as Kimberly-Clark, Kellogg's, and Procter & Gamble, have manufacturing facilities located in the Air Trade Area. Kimberly- Clark employs approximately 1,200 employees at their consumer paper products facility in the Air Trade Area. Murray Biscuit, a partner of Kellogg's, employs approximately 540 employees in the Air Trade Area. Since 2000, Kellogg's has invested approximately $41 million into the expansion of the Murray coo~e manufactutjng facilitY, which created approximately 130 new jobs in the Air Trade Area. Procter & Gamble employs approximately 450 employees in the Air Trade Area. In 2002, Procter & Gamble invested approximately $200 million into the expansion of their laundry detergent manufacturing plant, which created approximately 50 new jobs in the Air Trade Area. John Deere also has a significant presence in the Air Trade Area with approximately 420 employees. Since 1999, John Deere has invested approximately $43 million into the expansion of its commercial tractor products plant,. including 'a new $23 million facility in 2002. Approximately 220 new jobs have been. created in the Air Trade Area as a result of these expansions. According to the Augusta Metro Chamber of Commerce, FirstCo, a John Deere supplier, will invest approximately $3.5 million for a new manufacturing facility Utat will generate approximately 25 new jobs in the Air Trade Area once it is completed in summer 2005. Other significant manufacturing finns in the Air Trade Area include Avondale Mills (textile fabrics) with 3,500 employees; Shaw Industries (carpet yarns and plastic extrusion) with 1,380 employees; Advanced Glassfiber Yarn (fiberglass and roofing) with 1,000 employees; Bridgestone/Firestone (car and truck tires) with 950 employees; Tyco Rating Agency Dnlft: Riccndn &: Associates 11/29104 B- 22 Healthcare-Kendall (disposable medical supplies) with 850 employees; and International Paper (bleached paperboard) with 820 employees. 1.6.3 Trade Trade employment in the Air Trade Area, which includes both retail and wholesale trade, increased at a compounded annual growth rate of 0.6 percent between 1993 and 2003, compared to 1.3 percent for the nation. In 2003, the trade sector accounted for approximately 28,100 employees in the Air Trade Area, representing 13.9 percent of total nonagricultural employment during this year. Of that total, approximately 85 percent of these employees were engaged in retail trade. One indicator of growth in the trade sector is retail sales, defmed as all net sales (gross sales minus refunds and allowances for returns) for establishments engaged primarily in retail trade. Of the top 300 metropolitan and micropolitan areas in the nation, the Air Trade Area ranked 105m in total retail sales in 2003. Table 1.7 presents per capita retail sales for the Air Trade Area, the GAlSC Region, and the nation between 1995 and 1998 and between 2000 and 2003.6 As shown, per capita retail sales for the Air Trade Area increased from approximately $~,457 in 1995 to $9,207 in 1998. This increase represents a compounded annual growth rate of 2.9 percent during this period, compared to 4.4 percent for the GAlSC Region and 3.5 percent for the nation. As shown, per capita retail sales for the Air Trade Area, the GAlSC Region, and the nation increased between 2000 and 2001, yet decreased between 2001 and 2002 due to the effects of the terrorist attacks on September 11, 2001 (September 11) and the economic slowdown. Therefore, between 2000 and 2003, per capita retail sales for the Air Trade Area decreased slightly at a compounded annual growth rate of 0.6 percent, compared to 0.2 percent for the GAlSC Region and 1.9 percent for the nation. Table 1.7 also presents projections of per capita retail sales for 2008, the latest year for which such projections are currently available.7 According to Sales & Marketing Management magazine, per capita retail sales for the Air Trade Area are projected to increase from approximately $10,778 in 2003 to $11,973 in 2008. This increase represents a compounded annual growth rate of 2.1 percent, which is comparable to that projected for the GAlSC Region and the nation during this same period (compounded annual growth rates of 2.0 and 2.4 percent, respectively). The Augusta Mall is one of the largest shopping malls in Georgia with over 120 department stores and specialty shops and approximately one million square feet of retail space. The Aiken Mall is another significant shopping facility in the Air Trade Area with more than 50 retail stores and eateries and approximately 450,000 square feet of retail space. Other major shopping centers in the Air Trade Area include Augusta Exchange, Augusta Square, ~ational Hills Shopping Center, Southgate Shopping Center, Surrey Center, and the specialty shops of downtown Augusta and Aiken. 6 Due to a change in reporting total retail sales in Sales & Marketing Management, Survey of Buying Power 2000, total retail sales for 1999 are not available. In addition, total retail sales beginning in 2000 are not compatible to earlier years due to a different benchmark and definition. 7 Projected 2008 per capita retail sales are not available for Burke County. Rating Agency Draft: Ricnndo &: AIsocialCS 11/29104 B - 23 TABLE 1.7 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant Year PER CAPITA RETAIL SALES 1 GAlSC Region Air Trade Area United States Historical 1995 1996 1997 1998 1999 2000 2001 2002 2003 $8,457 $8,601 $8,813 $9,207 N/A $10,969 $1l,549 $10,943 $10,778 $8,823 $9,279 $9,568 $10,044 N/A $12,220 $12,716 $12,152 $12,291 $8,891 $9,214 $9,422 $9,856 N/A $12,010 $12,756 $12,480 $12,716 Proiected 2008 2 . $1l,973 $13,600 $14,291 Compounded Annual Growth Rate 1995 - 1998 2000 - 2003 2003 - 2008 2.9% -0.6% 2.1% 4.4% 0.2% 2.0% 3.5% 1.9% 2.4% 1 Due to a change in reporting total retail sales in Survey of Buying Power 2000, total retail sales for 1999 are not available. In addition, total retail sales beginning in 2000 are not compatible to earlier yeaTS due to a different benchmark and definition. 2 Projected 2008 per capita retail sales are not available for Burke County. Sources: Sales & Marketing Management, Survey of Buying Power, 1996-2004 Prepared by: Ricondo & Associates, Inc. B - 24 1.6.4 Information Recognizing the information-based economy, the new information sector combines communications, publishing, motion picture and sound recording, and online services. Information employment in the Air Trade Area increased at a compounded annual growth rate of 3.2 percent between 1993 and 2003 (the highest-growing sector during this period), compared to 1.8 percent for the nation. In 2003, the information sector accounted for approximately 3,300 employees in the Air Trade Area, representing 1.6 percent of total nonagricultural employment d~g this year. Communications is a significant part of the Air Trade Area's information-based economy. Morris Communications, a privately held media company with diversified holdings that include newspapers, magazines, book publishing, radio, and outdoor advertising, is the largest communications employer in the Air Trade Area with .800 employees. Quebecor World, a global company specializing in the delivery of print communication services to book and magazine publishers, retailers, catalogers, telephone companies, and direct mail customers, has 710 employees in the Air Trade Area. In 2002, Quebecor Wodd invested approximately $35 million to expand its catalog facility, which created approximately 100 new jobs in the Air Trade Area. The telecommunications company, BellSouth, also has a significant presence in the Air Trade ~a with 530 employees. According to the Augusta Metro Chamber of Commerce, approximately $9.0 million has been invested in call center operations in the Air Trade Area since 1999. With 1,100 employees in the Air Trade Area, Sitel is a technology-based company that provides customer relationship management strategies to companies that outsource their customer service operations. In 1999, Sitel invested approximately $3.0 million to construct a new facility in the Air Trade Area, which initially created approximately 500 new jobs. In 2001, Comcast, the largest cable and broadband communications provider in the nation, invested approximately $4.0 million for a new call center facility that created approximately 50 new jobs in the Air Trade Area. Civic Development Group, a full-service teleservice company that provides direct sales, and Knology, a regional company offering telephone, cable TV, and internet services, each invested approximately $1.0 million in 2001 to create new call center facilities that generated approximately 200 new jobs and 175 new jobs, respe.ctively, in the Air Trade Area. 1.6.5 TransportationlUtilities Transportation/utilities employment in the Air Trade Area increased at a compounded annual growth rate of2.1 percent between 1993 ~d 2003 (the second highest- growing sector during this period), compared to 1.1 percent for the nation. In 2003, the transportation/utilities sector accounted for approximately 4,900 employees in the Air Trade Area, representing 2.4 percent of total nonagricultural employment during this year. The Air Trade Area is located on Interstate 20 (running east and west from Texas to South Carolina) and the Savannah River, and provides close proximity to the Charleston and Savannah Ports. The Air Trade Area offers rail freight service provided by CSX Transportation and ~orfolk Southern Railway, Greyhound and Southeastern Stages bus lines, and approximately 40 motor freight carriers that provide transportation services. In 2002, FedEx, a global provider of transportation, e-comrnerce, and supply chain services, opened 31 additional home delivery operation centers throughout the United States, Rating AacnDY Dmft: Ricondn &: Associates 11/29104 B - 25 including Augusta. According to the Augusta Metro Chamber of Conunerce, FedEx will invest approximately $4.5 million for a new ground distribution center in 2004, which will create approximately 70 new jobs in the Air Trade Area. 1.6.6 Financial Finance/insurance/real estate employment in the Air Trade Area increased at a . compounded annual'growth rate of 1.0 percent between 1993 and 2003, compared to 1.7 percent for the nation. In 2003, this sector accounted for approximately 7,200 employees in the Air Trade Area, representing 3.6 percent of total nonagricultural employment during this year. Based on 2003 revenues, numerous financial companies included in the Fortune 500 for 2004 have a presence in the Air Trade Area including Bank of America, Merrill Lynch, Wachovia, SunTrust Banks, Regions Financial, and SouthTrust. 1.6.7 Services Services employment in the Air Trade Area increased at a compounded annual growth rate of 1.3 percent between 1993 and 2003, compared to 2.8 percent for the.nation. In 2003, the services sector accounted for approximately 80,300 employees in the Air Trade Area, representing 39.8 percent of total nonagricultural employment during this year, the highest employment level among sectors. Selected areas of the Air Trade Area's services industry are discussed in further detail below, including travel and tourism, cultural and recreational activities, medical and health, and higher education. Travel and Tourism In terms of employment, the travel and tourism industry accounted for approximately 19,000 employees in the Air Trade Area in 2003.8 According to the Augusta Metro Convention and Visitors Bureau, more than 1.5 million people visit Augusta annually and spend approximately $366 million in tourism expenditures. Major tourist attractions in the. Air Trade Area include Augusta Museum of History, National Science Center Fort Discovery, Woodrow Wilson's Childhood Home, Riverwalk Augusta, Lucy Craft Laney Museum of Black History, Confederate Powder Works, Georgia Golf Hall of Fame, and Morris Museum of Art. In 2003, the Augusta Metro Convention and Visitors Bureau booked approximately 320 events with 165,000 attendees and 72,560 hotel room nights, compared to approximately 265 events with 138,000 attendees and 74,500 hotel room nights in 2002. With seven meeting rooms and approximately 54,000 square feet, the largest meeting facility in the Air Trade Area is the Augusta-Richmond County Civic Center Complex. This facility features an 8,500-seat arena, a 2,700-seat theater, and a 14,500 square foot exhibit hall that opens into a 23,000 square foot arena floor. Other major meeting facilities in the Air Trade Area include Radisson Riverfront Hotel Augusta with 22 meeting rooms and approximately 4~,000 square feet, Savannah Rapids Pavilion with eight meeting rooms and approximately 25,000 square feet, Gordon Club with seven meeting rooms and approximately 20,000 square feet, The Clubhouse with two meeting rooms and approximately 12,000 square feet, and Augusta Towers Hotel and Conference Center .with 11 meeting rooms and approximately 9,000 square feet. g U.S. Department of Labor, Bureau of Labor Statistics. Rating Apcy Draft: Ricnndn &: Associa... 11/29104 B- 26 Augusta has the second-largest hotel room inventory in Georgia with approximately 65 hotel properties with more than 6,000 guest rooms. Major hotels in the Air Trade Area include Augusta Inn and Conference Center with 239 guest rooms, Radisson Riverfront Hotel Augusta with 234 guest rooms, Ramada Plaza with 200 guest rooms, Quality Inn and Sleep Inn Conference Center with 193 guest rooms, Belair . Conference Center with 183 guest rooms, Augusta Towers Hotel and Conference Center with 179 guest rooms, and Augusta Suites Inn with 176 guest rooms. . Cultural and Recreational Activities The Air Trade Area hosts a significant number of cultural and recreational activities. The Masters, one of Professional Golfers Association's four Grand Slam golftoumaments, is held annually at the Augusta ~ational Golf Club. Since 1934, the golf course designed by Bobby Jones and Clifford Roberts attracts golf spectators from around the world for one week each April. The Air Trade Area has more than 21 private and 15 public golf courses, including Jones Creek, the number one rated public golf course in Georgia. The Air Trade Area is home to the East Coast Hockey League's Augusta Lynx (affiliated with the ~ational Hockey League's ~ew Jersey Devils and Vancouver Canucks), - the South Atlantic (Single A) Minor League's Augusta Green Jackets (affiliated with Major League Baseball's Boston Red Sox), and numerous college sports teams affiliated with the various colleges discussed below. Major annual events in the Air Trade Area include the' Augusta Futurity, ~ational Barrel Horse Association Championship, Nike Peach Jam, Augusta Arsenal Soccer Shootout, Head of the South Regatta, and the Ladies Professional Golf Association's Asahi Ryokuken International Championship. Medical and Health With over 4,000 licensed hospital beds, the healthcare industry employs approximately 25,000 medical professionals in the Air Trade Area and is one of the largest medical centers in the southeast. The Medical College of Georgia (MCG) and Medical College of Georgia Health (MCG Health) are among the leading employers in the Air Trade Area with 4,660 employees and 3,000 employees, respectively. MCG is ranked as one of the top 20 medical schools in the nation and offers programs in dentistry, allied health sciences, nursing and graduate studies, as well as medicine. MCG Health is the clinical side of the medical school; and its medical center complex includes a 485-bed adult hospital, a ISO-bed Children's Medical Center, an Ambulatory Care Center with more than 80 outpatient clinics in one setting, and a Specialized Care Center housing a 13-county Level I regional trauma center. The MCG Health System also includes a variety of centers and units at more than 90 satellite clinics. The Aiken Regional Medical Centers (ARMC) employ 900 healthcare professionals in the Air Trade Area. This 225-bed acute care hospital is currently undergoing a $15 million expansion. In July 2003, a new cardiovascular floor was completed that features 34 all- private rooms. Offering radiation and chemotherapy treatment in one location along with support services, the 15,000 square foot Cancer Care Institute of Carolina opened in April 2004. A new 34-bed Emergency Room and consolidated 36-bed Intensive Care Unit is scheduled to be completed in spring 2005. Other major medical facilities in the Air Trade Area include University Hospital with 551 licensed beds, Augusta VA Medical Centers with Ratina AacnDY Draft: Ricondn &: Associares 11/29104 B- 27 440 licensed beds, Doctors Hospital with 350 licensed beds, Dwight David Eisenhower Army Medical Center with 300 licensed beds, and St. Joseph Hospital with 171 licensed beds. HiJlher Education The University System of Georgia is .the fourth largest university system in the nation. Combined with other affiliates, it offers students higher education options at more than 13 institutions within a ISO-mile radius of Augusta. These higher education institutions offer a wide range of academic programs, including certificates, associates, baccalaureate, masters, doctoral, and professional degrees. Augusta State University (ASU), one of the institutions include in the University Systems of Georgia, is the largest university in the Air Trade Area with more than 6,000 full- time and part-time students. ASU is a four-year college that offers 50 major programs, six bachelors programs and four associate degree programs, as well as graduate work in education, business, public administration, and psychology, including a cooperative doctoral program. In 2003, ASU completed Allgood Hall, a 123,000 square foot building that includes the College of Business Administration as well as parts of the Katherine Reese Pamplin College of Arts and Sciences. Still under construction, University Hall is another classroom building that is scheduled to be completed in fall 2004. Aiken Technical College (ATe) has approximately 3,400 enrolled students and offers 22 programs for an associates degree, five diploma programs, and 47 certificate programs in computer technology, industrial and engineering technology, health, public service, and business. In the past three years, ATC has opened three new buildings including the $5.4 million Dale Phelon Information Technology Center, the $3 million CSRA Manufacturing and Technology Training Center, and the $7.6 million ~ealth and Science Building. Other colleges and universities in the Air Trade Area include Troy State University with 6,300 students, Piedmont Technical College with 4,450 students, Augusta Technical College with 4,000 students, University of South Carolina Aiken with 3,200 students, Medical College of Georgia with 2,100 students, Paine College with 935 students, and Kerr Business Gollege with 520 students. 1.6.8 Government Government employment in the Air Trade Area increased at a compounded annual growth rate of 0.2 percent between 1993 and 2003, compared to 1.3 percent for the nation. In 2003, this sector accounted for approximately 39,600 employees in the Air Trade Area, representing 19.6 percent of total nonagricultural employment during this year. Fort Gordon and SRS are the top two major employers in the Air Trade Area with 17,400 employees and 12,500 employees, respectively. The U.S. Department of Energy also has a significant presence in the Air .Trade Area with 400 employees. Fort Gordon encompasses approximately 56,000 acres of Army post located on the western side of Augusta. This military facility serves as the largest communications electronics-training center in the world. The training center has advanced communications technology that adapts the telephone to military usage by incorporating satellite communications and computer technology. Fort Gordon is also home to the Army's Computer Science School and to a joint services intelligence organization that supports the U.S. Department of Defense. In addition, its teaching facilities at Eisenhower Army Medical Center serve as a regional tri-service medial center serving five southeastern states and Puerto Rating Agency Draft: Ricondn &: Associates 11/29/04 B - 28 Rico. In total, Fort Gordon's annual economic impact on the Air Trade Area is more than $1.2 billion, including payroll, contracts, purchase, and federal school aid. The Savannah River Site (SRS) is a U.S. Department of Energy nuclear facility. With approximately 198,000 acres (310 square miles), SRS is located in parts of three South Carolina counties, including Aiken. SRS's mission is to reduce nuclear danger by transferring applied environmental technology to government and non-government entities cleaning up the site, managing the waste, and forming economic and industrial alliances. Westinghouse Savannah River Company is responsible for the daily operations of the facility. SRS has a significant economic impact in both Georgia and South Carolina, affecting more than a dozen counties. The current annual budget of SRS is approximately $1.6 billion, including a payroll of approximately $900 million. 1.6.9 QlIality of Life Places Rated Almanac has rated Augusta as the second best city to live in Georgia. This rating is based on several factors, including cost of living, transportation, higher education, job outlook, healthcare, and recreations.' Entrepreneur magazine has recognized Augusta as "One of the 10 Best Southern Cities for Business". In the January 2001 issue of Expansion magazine, the Augusta-Richmond County MSA was 13 tb-out of 50 for the "Hottest Cities for Business Relocation." The considering factors were business environment, work force quality, operating costs, incentive programs, worker training programs, and ease of working with local officials. Where to Retire magazine ranked Augusta fourth among the nation's most affordable cities for retirement. Located in McDuffie County, the City of Thompson was recognized as a "Georgia Top Ten City of Excellence" by Georgia Trend magazine and Georgia Municipal Association in 2000. 1.7 SUMMARY trends: Asurnmary of the socioeconomic trends in the Air Trade Area includes the following · Population growth in the Air Trade Area between 1990 and 2003 was equal to that experienced nationwide yet lower than that experienced by the GAlSC Region. Population growth in the Air Trade Area is projected to be lower than that for the GAlSC Region and the nation, yet steady through at least 2010. · Per capita EBI for the Air Trade Area increased at a rate that was equal to that for the GAlSC Region and higher than that for the nation between 1998 and 2003. According to Sales and Marketing Management magazine, continued strong growth in per capita EBI for the Air Trade Area is expected between 2003 and 2008. · Although average annual unemployment rates for the Air Trade Area were higher than those for the GAlSC Region and the nation between 1993 and 2001, they were equal to or lower than the GAlSC Region and the nation in 2002 and 2003. · ~onagricultura1 employment in the Air Trade Area increased at a compounded annual growth rate of 0.7 percent between 1993 and 2003, compared to 1.6 percent nationwide during this same. period. Information and Rating Apncy Draft: Ricondo &: Associates 11/29104 B- 29 transportation/utilities were the highest growing sectors in the Air Trade Area during this period. · The Air Trade Area offers a variety of cultural, recreational, and educational resources and activities. · The economic base of the Air Trade Area is diversified and capable of supporting increased demand for air travel at the Airport through the projection period. Rating Agency Dmft: Ricnndn '" Assnciates 11/29104 B - 30 2. AIR TRAFFIC This chapter describes historical and projected aviation activities at the Airport and discusses key factors affecting trends in these activities. 2.1 AIRLINES SERVING THE AIRPORT As of November 2004, the Airport had scheduled passenger service provided by two regionals/cornrnuters.' These airlines include Atlantic Southeast (d/b/a Delta Connection). and US Airways Express. Table 2.1 presents the historical air carrier base at the Airport since 1995. Specific points concerning the Airport's historical air carrier base are presented below: · Atlantic Southeast (ASA) and US Airways Express have operated at the Airport during each of the years shown in Table 2.1. As of~ovember 2004, Atlantic Southeast provides nonstop service to Atlanta with nine daily flights, and US Airways Express provides nonstop service to. Charlotte with seven daily flights. · ExpressJet (a wholly owned subsidiary of Continental) initiated service at the Airport in March 2003. Continental was invited to test the Augusta market on a low financial risk basis. The initiation of service to the Airport represented little fmancial risk to Continental because of the incentives offered by the Aviation Commission and community. These incentives totaled approximately $1,500,000 and included rent, landing fee and fuel fee waivers for the initial period of operations, advertising allowance, and the provision of new facilities and all airline station equipment (furnishing, equipment, and computers) by the Aviation Commission. ExpressJet began service at the Airport with ~o flights per day to ~ew York City and Houston. After 18 months of service, Continental announced the discontinuation of ExpressJet service from the Airport effective October 30, 2004. The airline cited lower business travel than what was desired to satisfY corporate revenue and profitability goals as the primary reason for discontinuation of service. The Aviation Commission observes that Continental did not attract the business traveler because of airfares and schedules. The airfares did not appear to be particularly competitive with other airlines at the Airport or those offered by airlines at competing airports. Continental's schedule was not competitive or convenient for business travelers -- with flights departing/arriving too late in the day for travelers to conduct business. The Aviation Commission's air service advisor has said that in the future the majority of ExpressJet passengers are expected to shift to ASA and US Airways and only a small portion would be lost from total Airport enplanements. Therefore, it has been assumed in the activity forecast that the Airport would lose approximately 8,000 annual enplaned passengers due to the exit of Continental. I Regional airlines gross less than $100 million. Commuter airlines are classified according to the type of aircraft used (a maximum of 60 seats) and their operating frequency (at least five round trips per week between two or more points). Although technically classified by the FAA as a major and national airline, respectively, due to their level of gross operating revenues, Atlantic Southeast and Comair are included in the regionaYcommuter category in this report since they operate regional jets at the Airport. Rating Aacncy Dmft: Ricondn &: Assncialos 11/29/04 B - 31 TABLE 2.1 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant . Air Carrier 1995 1996 1997 1998 1999 2000 2001 2002 2003 20041 Delta Carriers 2 . . . . . . . . . . US Airways Carriers ) . . . . . . . . . . Air Carriers No Lon2er Serving the Ait:port ExpressJ et 4 . . . AIR CARRIER BASE 1 As ofNovemb~r 2004. 2 Delta Carriers include Delta, Atlantic Southeast and Comair. 3 US Airways Carriers include US AirWays and US Airways Express. 4 Initiated service "in March 2003. Continental discontinued ExpressJet service at the Airport October 30, 2004. Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc.. B - 32 · Delta discontinued mainline service at the Airport in December 2000, however it continues to provide limited service during the month of April each year to serve demand generated by the Masters Golf Tournament (the Masters). At the same time that Delta discontinued service at the Airport, ASA increased the size and frequency of its flights at the Airport. 2.2 mSTORICAL P ASSE~GER ACTIVITY This section presents historical trends in enplaned passengers at the Airport and the major factors influencing these trends, as well as historical market shares of enplanements by airline. 2.2.1 Enplaned Passengers The Airport is classified by the FAA as a non-hub facility based on its percentage of nationwide enplanements. Table 2.2 presents historical data on enplaned passengers at the Airport and the nation between 1993 and 2003. As shown, passenger activity at the Airport fluctuated between 1993 and 2000, averaging approximately 210,000 annual enplanements duiing this period. Following the economic downturn and September 11, however, the Airport's enplanements decreased by appro~i.mately 27 percent from 2000 to 2002. As such, the Airport's share of U.S. enplanements reacted accordingly. Since 2002, the Airport's enplanements have been recovering. Enplanements in 2003 increased 10.1 percent over 2002 levels due to factors described below. The Airport historically has experienced a high amount of passenger diversion to nearby competing airports. Hartsfield-Jackson Atlanta International Airport (Atlanta) is the primary competitor to the Airport due to its proximity to Augusta and its provision of frequent nonstop service to hundreds of destinations at a wide range of airfares. Airport leakage analyses prepared in October 2000 and February 2001 indicated that estimated passenger diversion to other airports was approximately 24 to 38 percent to Atlanta, approximately 9 to 10 percent to Columbia Metropolitan Airport (Columbia), and approximately 5 to 8 percent to Savannah/Hilton Head International Airport and other airports. An alternative analysis prepared in September 2004 indicates passenger diversion from the Airport is primarily to Atlanta (approximately 21 percent) and Columbia (approximately 10 percent).2 This passenger diversion to nearby competing aizports is primarily a result of the high level of nonstop service offered at these airports, and the higher than average air fare yields at the Airport. Specific details concerning enplaned passengers at the Airport between 1993 and 2003, as well as 2004 year-to-date, are discussed below: . · 1993-1996. Enplanements at the Airport decreased from 237,485 enplanements in 1993 to 198,726 in 1996 (a compounded annual decrease of 5.8 percent during this period). This decrease was primarily due to the elimination of service by US Airways in 1995 and the economic recession in the early 1990's. By comparison, enplanements nationwide increased by a compounded annual growth rate of 5.9 percent. 2 Augusta Regional Airport Leakage Analysis, February 2001; Telephone Survey, October 2000. Leakage Analysis prepared by Seabury Airline Planning Group, LLC--the Aviation Commission's air service advisor, September 2004. Rating Agency Dmft: Ricondn &: Associates 11/29104 B - 33 TABLE 2.2 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant HISTORICAL ENPLANEMENTS Airport Airport U.S. U.S. Market Year Enplanements I . Growth Enplanements 2 Growth Share 1993 237,485 469,300,000 0.051 % 1994 211,013 -11.1 % 510,000,000 8.7% 0.041% 1995 201,289 -4.6% 530,000,000 3.9% 0.038% 1996 198,726 -1.3% 557,000,000 5.1% 0.036% 1997 206,171 3.7% 577,800,000 3.7% 0.036% 1998 218,541 6.0% 590,400,000 2.2% 0.037% 1999 209,892 -4.0% 610,900,000 3.5% 0.034% 2000 201,921 -3.8% 641,200,000 5.0% 0.031 % 2001 166,537 -17.5% 626,800,000 -2.2% 0.027% 2002 147,951 -11.2% 574,500,000 -8.3% 0.026% 2003 ] 62,946 10.1% 587,300,000 3 2.2% 0.028% Compounded Annual Growth Rate 1993 - 1996 1996 - 1998 1998 - 2002 2002 - 2003 -5.8% 3.2% -11.0% 10.1% 5.9% 2.0% -2.0% 2.2% I Twelve months ending December 31. 2 Twelve months ending September 30. 3 Estimated by the FAA. Sources: Augusta Aviation Commission FAA (U.S. activity) Prepared by: Ricondo & Associates, Inc. B - 34 · 1996-1998. Passenger activity at the Airport increased between 1996 and 1998, from 198,726 enplanements to 218,541 (a compounded annual increase of 3.2 percent during this period). By comparison, enplanements nationwide increased at a compounded annual increase of2.0 percent during this same period · 1998-2002. Enplanements at the Airport decreased from 218,541 in 1998 to 147,951 in 2002. This decrease ~epresents a compounded annual decrease of 11.0 percent during this period, compared to 2.0 percent ex.perienced nationwide. The following factors contributed to this decrease in enplaned passengers at the Airport: Delta discontinued mainline service at the Airport in December 2000, however they continue to provide limited service during the month of April each year to serve demand generated by the Masters Golf Tournament (the Masters). Delta replaced the mainline service with primarily turboprop aircraft operated by ASA which eliminated some leisure travelers. Economic indicators in the nation prior to September 11 were beginning to show signs of a recession. In ~ovember 2001, the ~ational Bureau of Economic Research officially announced that in March 2001 the U.S. economy had entered its 10lh recession since the end of World War n. The. loss of household wealth dampened consumer confidence and significantly reduced consumer spending. The effects of September 11 accelerated the downturn in consumer spending on consumer goods and services, including spending on air travel. · 2002-2003. Enplanements from 2002 to 2003 increased by 10.1 percent and may be attributed to several factors: The initiation of new commercial service utilizing regional jets by ExpressJet in March 2003 attracted back some leisure travelerS who had abandoned Augusta when Delta AsA shifted to turboprop aircraft. ExpressJet's nonstop service to New York and Houston was also able to attract a smaIl number of business travelers who previously had driven to Atlanta. Finally, some passengers who had been reluctant to fly due to September II. the economic recession and other factors began to return to the market mirroring a similar nationwide trend. · 2004 Year-to-Date. Based on data through October 2004, enplanements at the Airport were 8.4 percent higher during the first ten months of 2004, compared to a similar period in 2003. This increase is primarily due to market recovery. By comparison, and based on Air Transportation Association (ATA) most recent year-to-date statistics through September 2004, domestic passenger activity for AT A m~mbers was 4.7 percent higher than a similar period in 2003. 2.2.2 Enplaned Passengers By Airline From 1996 through December 2000, Delta was the only major/national airline that provided service at the Airport. During this period, Delta accommodated nearly 50 percent of the Airport's enplanements. Since the discontinuation of Delta's mainline service, the Airport has been provided service entirely by regional/commuter airlines except for limited mainline service provided annually during the Masters. This shifting of enplanements from Rating Agency DnIft: Ricondo &: Associates 11/29104 B - 35 the majors/nationals to the regionals/commuters was not unique to the Airport, and generally followed the nationwide trend ofregionals/commuters initiating service in markets abandoned by the majors/nationals. Table 2.3 presents the historical share of enplanements by airline at the Airport between 1999 and 2003. As shown, Atlantic Southeast contributed 65 percent of enplanements at the Airport in 2003. ExpressJet, which initiated service in 2003, shared 17.1 percent, while USAirways Express shared 15.6 percent of the Airport's annual enplanements in 2003. 2.3 AIR SERVICE 2.3.1 Historical Air Service An important airport characteristic is the distribution of its 0&0 markets, which is a fi,mction of air travel demands and available services and facilities. This is particularly true for the Airport, as it serves primarily 0&0 passengers. Table 2.4 presents historical data on the Airport's primary (i.e., top 20) O&D markets. As shown, the Airport served primarily short- to medium-haul markets in the periods depicted, with an average stage length (i.e., passenger trip distance) of 956 miles in 1998 and 1,016 ,~les in 2003. The average stage lengths were slightly above the average stage lengths nationwide during these same periods. The Airport's average stage lengths reflect the Airport's geographical location and strong local demand for major eastern (i.e., ~ew York, Washington, and Boston), midwestem (i.e., .. Chicago) markets, and western (i.e., Dallas, Las Vegas, and Los Angeles) markets. The most significant change in 0&0 passenger levels at the Airport occurred in the Houston market, with 0&0 passengers increasing over 21 percent between 1998 and 2003. This increase was due to nonstop service initiated to this .market by ExpressJet in March 2003. This nonstop service has been discontinued. One measure of the relative profitability of 0&0 markets served is the revenue yield per coupon mile (passenger flight stage). As also shown in Table 2.4, the average revenue yield per coupon mile for all of the Airport's O&D markets was $0.2215 in 1998, compared to $0.1379 nationwide; and $0.1978 in 2003, compared to $0.1182 nationwide. This higher yield for the Airport as compared to the nation is reflective of the ~ort's service by regionaVcommuter airlines to hub airports and the fact that the Airport is not served by a low- fare carrier. Excluding Las Vegas and Los Angeles, 18 of the Airport's top 20 O&D markets exceeded the revenue yield per coupon mile for that of the nationwide average in 2003. The .revenue yield per coupon mile for New York, the Airport's top O&D market, was $0.2327 in 2003, nearly double the nationwide average of $0.1182. As of ~ovember 2004, daily nonstop service is provided to two cities, Atlanta and Charlotte, with a total of 16 daily flights. Table 2.5 presents the Airport's nonstop markets as of~ovember 2004, including the markets served, daily flights, and airlines providing nonstophflights. 2.3.2 Air Service Development Plan The Aviation Commission has an on-going three-part air service development plan to promote and develop air service at the Airport. The air service development program is RarillJ Agency Dmft: Ricondn &; Associates 11/29104 B - 36 2.3 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant TABLE I I 1999 2000 2001 2002 2003 Airline Enplanements Share Enplanements Share " Enplanements Share Enplanements Share Enplanements Share Atlantic Southeast 66,640 31. 7% 79,047 39.1% 124,783 74.9% 118,028 79.8% ] 05,896 65.0% Delta Air Lines I 102,852 49.0% 86,042 42.6% 5,767 3.5% 2,798 1.9% 1,133 0.7% Delta Carriers 169,492 80.8% ] 65,089 81.8% 130,550 78.4% 120,826 81. 7% 107,029 65.7% US Airways Express 40,400 19.2% 36,832 18.2% 33,243 20.0% 24,408 ] 6.5% 25,341 15.6% Exp~essJet 0 0.0% 0 0.0%" 0 0.0% 0 0.0% 27,865 17.]% All Others 2 0 0.0% 0 0.0% 2,744 1.6% 2,7]7 ].8% 2,711 1.7% Airport Total 3 209,892 100.0% 201,92] 100.0% ] 66,537 100.0% I 147,951 100.0% ] 62,946 100.0% . HISTORICAL ENPLANEMENTS BY AIRLINE II1 I UJ .....:t limited mainline service offered during the Masters. represented the Includes Comair. En~lanements in 2001 through 2003 .Consists of charter airlines. Totals 2 to individual rounding. Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. may not add due TABLE 2.4 Augusta Aviation Commission Augusta Regional Airpon Report of the Airport Consultant FY]998 FY 2003 Trip Total 0&0 Yield per Trip Total 0&0 Yield per Rank Market Length 1 Passengers Coupon Mile Rank Market Length 1 Passengers Coupon Mile 1 New York MH 34,010 50.2101 I New York MH 30,820 50.2327 2 Washington SH 23,530 50.2906 2 Washington SH 16,640 50.2838 3 Chicago MH 17,600 50.2579 3 Houston MH 9,690 50.1994 4 Dallas MH 12,150 50.2180 4 Boston MH 9,260 50.1 582 5 Atlanta SH 11,320 50.9187 5 Dallas MH 8,640 50.2000 6 Philadelphia SH 11,290 50.2574 6 Chicago MH 8,360 50.2643 7 Boston MH 10,550 50.2050 7 Las Vegas LH 7,580 50.0986 8 Los Angeles LH 9,410 50. II 53 8 Philadelphia SH 6,130 50.2842 9 Baltimore SH 9,350 50.2973 9 Tampa SH 6,040 50.2753 10 Las Vegas LH 8,280 50.1073 10 Kansas City MH 5,780 50.1690 11 San Francisco LH 8,230 50.1243 11 Los Angeles LH 5,590 50.1 076 12 Houston MH 7,970 50.2387 12 Atlanta SH 5,040 51.0572 13 Nashville SH 7,920 50.5416 13 Detroit MH 5,010 50.2277 ]4 Detroit MH 7,530 50.2425 14 Ft. Lauderdale SH 4,980 50.2082 15 Orlando SH 7,480 50.3312 15 San Antonio MH 4,960 50.2565 ]6 Cincinnati SH 6,990 50.4216 16 Baltimore SH 4,750 50.2859 17 St Louis SH 6,660 50.3704 17 Denver MH 4,700 50.1685 18 Denver MH 6,300 50.]839 18 Miami SH 4,290 50.]970 ]9 Pittsburgh SH 6,300 50.325 ] ]9 Orlando SH 4,]60 50.3295 20 Tampa SH 6,110 50.3456 20 Memphis SH 4,080 50.28] 0 Other 0&0 Markets ] 96.280 Other 0&0 Markets ]29.440 Total O&D Passengers 415,260 Total O&D Passengers 285,940 Total Airport Passengers 437,082 Total Airport Passengers 325,892 0&0 % of Total Passengers 95.0% O&D % of Total Passengers 2 87.7% Averaee A veralle Airport 3 956 50.2215 Airport 3 ],0]6 50.1978 United States 848 50.1379 United States 939 50.1182 PRIMARY O&D PASSENGER MARKETS I (SH) Short Haul = 0 to 600 miles (MH) Medium Haul = 601 to 1,800 miles (LH) Long Haul = over 1,800 miles 2 Statistical Sampling Anomaly 3 Average calculated for all of the Airport's O&D markets. Sources: 0&0 Survey of Airline Passenger Traffic, U.S. DOT, Table 8. Prepared by: Ricondo & Associates, Inc. B - 38 TABLE 2.5 Augusta Aviation Commission' Augusta Regional Airport Report of the Airport Consultant NONSTOP MARKETS Market Atlanta Charlotte Daily Nonstop Flights 9 7 16 Airline Atlantic Southeast US Airways Express Total Source: Official Airline Guide, October 20, 2004 Prepared by: Ricondo & Associates, Inc. B - 39 directed by the Airport Director and administered by a professional Airport marketing director. The air service development program includes the following three components: · Air Service Analysis and Market Research Program. The. Aviation Commission has an ongoing process of air service data review, market analysis, and change identification. It monitors air service statistics for the Airport, competing airports and the commercial airline industry to keep abreast of trends and happening. . It monitors airline network develop to identify potential opportunities for new or additional air service for the Airport. As a part of this program, the Aviation Commission reviews, analyzes, and evaluates the quality of existing air service and airfares. Through this .analytical process air services and airfare deficiencies are identified and . form a basis for air service or airfare proposals to airlines. · Airline Outreach Program. The Aviation Commission meets regularly with airlines serving the Airport and airlines that do not serve the Airport in an outreach program. The purpose of the meetings with the airline serving the Airport are to discuss air service deficiencies, airfare disparities, and present proposal for new or additional air service. The goal of this element of the plan is to call the attention of select airlines to opportunities at the Airport and providing them with quantitative information to support a decision to provide new or additional airfares or improve airfares. The Aviation Commission meets with airlines not serving the market to identify opportunities in Augusta and present air service proposal to these airlines. A major purpose of the outreach programs is to develop relationships with the schedule planning groups of airline of interest to Augusta. The Aviation Commission has developed such a relationship with a series of airlines over ~e years. · Air Traffic Retention Program. The Aviation Commission has an air traffic retention program to make the community aware of the benefits and necessity of supporting and using Augusta Regional Airport. As a part of this program, the Aviation Commission has retained the services of a marketing company to communicate the benefits of ''Flying Augusta" to the public. The message is that using the Airport is convenience and it provides economic benefits to Augusta. In addition, from time to time, members of the Airport Staff and Aviation Commission speak to community and civil groups to create interest and emphasis the convenience, services, and hassled free experience the. Airport offers.. The goal of this element of the program is to retain the existing passenger base and win back local passenger that may be using other airports. 2.4 HISTORICAL AIRCRAFT OPERATIO~S AND LANDED WEIGHT This section presents historical aircraft operations (takeoffs and landings) by major user category at the Airport, as well as historical landed weight by passenger airlines and all-cargo carriers. Rating Aacncy Dmft: Ricnndo &: Associates 11129104 B - 40 2.4.1 Aircraft Operations Table 2.6 presents historical operations (take-offs or landings) at the Airport by major user category between 1999 and 2003. As shown, total aircraft activity at the Airport has decreased from 51,854 operations in 1999 to 41,797 in 2003. Specific points concerning trends in operational activity by major user category at the Airport are discussed below: · MajorsfNationals. Major/national activity decreased in 2001 following the discontinuation of mainline service by Delta in December 2000. As mentioned previously, Delta continues to provide limited service in April of each year as a result of the Masters golf tournament. · Regionals/Commuters. With the exception of 2000 and 2002, operations by regionalslcorrunuters at the Airport steadily increased between 1999 and 2003, from 8,924 operations in 1999 to 11,452 in 2003. This increase, representing a compounded annual growth rate of 6.4 percent during this period, reflects the nationwide trend of the majors/nationals shifting their activity to their respective affiliated subsidiaries and/or code-sharing .airlines. Activity by regionals/corrunuters decreased 8.6 percent in 2002 from 2001 levels due to the effects of September 11 and. the economic slowdown nationwide. Regional/corrunuter operations then increased 15.9 percent in 2003 from the . previous year's level, primarily due to the initiation of new service by ExpressJet in 2003. · General Aviation. General aviation activity at the Airport steadily decreased each year'between 1999 and 2003, from 34,488 operations in 1999 to 23,872 in 2003, a compounded annual decrease of 8.8 percent during this period. Accelerating this decrease were the effects of September 11 and the economic slowdown nationwide during the latter part of this period. By comparison, general aviation activity for the nation decreased 1.0 percent from 1999 to 2003. · Other Air Taxi. Other air taxi activity (for-hire charters, fixed base operators, etc.) has increased from 331 in 1999 to 1,981 in 2003. · Military. Military activity at the Airport has been stable since 2001, averaging approximately 4,500 operations per year during that period.. 2.4.2 Landed Weight by Airline Table 2.7 presents the share oflanded weight by airlines at the Airport between 1999 and 2003. As shown, as a result of the discontinuation of mainline jet service by Delta in 2000, overall landed weight at the Airport has decreased since 1999, from 342,231 thousand pounds in 1999 to 273,140 thousand pounds in 2003. Atlantic Southeast, USAirways Express, and ExpressJet accounted for 54.8 percent, 22.4 percent, and 22.0 percent of landed weight at the Airport in 2003, respectively. 2.5 AVIATIO~INDUSTRY The U.S. aviation industry was significantly impacted by a number of events that occurred in. the early part of this decade (e.g., September 11,. the economic slowdown, the war with fraq, and the outbreak of the severe acute respiratory syndrome (SARS) virus in Asia and Canada), both in terms of Rarina Agency Draft: Ricondo &: Associates 11129104 B - 41 TABLE 2.6 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant HISTORICAL AIRCRAFT OPERATIONS Fiscal Major$/ . Regionalsl Airline General Other Year Nationals Commuters Total Aviation Air Taxi Military Total 1999 2,882 8,924 11,806 34,488 331 5,229 51,854 2000 1,982 8,890 10,872 33,340 760 5,828 50,800 2001 50 10,804 10,854 29,148 1,453 4,537 45,992 2002 6 9,878 9,884 28,114 1,566 4,480 44,044 2003 18 11,452 11,470 23,872 1,981 4,474 41,797 Compounded Annual Growth Rate 1999 - 2001 -86.8% 10.0% -4.1% -8.1% 109.5% -6.9% -5.8% 200 I - 2003 -40.0% 3.0% 2.8% -9.5% 16.8% -0.7% -4.7% 1999 - 2003 -71.9% 6.4% -0.7% -8.8% 56.4% -1.8% -5.2% Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. B - 42 TABLE 2.7 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant HISTORICAL LANDED WEIGHT BY AIRLINE (thousand pounds) 2003 Landed Weight 2002 Landed Weight 2001 Landed Weight 2000 Landed Weight 1999 Share Share Share 11,145 152,271 Share 45.7% 34.7% 132,522 100,608 Share 55.5% 24.9% Landed Weight 189,781 85,343 Airline Delta Air Lines I Atlantic Southeast 0.8% 54.8% 55.6% 22.4% 22.0% 2,246 149,689 51,935 61,106 60,099 0.3% 78.0% 78.3% 21. 7% 0.0% 660 166,398 167,058 46,344 o 5.1% 70.0% 75.1% 24.9% 0.0% 163,416 54,170 o 80.4% 19.6% 0.0% 233,130 56,661 o 80.4% 19.6% 0.0% 275,124 67,107 o Delta Carriers US Airways Express ExpressJet 100.0% 273,140 100.0% 213,402 100.0% 217,586 100.0% 289,791 100.0% Includes Com air. Totals may not add due to individual rounding. 342,231 Airport Total 2 t:::\j I .,.. UJ 2 Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. Ie levels of operations and workforce, as well as revenues and profitability. These events resulted in substantial flDanciallosses in the aviation industry each year between 2001 and 2003 and downgrades of airline ratings by the rating agencies. Several U.S. airlines and Air Canada filed for bankruptcy court protection during this period: · US Airways filed for bankruptcy court protection under Chapter lion August 11, 2002. US Airways and seven subsidiaries subsequently emerged from Chapter lion March 31, 2003, securing approximately $1.2 billion in new fmancing and investment. The airline continues to face significant flDancial hardships partially due to increasing fuel prices and pressures from low-cost carriers according to US Airways' management. On September 12, 2004, US Airways and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11. This filing became necessary to preserve cash and allow the Court to oversee US Airways' continued restructuring, including reaching new labor agreements to lower labor costs. · United filed for bankruptcy court protection under Chapter lion December 9,2002, and is expected to emerge from Chapter 11 in the latter part of 2004. · Hawaiian filed for bankruptcy court protection under Chapter lion March 21, 2003. · Air Canada filed for reorganization under Canada's Companies' Creditors Arrangement Act on April 1, 2003. Air Canada subsequently emerged from bankruptcy protection on September 30;2004. · ATA Holdings Corporation, parent of ATA Airlines, sought protection from creditors under Chapter lion October 26, 2004. In connection with the bankruptcy filing, AT A agreed to essentially sell its hub at Chicago Midway Airport and some other assets to AirTran Holdings, Inc. for $87.5 million cash. According to information obtained from Delta's filings with the Securities & Exchange Commission (SEe), Delta reported net losses of approximately $6.3 billion between 2001 and the third quarter of 2004. On ~ovember 1, 2004, Delta announced $500 million in new financing from General Electric (GE) Commercial Finance. On November 11, 2004, Delta announced that Delta pilots ratified a new contract to cut $1 billion in long-term, annual savings to the company. The GE . agreement, along with approval of the concessions from Delta's pilot union, will allow Delta access to $600 million from American Express. Getting its pilots to agree to cost savings and restructuring approximately $2.6 billion in unsecured debt load are the two major initiatives Delta has been pursuing to avoid filing for bankruptcy court protection under Chapter 11. On November 24, -!004, Delta announced that $607.5 million of unsecured debt had been tendered for exchange to holders of the $2.6 billion of unsecured debt. This amount was below the $680 million offered by Delta prior to the offer's expiration on ~ovember 23, 2004. The Air Transportation Safety and System Stabilization Act, enacted following the events of September 11, provided an infusion of $5 billion in federal grants for direct losses incurred in recognition of the effects of the system shutdown resulting from the events of September 11 and their longer-term. impact. In addition, $10 billion in possible loan guarantees were authorized for qualified applicants, with approximately $1.5 billion actually issued through September 30,2004. . With the enactment of the Aviation and Transportation Security Act in November 2001, the Transportation Security Administration (TSA) was created, which established different and improved Rating Agency Dmf\: Ricondn &: Associales 11/29104 B- 44 security processes and procedures. As a result of these measures, fees and unfunded mandates have added more than $4 billion to the industry's annual costs. On Apri116, 2003, President Bush signed an aid package of approximately $3 billion for the airline industry, part of a larger Iraqi-war spending bill. The aid package also included a six-month waiver of security fees owed the government for the last six months of federal FY 2003. The price of aviation fuel has steadily increased in recent years, from an average price of approximately $31 per barrel in 2003 to a record high of approximately $55 per barrel in October 2004. Some U.S. airlines have attempted to pass the higher fuel costs to consumers by increasing the . fuel surcharge; however, some of these attempts have been unsuccessful as many airlines, particularly low-cost carriers, refused to match the increase. As the U.S. airline industry continues to recover from the effects of September 11 and other factors cited earlier, a number of trends have emerged, including more widespread use of simplified fare structures, continued growth of competition by low-cost carriers in long-haul markets, increased numbers of routes being transferred from mainline carriers to regionals/commuters, increased efficiency and productivity, and declining real fares. 2.6 PROJECTIO~S OF A VIA TIO~ DEMAND Projections of aviation demand were prepared on the basis of local socioeconomic and demographic factors, the Airport's historical shares of U.S. domestic enplanements, anticipated trends in air carrier usage of the Airport, and comparisons to nationwide growth rates projected by the FAA. Projections of aviation activity are prepared annually by the Statistics and Forecast Branch of the FAA for use in its planning and decision-making processes. During the past several years, the FAA has adopted a decision-theoretic forecasting system, generally accomplished in two stages. The near term projections (federal FY 2004 through federal FY 2005) for commercial aviation were developed utilizing a set of assumptions regarding future capacity together with expert judgment as to the strength and timing of the recovery from the events of September 11 and the economic slowdown. Projections for federal FY 2006 through federal FY 2015 were based on results derived from econometric models. According to the FAA's projections, the outlook for the 12-year projection period is for U.S. economic activity to continue the strong recovery that began during the second-half of federal FY 2003 well into federal FY 2004/2005. Aviation demand, which was relatively weak in federal FY 2003, is expected to recover strongly during this same period. However, continued international tensions, fuel prices, and the prospects of additional airline bankruptcies have increased the risk and uncertainty of these projections, both in the short- and long-term. In preparing the projections included herein for the Airport, several methodologies were assessed for reasonableness; however, the overall approach was similar to that adopted by the FAA in its nationwide projections (i.e., expert judgment as to the timing and extent of recovery from the events of September 11 and the economic slowdown, followed by long-term growth correlated with socioeconomic trends in the Air Trade Area). Two of the methodologies used and assessed are described below: · Market Share Approach. In this methodology, judgments are made as to how and to what extent the Airport's rate of growth in domestic enplanements will differ from that projected for the nation by the FAA. On a macro scale, the U.S. projection provides a Rating Agency Dmft: Riccndo &: Associates 11/29104 B- 45 growth base reflecting how industry traffic in general is anticipated to grow in the future. The growth rate used for the Airport can be reflected as an increase or decrease in its future share of the market. · Socioeconomic Regression Approach. Statistical linear regression modeling is used in this methodology, with local socioeconomic factors as the independent variable and enplaned passengers as the dependent variable. Socioeconomic factors utilized in these analyses included population, income, and employment. Of interest in the analyses, among other factors, was how well each socioeconomic variable explained the annual variations in enplane.d passengers at the Airport (Le., the model's correlation coefficient). The resultant projections of activity at the Airport are based on a number of underlying assumptions including the following: · The Airport is still recovering from the effects of September 11 and the nationwide economic slowdown during the early part of this decade. Long-term activity at the Airport is projected to increase as a result of expected growth in socioeconomic conditions in the Air Trade Area during the projection period. · The Airport will continue its role of serving primarily 0&0 passengers and providing regional/commuter service to large hub airports. In addition, the Airport will continue to serve primarily short- to medium-haul markets. · As a result of the proximity of Hartsfield-Jackson Atlanta International and Columbia Metropolitan airports, as well as the higher than average air fare yields at the Airport, the Airport has historically experienced a high level of passenger diversion to nearby competing airports. It is 'anticipated that passenger leakage from the Airport's air service area will continue to occur to nearby competing airports throughout the projection period. · Continued high fuel prices in the short term will likely have an adverse impact on airline profitability, as well as hamper the recovery plans and cost-cutting efforts of certain airlines. Higher fuel prices may cause changes in air service at the Airport; however, the passenger demand for its major 0&0 markets will continue to be served during the projection period · Airline consolidation/mergers that may occur during the projection period are not likely to negatively impact passenger activity levels at the Airport due to its high percentage of O&D passengers. ~ew aidine alliances, should they develop, will be restricted to code sharing and joint frequent flyer programs, and should not reduce airline competition at the Airport. · For these analyses, and similar to the FAA's nationwide projections, it is assumed that there will not be any successful terrorist incidents against either U.S. or world aviation during the projection period. Additionally, it is assumed that there will not be a major contraction of the aviation industry through bankruptcy or consolidation during this same period. . · Economic disturbances will occur during the projection period causing year-to-year traffic variations; however, a long-term increase in nationwide traffic is expected to occur. Raling Agency Dmft: Ricondn &: Associates 11/29104 B- 46 Many of the factors influencing aviation demand cannot necessarily or readily be quantified; and any projection is subject to uncertainties. As a result, the projection process should not be viewed as precise. Actual future traffic levels at the Airport may differ from projections presented herein because events and circumstances do not occur as expected, and those differences may be material. 2.6.1 Enplanement Projections Table 2.8 presents historical and projected enplanements for the Airport's majors/nationals and regional/commuters. As shown, total enplanements are projected to increase from 162,946 in 2003 to approximately 180,000 in 2004, an increase of 10.5 percent during this period (compared to the 15.0 percent year-to-date growth experienced through six months of 2004 compared to 2003 levels during a similar six-month period). It is expected that passenger traffic will continue to recover at the Airport through 2006/2007. As shown, total enplanements are projected to further recover from approximately 180,000 in 2004 to approximately 201,800 in 2007, representing a compounded annual growth rate of 3.9 percent (compared to 5.5 percent for that of the nation during this same time frame). Beyond 2007, Airport enplanements are projected to increase to approximately 232,000 in 2012. This increase represents a compounded annual growth rate of 2.8 percent during this period, compared to 3.6 percent projected for the nation ~rojected by the FAA. . As described previously, the elimination of service by ExpressJet in late 2004 is not expected to have a significant impact on total enplanements. It is estimated up to 8,000 enplanements a year may be eliminated. With the elimination of mainline service at the Airport by Delta in 2000, it is anticipated that the Airport will continue to be served by the regional/commuter airlines with nonstop flights to the mainline carriers' hub airports. A nominal amount of major/national enplanements is shown to occur in future years as a result of limited service provided by Delta during the month of April each year to serve demand generated by the Masters. 2.6.2 Operations Projections Table 2.9 presents historical and projected aircraft operations for passenger airline, general aviation, all-cargo carrier, other air taxi, and military activity. As shown, total aircraft activity at the Airport is projected to increase from 41,797 operations in 2003 to 42,668 operations in 2004 (an increase of 2.1 percent), and then increase to approximately 45,730 operations in 2012 (a compounded annual growth rate of 0.9 percent, compared to 2.0 percent projected for the nation by the FAA). Passenger airline activity at the Airport is expected to increase from 11,470 operations in 2003 to 12,318 in 2004 (a 7.4 percent increase), partially due to the initiation of service by ExpressJet in March 2003 as well as a partial recovery to pre-September, 11 levels. During the remainder of the projection period, it is anticipated that passenger aircraft activity will increase from 12,298 operations in 2004 to approximately 14,000 in 2012, a compounded annual growth rate of 2.0 percent, compared to 2.8 percent projected nationwide for air carriers and air taxis combined by the FAA. In general, the passenger airline projections were developed based on historical relationships between enplaned passengers, load factors, and average seating .capacities of aircraft utilized at the Airport. Specifically, average regional/commuter seats per departure for passenger airlines at. the Airport are expected to increase from an average of 51.0 seats in Rarina All"IIcy Dmft: Ricnndn &. Associates 11129104 B- 47 TABLE 2.8 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant ENPLANEMENT PROJECTIONS Majors/ Regionals/ Year Nationals Commuters Total Historical 1993 195,920 41,565 237,485 1994 114,088 36,925 211,013 1995 137,437 63,852 201,289 1996 121,171 77 ,555 198,726 1997 128,312 77,859 206,171 i998 121,401 97,140 218,541 1999 102,852 107,040 209,892 2000 84,946 116,975 201,921 2001 2,998 163,539 166,537 2002 2,798 145,153 147,951 2003 1,133 161,813 162,946 Projected 2004 700 179,300 180,000 2005 700 188,300 189,000 2006 800 196,000 196,800 2007 800 201,000 20 1,800 2008 800 206,800 207,600 2009 800 213,100 213,900 2010 900 219,100 220,000 20 II 900 225,100 226,000 2012 900 231,200 232,100 Compounded Annual Growth Rate 1993 - 2003 -40.3% 14.6% -3.7% 2003 - 2004 -38.2% 10.8% 10.5% 2004 - 2007 4.6% 3.9% 3.9% 2007 - 2012 2.4% 2.8% 2.8% Sources: Augusta Aviation Commission (Historical) Ricondo & Associates', Inc. (Projected) Prepared by: Ricondo & Associates, Inc. B - 48 TABLE 2.9 Augusta Aviation Commission Augusta Regional Airport Report o/the Airport Consultant OPERATIONS PROJECTIONS Majors/ Regionals/ Airline Geneml . Other Year Nationals Commuters Total Aviation Air Taxi Military Total Historical 1999 2,882 8,924 11,806 34,4~8 331 5,229 51,854 2000 1,982 8,890 10,872 . 33,340 760 5,828 50,800 2001 50 10,804 10,854 29,148 1,453 4,537 45,992 2002 6 9,878 9,884 28,114 1,566 4,480 44,044 2003 18 11,452 11,470 23,872 1,981 4,474 41,797 Proiected 2004 20 12,298 12,318 23,850 2,000 4,500 42,668 2005 20 12,240 12,260 23,930 2,000 4,500 42,690 2006 20 12,620 12,640 24,110 2,000 4,500 43,250 2007 20 12,800 12,820 24,290 2,000 4,500 43,610 2008 20 13,020 13,040 24,460 2,000 4,500 44,000 2009 20 13,280 13,300 24,630 2,000 4,500 44,430 2010 20 13,520 13 ,540 24,800 2,000 4,500 44,840 2011 20 13,740 13,760 25,060 2,000 4,500 45,320 2012 20 13,980 14,000 25,230 2,000 4,500 45,730 Compounded Annual Growth Rate 1999 - 2003 -71.9% 6:4% -0.7% -8.8% 56.4% -3.8.% -5.2% 2003 - 2004 11.1% 7.4% 7.4% -0.1% 1.0% 0.6% 2.1% 2004 - 2012 0.0% 1.6% 1.6% 0.7% 0.0% 0,0% 0.9% Sources: Augusta Aviation Commission (Historical) Ricondo & Associates, Inc. (projected) Prepared by: Ricondo & Associates, Inc. B- 49 2003 to approximately 53.0 seats in 2012. This is similar to the average regional/commuter seat size projected by the FAA nationwide (i.e., 52.9 seats) in 2012. General aviation activity at the Airport is expected to increase from 23,872 operations in 2003 to approximately 25,230 operations in 2012 (a compounded annual growth rate of 0.7 percent during this period, compared to 1.3 percent projected for the nation by the FAA). Activity by other air taxi operators is projected to remain constant at approximately 2,000 operations each year between 2003 and 2012, comparable to its activity level during 2003. Future military activity at the Airport will be influenced by U.S. Department of Defense policy, which largely dictates the level of military activity at an airport. Similar to other air taxi operators, military activity at the Airport is projected to remain constant at approximately 4,500 operations each year during the projection period, comparable to its average activity level between 2001 and 2003. 2.6.3 Airline Landed Weight Projections Table 2.10 presents historical and projected airline carrier landed weight at the Airport. As shown, passenger airline landed weight is projected to increase from 273,140 thousand pounds in 2003 to 293,747 thousand pounds in 2004. This anticipated 7.5 percent increase in. passenger airline landed weight is primarily due to the additional regional/commuter activity by ExpressJet and USAirways Express during this period. As also shown, passenger airline landed weight is expected to further increase to approximately 336,338 thousand pounds in 2012, a compounded annual growth rate of 2.1 percent during this period. In general, the overall increases in airline landed weight are expected as a result of anticipated shifts in aircraft utilized and/or increased operations at the Airport during the projection period. Specifically for the Airport, the projected fleet mix takes into account 1) Delta's recent elimination of mainline service at the Airport; and 2) the increasing use of larger regional jets by the regionals/cornrnuters (e.g., 70-seat regional jets). Ralina Agency Dnft: Ricondn &: Associates 11129104 B - 50 TABLE 2.10 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant LANDED WEIGHT PROJECTIONS (thousand pounds) Majors!' Regionals/ Airline Year Nationals Commuters Total Historical 1999 189,781 152,450 342,231 2000 129,890 159,901 289,791 2001 3,390 214,196 . 217,586 2002 660 212,742 213,402 2003 2,246 270,894 273,140 Projected 2004 2,539 291,208 293,747 2005 2,540 290,136 292,676 2006 2,542 299,454 301,995 2007 2,544 304,039 306,583 2008 2,545 309,585 312,130 2009 2,547 . 316,094 318,641 2010 2,549 322,139 324,687 2011 2,550 327,718 330,269 2012 2,552 333,786 336,338 Compounded Annual Growth Rate 1999 - 2003 -67.0% 15.5% -5.5% 2003 - 2004 13.0% 7.5% 7.5% 2004 - 2012 0.1% 1.7% 1.7% Sources: Augusta Aviation Commission (Historical) Ricondo & Associates, Inc. (projected) Prepared by: Ricondo & Associates, Inc. B - 51 [This page intentionally left blank] B - 52 3. THE 2005 PROJECT This chapter presents a review of the existing Airport facilities, discusses the need for the 2005 Project and summarizes the 2005 Project at the Airport that is intended to be partially funded from the proceeds of the Series 2005 Bonds. All funding sources for the 2005 Project are discussed in the next chapter of this report. 3.1 EXIS~G AIRPORT FACILITIES Augusta Regional Airport. The Airport is located on Georgia Highway 56 Spur (Doug Barnard Parkway) at the termination of Tobacco Road. Interstate Highway 520 provides the main route to Doug Barnard Parkway and the Airport. The Airport occupies 1,248 acres immediately west of the Savannah River and about 7 miles south of downtown Augusta. A small part of the Airport property is located in South Carolina. The Airport's official elevation is 145 feet above sea level. Airfield Facilities. The airport's runway system accommodates a wide variety of aircraft, from small, single- engine aircraft to Airline and regional jets and military transports. There are two intersecting paved runways, 8-26 and 17-35. Taxiway systems connect runways with terminal building areas and other aircraft parking aprons. The Airport's taxiway system is comprised of seven taxiways that are lighted, paved, and identified by letter designations. Terminal Facilities. The existing passenger terminal (the Terminal) is an approximately 53,000 square foot facility consisting of three separate buildings originating from the Airport's use as a military facility. These structures were later joined to form the existing terminal. The three original structures were the infmnary, now utilized by the restaurant/concessions area, the dining hall, now utilized as the ticketing lobby, and a classroom building, now utilized by the rental car conc~ssionaires. In the mid-1960's, the Airport Commission constructed a baggage claim and baggage handling space between the ticketing and administration structures and a public waiting structure between the ticketing and restaurant structure. The Airport Commission constructed two separate holdrooms in 1973 and a new administration suite in 1987. These additions, and less significant additions and renovations made by the Airport Commission over the years, have resulted in a terminal facility that is composed of numerous different structural systems, roofs, mechanical systems, floor elevations, electrical equipment, materials, and finishes. The main building contains passenger ticketing, baggage handling, concessions, public waiting areas, and airport administration. Two buildings to the east of the main building contain gate holding areas, individual security inspection stations, and public restroorns. Between the main and east buildings is a landscaped courtyard. The passenger holding buildings are connected to the main building by an open-air canopy structure. The passenger ticketing lobby and counters are located in the center of the terminal building. The L-shaped counter, running diagonally across the lobby, has 12 ticket agent positions. The Airport has six aircraft gates, utilized by the passenger airlines. Apron Areas. The apron areas are used for aircraft parking and passenger loading/unloading. The Airport aprons are constructed of concrete/asphalt, asphalt, and perforated steel planking (PSP) tied down with stakes. The Airport aprons are characterized by the type of user and include Airline Apron, Air Cargo Apron, General Aviation Apron, Helicopter Apron and Garret Apron, which is utilized by Garret Aviation Services, Inc. (Garrett). Rating All"llcy Dnlft: Ricnndn &: Associates 11129104 B - 53 Other Airport Facilities. In addition to terminal building facilities, landside facilities include aircraft maintenance, general aviation, airport support, and commercial facilities. Garrett, the largest commercial business at the Airport, has an aircraft maintenance center located at the Airport. It is one of the 12 Garrett Aviation Services centers located throughout the u.s. The Augusta facility provides engine maintenance, engine retrofits and upgrades, airframe maintenance, avionics installation and repair, interiors refurbishing, ailxiliary power uhit repair, spare parts, and limited fIxed-base operations services. Most of the aircraft repaired are corporate aircraft. Garrett's main building consists of four hangar areas, office space, aircraft machine and maintenance shops, a recently added parts storage warehouse, a storage building, a sheet metal fabrication building, a work/accessory shop building, and an upholstery building. General aviation activity occurs at the south-central and south portions of the airport. The facilities include a general aviation terminal building, public and private aircraft parking, public and private hangars, flight training, and vehicle parking. During the 'week of the Masters, the general aviation terminal building and other facilities are reported to be crowded and special accommodations for the many visitors are provided in the passenger terminal building. A large conference room anq several offices are available under the command center, which is located immediately north of the general aviation terminal building. Other buildings on Airport property include the following: an air cargo facility comprised of a commercial. aircraft repair shop, maintenance hangar, airport storage and Enterprise Rental- Car service facility; two public-use hangars; one corporate hangar at the Airport; an unoccupied hotel; a vacant former bank building Airport Parking. Public Parking - Terminal building area parking consists of four lots, which support short-term and long-term public parking. The short-term parking area consists of two lots separated by the hotel. The south lot has 127 spaces and the north lot has 106 spaces. Additional short-term off-street parking is available on both sides of Aviation Way in front of the terminal building. The long-term parking area, located north of the terminal building, consists of 588 spaces. The employee parking area consists of 124 parking spaces. Rental Car Parking - The rental car companies share a 116-space parking area for automobiles ready for rental and for those being returned 'at the south end of the terminal building. Excess rental cars and cars being serviced are kept outside the terminal building area. Two of the rental car agencies use on-airport support facilities on Hangar Road, southwest of the terminal building area. Other rental car agencies have off-airport facilities. 3.2 TIlE 2005 Proiect The 2005 Project costs and funding sources are presented in Table 3.1. The total escalated cost of the 2005 Project is estimated to be $31.9 million. A portion of these costs was expended prior to 2004. Proceeds of the Series 2005 Bonds will be deposited into the Series 2005 Construction Account and applied to the payment or reimbursement of the costs of the 2005 Project. Radng Agency Dmft: Riccndn A Associates 11129104 B - 54 T,jBLE 3./ Augur", "''''''don COIIIIII"'"o" ,I_III Reg/tH.II ,jllport RqJtJrt of/he ,j11ptH'l COIIIIdlDnl 200S PROJECT COSTS cI FUNDING SOURCES $0 o ',023,000 o o o o o 280,000 413.000 ss:m:ooo o o S',716.000 $0 o ',999.000 o 137,000 o S02,OOO 128,000 o o sffi6:OOii so o ',661,000 o 310.000 o 342.000 187,000 o o s6.SOO,OOii p~ 1218,000 15,000 447,000 1.088,000 14S,OOO o 273,000 o o o ii:'i'i6.OOO ~ SO o 2.42',000 o o 99',000 o 296,000 o o sr.m:ooo SIal~ 563,000 o 151,000 o o o o o o o ffiO,OOii $0 .0 2,500,000 o o o o o o o S2,SOO,OOO SI,I31.ooo 176,000 1,274,000 o o o o o o o S2,S8I,OOO ProjOCl C_ Fully Loaded SI,412,OOO 191.000 23,4g6,000 1.088,000 . S92,OOO 99'.000 1,117,000 611.000 280.000 413,000 S3o:'i'i5.OOO RMII ill Dai&n ODd Biddiag F'.....ioIFealibilily Buildina CaasIrucIi.. Non Hu_ Pavemmu lhiIities Hu_d Pa.......... CurbIionI_.... Nonb Side Mulli-ModoJ Club Cndil Cud (R_ Ready I Relum) Rehab Soutb Sid. Emplnyeo ParIcing TERMINAL BUILDING PROmer I! 3S,OOO o S255,OOO 1.337,000 o s3.miiiiO 163,000 o S2,744.000 1,589.000 103,000 $31,877.000 OllIER PROJECTS, Runway 8-26 Rehabililad.. (Coasnuctinn) Tuiwoy E Ctact SeoIiag TOTAL 200S PROmer '4.000 103,000 S6,923.iiiiO ~ C_ JlIOYided by LPA Incorpontod. o o S6,SOO,ooO o o $2.186,000 I Includes inlIatinIwy oscoIa1ioa, COIISDUodon COIdingoncy, _... _..... _on odmiDimadon, teSidCDI pmjOCl ....._IBIi..,1Dd qualily .........losling. Note: PoniOlll ordlo 2005 PtojOCl..... oxponcIed ptior to 2004. PtepatOd by: Ric_.t: -"os,lnc. o o $3.716,000 0; I VI VI Projects with PFC funding presented on Table 3.1 were included in the PFC Amendment and Application filed with the FAA in July 2004. The Aviation Commission has received authority from the FAA to apply PFCs on a Pay-As-You-Go (P A YG) basis for certain project elements and to apply PFCs to the interest and principal components of debt service for those projects partially funded with proceeds of Series 2005 Bonds. This PFC Amendment and Application is discussed in Section 4.2. The Aviation Commission's 2005 Project consists of three capital improvement projects, which will be partially funded, with proceeds of the Series 2005 Bonds: 1. Terminal Building Project 2. Runway 8-26 Rehabilitation 3. Taxiway E Crack Sealing Terminal Building Project. As described in Section 3.1, the existing terminal facility is comprised of many of the original facilities from the Airport's previous use as a military facility. The Terminal Building project will replace the existing facility and it consists of multiple components including: Design and Bidding; Financial Feasibility; Building Construction; ~on Hardstand Pavements; Utilities; Hardstand Pavements; Curbfront Renovations; ~orth Side Multi-Modal Curb; Credit Card (Rental Ready / Return) Rehabilitation; and South Side Employee Parking. This project is discussed in detail in Section 3.3. The total escalated cost of the Terminal Building Project is estimated to be approximately $30.2 million. This project is expected to be paid with a combination of AIP, state funding, Aviation Commission funds, P A YG PFCs and proceeds from the Series 2005 Bonds. Runway 8-26 Rehabilitation. This 'project provides for the bituminous overlay of the entire 6,000-foot length of Runway 8-26 and rehabilitation of its lighting. The total cost of this project is estimated to be $1.6 million, of which $54,000 is expected to be funded from Series 2005 Bonds proceeds. Taxiway E Crack Sealing. This project includes sealing the cracks on Taxiway E to minimize surface water infiltration into the pavement section and thereby extend the life of the pavement prior to the need for rehabilitation. The total escalated cost of this project is estimated to be $103,000, of which the entire amount is expected to be funded from Series 2005 Bonds proceeds, The Commission plans to undertake other projects besides the 2005 Project in the 2004 - 2008 Capital Improvement Program (CIP) and these projects are presented in Table 4.1 in Chapter 4. Funding sources for these other projects do not include any proceeds from the issuance of the Series 2005 Bonds and are not expected to be funded with future bonds. Although the Commission has not developed a CIP beyond 2008, it is reasonable to expect capital expenditures will be incurred in those years. For the purposes of this financial analysis, it is assumed that Commission funds contributed to capital projects will be approximately $900,000, annually after 2008. 3.3 TIlE TERMINAL BUILDING PROJECT As described previously, the existing terminal is old and becoming increasingly more costly to maintain and does not provide adequate service for passengers and other users of the facility. The new terminal will meet the future demand for air travel. ~ecessity for this new terminal is generated by the functional obsolescence of the existing terminal, redundant and obsolete building systems that force up operating costs, inefficient building flow and structural inadequacies. The existing terminal Raring Agency Draft: Riccnclo &: Auociatcs 11129104 B - 56 is not up to minimum building codes and significant resources would be required to meet those minimums. The .construction program for the Proj ect consists of the demolition, in phases, of the existing terminal facility and the construction, also in phases, of a new terminal facility. The ground floor of the new terminal facility will total approximately 80,000 square feet of space and will contain holdrooms, ticketing and baggage make-up areas, baggage claim and baggage claim handling areas, and space for security offices, restrooms, concessions, rental car offices, circulation areas, and other ancillary and support areas. The second floor of the new terminal facility will total approximately 13,000 square feet of space and will contain administrative offices, restrooms, and additional support space. The construction program also includes site work related to access road, parking areas, and apron, including utilities, grading, drainage, paving, and marking. The new terminal facility will be constructed in the same footprint as the existing terminal facility while maintaining airline and concession operations. The construction timing has been scheduled over four phases and was designed to avoid any disruption of service during the Masters week. A floor plan drawing of the proposed new terminal is presented on the following page. The Aviation Commission has identified additional Capital Projects totaling approximately $4.5 million to be undertaken in 2005 through 2007. These projects have not been included in the CIP because they are contingent upon receiving future AIP entitlements. As AIP entitlements for 2005, 2006 and 2007 get appropriated, these projects will be constructed. If AIP funding is not appropriated, these projects will remain deferred until funding can be secured. Rating Agency Dmft: Ricondo & A.osocia,.. 11/29/04 B - 57 [This page intentionally left blank] B - 58 4. FINANCIAL ANALYSES This chapter examines the fmancial structure of the Airport; cost and fmancial implications of the 2005 Project, other projects included in the 2004 - 2007 CIP, and estimates of capital projects beyond 2007; Operating and Maintenance (O&M) Expenses and ~on-Airline Revenue projections; airline rates and charges projections; airline cost per enplaned passenger projections; application of Revenues; and projected debt service coverage. 4.1 FINANCIAL SlRUCTURE This section discusses Airport accounting practices, the requirements and provisions of the Master Bond Resolution as supplemented and amended by the First Supplemental Bond Resolution (collectively known as the Bond Resolution), and the rate-setting mechanism included in the Rate Ordinance passed on October 19, 2004, by the Aviation Commission for the Airport. 4.1.1 Airport Accounting Expenses and revenues of the Airport are categorized into functional areas and rolled up into type of expense for rate-making purposes. The Rate Ordinance includes defInitions of Cost Centers to which expenses and revenues will be allocated. Allocations of expenses to Cost Centers are based on percentages derived from discussions with Airport management and industry trends. Revenues are allocated into Cost Centers based on the type of revenue. Debt Service and Capital Expenditures will be assigned to Cost Centers based on the intended purpose of the expenditure. Cost Center defInitions may be found in section 4.1.3. 4.1.2 Bond Resolution The Bond Resolution authorizes the issuance of Airport Revenue Bonds by the Consolidated Government. The requirements of the Bond Resolution and the proposed methodology contained in the Airline Agreement were utilized to develop the application of revenues included in these financial analyses. The principal funds and accounts created in the Bond Resolution are presented in Exhibit 4.1. Sections of the Bond Resolution as they pertain to this report are summarized below: · "Revenues" means (i) all revenues, income, receipts and money derived from the ownership and operation of the Airport, including without limitation all rentals, charges, landing fees, use charges and concession revenue received by or on behalf of the Consolidated Government, Investment Earnings and all other income received from, and gain from, securities and other investments and amounts earned on amounts deposited in funds and accounts under the Bond Resolution or otherwise maintained with respect to the Airport, and (ii) all gifts, grants, reimbursements or payments received from governmental units or public agencies for the benefIt of the Airport which are (y) not restricted by law or the payor to application for a particular purpose other than payment of certain Bonds or Contracts and (z) otherwise lawfully available for payment of Bonds or Contracts; provided "Revenues" includes PFC Revenues. The term "Revenues" does not include proceeds of insurance so long as such proceeds are to be paid to a party separate from the Consolidated Government in respect of a liability or are to be used to repair or replace portions. of the Airport. "Revenues" are to be calculated on a cash basis rather than on an accrual basis. Rating Agency o..ft; RicoDdo & AMocialC3 11/29104 B - 59 Au/:usta Re/:ionaJ Airport Augusta Regional Airport Revenue Bond Flow of Funds "Airport Revenue" "PFC Revenue" AIRPORT REVENUE FUND . All income and receipts . Less: Defined exclusions .. REBATE FUND . Fund requirement, if any + OPERATION AND MAINTENANCE FUND . All income and receipts - . Less: Defined exclusions ~ AIRPORT BOND FUND . Principal/Sinking Account . Interest Account . Debt Service Reserve Account + OPERATING AND MAINTENANCE RESERVE FUND . Specified Requirement . RENEWAL AND REPLACEMENT FUND . Emergency Capital Requirements + SUBORDINATE SECURITIES FUND . Debt Service on Subordinate Obligations + CAPITAL IMPROVEMENT FUND . Fund Balance . Any Lawful Airport Purpose PFC REVENUE FUND · All PFC receipts · Including investment Income PFC BOND FUND · PFC PrincipaVSinking Account . · PFC Bond Interest Account · PFC Bond Reserve Account PFCs available for Other Obligations, if any PFC OBLIGATIONS FUND · Less: PFC Operating Expenses, or other obligations, if any PFCs available for P A YGO .. PFC PAYGO CAPITAL FUND · Fund Balance · Any Lawful PFC Purpose Compiled by: Ricondo & Associates, Inc. Exhibit 4.1 Flow of Funds under the Bond Resolution B - 60 · "PFC Revenues" means all income and revenue received by or required to be remitted to the Aviation Commission from the passenger facility charges imposed by the Consolidated Government pursuant to the PFC Act, and the PFC Regulations, including any interest earned after such charges have been remitted to the Consolidated Government as provided in the PFC Regulations, all of which may he pledged pursuant to the PFC Act and PFC Regulations S 158.13; provided, the term ''PFC Revenues'~ also includes any interest or other gain in any of the accounts or subaccounts created herein or in any Supplemental Resolution resulting from any investments and reinvestments ofPFC Revenues. · An Operation and Maintenance Reserve Fund is established equivalent to 60 days' Operating Expenses. · A Debt Service Reserve Account is established upon issuance of the Series 2005 Bonds equivalent to a reasonable reserve for the payment of principal of and interest on Bonds. · Under the Rate Covenant included in the Master Bond Resolution, the Consolidated Government has covenanted to collect rates, fees, and other charges for the services and facilities furnished by the Airport fully sufficient at all times for 100 percent of the Operating Expenses and for the accumulation in the Operation and Maintenance Reserve Fund of the Operating Reserve; and at least 125 percent of the Debt Service Requirement on all other Bonds payable for the year of computation. A summary of certain provisions of the Bond Resolution may be found in Appendix C, "Summary of Certain Provisions of the Bond Resolution," of the Official Statement. 4.1.3 Rate-Setting Mechanism As previously described, the Consolidated Government has adopted a Rate Ordinance relating to rates, fees and charges, and regulations for airline use of Airport facilities to reflect revised (1) methodology for recalculating airline rents and fees and certain other changes to airline rate, fees, and charges, and (2) updating the terms and conditions associated with airline use and occupancy of the Airport. The Aviation Commission believes that the deftnitions and procedures contained in the Rate Ordinance are consistent with those in the Bond Resolution and the United States Department of Transportation policy of airline rates. and charges. The Rate Ordinance provides a basis for calculating, charging, and collecting airline Terminal Building rents, Apron fees, Loading Bridge use fees, landing fees and other charges so that total Airport Revenues are sufficient to meet the requirements of the Rate Covenant. The Aviation Commission intends to negotiate a Scheduled Airline Operating Agreement and Terminal Building Lease (Airline Agreement) that will address the occupancy of the new Terminal Building and establish procedures for periodically adjusting airline rents, fees, and charges so that Revenues will be at least sufficient to meet the requirements of the Rate Covenant in each year the Airline Agreement is in effect. Prior to the execution of an Airline Agreement, the Aviation Commission intends to calculate, charge, and collect airline rents, fees, and charges according to the procedures set forth in the Rate Ordinance. Rating Agency Draft: Ricondo & ^>sociat.. 11/29104 B - 61 According to Airport management, the airlines have agreed in principle with the Aviation Commission's proposed capital improvements, and there are informal commitments to occupy space in the new Terminal Building. The airlines have shown support of the recently approved PFC application, discussed in Section 4.2. 4.1.4 Airline Rents and Fees under the Rate Ordinance As stated, the Rate Ordinance provides a basis for calculating charges, and collecting airline Terminal Building rents, Apron Fees, Loading Bridge Use Fees, Landing Fees, and other charges so that total Airport Revenue are sufficient to meet the requirements of the Rate Covenant. The Rate Ordinance establishes the following Airport Cost Centers to be used in the calculation of airline rents and fees: · Airfield Area shall mean those areas on the Airport that provide for the landing, takeoff, taxiing, parking, or other operations of aircraft, and the approach and runway protection zones, infield areas, and navigational aids. · Apron Area shall mean the pi'tved aircraft ramp area adjacent to the Terminal Building that provides for the parking, loading, unloading, and servicing of aircraft. · Loading Bridges shall mean the passenger loading bridges serving the Terminal Building. · Terminal Area shall mean the access roads and parking areas serving the Terminal Building. · Terminal Building shall mean the passenger terminal building serving the traveling public. · Aviation Services shall mean the aircraft fueling activities and facilities and equipment dedicated to accommodating general aviation activity (i.e., public hangars, general aviation tiedowns, general aviation apron, and general aviation terminal) together with the facilities and equipment dedicated to aircraft fueling activities. · Other Buildings and Areas shall mean those portions of the Airport not included in the preceding Airport Cost Centers, including the facilities, installations, and improvements thereon. The Aviation Commission is proposing continuation of the current rate levels until DBO of the terminal building, anticipated to be the second quarter of 2007, at which time the Aviation Commission will calculate rates as established in the Rate Ordinance. · Airline terminal building space rentals are to be calculated according to a compensatory formula based on the recovery of Operating and Maintenance Expenses and Capital costs allocable to the tenninaI building cost center. Rating Agency Draft: Riccndc & Associa... 11/29/04 B - 62 · Apron Fees are to be calculated according to a compensatory formula based on the recovery of Operating and Maintenance Expenses and Capital costs allocable to the Apron Area cost center. · Loading Bridge Use Fees are to be calculated according to a compensatory formula based on the recovery of Operating and Maintenance Expenses and capital costs allocable to the Loading Bridges. · Landing Fees are to be calculated according to a total Airport Residual cost methodology, taking into consideration all Airport requirements and all nonairline revenues. Airport requirements are defmed to include 125 percent of the annual debt service requirement for outstanding Airport revenue bonds. The Aviation Commission is currently charging the following rates: · Terminal rental rates will continue to be $30 per square foot. · Landing fees will continue to be $1.50 per thousand pounds. · An Apron fee or Loading Bridge use fee is not currently being charged. 4.2 FINANCING PLAN Table 4.1 presents the Capital Improvement Program for 2004 through 2007 that was developed by the Aviation Commission including funding sources and an estimate of capital project costs for 2008. Actual expenditures may not occur in the years initially developed and presented on Table 4.1, however, the Aviation Commission intends to construct all 2004 through 2007 capital projects before the end of 2007. Although specific projects have not been identified post-2007, it is assumed the Aviation Commission will utilize approximately $900,000 in each subsequent year to fund the local share of its capital projects. The Aviation Commission had Authority to collect approximately $29 million in PFCs to cover a prior version of the Terminal Building Project and some other projects. The Aviation Commission ftled a PFC Amendment in July 2004 to revise the scope and cost of the Terminal Building Project and on August 24, 2004, the FAA granted pennission to amend the amount of the original PFC application to $31.5 million to partially fund the terminal building components of the 2005 Project including project costs, and finance and interest. Also, in July 2004, the Aviation Commission fUed a PFC Application to fund approximately $2 million of projects, including finance and interest costs, included in the 2005 Project. The FAA issued a Final Agency Decision on November 4,2004, approving the PFC Application for a total collection of $2,007,000. As shown, the 2005 Project is anticipated to require approximately $13.4 million of the Series 2005A and Series 2005B Bonds and approximately $5.7 million funded from the proceeds of the Series 2005C Bonds. A list of the estimated sources and uses of funds for the Series 2005 Bonds is presented in Table 4.2. The Airport's Underwriter for the Series 2005 Bonds, based on expenditure estimates developed by the Aviation Commission and its consultants, provided the required bond issue size and debt service estimates based upon the following assumptions: Raring Agency Draft: Riccndo & Associates 11/29/04 B - 63 TABLE 4.1 Augusta Avtatlon Commission A ugusta Regional Airport Report of the Airport Consultant CAP1TAL lMPROVEMENT PROGRAM - 2004-2008 Series 200SA & Series 2005B Bond Series 2OO5C Bond Ptoceeds Proceeds so o o o o o o o o o SO so o o 54,000 o 790,000 o o o o S844,ooO Funds SO 133,000 o o o 404,000 o o 200,000 o S737,OOO Local State SO 54,000 5.000 35,000 2,000 o o o o o S96.000 Discretio so o o ,337,000 o ,500,000 o o o o S2,837,ooo Entitlements $63,000 ,988,000 190,000 163,000 57,000 o o o o o S2,46 I ,000 Passenger Facility Charge (PA YO S3,ooo o 5,000 o 1,000 o 266,000 145,000 o 16,000 $436,000 Project Cost 2004S S66.000 2,175,000 200.000 1,589,000 60,000 2,694,000 266,000 145.,000 200,000 16,000 S7,4II,OOO lQlM; Tenninal Area Improvements - Financial Feasibility o A Apron Expansion I Taxiway C Relocation LEO Communications Equipment B Runway 8-26 Rehabilitation (Constrilction) OA Apron - Partial Pavement Rejuvenation Terminal Area Improvements- Partial Construction, Building Terminal Area Improvements - Non Hardstand Pavements-Partial Const Terminal Area Improvements - Utilities- Partial Construction South Fuel Fann Tank Replacement (4 @ 10,000 gal) PFC Application Administrative Costs S2,321,OOO o o o o o S2,32 I ,000 S3,047,OOO o o o 447,000 103,000 S3,597,OOO SO 995.000 o o o o S995,OOO ,000 o o o o o $41,000 S4] so o o o o o SO $662,000 o o o o o S662.OOO S3oo,OOO o 822,000 273,000 o o SI,395,OOO $6,371,000 995,000 822,000 273,000 447,000 103,000 S9,O 11,000 ANNUAL TOTAL ~ Terminal Area Improvements- Partial Construction, Building Tenninal Area Improvements - Hanlstand Pavements Terminal Area Improvements - Non Hardsland Pavements-Partial Const Tenninal Area Improvements - Curbfront Renovations Terminal Area Improvements - Utilities- Partial Construction Taxiway E Crack Sealing . ANNUAL TOTAL l::;t:j I ~ S436.000 o $436,000 S2,266,OOO 280,000 413,000 o S2,959,ooo so o o SO S5,716,000 S3,474,ooo 844,000 S4,318,ooo S4,349,000 o o 315,000 $4,664,000 so o o SO S13,423,OOO SI.ooo,ooO o Sl,ooo,OOO $704,000 o o 296,000 Sl,ooo,OOO S300,OOO 202,000 400,000 S902,Ooo $4,634,000 $41,000 o ,000 $41,000 o o o S41,ooo so o o SO S219,ooO S4 o o SO o o o o SO so o o SO S2,837,ooo SO o SO SO o o o SO SO o o SO $3,123,000 SO o SO SO o o o SO SO o o SO ,000 SI,g3 S4,951,OOO 844,000 S5.795,ooo S7,36O,OOO 280,000 413.000 611,000 S8,664,OOO S3OO,OOO 202,000 400,000 S902,OOO S31,783,OOO Rehab ~ Terminal Area Improvements- Partial Construction, Building Terminal Area Improvements - Curbfront Renovations ANNUAL TOTAL 1QQ1; TenninaI Area Improvements- Partial Construction, Building Terminal Area Improvements - Credit Card (Rental Ready I Renun) Terminal Area Improvements - South Side Employee Parking Tenninal Area Improvements - North Side Multi-Modal Curb ANNUAL TOTAL 2OOa; Miscellaneous Tenninal Building Projects Miscellaneous Airfield Projects Miscellaneous Other Buildings and Areas Projects ANNUAL TOTAL TOTAL CAPITAL IMPROVEMENT PROGRAM 2004 -2008 TABLE 4.1 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant CAPITAL IMPROVEMENT PROGRAM - 2004-2008 Series 2005A & Series 2005B Bond Series 2005e Bond Proceeds Proceeds $0 o 5,023,000 o 693,000 o o $157,000 o ,660,000 o ,606,000 o o Local FWlds $202,000 1,128,000 2,608,000 o 2%,000 o 400,000 State $35,000 56,000 I23 ,000 o o o 5,000 Discretiona $1,337,000 o 1,500,000 o o o o Entitlements $163.000 2,045,000 725,000 o o o 90,000 $0 ,089,000 303,000 o 418,000 o 21,000 Passenger e $1,894.000 4,318,000 21,942,000 o 3,013,000 o 616,000 Airfield Area Apron Area Terminal Building Loading Bridges Tenninal Area Aviation Services Other Buildings and Areas $5,716,000 $13,423,000 2007 CIP by $4,634,000 2004. Actual expenditure<J may occur in different yearn than shown but the Aviation Commission intends to construct the 2004 $219,000 $2.837,000 $3,123,000 $1,831,000 $31,783,000 I Funding for CIP projects in 2004 through 2007 was adopted by the Aviation Commission on May TI, the end of 2007. Source: Project Costs, Stale Fwlds and 2003 FAA Funds. LPA (April Prepared by: Ricondo & Associates, Inc. - 2008 TOTAL CAPITAL IMPROVEMENT PROGRAM 2004 R&A 5, 2004) ; Remaining FWlding Sources $3,732,000 OJ I 0\ VI Table 4.2 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant SOURCES & USES - 2005 PROJECT TotalS SOURCES OF FUNDS: Par Amount - Series 2005A I Par Amount - Series 2005B I Par Amount - Series 2005C I Premium I Interest Earnings During Construction Aviation Commision Funds Federal Grants-In-Aid State of Georgia Grants PFC (pay-as-you-go) TOTAL SOURCES OF FUNDS $7,590,000 7,590,000 6,620,000 455,000 355,000 7,867,000 6,581,000 255,000 2,186,000 $39,499,000 USES OF FUNDS: 2005 Project Capitalized Interest (Net Funded) Debt Service Reserve Fund 1,2 Operation and Maintenance Reserve Fund 2,3 Renewal and Replacement Fund 2 Insurance Expense Total Issuance Costs 4 Rounding TOTAL USE$ OF FUNDS $31,877,000 2,330,000 2,173,000 978,000 1,000,000 703,000 436,000 2,000 $39,499,000 I Source: Merrill Lynch (November 19,2004) 2 Funded with Commission Funds. 3 Equivalent to two months O&M. 4 Two percent of Par. S Rounded to nearest thousand. Prepared by: Ricondo & Associates, Inc. B - 66 · Fixed-rate bonds are expected to be issued in three series of bonds on or about February 8,2005. · The fIrst interest payment is due July 1, 2007 and the fIrst principal payment is due January 1, 2008. · The average coupon interest rate is estimated to be 5.747 percent for the Series 2005 Bonds. · The debt service reserve requirement will be funded from an equity contribution from the Aviation Commission. · Insurance expense is estimated at 150 basis points of total adjusted debt service. · Issuance Expenses are estimated at 2% of par value of the Series 2005 Bonds. · The construction period is net funded. The earnings rate is assumed to be reinvested at the prevailing U.S. Treasury bill and note rates (assumed to range from approximately 1.5 percent to approximately 2.0-percent). These investment earnings are used to reduce the overall bond size. Average life of the construction fund is 1.0720 years. · Capitalized interest is net funded and calculated through the May I, 2005 interest payment date. The capitalized interest funds are assumed to be reinvested at the prevailing U.S. Treasury bill and note rates (assumed to range from approximately 1.5 percent to approximately 2.0 percent). Average life of the CAPI fund is 1.4485 years. Table 4.3 presents the annual estimated debt service requirements resulting from the issuance of the Series 2005 Bonds. As shown, the Aviation Comnlission has no outstanding debt. As presented in Table 4.3, annual debt service requirements in 2007, the fIrst year ofDBO, on the Series 2005 Bonds is estimated to be approximately $1.6 million. Of this debt, approximately 76 percent of the debt, or approximately $1.2 million, is expected to be repaid annually with PFC revenues. 4.3 O&M EXPENSES The Aviation Commission adopted the 2005 budget on November 16, 2004. The following table presents historical O&M Expenses through 2003 and budgeted O&M Expenses for 2004 and 2005: Rating Agency Dnlft: Ricondo & AMociates 11/29104 B - 67 TABLE 4.3 Augusta Aviation Commlu/on Augusta Regional Airport Report of the Airport Consultant PROJECTED DEBT SERVICE REOUIREMENT 2012 S436,425 762,063 380,650 S 1,579,138 o 428 o S428 201 $436,425 760,350 380,650 SI,577,425 o (534) o (S534) 2010 S436,425 762,488 380,650 SI,579,563 o .,075 o S1,075 ~cd 2009 S436,425 758,188 380,650 ,575,263 o 13 o 13 2008 $436,425 757,738 380,650 SI,574,813 o (109 o (SI09) 2007 $436,425 758,175 380,650 SI,575,250 09,106 89,544 95,163 S393,813 so o o SO o o o SO 2006 so o o SO o o o SO B~t 2005 SO o o SO o o o SO o SO Budget 2004 DEBT SERVICE' Series 2005A - PFC Non-AMT Series 2005B - PFC AMT Series 2005C - GARB AMT TOTAL DEBT SERVICE 98,488 S381.078 96,775 S380, 98,913 S381,725 SI 94,6 S380,763 ,194,163 S380,54 ,493,250 $475,813 o SO o SO Less: Available PFC NET DEBT SERVICE REQUIREMENT SI7.000 o ,076,000 o 105,000 o o SI,198.ooo SI7,ooo o .,075.000 o 105,000 o o SI,197.0oo SI7,Ooo o ,077 ,000 o 105,000 o o 99,000 SI7,OOO o . ,073,000 o 104,000 o o SI,I94,OOO SI7,ooo o ,073,000 , 0 104,000 o o SI,I94,OOO SI7,ooo o .073,000 o 104,000 o o SI.194,ooo SO o o o o o o SO SO o o o o o o SO SO o o o o o o SO Airfield Area Apron Area Terminal Building Loading Bridges Terminal Area Aviarion Services Other Building. and Mas SUBTOTAL to I 0\ 00 SO o 335,000 o 46,000 o o S381,OOO SO o 335,000 o 46,000 o o ,000 SO o 335,000 o 46,000 o o ,000 SO o 335,000 o 46,000 o o S381.ooo SO o 335,000 o 46,000 o o SO o 335,000 o 46,000 o o ,000 SO o o o o o o SO SO o o o o o o SO SO o o o o o o SO Airfield Area AprooArea Terminal Building Loading Bridges Terminal Arca Aviation Services Other Buildiogs and SUBTOTAL $17,000 o ,411,000 o 151,000 o o SI,579.ooo S38 SI7,OOO o ,410,000 o 151.000 o o SI,578,Ooo S38 S17,Ooo o ,412,000 o 151,000 o o ,580,000 SI7,OOO o ,408,000 o 150,000 o o SI,575,Ooo S)81.ooo SI7,ooo o ,408,000 o 150,000 o o ,575,000 S38 SI7,OOO o .408,000 o 150,000 o o SI,575,Ooo SO o o o o o o SO SO o o o o o o SO SO o o o o o o SO Areas IQIAl,; Airfield Area Apron Area Terminal Building Loading Bridges Terminal Arca A viarion Services Other Bwldings and Areas TOTAL DEBT SERVICE SI SI 19,2(04) Source: Annual Debt Service - Merrill Lynch (November Prepared by: Ricondo &: Associates, Inc. ;:f~,fj~'~~6~~t~~f~f~!;,:~:\}::~:;~;;':j);,;.:Z~~~VJJ;.~:i{ifJ":fl~~~;t~ Year Actual Actual Actual Actual Actual Budget Budget Ended 1999 2000 2001 2002 2003 2004 2005 Total O&M Ex enses $3,705,933 $4662,986 $4889,298 $5,212151 $5,678,040 $6,080,406 $5,867830 Enplaned Passen ern 209,892 201,921 166,537 147,951 162946 180,000 189,000 O&M Expenses per Passen er $17.66 $23.09 $29.36 $35.23 $34.85 $33.78 $31.05 Source: Augusta Aviation Commission Note: O&M Expenses differ from audited financial statements due to the re-classification of certain items for rate- makin u oses. The A' ort Consultant and Aviation Commission have reconciled these items. As shown, expenses are expected to increase from $3.7 million in 1999 to $5.9 million in 2005, a compounded annual growth rate of 8.0 percent. This increase was primarily driven by increasing insurance rates that have since stabilized, an increase in professional services attributed to consulting fees related to the design and planning of the capital program, an increase in contract services related to contracted security costs which are partially reimbursed with TSA grants, and events or the cost of the air show which has been discontinued. These increases were partially offset by stable salary expenses and reduced maintenance expenses. Table 4.4 presents O&M Expenses at the Airport by type of expense and by Cost Center for budget 2004 and 2005 and projected 2005 through 2012. As shown, O&M Expenses are budgeted to be approximately $5.9 million in 2005 and projected to be $7.3 million by 2012. In general, projections of future O&M Expenses were based on a review of historical trends, the anticipated impacts of inflation, and impacts due to capital improvements and represent an overall compounded annual growth rate of 3.1 percent from 2005 through 2012. Descriptions of some of the major expense categories include the following: · Salaries and Benefits. These expenses represent the salaries and wages associated with employment of all Airport personnel as well as other costs associated with employment, including fringe benefits, and other employee compensation and requirements. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Professional Services. This category includes services provided by outside contractors such as professional (accounting, auditing, consulting, etc.), custodial, equipment maintenance, ambulance, and indirect charges. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Utilities and Refuse. Utilities expenses include the cost of gas, electricity, water, waste disposal and trash removal for the Airport. The compounded annual growth rate for these expenses for 2005- 2012 is 4.9 percent. Rating Agency Dmft: Riccndo & Associates 11/29104 B - 69 TABLE 4.4 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant PROJECTED OPERATING & MAINTENANCE {O&YJ EXPENSES & COST CENTER ALLOCATIONS 2012 $4,016,000 424,000 490,000 76,000 8,000 283,000 73,000 9,000 192,000 43,000 173,000 84,000 104,000 438,000 6,000 96,000 47,000 180,000 315,000 214,000 $7,271,000 $1,818,000 364,000 2,763,000 30,000 727,000 1,163,000 406,000 $7,271,000 20 $3,899,000 412,000 467,000 74,000 8,000 275,000 71,000 9,000 186,000 42,000 168,000 82,000 101,000 425,000 6,000 93,000 46,000 175,000 306,000 208,000 $7,053,000 $1,763,000 353,000 2,680,000 29,000 705,000 1,128,000 395,000 $7,053,000 2010 $3,785,000 400,000 445,000 72,000 8,OliO 267,000 69,000 9,000 181,000 41,000 163,000 80,000 98,000 413,000 6,000 90,000 45,000 170,000 297,000 202,000 $6,841,000 $1,710,000 342,000 2,599,000 28,000 684,000 1,095,000 383,000 $6,841,000 P~ed 2009 $3,675,000 388,000 424,000 70,000 8,000 259,000 67,000 9,000 176,000 40,000 158,000 78,000 95,000 401,000 6,000 87,000 44,000 165,000 288,000 196,000 $6,634,000 $1,659,000 332,000 2,520,000 27,000 663,000 1,061,000 372,000 $6,634,000 2008 $3,568,000 377,000 404,000 68,000 8,000 251,000 65,000 9,000 171,000 39,000 153,000 76,000 92,000 389,000 6,000 84,000 43,000 160,000 280,000 190,000 $6,433,000 $1,608,000 322,000 2,444,000 26,000 643,000 1,029,000 361,000 2007 $3,464,000 366,000 385,000 66,000 8,000 244,000 . 63,000 9,000 166,000 38,000 149,000 74,000 89,000 378,000 6,000 82,000 42,000 155,000 272,000 184,000 $6,240,000 $1,560,000 312,000 2,371,000 25,000 624,000 998,000 350,000 $6,240,000 2006 $3,363,000 355,000 367,000 64,000 8,000 237,000 61,000 9,000 161,000 37,000 145,000 72,000 86,000 367,000 6,000 80,000 41,000 150,000 264,000 179,000 $6,052,000 $1,452,000 303,000 2,118,000 o 605,000 908,000 666,000 $6,052,000 Budgel 2005 $3,264,920 344,350 349,520 61,780 8,160 230,000 58,740 8,870 156,380 35,920 140,500 69,820 83,600 356,110 6,290 77,370 39,850 145,420 256,230 174,000 $5,867,830 587,000 880,000 644,830 $5,867,830 $1,408,000 294,000 2,054,000 o Budget 2004 $2,852,919 452,050 337,520 55,759 18,260 193,600 56,950 8,165 228,440 24,215 121,250 46,730 347,080 261,825 7,530 66,029 50,850 146,402 247,950 556,882 608,000 912,000 668,406 $6,080,406 2: Printing & Binding Salaries and Professional Utilities and Service Contractors Equipment Rental Insurance Commwrication Postage Advertising, Public Relations, Travel and Dues Bank and Credit Card Fees Education,Training and Licenses Contract Labor Materials and Supplies Publications Equipment and Furniture Events Benefits Services Refuse t;rj I -:t o Repairs & Maintenance Allocated Overliead and Transfers Maintenance projects and equipmen' TOTAL OPERATING AND MAINfENANCE EXPENSES $6,080,406 ALLOCA nON OF OPERATING AND MAINTENANCE EXPEN~ Airfield Area $1,459,000 Apron Area 305,000 Terminal Building 2,128,000 Loading Bridges 0 Terminal Area Aviation Services Other Buildings and Areas TOTAL ALLOCATED O&M EXPENSES $6,433,000 Asswnes the new terminal is open and is equipped with loading bridges in May 2007. Operating & Maintenance Expenses are shown net of Cost of Goods Sold. Assumes inflation equal to 3% per year and utility inflation equal to 5% per year. Source: Augusta Regional Airport (Actual) Prepared by: Ricondo & Associates, Inc. · Insurance. These expenses include the cost of general liability, worker's compensation, terminal operator and other insurance. The compounded annual growth rate for these expenses for 2005- 2012 is 5.0 percent. · Advertising, Public Relations, Printings & Binding. This category includes expenses incurred for advertising and other promotional programs. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Materials and Supplies. This category of expenditures includes office and operating supplies that are ordinarily used within one year after placed into service. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Allocated Overhead and Transfers. These expenses includes the allocation of services provided by the City to the Airport. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Maintenance Projects. This category includes major non-routine repairs of building structures and other integral systems, which significantly prolong or protect the usefu11ife of an asset, but are replacements rather than improvements. The compounded annual growth rate for these expenses for 2005- 2012 is 3.1 percent. 4.4 ~O~-AIRLINE REVENUES Unlike many airports of similar size, the Airport has. a substantial business enterprise with significant annual cash flow. As presented in a later table, ~on-Airline Revenues are expected to represent 84 percent of total Airport Revenues in 2004 and are projected to range from 82 percent to 86 percent of total Airport Revenues for 2005 through 2012. The Aviation Commission owns and operates the fixed base operations at the Airport and net Revenues from this Cost Center (Aviation Services) generate approximately half of all Airport Non-Airline Revenues. Aviation Services will be discussed in more detail in a following paragraph. The following table presents historical ~on-Airline Revenues through 2003 and budget for 2004 and 2005: :l~~glrJ=~~~~~t'.~.(-t~,:.::,'~.: ~~;;~1 Year Ended Total Non-Airline Revenues Enplaned Pass en ers Non-Airline Revenue per Passen er $25.43 $27.75 Source: Augusta Airport Commission Note: Total Non-Airline Revenues differ from audited financial statements due to the re-classification of certain items. The Ai ort Consultant and the Aviation Commission have reconciled these items. Actual 1999 Actual 2000 Actual 2001 Actual 2002 Actual 2003 Budget 2004 Budget 2005 $5 338 111 $5,602,491 $5437082 $6112,377 $6110216 $5732401 $5 777,920 209 892 201,921 166,537 147951 162 946 180000 189,000 $32.65 $4 I.3 1 $37.50 $31.85 $30.57 As shown, ~on-Airline Revenues are expected to increase from $5.3 million in 1999 to $5.8 million in 2005, a compounded annual growth rate of 1.3 percent. Rating Agency Draft: Ricondo & Associate> 11/29/04 B - 71 Table 4.5 presents ~on-Airline Revenues at the Airport by type of revenue and by Cost Center for budget 2004 and 2005, and projected 2005 through 2012. As shown, ~on-Airline Revenues are budgeted to be approximately $5.8 million in 2005 and projected to increase to approximately $7.4 million in 2012. This increase represents a compounded annual growth rate of 3.7 percent for 2005 through 2012. In general, projections of future ~on- Airline Revenues were based on a review of historical trends, the anticipated impacts of inflation, expected rate/revenue increases, impacts related to CIP and the projected growth in activity. Specific points concerning these projections are discussed below: 4.4.1 Airfield Area The primary source of Non-Airline Revenues.in the Airfield Area Cost Center is currently charter landing fees, however, the Aviation Commission started collecting General Aviation landing fees in 2004. Airfield Area ~on-Airline Revenues are expected to increase from approximately $21,000 budgeted in 2005 to approximately $35,000 in 2012. This increase represents a compounded annual growth rate of 7.6 percent during this period, and is the result of the implementation of general aviation landing fees and charter growth. o' 4.4.2 Terminal Building Currently, Non-Airline Revenues from the Terminal Building Cost Center are primarily comprised of security revenues (to offset contractual security expenses). Concession revenues are currently minimal, however, upon completion of the new Terminal building, it is anticipated that the improved food and beverage and retail concession facilities will generate improved concession revenues. Revenues are budgeted to be $329,700 in 2005 and are projected to increase to $479,000 by 2012, representing a compounded annual growth rate of 5.5 percent, due to the expanded concession facilities as well as an improved terminal advertising program. 4.4.3 Terminal Area Revenues from the Terminal Area Cost Center consist of parking revenues, taxi permit fees and rental car contracts. Part of the Tenninal Building expansion includes improved parking facilities and rental car facilities. These revenues are expected to increase from approximately $1.7 million budgeted in 2005 to approximately $2.3 million in 2012. This increase represents a compounded annual growth rate of 4.3 percent during this period and is the result of projected passenger growth as well as anticipated parking rate increases upon completion of the new facilities and renegotiation of rental car contracts. 4.4.4 Aviation Services Under the name Bush Field Aviation Services, the Airport provides services including fuel sales, parking, tiedown rental, and hangar space rental. The Airport contracts with McAir Aviation Services, Inc. for flight instruction and aircraft rental. The Airport also operates aviation facilities. Airport employees provide all services and the Airport purchases and resells fuel and otherrelated goods. ~et revenues from the Aviation Services Cost Center consist of fuel and other merchandise sales (net of cost of goods sold), general aviation ramp fees and labor services, catering fees, and other aircraft maintenance services and are expected to contribute 37 percent of total Airport Revenues budgeted for 2004. Rating Agency Draft: Ricondo '" Associates 11/29104 B - 72 TABLE 4.5 Augusta Aviation Commi33lon Augusta R.glona/ Airport R.port oj th. A (rporl Consultant PROJECTED NON-AIRLINE REVENUE 20\2 $25,000 10,000 $35,000 20 $24,000 9,000 $33,000 2010 $23,000 8,000 S31,OOO ~ed 2009 S22,OOO 7,000 $29,000 P 2008 $21,000 6,000 $27,000 2007 $20,000 5,000 $25,000 2006 $19,000 4,000 S23,ooO Budget . 2005 $18,000 3,000 S21,Ooo Budget 2004 $15,000 6,000 $21,000 AIRFIELD AREA' Charter Landing Fees General Aviation Landing Fees TOTAL AIRFIELD AREA; $289,000 46,000 9,000 3,000 60,000 72,000 $479,000 $289,000 45,000 9,000 3,000 58,000 72,000 $476,000 $289,000 44,000 9,000 3,000 56,000 72,000 S473,OOO $289,000 43,000 9,000 3,000 54,000 72,000 S470,OOO $289,000 42.000 9,000 3,000 52,000 72,000 5467,000 $289,000 40,000 9,000 3,000 50,000 72,000 $463,000 $289,000 o 9,000 3,000 7,000 o $308,000 $289,000 22,000 9,000 2,500 7,200 o $329,700 $498,000 22,000 9,000 2,500 7,200 o $538,700 Airline Security Revenue I Food & Beverage Concession: Telephone Concession Miscellaneous Coocessions Terminal Advertising Other Buildin8 Rentals (TSA) TOTAL TERMINAL BUILDING $1,081,000 7,000 1,157,000 14,000 S2,259,ooo $1.053,000 7,000 1,127,000 14,000 $2,201,000 ,025,000 7,000 ,097,000 \3,000 $2,142,000 $997,000 7,000 1,067,000 13,000 $2,084,000 S968,OOO 7,000 1,036,000 12,000 $2,023.000 $941,000 7,000 1,007.000 12.000 SI,967,ooo $836,000 7,000 895,000 11,000 $1,749,000 $803,000 7,200 860,000 10,800 $1,681,000 $721,200 7,200 925,000 10,800 $ 1,664,200 TERMINAL AREA' Automobile Parking Taxi Rental Cor Commissions Rental Car - Ready Return Rentals TOTAL TERMINAL AREA OJ I -....l Vol $10,169,000 (6,695,000) (83,000) $3,391,000 $9,861,000 (6,500,000) (81,000) $3,280,000 $9,563,000 (6,311,000) (78,000) $3,174,000 $9,274,000 (6.127,000) (76,000) $3,071,000 $8,994,000 (5,949,000) (74,000) $2,971,000 $8,723.000 (5,776,000) (72,000) $2,875,000 $8,460,000 (5,608,000) (69,000) $2,783,000 $8,005,620 (5,341,420) (62,390) $2,601.810 $6,747,644 (4,344,180) (57,252) S2.346,2 A VIA T10N SERVICES' A vjet Fuel Sales Less: Cost of Goods Sold Aviation Fuel Sale Discounts NET A VIET FUEL SALES $189,000 (126,000) $63,000 $189,000 (126,000) $63,000 $189,000 (126.000) $63,000 SI89,OOO (126,000) SI89,OOO (126..000) $63,000 $189,000 (126,000) S63,OOO $189,000 (126,000) $63,000 $189,250 (126,250) S63,OOO $185,200 (133,450) $51,750 looLL Fuel Sales Less: Cost of Goods Sold NET lOOLL FUEL SALES $20,000 (16,000) S4 ,000 $20,000 (16,000) $4,000 $20,000 (16,000) $4,000 $63,000 $20,000 (16,000) $4,000 $20,000 (16,000) $4,000 $20.000 (16,000) $4.000 $20,000 (16,000) $4,000 S20,380 (16,350) $4,030 $20,380 (8,680 $11,700 Auto Fuel, Diesel & Oil Sales Less: Cost of Goods Sold NET AUTO FUEL, DIESEL & OIL SALES $8,000 (12,000: ($4,000) S8,OOO (12,000) ($4,000 $8,000 (12,000) ($4,000) $8,000 (12,000) ($4,000) $8,000 (12,000) ($4,000 S8,OOO (12,000) ($4,000) S8,OOO (12,000 ($4,000) $8,300 (11,850) ($3,550 $5,000 (9,000) (S4,OOO Miscellaneous Merchandise Sales Less: Cost of Goods Sold NET MISCElLANEOUS $74,000 209,000 10.000 16,000 27,000 4,000 1,000 $3.795,000 $72,000 203,000 10,000 16,000 26.000 4,000 1,000 $3,675,000 S70,OOO 197.000 10,000 16,000 25.000 4,000 1.000 $3,560,000 $68,000 191,000 10,000 16,000 24,000 4,000 1,000 $3,448,000 $66,000 185,000 10,000 16.000 23,000 4,000 1,000 $3,339,000 $64,000 180,000 10,000 16,000 22,000 4,000 1,000 $3,235,000 $62,000 175.000 10,000 15,000 21,000 3,000 1,000 33,000 $3, $60,000 170,000 10,000 14,000 20,000 2,000 1,200 $2,942,490 $52,000 150,000 o 14,000 25,000 13,000 o $2,659,662 MEROIANDISE SALES General Aviation Ramp Fees Gcoeral Aviation Labor Services Catering Facilities Use Ground Handling Fees Aircraft C1caniog and Security Services Miscellaneous TOTAL AVIATION SERVICES TABLE 4.5 AUguJta AV/al/on Commwlon AUguJta Reg/anal Airport Report of the Airport Consultant PROJECTED NON-AIRLINE REVENUE Pr~cd 2009 Budge 2005 Budget 2004 2012 $356,000 137,000 93,000 o 28,000 20 $356,000 137,000 90,000 o 27,000 2010 $356,000 137,000 87,000 o 26,000 $356,000 137,000 84,000 o 25,000 14,000 3,000 $631,000 14,000 3,000 $627,000 14,000 3,000 $623,000 14,000 3,000 $619,000 2008 $356,000 137,000 82,000 o 24,000 14,000 3,000 $616,000 2007 $356,000 137,000 80,000 o 23,000 14,000 2,000 $612,000 2006 $356,000 137,000 78,000 o 22.000 $356,220 136,770 75.620 o 21,720 $356,221 136,769 93.600 25,000 12,624 7,000 2,000 $602,000 7,400 6,000 $603,730 7.425 7,200 $638,839 Oarrctt Avintion Rental and Utilities Morris Hangar Rental Other OfficclHangar Rentals Other Property Rental Tenant Services Rental Car Service Area Rentals 2 Miscellaneous TOTAL OTIlER BUll..DINGS AND AREAS: $246,000 $239,000 $232.000 $225,000 $218,000 $212,000 $206,000 $200,000 $210,000 Miscellaneous and Interest Income $7,445.000 portion of Contract Labor Expense. $7,251,000 $7.061,000 officers which offsets a $6,875,000 $6.690,000 I Represents revenues net of reimbursement from the Transporarion Secmity Administration (TSA) for law enfo~ment 2 Assumes service area rentals double at new termina11ocation. ~: AugustIl Regional Airport (Actual) Prepared by: Ricondn & Associates, Ine. $6.514,000 $6,021,000 $5.777 ,920 $5.732.401 TOTAL NON-AIRLINE REVENUES t::l:l I -..J ~ Net fuel, diesel and oil sales comprise 90 percent of net Aviation Services revenues with most of these revenues coming from the sale of Avjet fuel. Avjet fuel is sold to commercial airlines (both scheduled and nonscheduled), general aviation, military customers and a small amount is utilized for ground equipment and testing. General aviation customers purchase the largest percentage of the fuel volume, 45 percent of total fuel volume from 1999 through budget 2004, and commercial airlines purchase 36 percent of total fuel volume from 1999 through budget 2004. However, due to the higher profit margin on general aviation sales, general aviation customers contributed approximately 75 percent of total net fuel revenues from 1999 through budget 2004 with commercial airlines contributing approximately 10 percent of total revenues. Military customers have purchased approximately 17 percent of total fuel volume at the Airport over the 1999 through 2004 period and contributed approximately 15 percent of the net revenues. The following charts illustrate the relationship between fuel volumes and net fuel revenues. Average Avjet Fuel Volume (1999-2004) Airlines - non- scheduled 4% o General Aviation Airlines - scheduled 33% OM ilitary o Airlines - scheduled o Airlines - non-scheduled General Aviation 45% Rating Agency Dmft: Ricondn & Associates 11/29/04 B - 75 Average Net Avjet Fuel Revenue (1999-2004) o General Aviation Airlines - scheduled 8% Airlines - non- scheduled 2% [;] Military Military 15% o Airlines - scheduled o Airlines - non-scheduled General Aviation 75% Airport management constantly monitors competing airports to ensure its fuel prices are competitive. Based on historical activity, operation forecasts, discussions' with management over future fuel pricing strategies, and assumed inflationary impacts on the profit margins, it is projected that general aviation customers will contribute 77 percent of the total net fuel revenues for the period 2005 through 2012. For that same period, commercial airline and military customers are expected to contribute approximately seven (7) and 15 percent, respectively. ~et revenues from the Aviation Services Cost Center (after subtracting cost of goods sold) are expected to increase from approximately $2.9 million budgeted in 2005 to . approximately $3.8 million in 2012. This increase represents a compounded annual growth rate of 3.7 percent during this period, and is primarily due to the increased net revenues from fuel sales as well as the result of inflationary impacts on other revenues during the projection period. 4.4.5 Other Buildings and Areas Revenues 'from the Other Buildings and Areas Cost Center consist of hangar and building rentals, tenant services and rental car service area rentals. A portion of these Revenues is generated from Garrett. Previously owned by General Electric Company, Garrett was recently sold to the Carlyle Group to become part of the joint company of Garrett Aviation Services, Piedmont Hawthorne Aviation and Associated Air Center, The Carlyle Group has combined Garrett Aviation Services with Piedmont Hawthorne, the second largest fixed base operator in ~orth America and provides among other services, heavy aircraft maintenance services. The station manager expects this change in ownership to yield additional customers. Total Revenues from Other Buildings and Areas are expected to increase from approximately $603,730 budgeted in 2005 to approximately $631,000 in 2012. This increase Rating Agency Dn1ft: Ricondo & Associates 11/29/04 B - 76 represents a compounded annual growth rate of 0.6 percent during this period, and is the result of an increase in the rental car service area. 4.5 AIRLINE REVENUES The balance of the revenues generated at the Airport is comprised of terminal building rentals, apron fees, loading bridge fees, and landing fees payable by the airlines. As described previously, it is the Aviation Commission's intention to continue charging existing rates of $30 per square foot in the terminal and $1.50 per thousand pounds for the landing fee until DBO of the terminal building. The Aviation Commission does not currently charge apron fees or loading bridge fees but will implement collection of these fees at DBO. Upon implementation of the cost based calculation of rates (anticipated to be in 2007), the following components comprise the requirement for the various airline rates: · O&M Expenses. The expenses attributed to the various rate-setting areas. · O&M Reserve. This requirement represents the amount necessary to maintain an O&M Reserve Fund equal to one-sixth of annual O&M Expenses. The initial O&M Reserve will be funded with Aviation Commission funds. · Debt Service. Debt service requirements (net of PFC) resulting from the Series 2005 Bonds attributable to the rate-setting areas. · Debt Service Coverage. As required by the Bond Resolution, revenue bond debt service coverage must be maintained at least equal to 1.25 times annual debt service. · Capital Improvement Factor. Because the proposed Airline Agreement incorporates a residual type rate-making methodology, a recovery for future capital improvements needs to be incorporated into the rates. The Aviation Commission is proposing a Capital Improvement Factor assessed to the airlines, which is equivalent to a portion of the net revenues in the Aviation Services cost center as a means to accumulate funds for future capital projects. · Non-Airline Revenues. In the residual airport landing fee calculations, ~on-Airline Revenues will offset the rate base requirements. The specific rate-setting formulas are described below: 4.5.1 Terminal Rental Rate The terminal rental rate calculation combines terminal cost center-specific O&M Expenses, O&M Reserve requirement, debt service (net of PFC) and the incremental increase in debt service coverage. This net requirement is divided by the useable square feet to determine the terminal rental rate. Table 4.6 presents the terminal rental rate for 2004 through 2012. As shown, the terminal rental rate is projected to increase from the currently charged $30.00 per square foot in 2004 to $34.19 in 2007, fIrst year after DBO and then is projected to increase to $38.13 per square foot by2012. Rating Agency DIU\: Ricondo &. Associa... 11129/04 B - 77 TABLE 4.6 Augusta Aviation Commission Augusta Regional Airport Report o/the Airport Consultant TERMINAL BUILDING RENTAL RB UIREMENT 2012 $2,763,000 14,000 335,000 84,000 $3,196,000 20 $2,680,000 14,000 335,000 84,000 $3,113,000 2010 $2,599,000 13,000 335,000 84,000 $3,031,000 Projected 2009 $2,520,000 13 ,000 335,000 84,000 $2,952,000 2008 $2,444,000 12,000 335,000 84,000 $2,875,000 2007 $2,371,000 o 335,000 84,000 $2,790,000 2006 $2,. .8,000 o o o $2,118,000 Budget 2005 $2,054,000 o o o Budget 2004 28,000 o o o 28,000 $2, Operating and Mainlenance Expenses Operating and Maintenance Reserve I Debl Service Requiremenl - net of PFC Coverage on debt service (25%) TERMINAL BUILDING REQUIREMENT (84,000) 2,000 (84,000) $3,029,000 (84,000) $2,947,000 (84,000) $2,868,000 (84,000) $2,791,000 o $2,790,000 o 8,000 $2,054,000 o $2,054,000 $2, o $2,128,000 Less: Prior Year Coverage NET TERMINAL BUILDING REQUIREMENT 81,612 $3, 81,612 81.6]2 ,612 8 81,6]2 81,612 52,102 $2, 52,102 52,102 Useable Space (Square Feet) 2.3 AVERAGE RENTAL RATE (pER SQUARE FOOl) tx1 I -l 00 $38.13 $37. $36. $35.]4 $34.20 $34.19 N/A N/A N/A N/A N/A N/A N/A N/A N/A $30.00 $30.00 $30.00 Current Terminal Rental Rate 4 24,341 24,34 24,34 24,341 24,34 24,34 5,127 5,127 20,858 (Square Feet) Total Leased Airline Space Assumes O&M Reserve FWld is initially funded with Commission Funds and annual increases funded via rates after DBO of new terminal Asswnes 90,000 square foot new terminal building opens in 2007. Source LP A and Airport Management Assumes terminal rental rates remain at current level ROlmded to thousand. Prepared by: Ricondo & Associates, Inc. $928,000 to two months Operating and Maintenance Expenses. $903,000 $879,000 $855,000 $832,000 equa\ at a level $832,000 $454,000 $454,000 $626,000 AIRLINE RENTAL REVENUE apply. time calculated rates which at terminal DBO of new until ($30/sq ft) 4.5.2 Apron Fee The apron fee calculation combines apron cost center-specific O&M Expenses, O&M Reserve requirement, debt service (net of PFC) and the incremental increase in debt service coverage. This net requirement is divided by number of parking positions to yield the unit rate per parking position. Table 4.7 presents the apron fee for 2004 through 2012. As shown, the Aviation Commission is not currently charging an apron fee. The apron rate is projected to be $52,000 per parking position in 2007 and projected to increase $61,000 per parking position in 2012. 4.5.3 Loading Bridge Fee The loading bridge fee calculation combines loading bridge cost center-specific O&M Expenses, O&M Reserve requirement, debt service (net of PFC) and the incremental increase in debt service coverage. This net requirement is divided by number of bridges to yield the unit rate per loading bridge. Table 4.8 presents the loading bridge fee for 2004 through 2012. As shown, the Aviation Commission is not currently charging a loading bridge fee.' The loading bridge rate is projected to be $29,000 per bridge in 2007 and projected to increase $30,000 per bridge in 2012. 4.5.4 Landing Fee The landing fee calculation combines total airport O&M Expenses and O&M Reserve requirement, total airport debt service and debt service coverage and the capital improvement factor to yield the Airfield Requirement. Total airport Non-Airline Revenues, other airline revenues,. PFC revenues available for debt service and coverage and prior period debt service coverage are deducted from the Airfield Requirement to yield the Net Airfield Requirement. This net requirement is divided by the landed weight to determine the landing fee rate. Table 4.9 presents landing fees for 2004 through 2012. As shown, the Aviation Commission will charge the current landing fee of $1.50 per thousand pounds landed weight in 2004 through 2006. The projected landing fee for 2007 is calculated to be $1.05 per thousand pounds landed weight, is projected to decrease to $0.90 in 2008 and is projected to increase to $1.20 per thousand pounds landed weight in 2012. 4.6 APPLICATIO~ OF REVE~S Table 4.10 presents the available revenues and the application of those revenues to the various funds for the Airport for 2004 through 2012. Specific points regarding the application of revenues are presented below: · All Airport Revenues, including PFC revenues available for debt service and coverage, are combined to develop Available Revenues each year. · Airline cost per enplaned passenger is projected to increase from $5.93 in 2004 to $6.70 in 2007, the first year of DBO of the new terminal building, and is projected to decrease to $6.32 in 2008 and i1icrease to $6.72 by 2012. Rating Agency Dmft: Ricoodo &: Associates 11/29104 B - 79 TABLE 4.7 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant APRON FEES 2012 $364,000 2,000 o o 2011 $353,000 2,000 o o 2010 $342,000 2,000 o o Projected 2009 $332,000 2,000 o o 2008 $322,000 2,000 o o 2007 $312,000 2,000 o o 2006 $303,000 o o o $303,000 o Budge 2005 $294.000 o o o $294,000 o Budget 2004 $305,000 o o o Operating and Maintenance Expenses Operating and Maintenance Reserve I Debt Service Requirement - net ofPFC Coverage on debt service (25%) APRON AREA REQUIREMENT $314,000 o $314,000 $305,000 o $305,000 N1A $366,000 o $366,000 6 $355,000 o $344,000 o $344,000 6 $334,000 o $334,000 6 $324,000 o $324,000 $303,000 N/A $294,000 N1A Less: Prior Year Coverage NET APRON AREA REQUIREMENT Nwnber of Parking Positions $61,000 3 83,000 $355,000 6 $59,000 $57,000 3 71,000 $56,000 3 $168,000 6 $54,000 3 $162,000 6 $52,000 3 56,000 N/A N/A $0 N/A N/A $0 N/A N/A $0 UNIT RATE PER PARKING POSITION 2 Parking Positions Utilized APRON FEES tIl I 00 o $ Asswnes O&M Reserve FWld is initially fimded with Commission FW1<1s and annual increases fimded via rates after DBO of new terminal at a level equal to two months Operating and Maintenance Expenses. The Commission does nol currently charge an Apron Use Fee W1der the terms of the Ordinance. It is assumed that a calculated Apron Use Fee will be charged beginning in 2007. Prepared by: Ricondo & Associates, Inc. 3 $177,000 $ $1 TABLE 4.8 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant LOADING BRlDGE USE FEE Budget Budget Projected 2004 2005 2006 2007 2008 2009 2010 201 2012 Operating and Maintenance Expenses $0 $0 $0 $25,000 $26,000 $27,000 $28,000 $29,000 $30,000 Operating and Maintenance Reserve I 0 0 0 4,000 0 0 0 0 0 Debt Service Requirement - net of PFC 0 0 0 0 0 0 0 0 0 Coverage on debt service (25%) 0 0 0 0 0 0 0 0 0 LOADING BRIDGE REQUIREMENT $0 $0 $0 $29,000 $26,000 $27,000 $28,000 $29,000 $30,000 Less: Prior Year Coverage 0 0 0 0 0 0 0 0 0 NET LOADING BRIDGE REQUIREMENT $0 $0 $0 $29,000 $26,000 $27,000 $28,000 $29,000 $30,000 Number of Loading Bridges N/A N/A N1A I ] ] I I I UNIT RATE PER LOADING BRIDGE 2 N1A N/A N/A $29,000 $26,000 $27,000 $28,000 $29,000 $30,000 Loading Bridges Utilized N/A N/A NlA I I I I I I LOADING BRIDGE REVENUES $0 $0 $0 $29,000 $26,000 $27,000 $28,000 $29,000 $30,000 = - - - 1 Asswnes O&M Reserve Fund is initially funded with Commission FWl(1s and annual increases funded via rates after DBO of new terminal at a level equal to two months Operating and Maintenance Expenses. 2 The Commission does not cwrently charge a Loading Bridge Fee W1der the terms of the Ordinance. It is asswned that a calculated Loading Bridge Fee will be charged beginning in 2007. Prepared by: Ricondo & Associates, Inc. to I 00 ...... TABLE 4.9 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant AIRLINE LANDING FEE REQUIREMENT 2012 $7,271,000 36,000 1,579,000 395,000 1,316,000 $10,597,000 20 $7,053,000 35,000 I ,578,000 395,000 1,274,000 $10,335,000 2010 $6,841,000 35,000 1,580,000 395,000 1,233,000 $10,084,000 Projected 2009 $6,634,000 34,000 1,575,000 394,000 1,194,000 $9,831,000 2008 $6,433,000 32,000 1,575,000 394,000 1,155,000 $9,589,000 2007 $6,240,000 31,000 1,575,000 394,000 1,119,000 $9,359,000 2006 $6,052,000 o o o o $6,052,000 Budget 2005 $5,867,830 o o o o $5,867,830 Budget 2004 $6,080,406 o o o o $6,080,406 Operating and Maintenance Expenses Operating and Maintenance Reserve J Debl Service Requirement (Principal & Interest ) Coverage on debt service (25%) Capital Improvement Factor AIRFIELD REQUIREMENT $7,445,000 928,000 183,000 30,000 1,198,000 395,000 $7,251,000 903,000 177,000 29,000 1,197,000 395,000 $9,952,000 $383,000 $7,061,000 879,000 171,000 28,000 ,199,000 394,000 $6,875,000 855,000 168;000 27,000 ,195,000 394.000 $6,690,000 832,000 62,000 26,000 ,194,000 394,000 $6,514,000 832,000 156,000 29,000 ,493,000 o $6,021,000 454,000 o o o o $5,777 ,920 454,000 o o o o $5,732,401 626,000 o o o o Less: Nonairhne Revenues Termina] Renta] Revenues Apron Fees Loading Bridge Fees PFC Revenues avai]able for debl Prior Year Coverage t.r:l I 00 tv $9,514,000 $317,000 $9,298,000 $291,000 $9,024,000 $335,000 $6,475,000 ($423,000) $6,231,920 ($364,090) $6,358,40 ($277 ,995) service and coverage TOTAL CREDITS NET AIRFIELD REQUIREMENT $10,179,000 $418,000 $9,732,000 $352,000 347,000 342,000 337,000 33] ,000 325,000 320,000 3] 5,000 305,000 294,000 Landed Weight (] ,()oo"]b Units) Total Airline $1.20 2 .1 $ $1.04 $0.96 $0.90 $1.05 N/A N/A N/A AVERAGE LANDING FEE RATE (000 LB) N/A N/A N/A N/A N/A N/A $1.50 $1.50 $1.50 of Landed Weight) (per 1,000 POWld Uni ding Fee Rate 8,000 to two months Operating and Maintenance Expenses. $4 $383,000 $352,000 $317,000 equal $29] ,000 DBO of new terminal at a level $335,000 $473,000 funded with Aviation Commission FWlds and annual increases funded via rates after ($1.50/000 Ib) Wltil DBO of new terminal at which time calculated rates apply. $458,000 $441,000 TABLE 4.10 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant APPLICA TION OF REVENUE 2012 $928,000 183,000 30,000 418,000 $1,559,000 20 $903,000 177,000 29,000 383,000 $1,492,000 2010 $879,000 171,000 28,000 352,000 $1,430,000 P~ed 2009 $855,000 168,000 27,000 317,000 $1,367,000 2008 $832,000 162,000 26,000 291,000 $1,311,000 2007 $832,000 156,000 29,000 335,000 $1.352,000 2006 $454,000 o o 473,000 $927 .000 Budge 2005 $454,000 o o 458,000 $912,000 Budge 2004 $626,000 o o 441,000 Airline Revenue Terminal Rentals Apron Use Fees Loading Bridge Use Fees Landing Fees Total Airline Revenue 7,445,000 $9,004,000 1,198,000 0,202,000 7,251,000 $8,743,000 1,197,000 $9,940,000 7,061,000 $8,491,000 1,199,000 $9,690,000 6,875,000 $8,242,000 1,195,000 $9,437,000 6,690,000 $8,00 1,000 1,194,000 $9,195,000 6,514,000 $7,866,000 1,493,000 $9,359,000 6,021,000 $6,948,000 o 5,777,920 $6,689,920 o $1,067,000 5,732,401 $6,799,401 o Non-Airline Revenue Total Airport Revenue PEC Revenues available for debt service & coverage $ $7,271,000 1,579,000 o 36,000 o 1,316,000 0,202,000 $7,053,000 1,578,000 o 35,000 $6,841,000 1,580,000 1,000 35,000 o 1,233,000 $9,690,000 $6,634,000 1,575,000 o 34,000 o ,]94,000 $9,437,000 $6,433,000 1,575,000 o 32,000 o 55,000 95,000 $6,240,000 1,575,000 394,000 27,000 o ],]23,000 $9,359,000 $6,948,000 $6,052,000 o o o $6,689,920 $5,867,830 o o o o $6,799,40 $6,080,406 o o o o 718,995 $6, 799 ,40 A vailable Revenues ofRI Operating and Maintenance Expenses Bond Debt Setvice (principal and Inlerest) Revenue Credit Account Operating and Maintenance Resetve Renewal and Replacement Resetve Capital Improvement Account Total Application of Airport Revenue OJ I 00 W o ,274,000 $9,940,000 o 896,000 $6,948,000 822,090 $6,689,920 $ $9, 232,100 $6.72 226,000 $6.60 220,000 $6.50 213,900 $6.39 207,600 $6.32 20] ,800 $6.70 96,800 $4.71 89,000 $4.83 80,000 $5.93 Scheduled Airline Enplanements Airline Cost per Enplaned Passenger $2,931,000 394,000 $2,887,000 395,000 $2,849,000 394,000 $2,803,000 394,000 $2,762,000 394,000 19,000 o $3 Available Revenues less Operating and Maintenance Expenses Revenues Available in Revenue Credit Account 3.325,000 1,579,000 2.1] 3,282,000 ,578,000 2.08 3,243,000 1,580,000 2.05 3,197,000 ] ,575,000 2.03 3,156,000 1,575,000 2.00 3,119,000 1,575,000 .98 Debt Setvice and Coverage Net Revenues available for Annual Debt Service N/A N1A N1A & Revenue Credit Account) Coverage on Debt Setvice (With PFC revenues Inc. Ricondo & Associates Prepared by: · Estimated debt service coverage calculations are also presented for 2007 through 2012. As required in the Bond Resolution, net revenues are required to be at least 1.25 times the amount required to be paid for total capital charges in that year. As shown in the table, debt service coverage exceeds the 1.25 requirement in each year of the fmancial projection. · Coverage may be calculated annually on a rolling basis and is projected to be funded from PFC revenues and general airport revenues in the fIrst year in which debt service repayment begins. Funds maintained in the Coverage account may be utilized in the debt service coverage calculation. Rating Agency Draft: Ricondo & Associ.... 11/29104 B - 84 0) '" -5 .~ E'~ ';:l U 0) 1i -51Jl o 0 _..c 15~ .t: 0 0..0 "t:!(;l 0) '" ->, 8";3 gll lll::! >,0 ",-5 J::._ 0-'; -..c ~ '" ~b '-c 0>, >'", '""J::. Eo I. - 01. c~ ~o c ~ c 0 ~.= II '0 .~ - "5l g g.t: .- '" ~~.~ E'E -5 ~:a ~ ''':; ~ >. '5~ ~ u-'- 0) I. 0 '" 0 '" 1Jl= ~ 0)1i~ ,cO'" r-_o ';:l ,; ~.t: o~ ::s .::: 0 u g C 1Jl _ = ru 8E-= ..c21. :::: -=.g ~ g ;; C U C E c.g ""Sl'"" ce:,g ~ 0)._ aOi-a o ~ 5- '"" I. g.u 0 "::IS 5 ..!:!o'.c: g- g o ~.~ UCbJl EH= I::! 0;5 B o ~ I. '~c:::; 0 ~.~ '& ..c_ ;..> - '" 03-'- .5] ~ e"''"2 ~ ~ '" ",,~ll ~-"" 'a E:; - '" 0 g ~ ~ t).- ru g~~ ._ c ~ ca ..... 0 c: 0) . t:"t:! C ..s :3 .g .5 g 0) .,:'u -5t:::: "'OtE~ a-a ..: _c~ cL:c.... E.5 ~ O)""U 0i1::!5l ci3lU-c > U -a'- .- 'u~~ !f~c 0':';;; ,...,co taE"B .5 ~~ .~ b5 .t: 11 -a'2, Q...- >, .~,g a ~O.5 PRELIMINARY OFFICIAL STATEMENT DATED JANUARY _,2005 THREE SEPARATE ISSUES (Book-Entry Only) RATINGS See "MISCELLANEOUS - Ratings" herein. In the opinion of Bond Counsel, under existing law and subject to the conditions described herein, interest on the Series 2005A Bonds (i) is excluded from gross income for federal income tax purposes. (ii) is exempt from present State of Georgia income taxation, and (iii) wiLL not be an item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations. See "LEGAL MATTERS _ Opinion of Bond Counsel" herein. In the opinion of Bond Counsel, under existing law and subject to the conditions described herein, interest on the Series 2005B Bonds and the Series 2005C Bonds (i) is excluded from gross income for federal income tax purposes, except for any period during which a Series 2005B Bond or a Series 2005C Bond, respectively. is held by a "substantial user" of the facilities financed with the proceeds of the Series 2005B Bonds or the Series 2005C Bonds, respectively, or a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the "Code "), (ii) is exempt from present State of Georgia income taxation, and (iii) is an item of preference for purposes of compllling the federal alternative minimum tax imposed on corporations and taxpayers other than corporations and wiLL be raken into account in determining the adjusted current earnings for the purpose of computing the alternative minimum tax imposed upon certain corporations. See "LEGAL MATTERS. Opinion of Bond Counsel" herein. . . ..~ ~.~ fttflUdlc6 ~t1 Hl'.rimlld Ai.,~)rt $21,990,000* AUGUSTA, GEORGIA Airport Revenue Bonds, Series 2005 New Issue $7,425,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) New Issue $8,000,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2oo5B (AMT) New Issue $6,565,000* Airport General Revenue Bonds, Series 2005C (AMT) Dated: Date of Issuance Due: January 1, as shown on the inside front cover hereof The Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) (the "Series 2005A Bonds"), the Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) (the "Series 2005B Bonds"), and the Airport General Revenue Bonds, Series 2OO5C (AMT) (the "Series 2005C Bonds") are being issued by Augusta, Georgia (the "Consolidated Government") for the purpose of financing Ihe cosls of acquiring, construcling, and inslalling a new airline passenger tenninal and certain other capital improvemenls (the "2005 Project") for the Augusta Regional Airport at Bush Field (the "Airport"). See "PLAN OF FINANCING" herein. Interest on the Series 2005A Bonds, the Series 2005B Bonds, and the Series 2005C Bonds (collectively the "Series 2005 Bonds") is payable semiannually on January I and July 1 of each year, commencing on July I, 2005. All Series 2005 Bonds bear interest from their date of issuance. See "INTRODUCTION - Description of the Series 2005 Bonds" herein. The Series 2005 Bonds are subject to mandatory and optional redemption prior to maturity as described herein. See "THE SERIES 2005 BONDS - Redemption" herein. The Series 2005A Bonds and the Series 2005B Bonds are special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on (1) revenues derived by the Consolidated Government from the ownership and operation of the Airport, remaining after the payment of expenses of operating, maintaining, and repairing the Airport ("Net General Revenues"), and (2) those passenger facility charge revenues thaI are allocable to the 2005 Project ("PFC Revenues"). The Series 2005C Bonds are special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on Net General Revenues only; the Series 2005C Bonds are not secured by or payable from PFC Revenues. The Series 2005 Bonds will be issued and secured on a parity with any additional revenue bonds of the Consolidated Government hereafter issued on a parity with the Series 2005 Bonds. See "SECURITY AND SOURCES OF PA YMENT FOR THE SERIES 2005 BONDS" herein. The Series 2005 Bonds do not constitute a debt or general obligation of the Consolidated Government or a pledge of the faith and credit or taxing power of the Consolidated Government. No governmental entity, including the Consolidated Government, is obligated to levy any tax for the payment of the Series 2005 Bonds. No recourse may be had against the General Fund of the Consolidated Government for the payment of the Series 2005 Bonds. The maturities, principal amounts, interest rates, and prices or yields of the Series 2005 Bonds are set forth on the inside front cover of this Official Statement. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. The Series 2005 Bonds are offered when, as, and if issued by the Consolidated Government and accepted by Ihe Underwriter, subject to prior sale and to withdrawal or modification of the offer without nOlice, and are subject to Ihe approving opinion of SUlherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters will be passed on for the Consolidaled Governmenl by its counsel, Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLC, Augusta, Georgia, and for the Underwriler by ils counsel, Kilpatrick Stockton LLP, Augusta, Georgia. The Series 2005 Bonds in definitive fonn are expected to be delivered 10 The Depository Trusl Company in New York, New York on or about .2005. MERRILL LYNCH & CO. Dated: ,2005 *Preliminary; subjecl to change KS DRAFT 1/6/05 #1 778276v9 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, AND PRICES OR YIELDS $7,425,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) $7,425,000* _% Term Bonds due January 1,2035*, Priced at_% to Yield_% $8,000,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) $8,000,000* _% Term Bonds due January 1,2030*, Priced at_% to Yield_% $6,565,000* Airport General Revenue Bonds, Series 2005C (AMT) $6,565,000* _% Term Bonds due January 1,2033*, Priced at_% to Yield_% AUGUSTA, GEORGIA ELECTED OFFICIALS Augusta-Richmond County Commission Bob Young, lv/ayor Williams H.. Mays, III, Mayor Pro Tempore Betty Beard Bobby G. Hankerson Tommy Boyles Barbara Sims Andy Cheek Jimmy Smith Richard Colclough Marion F. Williams Don A. Grantham APPOINTED OFFICIALS Consolidated Government Administration Frederick L. Russell, Interim Administrator David Persaud, Director of Finance Lena J. Bonner, Clerk of Commission Stephen E. Shepard, Consolidated Government Attorney Augusta Aviation Commission Cedric 1. Johnson, Chainnan [TO BE REVISED] Bernard Silverstein, Vice Chainnan Grier C. Bovard Venus D. Cain Christopher A. Cunningham Kenneth G. Grisko Brad Kyzer, Jr. Sheila D. Paulk Joe L. Scott Earnest G. Smith Richard Colclough, Ex Officio j-!(j ...v~ Airport Administration Willis M. Boshears, Jr., Airport Director Timothy Weegar, A.A.E, CPM, Assistant Airport Director Tammy Strange, C.P.A., Director of Finance SPECIAL SERVICES Airport Auditors Cherry, Bekaert & Holland, L.L.P. Augusta, Georgia Bond Counsel Sutherland Asbill & Brennan LLP Atlanta, Georgia Airport Consultant Ricondo & Associates, Inc. Cincinnati, Ohio TABLE OF CONTENTS Page INTRODUCTION ........................................................................... ...................... ......... ............................................... I The Consolidated Government.................... .............................................................................................................. 1 The Aviation Commission......................................................................................................................................... 1 Purpose of the Series 2005 Bonds .............................................................................................................................2 The Airport......................................................................................................................... . .. .................................... 2 Security and Sources of Payment for the Series 2005 Bonds .................................................................................... 2 Description of the Series 2005 Bonds........................................................ ................................................................ 3 Tax Exemption............................................................................................................................... ............... ............3 Bond Registrar, Paying Agent, and Depositories ......................................................................................................4 Professionals Invol ved in the Offering...................................................................................................................... 4 Legal Authori ty ............................................................................................................................................... ..........4 Offering and Delivery of the Series 2005 Bonds.......................................................................................................4 Continuing Disclosure........................................................................................................................................ ....... 5 In vestment Considerations................................................................................................................ .........................5 Other Information............................................................................................................................ ..........................5 PLAN OF FINANCING ..................................... ........................................................................................................... 7 Estimated Sources and Applications of Funds...........................................................................................................7 The 200S Project....................................................................................................... .................................................7 General Contractor.................................................................................................. .................................................. 9 Arc hi tect .............................................................................................................................. ...................................... 9 Program Manager..................................................................................................................... .................................9 THE SERIES 2005 BONDS............................................................................................................. ........................... 10 Description .............................................................................................................................................................. 10 Redemption.............................................................................................................................................................. 10 Book-Entry Only System.......................................... ............................................................................................... l2 Legal Authority....................................................................... ................................................................................ 14 Investments..... ................................................................ ......................... ................................................................ 14 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS.................................................... 14 Pledged Revenues................................ .................................................................................................................... 14 Funds Created By the Bond Resolution and Row of Funds............................................................................... .....15 Rate Covenant...................................... ..................................................... .............................................................. 19 Parity and Subordinate Bonds ................................................................................................................................. 19 Limited Obligations............................ ..... ................................................................................................................ 20 Remedies...... ......... ....... ...... ................ ............................ ................................... ....................... ...... ..... ....................20 THE CONSOLIDATED GOVERNMENT ............................. .................................................................... ................21 Introduction..... .......................... ...................................................... ........................................................................ 21 Consolidated Government Administration and Officials........ ...... ........................................................................... 22 THE AVIATION COMMISSION ..............................................................................................................................23 Introduction ........................................................................................................... ................. .................................23 ! Aviation Commission Administration and Officials ...............................................................................................23; I THE AIRPORT ...........................................................................................................................................................24 I Introduction .............................................................................................................................. ............................... 24 Airport Facil i ties.......................................................................................................................... ............................ 24 Air Trade Area......................................................................................................................................................... 25 Competi ti on .............................................................................................................................. ............................... 26 Airlines Providing Service.................... ................................................................................................................... 26 A vailability of Information Concerning Individual Airlines ................................................................................... 26 Aviation Activity.......................... ........................................................ ........................................ ........................... 26 Origin and Destination Information................................ ......................................................................................... 27 (i) Page Airline and Other Revenue Sources..................................................................................................... ....... .............27 Employees, Employee Relations, and Labor Organizations ......................................:...... ....................................... 29 AIRPORT FINANCIAL INFORMATION ................. ............................................................................~...................29 Accounting System and Policies.................................................................................................................:........... 29 Historical and Pro Forma Capi tal Structure............................................................................................................. 30 Debt Service Requirements..................................................................................................................................... 32 Five Year Operating History................ ............. ................................. ............ .................................... ............. ........ 33 Management's Discussion and Analysis of Results of Operations..........................................................................35 Forecasted Debt Service Coverage Ratios ............................................................................................................... 36 Operati ng Budget............. ........................................................................................................................................ 3.6 Capital Improvements Program............................................................................................................................... 38 Passenger Facility Charges........................................ .............................................................................................. 38 Federal Grants-In-Aid........................................................................................... ...................................................40 ~n~~;~~:: ~~~:~~~.::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~ INVESTMENT CONSIDERATIONS ................................... .....................................................................................43 Introduction...................................................................................................................................................... .......43 Levels of Airline Traffic and Financial Condition of the Airlines...........................................................................43 Importance of Delta and US Airways at the Airport ...............................................................................................44 Effect of Airline Bankruptcies................................................................................................................................. 44 Costs of Aviation Fuel............................................................................................................................................. 46 Aviation Security Concerns..................................................................................................................................... 46 Regulations and Restrictions Affecting the Airport............................................................... .................................. 47 Negotiation of New Revenue-Producing Agreements............................................................................................. 47 Competition....... ...................................................................................................................................................... 48 Unavailability of Certain Insurance Coverage......................................................................................................... 48 Construction Ri sks........................................................................................................................... ........................48 Early Payment Prior to Maturity.............................................................................. Error! Bookmark not defined. LEGAL MA TIERS ....................................................................................................................................................48 Pending Litigation.....................................................:............................................................................................. 48 Opinion of Bond Counsel........................................................................................................................................ 49 Original Issue Discount and Premium ..................................................................................................................... 50 Validation Proceedings........... ................................................................................................................ ................. 50 Closing Certi ficates ................................................................................................................................................. 50 MISCELLANEOUS .................................................................................................................................................... 51 Ratings............................................... ....................................................................................................................... 51 U nderwri ting.......................................................................................................................... .................................. 51 Independent Professionals....................... ................................................................................................................ 51 Summary of Continuing Disclosure Certificate.......................................................................................................51 Additional Information............................................................................................................................................ 55 CERTIFICATION .......................................................................................................................................................55 APPENDIX A: FINANCIAL STATEMENTS OF THE AIRPORT .......................................................................A-l APPENDIX B: REPORT OF THE AIRPORT CONSULTANT ............................................................................. B-1 APPENDIX C: SUMMARY OF THE BOND RESOLUTION ............................................................................... C-I' I APPENDIX 0: FORMS OF LEGAL OPINIONS ...................................................................................................D-II I (ii) OFFICIAL STATEMENT of AUGUSTA, GEORGIA relating to its $21,990,000* AIRPORT REVENUE BONDS, SERIES 2005 New Issue $7,425,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) New Issue $8,000,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) New Issue $6,565,000* Airport General Revenue Bonds, Series 2OO5C (AMT) INTRODUCTION The purpose of this Official Statement, which includes the cover page and the Appendices hereto, is to furnish certain information in connection with the sale by Augusta, Georgia of $21,990,000* in aggregate principal amount of its Airport Revenue Bonds, Series 2005, consisting of $7,425,000* in aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) (the "Series 2005A Bonds"), $8,000,000* in aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) (the "Series 2005B Bonds"), and $6,565,000* in aggregate principal amount of its Airport General Revenue Bonds, Series 2005C (AMT) (the "Series 2005C Bonds"). The Series 2005A Bonds and the Series 2005B Bonds are referred to colIectively as the "Series 2005A/B Bonds" in this Official Statement and will be differentiated, where necessary, by reference to the Series 2005A Bonds and the Series 2005B Bonds. The Series 2005A/B Bonds and the Series 2005C Bonds are referred to collectively as the "Series 2005 Bonds" in this Official Statement and will be differentiated, where necessary, by reference to the Series 2005A/B Bonds and the Series 2005C Bonds. Definitions of certain terms used in this Official Statement and not otherwise defined herein are set forth in Appendix C to this Official Statement under the heading "SUMMARY OF THE BOND RESOLUTION _ Defmitions." This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed infonnation contained in the entire Official Statement, including the cover page and the Appendices, and the documents summarized or described herein. Potential investors should fully review the entire Official Statement. The offering of the Series 2005 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or to otherwise use it without the entire Official Statement, including the Appendices hereto. The Consolidated Government Augusta, Georgia (the "Consolidated Government") is a political subdivision of the State of Georgia, created on January 1, 1996 pursuant to Acts of the General Assembly of the State of Georgia that authorized the: consolidation of the municipal corporation known as "The City Council of Augusta" (the "City") and the political I subdivision known as "Richmond County, Georgia" (the "County"). The Consolidated Government is located in thel central eastern portion of the State of Georgia bordering the South Carolina state line, approximately 155 miles eastl of Atlanta, Georgia and 75 miles southwest of Columbia, South Carolina. For more complete information, see: "THE CONSOLIDATED GOVERNMENT" herein. The A viation Commission The Augusta Aviation Commission (the "Aviation Commission") is an agency of the Consolidated Government establisbed by ordinance of the Consolidated Government, which operates and manages Augusta Regional Airport at Bush Field (the "Airport") for the benefit of the Consolidated Government. The Aviation *Throughout this Preliminary Official Statement, the asterisk indicates information that is preliminary and subject to change. Commission is not a legal entity separate and independent of the Consolidated Government. For more complete information, see "THE A VIA TION COMMISSION" herein. Purpose of the Series 2005 Bonds The proceeds of the Series 2005 Bonds will be used, together with other available funds, (i) to pay the costs of acquiring, constructing, and installing a new airline passenger terminal and certain other capital improvements (the "2005 Project") for the Airport, (ii) to initially fund approximately 27 months of interest on the Series 2005 Bonds, (iii) to fully fund a debt service reserve fund to secure the Series 2005 Bonds, and (iv) to pay the costs of issuance of the Series 2005 Bonds. The primary purpose of the 2005 Project will be to replace the Airport's existing airline passenger terminal (the "Terminal Building Project"). The Consolidated Government expects to contract with (the "General Contractor") to construct the Terminal Building Project for the Consolidated Government for a fixed contract sum pursuant to The American Institute of Architects Standard Form of Agreement Between Owner and Contractor (AlA Document A 101ICMa) (the "Construction Contract"), between the General Contractor and the Consolidated Government. The Consolidated Government expects to enter into the Construction Contract with the General Contractor in February 2005. The LPA Group Incorporated (the "Architect") will design the Terminal Building Project for the Consolidated Government pursuant to an Agreement for Professional Services (the "Architect's Agreement"), dated July 18,2002, between the Architect and the Consolidated Government. Parsons Brinckerhoff Construction Services, Inc. (the "Program Manager") will provide construction and program management services for the Terminal Building Project for the Consolidated Government pursuant to a Professional Services Consultant Agreement (the "Program Management Agreement"), dated November 29, 2004, between the Program Manager and the Consolidated Government. For more complete information, see "PLAN OF FINANCING" herein. The Airport The Consolidated Government owns and the Aviation Commission operates the Airport. The City purchased the Airport from the U.S. government in 1945 and converted the Airport from a military facility to a commercial service facility. The Airport is located approximately seven miles south of downtown Augusta primarily within the territorial limits of the Consolidated Government. The Airport presently consists of approximately 1,248 acres of land, a primary all-weather runway that is approximately 8,000 feet in length, a crosswind runway that is approximately 6,000 feet in length, a weather service station, an air traffic control tower, a main terminal building containing approximately 68,000 square feet, public parking facilities consisting of four surface lots containing 821 parking spaces, and 179,600 square feet of other rented buildings occupied by businesses involved in aeronautical activities. As of November 2004, Delta Airlines Inc. and US Airways Inc., through their wholly-owned subsidiaries, provided scheduled service to and from the Airport. For more complete information, see "THE AIRPORT" herein. Security and Sources of Payment for the Series 2005 Bonds The Series 2oo5NB Bonds are special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on (1) hereinafter described General Revenues remaining after the payment of expenses of operating and maintaining the Airport ("Net General Revenues"), and (2) those passenger facility charge revenues that are allocable to the 2005 Project ("PFC Revenues"). The Series 2005C Bonds are special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on Net General Revenues only; the Series 2005C Bonds are not secured by or payable from PFC Revenues. "General Revenues" consist of all rates, fees, charges, rents, and other income derived by the Consolidated Government from the ownership or operation of the Airport and include certain revenues derived from rental car i concessions, terminal concessions, food concessions, rentals ofland and buildings to fixed base operators and other, tenants, landing fees, and earnings from the investment of revenues. General Revenues do not include PFC; Revenues. For a description of PFC Revenues, see "AIRPORT FINANCIAL INFORMATION - Passenger I Facility Charges" herein. References to "Pledged Revenues" in this Official Statement mean, in the case of the i Series 2oo5A/B Bonds, Net General Revenues and PFC Revenues, and, in the case of the Series 2OO5C Bonds, Net. General Revenues. I I The Series 2005 Bonds will be equally and ratably secured on a parity basis with any additional revenue bonds of the Consolidated Government hereafter issued on a parity basis with the Series 2005 Bonds. The Series 2005 Bonds and any additional revenue bonds of the Consolidated Government hereafter issued on a parity basis with the Series 2005 Bonds are collectively referred to as the "Bonds" in this Official Statement. -2- The Series 2005 Bonds do not and will not constitute a debt or general obligation of the Consolidated Government or a pledge of the faith and credit or taxing power of the Consolidated Government. No governmental entity, including the Consolidated Government, is obligated to levy any tax for the payment of the Series 2005 Bonds. No recourse may be had against the General Fund of the Consolidated Government for the payment of the Series 2005 Bonds. The pledge of and lien on Pledged Revenues securing the Series 2005 Bonds do not create a legal or equitable pledge, charge, lien, or encumbrance upon any of the Consolidated Government's property or income, receipts, or revenues, except the Pledged Revenues and the amounts on deposit in the funds held under the hereinafter described Bond Resolution. The Series 2005AJB Bonds will also be secured by a debt service reserve account to be held in trust for the owners of all of the Bonds secured by a first priority lien on Net General Revenues and PFC Revenues, equally and ratably, under the terms of the hereinafter described Bond Resolution. The debt service reserve account for the Series 2005AJB Bonds will be fully funded upon the issuance of the Series 2005AJB Bonds, in an amount equal to $ *, from amounts contributed by the Consolidated Government. The Series 2005C Bonds will also be secured by a debt service reserve account to be held in trust for the owners of all of the Bonds secured by a first priority lien on Net General Revenues only, equally and ratably, under the terms of the hereinafter described Bond Resolution. The debt service reserve account for the Series 2005C Bonds will be fully funded upon the issuance of the Series 2005C Bonds, in an amount equal to $ *, from amounts contributed by the Consolidated Government. For more complete and detailed information, see "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS" herein. Description of the Series 2005 Bonds Redemption. The Series 2005A Bonds maturing on or after January I, 20_, are redeemable at the option of the Consolidated Government, not earlier than January 1, 20_, at the prices and on the terms described in this Official Statement. The Series 2005B Bonds maturing on or after January I, 20_, are redeemable at the option of the Consolidated Government, not earlier than January 1, 20_, at the prices and on the terms described in this Official Statement. The Series 2005C Bonds maturing on or after January I, 20_, are redeemable at the option of the Consolidated Government, not earlier than January I, 20_, at the prices and on the terms described in this Official Statement. The Series 2005 Bonds are subject to mandatory redemption in part prior to maturity on the dates and in the amounts described in this Official Statement. For more complete information, see "THE SERIES 2005 BONDS - Redemption" herein. Denominations. The Series 2005 Bonds are issuable in denominations of $5,000 or any integral multiple thereof. Book-Entry Bonds. Each of the Series 2005 Bonds will be issued as fully registered certificates in the denomination of one certificate per aggregate principal amount of the stated maturity of each series thereof, and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC"), New York, New York, an automated depository for securities and clearing house for securities transactions, which will act as securities depository for the Series 2005 Bonds. Purchasers will not receive certificates representing their ownership interest in the Series 2005 Bonds purchased. Purchases of beneficial interests in the Series 2005 Bonds will be made in book-entry only form (without certificates), in authorized denominations, and, under certain circumstances as more fully described in this Official Statement, such beneficial interests are exchangeable for one or more fully registered certificates of like series, principal amount, and maturity in authorized denominations. For more complete infonnation, see "THE SERIES 2005 BONDS - Book-Entry Only System" herein. Payments. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2005 Bonds,: payments of the principal of, premium, if any, and interest on the Series 2005 Bonds will be made directly to Cede & Co., which will remit such payments to the DTC participants, which will in turn remit such payments to the beneficial owners of the Series 2005 Bonds. I For a more complete description of the Series 2005 Bonds, see "THE SERIES 2005 BONDS" herein. Tax Exemption In the opinion of Bond Counsel, under existing law and subject to the conditions described herein, interest on the Series 2005A Bonds (i) is excluded from gross income for federal income tax purposes, (ii) is exempt from present State of Georgia income taxation, and (iii) will not be an item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations. In the opinion of Bond Counsel, under -3- existing law and subject to the conditions described herein, interest on the Series 20058 Bonds and the Series 2005C Bonds (i) is excluded from gross income for federal income tax purposes, except for any period during which a Series 2oo5B Bond or Series 2005C Bond, respectively, is held by a "substantial user" of the facilities financed with the proceeds of the Series 2005B Bonds or the Series 2005C Bonds, respectively, or a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) is exempt from present State of Georgia income taxation, and (iii) is an item of preference for purposes of computing the federal alternative minimum tax imposed on corporations and taxpayers other than corporations and will be taken into account in determining the adjusted current earnings for the purpose of computing the alternative minimum tax imposed upon certain corporations. See Appendix D hereto for the forms of the opinions Bond Counsel proposes to deliver in connection with the issuance of the Series 2005 Bonds. For a more complete discussion of such opinions and certain other tax consequences of owning the Series 2005 Bonds, including certain exceptions to the exclusion of the interest on the Series 2005 Bonds from gross income, see "LEGAL MATTERS - Opinion oC Bond Counsel and - Original Issue Discount and Premium" herein. Bond Registrar, Paying Agent, and Depositories SunTrust Bank, Atlanta, Georgia, will act as bond registrar and as paying agent for the Series 2005 Bonds and as depository of the Debt Service Fund, the PFC Debt Service Fund, the Operation and Maintenance Reserve Fund, the Renewal and Replacement Fund, and the Rebate Fund created under the hereinafter described Bond Resolution. Smith Barney Corporate Trust Company will act as depository of the Revenue Fund, the PFC Revenue Fund, the Operation and Maintenance Fund, the Construction Fund, the Capital Improvement Fund, the PFC Obligations Fund, the PFC Capital Fund, and the Subordinate Securities Fund created under the hereinafter described Bond Resolution. ProCessionals Involved in the Offering Certain legal matters pertaining to the Consolidated Government and its authorization and issuance of the Series 2005 Bonds are subject to the approving opinions of Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel. Copies of such opinions will be available at the time of delivery of the Series 2005 Bonds, and a copy of each of the proposed forms of such opinions is attached hereto as Appendix D. Certain legal matters will be passed on for the Consolidated Government by its counsel, Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLC, Augusta, Georgia, and for the Underwriter by its counsel, Kilpatrick Stockton LLP, Augusta, Georgia. The financial statements of the Airport as of December 31, 2003 and 2002 and for the years then ended, attached hereto as part of Appendix A, have been audited by Cherry, Bekaert & Holland, L.L.P., Augusta, Georgia, independent certified public accountants, to the extent and for the periods indicated in their report thereon which appears in Appendix A hereto. The Report of the Airport Consultant attached to this Official Statement as Appendix B has been prepared by Ricondo & Associates, Inc., Cincinnati, Ohio. See "MISCELLANEOUS - Independent ProCessionals" herein. THE REPORT OF THE AIRPORT CONSULTANT, INCLUDING ALL COMMENTS, ASSUMPTIONS, NOTES, AND DISCLAIMERS, SHOULD BE READ IN ITS ENTIRETY. Legal Authority The Series 2005 Bonds are being issued and secured pursuant to the authority granted by the laws of the State of Georgia and under the provisions of a Master Bond Resolution adopted by the Augusta-Richmond County Commission on , 2005 and by the Aviation Commission on , 2005, as ratified, reaffirmed, supplemented, and amended by Supplemental Bond Resolutions adopted by the Augusta-Richmond County Commission and the Aviation Commission on , 2005 and , 2005 (collectively the "Bond Resolution"). For more complete information, see "THE SERIES 2005 BONDS - Legal Authority" herein. Offering and Delivery oC the Series 2005 Bonds The Series 2005 Bonds are offered when, as, and if issued by the Consolidated Government and accepted by . the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice. The Series 2005 I Bonds in definitive form are expected to be delivered to The Depository Trust Company in New York, New York on or about ,2005. -4- Continuing Disclosure The Consolidated Government has covenanted in the Bond Resolution and a Continuing Disclosure Certificate (the "Disclosure Certificate") for the benefit of the beneficial owners of the Series 2005 Bonds to provide certain financial information and operating data relating to the Airport (the "Annual Report") by not later than 195 days after the end of each fiscal year of the Consolidated Government, commencing with fiscal year 2004, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the Consolidated Government with each Nationally Recognized Municipal Securities Information Repository. The notices of material events will be filed by the Consolidated Government with each Nationally Recognized Municipal Securities Information Repository. The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized herein under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the "Rule"). Investment Considerations There are certain considerations relating to an investment in the Series 2005 Bonds, which are set forth in this Official Statement under the caption "INVESTMENT CONSIDERATIONS" and which should be carefully reviewed by prospective purchasers of the Series 2005 Bonds. The Series 2005 Bonds may not be suitable for purchase by all investors. See "INVESTMENT CONSIDERATIONS" herein. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. This Official Statement contains forecasts, projections, and estimates that are based on current expectations but are not intended as representations of fact or guarantees of results. If and when included in this Official Statement, the words "expects," "forecasts," "projects," "intends," "anticipates," "estimates," and analogous expressions are intended to identify forward-looking statements as defined in the Securities Act of 1933, as amended, and any such statements inherently are subject to a variety of risks and uncertainties, which could cause actual results to differ materially from those contemplated in such forward-looking statements. These forward-looking statements speak only as of the date of this Official Statement. The Consolidated Government disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Consolidated Government's expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Consolidated Government, the Aviation Commission, the Series 2005 Bonds, the Airport, the Bond Resolution, the Disclosure Certificate, and the security and sources of payment for the Series 2005 Bonds. Such descriptions and information do not purport to be comprehensive or definitive. The summaries of various constitutional provisions and statutes, the Bond Resolution, the Disclosure Certificate, and other documents are intended as summaries only and are qualified in their entirety by reference to such documents, and references herein to the Series 2005 Bonds are qualified in their entirety to the forms thereof included in the Bond Resolution. Copies of the Bond Resolution, the Disclosure Certificate, and other documents and information are available, upon request and upon payment to the Aviation Commission of a charge for copying, mailing, and handling, from Tammy Strange, Director of Finance, Augusta Regional Airport, 1501 Aviation Way, Augusta, Georgia 30906-9620, telephone (706) 798-3236. During the period of the offering of the Series 2005 Bonds, copies of such documents are available, upon request and upon payment to the Underwriter of a charge for copying, mailing, and handling, from Merrill Lynch & Co., Inc., 4 World Financial Center, 9th Floor, New York, New York 10080, telephone (212) 449-0655. The Series 2005 Bonds have not been registered under the Securities Act of 1933, and the Bond Resolution has not been qualified under the Trust Indenture Act of 1939, in reliance on exemptions contained in such Acts. I This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there I be any sale of the Series 2005 Bonds by any person in any jurisdiction in which it is unlawful for such person to. make such offer, solicitation, or sale. No dealer, broker, salesman, or other person has been authorized by the Consolidated Government or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Consolidated Government or the Underwriter. Except where otherwise indicated, all information contained in this Official Statement has been provided by the Consolidated Government. The information set forth herein has been obtained by the Consolidated Government from sources that are believed to be reliable but is not guaranteed as to accuracy or completeness by the Underwriter. The Consolidated Government has not provided -5- information regarding the airlines serving the Airport and does not certify as to the accuracy or sufficiency of the disclosure practices of or content of the information provided by such airlines and is not responsible for the information provided by such airlines. The information contained herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the affairs of the Consolidated Government or the other matters described herein since the date hereof or the earlier dates set forth herein as of which certain information contained herein is given. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the acwracy or completeness of such information. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market prices of the Series 2005 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. [Remainder of Page Intentionally Left Blank] -6- PLAN OF FINANCING Estimated Sources and' Applications of Funds The sources and applications of funds in connection with the issuance of the Series 2005 Bonds are estimated below. Estimated Sources of Funds*: Proceeds of Series 2005A Bonds Proceeds of Series 2005B Bonds Proceeds of Series 2005C Bonds Interest Earnings During Construction I Federal Grants-In-Aid PFC Pay-As-You-Go Funds State of Georgia Grants A viation Commission Funds Total Sources of Funds $ 7,425,000 8,000,000 6,565,000 6,581,000 2,186,000 255,000 Estimated Applications of Funds*: Costs of 2005 project2 Capitalized Interest3 Deposit to Debt Service Reserve Accounts4 Deposit to Operation and Maintenance Reserve Fund5 Deposit to Renewal and Replacement Fund6 Costs of Issuance7 Total Applications of Funds $31,877,000 978,000 I ,000,000 Based on estimated earnings on the unexpended construction and capitalized interest funds at an investment rate of _ % and debt service reserve funds at an investment rate of _ % over a period of _ months. 2 See "PLAN OF FINANCING - The 2005 Project" herein for a detailed itemization of 2005 Project costs. 3 Represents interest on the Series 2005 Bonds for approximately 27 months. 4 This amount fully funds (a) the Series 2005A/B Subaccount of the PFC Debt Service Reserve Account in an amount equal to the maximum amount of principal and interest coming due on the Series 2005A/B Bonds in the then current or any succeeding sinking fund year (January 2 - January I), and (b) the Series 2005C Subaccount of the Debt Service Reserve Account in an amount equal to the maximum amount of principal and interest coming due on the Series 2005C Bonds in the then current or any succeeding sinking fund year (January 2 - January I). See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS - Funds Created By the Bond Resolution and Flow of Funds -- Debt Service Fund; PFC Debt Service Fund" herein. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS - Funds Created By the Bond Resolution and Flow of Funds -- Operation and Maintenance Reserve Fund" herein. 6 See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS - Funds Created By the Bond Resolution and Flow of Funds -- Renewal and Replacement Funcf' herein. 7 Includes underwriting discount, legal and accounting fees, initial Bond Registrar's and Paying Agent's fees, printing costs, validation court costs, rating agencies' fees, and other costs of issuance. The 2005 Project The 2005 Project consists of the acquisition, construction, and installation of a new airline passenger terminal to replace the existing airline passenger terminal (the "Terminal Building Project") at the Airport and certain other capital improvements for the Airport. ! I The Aviation Commission is presently using many of the original facilities from the Airport's previous use as al military facility, including portions of the terminal building and the on-site hotel. The existing terminal facility consists of approximately 53,000 square feet of interior, conditioned space and I 1,000 square feet of covered. exterior space. The terminal facility currently consists of three structures: the main terminal building containing the ticketing and baggage handling activities, concessions, and general public waiting space and two structures containing individual holdrooms and security screening stations. These structures are linked by a series of covered -7- walkways. The main terminal building was originally three separate structures during the Airport's use as a military facility. These structures were later joined to form the existing terminal. The three original structures were the infirmary, now utilized by the restaurant/concessions area, the dining hall, now utilized as the ticketing lobby, and a classroom building, now utilized by the rental car concessionaires. In the mid-1960's, the Aviation Commission constructed a baggage claim and baggage handling space between the ticketing and administration structures and a public waiting structure between the ticketing and restaurant structure. The Aviation Commission constructed two separate hold rooms in 1973 and a new administration suite in 1987. These additions, and less significant additions and renovations made by the Aviation Commission over the years, have resulted in a terminal facility that is composed of numerous different structural systems, roofs, mechanical systems, floor elevations, electrical equipment, materials, and finishes. In order to improve the Airport, the Aviation Commission demolished two hotel buildings, constructed two short-term parking lots, and made loop road and access improvements in the late 1990s. The construction program for the Terminal Building Project consists of the demolition, in phases, of the existing terminal facility and the construction, also in phases, of a new terminal facility. The ground floor of the new terminal facility will total approximately 80,000 square feet of space and will contain holdrooms, ticketing and baggage make-up areas, baggage claim and baggage claim handling areas, and space for security offices, restrooms, concessions, rental car offices, circulation areas, and other ancillary and support areas. The second floor of the new terminal facility will total approximately 13,000 square feet of space and will contain administrative offices, restrooms, and additional support space. The construction program also includes sitework related to access road, parking areas, and apron, including utilities, grading, drainage, paving, and marking. The new terminal facility will be constructed in the same footprint as the existing terminal facility while maintaining airline and concession operations. The first phase of construction is expected to last approximately 10 months and involves constructing an approximately 23,000 square foot concourse and associared hardstand improvements between two existing holdrooms. Minimal disruption to airline operations should occur during Phase 1 of the construction schedule. Phase 2 of the construction schedule is expected to last approximately 4 months and involves the temporary renovation of a holdroom for ticketing, the temporary renovation of a holdroom for baggage claim, and the relocation of five car rental agencies, the Transportation Security Administration, and the Marshal's Department to temporary business office trailers to be located near temporary baggage claim. Phase 3 of the construction schedule is expected to last approximately 12 months and involves the demolition of the main (existing) terminal building and new construction amounting to approximately 70,000 square feet (including the second floor) being constructed in the same footprint. Phase 4 of the construction schedule is expected to last approximately 4 months and involves the demolition of two holdrooms and administration offices, various sitework, and landscaping. The new terminal facility will encompass 18 ticket counter positions, 6 multi-use jet aircraft gates, and 2 baggage claim devices. The new terminal facility provides for 100% in-line baggage screening, using explosive detection system ("EDS") machines. The other capital improvements for the Airport included in the 2005 Project are the bituminous overlay of the entire length of a 6,000 foot runway and rehabilitation of its lighting and the sealing of cracks on a taxiway. The expected categories of expenditures related to the 2005 Project, based upon the hereinafter described Construction Contract and the plans and specifications for the 2005 Project, are set forth below: Costs of 2005 Project*: Terminal Building Project Runway 8-26 Rehabilitation Taxiway E Crack Sealing Total $30,185,000 1,589,000 103.000 $31.877.000 The runway rehabilitation and the taxiway crack sealing included in the 2005 Project are either substantially completed or currently underway. Approximately $ of the proceeds of the Series 2005 Bonds will be usee! to reimburse the Consolidated Government for costs associated with these projects.' ; I For a more complete description of the 2005 Project, see the Report of the Airport Consultant attached to thi~ Official Statement as Appendix B. -8- General Contractor The Construction Contract The Consolidated Government expects to commence construction of the Terminal Building Project in February 2005. The. Construction Contract will require the General Contractor to construct the Terminal Building Project for a fixed contract sum of $ . The General Contractor will be required to secure its obligations for construction and timely completion by labor and material payment and performance bonds. The Construction Contract will provide that the work to be performed be substantially completed within 905 days after the issuance of a notice to proceed with construction and will contain a penalty or liquidated damages provision in the amount of $10,000 per day for delays in excess thereof. The Construction Contract will provide, for each phase of construction, for retainage of 10% until the work is 50% complete and for retainage of 5% after the work is 50% complete. The Construction Contract does not include furnishings or equipment. The General Contractor The Consolidated Government expects to contract with of, , to serve as general contractor for the construction of the Terminal Building Project. The Consolidated Government expects to enter into the Construction Contract with the General Contractor in 2005. The General Contractor was organized in 19_ and has an unlimited general contractor's license in Georgia. [DESCRIBE] Architect The Architect's Agreement The Architect's Agreement provides for compensation for basic services equal to a stipulated sum of $ . Under the Architect's Agreement, the Architect agreed to design the Terminal Building Project to conform to program requirements established by the Consolidated Government, to prepare construction documents consisting of plans and specifications setting forth in detail the requirements for the construction of the Terminal Building Project, to assist in awarding and preparing construction contracts, and to provide construction administration services, including inspection of construction progress to ensure conformity with the plans and specifications. The Architect The Consolidated Government has contracted with The LP A Group Incorporated of Columbia, South Carolina, to serve as the design and inspecting architect for the Tenninal Building Project. The Architect is registered in 16 states, including Georgia. The Architect is a privately-owned company formed in 1981 and currently has 280 employees located in 17 offices throughout the southeastern United States. The Architect has average annual gross revenues in excess of $40 million. The Architect specializes in transportation consulting through engineering, architecture, and planning services. There is no known relationship of any kind, by blood, marriage, or business, between any director, officer, or stockholder of the Architect and any official or employee of the Consolidated Government. Program Manager The Program Management Agreement Under the Program Management Agreement, the Program Manager has agreed to provide certain construction management services in connection with the Tenninal Building Project. During the pre-construction phase, these services include preparing a management/administration plan, assisting in schedule and budget development, reviewing plans and specifications, and analyzing general contractor bids. During the construction phase, the Program Manager is required to monitor and coordinate on behalf of the Consolidated Government the construction activities of the Terminal Building Project, including, among other things, administering contracts, monitoring and inspecting the General Contractor's work, establishing and implementing a change order control system, reviewing progress of construction, providing cost management services, and providing a final inspection report upon completion. The Consolidated Government has agreed to compensate the Program Manager for the performance of its services under the Program Management Agreement in a lump sum amount of $1 ,448,000. The Program Manager The Consolidated Government has contracted with Parsons Brinckerhoff Construction Services, Inc. of Atlanta, Georgia to serve as the program manager for the Terminal Building Project. The Program Manager is a -9- Delaware corporation organized in 1978 which provides professional construction management services for transportation, power, buildings, and environmental projects throughout the world. The Program Manager is wholly owned by Parsons Brinckerhoff, Inc., a New York corporation which acts as the holding company of several companies that provide program management, planning, engineering, and construction management services and employ approximately 9,000 persons in more than 150 offices worldwide. The Program Manager has average annual gross revenues in excess of $167 million, and its parent, Parsons Brinckerhoff, Inc., has average annual gross revenues in excess of $1.37 billion. There is no known relationship of any kind, by blood, marriage, or business, between any director, officer, or stockholder of the Program Manager, or its parent, Parsons Brinckerhoff, Inc., and any official or employee of the Consolidated Government. THE SERIES 2005 BONDS Description The Series 2005A Bonds are being issued in the aggregate principal amount of $7,425,000*, the Series 2005B Bonds are being issued in the aggregate principal amount of $8,000,000*, and the Series 2005C Bonds are being issued in the aggregate principal amount of $6,565,000*. The Series 2005 Bonds will be dated as of their date of issuance, and will bear interest at the rates set forth on the inside front cover page of this Official Statement, payable July I, 2005, and semiannually thereafter on July I and January I of each year to the registered owner as shown on the books and records of SunTrust Bank, Atlanta, Georgia, as Paying Agent and Bond Registrar (the "Paying Agent" or the "Bond Registrar") as of the close of business on the 15th day of the calendar months next preceding such July 1 and January 1. Subject to the redemption provisions set forth below, the Series 2005 Bonds will mature on the dates and in the amounts set forth on the inside front cover page of this Official Statement. The principal of and redemption premium, if any, on the Series 2005 Bonds are payable when due to the registered owner upon presentation at the principal corporate trust office of the Paying Agent. The Series 2005 Bonds are issuable only as fully registered bonds, without coupons, in any authorized denomination. Purchases of beneficial ownership interests in the Series 2005 Bonds will be made in book-entry form and purchasers will not receive certificates representing interests in the Series 2005 Bonds so purchased. If the book-entry system is discontinued, Series 2005 Bonds will be delivered as described in the Bond Resolution, and beneficial owners of the Series 2005 Bonds will become the registered owners of the Series 2005 Bonds. Redemption Optional Redemption of Series 2005A Bonds The Series 2oo5A Bonds maturing on and after January 1, 20-,- are redeemable at the option of the Consolidated Government in whole at any time, or in part on any interest payment date, not earlier than January I, 20_, in the inverse order of maturities (less than all of such Series 2005A Bonds of a single maturity to be selected by lot in a manner determined by the Bond Registrar), from any monies available therefor at the following redemption prices (expressed as percentages of the principal amount of the Series 2005A Bonds being redeemed) plus accrued interest to the redemption date, all in the manner provided in the Bond Resolution. Redemotion Dates (inclusive) Redemotion Price January 1, 20 through December 3 I, 20 January 1, 20 through December 31, 20 January 1,20 and thereafter Mandatory Redemption of Series 2005A Bonds The Series 2005A Bonds are subject to scheduled mandatory redemption prior to maturity in part (the actual bonds to be redeemed to be selected by lot in such manner as may be designated by the Paying Agent) at a: redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, in the! following principal amounts and on the dates set forth below (the January 1, 2035* amount to be paid rather than redeemed): -10- Series 2005A Bonds Maturing January 1. 2035* January 1 of the Year Principal Amount January 1 of the Year Principal. Amount (Leaving $ to mature January 1,2035*) Optional Redemption of Series 2005B Bonds The Series 2005B Bonds maturing on and after January 1, 20_ are redeemable at the option of the Consolidated Government in whole at any time, or in part on any interest payment date, not earlier than January 1, 20_, in the inverse order of maturities (less than all of such Series 2005B Bonds of a single maturity to be selected by lot in a manner determined by the Bond Registrar), from any monies available therefor at the following redemption prices (expressed as percentages of the principal amount of the Series 2005B Bonds being redeemed) plus accrued interest to the redemption date, all in the manner provided in the Bond Resolution. Redemption Dates (inclusive) Redemption Price January 1,20 through December 31,20 January I, 20 through December 31, 20 January 1,20 and thereafter Mandatory Redemption of Series 2005B Bonds The Series 2oo5B Bonds are subject to scheduled mandatory redemption prior to maturity in part (the actual bonds to be redeemed to be selected by lot in such manner as may be designated by the Paying Agent) at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, in the following principal amounts and on the dates set forth below (the January 1, 2030* amount to be paid rather than redeemed): Series 2oo5B Bonds Maturing January 1, 2030* January 1 of the Year Principal Amount January 1 of the Year Principal Amount (Leaving $ to mature January 1,2030*) Optional Redemption of Series 2005e Bonds The Series 2005C Bonds maturing on and after January 1, 20_ are redeemable at the option of the Consolidated Government in whole at any time, or in part on any interest payment date, not earlier than January I, 20_, in the inverse order of maturities (less than all of such Series 2OO5C Bonds of a single maturity to be selected by lot in a manner determined by the Bond Registrar), from any monies available therefor at the following redemption prices (expressed as percentages of the principal amount of the Series 2005C Bonds being redeemed)i plus accrued interest to the redemption date, all in the manner provided in the Bond Resolution. Redemption Dates (inclusive) Redemption Price January 1,20 through December 31,20 January 1, 20 through December 31, 20 January 1, 20 and thereafter -11- Mandatory Redemption of Series 2005C Bonds The Series 2005C Bonds are subject to scheduled mandatory redemption prior to maturity in part (the actual bonds to be redeemed to be selected by lot in such manner as may be designated by the Paying Agent) at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, in the following principal amounts and on the dates set forth below (the January 1, 2033* amount to be paid rather than redeemed): Series 2005C Bonds Maturing January 1.2033* January 1 of the Year Principal Amount January I of the Year Principal Amount (Leaving $ to mature January 1,2033*) Redemption Notices Notice of any redemption of the Series 2005 Bonds, identifying the Series 2005 Bonds (or any portion of the respective principal sums thereof) to be redeemed, will be given by fIrst-class mail, postage prepaid, not less than thirty (30) days prior to the redemption date to. alI registered owners of the Series 2005 Bonds to be redeemed (in whole or in part). Failure to give appropriate notice of any redemption by mail or any defect in the notice wilI not affect the validity of the proceedings for the redemption of any Series 2005 Bond. Book-Entry Only System The Depository Trust Company ("DTC"), New York, New York, or its successor, will act as SeCUrItIes depository for the Series 2005 Bonds. The Series 2005 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Series 2005 Bond will be issued for each maturity of each series, in the aggregate principal amount of such maturity, and will be deposited with DTC. So long as DTC or its nominee is the registered owner of the Series 2005 Bonds, payments of the principal and redemption premium of and interest due on the Series 2005 Bonds will be payable directly to DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholIy-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as welI as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and I non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). , DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the I Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. I Purchases of Series 2005 Bonds under the DTC system must be made by or through Direct Participants, which . will receive a credit for the Series 2005 Bonds on DTC's records. The ownership interest of each actual purchaser ' of each Series 2005 Bond (a "BenefIcial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confIrmation from DTC of their purchase. Beneficial Owners -12- are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2005 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2005 Bonds, except in the event that use of the book-entry system for the Series 2005 Bonds is discontinued. To facilitate subsequent transfers, all Series 2005 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2005 Bonds with DTC and their registration in the name of Cede & Co., or such other DTC nominee, do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2005 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2005 Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to DTC. If less than all of the Series 2005 Bonds of either series within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2005 Bonds unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Paying Agent as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2005 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, and interest payments on the Series 2005 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Consolidated Government or the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Consolidated Government, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Consolidated Government or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Series 2005 Bonds at any time by giving reasonable notice to the Consolidated Government or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2005 Bonds are required to be printed and delivered. The information concerning DTC and DTC's book-entry system set forth above has been obtained from DTC, and the Consolidated Government takes no responsibility for the accuracy thereof. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE BONDHOLDER, THE CONSOLIDATED GOVERNMENT SHALL TREAT CEDE & CO. AS THE ONLY BONDHOLDER FOR ALL PURPOSES, INCLUDING RECEIPT OF ALL PRINCIPAL AND PREMIUM OF AND INTEREST ON THE SERIES 2005 BONDS, RECEIPT OF NOTICES, VOTING, AND REQUESTING OR DIRECTING THE CONSOLIDATED GOVERNMENT AND THE PAYING AGENT TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS. THE CONSOLIDATED GOVERNMENT HAS NO RESPONSIBILITY OR OBLIGATION TO THE DIRECT OR INDIRECT PARTICIPANTS OR THE: BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT OR INDIRECT PARTICIPANT; (B) THE PAYMENT BY ANY DIRECT OR. INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AND PREMIUM OF AND INTEREST ON THE SERIES 2005 BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY DIRECT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND -13- RESOLUTION TO BE GIVEN TO BONDHOLDERS; OR (D) OTHER ACTION TAKEN BY DTC OR CEDE & CO. AS BONDHOLDER. Beneficial Owners of the Series 2005 Bonds may experience some delay in their receipt of distributions of principal and interest on the Series 2005 Bonds since such distributions will be forwarded by the Paying Agent to DTC and DTC will credit such distributions to the accounts of Direct Participants which will thereafter credit them to the accounts of Beneficial Owners either directly or indirectly through Indirect Participants. Issuance of the Series 2005 Bonds in book-entry form may reduce the liquidity of the Series 2005 Bonds in the secondary trading market since investors may be unwilling to purchase Series 2005 Bonds for which they cannot obtain physical certificates. In addition, since transactions in the Series 2005 Bonds can be effected only through DTC, Direct Participants, Indirect Participants, and certain banks, the ability of a Beneficial Owner to pledge Series 2005 Bonds to persons or entities that do not participate in the DTC system, or otherwise to take action in respect of such Series 2005 Bonds, may be limited due to lack of a physical certificate. Beneficial Owners will not be recognized by the Paying Agent as registered owners for purposes of the Bond Resolution, and Beneficial Owners will be permitted to exercise the rights of registered owners only indirectly through DTC and the Direct or Indirect Participants. Legal Authority Paragraph I of Section VI of Article IX of the Constitution of the State of Georgia authorizes any political subdivision to issue revenue bonds as provided by general law and provides (1) that the obligation represented by revenue bonds shall be repayable only out of the revenue derived from the project and shall not be deemed to be a debt of the issuing political subdivision and (2) that no issuing political subdivision shall exercise the power of taxation for the purpose of paying any part of the principal or interest of any such revenue bonds. The Series 2005 Bonds are being issued and secured pursuant to the authority granted by Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, known as the "Revenue Bond Law" (the "Revenue Bond Law"), and under the provisions of a Master Bond Resolution adopted by the Augusta-Richmond County Commission on , 2005 and by the Aviation Commission on , 2005, as ratified, reaffirmed, supplemented, and amended by Supplemental Bond Resolutions adopted by the Augusta-Richmond County Commission and the Aviation Commission on , 2005 and , 2005 (collectively the "Bond Resolution"). Investments For a description of how the proceeds of the Series 2005 Bonds that are being used to finance the 2005 Project are to be invested pending their use, the provisions governing those investments, the conditions that must be satisfied before such proceeds may be applied to their intended use, and other provisions governing the investment of the proceeds of the Series 2005 Bonds and the amounts held to pay debt service on the Series 2005 Bonds, see "SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION - Permitted Investments" in Appendix C hereto and "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS - Funds Created By the Bond Resolution and Flow of Funds" herein. SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS Pledged Revenues Under the terms of the Bond Resolution, the Series 2005A/B Bonds are secured by a first priority pledge of and lien on Net General Revenues and PFC Revenues. Under the terms of the Bond Resolution, the Series 2005C Bonds are secured by a first priority pledge of and lien on Net General Revenues only; the Series 2005C Bonds are not secured by or payable from PFC Revenues. General Revenues consist of all rates, fees, charges, rents, and other income derived by the Consolidated Government from the ownership or operation of the Airport and include certain revenues derived from rental car concessions, terminal concessions, food concessions, rentals of land and buildings to fixed base operators and other tenants, landing fees, and earnings from the investment of revenues. Net General Revenues consist of General Revenues remaining after the payment of expenses of operating and maintaining the Airport. General Revenues do not include PFC Revenues. For a description of PFC Revenues, see "AIRPORT FINANCIAL INFORMATION - Passenger Facility Charges" herein. References to "Pledged Revenues" in this Official Statement mean, in the case of the Series 2005A/B Bonds, Net General Revenues and PFC Revenues, and, in the case of the Series 2005C Bonds, Net General Revenues. -14- The Consolidated Government has ,covenanted in the Bond Resolution that it will not create or suffer to be created in the operation and maintenance of the Airport any charge, lien, or security interest on the Airport or upon the revenues derived therefrom ranking prior to or (except as provided in the Bond Resolution with respect to the issuance of parity bonds) equally with the lien and charge upon such revenues created by the Bond Resolution. The Consolidated Government has also made certain covenants in the Bond Resolution concerning the sale or disposition of the Airport, insurance on the Airport, and the books and records relating to the Airport, which are described in "SUMMARY OF THE BOND RESOLUTION - Maintenance, Insurance, and Sale of the Airport; Annual Budget; Uneconomic Facilities; Tax Covenants" in Appendix C to this Official Statement. Funds Created By the Bond Resolution and Flow of Funds With respect to General Revenues of the Airport, the Bond Resolution creates and requires the Aviation Commission, on behalf of the Consolidated Government, to maintain the following funds: (1) the Revenue Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission; (2) the Operation and Maintenance Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission; (3) the Operation and Maintenance Reserve Fund, to be held initially by SunTrust Bank, Atlanta, Georgia, as Depository for the account of the Aviation Commission; (4) the Debt Service Fund, to be held initially by SunTrust Bank, Atlanta, Georgia, as Custodian for the account of the Aviation Commission, and therein the following four accounts: (a) Interest Account, with subaccounts therein for each series of Bonds, (b) Contract Payments Account, with subaccounts therein for each series of Bonds, (c) Principal Account, with subaccounts therein for each series of Bonds, and (d) Debt Service Reserve Account, with a subaccount therein for each series of Bonds secured by a lien on Net General Revenues which has a Debt Service Reserve Requirement; provided a subaccount therein may be utilized for more than one series of Bonds if all such series are specified in the related Supplemental Bond Resolutions to share a pledge of such &ccount and have a combined Debt Service Reserve Requirement; (5) the Renewal and Replacement Fund, to be held initially by SunTrust Bank, Atlanta, Georgia, as Depository for the account of the Aviation Commission; (6) the Construction Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission, and therein the Capitalized Interest Account; (7) the Rebate Fund, to be held initially by SunTrust Bank, Atlanta, Georgia, as Depository for the account of the Aviation Commission; (8) the Subordinate Securities Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission; and (9) the Capital Improvement Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission, and therein the following two accounts: (a) Capital Improvement Account, and (b) Revenue Credit Account. With respect to PFC Revenues of the Airport, the Bond Resolution creates and requires the Aviation, Commission, on behalf of the Consolidated Government, to maintain the following funds: I (1) the PFC Revenue Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission; (2) the PFC Debt Service Fund, to be held initially by SunTrust Bank, Atlanta, Georgia, as Custodian for the account of the Aviation Commission, and therein the following four accounts: -15- (a) Interest Account, with subaccounts therein for each series of Bonds, (b) Contract Payments Account, with subaccounts therein for each series of Bonds, (c) Principal Account, with subaccounts therein for each series of Bonds, and (d) PFC Debt Service Reserve Account, with a subaccount for each series of Bonds secured by a lien on PFC Revenues which has a Debt Service Rese(ve Requirement; provided a subaccount therein may be utilized for more than one series of Bonds if all such series are specified in the related Supplemental Bond Resolutions to share a pledge of such account and have a combined Debt Service Reserve Requirement; (3) the PFC Obligations Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission; and (4) the PFC Capital Fund, to be held initially by Smith Barney Corporate Trust Company, Augusta, Georgia, as Depository for the account of the Aviation Commission. Revenue Fund; PFC Revenue Fund; Operation and Maintenance Fund The Bond Resolution requires the Consolidated Government, acting by and through the Aviation Commission, to deposit and continue to deposit all General Revenues in the Revenue Fund from time to time as and when received and to deposit and continue to deposit all PFC Revenues in the PFC Revenue Fund from time to time as and when received. Under the terms of the Bond Resolution, moneys in the Revenue Fund are to be applied from time to time to the following purposes and, prior to the occurrence and continuation of an Event of Default under the Bond Resolution, in the following order of priority subject to the limitations set forth below: (i) to depos~t into the Operation and Maintenance Fund to pay Expenses of Operation and Maintenance; (ii) to deposit into the Debt Service Fund the amounts required for debt service on General Revenue Bonds and for the purpose of making payments under Contracts; (iii) to deposit into the PFC Debt Service Fund the amount of any shortfall in the monthly deposits required for the PFC Revenue Fund; (iv) to deposit into the Rebate Fund the amounts required to make provision for arbitrage rebate payments to the United States government; (v) to deposit into the Operation and Maintenance Reserve Fund the amounts necessary to reserve against any shortfall in funds to pay Expenses of Operation and Maintenance when due; (vi) to pay to any party to a Contract the amounts due thereon, including continuing commission or commitment fees and repayment of amounts equivalent to principal on related Bonds; (vii) to pay in periodic installments any amounts into the Subordinate Securities Fund required to be paid with respect to Subordinate Bonds and Other Airport Obligations in accordance with any related Supplemental Resolution; (viii) to transfer the amounts, if any, required to be paid to the Renewal and Replacement Fund; and (ix) to transfer the balance of the Revenue Fund to the Capital Improvement Fund. Under the terms of the Bond Resolution, moneys in the PFC Revenue Fund are to be applied from time to time to the following purposes and, prior to the occurrence and continuation of an Event of Default under the Bond Resolution, in the following order of priority: (i) to deposit into the PFC Debt Service Fund the amounts required for debt service on PFC Revenue Bonds and for the purpose of making payments under related Contracts; (ii) to deposit into the PFC Obligations Fund the amounts required to pay costs of administering the PFC program and any Expenses of Operation and Maintenance of PFC Facilities eligible to be paid from PFC Revenues; and (iii) to transfer the balance of the PFC Revenue Fund to the PFC Capital Fund to pay Costs of PFC Facilities, the payment of PFC Revenue Bonds and related Contracts. No payments with respect to Other Airport Obligations may be made from General Revenues if such Other Airport Obligations relate to Special Purpose Facilities, and no payments may be made with respect to any Other Airport Obligations unless all required payments have been made to each subaccount with respect to Bonds and on all Contracts; provided if required by the terms thereof, obligations treated as Senior Lien Bonds pursuant to the Bond Resolution will be paid with the other Senior Lien Bonds. If at any time the amounts in any subaccount of the Debt Service Fund are less than the amounts required by; the Bond Resolution, and there are not on deposit in the Capital Improvement Fund available moneys sufficient toi cure any such deficiency, then the Consolidated Government, or the Aviation Commission, on behalf of the i Consolidated Government, will withdraw from the Subordinate Securities Fund and deposit in such subaccount ofl the Debt Service Fund, as the case may be, the amount necessary (or all the moneys in such funds and accounts, if: less than the amount required) to make up such deficiency. With respect to Bonds having a Senior Lien both on Net General Revenues and on PFC Revenues, payments for principal and interest on such Bonds and on Contracts related to such Bonds will be payable first from amounts on deposit in the PFC Debt Service Fund. In the event that amounts on deposit in the appropriate account of the PFC Debt Service Fund are insufficient to make such payments, an amount equal to the insufficiency will be -16- transferred from any fund or account related to General Revenues (other than the Debt Service Reserve Account, the Rebate Fund, or any account or subaccount thereot) and transferred to the PFC .Debt Service Fund. Debt Sef1Jice Fund; PFC Debt Service Fund The Bond Resolution requires that sufficient moneys be paid in periodic installments from (a) the Revenue Fund into the accounts and subaccounts of the Debt Service Fund for the purpose of paying the General Revenue Bonds as they become due and payable and for the purpose of making payments under Contracts, and (b) the PFC Revenue Fund into the accounts and subaccounts within the PFC Debt Service Fund for the purpose of paying the PFC Revenue Bonds as they become due and payable and for the purpose of making payments under related Contracts. The Bond Resolution creates the Series 2005AIB Subaccount of the PFC Debt Service Reserve Account and the Series 2005C Subaccount of the Debt Service Reserve Account. The Debt Service Reserve Requirement for the Series 2005AIB Bonds, and for any series of Bonds hereafter issued pursuant to the Bond Resolution as Additional Bonds with a Senior Lien on Net General Revenues and a Senior Lien on PFC Revenues, is the aggregate sum of, for each such series of Bonds so secured, the lesser of (i) 125 percent of the Average Annual Debt Service Requirement, (ii) the Maximum Annual Debt Service Requirement, and (iii) 10 percent of the stated principal amount. The Debt Service Reserve Requirement for the Series 2005C Bonds, and for any series of Bonds hereafter issued pursuant to the Bond Resolution as Additional Bonds with a Senior Lien on Net General Revenues only, is the aggregate sum of, for each such series of Bonds so secured, the lesser of (i) 125 percent of the Average Annual Debt Service Requirement, (ii) the Maximum Annual Debt Service Requirement, and (iii) ] 0 percent of the stated principal amount. The Series 2005AIB Subaccount of the PFC Debt Service Reserve Account securing the Series 2005AIB Bonds will not secure the Series 2005C Bonds, and the Series 2005C Subaccount of the Debt Service Reserve Account securing the Series 2005C Bonds will not secure the Series 2005AIB Bonds. Any increase in the amount of the Debt Service Reserve Requirement resulting from the issuance of Additional Bonds which also are secured by an existing subaccount of the Debt Service Reserve Account or the PFC Debt Service Reserve Account are required by the Bond Resolution to be funded upon the issuance and delivery of such Additional Bonds. The Bond Resolution requires that the balance of each subaccount of the Debt Service Reserve Account or the PFC Debt Service Reserve Account be maintained at an amount equal to the Debt Service Reserve Requirement for the related Bonds (or such lesser amount that is required upon the failure of the Consolidated Government or the Aviation Commission to provide a substitute Reserve Account Credit Facility in certain events). The Debt Service Reserve Requirement for any Bonds may be satisfied in whole or in part by means of a Reserve Account Credit Facility, subject to restrictions provided in the Bond Resolution. Any such Reserve Account Credit Facility must be pledged to the benefit of the owners of all of the Bonds so secured. The Consolidated Government reserves the right, if it deems it necessary in order to acquire such a Reserve Account Credit Facility, to amend the Bond Resolution without the consent of any of the owners of the Bonds in order to grant to the Reserve Account Credit Facility Provider such additional rights as it may demand, provided that such amendment shall not, in the written opinion of Bond Counsel filed with the Consolidated Government, impair or reduce the security granted to the owners of Bonds or any of them. The Series 2005NB Subaccount of the PFC Debt Service Reserve Account securing the Series 2005NB Bonds will be fully funded upon the issuance of the Series 2005NB Bonds in amount equal to $ * from amounts contributed by the Consolidated Government. The Series 2005C Subaccount of the Debt Service Reserve Account securing the Series 2005C Bonds will be fully funded upon the issuance of the Series 2005AIB Bonds in amount equal to $ * from amounts contributed by the Consolidated Government. Operation and Maintenance Reserve Fund At the time of the issuance and delivery of the Series 2005 Bonds, there will be deposited from funds held by the Aviation Commission an amount equal to the Operating Reserve, which is an amount equal to 60 days' Expenses of Operation and Maintenance. Thereafter, there will be deposited monthly to the Operation and Maintenance Reserve Fund an amount, if any, necessary to maintain a balance equal to the Operating Reserve as estimated by the Airport Finance Officer. Amounts held within the Operation and Maintenance Reserve Fund will be disbursed solely for the purposes of paying Expenses of Operation and Maintenance in the event there is insufficient money in I the Revenue Fund to pay the same when due. Subordinate Securities Fund After all deposits are made as required by the Bond Resolution to the Revenue Fund, the PFC Revenue Fund, ' the Operation and Maintenance Fund, the Debt Service Fund, the Debt Service Reserve Account and the Operation and Maintenance Reserve Account, there will be deposited sufficient moneys to be paid in periodic installments -] 7- from the Revenue Fund into the Subordinate Securities Fund for the purpose of paying Subordinate Bonds and Other Airport Obligations as they become due and payable. Such periodic installments are to be paid into the Subordinate Securities Fund in accordance with the terms of such Other Airport Obligations or as set forth in a Supplemental Resolution. In connection with the issuance of any Subordinate Bonds or Other Airport Obligations, the Aviation Commission may place additional restrictions on the use of funds on deposit in the Subordinate Securities Fund, and may agree that such fund will be a trust fund. Renewal and Replacement Fund At the time of issuance and delivery of the Series 2005 Bonds, there will be deposited from funds held by the A viation Commission the sum of $1,000,000 to the Renewal and Replacement Fund. The Renewal and Replacement Fund must at all times contain a balance of $] ,000,000 or such greater amount as is recommended from time to time by the Airport Consultant (the "Required Amount"). If at any time during a Fiscal Year, moneys on deposit in the Renewal and Replacement Fund are less than the Required Amount, there will be deposited, beginning the first month of the Fiscal Year following the Fiscal Year in which such deficiency occurred and within a period of 12 months thereafter, on the last business day of each month, amounts into the Renewal and Replacement Fund from moneys on deposit in the Revenue Fund, after making the required deposits to the Debt Service Fund and the Subordinate Securities Fund, so that not less than the Required Amount will be on deposit in the Renewal and Replacement Fund. The moneys on deposit in the Renewal and Replacement Fund will be used solely for non-recurring capital costs related to the Airport. Capital Improvement Fund The Bond Resolution requires that moneys transferred into the Capital Improvement Fund be applied to the Capital Improvement Account and to the Revenue Credit Account at the discretion of the Aviation Commission. Moneys in the Revenue Credit Account will be transferred at the beginning of each Fiscal Year to the Revenue Fund and applied for such Fiscal Year as a credit in the calculation of such fees and charges as determined by the Aviation Commission that are related to the Airport. All sums accumulated and retained in the Capital Improvement Account will be used first to prevent default in the payment of interest on or principal of any General Revenue Bonds when due and then will be applied by the Aviation Commission from time to time, to the following purposes and, prior to the occurrence and continuation of an Event of Default, in the order of priority determined by the Aviation Commission in its sole discretion: (a) for the purposes for which moneys held in the Revenue Fund may be applied under the Bond Resolution, (b) to pay any governmental charges and assessments against the Airport or any part thereof which may then be due and owing, (c) to make acquisitions, betterments, extensions, repairs, or replacements or other capital improvements (including the purchase of equipment) to the Airport deemed necessary by the Aviation Commission (including payments under contracts with vendors, suppliers, and contractors for the foregoing purposes), (d) for lawful Airport Purposes and (e) to acquire Senior Lien Bonds by redemption or by purchase in the open market at a price not exceeding the callable prices as provided and in accordance with the terms and conditions of the Bond Resolution, which Senior Lien Bonds may be any of the Senior Lien Bonds, prior to their respective maturities, and when so used for such purposes the moneys will be withdrawn from the Capital Improvement Account and deposited into the related subaccounts of the Interest Account and the Principal Account for the Bonds to be so redeemed or purchased. Construction Fund Moneys in the Construction Fund will be held by such bank as may from time to time be designated by the A viation Commission, and applied to the payment of the Costs of the Project, or for the repayment of advances made for that purpose in accordance with and subject to the provisions and restrictions set forth in the Bond Resolution. The Consolidated Government and the Aviation Commission each covenants that it will not cause or permit to be paid from the Construction Fund any sums except in accordance with such provisions and restrictions; I provided, however, that any moneys in the Construction Fund not presently needed for the payment of current I obligations during the course of construction may be invested in Permitted Investments maturing not later than (i) I the date upon which such moneys will be needed according to a schedule of anticipated payments from the. Construction Fund filed with the Consolidated Government by the Airport Director or, (ii) in the absence of such: schedule, 36 months from the date of purchase, in either case upon written direction of the Aviation Commission.; Any such investments will be held by the Depository, in trust, for the account of the Construction Fund until I maturity or until sold, and at maturity or upon such sale the proceeds received therefrom including accrued interestj and premium, if any, will be immediately deposited by the Depository in the Construction Fund and will be disposed; of in the manner and for the purposes provided in the Bond Resolution. Amounts held in the Capitalized Interest: Account will be transferred to the related Interest Account on or before the 30th day preceding each Interest Payment Date for related Bonds in the amount necessary to pay interest coming due on such Bonds on the next! Interest Payment Date. I -] 8- The gross revenues derived by the Consolidated Government from the,ownership and operation of the Airport may be used only in accordance with the provisions of the Bond Resolution described above and may not be transferred to either the General Fund or any other fund of the Consolidated Government. Rate Covenant Pursuant to the Bond Resolution, the Consolidated Government has covenanted and agreed at all times, acting by and through the Aviation Commission, to prescribe, fix, maintain and collect rates, fees, and other charges for the services and facilities furnished by the Airport to: (i) provide for 100 percent of the Expenses of Operation and Maintenance and for the accumulation in the Operation and Maintenance Reserve Account of the Operating Reserve; and (ii) produce Net General Revenues, together with Other Available Moneys, in each Fiscal Year which will: (a) equal at least 125 percent of the Debt Service Requirement on all General Revenue Bonds then Outstanding for the Sinking Fund year ending on the next January 1 and at least 100 percent of the debt service or other amounts payable on all Subordinate Bonds and, other Airport Obligations payable from Net General Revenues then Outstanding for the year of computation, (b) enable the Aviation Commission to make all required payments, if any, into the Debt Service Reserve Account, the PFC Debt Service Reserve Account, the Rebate Fund, the Renewal and Replacement Fund and on any Contract or Other Airport Obligation, (c) enable the Aviation Commission to accumulate an amount to be held in the Capital Improvement Fund, which in the judgment of the Aviation Commission is adequate to meet the costs of major renewals, replacements, repairs, additions, betterments, and improvements to the Airport, necessary to keep the same in good operating condition or as is required by any governmental agency having jurisdiction over the Airport, and (d) remedy all deficiencies in required payments from the Revenue Fund from prior Fiscal Years. If the Consolidated Government, acting by and through the Aviation Commission, fails to prescribe, fix, maintain, and collect rates, fees, and other charges, or to revise such rates, fees, and other charges, in accordance with the Bond Resolution in any Fiscal Year, but the Aviation Commission, on behalf of the Consolidated Government, in the next Fiscal Year has promptly taken all available measures to revise such rates, fees and other charges after consideration of recommendations from an Airport Consultant, there shall be no Event of Default with respect to any Supplemental Bond Resolution relating to Senior Lien Bonds as described in the Bond Resolution until the end of the second Fiscal Year following such failure to prescribe rates in accordance with the Bond Resolution and only then if Net Revenues are less than the amount required by the Bond Resolution. The rates, fees, and other charges will be classified in a reasonable manner to cover users of the services and facilities furnished by the Airport so that, as nearly as practicable, such rates, fees, and other charges will be uniform in application to all users falling within any reasonable class. The Consolidated Government has covenanted that neither it nor the Aviation Commission will enter into any agreement with a user of the Airport facilities unless such agreement permits the rates, fees and charges to be revised semiannually by the Consolidated Government or by the Aviation Commission, on its behalf, (a) to comply with the requirements described above and (b) in the event of an unusual or extraordinary event resulting in a decline of Revenues by more than ]0 percent, calculated on a budget basis, from the immediately preceding six month period. Parity and Subordinate Bonds Upon satisfaction of certain conditions, the Bond Resolution permits the Consolidated Government, for specified purposes, to issue additional revenue bonds without express limit as to principal amount, which will be equally and ratably secured on a parity basis with the Series 2005 Bonds under the Bond Resolution. See "SUMMARY OF THE BOND RESOLUTION - Additional Bonds" in Appendix C hereto. The Consolidated Government may issue additional parity bonds in the future to finance part of the cost of ongoing capital improvements to the Airport. The issuance of additional parity bonds may, for a period of time, dilute the security for the Series 2005 Bonds. I Upon satisfaction of certain conditions, the Bond Resolution also permits the Consolidated Government to! issue obligations secured by Net General Revenues or PFC Revenues that are junior and subordinate to the Bonds as I to lien and right of payment. In the event Subordinate Lien Bonds are issued with a Subordinate Lien on Net General Revenues, amounts in the Subordinate Securities Fund will be used to pay such Subordinate Lien Bonds, and in the event Subordinate Lien Bonds are issued with a Subordinate Lien on PFC Revenues, payments from the PFC Revenue Fund to the PFC Capital Fund will be suspended and the amounts that otherwise would have been transferred to the PFC Capital Fund may be used to pay such Subordinate Lien Bonds. See "SUMMARY OF THE BOND RESOLUTION - Subordinate Lien Bonds" in Appendix C hereto. - ]9- Limited Obligations The Series 2005 Bonds are special limited obligations of the Consolidated Government payable solely from the Pledged Revenues. The Series 2005 Bonds are not payable from and are not secured by a charge, lien, or encumbrance upon any funds or assets of the Consolidated Government other than the Pledged Revenues and the funds created and held under the Bond Resolution. The Series 2005 Bonds do not and will not constitute a debt or general obligation of the Consolidated . Government or a pledge of the faith and credit or taxing power of the Consolidated Government. No governmental entity, including the Consolidated Government, is obligated to levy any tax for the payment of the Series 2005 Bonds. No recourse may be had against the General Fund of the Consolidated Government for the payment of the Series 2005 Bonds. The pledge of and lien on Pledged Revenues securing the Series 2005 Bonds do not create a legal or equitable pledge, charge, lien, or encumbrance upon any of the Consolidated Government's property or income, receipts, or revenues, except the Pledged Revenues and the amounts on deposit in the funds held under the Bond Resolution. Remedies The Revenue Bond Law provides that the provisions of the Revenue Bond Law and the Bond Resolution constitute a contract between the Consolidated Government and the owners of the Bonds. For a description of the remedies available to owners of the Bonds under the terms of the Bond Resolution upon the occurrence of an Event of Default thereunder, see "SUMMARY OF THE BOND RESOLUTION - Events of Default and Remedies" in Appendix C hereto. In addition to the remedies set forth in the Bond Resolution, the Revenue Bond Law provides that the duties of the Consolidated Government, the Augusta-Richmond County Commission, and the officers of the Consolidated Government under the Revenue Bond Law and the Bond Resolution are enforceable by any owner of the Bonds by mandamus or other appropriate action or proceeding at law or in equity. The Revenue Bond Law also provides that in the event the Consolidated Government defaults in the payment of the principal or interest on any of the Bonds after the same becomes due, whether at maturity or upon call for redemption, and such default continues for a period of 30 days, or in the event the Consolidated Government or the Augusta-Richmond County Commission or the officers, agents, or employees of the Consolidated Government fail or refuse to comply with the essential provisions of the Revenue Bond Law or default in any material respect in the Bond Resolution, any holders of the Bonds shall have the right to apply in an appropriate judicial proceeding to the Superior Court of Richmond County or to any court of competent jurisdiction for the appointment of a receiver of the Airport, whether or not all Bonds have been declared due and payable and whether or not such holder is seeking or has sought to enforce any other right or to exercise any remedy in connection with the Bonds. Upon such application, the Superior Court, if it deems such action necessary for the protection of the bondholders, may appoint and, if the application is made by the holders of 25 percent in principal amount of the Bonds then outstanding, shall appoint a receiver of the Airport. The receiver so appointed under the Revenue Bond Law, directly or by his agents and attorneys, is required under the Revenue Bond Law to forthwith enter into and upon and take possession of the Airport. If the court so directs, the receiver may exclude the Consolidated Government, the Augusta-Richmond County Commission, and the Consolidated Government's officers, agents, and employees, and all persons claiming under them, wholly [rom the Airport. Under the Revenue Bond Law, the receiver will have, hold, use, operate, manage, and control the Airport, in the name of the Consolidated Government or otherwise, as the receiver may deem best. Under the Revenue Bond Law, the receiver will exercise all the rights and powers of the Consolidated Government with respect to the Airport as the Consolidated Government itself might do. The receiver will maintain, restore, insure, and keep insured the Airport and from time to time will make all such necessary or proper repairs, as the receiver may deem expedient. Under the Revenue Bond Law, the receiver will establish, levy, maintain, and collect such fees, tolls, rentals, and other charges in connection with the Airport, as he deems necessary or proper and reasonable. Under the Revenue Bond Law, the receiver will collect and receive all revenues and will deposit the same in a separate account and apply the revenues so collected and received in such manner as the court shall direct. Notwithstanding the provisions of the Revenue Bond Law described above, the receiver has no power to sell, assign, mortgage, or otherwise dispose of any assets of whatever kind or character belonging to the Consolidated Government and useful for the Airport. The authority of any such receiver is limited to the operation and maintenance of the Airport. No court may have jurisdiction to enter any order or decree requiring or permitting the receiver to sell, assign, mortgage, or otherwise dispose of any such assets. The receiver must, in the performance of the powers conferred upon him, act under the direction and supervision of the court making such appointment and will at all times be subject to the orders and decrees of such court and may be removed by such court. -20- Under the terms of the Revenue Bond Law, whenever all that is due upon the Bonds and interest thereon and upon any other notes, bonds, or other obligations and interest thereon having a charge, lien, or encumbrance on the revenues of the Airport and under any of the terms of the Bond Resolution has been paid or deposited as provided therein and whenever all defaults have been cured and made good and it appears to the court that no default is imminent, the court must direct the receiver to surrender possession of the Airport to the Consolidated Government. The same right of the holders of the Bonds to secure the appointment of a receiver exists upon any subsequent default as is provided in the Revenue Bond Law. If the Consolidated Government were to default on the Series 2005 Bonds, the realization of value from the pledge of the Pledged Revenues to secure the payment of the Series 2005 Bonds would depend upon the exercise of various remedies specified by the Bond Resolution and Georgia law (including the Revenue Bond Law). These remedies may require judicial actions, which are often subject to discretion and delay arid which may be difficult to pursue. The enforceability of rights or remedies with respect to the Series 2005 Bonds may be limited by state and federal laws, rulings, and decisions affecting remedies and by bankruptcy, insolvency, or other laws affecting creditors' rights or remedies heretofore or hereafter enacted. Section 36-80-5 of the Official Code of Georgia Annotated provides that no political subdivision created under the Constitution or laws of the State of Georgia shall be authorized to file a petition for relief from payment of its debts as they mature or a petition for composition of its debts under any federal statute providing for such relief or composition or otherwise to take advantage of any federal statute providing for the adjustment of debts of political subdivisions and public agencies and instrumentalities. Section 36-80-5 of the Official Code of Georgia Annotated also provides that no chief executive, mayor, board of commissioners, or other governmental officer, governing body, or organization shall be empowered to cause or authorize the filing by or on behalf of any political subdivision created under the Constitution or laws of the State of Georgia of any petition for relief from payment of its debts as they mature or a petition for composition of its debts under any federal statute providing for such relief or composition or otherwise to take advantage of any federal statute providing for the adjustment of debts of political subdivisions and public agencies and instrumentalities. THE CONSOLIDATED GOVERNMENT Introduction The consolidated government of Augusta-Richmond County is a political subdivision created and existing under the laws of the State of Georgia and presently has as its formal or legal name "Augusta, Georgia." The Consolidated Government was created on January 1, 1996 pursuant to Acts of the General Assembly of the State of Georgia (collectively the "Consolidation Act") which authorized the consolidation of the municipal corporation known as "The City Council of Augusta" and the political subdivision known as "Richmond County, Georgia." The Consolidation Act and the consolidation of the City and the County were separately approved by a majority of the qualified voters of the City and the County at an election held on June 20, 1995. On January 1, 1996, the Consolidated Government became a consolidated city-county government, with territorial limits covering all of what was formerly Richmond County. This geographic area is hereinafter referred to as "Richmond County." The Cities of Blythe and Hephzibah, small communities with populations of approximately 307 and 3,336, respectively, still hold their own municipal charters within the consolidated territory. The relationship between the Consolidated Government and the Cities of Blythe and Hephzibah is similar to that of counties to municipalities located within the territorial limits of such counties. The Consolidated Government is the third consolidated city-county government within the State of Georgia. As such, it has all of the governmental and corporate powers of both municipal corporations and counties under Georgia law. Under the terms of the Consolidation Act, the Augusta-Richmond County Commission may exercise and is subject to all of the rights, powers, duties, and obligations previously applicable to the governing authorities of the City and the County. Consolidation is intended to result in the removal of duplicate services formerly rendered by the City and County governments. As a result of consolidation, the Consolidated Government provides, under one management, public services throughout its territorial limits, which services would have been provided separately by the City and the County. The City was originally chartered in 1789 by the General Assembly of the State of Georgia, making it I Georgia's second oldest city. As a city, the Consolidated Government would rank as the second largest by population in the State of Georgia. The Consolidated Government is located in the central eastern portion of the State of Georgia on the south bank of the Savannah River, which is the Georgia-South Carolina state boundary, approximately ]55 miles east of Atlanta, Georgia and 75 miles southwest of Columbia, South Carolina. Richmond County has a land area of approximately 325 square miles. At its highest point, Richmond County is situated at 520 feet above sea level. Richmond County is located on the Fall Line, which is the natural division of the -2]- Piedmont Plateau and the Coastal Plain of Georgia. Its physical features include rolling slopes in the north, transitioning to more level terrain in the south. Average rainfall is 43 inches per year, and average temperatures range from a high of 91 degrees in the summer to a low of34 degrees in the winter. Consolidated Government Administration and Officials The form of government of the Consolidated Government is the municipal form of government. Under the Consolidation Act, the governing authority of the Consolidated Government is a board of commissioners designated as the Augusta-Richmond County Commission (the "Commission"). The Commission consists of a Mayor and ten commissioners. The members of the Commission serve terms of office of four years and until a successor is elected and qualified. All members of the Commission are full voting members, except for the Mayor, who has the right to vote only to make or break a tie vote on any matter. Under the terms of the Consolidation Act, seven members of the Commission constitute a quorum for the transaction of ordinary business, and an affirmative vote of at least six members is required for the Commission to take action. For the purpose of electing members of the Commission, Richmond County is divided into ten commission districts. Each commissioner is elected by the voters residing within such commissioner's commission district. Commission district 9 encompasses all of commission districts I, 2, 4, and 5. Commission district 10 encompasses all of commission districts 3, 6, 7, and 8. No person will be eligible to serve as a commissioner unless he or she: (1) has been a resident of the commission district from which elected for a period of one year immediately prior to the date of the election, (2) continues to reside within the commission district from which elected during his or her term of office, (3) is a registered and qualified elector of Richmond County, and (4) meets the qualification standards required for members of the Georgia House of Representatives. No person who has served two consecutive full four-year terms of office as commissioner will again be eligible to hold office as commissioner until after the expiration of four years from the conclusion of that person's last term of office as commissioner. The Mayor is the chief executive officer of the Consolidated Government and is elected on a county-wide basis by the voters of the entire county. No person will be eligible to serve as Mayor unless he or she (I) has been a resident of Richmond County for a period of one year immediately prior to the date of the election, (2) continues to reside within Richmond County during his or her term of office, (3) is a registered and qualified elector of Richmond County, and (4) meets the qualification standards required for members of the Georgia House of Representatives. No person who has served two consecutive full four-year terms of office as Mayor will again be eligible to hold office as Mayor until after the expiration of four years from the conclusion of that person's last term of office as Mayor. Under the Consolidation Act, the Mayor presides at all meetings of the Commission, but has no power to veto ordinances, resolutions, or other actions of the Commission. Information concerning the current Mayor and commissioners is set forth below: Name arid Office Held Bob Young, Mayor Betty Beard, District 1 Marion F. Williams, District 2 Barbara Sims, District 3 Richard Colclough, District 4 Bobby G. Hankerson, District 5 Andy Cheek, District 6 Tommy Boyles, District 7 Jimmy Smith, District 8 Williams H. Mays, III, District 9 Don A. Grantham, District 10 Expiration of Term Principal Occupation December 31, 2006 December 31, 2005 December 31, 2007 December 31,2005 December 31, 2007 December 31, 2005 December 31, 2007 December 31, 2005 December 31, 2007 December 3],2005 December 31, 2007 Full-time Mayor Retired Teacher Pastor Volunteer Social Worker Minister Manager Business Owner Retired Business Owner Business Owner Business Owner Frederick L. Russell has been the Interim Administrator of the Consolidated Government since June 2004. From January 2002 until he assumed the Interim Administrator position, Mr. Russell served as the Consolidated Government's Deputy Administrator, Public Safety Portfolio. He attended the FBI National Academy, 150th; Session. Some of the former positions he has held include Deputy Chief, Richmond, Virginia Police Department; : Executive Director, Virginia State Crime Commission; and Chief of Police, City of Bedford, Virginia. Mr. Russell I received a Master of Science degree in Criminal Justice from Nova University and a Bachelor of Science degree from Virginia Tech. , -22- David Persaud has been the Director of Finance of the Consolidated Government since June 3, 2002. Mr. Persaud was the Director of Finance for Chatham County, Georgia from November of 1985 through May of 2002. From August of ] 984 through November of 1985, Mr. Persaud was the Director of Finance of the City of Mount Dora, Florida. From February of 1982 through August of 1984, Mr. Persaud was the accountant for Glynn County, Georgia. Prior to August of 1984, Mr. Persaud was employed in the private sector. Mr. Persaud received a B.S. degree in Business Administration and Accounting from California Coast University and a Masters degree in Public Administration from Savannah State University. He is a Certified Government Financial Manager (CGFM) and has a Chartered Pension Executive (CPE) certification. THE AVIATION COMMISSION Introduction The Consolidated Government by ordinance established the Augusta Aviation Commission to take charge of the Airport. The Aviation Commission manages and operates the Airport for the Consolidated Government. The Aviation Commission is not a legal entity separate and independent of the Consolidated Government but is an agency of the Consolidated Government. The Consolidated Government, in the ordinance establishing the Aviation Commission, authorized the Aviation Commission to enter into contracts with respect to the Airport on behalf of the Consolidated Government, subject to the approval of the Augusta-Richmond County Commission for any contract with a term exceeding one year. The Aviation Commission operates from offices separate from the Consolidated Government's administration building, which are located at the Airport. Aviation Commission Administration and Officials The Aviation Commission consists of twelve members who are appointed for staggered four-year terms of office. In addition, the Mayor of the Commission serves as an ex-officio member of the Aviation Commission. Each of the ten commissioners of the Consolidated Government appoints a member of the Aviation Commission to represent each of the ten commissioner districts of the Consolidated Government. The Richmond County legislative delegation appoints two members of the Aviation Commission. Members of the Aviation Commission are required to be citizens of Richmond County who have had at least ten years of business experience and have manifested some interest in the advancement of aviation. The Aviation Commission holds regular meetings on a monthly basis. Information concerning the current members of the Aviation Commission is set forth below: Expiration Number of Years Principal Name and Office Held' of Term in Office Occupation Cedric J. Johnson, Chaimzan March 3], 2006 6 Banker Bernard Silverstein, Vice Chaimlan March 31, 2006 ]5 Retired Grier C. Bovard March 31,2008 2 Business Owner Venus D. Cain March 31, 2008 I Property Book Officer Christopher A. Cunningham March 31, 2006 2.5 Business Owner Kenneth G. Grisko March 31, 2008 0.5 Retired Military Brad Kyzer, Jr. March 31, 2008 3.5 Insurance Agency Owner Sheila D. Paulk March 3 I, 2006 4 Counselor Joe L. Scott March 31, 2006 7 Richmond County Board of Education Member Earnest G. Smith March 3 I, 2008 4.5 Corporate Consultant Richard Colclough2 Ex Officio nla Social Worker There are currently two vacancies on the Aviation Commission. 2 Mr. Colclough is the designee of the Mayor, who serves as an ex-officio member of the Aviation Commission. Willis M. Boshears. Jr. has been the Airport Director since August 2003 and is responsible for the day-to-day i operations of the Airport. Since 1997, Mr. Boshears has also served as the airport manager for the Daniel Field Airport, the Consolidated Government's general aviation airport. Mr. Boshears served in the United States Air Force from 1967 to 1973 and continued military service in the USAF Reserve until retirement in 1996. From 1974 to 1990, Mr. Boshears was employed by Augusta Aviation Inc., the fixed base operator at Daniel Field Airport, and -23- he served as president of that corporation from 1981 to 1990. Mr. Boshears served as an aviation consultant in the fixed base operator industry from 1990 to 1997. He received a degree in Business Administration from the University of Georgia in 1967. The Airport Director is appointed 'by and serves at the pleasure of the Aviation Commission. Timothy Weegar, A.A.E.,. CPM, has been the Assistant Airport Director since September ]997 and is responsible for capital construction management and Airport operations. From 1991 to 1997, Mr. Weegar was employed by Tallahassee Regional Airport as Operations Manager and then as Superintendent of Airport Operation. From 1985 to 1991, Mr. Weegar was employed by Ocala Regional Airport as Airport Operations Coordinator and then as Airport Operations Manager. Mr. Weegar received a Bachelor of Science degree in Aeronautical Studies from Embry Riddle Aeronautical University in 1985. In 1992, he received accreditation status as a Certified Public Manager (CPM) from the State of Florida, Center for Public Management, at Florida State University. In 1994, he received accreditation status as an Accredited Airport Executive (A.A.E.) from the American Association of Airport Executives. Mr. Weegar also holds a current commercial instrument pilot rating. Tammy Strange, c.P.A., has been the Director of Finance of the Airport since April 2004. Ms. Strange previously served as the Assistant Director of Finance for the Consolidated Government from January 2001 through April 2004. From 1995 through 2000, Ms. Strange 'was an auditor for Baird & Company, LLC, a public accounting firm. Prior to 1995, Ms. Strange was employed by the State of Georgia Department of Human Resources. Ms. Strange received a Bachelor of Science degree in Business Administration and Accounting from Augusta State University in 1995. She is a Certified Public Accountant. THE AIRPORT Introduction The Revenue Bond Law authorizes the Consolidated Government to acquire and operate airports for users within and outside its territorial boundaries. The Airport was established in 194] as a military facility by the U.S. War Department. It was known as the Georgia Aero Flying School and was an aviation school developed to support the United States' military build-up prior to World War II. The City acquired the Airport from the federal government in 1945 and established the Augusta Aviation Commission. The City converted the Airport into a commercial service facility in ]949. The consolidation of the governments of the City and the County vested ownership and operation of the Airport with the Consolidated Government. The Aviation Commission operates the Airport as a department of the Consolidated Government. Airport Facilities General The Airport occupies approximately 1,248 acres of land in the territorial limits of the Consolidated Government and in Aiken County, South Carolina. The Airport is located approximately seven miles south of downtown Augusta. Airfield The major airfield facilities consist of two intersecting air carrier runways of concrete and asphalt construction and associated taxiways. The primary runway is approximately 8,000 feet long and 150 feet wide. The secondary runway is approximately 6,000 feet long and 75 feet wide and is used primarily for crosswind operations. The; runways provide operational facilities to cover varying wind conditions and are connected by a system of taxiways I and aprons. In addition, the primary runway approach is equipped from each direction with high-intensity runway: lighting, centerline lighting, an instrument landing system, a localizer and glide slope indicator, a visual approach i slope indicator, and runway end identified lights, which permit continuous operation under almost all weather I conditions. The boundaries of the Airport provide sufficient clear area for runway approaches to meet the I requirements of the Federal Aviation Administration (the "FAA"). The taxiway system at the Airport consists o( two partial-length taxiways and one full-length taxiway, parallel to the two air carrier runways, and four exit taxiways. -24- Existing Temlinal The existing passenger terminal is an approximately 53,000 square foot facility consisting of three separate buildings. The main building contains passenger ticketing, baggage handling, concessions, public waiting areas, and airport administration. Two buildings to the east of the main building contain gate holding areas, individual security inspection stations, and public restrooms. A landscaped courtyard is located between the main and east buildings. The passenger holding buildings are connected to the main building by an open-air canopy structure. The passenger ticketing lobby and counters are located in the center of the terminal building and contain ]2 ticket agent positions. The terminal has six aircraft gates utilized for passenger loading. The baggage handling system at the terminal consists of two outbound baggage conveyors, the baggage make-up area, and the baggage claim area. There are no curbside check-in facilities. Apron Areas The apron areas are used for aircraft parking and passenger loading and unloading. The Airport aprons are constructed of concrete/asphalt, asphalt, and perforated steel planking ("PSP") tied down with stakes. The apron referred to as the Airline Apron is located east of the passenger terminal building, serves airline and commuter aircraft, and contains approximately 44,500 square yards and six aircraft parking positions corresponding to Gates I through 6. The Air Cargo Apron contains approximately 2,800 square yards. General aviation aircraft use the parking apron south of the terminal building, which contains 86,300 square yards and 38 aircraft tiedown positions, and an approximately 22,300-square-yard apron located south of the control tower. The Helicopter Apron, containing approximately 5,500 square yards, and a PSP apron, containing approximately 40,200 square yards, are used for fixed-wing aircraft when aircraft parking requirements exceed the permanent apron capacity, most notably during the Masters Golf Tournament. Garrett Aviation Services, Inc., the largest commercial business at the Airport, leases three aprons containing approximately 25,000 square yards and exclusively uses a taxilane. Parking Facilities Parking facilities at the Airport currently contain 821 surface public parking spaces: 233 spaces in two short- term and daily lots directly adjacent to the existing terminal building, and 588 spaces in two long-term economy lots. There are approximately 116 rental car readylreturn spaces in the parking lot adjacent to the existing terminal building. Approximately 124 parking spaces for employees are provided in one surface lot. There are several other parking areas adjacent to corporate hangar, fixed base operator, government, and commercial facilities for tenants, their visitors, and employees General A viation Facilities The general aviation facilities include a general aviation terminal building, public and private aircraft parking, two public use hangars, one private hangar, flight training, and vehicle parking. The Fixed Base Operations facility and aviation support businesses in this area provide a wide range of general aviation services, including aircraft fueling, airframe and engine repair, ramp parking and tie downs, ground handling, hangar storage, pilots' lounge, and avionics repair. Airport Support Facilities The Airport support facilities include an FAA traffic control tower, fuel storage facilities, aircraft rescue and fire fighting station, and airport administration, operations, and maintenance facilities. For additional information regarding the Airport's facilities, see "REPORT OF THE AIRPORT CONSULTANT - THE 2005 Project n Existing Airport Facilities" in Appendix B to this Official Statement. Air Trade Area The Airport Consultant defines an Air Trade Area for the Airport that encompasses 15 counties located in Georgia and South Carolina. The Airport Consultant defines a primary Air Trade Area that is comprised of the five counties that constitute the Augusta-Aiken Metropolitan Statistical Area, namely Columbia, McDuffie, and Richmond Counties, Georgia and Aiken and Edgefield Counties, South Carolina. In addition to the primary Air Trade Area, the Airport Consultant defines a secondary Air Trade Area that is comprised of Lincoln, Wilkes, Taliaferro, Warren, Glascock, Jefferson, Burke, and Jenkins Counties, Georgia and Barnwell and McCormick Counties, South Carolina. The population of the primary air trade area was 488,538 in 2003, the per capita effective buying income of the primary air trade area was $15,957 in 2002, and the unemployment rate for the primary air trade area was 5.0% in 2003. For detailed demographic and economic information for the air trade area, see "REPORT OF THE -25- AIRPORT CONSULTANT - ECONOMIC BASE FOR AIR TRANSPORTATION" in Appendix B to this Official Statement. Competition The Airport's primary competItion comes from the Hartsfield-Jackson Atlanta International Airport, the Columbia Metropolitan Airport, and, to a lesser extent, the Charleston International Airport and the Savannah/Hilton Head International Airport. The Hartsfield-Jackson Atlanta International Airport is the nearest large hub airport and is an approximately 2.75 hour drive from the Airport. The Columbia Metropolitan Airport is an approximately 1.25 hour drive from the Airport. The Charleston International Airport and the Savannah/Hilton Head International Airport are an approximately 2.75 hour drive and 2.00 hour drive, respectively, from the Airport. The competition from these airports arises primarily from airfares, which can be lower on some but not all flights at the competing airports. For a discussion of passenger diversion from the Airport to nearby competing airports, see "REPORT OF THE AIRPORT CONSULTANT - AIR TRAFFIC -- Historical Passenger Activity" in Appendix B to this Official Statement. Airlines Providing Service The Airport is an origin and destination airport. Atlantic Southeast, a wholly-owned subsidiary of Delta Airlines, and US Airways Express, each a regional/commuter airline, presently provide scheduled passenger service at the Airport. As of October 31, 2004, Continental Express ceased operations at the Airport. For more detailed information regarding the airlines providing service at the Airport, see "INVESTMENT CONSIDERATIONS _ Importance of Delta and US Airways at the Airport" herein and "REPORT OF THE AIRPORT CONSUL TANT - AIR TRAFFIC n Airlines Serving the Airport" in Appendix B to this Official Statement. A vailability of Information Concerning Individual Airlines Certain of the airlines (or their respective parent corporations) are subject to the information reporting requirements of the Securities Exchange Act of ]934, and, in accordance therewith, file reports and other information with the Securities and Exchange Commission (the "SEC"). Certain information, including financial information, concerning such airlines (or their respective parent corporations) is disclosed in reports and statements filed with the SEe. Such reports and statements can be inspected and copies obtained at prescribed rates at the SEC's principal offices at 450 Fifth Street, N.W., Washington, D.e. 20549, and should be available for inspection and copying at the SEC's regional offices located at 233 Broadway, New York, New York 10279, and 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC maintains a website at www.sec.gov containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEe. In addition, each domestic airline is required to file periodic reports of financial and operating statistics with the U.S. Department of Transportation (the "DOT"). Such reports can be inspected at the Office of Aviation Information Management, Data Requirements and Public Reports Division, Research and Special Programs Administration, Department of Transportation, 400 7th Street, S.W., Washington, D.e. 20590, and copies of such reports can be obtained from the DOT at prescribed rates. Neither the Consolidated Government nor the Underwriter undertake any responsibility for or make any representation as to the accuracy or completeness of (i) any reports and statements filed with the SEC or the DOT, or (ii) any material contained on the SEC's website as described in the preceding paragraph, including, but not limited to, updates of information on the SEC's website or links to other internet sites accessed through the SEC's website. Airlines owned by foreign governments or foreign corporations operating airlines (unless such foreign airlines have American Depository Receipts registered on a national exchange) are not required to file information with the SEe. Airlines owned by foreign governments or foreign corporations file limited information only with the DOT. A viation Activity The Airport is classified by the FAA as a non-hub airport. In 2003, there were ]62,946 commercial airline enplanements, ] 1,470 commercial aircraft operations with a total landed weight of approximately 273,140,000 pounds, 23,872 operations of general aviation aircraft, and 4,474 operations of military aircraft at the Airport. In 2003, Atlantic Southeast accounted for 65% of commercial airline enplanements, Continental Express accounted for 17% of commercial airline enplanements, and US Airways Express accounted for 16% of commercial airline' enplanements. For detailed historical and forecasted information concerning aviation activity at the Airport, see "REPORT OF THE AIRPORT CONSULTANT - AIR TRAFFIC" in Appendix B to this Official Statement. -26- Origin and Destination Information The Airport serves primarily short- to medium-haul origin and destination markets, with an average stage length (i.e., passenger trip distance) of 1,0]6 miles in 2003. The Airport's average stage lengths reflect the Airport's geographical location and strong local demand for major eastern (i.e., New York, Washington, and Boston), midwestern (i.e., Chicago), and western (i.e., Dallas, Las Vegas, and Los Angeles) markets. As of November 2004, daily nonstop service from the Airport is provided to two cities with a total of 16 daily flights, including nine daily nonstop flights to Atlanta and seven daily nonstop flights to Charlotte. For detailed origin and destination information concerning the Airport, see "REPORT OF THE AIRPORT CONSULTANT - AIR TRAFFIC-- Historical Air Service" in Appendix B to this Official Statement. Airline and Other Revenue Sources General The Aviation Commission has entered into, and receives payments under, agreements and informal arrangements with airlines and other parties, including lease and use agreements relating to landing fees and the leasing of space in the terminal building at the Airport, other building and miscellaneous leases relating to the leasing of hangar facilities at the Airport, concession agreements relating to the sale of goods and services at the Airport, and parking and car rental agreements. In addition, the Aviation Commission conducts limited fixed base operations at the Airport that generate approximately half of the Airport's non-airline revenues. The Aviation Commission has allowed most of its contracts with the airlines and other Airport users to expire in anticipation of constructing the new terminal facility. The Aviation Commission plans to negotiate new contracts with the airlines and other Airport users after the date of beneficial occupancy of the new terminal facility. Airline Agreements The Aviation Commission has allowed most of its agreements with Atlantic Southeast and US Airways Express to expire and is in the process of negotiating a new airline agreement with each airline that will become effective upon the date of beneficial occupancy of the new terminal facility for a term of five years. On November 3, 2004, the Augusta-Richmond County Commission adopted an ordinance (the "Rate Ordinance") requiring the A viation Commission to establish rates, rents, fees, and other charges for airlines that do not have operating agreements with the Consolidated Government. The Rate Ordinance provides that until the date of beneficial occupancy of the new terminal facility the rental rate for space in the existing terminal facility leased for an airline's exclusive use and preferential and nonexclusive use will be $30 per square foot per year, subject to annual adjustment for increased operating costs. The Rate Ordinance also provides that until the date of beneficial occupancy of the new terminal facility the landing fee rate will be $1.50 per 1,000 pounds of each aircraft's certificated maximum landing weight, subject to annual adjustment for increased operating costs. The Aviation Commission expects to negotiate the rates, rents, fees, and other charges in the new airline agreements to be the same as those set forth in the Rate Ordinance. The Rate Ordinance establishes seven direct cost centers to account for Airport revenues and expenses and to calculate and adjust rents and fees, as follows: . (1) Airfield Area - The Airfield Area cost center means those areas of the Airport that provide for landing and takeoff, taxiing, parking, or other aircraft operations on the ground. (2) Apron Area - The Apron Area cost center means the area dedicated to parking and ground handling of aircraft at the terminal building. (3) Aviation Services - The Aviation Services cost center means aircraft fueling activities, facilities, and equipment and facilities and equipment that serve general aviation activity. (4) Loading Bridges - The Loading Bridges cost center means loading bridges serving aircraft at the i terminal building. (5) Terminal Area - The Terminal Area cost center means the access road and parking areas: surrounding the terminal building. I (6) Terminal Building - The Terminal Building cost center means the terminal building and related; signage, landscaping, and curbside areas. I -27- (7) Other Buildings and Areas - The Other Buildings and Areas cost center means those portions of the Airport not included in the preceding cost centers. Under the Rate Ordinance, the terminal building rental for an airline is payable monthly to the Aviation Commission based on the terminal building rental rate for the fiscal year and the amount of square feet of the terminal building allocated to the airline. Terminal building costs for a fiscal year are calculated by totaling budgeted direct and indirect operation and maintenance expenses allocable to the terminal building, an amount equal to 1.25 times the budgeted debt service allocable to the terminal building (reduced by PFC revenues available to pay such debt service), budgeted deposits to funds required by the Bond Resolution and other budgeted Airport expenses that are allocable to the terminal building, and any adjustments due to actual terminal building costs that differ from budgeted terminal building costs for the prior fiscal year. The budgeted terminal building cost for the fiscal year is then divided by the total square footage in the terminal building, less mechanical and utility space, to determine an average rental rate per square foot. Terminal building rentals for space devoted to the exclusive use of an airline are calculated by multiplying the annual rental rate by the amount of square feet of the terminal allocated for the exclusive use of the airline. Rentals for joint use space are prorated among the airlines according to a formula that prorates the cost of the space on the basis of each airline's share of total enplaned passengers. Under the Rate Ordinance, the apron area rental for an airline is payable monthly to the Aviation Commission based on the apron area rental rate for the fiscal year and the number of aircraft gates assigned to the airline. Apron area costs for a fiscal year are calculated by totaling budgeted operation and maintenance expenses allocable to the apron area, an amount equal to 1.25 times the budgeted debt service allocable to the apron area (reduced by PFC revenues available to pay such debt service), budgeted deposits to funds required by the Bond Resolution and other budgeted Airport expenses that are allocable to the apron area, and any adjustments due to actual apron area costs that differ from budgeted apron area costs for the prior fiscal year. The budgeted apron area cost for the fiscal year is then divided by the total number of aircraft gates in the terminal building to determine a rental rate per aircraft gate. An airline's apron area rental is calculated by multiplying the annual rental rate by the number of aircraft gates assigned to the airline. Under the Rate Ordinance, the loading bridge use fee for an airline is payable monthly to the Aviation Commission based on the loading bridge use fee rate for the fiscal year and the number of loading bridges assigned to the airline. Loading bridge costs for a fiscal year are calculated by totaling budgeted operation and maintenance expenses allocable to the loading bridges, an amount equal to 1.25 times the budgeted debt service allocable to the loading bridges (reduced by PFC revenues available to pay such debt service), budgeted deposits to funds required by the Bond Resolution and other budgeted Airport expenses that are allocable to the loading bridges, and any adjustments due to actual loading bridge costs that differ from budgeted loading bridge costs for the prior fiscal year. The budgeted loading bridge cost for the fiscal year is then divided by the total number of loading bridges to determine a use fee rate per loading bridge. An airline's loading bridge use fees are calculated by multiplying the annual use fee rate by the number of loading bridges assigned to the airline. Under the Rate Ordinance, the landing fee for an airline is payable monthly to the Aviation Commission and is equal to the airline's total certificated maximum landed weight for the month multiplied by the landing fee rate then in effect. The landing fee rate for a fiscal year is calculated by dividing a landing fee requirement with respect to Airport costs by the estimated total certificated maximum landed weight of all airlines for the fiscal year. Airport costs for a fiscal year are calculated by totaling direct and indirect budgeted operation and maintenance expenses of the Airport, budgeted annual debt service plus coverage required by the Bond Resolution, budgeted deposits to funds required by the Bond Resolution, 50% of net revenues budgeted for the aviation services cost center, budgeted other Airport expenses, and any adjustments due to actual revenues or expenses that differ from budgeted revenues or expenses for the prior fiscal year. The landing fee requirement is calculated by subtracting from the total Airport expense described above (I) the total budgeted unrestricted Airport revenue (including terminal building and apron area rentals and loading bridge use fees, but excluding landing fees) and (2) other available funds, including funded coverage from the prior fiscal year. While Airport management has already discussed its proposed rate implementation strategy with the airlines, in the event that the Aviation Commission and the airlines cannot reach a formal agreement on a new airline rate- making methodology or the timing of its introduction, the airlines could, potentially, challenge the reasonableness of the Consolidated Government's revised airline rate-making methodology under the DOT's rates and charges review process. Non-Airline Revenue Sources Major sources of non-airline revenues include terminal building concessions, public automobile parking, automobile rentals, company privilege fees and space rentals, building and ground rentals and revenues generated from fixed base operations. It is the policy of the Aviation Commission to periodically competitively select, through a public bid process, concessionaires and providers of non-airline services at the Airport. -28- Fixed Base Overations. The Aviation Commission conducts limited fixed base operations at the Airport, selling fuel and providing limited ramp services. The level of profit margins on fuel sales varies by type of customer, with the largest margins on fuel sold to general aviation and lower margins on fuel sold to airlines. For the period January 1 through October 31, 2004, the collecti ve profit margin was 36 percent of fuel sales. Temzinal Bllildin~ Concession ARreements. Presently, pursuant to informal arrangements, food and beverage operators pay the Aviation Commission 5% of gross sales for bar sales, and a coffee cart operator pays the Aviation Commission 12.5% of gross sales for beverages and snacks. In the new terminal building, the Aviation Commission expects to provide food and beverage services either itself or through a concessionaire. The Aviation Commission also expects concessions in the new terminal building to include news, gift, and travelers necessity items. The Aviation Commission expects to realize revenues equal to approximately $0.20 per enplaned passenger from concessions in the new terminal building. Public ParkinR Af!reements. The daily parking rates are $8.00 in the short-term lot and $6.00 in the long-term lot. Parking management services are provided at the Airport by RepubliclPayne Parking System. The company provides complete turnkey maintenance and operation of all Airport parking facilities. Compensation under the contract is an annual fixed management fee of $27,000. The current contract expires on December 31, 2004 and permits the Aviation Commission to renew the contract for two additional one year renewal terms. It is the policy of the Aviation Commission to periodically re-bid this management contract based upon contemporary airport industry practices. Rental Car A~reements. The rental car agreements at the Airport have expired, and upon completion of the new tenrunal building the Aviation Commission expects to re-bid the rental car concession privilege based upon contemporary airport industry practices. The Aviation Commission currently operates under informal non-exclusive concession arrangements for on-airport automobile rental operations with A vis, Budget, Enterp~ise, Hertz, and National. Rental car companies currently pay an amount equal to the greater of 10% of their gross-revenues or a minimum annual guarantee. In addition, rental car companies operating at the Airport are required to rent, at prevailing rental rates, office space and automobile ready/return parking spaces. Miscellaneous ARreements. The Aviation Commission collects building and ground rentals from various Airport properties, which are rented to third parties (including properties for hangars, cargo facilities, and industrial and commercial purposes). Employees, Employee Relations, and Labor Organizations The Consolidated Government employed 73 persons related to the Airport as of September 30, 2004, all of which are full-time employees. No employees of the Consolidated Government related to the Airport are represented by labor organizations or are covered by collective bargaining agreements, and the Consolidated Government is not aware of any union organizing efforts at the present time. The Airport Director believes that employee relations are good. AIRPORT FINANCIAL INFORMATION Accounting System and Policies The Consolidated Government maintains all of its funds and accounts relating to the Airport separate from other Consolidated Government funds. The accounting practices and policies of the Consolidated Government relating to the Airport conform to generally accepted accounting principles as applied to governments. The Airport is accounted for as an Enterprise Fund of the Consolidated Government. Enterprise Funds are used to account for operations (i) that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or (ii) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and net income is appropriate; for capital maintenance, public policy, management control, accountability, or other purposes. The Airport is accounted for using the accrual basis of accounting. Its revenues are recognized when earned, and its expenses are I recognized when incurred. ' Financial statements of the Airport beginning with the fiscal year ended December 3], 2002 meet the Governmental Accounting Standards Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments ("GASB 34"). -29- Note 1 of the audited financial statements of the Airport included as part of Appendix A contains a detailed discussion of the Consolidated Government's significant accounting policies relating to the Airport. Historical and Pro Forma Capital Structure Set forth below is an historical, comparative summary of the capital structure of the Airport as of the end of its past five fiscal years and as of October 31, 2004. The information in the following table has been extracted from audited financial statements of the Airport for the years ended December 31, 1999 to 2003 and from unaudited interim financial statements of the Airport for the ten-month period ended October 31, 2004. Although the information for the past five fiscal years was taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the capital structure of the Airport as of the end of the years shown. The unaudited interim amounts reflected below are not necessarily indicative of the amounts that will be outstanding as of the end of the full fiscal year. For more complete information, reference is made to the financial statements from which this information was extracted, copies of which are available from the Aviation Commission upon request. Historical Capital Structure of the Airport Amount Amount Outstanding as of December 31 (Audited) Outstanding as of October 3 I, 2004 1999' 20001 2001' 2002 2003 (Unaudited) Current Liabilities: $' - Accounts and Other Payables 152,188 $ 199,489 $ 1,439,878 $ 943,770 $ 675,191 Accrued Salaries and Vacation 132,165 68,466 166,705 176,893 186,943 Due to Other Funds I ,468.770 1.82L153 700,470 1.904.261 I ,663.879 Total Current Liabilities Payable from Unrestricted Assets 1.753.123 2.089.108 2.307.053 3.024.924 2.526.013 Current Liabilities Payable from Restricted Assets: Accrued Revenue Bond Interest 4,662 3,472 2,207 943 Revenue bonds payable - current 80.000 85.000 85.000 Total Current Liabilities 1.837.785 2.177 .580 2.394.260 3,025.867 2.526.013 Long Term Liabilities Revenue Bonds Payable 170.000 85.000 Total Liabilities 2.007.785 2.262.580 2.394.260 3.025.867 2.526.013 Net Assets Invested in Capital Assets, Net of Related Debt 23,753,219 23.214,782 22,025,656 23,961,113 22,939.560 Restricted Net Assets 336,687 255,152 167,864 81,367 2,495,807 Unrestricted Net Assets 7.745,168 9.998.855 10.248.751 11.378.059 11.707,488 Total Net Assets 31.835.074 33,468.789 32.442.271 35.420.539 37.142.855 Total Liabilities and Net Assets $33.842.859 $35.731.369 $34.836.531 $38.446.406 $39.668.868 Ratio of Long-Term Liabilities to Net Assets Q.5..3. % J1..25. % nla nla nla nla Long- Term Liabilities as a Percentage of Total Capitalization ~% Q.M% nla nla nla nla Information shown for 1999,2000, and 2001 has been restated to conform to the GASB 34 reporting format. -30- Set forth below is the pro forma capital structure of the Airport as of October 31, 2004, determined by the application of pro forma adjustments to the actual amounts outstanding as of October 31, 2004, which assume that the Series 2005 Bonds were issued on October 31, 2004. Pro Forma Capital Structure of the Airport Current Liabilities: Accounts and Other Payables Accrued Salaries and Vacation Due to Other Funds Total Current Liabilities Payable from Unrestricted Assets Current Liabilities Payable from Restricted Assets: Accrued Revenue Bond Interest Revenue bonds payable - current Total Current Liabilities Amount Outstanding as of October 31,2004 (Unaudited) 1.227,535 Long Term Liabilities Revenue Bonds Payable Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted Net Assets Unrestricted Net Assets Total Net Assets Total Liabilities and Net Assets Ratio of Long- Term Liabilities to Net Assets Long- Term Liabilities as a Percentage of Total Capitalization 2] ,990,000* The Consolidated Government has no present plans to issue additional revenue bonds secured by revenues of the Airport in the next five years. There has never been a default in payment of the principal of or interest on any revenue bonds of the Consolidated Government, the City, or the County secured by revenues of the Airport. -31- of For for the years shown below. requirements with respect to the Series 2005 Bonds maturity or mandatory redemption amount is used. nterest payment the relevant Debt Service Requirements Following are the principal and calculating the principal payable in any year, purposes Series 2005C Bonds. - - Tolal Combined Total Debt Service Debt Service Princinal Interest Requiremems Requirement~. Total Debt Service Requirement~ Series 2005B Bonds. Interest Series 2005A Bonds. - - Total Debt Service Princinal Interest Requirements Year Ending ~ Princinal 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -32- Totals Five Year Operating History Set forth below is an historical, comparative summary of the revenues and expenses of the Airport for its past five fiscal years and for the ten-month periods ended October 31, 2003 and 2004. The information in the following table has been extracted from audited financial statements of the Airport for the years ended December 31, ] 999 to 2003 and from unaudited interim financial statements of the Airport for the ten-month periods ended October 31, 2003 and 2004. Although the information for the past five fiscal years was taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the results of operations of the Airport for the periods shown. The interim amounts set forth below have been prepared by the staff of the Airport without audit and, in the opinion of staff of the Airport, include all adjustments necessary for a fair statement of the operating results of the Airport for such interim periods, all of which adjustments are of a normal recurring nature. The intt:rim amounts reflected below are not necessarily indicative of the financial results that will be achieved for the full fiscal year. For more complete information, reference is made to the financial statements from which this information was extracted, copies of which are available from the Aviation Commission upon request. [Remainder of Page Intentionally Left Blank] -33- Summary of Airport Revenues and Expenses Ten-Month Periods Years Ended December 31 (Audited) Ended October 31 (Unaudited) 1999' 20001 2001' 2002 2003 2003 2004 Operating Revenue: Landing Fees $ 245,344 $ 384,578 $ 297,423 $ 335.666 $ 337,477 Terminal Area Rental 458.732 619.473 557,679 532,264 529.350 Security Reimbursements 163,107 196,192 209,343 502.586 486,237 Federal Operating Grant Revenue 112.743 Apron Charges 171,640 167,029 162,022 187,706 200,449 FBO Revenue 192,445 1 02,723 34,806 44.393 38,984 Fuel Sales 4,576,595 5,778.490 5,554,014 6,001,162 6,654,172 Other Aeronautical 58,860 41,392 57,124 2,198 7.969 Land and Non-Terminal Fees 518.842 516,823 553,794 604,382 781,309 Terminal Food and Beverage 32.004 2,035 16,761 22.652 26.449 Terminal Other 9.232 7,614 7,012 5;123 12.376 Rental Cars 1,047,033 998,330 931,269 872,625 870.617 Parking 693.034 674,725 522.810 730,366 848,196 Non-Aeronautical 2.541 1.433 5.939 11.767 19.765 Total Operating Revenue 8.169.409 9.490.837 8.909.996 9.852.890 10,926.093 Operating E~nse: Personnel ompensation and Benefits 2,471,338 2,608,748 2,927,966 2,920,546 3,010,140 Communications and Utilities 292,041 292,282 326.864 365,940 396,888 Repairs and Maintenance 193,168 196.689 197,672 227,104 159,273 FBO Expens~ 45.465 53.454 49,937 33,359 45.540 Fuel Expense- 2,249,790 3,508.215 3,134,127 3,096.007 4,398,235 Non-Aeronautical Expense 26,442 Contractual Services 314,255 584,828 554,637 523,708 442,001 Insurance 47,911 51,684 116,280 215,297 210,863 Supplies and Material 102,377 107.877 93,380 95,673 101.554 Depreciation 943, III 1,000,328 1,183,701 1 ,040,292 1,555.972 Miscellaneous Expense 132,030 131,869 136,900 136,900 348,180 Other Expense 221.897 530.977 832.948 796.319 568.919 Total Operating Expense 7.013.383 9.066,951 9.580.854 9.451.145 11.237.565 Operating Income (Loss) 1.156.026 423,886 (670.858) 401.745 (311.472) Non-Operating Revenues (Expenses) Federal Capital Grant Revenue 750,457 352,431 1,897,978 2,109,549 1,236,414 Passenger Facility Charges 596,651 534,747 580,982 670,629 Interest Income 254,115 233,346 562.130 326,812 173,169 Miscellaneous Income - Contributions and Donations 311,324 Miscellaneous Income - Events 425,030 326,760 9.474 Master Plan and Program Expenses (47.003) (1.221.842) (293.979) (355.435) Miscellaneous Expense - Events (289,321) (19,089) (422,337) (38.500) Miscellaneous Income (Expense) Net 160 Interest Expense (]S.842) 01.305) (6.322) 0.264) (23 .287) Net Non-Operating Revenue 988.890 1.259 .829 1.747.602 2.626.523 1.938.788 Net Income Before Transfers 2,144,916 1,683,715 1,076,744 3,028,268 1,672.316 Transfers (n 100,000 Transfers Out (30.000) (50.000) (44.000) (50.000) (50.000) Change in Net Assets 2,114,916 1,633,715 1.032,744 2.978,268 1,722.316 Total Net Assets at Beginning of Year 29,720,158 31,835,074 33,468,789 32.442.271 35,420,539 Prior Period Adjustment (2.059.262) Total Net Assets at End of Year $31835074 $33 468 789 $12442 271 $35420 539 $17 142855 Information shown for 1999,2000, and 2001 has been restated to conform to the GASB 34 reporting format. 2 Represents cost of fuel sold. -34- Management's Discussion and Analysis of Results of Operations The Airport's total operating revenue increased from approximately $8.2 million in 1999 to approximately $9.5 million in 2000, then decreased to approximately $8.9 million in 2001, then increased to approximately $9.9 million in 2002 and to approximately $11.0 million in 2003. Over the five-year period, the average annual increase was approximately 7.5%. From 1999 through 2003, the Airport's four largest sources of operating revenue were fuel sales, rental car revenue, parking fees, and land and non-terminal fees. Fuel sales represented the largest source of operating revenue, generating approximately 60.3% of total operating revenue during the five-year period. Due to variations in fuel prices and volumes of fuel sold, profit margins from fuel sales (after subtracting cost of fuel sold) regularly fluctuated from 1999 through 2002, ranging from 39% to 50%. In 2003, Airport management implemented weekly pricing adjustments. As a result, profit margins remained relatively stable during 2003 and through October 31, 2004, varying from 34% to 36%. From 1999 through 2003, rental car revenue represented the second largest source of operating revenue, generating approximately 10.0% of total operating revenue. Over the five-year period, rental car revenue decreased on average by approximately 4% per year, mirroring the Airport's decline in passenger activity during the same period. Revenue from parking fees represented the third largest source of operating revenue from 1999 through 2003, generating approximately 7.3% of total operating revenue. Parking revenue is generated from fees charged for short-term, long-term, and credit card parking activity. Parking lot areas were operated on a 60/40 revenue split between the Airport and the parking lot operator until December 31, 2001. On January I, 2002, the Airport changed from a contract perce!ltage split to a management contract with an annual management fee, and, during May 2003, parking lot rates were-increased. From 1999 through 2001, revenue from parking fees decreased on average by approximately 9% per year, mirroring the Airport's decline in passenger activity during the same period. During 2002 and 2003, as a result of the change in fee structure and increase in rates, revenue from parking fees increased on average by approximately 28% per year. From 1999 through 2003, revenue from land and non-terminal fees represented the fourth largest source of operating revenue, generating approximately 6.3% of total operating revenue. Revenue from land and non-terminal fees during this period consisted primarily of charter landing fees, general aviation fees, and hangar rentals. This revenue source remained relatively stable from 1999 through 2002. In 2003, revenue from land and non-terminal fees increased by 30% as compared to 2002. This increase resulted from (1) the implementation of new general aviation landing fees and (2) rental revenue on a new engine testing facility completed in 2002 and leased to Garrett A viation Services, Inc. The Airport's total operating expense increased from approximately $7.0 million in ]999 to approximately $9.] million in 2000 and to approximately $9.6 million in 2001, then decreased to approximately $9.5 million in 2002, then increased to approximately $11.2 million in 2003. Over the five-year period, the average annual increase in total operating expense was approximately ]2.5%. Most of the increase in total operating expense was due to increased fuel expense, which increased on average by approximately] 8% per year over the five-year period. In addition, personnel compensation and benefits expense increased on average by approximately 5% per year over the five-year period. During this period, the Airport undertook labor restructuring measures, including workforce reductions and outsourcing, intended to reduce labor costs in order to offset escalating health insurance premiums and increased staffing needed to address security concerns. From 1999 through 2002, depreciation expense remained relatively constant; however, depreciation expense increased by approximately 50% in 2003 as compared to 2002. The increase in 2003 resulted primarily from the implementation of a 4-year accelerated depreciation schedule for a temporary holding room constructed and equipment purchased as an incentive package for Continental Express. As of October 31, 2004, Continental Express ceased operations at the Airport. See "THE AIRPORT. Airlines Providing Service" herein. -35- Forecasted Debt Service Coverage Ratios The Consolidated Government has retained Ricondo & Associates, Inc., Cincinnati, Ohio, the Consolidated Government's airport consultant, to prepare a financial forecast of the Airport's Pledged Revenues available for debt service, for a period of 9 years commencing with fiscal year 2004, based upon assumptions and estimates concerning future events and circumstances that the Consolidated Government believes to be reasonable. The Consolidated Government's financial forecast has been examined and reported on by Ricondo & Associates, Inc. The forecasted Debt Service Coverage Ratios set forth below are derived from the financial forecast included as part of Appendix B to this Official Statement, the Report of the Airport Consultant. THE FINANCIAL FORECAST IS BASED SOLEL Y UPON ASSUMPTIONS MADE BY THE CONSOLIDATED GOVERNMENT, INCLUDING, WITHOUT LIMITATION, ASSUMPTIONS AS TO REVENUES AND OPERATING EXPENSES. THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH SUCH ASSUMPTIONS, THAT UNCONTROLLABLE FACTORS WILL NOT AFFECT SUCH ASSUMPTIONS, OR THAT THE FORECASTED RESULTS WILL BE ACHIEVED. THE ACHIEVEMENT OF THE FINANCIAL FORECAST WILL BE AFFECTED BY ECONOMIC CONDITIONS AND OTHER UNCONTROLLABLE FACTORS AND IS DEPENDENT UPON THE OCCURRENCE OF FUTURE EVENTS THAT CANNOT BE ASSURED. THUS, THE ACTUAL RESULTS ACHIEVED MAY VARY FROM THOSE FORECAST, AND SUCH VARIATIONS COULD HAVE AN ADVERSE EFFECT UPON THE AIRPORT'S PLEDGED REVENUES A V AILABLE FOR DEBT SERVICE. THE ASSUMPTIONS AND RATIONALE INCLUDED IN THE REPORT OF THE AIRPORT CONSULTANT ARE AN INTEGRAL PART OF THE FORECAST. THE REPORT OF THE AIRPORT CONSULTANT, INCLUDING ALL COMMENTS, ASSUMPTIONS, NOTES, AND DISCLAIMERS, SHOULD BE READ IN ITS ENTIRETY. See "REPORT OF THE AIRPORT CONSULTANT" in Appendix B to this Official Statement. Forecasted Debt Service Coverage Ratios Forecasted Net Revenues Available for Debt Service1 Maximum Annual Debt Service on Revenue Bonds Forecasted Debt Service Coverage Ratio 2005 Years Ending December 31 2006 2007 2008 2009 Operating Budget The Consolidated Government is not legally required under Georgia law to adopt a budget for the Airport. The Consolidated Government, however, has covenanted in the Bond Resolution to adopt an annual budget for the Airport for each fiscal year, and the staff of the Airport prepares an annual operating budget for the Airport for management control purposes. The staff of the Airport uses the accrual basis of accounting in its annual operating budget for the Airport, which is consistent with the basis of accounting used in the Airport's financial statements. Set forth below is a summary of the Airport's budget for the year ending December 31,2005. This budget is based upon certain assumptions and estimates of the staff of the Airport regarding future events, transactions, and circumstances. Realization of the results projected in this budget will depend upon implementation by management of the Airport of policies and procedures consistent with the assumptions. There can be no assurance that actual events will correspond with such assumptions, that uncontrollable factors will not affect such assumptions, or that the projected results will be achieved. Accordingly, the actual results achieved could materially vary from those projected in the budget set forth below. -36- Airport Budget for Year Ending December 31, 2005 Operating Revenue: Landing Fees Terminal Area Rental Security Reimbursements Apron Charges FBO Revenue Fuel Sales Land and Non-Terminal Fees Terminal Food and Beverage Terminal Other Rental Cars Parking Non-Aeronautical Total Operating Revenue $ 371,000 550,000 475,100 230,000 42,000 8,215,250 588,910 22,000 ] ] ,500 894,200 8 11 ,400 10.920 12,222.280 Operating Expense: Personnel Compensation and Benefits Communications and Utilities Repairs and Maintenance FBO Expense Fuel Expensel Insurance Supplies and Material Depreciation Miscellaneous Expense Other Expense Total Operating Expense Operating Income (Loss) 3,294,320 422,600 207,000 62,390 5,479,520 250,830 253,210 1,500,000 262,040 409,450 12,141,360 80,920 Non-Operating Revenues (Expenses) Federal Capital Grant Revenue Passenger Facility Charges Interest Income Miscellaneous Expense - Events Net Non-Operating Revenue Net Income Before Transfers Transfers In Transfers Out Change in Net Assets Total Net Assets at Beginning of Year Total Net Assets at End of Year 2,300,000 871,200 200,000 18.500 3.389,700 3,470,620 3,470,620 42.867.699 $46.338.319 Represents cost of fuel sold. -37- Capital Improvements Program The following table summarizes the estimated value of capital improvements made to the Airport in each year for the past five fiscal years and the funding sources for such capital improvements. Funding Sources Fiscal Total Value of Debt Proceeds and Federal Grants- Year Capital Improvements Airport Revenues Investment Earnings In-Aid ]999 $1,709,060 $ 624,447 $-0- $1,084,613 2000 381,891 29,460 -0- 352,431 2001 ] ,968,837 70,859 -0- ] ,897,978 2002 3,194,353 1,318,258 -0- 1,876,095 2003 3,044,486 1,808,072 -0- 1,236,414 The staff of the Airport has developed a multi-year capital improvements program and a plan to finance the program that relies on several funding sources. The capital improvements program allows the staff of the Airport to plan, on a long-term basis, for future Airport capital needs. The capital improvements program is updated periodically. For a summary of the Airport's capital improvements program for 2004 through 2008, see "REPORT OF THE AIRPORT CONSULTANT - FINANCIAL ANALYSIS -- Financing Plan" in Appendix B to this Official Statement. Passenger FaciIitJ Charges Passenger facility charges, referred to as PFCs, are fees authorized by the Aviation Safety and Capacity Expansion Act of 1990, as amended and recodified at 49 U.S.c. ~ 40117 (the "PFC Act"), as implemented by the FAA pursuant to published regulations at ]4 CFR Part ]58 (the "PFC Regulations"). The PFC Act permits a public agency that controls a commercial service airport (those with regularly scheduled service and enplaning 2,500 or more passengers annually) to charge each paying passenger enplaning at the airport a PFC of $1.00, $2.00, $3.00, or $4.50, subject to certain exceptions described below. The proceeds from PFCs are to be used to finance eligible airport-related projects approved by the FAA that preserve or enhance the capacity, safety, or security of the national air transportation system, reduce or mitigate noise from an airport that is part of the system, or provide an opportunity for enhanced competition between or among air carriers or foreign air carriers. "Eligible airport-related projects" include certain airport development or planning, terminal development, airport noise compatibility measures, and planning and construction of gates and related areas (but excluding restaurants, rental car facilities, automobile parking, or other concessions) within airport boundaries for the movement of passengers and baggage. The public agency must obtain the FAA's approval before imposing PFCs and before using the proceeds of PFCs. FAA approval may be for "impose-only" authority, "use" authority, or "impose-and-use" authority. "Impose-only" authority permits the public agency to charge PFCs for approved projects but requires another application for authority to use such PFCs. Projects for which impose-only authority is granted must be "implemented" within five years after the effective date of such authority; and a use application (or, if the implementation schedule is delayed, a request for extension) must be submitted within three years after the effective date. Projects for which "impose-and-use" authority is granted must be implemented within two years after approval of the use of the PFCs. Implementation means that a notice to proceed has been issued by the public agency to a contractor, in the case of a construction project, that a title search, survey, or appraisal has commenced for a significant part of the property in the case of property acquisition, or that a contractor or public agency has started work in the case of any other non-construction project. An airport may only impose the designated PFC until the authorized total amount is collected, and interest earnings on PFCs collected are included in the approved PFC collection amount. PFCs are collected on behalf of airports by air carriers, certain foreign air carriers, and their agents ("Collecting Carriers") from each eligible enplaning passenger at such airport. PFCs may not be collected, however, from a passenger enplaning at the airport if the passenger did not pay for the ticket (for example, if the passenger obtained the ticket with a frequent flier award coupon without monetary payment) or from a passenger flying on an essential air-service route. A PFC may be collected from a passenger (i) on a one-way trip, only for the first two enplaning airports on the travel itinerary where PFCs are imposed, and (ii) on a roundtrip, only for the first two and the last two enplaning airports where PFCs are imposed. Public agencies may request that a class of air carrier not be required to collect PFCs if that class constitutes 1 % or less of the total number of passengers enplaned annually at the airport. -38- In the process of collecting PFCs, each Collecting Carrier is entitled to and does commingle the collected PFCs with its other funds. The Collecting Carriers are authorized to withhold, as a collection fee, (i) eleven cents per eligible enplaning passenger from whom a PFC is collected, and (ii) any investment income earned on the amount collected prior to the due date of the remittance. Collecting Carriers remit collected PFCs to the airport on a monthly basis. Quarterly, the Aviation Commission compares the amount of PFCs remitted with the quarterly enplanement figures provided by the Collecting Carriers. The Aviation Commission compiles and sends a passenger facility charge report to the FAA and to the Collecting Carriers each quarter. As required by the FAA, the Aviation Commission requests annual audit reports from Collecting Carriers carrying more than 50,000 eligible enplaning passengers. For the years 2000 through 2003, the Consolidated Government's independent accountants determined that there were no material delinquencies for the PFC payments. With respect to a Collecting Carrier operating at the Airport that is involved in bankruptcy proceedings, it is unclear whether the Consolidated Government would be afforded the status of a secured creditor with regard to PFCs collected or accrued by that Collecting Carrier. Congress enacted legislation in late 2003 that requires an airline that files for bankruptcy protection, or that has an involuntary bankruptcy proceeding commenced against it, to segregate PFC revenue in a separate account for the benefit of the public agencies entitled to such revenue. See "INVESTMENT CONSIDERATIONS - Effect of Airline Bankruptcies -- PFCs" herein. The PFC Act, as well as the PFC Regulations, are subject to amendment and repeal. Without approval of the FAA, but with written notice to the Collecting Carriers and to the FAA, the level of the PFCs charged or the total amount of approved PFCs may be decreased, or the total amount of PFCs to be collected may be increased, by an amount not exceeding fifteen percent of the approved amount of PFCs. Increases in excess of fifteen percent may not be instituted without the approval of the FAA. Any change will be effective as of the first day of a month that is at least 60 days after the date the Collecting Carriers are notified of the change. On May 5, ] 999, the Aviation Commission received approval, pursuant tp a first PFC application, to collect a $3.00 PFC from September 1, 1999 to September ], 2026 on each qualifying enplaning passenger totaling $29,266,258, in order to finance, among other things, the new terminal facility. On May 1,2000, the FAA approved an amendment to the first PFC application, increasing the collection level to $4.50 on each qualifying enplaning passenger, decreasing the total amount authorized to be collected to $28,835,139 and revising the charge expiration date to July 1, 2020. On August 24, 2004, the FAA approved another amendment to the first PFC application, increasing the total amount authorized to be collected to $31,482,000 and extending the charge expiration date to July I, 2030. The FAA's approval ("Final Agency Decision") contemplates leveraging a portion of the Aviation Commission's PFCs and authorizes PFC revenues to be applied to bond financing with respect to PFC-approved projects. Specifically, the Final Agency Decision allows the Aviation Commission to impose and use PFCs for the payment of (1) debt service on bonds used to fund PFC-approved projects ($29,296,000), and (2) PFC-approved project costs on a pay-as-you-go basis ($2,186,000). On November 4,2004, the Aviation Commission received approval, pursuant to a second PFC application, to collect a $4.50 PFC on each qualifying enplaning passenger totaling $2,007,000 and extending the charge expiration date to August 1, 2031, in order to finance certain PFC-approved projects at the Airport that are part of the Aviation Commission's five-year capital improvement program. The FAA's Final Agency Decision contemplates leveraging a portion of the Aviation Commis.sion's PFCs and authorizes PFC revenues to be applied to bond financing with respect to PFC-approved projects. Specifically, the Final Agency Decision allows the Aviation Commission to impose and use PFCs for the payment of (1) debt service on bonds used to fund PFC-approved projects ($1,868,000), and (2) PFC-approved project costs on a pay-as-you-go basis ($139,000). As of September 30, 2004, the Aviation Commission had collected PFC revenues in the total amount of $2,993,562 (excluding interest earnings on such amount). No assurance can be given that the PFC revenues and the schedule for their receipt that are assumed in the Aviation Commission's plan of financing will be attained. The FAA may terminate the Airport's authority to impose PFCs, subject to informal and formal procedural safeguards, if the FAA determines that (i) the Airport is in violation of certain provisions of the Airport Noise and Capacity Act of 1990 relating to an airport's noise or access restrictions on aircraft operations, (ii) PFC collections and investment income thereon are not being used for approved projects in accordance with FAA impose-and-use ; authority for the 2005 Project or with the PFC Act and the PFC Regulations, (iii) implementation of the approved projects does not commence within the time periods specified in the PFC Act and PFC Regulations, or (iv) the Airport is otherwise in violation of the PFC Act, the PFC Regulations, or the FAA impose-and-use authority. If the FAA determines that revenue derived from a PFC is excessive or is not being used in accordance with the PFC Act, the FAA may reduce the amount of Airport Improvement Program funds otherwise payable to the Airport. No assurance can be given that PFCs will actually be received in the amount or at the time contemplated by the Consolidated Government. The amount of actual PFC revenues collected, and the rate of collection, will vary -39- depending on the actual levels of qualified passenger enplanements at the Airport. Furthermore, no assurance can be given that the Airport's authority to impose a PFC will not be terminated by Congress or the FAA, or that the PFC program will not be modified or restricted by Congress or the FAA so as to reduce PFC revenues available to the Airport. Federal Grants-In-Aid The Airport and Airway Improvement Act of 1982 created the Airport Improvement Grant Program ("AlP"), which is administered by the FAA and funded by the Airport and Airway Trust Fund. This fund is financed by federal aviation user taxes. Grants are available to airport operators in the form of "entitlement" funds and "discretionary" funds. Entitlement funds are apportioned annually based upon enplaned passengers and cargo landing weights, and discretionary funds are available at the discretion of the FAA based upon a national priority system. Actual entitlement funds will vary with the actual number of passenger enplanements, with total appropriations for the AlP, and with any revision of the existing statutory formula for calculating such funds. The DOT classifies airports as large, medium, small, and non-hubs according to their share of the total enplaned passengers in the United States. Large-hub airports enplane over 0.] percent, medium-hub airports enplane between 0.25 percent and 0.9999 percent, small-hub airports enplane between 0.05 percent and 0.2499 percent, and non-hub airports enplane less than 0.05 percent of total enplaned passengers in the United States. Pursuant to the PFC Act, annual federal passenger entitlement grants to large- and medium-hub airports are reduced by 50 percent when a $3.00 PFC is imposed and are reduced by 75 percent when a $4.50 PFC is imposed. Small- and non-hub airports are not required to reduce their passenger entitlement grants due to the collection of any PFC amount. As a result of the Airport's non-hub classification by the DOT, the Consolidated Government is not required to reduce any federal passenger entitlement grants when collecting the current $4.50 PFC. The AViation Commission's plan of finance . for the 2005 Project includes approximately $6.58 million in funding from AlP grants, of which approximately $2.74 million will be entitlement funding and approximately $3.84 million will be discretionary funding. The entire $6.58 million in AlP grant funding for the 2005 Project has been awarded to the Consolidated Government. The FAA presently disburses grant funds on a reimbursement basis after the Consolidated Government incurs the capital expenditures for which the grant was awarded. Employee Benefits The Consolidated Government presently maintains one agent multiple-employer (the "GMEBS Plan") and one single-employer defined-benefit pension plan (the "1977 Plan") covering certain employees of Consolidated Government, including certain employees of the Airport. The Consolidated Government also presently maintains two additional single-employer defined-benefit pension plans (the "General Retirement Plan" and the "1945 Plan"), covering certain employees of Consolidated Government, but these plans do not cover any employees of the Airport. The Consolidated Government presently maintains one defined-contribution plan, described below, covering certain employees of Consolidated Government, including certain employees of the Airport. The GMEBS Plan is administered through the Georgia Municipal Employees Benefit System ("GMEBS"), an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for cities in the State of Georgia. The General Retirement Plan covers former City employees. The] 945 Plan and the 1977 Plan cover former County employees. The funding methods and determination of benefits payable for the defined-benefit plans in general provide that pension funds are to be accumulated from employee contributions, employer contributions, and income from the investment of accumulated funds. Former City employees hired after March 1, 1949 and before March ], 1987, whose age did not exceed 35 at the time of their employment, are covered by the General Retirement Plan. Former City employees hired on or after March], 1987 and before consolidation of the City and County governments are covered by GMEBS. Former County employees hired prior to October 1, 1975 are covered by the 1945 Plan. Former County employees not covered by the ] 945 Plan, whose age did not exceed 60 at the time of their employment, are covered by the 1977 Plan. Consolidated Government employees who are not covered by another plan are covered by the defined-contribution plan described below. All of the Consolidated Government's pension plans, except for the defined-contribution plan, are closed to new employees. -40- Set forth below is selected information about the. Consolidated Government's two defined-benefit pension plans covering certain employees of Consolidated Government, including certain employees of the Airport. Contributions to Defined-Benefit Pension Plans Years Ended December 31 1999 2000 2001 2002 2003 $ nla $ n/a $ nla $ nla $ nla 178,545 204,576 192,622 ]68,316 181,834 $ 958,892 $892, ]42 $882,844 $868,682 $802,692 1,124,928 975,037 998,983 925,071 655,871 GMEBS Employee Contributions Employer Contributions 1977 Plan Employee Contributions Employer Contributions Analysis of Funding Progress of Defined-Benefit Pension Plans (Funded) U Munded (Funded) Actuarially Unfunded Accrued Actuarial Actuarial Actuarially Actuarially Liability as a Valuation Value of Accrued Accrued Funded Covered Percentage of Date Assets Liability Liability Ratio Payroll Covered Payroll GMEBS 03/01/00 $5,559,655 $6,422,501 $862,846 86% $7,719,739 11.2% 03/01/02 6,308,424 6,887,424 579,000 91 6,913,560 8.4 03/01/03 6,477,885 7,] 46,314 668,429 90 6,988,509 9.6 03/01/04 6,913,410 7,553,911 640,501 91 6,637,655 9.6 1977 Plan 01/01/99 $ 9,976,793 $14,137,712 $4,160,919 71% $24,454,857 17% 01/01/00 ] 0,836,439 15,060,421 4,223,982 72 21,709,421 19 01/01/01 11,136,602 15,575,523 4,438,921 72 21,705,175 20 01/0 1/02 14,065,58 ] 16,860,437 2,794,356 83 21,029,237 ]3 01/01/03 12,609,297 18,150,] 92 5,540,895 69 22,187,948 25 Membership in Defined-Benefit Pension Plans as of December 31, 2003 Retirees and Terminated Plan Members Active Beneficiaries Entitled to But Not Yet Plan Receiving Benefits Receiving Benefits Members GMEBS 77 5 226 ] 977 Plan 72 170 626 Total l42 ill ill The Consolidated Government is required by Georgia law to have an actuarial valuation of its defined-benefit pension plans done once every three years. The Consolidated Government met the minimum funding levels prescribed by state law through January I, 2003. Note 5 of the audited financial statements of the Airport included as a part of Appendix A to this Official Statement contains a detailed description of the Consolidated Government's defined-benefit pension plans covering employees of the Airport. The Consolidated Government maintains a single employer, defined-contribution plan created in accordance with Internal Revenue Code Section 401(a) for its full-time employees, including employees of the Airport. In a defined-contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The Consolidated Government has no liability under this plan except for contributions established and made each year. Employees are eligible to participate in the plan after one month of employment. Participants in the plan are required to contribute 4% of their salary, and the Consolidated Government is required to contribute 2% of the participant's salary to the plan. The Consolidated Government's contributions for each employee are fully vested -41- after five years of continuous employment. The plan is administered by Nationwide Life Insurance. As of December 31, 2003, there were approximately 1,297 participants in the plan. For the year ended December 31, 2003, participants in the plan contributed approximately $1,403,334 and the Consolidated Government contributed approximately $701,667. The Consolidated Government also offers its employees, including employees of the Airport, a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan is available to all employees and permits them to defer income taxation of a portion of their salary to future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the Consolidated Government subject only to the claims of the Consolidated Government's general creditors. Participants' rights under the plan are equal to those of general creditors of the Consolidated Government in an amount equal to the fair market value of the deferred account for each participant. The Consolidated Government believes that it is unlikely that it will use these assets to satisfy the claims of general creditors in the future. The Consolidated Government believes that it has no liability for losses under the plan but does have the duty of care that would be required of an ordinary prudent investor in making plan investments. Consolidated Government employees accrue vacation and sick leave in different amounts, depending upon the period of time the Consolidated Government has employed them. The maximum amount of vacation leave that employees may accumulate is 26 days. The Consolidated Government pays accrued vacation leave upon termination of employment and has reflected a liability for accumulated vacation pay in its financial statements. The maximum amount of sick leave that Consolidated Government employees (other than firefighters) may accumulate is 132 days. The Consolidated Government, however, does not pay accrued sick Iyave upon termination of employment and has not reflected accumulated sick leave as a liability in the Consolillated Government's financial statements. In addition to pension benefits, the Consolidated Government provides certain health care and life insurance benefits for retired employees of the Consolidated Government. The Consolidated Government's employees who are also participants in one of the retirement plans are eligible for these post-employment retirement benefits if they reach normal retirement age or are totally disabled while employed by the Consolidated Government. The cost of these benefits is recognized as expenditures as claims and premiums are paid. For the year ended December 31, 2003, there were 230 retirees eligible for these post-employment retirement benefits, which cost approximately $956,543. Insurance Coverage The Consolidated Government carries liability insurance for the Airport or is self-insured for the types of claims and in amounts that are customary for similar enterprises. The Consolidated Government also carries property and casualty damage insurance on buildings and other physical assets related to the Airport. See "SUMMARY OF THE BOND RESOLUTION - Maintenance, Insurance, and Sale of the Airport; Annual Budget; Uneconomic Facilities; Tax Covenants" in Appendix C to this Official Statement for a description of the Consolidated Government's covenants regarding insurance for the Airport. Present insurance coverage for the Consolidated Government is summarized below: ~ Amount in Force Building and Contents Employee Blanket Bond Public Official Bond for each Commissioner $319,000,000 I 100,000 10,000 ~ Limits of Liability Each Occurrence Aggregate Public Officials' Liability $2,000,000 None Includes boiler and machinery and valuable papers. -42- The Consolidated Government maintains four Risk Management Funds to account for and finance its self- insured risks of loss. The Risk Management Funds are maintained to provide general liability insurance, workers' compensation coverage, and unemployment coverage for the Consolidated Government, including the Airport. As of December 3\, 2003, the fund balances of the Risk Management Funds totaled $564,245. In addition, the Consolidated Government designated $4,705,000 of its unreserved fund balance in its general fund for risk management. The Consolidated Government is also self-insured for its workers' compensation coverage through a self-insurance program that is administered under contracts with third party administrators. For a description of the Consolidated Government's self-insurance programs, see Note 6 to the audited financial statements of the System included as part of Appendix A to this Official Statement. A summary of the Consolidated Government's self-insured retention and excess liability insurance coverage is set forth below: ~ Self-Insured Retention Each Occurrence Aggregate Excess Liability Insurance Limits of Liability Each Occurrence Aggregate Workers' Compensation $500,000 None $\ ,000,000 None The current insurance policies do not insure the Airport against acts of war or terrorism, because the Aviation Commission has judged that such coverage is not available with the terms and for a premium that is economically feasible for the Airport. The Consolidated Government requires payment and performance surety bonds and builders' risk insurance of all contractors and subcontractors involved in construction related to the Airport. The Consolidated Government requires the surety bonds to be issued by surety firms listed on the U.S. Treasury-approved list and the builders' risk insurance to be in the amount of the contract sums. INVESTMENT CONSIDERATIONS Introduction In analyzing the Series 2005 Bonds and in order to make an informed investment decision, potential investors should carefully consider the following investment considerations prior to making a decision to purchase the Series 2005 Bonds. The following investment considerations are not intended to be exhaustive of the general or specific investment considerations relating to the purchase of the Series 2005 Bonds. Additional investment considerations relating to the purchase of the Series 2005 Bonds are described throughout this Official Statement, whether or not specifically designated as investment considerations. Levels of Airline Traffic and Financial Condition of the Airlines Even before the events of September 11, 200], a number of airlines were experiencing financial difficulties and, since the events of September 11, 200\, most airlines have been downgraded by the credit rating agencies, numerous airlines have tiled for bankruptcy protection (as discussed in "INVESTMENT CONSIDERATIONS - Effect of Airline Bankruptcies" below), and most airlines that have not filed for bankruptcy protection have reported continuing financial difficulties. In response to the events of September 11,2001, the economic slowdown, the ongoing hostilities in Iraq and elsewhere in the Middle East, and the severe acute respiratory syndrome ("SARS") outbreak in 2003 and in an effort to stem mounting financial losses, most major airlines reduced flight schedules and instituted significant employee layoffs. Most airlines have also retired old, less efficient aircraft and replaced larger aircraft with small, regional jet aircraft on selected routes, resulting in an additional reduction in , scheduled seat capacity. Additionally, recent international flight cancellations due to security concerns and · heightened threat levels declared by the Department of Homeland Security have reduced airline traffic. The I Consolidated Government cannot predict with any certainty what impact these events are likely to have on any of : the airlines operating at the Airport, or the potential that these incidents or the reduction in activity may cause I airlines to file for bankruptcy protection or cease operations. Further, the Consolidated Government cannot predict, the likelihood of future incidents similar to the events of September 11, 200], the likelihood of future air transportation disruptions, or the impact on the Consolidated Government or the airlines operating at the Airport from such incidents or disruptions. See "INVESTMENT CONSIDERATIONS - Effect of Airline Bankruptcies" below. -43- Key factors that affect airline traffic at the Airport and the financial condition of the airlines, and, therefore, the amount of Pledged Revenues available for payment of the Series 2005 Bonds, include: local, regional, national, and international economic and political conditions; international hostilities; world health concerns; aviation security concerns; airline service and routes; airline airfares and competition; airline industry economics, including labor relations; availability and price of aviation fuel; capacity of the national air traffic control and airport systems; capacity of the Airport and competition from other airports; and business travel substitutes, including teleconferencing, videoconferencing, and web-casting. Many of these factors, most of which are outside the Consolidated Government's control, are discussed in further detail in the Report of the Airport Consultant. If aviation activity and enplaned passenger traffic at the Airport do not meet forecast levels, a corresponding reduction could occur in forecasted Pledged Revenues. See "REPORT OF THE AIRPORT CONSULTANT" in Appendix B to this Official Statement. The Report of the Airport Consultant should be read in its entirety for an explanation of the assumptions and forecasts used therein. Importance of Delta and US Airways at the Airport The Airport derives a portion of its operating revenues (7% in fiscal year 2003) from landing and facility rental fees paid by the airlines using the Airport. The financial strength and stability of the airlines using the Airport, together with numerous other factors, influence the level of aviation activity at the Airport. In addition, individual airline decisions regarding level of service at the Airport can be expected to affect total enplanements. On August 26, 2004, Continental Express notified the Consolidated Government that it would cease serving the Airport as of October 30, 2004. For the year ended December 31, 2003, Continental Express accounted for approximately 3% of the total airline rentals, fees, and charges component of the Airport's operating revenues and approximately 17% of total enplaned passengers at the Airport. As a result of Continental's decision, Delta Air Lines' wholly-owned subsidiary, Atlantic Southeast, and US Airways Express will be the only two airlines serving the Airport as of October 31,2004. For the year ended December 31, 2003, Delta Air Lines' regional/commuter wholly-owned subsidiary, Atlantic Southeast, accounted for approximately 67% of the total airline rentals, fees, and charges component of the Airport's operating revenues and approximately 65% of total enplaned passengers at the Airport. For the year ended December 31, 2003, Delta reported a net loss of $773 million, compared with a net loss of $1.3 billion for the year ended December 3\,2002. For the six-month period ended June 30, 2004, Delta reported a net loss of $2.3 billion, compared with a net loss of $282 million for the six-month period ended June 30, 2003. In its quarterly report to the SEC for the quarter ended June 30, 2004, Delta reported that continued losses of the magnitude experienced in 2003 and the first half of 2004 are unsustainable over the long term, and if it cannot achieve a competitive cost structure, regain sustained profitability, and access the capital markets on acceptable terms, it will need to restructure its costs through Chapter 11 bankruptcy protection. [UPDATE]. See "THE AIRPORT - Availability of Information Concerning Individual Airlines" herein. For the year ended December 31, 2003, US Airways' regional/commuter affiliate, US Airways Express, accounted for approximately 28% of the total airline rentals, fees, and charges component of the Airport's operating revenues and approximately 16% of total enplaned passengers at the Airport. On August 11, 2002, US Airways filed for protection under Chapter 11 of the US Bankruptcy Code in the Eastern District of Virginia, and emerged from bankruptcy on March 31, 2003. Due to recurring losses, on September 12, 2004, US Airways again filed for protection under Chapter 11 of the US Bankruptcy Code in the Eastern District of Virginia. US Airways is attempting to reduce its costs through the bankruptcy proceedings in order to allow it to compete with low-cost carriers, primarily by reducing salaries, wages, pension costs, and post-employment retirement benefits of its unionized workers. See "THE AIRPORT - Availability of Information Concerning Individual Airlines" herein. Effect of Airline Bankruptcies General The profitability of the airline industry has deteriorated since 2000, with many airlines reporting substantial i financial losses and several airlines filing for bankruptcy protection, due not only to the events of September 11, 2001, but also to a general economic slowdown, which commenced prior to the events of September 11, 2001, increased aviation fuel costs, weather conditions, labor disruptions, and other factors. Since December 2000, some airlines filing for bankruptcy protection include National Airlines (which did not operate at the Airport and eventually ceased operations); Trans World Airlines ("TW A") (which was integrated into American after I substantially all of TW A's assets and certain liabilities were purchased by American; American does not operate from the Airport); Midway Airlines (which did not operate at the Airport and eventually ceased operations); US I Airways; United (which does not operate from the Airport); Air Canada (which does not operate from the Airport); Hawaiian Airlines (which does not operate from the Airport); and ATA Airlines (which does not operate from the Airport). -44- The Consolidated Government is unable to predict how long any airline in bankruptcy protection .will continue operating at the Airport or whether any of these airlines will liquidate in the future. Additional bankruptcies, liquidations, or major restructurings of other airlines could occur. It is not possible to predict the impact on the Airport of any future bankruptcies, liquidations, or major restructurings of other .airlines. See "INVESTMENT CONSIDERA TIONS - Levels of Airline Traffic and Financial Condition of the Airlines" herein. Assumption or Rejection of Airline Agreements In the event an airline that has executed an Airline Agreement or other agreement with the Consolidated Government seeks protection under the bankruptcy laws, such airline or its bankruptcy trustee must determine whether to assume or reject its agreements with the Consolidated Government (a) within 60 days (or later if ordered by the court) with respect to its Airline Agreement or leases of non-residential real property, or (b) prior to the confirmation of a plan of reorganization with respect to any other agreement. Bankruptcy courts, however, are courts of equity and can, and often do, grant exceptions to these statutory limitations. In the event of assumption or assignment of any agreement to a third party, the airline would be required to cure any pre- and post- petition monetary defaults and provide adequate assurance of future performance under the applicable Airline Agreement or other agreements. Rejection of an Airline Agreement or other agreement or executory contract will give rise to an unsecured claim of the Consolidated Government for damages, the amount of which in the case of an Airline Agreement or other agreement is limited by the U.S. Bankruptcy Code generally to the amounts unpaid prior to bankruptcy plus the greater of (i) one year of rent or (ii) 15% of the total remaining lease payments, not to exceed three years. The amount, however, ultimately received in the event of a rejection of an Airline Agreement or other agreement could be considerably less than the maximum amounts allowed under the U.S. Bankruptcy Code. US Airways was not operating under an Airline Agreement at the Airport at the time of its most recent filing for bankruptcy protection. The Consolidated Government has an unsecured claim against US Airways for pre- petition accrued rent and landing fees and may continue to charge US Airways rent and landing fees under the Rate Ordinance as a condition of US Airways' use of the Airport while its bankruptcy proceeding is pending. The Consolidated Government may terminate US Airways' right to use the Airport at any time before a new airline agreement between the parties is executed. With respect to an airline in bankruptcy proceedings in a foreign country, the Consolidated Government is unable to predict what types of orders or relief could be issued by foreign bankruptcy tribunals, or the extent to which any such orders would be enforceable in the United States. Pre-Petition Obligations During the pendency of a bankruptcy proceeding, a debtor airline may not, absent a court order, make any payments to the Consolidated Government on account of goods and services provided prior to the bankruptcy. Thus, the Consolidated Government's stream of payments from a debtor airline would be interrupted to the extent of pre-petition goods and services, including accrued rent and landing fees. All of the pre-petition obligations of US Airways have been paid or arranged to be paid. PFCs Pursuant to the PFC Act, the FAA has approved the Consolidated Government's applications to require the airlines to collect and remit to the Consolidated Government a $4.50 PFC on each enplaning revenue passenger at the Airport. The PFC Act provides that PFCs collected by the airlines constitute a trust fund held for the beneficial interest of the eligible agency (i.e. the Consolidated Government) imposing the PFCs, except for any handling fee or retention of interest collected on unremitted proceeds. In addition, federal regulations require airlines to account for I PFC collections separately and to disclose the existence and amount of funds regarded as trust funds in their respective financial statements. However, the airlines, provided they are not under bankruptcy protection, are permitted to commingle PFC collections with other revenues. The bankruptcy courts have not fully addressed such trust arrangements. Therefore, the Consolidated Government cannot predict how a bankruptcy court might rule on this matter in the event of a bankruptcy filing by one of the airlines operating at the Airport. The PFC Act, as ! amended by Vision tOO-Century of Aviation Reauthorization Act ("Vision 100"), requires an airline in bankruptcy! protection (except airlines that filed for bankruptcy protection prior to the effective date of Vision 100) to segregate: PFC collections from all of its other revenues. ! I It is possible that the Consolidated Government could be held to be an unsecured creditor with respect to i unremitted PFCs held by an airline that has filed for bankruptcy protection. Additionally, the Consolidated Government cannot predict whether an airline operating at the Airport that files for bankruptcy protection would -45- have properly accounted for the PFCs owed to the Consolidated Government or whether the bankruptcy estate would have sufficient moneys to pay the Consolidated Government in full for the PFCs owed by such airline. Costs of Aviation Fuel According to the Air Transportation Association ("AT A"), fuel is the second largest cost component of airline operations after labor and continues to be an important and uncertain determinate of an air carrier's operating economics. There has been no shortage of aviation fuel since the "fuel crisis" of 1 974, but any increase in fuel prices causes an increase in airline operating costs. The average price of oil in 2003 of $31 per barrel was more than 50% higher than the lO-year median price of oil. In October 2004, the price of oil rose to more than $55 per barrel, a record high. According to the ATA, a one-dollar increase in the price of oil per barrel equates to approximately $425 million in annual additional expense for U.S. airlines. Some U.S. airlines have attempted in recent months to pass the higher fuel costs to consumers by increasing the fuel surcharge or increasing the price of airfares. Some of these attempts have been unsuccessful as many airlines, particularly the low-cost carriers, refused to match the increase. Significant and prolonged increases in the cost of aviation fuel are likely to have an adverse impact on air transportation industry profitability and hamper the recovery plans and cost-cutting efforts of certain airlines, including Delta. A viation Security Concerns Concerns about the safety of airline travel and the effectiveness of security precautions, particularly in the context of international hostilities (such as the war in Iraq and the continuing military action in Iraq), terrorist attacks, increased threat levels declared by the Department of Homeland Security, and world health concerns such as the SARS outbreak in 2003, may influence passenger travel behavior and air travel demand. These concerns have intensified in the aftermath of the events of September 11, 2001. Travel behavior may be affected by anxieties about the safety of flying and by the inconveniences and delays associated with more stringent security screening procedures, both of which may give rise to the avoidance of air travel generally and the switching from air to surface travel modes. The Airport Consultant has assumed as part of its passenger forecasts that no future acts of terrorism will occur during the forecast period. See "REPORT OF THE AIRPORT CONSULTANT" attached to this Official Statement as Appendix B. Intensified security precautions have been instituted by government agencies, airlines, and airport operators since the events of September 11, 2001. These precautions include the strengthening of aircraft cockpit doors, the federal program to allow and train U.S. commercial airline pilots to carry firearms during flights, changes to prescribed flight crew responses to attempted hijackings, increased presence of armed sky marshals, federalization of airport security functions under the Transportation Security Administration (the "TSA"), and revised procedures and techniques for the screening of passengers and baggage for weapons and explosives. No assurance can be given that these precautions will be successful. Also, the possibility of international hostilities or further terrorist attacks involving or affecting commercial aviation are a continuing concern that may affect future travel behavior and airline passenger demand. The Aviation and Transportation Security Act ("ATSA") was signed into law by President Bush on November 19, 200 I. The A TSA created the TSA, which is part of the newly created Department of Homeland Security. The ATSA requires, among other things, that all security screeners at airports be federal employees. Security screeners must undergo background checks and must be U.S. citizens. By 2005, airports that meet increased security guidelines have the option to continue using federal employees or return to using private security companies. The new federal security screening services will be paid for by charging passengers $2.50 per departure or connection, not to exceed $5.00 per trip. In addition to the fee charged to passengers, to the extent necessary, a fee may also be imposed on air carriers, which fee may not exceed, in the aggregate, the total amount paid in calendar year 2000 by the air carriers for screening passengers and property. This fee, designated the "Aviation Infrastructure Security Fee," was imposed on air carriers by the TSA effective February 18, 2002. The TSA assumed most passenger screening functions nationwide in February 2002, largely by contracting with private sector security providers. By January 1,2003, the TSA had taken over screening functions at all checkpoints in the Airport. To comply with the checked baggage screening requirements imposed by the A TSA, by December 31, 2002, explosive detection systems ("EDS") approved by the TSA were required to be deployed at airports in the United I States to screen all checked baggage. However, the Homeland Security Act of 2002 (the "Homeland Security Act") gave the Undersecretary of Transportation for Security (the "Undersecretary") the discretion to determine whether the TSA could meet the December 31, 2002 deadline for deployment of the EDS machines at a particular airport. If the Undersecretary determined that the TSA could not meet the deployment deadline at a particular airport, such airport was allowed to continue to operate past the deadline, provided that by December 31, 2003, the Undersecretary submitted to the Senate Committee on Commerce, Science, and Transportation and to the House Committee on Transportation and Infrastructure a detailed plan for the deployment of the required EDS machines at such airport and the airport continued to screen all checked baggage with a combination of EDS machines, manual -46- searches, searches by canine explosive detection units, or screening by other means or technology (i.e., explosive trace detection systems). In response in part to the security requirements of ATSA and TSA, the Consolidated Government initiated the design and planning of a new terminal building, the construction of which is included in the 2005 Project. Because of the implementation of the Congressional mandate, effective January 1, 2003, for the screening of all checked baggage for explosives, as well as the impact on airport operations of procedures mandated under "Level Yellow" (elevated), "Level Orange" (high), and "Level Red" (severe) national threat levels declared by the Department of Homeland Security under the new Homeland Security Advisory System, there is the potential for significantly increased inconvenience and delays at many airports. Since its inception the threat level has never been below Level Yellow nor above Level Orange. The Department of Homeland Security elevated the alert status to Level Orange four times during 2003 for a total of 72 days. To date, only minor delays have been experienced at the Airport as a result of the new security procedures; however, this may change as a result of increased passenger traffic or other factors such as requirements for additional forms of screening or reductions of the TSA workforce. The A TSA also requires that eventually all passenger bags, mail, and cargo be screened to prevent the carriage of weapons (including chemical and biological weapons), explosives, or incendiary devices; however, no regulations regarding these enhanced security measures have been proposed as of the date of this Official Statement. The Consolidated Government cannot predict whether the Airport will be a target of terrorists in the future. After the events of September 11, 200], the United States government launched a military offensive against Afghanistan and in March 2003 against Iraq, and has warned that these hostilities may continue for years. The Consolidated Government cannot predict the duration of the effects of these hostilities on the air transportation system or the likelihood of any retaliation. Any such action could directly or indirectly reduce passenger traffic and depress airline industry revenues and Airport revenues. The Consolidated Government cannot predict the duration or extent of the reduction in air travel or the extent of the impact on Airport revenues or the financial condition of the Airport or any of the airlines operating at the Airport, including the potential that these incidents may cause additional airlines to seek bankruptcy protection. Regulations and Restrictions Affecting the Airport The operations of the Airport are affected by a variety of contractual, statutory, and regulatory restrictions and limitations, including, without limitation, the provisions of its airline agreements, the federal acts authorizing the imposition, collection, and use of PFCs, and extensive federallegislalion and regulations applicable to all airports in the United States. In the aftermath of the events of September 11, 2001, the Airport also has been required to implement enhanced security measures mandated by the FAA and the Department of Homeland Security. See ''INVESTMENT CONSIDERATIONS - Aviation Security Concerns" herein. It is not possible to predict whether future restrictions or limitations on Airport operations will be imposed, whether future legislation or regulations will affect anticipated federal funding or PFC collections for capital projects for the Airport, whether additional requirements will be funded by the federal government or require funding by the Consolidated Government, or whether such restrictions or legislation or regulations would adversely affect Airport revenues. Negotiation of New Revenue-Producing Agreements The airline agreements, pursuant to which the airlines using the Airport agreed to pay rates and charges for its use, have expired. The Aviation Commission intends to implement the proposed new Airline Agreement as soon as possible after completion of the new terminal building (estimated to be August 2007). In the event that the Aviation Commission and the airlines cannot reach a formal agreement on a new airline rate-making methodology or the I timing of its introduction, the airlines could, potentially, challenge the Aviation Commission's revised airline rate- making methodology under the DOT's rates and charges review process. This review process includes the Secretary of Transportation reviewing rates and charges complaints brought by airlines. Specifically, the Secretary of Transportation conducts an administrative review to determine the reasonableness of new fees and fee increases imposed on airlines using airport facilities. Most of the non-airline agreements, pursuant to which other users of the Airport agreed to pay rates and charges for its use, have also expired. The Aviation Commission intends to negotiate new non-airline agreements as soon as possible after completion of the new terminal building. Sigillficant assumptions of the Report of the Airport Consultant attached hereto as Appendix B are that airline agreements will be executed with the airlines using the Airport containing terms consistent with the Rate Ordinance and that non-airline agreements will be executed with other users of the Airport containing the terms set forth in the Report of the Airport Consultant. -47- No assurance can be given as to when or whether any such agreements can be negotiated or what terms such agreements will provide. Competition The Airport's Air Trade Area is served by several other carrier airports, including a large-hub airport at Atlanta and small-hub airports at Columbia, South Carolina, Charleston, South Carolina, and Savannah, Georgia. Service from the Airport is subject to competition from other forms of transportation. In addition, teleconference, videoconference, and web-based meetings continue to improve in quality and price to the extent that they are often satisfactory alternatives to face-to-face meetings, and these modes of communication may potentially reduce the need for business travel throughout the aviation industry, including the Airport. Furthermore, the ability of the Airport to continue to attract passengers and air carriers is dependent on factors such as cost and convenience. Increased costs resulting from the Airport's capital improvement program and compliance with federally mandated security requirements could result in the Airport's being at a competitive disadvantage relative to other airports in the Airport's Air Trade Area, as well as other modes of transportation. Unavailability of Certain Insurance Coverage The Consolidated Government no longer has insurance for war casualty or terrorist acts. The Consolidated Government was insured on September 11, 200], but that coverage was terminated as a result of the events of September 11, 200 1 and has not yet been replaced because, as of the date of this Official Statement, such insurance is not available at reasonable costs and in meaningful amounts. No assurance can be given that such insurance will be available at reasonable costs and in meaningful amounts in the future, or that to the extent that the Consolidated Government is uninsured, it will be able to satisfy any claims in the event of a future war or terrorist attack. Construction RiSks The timely completion of the construction of the 2005 Project is dependent upon, among other factors, promptly obtaining approvals and permits from various governmental agencies and the absence of delays due to labor disputes, site difficulties, delays in delivery and shortages of materials, and adverse weather conditions. The cost of constructing the 2005 Project may be affected by factors beyond the control of the Consolidated Government, including labor disputes, site difficulties, energy and material shortages, subcontractor defaults, adverse weather conditions, and other unforeseen contingencies. There can be no assurance that the Consolidated Government will complete the construction of the 2005 Project in accordance with its present construction schedule and construction budget. The Construction Contract will obligate the General Contractor to substantially complete construction of the 2005 Project on or before for a fixed contract sum of $ and will require the General Contractor to secure its obligations for construction and timely completion by labor and material payment and performance bonds. Although the Construction Contract will contain a penalty provision providing for a penalty equal to $10,000 per day in the event construction of the 2005 Project is not completed in a timely fashion, there can be no assurance that construction of the 2005 Project will be completed within the time provided by the Construction Contract or that the damages suffered by the Consolidated Government as a result thereof can be recovered without costly and time-consuming litigation. In addition, there can be no assurance that the obligations of the surety under the payment and performance bonds can be enforced without costly and time-consuming litigation. LEGAL MATTERS Pending Litigation The Consolidated Government, like other similar bodies, is subject to a variety of suits and proceedings arising in the ordinary conduct of the affairs of the Airport. The Consolidated Government, after reviewing the current ' status of all pending and threatened litigation relating to the Airport with its counsel, Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLC, believes that, while the outcome of litigation cannot be predicted, the final settlement of all lawsuits that have been filed and of any actions or claims pending or threatened against the Consolidated, Government relating to the Airport or its officials in such capacity are adequately covered by insurance or will not have a material adverse effect upon the financial position or results of operations of the Airport. There is no litigation now pending or, to the knowledge of the Consolidated Government, threatened against the Consolidated Government that restrains or enjoins the issuance or delivery of the Series 2005 Bonds, the pledge of the Pledged Revenues to secure the Series 2005 Bonds, or the use of the proceeds of the Series 2005 Bonds or -48- that questions or contests the validity of the Series 2005 Bonds or the proceedings and authority under which they are to be issued and secured. Neither the creation, organization, or existence of the Consolidated Government, nor the title of the present members or other officials of the Consolidated Government to their respective offices, is being contested or questioned. Opinion of Bond Counsel Certain legal matters incident to the authorization and issuance of the Series 2005 Bonds are subject to the approval of Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel, whose approving opinions will be available at the time of delivery of the Series 2005 Bonds. It is anticipated that the approving opinions wiIl be in substantiaIly the forms attached hereto as Appendix D. The Internal Revenue Code of 1986, as amended (the "Code"), contains a number of requirements and restrictions that apply to the Series 2005 Bonds. These include restrictions on investments, requirements for periodic payment of arbitrage profits to the United States, requirements regarding the use of the Series 2005 Bond proceeds, and other restrictions and requirements. Failure to comply with certain of such requirements and restrictions may cause interest on the Series 2005 Bonds to become subject to federal income taxation, retroactive, in some cases, to the date of issuance of the Series 2005 Bonds. In the opinion of Bond Counsel, under existing statutes, rulings, and court decisions and under applicable regulations, interest on the Series 2005A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. No opinion will be expressed with respect to any other federal tax consequences of the receipt or accrual of interest on the Series 2005A Bonds. In the opinion of Bond Counsel, under existing statutes, rulings, and court decisions and under applicable regulations, interest on the Series 2005B Bonds and the Series 2005C Bonds is excluded from gross income for federal income tax purposes except for any period during which a Series 2005B Bond or a Series 2005C Bond, respectively, is held by a "substantial user" of the facilities financed with the proceeds of the Series 2005B Bonds or the Series 2005C Bonds, respectively, or a "related person" within the meaning of Section l47(a) of the Code. The interest on the Series 2005B Bonds and the Series 2005C Bonds will be treated as an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on corporations and taxpayers other than corporations, and will be taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed upon certain corporations. No opinion will be expressed with respect to any other federal tax consequences of the receipt or accrual of interest on the Series 2005B Bonds or the Series 2005C Bonds. Ownership of the Series 2005 Bonds may result in other collateral federal income tax consequences to certain taxpayers, including without limitation, corporations subject to the environmental tax, banks, thrift institutions and other financial institutions, foreign corporations that conduct a trade or business in the United States, property and casualty insurance corporations, S corporations, individual recipients of social security or railroad retirement benefits, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2005 Bonds. Purchasers of the Series 2005 Bonds should consult their tax advisors as to the applicability of any such collateral tax consequences. In rendering its opinions that the interest on the Series 2005 Bonds is not includable in gross income for federal income tax purposes, Bond Counsel will (i) rely as to certain factual matters upon representations of the Consolidated Government with respect to, among other things, the use of the proceeds of the Series 2005 Bonds without undertaking to verify the same by independent investigation, and (ii) assume the continued compliance by the Consolidated Government with its covenants relating to the use of the proceeds of the Series 2005 Bonds and compliance with other requirements of the Code. The inaccuracy of any such representations or noncompliance with such covenants may cause interest on the Series 2005 Bonds to become includable in gross income for federal income tax purposes retroacti ve to the date of issuance of the Series 2005 Bonds. In the opinion of Bond Counsel, under existing statutes, interest on the Series 2005 Bonds is exempt from all present state income taxation within the State of Georgia. Interest on the Series 2005 Bonds mayor may not be subject to state or local income taxation in jurisdictions other than Georgia under applicable state or local laws. ~ Purchasers of the Series 2005 Bonds should consult their tax advisors as to the taxable status of the Series 2005 Bonds in a particular state or local jurisdiction other than Georgia. -49- Original Issue Discount and Premium In the opinion of Bond Counsel, any original issue discount in the selling price of a Series 2005 Bond, to the extent properly allocable to an owner of such Series 2005 Bonds, is excluded from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity over the initial offering price to the public (excluding underwriters and other intermediaries) at which price a substantial amount of the Series 2005 Bonds of such maturity is sold. Under Sections 1272 and 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues during any accrual period generally equals (i) the issue price plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income purposes, and will increase the holder's tax basis for purposes of determining gain or loss upon disposition (including redemption or payment at maturity). The foregoing is a general discussion of certain federal income tax consequences of original issue discount and does not purport to deal with all tax questions that may be relevant to particular investors or circumstances, including purchasers of Series 2005 Bonds in the secondary market. Owners of Series 2005 Bonds should consult their own tax advisors with respect to these issues and with respect to the state and local tax consequences of original issue discount. Certain maturities of the Series 2005 Bonds are being sold at prices in excess of the principal amount thereof. Under the Code, the excess of an owner's cost basis of a bond over the principal amount of such bond (other than a bond held as inventory, stock in trade, or for sale to customers in the ordinary course of business) is generally characterized as "bond premium." For federal income tax purposes, bond premium is amortized over the term of the related bond. An owner will therefore be required to decrease its basis in the Series 2005 Bonds by the amount of amortizable bond premium attributable to each taxable year it holds Series 2005 Bonds. The amount of amortizable bond premium attributable to each taxable year is determined on an actuarial basis at a constant interest rate compounded on each interest payment date. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of Series 2005 Bonds at a premium should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption, or other disposition of Series 2005 Bonds. Validation Proceedings The State of Georgia will institute proceedings in the Superior Court of Richmond County, Georgia to validate the Series 2005 Bonds and the security therefor. The State of Georgia will be the plaintiff in the proceeding, and the Consolidated Government will be the defendant. A final judgment confirming and validating the Series 2005 Bonds and the security therefor will be entered before the Series 2005 Bonds are issued and delivered. Under Georgia law, the judgment of validation will be forever conclusive against the Consolidated Government upon the validity of the Series 2005 Bonds and the security therefor. Closing Certificates At closing of the sale of the Series 2005 Bonds by the Underwriter, the Consolidated Government will deliver to the Underwriter a certificate (1) that no litigation is pending or threatened against it that would have a material effect on the issuance or validity of the Series 2005 Bonds or the security for the Series 2005 Bonds or, except as disclosed in this Official Statement, on the financial condition of the Airport, and (2) that the information contained in this Official Statement does not contain any misstatement of a material fact and does not omit to state any material fact necessary to make the statements herein contained, in light of the circumstances under which they were made, not misleading. -50- MISCELLANEOUS Ratings Fitch Inc. and Moody's Investors Service, Inc., have assigned ratings of "BBB-" and "Baa3," respectively, to the Series 2005 Bonds. The ratings reflect only the respective views of the rating agencies, and an explanation of the significance of each rating may be obtained from the rating agency furnishing such rating at the following addresses: Fitch, Inc., One State Street Plaza, New York, New York 10004, and Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies, and assumptions of its own. There is no assurance that either or both of such ratings will remain unchanged for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agency furnishing the same, if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the liquidity and market price of the Series 2005 Bonds. Underwriting The Series 2005 Bonds will be purchased for re-offering at negotiated sale by Merrill Lynch & Co., Inc. (the "Underwriter") from the Consolidated Government at an aggregate purchase price of _ percent of the principal amount of the Series 2005 Bonds plus accrued interest to the date of delivery. The Underwriter will enter into a Bond Purchase Agreement that provides that the Underwriter will purchase all of the Series 2005 Bonds, if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2005 Bonds will be subject to various conditions contained in the Bond Purchase Agreement. The Underwriter intends to offer the Series 2005 Bonds to the public initially at the offering prices set forth on the inside front cover page of this Official Statement, which offering prices may subsequently be changed from time to time by the Underwriter without any requirement of prior notice. The Underwriter will receive no fee (other than the anticipated profits described in the preceding sentence) from the Consolidated Government for underwriting the Series 2005 Bonds. The Underwriter has reserved the right to permit other securities dealers who are members of the National Association of Securities Dealers, Inc. to assist in selling the Series 2005 Bonds. The Underwriter may offer and sell the Series 2005 Bonds to certain dealers (including dealers depositing Series 2005 Bonds into investment trusts) at prices lower than the public offering prices set forth on the inside front cover page of this Official Statement or otherwise allow concessions to such dealers who may re-allow concessions to other dealers. Any discounts or commissions that may be received by such dealers in connection with the sale of the Series 2005 Bonds will be deducted from the Underwriter's underwriting profits. Independent Professionals The financial statements of the Airport as of December 31, 2003 and 2002 and for the years then ended, attached hereto as part of Appendix A, have been audited by Cherry, Bekaert & Holland, L.L.P., Augusta, Georgia, independent certified public accountants, to the extent and for the periods indicated in their report thereon, which appears in Appendix A. Such financial statements have been included herein in reliance upon the report of Cherry, Bekaert & Holland, L.L.P. The Consolidated Government has retained Ricondo & Associates, Inc., Cincinnati, Ohio, as its consultant to develop several reports and studies relating to the Airport and certain financial matters. Ricondo & Associates, Inc. has prepared the report included as Appendix B to this Official Statement, which is included herein in reliance upon such firm's experience in airport consulting and related financial matters. Summary of Continuing Disclosure Certificate Definitions The following capitalized terms have the following meanings for purposes of the Disclosure Certificate: "Annual Report" means any Annual Report provided by the Consolidated Government pursuant to the provisions of the Disclosure Certificate described herein under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate -- Provision of Annual Reports and -- Content of Annual Reports." "Bondholders" means the beneficial owners of the Series 2005 Bonds. "Dissemination Agent" means the Consolidated Government, or any successor Dissemination Agent designated in writing by the Consolidated Government and that has filed with the Consolidated Government a written acceptance of such designation. -51- "Fiscal Year" means any period of twelve consecutive months adopted by the Consolidated Government as its fiscal year for financial reporting purposes and initially means the period beginning on January 1 of each calendar year and ending on December 31 of the same calendar year. "Listed Events" means any of the events listed in the provisions of the Disclosure Certificate described herein under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate -- Reporting of Significant Events." ' "National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Currently, the followi ng are National Repositories: (1) Bloomberg Municipal Repository, Skillman, New Jersey, (2) DPC Data Inc., Fort Lee, New Jersey, (3) FT Interactive Data, New York, New York, and (4) Standard & Poor's Securities Evaluations, Inc., New York, New York. "Repository" means each National Repository and each State Repository. "Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may beamended from time to time. "State Repository" means any public or private repository or entity dysignated by the State of Georgia as a state repository for the purpose of the Rule. As of the date of this Official Staterr'ient, there is no State Repository. Provision of Annual Reports The Consolidated Government agreed in the Disclosure Certificate to, or to cause the Dissemination Agent to, not later than 195 days after the end of each Fiscal Year, commencing with fiscal year 2004, provide to each Repository an Annual Report that is consistent with the requirements of the provisions of the Disclosure Certificate described below under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate -- Content of Annual Reports." Not later than fifteen business days prior to such date, the Consolidated Government agreed to provide the Annual Report to the Dissemination Agent (if other than the Consolidated Government). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in the provisions of the Disclosure Certificate described below under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate -- Content of Annual Reports"; provided that the audited financial statements of the Airport may be submitted separately from the balance of the Annual Report. If the Consolidated Government is unable to provide to the Repositories an Annual Report by the date required as described above, the Consolidated Government must send a notice to each Repository of such failure. The Dissemination Agent is required to: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the Consolidated Government, file a report with the Consolidated Government certifying that the Annual Report has been provided pursuant to the Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. The Consolidated Government is required to promptly file a notice of any change in its Fiscal Year with each Repository. If the audit report specified in clause (1) of the provisions of the Disclosure Certificate described below under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate -- Content of Annual Reports" is not submitted as part of the Annual Report to each Repository pursuant to the Disclosure Certificate, the Consolidated Government agreed to, or to cause the Dissemination Agent to, provide to each Repository such audit report, together with the audited financial statements of the Airport to which such audit report relates, when they are available to the Consolidated Government. Content of Annual Reports The Disclosure Certificate requires the Consolidated Government's Annual Report to contain or incorporate by reference the following: -52- (\) the financial statements of the Airport for the preceding Fiscal Year, which must be prepared in accordance with generally accepted accounting principles, as in effect from time to time, and which must be accompanied by an audit report, if available at the time of submission of the Annual Report to each Repository pursuant to the Disclosure Certificate, resulting from an audit conducted by an independent certified public accountant or firm of independent certified public accountants in conformity with generally accepted auditing standards; (2) if generally accepted accounting principles have changed since the last Annual Report was submitted pursuant to the Disclosure Certificate and if such changes are material to the Airport, a narrative explanation describing the impact of such changes on the Airport; and (3) information for the preceding Fiscal Year regarding the following categories of financial information and operating data of the Airport: (A) Airport enplanements by airline, (B) primary origin and destination passenger markets for the Airport, (C) aircraft operations, (D) landed weight by airline, (E) historical debt service coverage ratio, (F) total costs of capital improvements and funding sources, and (G) the insurance coverage of the Airport. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Consolidated Government or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Consolidated Government must clearly identify each such other document so incorporated by reference. Reporting of Significant Events The Disclosure Certificate governs the giving of notices of the occurrence of any of the following events with' . respect to the Series 2005 Bonds: (\) Principal and interest payment delinquencies; (2) Non-payment related defaults; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions or events affecting the tax-exempt status of the Series 2005 Bonds; (7) Modifications to rights of Bondholders; (8) Series 2005 Bond calls; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Series 2005 Bonds; and (11) Rating changes. If the Consolidated Government obtains knowledge of the occurrence of a Listed Event that is material, the Consolidated Government has agreed to promptly file a notice of such occurrence with each Repository. Notwithstanding the foregoing, notice of Listed Events described in clauses 8 and 9 need not be given under the Disclosure Certificate any earlier than the notice (if any) of the underlying event is given to the owners of the affected Series 2005 Bonds pursuant to the Bond Resolution. Termination of Reporting Obligation The Consolidated Government's obligations under the Disclosure Certificate will terminate upon the legal defeasance, prior redemption, or payment in full of all of the Series 2005 Bonds. -53- Dissemination Agent The Consolidated Government may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. Amendment; Waiver Notwithstanding any other provision of the Disclosure Certificate, the Consolidated Government may amend the Disclosure Certificate, and any provision of the Disclosure Certificate may be waived, if (a) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligor on the Series 2005 Bonds, or type of business conducted; (b) such amendment or waiver does not materially impair the interests of the Bondholders, as determined either by an unqualified opinion of nationally recognized bond counsel filed with the Consolidated Government or by the approving vote of the Bondholders owning more than two-thirds in aggregate principal amount of the Series 2005 Bonds outstanding at the time of such amendment or waiver; and (c) such amendment or waiver is supported by an opinion of counsel expert in federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings in the Disclosure Certificate to violate the Rule if such amendment or waiver had been effective on the date of the Disclosure Certificate but taking into account any subsequent change in or official interpretation of the Rule, as well as any change in circumstances. If any provision of the Disclosure Certificate described herein under the caption "MISCELLANEOUS . Summary of Continuing Disclosure Certificate -- Content of Annual Reports" is amended or waived, the first Annual Report containing any amended, or omitting any waived, operating data or financial information must explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of operating data or financial information being provided. If the provisions of the Disclosure Certificate described herein under the caption "MISCELLANEOUS - Summary of Continuing Disclosure Certificate -- Content of Annual Reports" specifying the accounting principles to be followed in preparing the financial statements of the Airport are amended or waived, the Annual Report for the year in which the change is made must present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison must include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to the Bondholders to enable them to evaluate the ability of the Consolidated Government to meet its obligations. To the extent reasonably feasible, the comparison must also be quantitative. The Consolidated Government must file a notice of the change in the accounting principles with each Repository on or before the effective date of any such amendment or waiver. Additional Information Nothing in the Disclosure Certificate will prevent the Consolidated Government from disseminating any other information, using the means of dissemination set forth in the Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by the Disclosure Certificate. If the Consolidated Government chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by the Disclosure Certificate, the Consolidated Government will have no obligation under the Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Default In the event of a failure of the Consolidated Government to comply with any provision of the Disclosure Certificate, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Consolidated Government to comply with its obligations under the Disclosure Certificate. A default under the Disclosure Certificate will not be deemed an "event of default" or "default" under the Bond Resolution, and the sole remedy under the Disclosure Certificate in the event of any failure of the Consolidated Government to comply with the Disclosure Certificate will be an action -54- to compel performance. A court may decide not to order the specific performance of the covenants contained in the Disclosure Certificate. Additional Information Use of the words "shall," "must," or "will" in this Official Statement in summaries of documents or laws to describe future events or continuing obligations is not intended as a representation that such event will occur or obligation will be fulfilled but only that the document or law contemplates or requires such event to occur or obligation to be fulfilled. Any statements made in this Official Statement invol ving estimates or matters_ of opinion, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates or matters of opinion will be realized. Neither this Official Statement nor any statement that may have been made orally or in writing is to be construed as a contract with the owners of the Series 2005 Bonds. CERTIFICATION The execution and delivery of this Official Statement, and its distribution and use by the Underwriter, have been duly authorized and approved by the Consolidated Government. AUGUSTA, GEORGIA By: Mayor, Augusta-Richmond County Commission By: Chairman, Augusta Aviation Commission -55- APPENDIX A FINANCIAL STATEMENTS OF THE AIRPORT The financial statements of the Airport as of December 3], 2003 and 2002 and for the years then ended, included as part of this Appendix A, have been audited by Cherry, Bekaert & Holland, L.L.P., Augusta, Georgia, independent certified public accountants, to the extent and for the periods indicated in their report thereon, which appears in this Appendix A. Such financial statements have been included herein in reliance upon the report of Cherry, Bekaert & Holland, L.L.P. The financial statements of the Airport as of October 31, 2004 and 2003 and for the ten-month periods then ended, included as part of this Appendix A, have been prepared by the staff of the Airport without audit and, in the opinion of the staff of the Airport, include all adjustments necessary for a fair statement of the results of operations of the Airport for such interim periods, all of which adjustments are of a normal recurring nature. The interim amounts reflected in these financial statements are not necessarily indicative of the financial results that will be achieved for the full fiscal year. [Remainder of Page Intentionally Left Blank] APPENDIX B REPORT OF THE AIRPORT CONSULTANT The Consolidated Government has retained Ricondo & Associates, Inc., Cincinnati, Ohio, as its consultant to develop several reports and studies relating to the Airport and certain financial matters. The Report of the Airport Consultant, prepared by Ricondo & Associates, Inc., has been included as this Appendix B in reliance upon such firm's experience in airport consulting and related financial matters. THE REPORT OF THE AIRPORT CONSULTANT, INCLUDING ALL COMMENTS, ASSUMPTIONS, NOTES, AND DISCLAIMERS, SHOULD BE READ IN ITS ENTIRETY. [Remainder of Page Intentionally Left Blank] APPENDIX C SUMMARY OF THE BOND RESOLUTION This Appendix C has been prepared by Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel. The a Master Bond Resolution adopted by the Augusta-Richmond County Commission on , 2005 and by the Aviation Commission on , 2005, as ratified, reaffirmed, supplemented, and amended by Supplemental Bond Resolutions adopted by the Augusta-Richmond County Commission and the Aviation Commission on , 2005 and , 2005 (collectively the "Bond Resolution"), is a contract for the benefit of the owners of the Bonds, which specifies the terms and details of the Series 2005 Bonds and which defines the security for the Series 2005 Bonds. The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Bond Resolution. Other provisions of the Bond Resolution are described in this Official Statement under the captions "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2005 BONDS - Pledge of Revenues, - Funds Created by the Bond Resolution and Flow of Funds, and - Rate Covenant." Reference is made to the Bond Resolution in its entirety for a complete recital of the detailed provisions thereof, copies of which are available from the Consolidated Government upon request. [Remainder of Page Intentionally Left Blank] APPENDIX D FORMS OF LEGAL OPINIONS The forms of Legal Opinions included as -this Appendix D have been prepared by Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel, and are substantially the forms to be given in connection with the delivery of the Series 2005 Bonds. [Remainder of Page Intentionally Left Blank] SUMMARY OF CONTENTS 1 Pa2e Introduction..... .................... ......... ......... ...................... Plan of Financing............... ...... ........... ................. ....... The Series 2005 Bonds............................................... Security and Sources of Payment for the Series 2005 Bonds ........................................... The Consolidated Government .................................. The Aviation Commission.......................................... The Airport ............................................... ................. Airport Financial Information ................................... Investment Considerations ......................................... Legal Matters ......... ................. ....................... ............. Miscellaneous............................................................ . Certification ............ ........ ....... .......... ..... ..................... Appendix A: Financial Statements of the Airport........... .................. ........................... A-I Appendix B: Report of the Airport Consultant. ........................ ..... .................. ........ B-1 Appendix C: Summary of the Bond Resolution........................................................ C-I Appendix D: Forms of Legal Opinions ............... D-I No dealer, broker, salesman, or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Consolidated Government or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 200S Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. The delivery of this Official Statement at any time does not imply that the information herein is correct as of any time subsequent to this date. I See detailed "TABLE OF CONTENTS" on pages (i) to (ii). $21,990,000* AUGUSTA, GEORGIA yfaa~ta@ d IWg'lOllal Alrplwf Airport Revenue Bonds, Series 2005 New Issue $7,425,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMn New Issue $8,000,000* Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT) New Issue $6,565,000* Airport General Revenue Bonds, Series 200SC (AMT) OFFICIAL STATEMENT MERRILL LYNCH & CO. Dated: ,2005 *Preliminary; subject to change. A FIRST SUPPLEMENTAL BOND RESOLUTION SUPPLEMENTING THE MASTER BOND RESOLUTION OF AUGUSTA, GEORGIA TO PROy:IDE FOR THE ISSUANCE OF REVENUE BONDS SECURED BY A SENIOR LIEN ON PFC REVENUES AND A SENIOR LIEN ON GENERAL REVENUES AND REVENUE BONDS SECURED BY A SENIOR LIEN ON GENERAL REVENUES ONLY TO PROVIDE FUNDS TO FINANCE OR REFINANCE, IN WHOLE OR IN PART, THE COST OF THE PLANNING, ENGINEERING, DESIGN, ACQUISITION AND CONSTRUCTION OF CERTAIN IMPROVEMENTS TO AUGUSTA REGIONAL AIRPORT AT BUSH FIELD, AND TO PAY EXPENSES RELATING THERETO; TO RATIFY, AUTHORIZE AND APPROVE THE PREPARATION, USE AND DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT IN CONNECTION WITH THE OFFER AND SALE OF THE BONDS; TO PROVIDE FOR THE ANNUAL SUBMISSION OF CERTAIN FINANCIAL INFORMATION AND OPERATING DATA PURSUANT TO RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION; TO PROVIDE FOR THE FORM OF THE BONDS AND FOR THE EXECUTION OF THE BONDS; TO PROVIDE FOR THE PLACE OF PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS; AND FOR OTHER PURPOSES: FIRST SUPPLEMENTAL BOND RESOLUTION ADOPTED FEBRUARY 1,2005 BY THE AUGUSTA-RICHMOND COUNTY COMMISSION ADOPTED JANUARY 20, 2005 BY THE AUGUSTA A VIA nON COMMISSION PROVIDING FOR THE ISSUANCE OF Not to exceed $14,500,000 aggregate principal amount Airport Passenger Facility Charge and General Revenue Bonds Series 2005A (Non-AMT) and Series 2005B (AMT) Not to exceed $7,000,000 aggregate principal amount Airport General Revenue Bonds Series 2005C (AMT) AO 1162781.6 Table of Contents Pa2e AR TI CLE I. GENERAL; DEFINITIONS ........... ........ ..... ...... ........ ...... ..... ........ ...... ...... .............. ............. 3 Section 1.1. First Supplemental Bond Resolution.............................................................................. 3 Section 1.2. Definitions. ...... .............. ........... .......... ....................... ............... .... ..................................3 ARTICLE II. ISSUANCE OF THE SERIES 2005A BONDS AND SERIES 2005B BONDS..............3 Section 2.1. Authorization of the Series 2005A Bonds and Series 2005B Bonds. ............................3 Section 2.2. Series 2005NB Bonds are General Revenue Bonds and PFC Revenue Bonds......................................................................................................................... .....4 Execution; Form of Series 2005NB Bonds. ..................................................................4 Application of Proceeds of Series 2005NB Bonds. ....................................................13 Optional and Mandatory Redemption of Series 2005NB Bonds. ...............................13 Section 2.3. Section 2.4. Section 2.5. ARTICLE III. ISSUANCE OF THE SERIES 2005C BONDS .............................................................13 Section 3.1. Authorization of the Series 2005C Bonds.................................................................... 13 Section 3.2. Series 2005C Bonds are General Revenue Bonds........................................................ 14 Section 3.3. Execution; Form of Series 2005C Bonds. ....................................................................14 Section 3.4. Application of Proceeds of Series 2005C Bonds. ........................................................23 Section 3.5. Optional and Mandatory Redemption of Series 2005C Bonds. ...................................23 ARTICLE IV. PROVISIONS RELATING TO ALL SERIES 2005 BONDS .....................................23 Section 4.1. Registration, Transfer and Exchange. ..........................................................................23 Section 4.2. Book Entry System of Registration.. ....... ................................................... ............ ...... 24 Section 4.3. CovenantsWith Respect to Arbitrage. .........................................................................26 Section 4.4. Limited Obligation. ....... ......... ............... ...... ....................................... ..... ....... ..... .........26 Section 4.5. Offering Materials. ... ....................... ....... ................ ................................. ............... ...... 26 Section 4.6. Continuing Disclosure Certificate. . ................... ........................... ........................ ........26 ARTICLE V. PROJECT FUNDS; DEBT SERVICE FUNDS AND COSTS OF ISSUANCE ACCOUNT ........ ....... .......................................... ...... ....... ............ ....... ........27 2005 Project Fund. .... ......... ...................... ..... ............ .... ...... ... ........ ....... .... .......... .........27 Investments................................................................................................................... 28 Creation of Additional Funds and Accounts; Debt Service Reserve............................ 28 No Lien or Claims. ...................... ...................... ........ ......... ................. ................... ......29 Section 5.1. Section 5.2. Section 5.3. Section 5.4. AR TI CLE VI. MISCELLANEOUS ..... .................................... ........ ....................... .......... ...................... 29 Section 6.1. Supplemental Resolution... ............ .......... ........ ............ ................... ..............................29 , Section 6.2. Validation. ......... ............ ................... ...... ............................................ ...... ....................29 Section 6.3. Closing Papers.............................................................................................................. 30 Section 6.4. Binding Contract. .............................................................. ...........................................30 Section 6.5. Conflicting Ordinances or Resolutions. ....................................................................... 30 EXHIBIT A Report of Airport Consultant AD 1162781.6 -)- FIRST SUPPLEMENTAL BOND RESOLUTION A FIRST SUPPLEMENTAL BOND RESOLUTION SUPPLEMENTING THE MASTER BOND RESOLUTION OF AUGUSTA, GEORGIA TO PROVIDE FOR THE ISSUANCE OF REVENUE BONDS SECURED BY A SENIOR LIEN ON PFC REVENUES AND A SENIOR LIEN ON GENERAL REVENUES AND REVENUE BONDS SECURED BY A SENIOR LIEN ON GENERAL REVENUES ONLY TO PROVIDE FUNDS TO FINANCE OR REFINANCE, IN WHOLE OR IN PART, THE COST OF THE PLANNING, ENGINEERING, DESIGN, ACQUISITION, AND CONSTRUCTION OF CERTAIN IMPROVEMENTS TO AUGUSTA REGIONAL AIRPORT AT BUSH FIELD AND TO PAY EXPENSES RELATING THERETO; TO RATIFY, AUTHORIZE AND APPROVE THE PREPARATION, USE AND DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT IN CONNECTION WITH THE OFFER AND SALE OF THE BONDS; TO PROVIDE FOR THE ANNUAL SUBMISSION OF CERTAIN FINANCIAL INFORMATION AND OPERATING DATA PURSUANT TO RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION; TO PROVIDE FOR THE FORM OF THE BONDS AND FOR THE EXECUTION OF THE BONDS; TO PROVIDE FOR THE PLACE OF PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS; AND FOR OTHER PURPOSES: WHEREAS, under and by virtue of the authority of the Constitution and laws of the State of Georgia, including specifically, but without limitation, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, known as the "Revenue Bond Law," as amended (the "Revenue Bond Law"), and an act of the General Assembly of the State of Georgia (Georgia Laws 1995 p. 3468 et seq.) (the "Act"), Augusta, Georgia (the "Consolidated Government") is authorized to undertake the acquisition, construction, reconstruction and improvement of airports for its own use and for the use of the public; and WHEREAS, the Consolidated Government owns Augusta Regional Airport at Bush Field (the "Airport"); and WHEREAS, the Airport is operated for and on behalf of the Consolidated Government by the Augusta Aviation Commission, a board appointed by the Consolidated Government to manage and provide oversight for the Airport and all other property incidental thereto; and WHEREAS, the Consolidated Government and the Augusta Aviation Commission adopted the Master Bond Resolution on February 1, 2005 and January 20, 2005, respectively (the "Master Bond Resolution"), pursuant to which the Consolidated Government has authorized the issuance of airport revenue bonds pursuant to Supplemental Bond Resolutions (as defined in the Master Bond Resolution); and WHEREAS, capitalized terms used herein and not otherwise defined herein are used with the meanings assigned thereto by the Master Bond Resolution; and WHEREAS, the Consolidated Government desires to provide for the demolition, in phases, of the existing airline passenger terminal building and the construction, in phases, of a new airline passenger, terminal building consisting of new holdrooms, new ticketing and baggage make-up areas and new bag: claim and bag claim handling areas, security offices, concession spaces, rental car offices and other ancillary and support space, and site work related to access road, parking areas and aprons, including utilities, grading and drainage and paving (the "2005 Project"), and the 2005 Project is described in the report of its airport consultant, Ricondo & Associates, Inc. (the "Airport Consultant"), which is attached hereto as Exhibit A and hereby made a part hereof (the "Report of the Airport Consultant"); and AO I I 6278 \.6 WHEREAS, it has been determined that the most feasible method of raising funds to finance the 2005 Project and to pay expenses relating thereto is for the Consolidated Government to issue its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT) and Series 2005B (AMT) in an aggregate principal amount not to exceed $14,500,000 (the "Series 2005A/B Bonds") and its Airport General Revenue Bonds, Series 2005C (AMT) in an aggregate principal amount not to exceed $7,000,000 (the "Series 2005e Bonds" and, together with the Series 2005AIB Bonds, the "Series 2005 Bonds"); and WHEREAS, there is currently no bonded indebtedness outstanding with respect to the Airport; and WHEREAS, the Consolidated Government and the Augusta Aviation Commission desire to secure the repayment of the Series 2005A Bonds and the Series 2005B Bonds with a senior lien on both Net General Revenues and PFC Revenues of the Airport, and desire to secure the repayment of the Series 2005C Bonds with a senior lien on Net General Revenues of the Airport; and WHEREAS, after extensive study and investigation, the Consolidated Government has determined that the anticipated PFC Revenues and Net General Revenues to be received by the Augusta Aviation Commission, on behalf of the Consolidated Government, from time to time will be sufficient to provide for the payment of the principal of, premium (if any) and interest on the Series 2005 Bonds and any other amounts, charges, fees and expenses payable with respect to the Series 2005 Bonds, as and when the same become due, all as is shown in the Report of the Airport Consultant attached hereto as Exhibit A; and WHEREAS, prior to the actual issuance and delivery of the Series 2005 Bonds, the Consolidated Government and the Aviation Commission will enter into a contract with SunTrust Bank (the "Paying Agent"), pursuant to which the Paying Agent will agree to act as Paying Agent and as Bond Registrar for the Series 2005 Bonds and to perform various functions with respect to the Series 2005 Bonds, including, but not limited to, the authentication of the Series 2005 Bonds by the manual signature of a duly authorized officer of the Paying Agent, as Bond Registrar, the registration, transfer, exchange and related mechanical and clerical functions, as well as the preparation, signing and issuance of checks and drafts in payment of the principal of and interest on the Series 2005 Bonds as same become due and payable; and WHEREAS, to ensure compliance with Securities and Exchange Commission Rule 15c2-12, it is necessary and desirable to authorize the execution and delivery by the Consolidated Government of a continuing disclosure certificate with respect to the Series 2005 Bonds, pursuant to which the Consolidated Government will agree to provide notices of certain events and to submit annually certain financial information and operating data to specified information repositories; and WHEREAS, the Consolidated Government and. the Augusta Aviation Commission must now ratify the preparation, use and distribution of the preliminary official statement pertaining to the Series ,2005 Bonds and authorize the preparation, use and distribution of the official statement pertaining to the Series 2005 Bonds and the validation, execution, authentication, issuance, sale and delivery of the Series 2005 Bonds. i NOW, THEREFORE, BE IT RESOLVED by the Augusta-Richmond County Commission and the Augusta Aviation Commission, as follows: -2- AD 116278\.6 ARTICLE I. GENERAL; DEFINITIONS Section 1.1. First Supplemental Bond Resolution. This First Supplemental Bond Resolution is adopted pursuant to and in accordance with Section 20 I of the Master Bond Resolution and all terms, covenants, restrictions and provisions of the Master Bond Resolution shall be applicable to the Series 2005 Bonds authorized by this First Supplemental Bond Resolution and the proceeds thereof, except as otherwise expressly provided herein. All of the terms and provisions of this First Supplemental Bond Resolution shall be deemed to be a part of the terms and provisions of the Master Bond Resolution for all purposes, and the Master Bond Resolution and this First Supplemental Bond Resolution (hereinafter sometimes collectively referred to as the "Bond Resolution") shall be read, taken and construed as one and the same instrument. Section 1.2. Definitions. All terms as defined in the Master Bond Resolution shall have the same meaning herein, unless the context othelWise indicates. In addition to the foregoing, the following terms shall have the meanings hereafter set forth: "Interest Payment Date" means, for the Series 2005 Bonds, each January I and July I, commencing July 1,2005, through the final maturity of the Series 2005 Bonds. ARTICLE II. ISSUANCE OF THE SERIES 2005A BONDS AND SERIES 2005B BONDS Section 2.1. Authorization of the Series 2005A Bonds and Series 2005B Bonds. For the purpose of providing funds to finance a portion of the costs of the planning, engineering, design, acquisition and construction of the 2005 Project, including capitalized interest during the period of construction of the 2005 Project, and to pay expenses necessary to accomplish the foregoing, the issuance of the Series 2005A Bonds and the Series 2005B Bonds in the aggregate principal amount not to exceed $14,500,000 is hereby authorized. The Series 2005A Bonds shall be designated as "Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (Non-AMT)" and the Series 2005B Bonds shall be designated as "Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (AMT)" (collectively, the "Series 2005A/B Bonds"). The principal of the Series 2005AIB Bonds shall mature (or be acquired by mandatory redemption proceedings) on January I in such year or years not later than January I, 2035, such that the highest amount of principal and interest coming due on the Series 2005AIB Bonds in any Sinking Fund Year shall not exceed $3,200,000. The Series 2005AIB Bonds shall be dated not later than the date of issuance and delivery, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered upwards from RA-I or RB-I, as applicable, shall be in the form of fully-registered bonds without coupons, shall bear interest i from date at such rate or rates not exceeding 7 percent per annum, all interest payable semiannually on: January 1 and July I in each year and shall be subject to optional redemption as set forth in a i Supplemental Resolution. The Series 2005AIB Bonds shall be book-entry bonds as described in Section 210 of the Master Bond Resolution and as such shall be subject to Section 4.2 of this First Supplemental Bond Resolution. -3- AD 1162781.6 The provisions for dates, authentication, payment, registration and optional, mandatory and extraordinary redemption shall be in accordance with Article II and Article III of the Master Bond Resolution and as set forth in a Supplemental Resolution. Section 2.2. Series 2005A/B Bonds are General Revenue Bonds and PFC Revenue Bonds. The Series 2005AIB Bonds, when issued, shall have a Senior Lien on both PFC Revenues and Net General Revenues of the Airport on a parity with each other, and shall constitute both General Revenue Bonds and PFC Revenue Bonds. The Series 2005AIB Bonds shall rank on a parity with each other and with the Series 2005C Bonds as to lien on Net General Revenues. Section 2.3. Execution; Form of Series 2005A/B Bonds. (a) The Series 2005A/B Bonds shall be executed on behalf of the Consolidated Government by use of the manual or facsimile signature of the Mayor of the Consolidated Government and the Chairman of the Augusta Aviation Commission and attested by the manual or facsimile signature of the Clerk of the Consolidated Government and the official seal of the Consolidated Government shall be impressed thereon or a facsimile thereof imprinted thereon, and the Series 2005A/B Bonds shall be authenticated by the manual signature of a duly authorized signatory of the bond registrar with respect to the Series 2005A/B Bonds. The validation certificate to be printed on the Series 2005A/B Bonds shall be executed by use of the manual or facsimile signature of the Clerk of the Superior Court of Richmond County and the official seal of said Court shall be impressed thereon or a facsimile thereof shall be imprinted thereon. In case any officer whose signature shall appear on the Series 2005AIB Bonds shall cease to be such officer before delivery of such Series 2005A/B Bonds, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. (b) The Series 2005AIB Bonds, the validation certificate and the bond registrar's certificate of authentication shall be in substantially the forms set out below, with such variations, omissions, substitutions and insertions as are required or permitted by the Bond Resolution. -4- AO 1162781.6 [FORM OF SERIES 200SNB BONDS] Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (HDTC''), to Augusta, Georgia or its agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. R[A or B]- $ UNITED STATES OF AMERICA STATE OF GEORGIA AUGUST A, GEORGIA AIRPORT P ASSENGER FACILITY CHARGE AND GENERAL REVENUE BOND SERIES 2005[A or B) DATE: INTEREST RATE: % MATURITY DATE: CUSIP: FOR VALUE RECEIVED, AUGUSTA, GEORGIA (the "Consolidated Government"), a municipal corporation and county duly created and existing under the laws of the State of Georgia, hereby promises to pay solely from the sources hereinafter described to CEDE & CO., or registered assigns, the principal sum of DOLLARS in lawful money of the United States of America, on the date specified above, unless redeemed prior thereto as hereinafter provided, upon presentation and surrender of this Series 200S[A or B] Bond to SunTrust Bank, Atlanta, Georgia, as registrar and paying agent (the "Bond Registrar" or the "Paying Agent"), and to pay interest on said principal sum (computed on the basis of a 360-day year of twelve 30-day months) at the interest rate per annum specified above, payable semiannually on January 1 and July I of each year (each such date an "Interest Payment Date"), commencing January 1, 200S, from the Interest Payment Date next preceding the date of authentication of this Series 2005[A or B] Bond to which interest has been paid or provided for, unless the date of authentication of this Series 200S[A or B] Bond is an Interest Payment Date to which interest has been paid or provided for, in which case from the date of authentication hereof, or unless no interest has been paid hereon, in which case from the date hereof, or unless such authentication date shall be after any record date (hereinafter defined) and before the next succeeding Interest Payment Date, in which case interest shall be paid from the next succeeding Interest Payment Date. The interest payable on any Interest Payment Date will be paid by first class mail, postage prepaid, mailed on the date on which due to the person in whose name this Series 200S[A or B] Bond is registered at the close of business on the ISth day of the calendar month next preceding such Interest Payment Date (each such date, a "Record Date") at the address shown on the bond register maintained by : the Bond Registrar on such Record Date, except that any interest not so timely paid or duly provided for; shall cease to be payable to the person who is the registered owner of this Series 200S[A or B] Bond as of I the Record Date and shall be payable to the person who is the registered owner of this Series 200S[A or ' B] Bond at the close of business on a special record date for the payment of such defaulted interest. Such' special record date shall be fixed by the Bond Registrar whenever moneys become available for the payment of such defaulted interest, and notice of the special record date shall be given by first class mail -S- AD 1162781.6 by the Bond Registrar or by or on behalf of the Consolidated Government to the owner hereof not less than 50 days prior thereto. Notwithstanding the foregoing, however, interest on this Series 2005[A or B) Bond shall be payable to any registered owner of more than $1,000,000 in aggregate principal amount of the Series 2005[A or B) Bonds by deposit of immediately available funds to the account of such registered owner maintained with the Paying Agent or transmitted by wire transfer to such registered owner at an account maintained at a commercial bank located within the United States of America, if the Paying Agent receives from such registered owner written deposit or wire transfer instructions prior to the Record Date preceding the Interest Payment Date for which the deposit or wire transfer is requested. The principal of this Series 2005[A or B) Bond is payable only upon presentation and surrender of this bond at the principal corporate trust office of the Bond Registrar and Paying Agent, or its successor or successors, in any coin or currency of the United States of America which at the time of such payment is legal tender for public and private debts. Notwithstanding the foregoing, so long as this Series 2005[A or BJ Bond is registered in the name of Cede & Co., payment of principal of and interest on this Series 2005[A or BJ Bond shall be made by wire transfer to Cede & Co. This Series 2005[A or B) Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Resolution (hereinafter described) until this Series 2005[A or B] Bond shall have been authenticated and registered upon the registration books kept by the Bond Registrar for that purpose, which authentication shall be evidenced by the manual execution of the certificate hereon by the Bond Registrar. This Series 2005[A or B) Bond is one of a series of airport passenger facility charge and general revenue bonds in the aggregate principal amount of $ duly authorized and designated "Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005[A or B]" (the "Series 2005[A or B] Bonds") all of like tenor, except as to authentication dates, numbers, denominations, interest rates and maturities. The Series 2005[A or B] Bonds are issued by the Consolidated Government pursuant to the Constitution and laws of the State of Georgia, including specifically, but without limitation, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, as amended, known as the "Revenue Bond Law," an act of the General Assembly of the State of Georgia (Georgia Laws 1995 p. 3468 et seq., as amended), and the Master Bond Resolution adopted , 2005 by the Consolidated Government and , 2005 by the Augusta Aviation Commission, as amended and supplemented by a First Supplemental Bond Resolution adopted by the Consolidated Government on , 2005 and by the Augusta Aviation Commission on , 2005 (collectively, the "Bond Resolution"), for the purpose of providing funds to finance all or a portion of the costs of acquiring, construction, installing and equipping certain improvements and . additions to the Consolidated Government's Augusta Regional Airport at Bush Field (the "Airport"), including capitalized interest during the period of construction of such additions and improvements, and to pay expenses necessary to accomplish the foregoing. The Series 2005[A or B] Bonds are both General Revenue Bonds and PFC Revenue Bonds (as defmed in the Bond Resolution) and are secured by a senior lien on PFC Revenues (as defined in the Bond Resolution) and by a senior lien on Net General Revenues. Concurrently with the issuance of the Series 2005[A or B) Bonds, pursuant to the First Supplemental Bond Resolution the Consolidated Government is issuing and delivering $ aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005[A or B] Bonds (the "Series 2005[A or B] Bonds" and, together with the Series 2005 [A or B] Bonds, the "Series 2005NB Bonds") and $ -6- AD 1162781.6 aggregate principal amount of its Airport General Revenue Bonds, Series 2005C (the "Series 2005C Bonds"), and the lien of the Series 2005[A or B] Bonds on PFC Revenues is on a parity with the lien on such revenues securing the Series 2005[A or B] Bonds and the lien of the Series 2005 [A or B] Bonds on Net General Revenues is on a parity with the lien on such revenues securing the Series 2005 [A or B] Bonds and the Series 2005C Bonds. Net General Revenues include general1y al1 revenues arising from the ownership or operation of the Airport after the payment of expenses of operation and maintenance of the Airport, but specifically exclude "PFC Revenues" (revenues received by or required to be remitted to the Augusta Aviation Commission from the passenger facility charges imposed by the Augusta Aviation Commission pursuant to the Aviation Safety and Capacity Government Expansion Act of 1990) and "Special Purpose Revenues" (revenues arising from or generated by one or more Special Purpose Facilities (as defined in the Bond Resolution)). Pursuant to the Bond Resolution, upon compliance with certain conditions, the Consolidated Government may (i) issue additional revenue bonds secured on a parity with the Series 2005AIB Bonds, (ii) issue additional revenue bonds secured on a subordinate basis to payment from the same revenues securing the Series 2005AIB Bonds, (iii) issue additional revenue bonds secured by revenues different from the revenues securing the Series 2005AIB Bonds, (iv) issue additional revenue bonds secured by a combination of (i) and (iii) or (ii) and (iii), (v) grant a lien securing other obligations on a parity with or on a subordinate basis to the Series 2005AIB Bonds. The Consolidated Government, acting by and through the Augusta Aviation Commission, has covenanted and hereby covenants and agrees at all times while any Bonds are outstanding and unpaid to prescribe, fix, maintain, and collect rates, fees, and other charges for the services and facilities of the Airport to: (i) provide for 100 percent of the Expenses of Operation and Maintenance of the Airport (except for certain specific facilities) and for the accumulation in the Operation and Maintenance Reserve Fund, as defined in the Bond Resolution, of the Operating Reserve, and (ii) produce Net General Revenues, as defined in the Bond Resolution, in each Fiscal Year, as defined in the Bond Resolution, which, together with Other Available Moneys (as defined in the Master Bond Resolution) wil1: (a) equal at least 125 percent of the debt service requirement of all Net General Revenue Bonds, as defined in the Bond Resolution, and at least 100 percent of the debt service requirement of al1 Subordinate Bonds and Other Airport Obligations payable from Net General Revenues, (b) enable the Consolidated Government to make all payments required to come from Net General Revenues into any Debt Service Reserve Account, the PFC Debt Service Reserve Account, the Renewal and Replacement Fund and the Rebate Fund and on Contracts or Other Airport Obligations, as each is defined in the Bond Resolution, (c) enable tbe Consolidated Government to accumulate an amount to be held in the Capital Improvement Fund, as defmed in the Bond Resolution, which in the judgment of the Consolidated Government is adequate to meet the costs of major renewals, replacements, repairs, additions, betterments, and improvements to the Airport, necessary to keep the same in good operating condition or as is required by any governmental agency having jurisdiction over the Airport, and (d) with other revenues, remedy all deficiencies in required payments into any of the funds and accounts mentioned in the Bond Resolution from prior Fiscal Years. THE SERIES 2005[A OR BJ BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OF THE CONSOLIDATED GOVERNMENT NOR A PLEDGE OF THE FAITH AND CREDIT OF THE CONSOLIDATED GOVERNMENT. THE SERIES 2005[A OR BJ BONDS; SHALL NOT BE PAYABLE FROM OR BE A CHARGE UPON ANY FUNDS OTHER THAN ~ THE REVENUES AND AMOUNTS PLEDGED TO THE PAYMENT THEREOF, NOR SHALL THE CONSOLIDATED GOVERNMENT BE SUBJECT TO ANY PECUNIARY LIABILITY : THEREON. NO OWNER OR OWNERS OF TillS SERIES 2005[A OR BJ BOND SHALL EVER HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER OF THE' CONSOLIDA TED GOVERNMENT TO PAY TillS SERIES 2005[A OR BJ BOND OR THE INTEREST HEREON, NOR TO ENFORCE PAYMENT OF TillS SERIES 2005[A OR BJ BOND AGAINST ANY PROPERTY OF THE CONSOLIDATED GOVERNMENT; NOR SHALL TillS -7- AD I I 6278i.6 SERIES 2005[A OR BJ BOND CONSTITUTE A CHARGE, LIEN, OR ENCUMBRANCE, LEGAL OR EQUITABLE, UPON ANY PROPERTY OF THE CONSOLIDATED GOVERNMENT, EXCEPT FOR THE NET GENERAL REVENUES, PFC REVENUES AND ANY OTHER FUNDS PLEDGED TO SECURE THE PAYMENT OF THE SERIES 2005[A OR BJ BONDS. No covenants, stipulations, obligations or agreements of any officer, agent, attorney or employee of the Consolidated Government or the Augusta Aviation Commission shall be deemed to be covenants, stipulations, obligations or agreements of any such officer, agent, attorney or employee, past or present, in his individual capacity. No recourse shall be had for the payment of the Series 2005[A or B) Bonds or any claim thereon against any member, director, officer, agent, attorney or employee of the Consolidated Government or the Augusta Aviation Commission, past, present or future. , The person in whose name this Series 2005[A or B) Bond is registered on the registration books kept by the Bond Registrar shall be deemed to be the owner of this Series 2005[A or B) Bond for all . purposes. The Series 2005[A or B) Bonds are being issued by means of a book-entry system, with actual Series 2005[A or B) Bonds immobilized at The Depository Trust Company, New York, New York (the "Securities Depository"), or its successor as Securities Depository, evidencing ownership of the Series 2005[A or B) Bonds in Authorized Denominations (hereinafter defined), and with transfers of beneficial ownership effected on the records of the Securities Depository and its participants pursuant to the rules and procedures established by the Securities Depository. Actual Series 2005[A or B) Bonds are not available for distribution to the owners of beneficial interests in the Series 2005[A or B) Bonds registered in book-entry form (the "Beneficial Owners"), except under the limited circumstances set forth in the Bond Resolution. The principal, redemption premium (if any) and interest on the Series 2005[A or B) Bonds are payable by the Paying Agent to Cede & Co., as nominee of the Securities Depository. Transfers of principal, redemption premium (if any) and interest payments to participants of the Securities Depository is the responsibility of the Securities Depository and transfers of principal, redemption premium (if any) and interest to Beneficial Owners of the Series 2005[A or B) Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of Beneficial Owners. Neither the Consolidated Government nor the Bond Registrar and Paying Agent is responsible or liable for maintaining, supervising or reviewing the records maintained by the Securities Depository, its participants or persons acting through such participants. If the Series 2005[A or B) Bonds are no longer registered to a Securities Depository or its nominee, this Series 2005[A or B) Bond may be registered as transferred only upon the registration books kept for that purpose at the principal corporate trust office of the Bond Registrar by the registered owner hereof in person, or by his or her attorney duly authorized in writing, upon presentation and surrender to the Bond Registrar of this Series 2005[A or B] Bond duly endorsed for registration of transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing, and thereupon a new registered bond, in the same aggregate principal amount and of the same maturity, shall be issued to the transferee in , exchange therefor. In addition, if the Series 2005[A or B] Bonds are no longer registered to a Securities Depository, this Series 2005[A or B] Bond may be exchanged by the registered owner hereof or his or her duly authorized attorney upon presentation at the principal corporate trust office of the Bond Registrar for an equal aggregate principal amount of Series 2005[A or B] Bonds of the same maturity and in any Authorized Denominations in the manner, subject to the conditions and upon payment of charges, if any, provided in the Bond Resolution. The Series 2005[A or B] Bonds are issuable in the form of fully registered bonds in Authorized Denominations and may be exchanged by the registered owner hereof or his duly authorized attorney upon presentation at the principal corporate trust office of the Bond Registrar for an equal aggregate principal amount of Series 2005[A or B] Bonds of the same maturity and series and in any authorized denominations in the manner, subject to the conditions and upon payment of charges, if any, provided in -8- AO 1 1 6278 \.6 the Bond Resolution. As used herein, the term "Authorized Denominations" means $5,000 and any integral multiple thereof. The Series 2005[A or B] Bonds may not be called for optional redemption prior to January 1, 200_. The Series 2005[A or B] Bonds maturing on or after January 1, 20_ may be redeemed prior to their respective maturities at the option of the Consolidated Government, either in whole or in part at any time not earlier than January 1,20_, in the manner and subject to the provisions of the Bond Resolution, at the respective redemption prices (expressed as percentages of the principal amount) set forth below, together with accrued interest to the redemption date; Redemption Dates (both dates inclusive) Redemption Price If less than all of the Series 2005 [A or B] Bonds of a maturity shall be called for redemption, the particular bonds or portions thereof to be redeemed shall be selected by lot in such manner as may be designated by the Bond Registrar. Notice of redemption, unless waived, is to be given by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of each Series 2005[A or B] Bond to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar. All such Series 2005[A or B] Bonds called for redemption and for the retirement of which funds are duly provided shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2005[A or B] Bonds on such date, and interest on the Series 2005[A or B] Bonds or portions of Series 2005[A or B] Bonds so called for redemption shall cease to accrue, such Series 2005[A or B] Bonds or portions of Series 2005[A or B] Bonds shall cease to be entitled to any lien, benefit, or security under the Bond Resolution, and the owners of such Series 2005[A or B] Bonds or portions of Series 2005[A or B] Bonds shall have no rights in respect thereof except to receive payment of the redemption price. The Bond Resolution permits optional redemptions as described above to be conditioned on the occurrence of particular events and, if a redemption is so conditioned, the notice thereof will specify the terms of such conditional redemption. Any defect in any notice of redemption shall not affect the validity of proceedings for the redemption of any Series 2005[A or B] Bonds. The Bond Resolution contains a more particular statement of the covenants and provisions securing the Series 2005[A or B] Bonds, the conditions under which the owner of this Series 2005[A or B] Bond may enforce covenants (other than the covenant to pay principal of and interest on this Series' 2005[A or B] Bond when due from the sources provided, the right to enforce which is unconditional), the conditions upon which additional revenue bonds may be issued on a parity or achieve parity status with this Series 2005[A or B] Bond under the Bond Resolution, and the conditions upon which the Bond Resolution may be amended or supplemented. Upon the occurrence of an Event of Default under the Bond Resolution, the owner of this Series 2005[A or B] Bond shall be entitled to the remedies provided by the Bond Resolution and the Revenue Bond Law. It is hereby certified, recited, and declared that all acts, conditions, and things required by the Constitution and the laws of the State of Georgia to exist, happen, and be performed precedent to and in the issuance of this Series 2005[A or B] Bond and the adoption of the Bond Resolution do exist, have happened, and have been performed in due time, form, and manner as required by law. -9- AO 1162781.6 IN WITNESS WHEREOF, the Consolidated Government has caused this Series 2005[A or B] Bond to be executed by the manual [facsimile] signature of its Mayor and the Chairman of the Augusta Aviation COrnnllssion and has caused the official seal of the Consolidated Government to be impressed on this Series 2005[A or B] Bond and attested by the manual [facsimile] signature of its Clerk, as of ,2005. (S E A L) AUGUSTA, GEORGIA By: Mayor By: Chairman, Augusta Aviation Commission Attest: Clerk ***** CERTIFICATE OF AUTHENTICA nON Date of Authentication: This bond is one of the Series 2005[A or B] Bonds described herein. SUNTRUST BANK, as Bond Registrar By: Authorized Signatory ***** -10- AD 1162781.6 VALIDATION CERTIFICATE STATE OF GEORGIA ) ) COUNTY OF RICHMOND ) The undersigned Clerk of the Superior Court of Richmond County, State of Georgia, DOES HEREBY CERTIFY that this Bond and the security therefor was validated and confirmed by judgment of the Superior Court of Richmond County, on , 2005, that no intervention or objection was filed opposing the validation of this Bond and the security therefor, and that no appeal of such judgment of validation has been taken. Witness my (facsimile) signature and seal of the Superior Court of Richmond County, Georgia. Clerk, Superior Court of Richmond County, Georgia (8 E A L) ***** -11- AD ] ] 6278 \.6 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto [please print or typewrite name and address including postal zip code.] [please insert Social Security or Tax Identification Number of Assignee.] the within bond and all rights thereunder, hereby constituting and appointing attorney to transfer this Bond on the bond registration book kept for such purpose by the Bond Registrar, with full power of substitution in the premises. Signature Guaranteed Registered Owner Notice: Signature(s) must be guaranteed by an eligible guarantor Authority (such as banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved Signature Guarantee Medallion Program pursuant to S.E.C. Rule 17Ad-15. Notice: The signature(s) on this assignment must correspond with the name as it appears on the face of the within bond in every particular without alterations, enlargement or any change whatsoever. ***** -12- AO 116278\.6 Section 2.4. Application of Proceeds of Series 200SA/B Bonds. Upon the written request of the Consolidated Government and the Augusta Aviation Commission, the Bond Registrar shall authenticate and deliver the Series 2005NB Bonds to the purchaser or purchasers and shall receive a receipt for the Series 2005 Bonds. The Augusta Aviation Commission shall apply the proceeds from the sale of the Series 2005NB Bonds as provided in the Supplemental Resolution. The application of proceeds from the sale of the Series 2005NB Bonds shall at a minimum provide for the following deposits: (a) The deposit into the Series 2005A Subaccount in the Capitalized Interest Account of the 2005 Project Fund of the proceeds of the Series 2005A Bonds designated for capitalized interest, to be used and applied toward the payment of interest on the Series 2005A Bonds during the construction of the 2005 Project. (b) The deposit into the Series 2005B Subaccount in the Capitalized Interest Account of the . 2005 Project Fund of the proceeds of the Series 2005B Bonds designated for capitalized interest, to be used and applied toward the payment of interest on the Series 2005B Bonds during the construction of the 2005 Project. (c) The deposit into the Debt Service Reserve Subaccount for PFC Revenue Bonds of an amount sufficient to fund the Debt Service Reserve Requirement on the Series 2005NB Bonds. (d) The deposit into the Costs ofIssuance Account within the 2005 Project Fund of proceeds of the Series 2005NB Bonds for expenses incurred in connection with the issuance of the Series 2005NB Bonds. (e) The deposit into the Construction Account of the 2005 Project Fund of proceeds of the Series 2005NB Bonds for payment of Costs of the 2005 Project. (f) The payment to the Underwriter of the underwriter's discount for the Series 2005NB Bonds. Section 2.5. Optional and Mandatory Redemption of Series 200SA/B Bonds. The Series 2005NB Bonds shall be subject to optional and mandatory redemption as determined by the Airport Finance Officer during the pricing of such Bonds, as approved in the Supplemental Resolution. ARTICLE III. ISSUANCE OF THE SERIES 200SC BONDS Section 3.1. Authorization of the Series 200SC Bonds. i For the purpose of providing funds to finance a portion of the costs of the planning, engineering, ~ design, acquisition and construction of the 2005 Project, including capitalized interest during the period of . construction of the 2005 Project, to provide for a reasonably required debt service reserve and to pay expenses necessary to accomplish the foregoing, there are hereby authorized to be issued not to exceed $7,000,000 aggregate principal amount of "Augusta, Georgia Airport General Revenue Bonds, Series' 2005C (AMT)." The principal of the Series 2005C Bonds shall mature (or be acquired by mandatory redemption proceedings) on January 1 in such year or years not later than January 1, 2035, such that the -13- AD 1162781.6 highest amount of principal and interest coming due on the Series 2005C Bonds in any Sinking Fund Year shall not exceed $2,700,000. The Series 2005C Bonds shall be dated the date on which issued and delivered, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered from RC-I upwards, shall be initially issued in book-entry only form as fully-registered bonds without coupons, shall bear interest from date at such rate or rates not exceeding 7 percent per annum, all interest payable July I, 2005 and semiannually thereafter on January I and July I in each year, and shall be subject to optional redemption as set forth in a Supplemental Resolution. The provisions for dates, authentication, payment, registration and optional, mandatory and extraordinary redemption shall be in accordance with Article II and Article III of the Master Bond Resolution and as set forth in a Supplemental Resolution. The Series 2005C Bonds shall be book-entry bonds as described in Section 210 of the Master Bond Resolution and as such shall be subject to Section 4.2 of this First Supplemental Resolution. Section 3.2. Series 200SC Bonds are General Revenue Bonds. The Series 2005C Bonds shall be payable from and secured by Net General Revenues and shall rank on a parity with the Series 2005NB Bonds as to lien on Net General Revenues. Section 3.3. Execution; Form of Series 200SC Bonds. (a) The Series 2005C Bonds shall be executed on behalf of the Consolidated Government by use of the manual or facsimile signature of the Mayor of the Consolidated Government and the Chairman of the Augusta Aviation Commission and attested by the manual or facsimile signature of the Clerk of the Consolidated Government and the official seal of the Consolidated Government shall be impressed thereon or a facsimile thereof imprinted thereon, and the Series 2005C Bonds shall be authenticated by the manual signature of a duly authorized signatory of the bond registrar with respect to the Series 2005C Bonds. The validation certificate to be printed on the Series 2005C Bonds shall be executed by use of the manual or facsimile signature of the Clerk of the Superior Court of Richmond County and the official seal of said Court shall be impressed thereon or a facsimile thereof shall be imprinted thereon. In case any officer whose signature shall appear on the Series 2005C Bonds shall cease to be such officer before delivery of such Series 2005e Bonds, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. (b) The Series 2005C Bonds, the validation certificate and the bond registrar's certificate of authentication shall be in substantially the forms set out below, with such variations, omissions, substitutions and insertions as are required or permitted by the Bond Resolution. -14- AD 1162781.6 [FORM OF SERlES 200SC BONDS] Unless this Bond is presented by an authorized representative oj The Depository Trust Company, a New York corporation ("DTC''), to Augusta, Georgia or its agent Jor registration oj transJer, exchange or payment, and any Bond issued is registered in the name oj Cede & Co. or in such other name as is requested by an authorized representative oj DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative oj DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. RC- $ UNITED STATES OF AMERICA STATE OF GEORGIA AUGUSTA, GEORGIA AIRPORT GENERAL REVENUE BOND SERIES 200SC DATE: INTEREST RATE: % MATURITY DATE: CUSIP: FOR VALUE RECEIVED, AUGUSTA, GEORGIA (the "Consolidated Government"), a municipal corporation and a county duly created and existing under the laws of the State of Georgia, hereby promises to pay solely from the sources hereinafter described to CEDE & CO., or registered assigns, the principal sum of DOLLARS in lawful money of the United States of America, on the date specified above, unless redeemed prior thereto as hereinafter provided, upon presentation and surrender of this Series 200SC Bond to SunTrust Bank, Atlanta, Georgia, as registrar and paying agent (the "Bond Registrar" or the "Paying Agent"), and to pay interest on said principal sum (computed on the basis of a 360-day year of twelve 30-day months) at the interest rate per annum specified above, payable semiannually on January 1 and July 1 of each year (each such date an "Interest Payment Date"), commencing January 1,2005, from the Interest Payment Date next preceding the date of authentication of this Series 2005C Bond to which interest has been paid or provided for, unless the date of authentication of this Series 2005C Bond is an Interest Payment Date to which interest has been paid or provided for, in which case from the date of authentication hereof, or unless no interest has been paid hereon, in which case from the date hereof, or unless such authentication date shall be after any record date (hereinafter defined) and before the next succeeding Interest Payment Date, in which case interest shall be paid from the next succeeding Interest Payment Date. The interest payable on any Interest Payment Date will be paid by first class mail, postage prepaid, mailed on the date on which due to the person in whose name this Series 200SC Bond is registered at the close of business on the 15th day of the calendar month next preceding such Interest , Payment Date (each such date, a "Record Date") at the address shown on the bond register maintained by the Bond Registrar on such Record Date, except that any interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner of this Series 200SC Bond as of the i Record Date and shall be payable to the person who is the registered owner of this Series 200SC Bond at the close of business on a special record date for the payment of such defaulted interest. Such special I record date shall be fixed by the Bond Registrar whenever moneys become available for the payment of such defaulted interest, and notice of the special record date shall be given by first class mail by the Bond -15- AO 1 16278\.6 Registrar or by or on behalf of the Consolidated Government to the owner hereof not less than 50 days prior thereto. Notwithstanding the foregoing, however, interest on this Series 2005C Bond shall be payable to any registered owner of more than $1,000,000 in aggregate principal amount of the Series 2005C Bonds by deposit of immediately available funds to the account of such registered owner maintained with the Paying Agent or transmitted by wire transfer to such registered owner at an account maintained at a commercial bank located within the United States of America, if the Paying Agent receives from such registered owner written deposit or wire transfer instructions prior to the Record Date preceding the Interest Payment Date for which the deposit or wire transfer is requested. The principal of this Series 2005C Bond is payable only upon presentation and surrender of this bond at the principal corporate trust office of the Bond Registrar and Paying Agent, or its successor or successors, in any coin or currency of the United States of America which at the time of such payment is legal tender for public and private debts. Notwithstanding the foregoing, so long as this Series 2005C Bond is registered in the name of Cede & Co., payment of principal of and interest on this Series 2005C Bond shall be made by wire transfer to Cede & Co. This Series 2005C Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Resolution (hereinafter described) until this Series 2005C Bond shall have been authenticated and registered upon the registration books kept by the Bond Registrar for that purpose, which authentication shaH be evidenced by the manual execution of the certificate hereon by the Bond Registrar. This Series 2005C Bond is one of a series of airport general revenue bonds in the aggregate principal amount of $ duly authorized and designated "Augusta, Georgia Airport General Revenue Bonds, Series 2005C" (the "Series 2005C Bonds") all of like tenor, except as to authentication dates, numbers, denominations, interest rates and maturities. The Series 2005C Bonds are issued by the Consolidated Government pursuant to the Constitution and laws of the State of Georgia, including specifically, but without limitation, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, as amended, known as the "Revenue Bond Law," an act of the General Assembly of the State of Georgia (Georgia Laws 1995 p. 3468 et seq., as amended), and the Master Bond Resolution adopted , 2005 by the Consolidated Government and , 2005 by the Augusta Aviation Commission, as amended and supplemented by a First Supplemental Bond Resolution adopted by the Consolidated Government on , 2005 and by the Augusta Aviation Commission on , 2005, (collectively, the "Bond Resolution"), for the purpose of providing funds to finance all or a portion of the costs of acquiring, construction, installing and equipping certain improvements and additions to the Consolidated Government's Augusta Regional Airport at Bush Field (the "Airport"), including capitalized interest during the period of construction of such additions and improvements, and to pay expenses necessary to accomplish the foregoing. The Series 2005C Bonds are General Revenue Bonds (as defined in the Bond Resolution) secured by a senior lien on the Net General Revenues (as defined in the Bond Resolution) of the Airport. Net General Revenues include generally all revenues arising from the ownership or operation of the Airport remaining after the payment of expenses of operation and maintenance of the Airport, but specifically exclude "PFC Revenues" (revenues received by or required to be remitted to the Augusta Aviation I Commission from the passenger facility charges imposed by the Augusta Aviation Commission pursuant to the Aviation Safety and Capacity Expansion Act of 1990), and "Special Purpose Revenues" (revenues arising from or generated by one or more Special Purpose Facilities (as defined in the Bond Resolution)). -16- AO 1 1 6278 \.6 Concurrently with the issuance of the Series 2005C Bonds, pursuant to the First Supplemental Bond Resolution the Consolidated Government is issuing and delivering $ aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A (the "Series 2005A Bonds") and $ aggregate principal amount of its Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B (the "Series 2005B Bonds" and, together with the Series 2005A Bonds, the "Series 2005AIB Bonds"). The Series 2005C Bonds are secured on a parity with the Series 2005AIB Bonds by a senior lien on the Net General Revenues of the Airport. The Series 2005AIB Bonds are also secured by a senior lien on PFC Revenues. Pursuant to the Bond Resolution, upon compliance with certain conditions, the Consolidated Government may (i) issue additional revenue bonds secured on a parity with the Series 2005C Bonds and the Series 2005AIB Bonds, (ii) issue additional revenue bonds secured on a subordinate basis to payment from the same revenues securing the Series 2005C Bonds and the Series 2005AIB Bonds, (iii) issue additional revenue bonds secured by revenues different from the revenues securing the Series 2005C Bonds and the Series 2005AIB Bonds, (iv) issue additional revenue bonds secured by a combination of (i) and (iii) or (ii) and (iii), or (v) grant a lien securing other obligations on a parity with or on a subordinate basis to the Series 2005C Bonds and the Series 2005AIB Bonds. The Series 2005C Bonds, the Series 2005AIB Bonds (with respect only to the senior lien on Net General Revenues) and additional bonds secured on a parity therewith are hereinafter referred to as the "General Revenue Bonds." The Consolidated Government acting by and through the Augusta Aviation Commission has covenanted and hereby covenants and agrees at all times while any General Revenue Bonds are outstanding and .unpaid to prescribe, fix, maintain, and collect rates, fees, and other charges for the services and facilities of the Airport to: (i) provide for 100 percent of the Expenses of Operation and Maintenance of the Airport (except for certain specific facilities) and for the accumulation in the Operation and Maintenance Reserve Fund, as defined in the Bond Resolution, of the Operating Reserve, and (ii) produce Net General Revenues as defmed in the Bond Resolution, in each Fiscal Year, as defined in the Bond Resolution, which together with Other Available Moneys (as defined in the Master Bond Resolution) will: (a) equal at least 125 percent of the debt service requirement of all General Revenue Bonds, including the Series 2005C Bonds and the Series 2005AIB Bonds, and at least 100 percent of the debt service requirement of all Subordinate Lien Bonds and Other Airport Obligations payable from Net General Revenues, (b) enable the Consolidated Government to make all payments required to come from General Revenues into any Debt Service Reserve Account, the PFC Debt Service Reserve Account, the Renewal and Replacement Fund and the Rebate Fund and on Contracts or Other Airport Obligations, as each is defined in the Bond Resolution, (c) enable the Consolidated Government to accumulate an amount to be held in the Capital Improvement Fund, as defined in the Bond Resolution, which in the judgment of the Consolidated Government is adequate to meet the costs of major renewals, replacements, repairs, additions, betterments, and improvements to the Airport, necessary to keep the same in good operating condition or as is required by any governmental agency having jurisdiction over the Airport, and (d) with other revenues, remedy all deficiencies in required payments into any of the funds and accounts , mentioned in the Bond Resolution from prior Fiscal Y ears~ THE SERIES 200SC BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OF THE CONSOLIDATED GOVERNMENT NOR A PLEDGE OF THE FAITH AND CREDIT OF THE CONSOLIDATED GOVERNMENT. THE SERIES 200SC BONDS SHALL NOT BE PAY ABLE FROM OR BE A CHARGE UPON ANY FUNDS OTHER THAN THE REVENUES AND AMOUNTS PLEDGED TO THE PAYMENT THEREOF, NOR SHALL THE CONSOLIDATED GOVERNMENT BE SUBJECT TO ANY PECUNIARY LIABILITY THEREON. NO OWNER OR OWNERS OF THIS SERIES 200SC BOND SHALL EVER HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER OF THE CONSOLIDATED GOVERNMENT TO PAY THIS SERIES 200SC BOND OR THE INTEREST HEREON, NOR TO ENFORCE PAYMENT OF THIS SERIES 200SC BOND AGAINST ANY -17- AO 116278 \.6 PROPERTY OF THE CONSOLIDATED GOVERNMENT; NOR SHALL TIDS SERIES 200SC BOND CONSTITUTE A CHARGE, LIEN, OR ENCUMBRANCE, LEGAL OR EQUITABLE, UPON ANY PROPERTY OF THE CONSOLIDATED GOVERNMENT, EXCEPT FOR THE NET GENERAL REVENUES, PFC REVENUES AND ANY OTHER FUNDS PLEDGED TO SECURE THE PAYMENT OF THE SERIES 200SC BONDS. No covenants, stipulations, obligations or agreements of any officer, agent, attorney or employee of the Consolidated Government shall be deemed to be covenants, stipulations, obligations or agreements of any such officer, agent, attorney or employee, past or present, in his individual capacity. No recourse shall be had for the payment of the Series 2005C Bonds or any claim thereon against any member, director, officer, agent, attorney or employee of the Consolidated Government, past, present or future. The person in whose name this Series 2005C Bond is registered on the registration books kept by the Bond Registrar shall be deemed to be the owner of this Series 2005C Bond for all purposes. The Series 2005C Bonds are being issued by means of a book-entry system, with actual Series 2005C Bonds immobilized at The Depository Trust Company, New York, New York (the "Securities Depository"), or its successor as Securities Depository, evidencing ownership of the Series 2005C Bonds in Authorized Denominations (hereinafter defined), and with transfers of beneficial ownership effected on the records of the Securities Depository and its participants pursuant to the rules and procedures established by the Securities Depository. Actual Series 2005C Bonds are not available for distribution to the owners of beneficial interests in the Series 2005C Bonds registered in book-entry form (the "Beneficial Owners"), except under the limited circumstances set forth in the Bond Resolution. The principal, redemption premium (if any) and interest on the Series 2005C Bonds are payable by the Paying Agent to Cede & Co., as nominee of the Securities Depository. Transfers of principal, redemption premium (if any) and interest payments to participants of the Securities Depository is the responsibility of the Securities Depository and transfers of principal, redemption premium (if any) and interest to Beneficial Owners of the Series 2005C Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of Beneficial Owners. Neither the Consolidated Government nor the Bond Registrar and Paying Agent is responsible or liable for maintaining, supervising or reviewing the records maintained by the Securities Depository, its participants or persons acting through such participants. If the Series 2005C Bonds are no longer registered to a Securities Depository or its nominee, this Series 2005C Bond may be registered as transferred only upon the registration books kept for that purpose at the principal corporate trust office of the Bond Registrar by the registered owner hereof in person, or by his or her attorney duly authorized in writing, upon presentation and surrender to the Bond Registrar of this Series 2005C Bond duly endorsed for registration of transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing, and thereupon a new registered bond, in the same aggregate principal amount and of the same maturity, shall be issued to the transferee in exchange therefor. In addition, if the Series 2005C Bonds are no longer registered to a Securities Depository, this Series 2005C Bond may be exchanged by the registered owner hereof or his or her duly, authorized attorney upon presentation at the principal corporate trust office of the Bond Registrar for an equal aggregate principal amount of Series 2005C Bonds of the same maturity and in any Authorized Denominations in the manner, subject to the conditions and upon payment of charges, if any, provided in the Bond Resolution. The Series 2005C Bonds are issuable in the form of fully registered bonds in Authorized Denominations and may be exchanged by the registered owner hereof or his duly authorized attorney upon presentation at the principal corporate trust office of the Bond Registrar for an equal aggregate ' principal amount of Series 2005C Bonds of the same maturity and series and in any authorized denominations in the manner, subject to the conditions and upon payment of charges, if any, provided in the Bond Resolution. As used herein, the term "Authorized Denominations" means $5,000 and any integral multiple thereof. -18- AD 1 1 6278\.6 The Series 2005C Bonds may not be called for optional redemption prior to January 1, 200_. The Series 2005C Bonds maturing on or after January 1,20_ may be redeemed prior to their respective maturities at the option of the Consolidated Government, either in whole or in part at any time not earlier than January 1, 20_, in the manner and subject to the provisions of the Bond Resolution, at the respective redemption prices (expressed as percentages of the principal amount) set forth below, together with accrued interest to the redemption date: Redemption Dates (both dates inclusive) Redemption Price If less than all of the Series 2005C Bonds of a maturity shall be called for redemption, the particular bonds or portions thereof to be redeemed shall be selected by lot in such manner as may be designated by the Bond Registrar. Notice of redemption, unless waived, is to be given by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of each Series 2005C Bond to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar. All such Series 2005C Bonds called for redemption and for the retirement of which funds are duly provided shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2005C Bonds on such date, and interest on the Series 2005C Bonds or portions of Series 2005C Bonds so called for redemption shall cease to accrue, such Series 2005C Bonds or portions of Series 2005C Bonds shall cease to be entitled to any lien, benefit, or security under the Bond Resolution, and the owners of such Series 2005C Bonds or portions of Series 2005C Bonds shall have no rights in respect thereof except to receive payment of the redemption price. The Bond Resolution permits optional redemptions as described above to be conditioned on the occurrence of particular events and, if a redemption is so conditioned, the notice thereof will specify the terms of such conditional redemption. Any defect in any notice of redemption shall not affect the validity of proceedings for the redemption of any Series 2005C Bonds. The Bond Resolution contains a more particular statement of the covenants and prOVISIons securing the Series 2005C Bonds, the conditions under which the owner of this Series 2005C Bond may enforce covenants (other than the covenant to pay principal of and interest on this Series 200SC Bond when due from the sources provided, the right to enforce which is unconditional), the conditions upon which additional revenue bonds may be issued on a parity or achieve parity status with this Series 2005C , Bond under the Bond Resolution, and the conditions upon which the Bond Resolution may be amended or supplemented. Upon the occurrence of an Event of Default under the Bond Resolution, the owner of this Series 2005C Bond shall be entitled to the remedies provided by the Bond Resolution and the Revenue Bond Law. It is hereby certified, recited, and declared that all acts, conditions, and things required by the i Constitution and the laws of the State of Georgia to exist, happen, and be performed precedent to and in the issuance of this Series 2005C Bond and the adoption of the Bond Resolution do exist, have happened, and have been performed in due time, form, and manner as required by law. -19- AD 1162781.6 IN WITNESS WHEREOF, the Consolidated Government has caused this Series 2005C Bond to be executed by the manual [facsimile] signature of its Mayor and the Chairman of the Augusta Aviation Commission and has caused the official seal of the Consolidated Government to be impressed on this Series 200SC Bond and attested by the manual [ facsimile] signature of its Clerk, as of 2005. (S E A L) AUGUSTA, GEORGIA By: Mayor By: Chairman, Augusta Aviation Commission Attest: Clerk ***** CERTIFICATE OF AUTHENTICATION Date of Authentication: This bond is one of the Series 200SC Bonds described herein. SUNTRUST BANK, as Bond Registrar By: Authorized Signatory ***** -20- AD 116278\.6 VALIDATION CERTIFICATE STATE OF GEORGIA ) ) COUNTY OF RICHMOND ) The undersigned Clerk of the Superior Court of Richmond County, State of Georgia, DOES HEREBY CERTIFY that this Bond and the security therefor was validated and confirmed by judgment of the Superior Court of Richmond County, on , 2005, that no intervention or objection was filed opposing the validation of this Bond and the security therefor, and that no appeal of such judgment of validation has been taken. Witness my (facsimile) signature and seal of the Superior Court of Richmond County, Georgia. Clerk, Superior Court of Richmond County, Georgia (S E A L) ***** -21- AD 116278\.6 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto [Please print or typewrite name and address including postal zip code.] [please insert Social Security or Tax Identification Number of Assignee.] the within bond and all rights thereunder, hereby constituting and appointing attorney to transfer this Bond on the bond registration book kept for such purpose by the Bond Registrar, with full power of substitution in the premises. Signature Guaranteed Registered Owner Notice: Signature(s) must be guaranteed by an eligible guarantor Authority (such as banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved 'Signature Guarantee Medallion Program pursuant to S.E.C. Rule 17Ad-15. Notice: The signature(s) on this assignment must correspond with the name as it appears on the face of the within bond in every particular without alterations, enlargement or any change whatsoever. ***** -22- AO 1 1 6278 \.6 Section 3.4. Application of Proceeds of Series 200SC Bonds. Upon the written request of the Consolidated Government and the Augusta Aviation Commission, the Bond Registrar shall authenticate and deliver the Series 2005C Bonds to the purchaser or purchasers and shall receive a receipt for the Series 2005C Bonds. The Augusta Aviation Commission shall apply the proceeds from the sale of the Series 2005C Bonds as provided in the Supplemental Resolution. The application of proceeds of the Series 2005C Bonds shall at a minimum provide for the following deposits: (a) The deposit into the Series 2005C Subaccount in the Capitalized Interest Account of the 2005 Project Fund designated for capitalized interest, to be used and applied toward the payment of interest on the Series 2005C Bonds during the construction of the 2005 Project. (b) The deposit into the Debt Service Reserve Subaccount for General Revenue Bonds of an amount sufficient to fund the Debt Service Reserve Requirement on the Series 2005C Bonds. (c) The deposit into the Costs of Issuance Account within the 2005 Project Fund of proceeds of the Series 2005C Bonds designated for the payment of the expenses incurred in connection with the issuance of the Series 2005C Bonds. (d) The payment to the Underwriter of the underwriter's discount for the Series 2005C Bonds. (e) The deposit into the Construction Account of the 2005 Project Fund of proceeds of the Series 2005C Bonds designated for the payment of costs of the 2005 Project. Section 3.5. Optional and Mandatory Redemption of Series 200SC Bonds. The Series 2005C Bonds shall be subject to optional and mandatory redemption as determined by the Airport Finance Officer during the pricing of the Series 2005C Bonds, as approved in the Supplemental Resolution. ARTICLE IV. PROVISIONS RELATING TO ALL SERIES 2005 BONDS Section 4.1. Registration, Transfer and Exchange. SunTrust Bank, Atlanta, Georgia is hereby designated as the paying agent (the "Paying Agent") and bond registrar (the "Bond Registrar") for the Series 2005 Bonds. Subject to Section 4.2 of this First Supplemental Bond Resolution, the Bond Registrar will keep the bond registration book for registration of the Series 2005 Bonds and for registration of transfers of the Series 2005 Bonds in the event the Series 2005 Bonds are not held in book-entry form. The transfer of any Series 2005 Bond will be registered upon the bond registration book upon the surrender and presentation of the Series 2005 Bond to the Bond Registrar duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or attorney authorized in writing in form satisfactory to the Bond Registrar. Upon any such registration of transfer, the Bond Registrar will authenticate and deliver in exchange for such Series 2005 Bond so surrendered, a new Series 2005 Bond registered in the name of the transferee or transferees of the same maturity, interest rate, aggregate principal amount, and tenor, of any authorized denomination or denominations, and bearing numbers not then outstanding. Series 2005 Bonds may be exchanged at the principal corporate trust office of the Bond Registrar for a like aggregate principal amount of Series 2005 Bonds of other authorized denominations and bearing numbers not then outstanding. The Consolidated -23- AO 116278\.6 Government will cause to be executed and the Bond Registrar will authenticate and deliver Series 2005 Bonds which the bondholder making the exchange is entitled to receive. In any exchange or transfer of registration of any Series 2005 Bond, the owner of such Series 2005 Bond will not be required to pay any charge or fee. If any Series 2005 Bond is mutilated, lost, stolen or destroyed, the Consolidated Government may execute and deliver a new Series 2005 Bond of the same aggregate principal amount and tenor in lieu of and in substitution for the Series 2005 Bond mutilated, lost, stolen or destroyed. All other provisions with respect to the Bond Registrar and Paying Agent shall be governed by Article II of the Master Bond Resolution. Section 4.2. Book Entry System of Registration. The following provisions shall apply to Series 2005 Bonds held In a book-entry system of registration: (a) Upon the initial issuance, the ownership of each Series 2005 Bond shall be registered in the name of the Securities Depository or the Securities Depository Nominee, and ownership thereof shall be maintained in Book Entry Form by the Securities Depository for the account of the Agent Members thereof. Initially, the Series 2005 Bonds shall be registered in the name of Cede & Co., as the nominee of The Depository Trust Company. Beneficial Owners will not receive Series 2005 Bonds from the Bond Registrar evidencing their ownership interests. Except as provided in subparagraph (c) below, the Series 2005 Bonds may be transferred, in whole but not in part, only to the Securities Depository or the Securities Depository Nominee, or to a successor Securities Depository selected or approved by the Consolidated Government or to a nominee of such successor Securities Depository. (b) With respect to Series 2005 Bonds registered in the name of the Securities Depository or the Securities Depository Nominee, neither the Consolidated Government, the Bond Registrar nor the Paying Agent shall have any responsibility or obligation to any Agent Member or Beneficial Owner. Without limiting the foregoing, neither the Consolidated Government, the Bond Registrar nor the Paying Agent shall have any responsibility or obligation with respect to: (i) the accuracy of the records of the Securities Depository, the Securities Depository Nominee or any Agent Member with respect to any Beneficial Ownership interest in the Series 2005 Bonds; (ii) the delivery to any Agent Member, any Beneficial Owner or any other person, other than the Securities Depository or the Securities Depository Nominee, of any notice with respect to the Series 2005 Bonds; or (iii) the payment to any Agent Member, any Beneficial Owner or any other person, other than the Securities Depository or the Securities Depository Nominee, of any amount with respect to the principal of or interest on the Series 2005 Bonds. So long as any Series 2005 Bonds are registered in Book Entry Form, the Consolidated Government, the Bond Registrar and the Paying Agent may treat the Securities Depository as, and deem the Securities Depository to be, the absolute owner of such Series 2005 Bonds for all purposes whatsoever, including without limitation: (i) the payment of principal and interest on such Series 2005 Bonds; (ii) registering transfers with respect to such Series 2005 Bonds; and -24- AD 1162781.6 (iii) voting and obtaining consents under the Bond Resolution. So long as any Series 2005 Bonds are registered in Book Entry Form, the Paying Agent shall pay all principal of and interest on the Series 2005 Bonds only to the Securities Depository or the Securities Depository Nominee as shown in the Bond Register, and all such payments shall be valid and effective to fully discharge the Consolidated Government's obligations with respect to payment of principal of and interest on the Series 2005 Bonds to the extent so paid. (c) If at any time (i) the Consolidated Government determines that the Securities Depository is incapable of discharging its responsibilities described herein, (ii) if the Securities Depository notifies the Consolidated Government or the Paying Agent that it is unwilling or unable to continue as Securities Depository with respect to the Series 2005 Bonds, or (iii) if the Securities Depository shall no longer be registered or in good standing under the Securities Exchange Act of 1934 or other applicable statute or regulation and a successor Securities Depository is not appointed by the Consolidated Government within 90 days after the Consolidated Government receives notice or becomes aware of such condition, as the case may be, then the provisions of these subparagraphs (a) and (b) shall no longer be applicable and the Consolidated Government shall execute and the Bond Registrar shall authenticate and deliver certificated bonds to the Beneficial Owners. The Series 2005 Bonds issued pursuant to this subparagraph (c) shall be registered in such names and authorized denominations as the Securities Depository, pursuant to instructions from the Agent Member or otherwise, shall instruct the Bond Registrar. Upon exchange, the Bond Registrar shall authenticate and deliver the certificated Series 2005 Bonds to the persons in whose names such Series 2005 Bonds are so registered on the business day immediately preceding the date of such exchange. apply: (d) For purposes of the foregoing paragraphs (a) through (c), the following definitions shall (i) "Beneficial Owner" shall mean the owners of a beneficial interest in the Series 2005 Bonds registered in Book Entry Form. (ii) "Book Entry Form" or "Book Entry System" shall mean, with respect to the Series 2005 Bonds, a form or system, as applicable, under which (i) the ownership of beneficial interests in the Series 2005 Bonds and bond service charges may be transferred only through book entry and (ii) physical Series 2005 Bonds in fully registered form are registered only in the name of a Securities Depository or its nominee as holder, with physical Series 2005 Bonds in the custody of a Securities Depository. (iii) "Securities Depository" means any secunhes depository that is a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to provisions of Section 17 A of the Securities Exchange Act of 1934, operating and maintaining, with its participants or otherwise, a Book Entry System to record ownership of beneficial interest in bonds and bond service charges, and to effect transfers of bonds in Book Entry Form, and means, initially, The Depository Trust Company (a limited purpose trust company), New York, New York. (iv) "Securities Depository Nominee" means any nominee of a Securities Depository and shall initially mean Cede and Co., New York, New York, as nominee of The Depository Trust Company. -25- AD 1162781.6 Section 4.3. Covenants With Respect to Arbitrage. The Consolidated Government and the Augusta Aviation Commission each hereby covenants and agrees that it will not, subsequent to the date of the issuance of the Series 2005 Bonds, intentionally use any portion of the proceeds of the Series 2005 Bonds to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except as may be otherwise permitted by Section 148 of the Internal Revenue Code of 1986, as amended (the "Code") and that it will comply with, and take such action and make such payments as may be permitted or required by, Section 148(f) of the Code, to ensure that the Series 2005 Bonds do not constitute "arbitrage bonds" within the meaning of Section l48(a) of the Code. The Mayor of the Consolidated Government and the Airport Director and Airport Finance Officer are hereby authorized and directed to execute, for and on behalf of the Consolidated Government and the Augusta Aviation Commission, a certification, based upon facts, estimates and circumstances as to the reasonable expectations regarding the amount, expenditure and use of the proceeds derived from the sale of the Series 2005 Bonds of this issue, as well as such other documents as may be necessary or desirable in connection with the issuance and delivery of the Series 2005 Bonds. Section 4.4. Limited Obligation. THE SERIES 2005 BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OF THE CONSOLIDATED GOVERNMENT NOR A PLEDGE OF THE FAITH AND CREDIT OF THE CONSOLIDATED GOVERNMENT. THE SERIES 2005 BONDS SHALL NOT BE PAYABLE FROM OR BE A CHARGE UPON ANY FUNDS OTHER THAN THE REVENUES AND AMOUNTS PLEDGED TO THE PAYMENT THEREOF, NOR SHALL THE CONSOLIDATED GOVERNMENT BE SUBJECT TO ANY PECUNIARY LIABILITY THEREON. NO OWNER OR OWNERS OF ANY SERIES 2005 BOND SHALL EVER HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER OF THE CONSOLIDATED GOVERNMENT TO PAY SUCH BOND OR THE INTEREST THEREON, NOR TO ENFORCE PAYMENT OF ANY SUCH BOND AGAINST ANY PROPERTY OF THE CONSOLIDATED GOVERNMENT; NOR SHALL ANY SUCH BOND CONSTITUTE A CHARGE, LIEN, OR ENCUMBRANCE, LEGAL OR EQUITABLE, UPON ANY PROPERTY OF THE CONSOLIDATED GOVERNMENT, EXCEPT FOR THE PASSENGER FACILITY CHARGES AND NET GENERAL REVENUES OF THE AIRPORT AND ANY OTHER FUNDS PLEDGED TO SECURE THE PAYMENT OF THE SERIES 2005 BONDS. No covenants, stipulations, obligations or agreements of any officer, agent, attorney or employee of the Consolidated Government or the Augusta Aviation Commission shall be deemed to be covenants, stipulations, obligations or agreements of any such officer, agent, attorney or employee, past or present, in his individual capacity. No recourse shall be had for the payment of the Series 2005 Bonds or any claim thereon against any member, director, officer, agent, attorney or employee of the Consolidated Government, past, present or future. Section 4.5. Offering Materials. The preparation, use and distribution of a Preliminary Official Statement with respect to the Series 2005 Bonds (the "Preliminary Official Statement"), is hereby authorized, ratified and approved. i The Preliminary Official Statement shall be "deemed final" by the Consolidated Government as of its date, and the execution of its certificates to such effect by the appropriate officers of the Consolidated ! Government is hereby authorized and approved Continuing Disclosure Certificate. -26- AD 1162781.6 The Consolidated Government hereby covenants and agrees that it will, to the extent allowed by applicable law, comply with and carry out all provisions of the Continuing Disclosure Certificate to be executed by the Consolidated Government and dated as of the date of issuance and delivery of the Series 2005 Bonds, as originally executed and as it may be amended from time to time in accordance with its terms (collectively, the "Disclosure Certificate"). The execution and delivery by the Consolidated Government of the Disclosure Certificate is hereby authorized. The Mayor of the Consolidated Government is authorized to sign the Disclosure Certificate on behalf of the Consolidated Government, and the corporate seal of the Consolidated Government shall be affixed on the Disclosure Certificate and attested by the Clerk. Notwithstanding any other provision of the Bond Resolution, failure of the Consolidated Government to comply with the Disclosure Certificate shall not be considered a default thereunder, and under no circumstances shall 'such failure affect the validity or the security for the payment of the Series 2005 Bonds. It is expressly provided, however, that any beneficial owner of the Series 2005 Bonds may take such action, to the extent and in such manner as may be allowed by applicable law, as may be necessary and appropriate, including seeking mandamus or specific performance by court order to cause the Consolidated Government to comply with its obligations under this Section. The cost to the Consolidated Government of performing its obligations set forth in this Section shall be paid solely from funds lawfully available for such purpose. Nothing contained in the Bond Resolution shall obligate the levy of any tax for the Consolidated Government's obligations set forth in this Section. ARTICLE V. PROJECT FUNDS; DEBT SERVICE FUNDS AND COSTS OF ISSUANCE ACCOUNT Section 5.1. 2005 Project Fund. (a) A special trust fund is hereby created and established and designated as the "Augusta, Georgia Airport Series 2005 Project Fund" (the "2005 Project Fund"). Smith Barney Corporate Trust ,Company is hereby designated as the Project Fund Custodian (the "Project Fund Custodian"). There is hereby established within the 2005 Project Fund a separate account which shall be designated as the "Construction Account," a second separate account which shall be designated as the "Costs of Issuance Account," and a third separate account which shall be designated as the "Capitalized Interest Account." The Project Fund Custodian, at the direction of the Augusta Aviation Commission, may establish other accounts or subaccounts in the 2005 Project Fund from time to time, and the Augusta Aviation Commission hereby covenants and agrees to establish and maintain such other accounts or subaccounts if and to the extent required by (i) the Tax and Non-Arbitrage Certificate to be issued and delivered in connection with the issuance of the Series 2005 Bonds or (ii) any statutory or regulatory requirements applicable to ensure that any particular category or item of revenue is applied in conformity with such statutory or regulatory requirement. Disbursements of Bond proceeds from the 2005 Project Fund shall be made only for payment of the Costs of the 2005 Project (including capitalized interest) and ' for payment of costs of issuance of the Series 2005 Bonds, provided, however, the owners of the Series ~ 2005 Bonds shall have recourse against amounts on deposit in the 2005 Project Fund in the event there is I a default with respect to the payment of the principal of or interest on the Series 2005 Bonds. (b) Before any disbursements shall be made from the Construction Account, there shall be filed by the Airport Finance Officer with the Project Fund Custodian a requisition for such disbursement stating each amount to be paid, the account from which such payment is to be made and the name of the person, firm or corporation to whom payment thereof is due (or in the case of reimbursement of the Consolidated Government or the Augusta Aviation Commission for costs paid by the Consolidated Government or the Augusta Aviation Commission, that such amount is due to the Consolidated -27- AD 1162781.6 Government or the Augusta Aviation Commission). The Augusta Aviation Commission shall maintain records with respect to the expenditures of such funds. (c) All disbursements from the Costs ofIssuance Account of the 2005 Project Fund shall be made by the Project Fund Custodian upon written direction of the Airport Finance Officer and applied to the payment of costs and expenses incurred by the Consolidated Government and/or the Augusta Aviation Commission in connection with the issuance and delivery of the Series 2005 Bonds. Moneys remaining in the Costs of Issuance Account after the earlier of (i) the payment of all costs and expenses in connection with the Series 2005 Bonds or (ii) six months after the issuance and delivery of the Series 2005 Bonds shall be deposited upon direction of the Augusta Aviation Commission into the Construction Account. (d) The Project Fund Custodian shall, at the direction of the Airport Finance Officer, transfer from the Capitalized Interest Account (and each subaccount therein) to the Debt Service Fund such amounts as shall be necessary from time to time to pay interest on the Series 2005 Bonds during the period of construction of the 2005 Project. Section 5.2. Investments. Amounts on deposit in the 2005 Project Fund and each account therein may be invested and reinvested by the Augusta Aviation Commission in Permitted Investments. All such investments shall be made so as to mature or be subject to redemption (without penalty) at the option of the owner thereof on or prior to the date or dates that the Augusta Aviation Commission anticipates that moneys therefrom will be required. Each investment shall be credited to the fund or account for which it is held, and the income, profits and revenues on such investments shall be credited to the fund or account for which such investment was made. Section 5.3. Creation of Additional Funds and Accounts; Debt Service Reserve. (a) There are hereby created: (i) within the Interest Account of the Augusta, Georgia Airport Debt Service Fund, a Series 2005C Subaccount; (ii) within the Principal Account of the Augusta, Georgia Airport Debt Service Fund, a Series 2005C Subaccount; (iii) within the Debt Service Reserve Account of the Augusta, Georgia Airport Debt Service Fund, a Series 2005C Subaccount; (iv) within the Interest Account of the Augusta, Georgia Airport PFC Debt Service Fund, a Series 2005NB Subaccount; (v) within the Principal Account of the Augusta, Georgia Airport PFC Debt Service Fund, a Series 2005NB Subaccount; and (vi) within the PFC Debt Service Reserve Account of the Augusta, Georgia Airport PFC Debt Service Fund, a Series 2005NB Subaccount. -28- AD] ]62781.6 The funds in each subaccount shall secure the Series 2005A Bonds, Series 2005B Bonds and Series 2005C Bonds, respectively. (b) The Debt Service Reserve Requirement for the Series 2005AIB Bonds, and for any series of Bonds hereafter issued pursuant to Section 502 of the Master Bond Resolution as Additional Bonds with a Senior Lien on Net General Revenues and a Senior Lien on PFC Revenues, shall be the aggregate sum of, for each such series of Bonds so secured, the lesser of (i) 125 percent of the Average Annual Debt Service Requirement, (ii) the Maximum Annual Debt Service Requirement, and (iii) 10 percent of the stated principal amount. Immediately upon issuance of the Series 2005AIB Bonds, the 2005AIB Subaccount of the PFC Debt Service Reserve Account shall contain the total Debt Service Reserve Requirement applicable to the Series 2005AIB Bonds. (c) The Debt Service Reserve Requirement for the Series 2005C Bonds, and for any series of Bonds hereafter issued pursuant to Section 502 of the Master Bond Resolution as Additional Bonds with a Senior Lien on Net General Revenues only, shall be the aggregate sum of, for each such series of Bonds so secured, the lesser of (i) 125 percent of the Average Annual Debt Service Requirement, (ii) the Maximum Annual Debt Service Requirement, and (iii) 10 percent of the stated principal amount. Immediately upon issuance of the Series 2005C Bonds, the 2005C Subaccount of the Debt Service Reserve Account shall contain the total Debt Service Reserve Requirement applicable to the Series 2005C Bonds. Section 5.4. No Lien or Claims. Neither the Paying Agent nor any other Person except for Bondholders shall have any claim against any fund or account created pursuant to this First Supplemental Bond Resolution. ARTICLE VI. MISCELLANEOUS Section 6.1. Supplemental Resolution. The Consolidated Government and the Augusta Aviation Commission shall, after the Series 2005 Bonds have actually been sold, adopt a Supplemental Resolution which among other things will specify the interest rate or rates per annum which the Series 2005 Bonds of each series shall bear, the principal amount of Series 2005 Bonds of each series to mature in each year, the maturities of the Series 2005 Bonds of each series, if any, which shall be designated as term bonds subject to mandatory redemption, and the optional redemption provisions applicable to the Series 2005 Bonds of each series, will provide for the execution and delivery of a bond purchase agreement, will provide for the specific application of proceeds of the Series 2005 Bonds and will provide for the actual issuance and delivery of the Series 2005 Bonds of each series upon payment therefor by the purchaser or purchasers thereof. Section 6.2. Validation. In order to proceed with the issuance and delivery of the Series 2005 Bonds, the Mayor of the Consolidated Government is hereby authorized and directed immediately to notify the District Attorney of the Augusta Judicial Circuit of the action taken by the Consolidated Government as shown by this First I Supplemental Bond Resolution, to request the District Attorney to institute proper proceedings to confirm I and validate the Series 2005 Bonds and to pass upon the security therefor, and the Mayor is further authorized to acknowledge service and to make answer in such proceedings and the Mayor, the Chairman of the Augusta Aviation Commission and the Clerk of the Consolidated Government are authorized to -29- AO 1162781.6 take any and all further action and to execute any and all further instruments as they might deem necessary to consummate the sale, issuance and delivery of the Series 2005 Bonds. Section 6.3. Closing Papers. The Mayor, the Consolidated Government Attorney, the Airport Director, the Airport Finance Officer and the Clerk, and other officials, officers and agents of the Consolidated Government, and Bond Counsel, are hereby authorized, empowered and directed to prepare, execute, file and deliver such further instruments, certificates or other documents, and a certificate of the Consolidated Government with respect to tax matters, and to take such other and further action, as may be necessary or desirable to consummate the aforesaid issuance of the Series 2005 Bonds and to give full force and effect to the Bond Resolution. Section 6.4. Binding Contract. This First Supplemental Bond Resolution shall constitute a contract binding the Consolidated Government and the Augusta Aviation Commission and, as such, the Mayor and the Chairman of the Augusta Aviation Commission are signing this contract on behalf of the Consolidated Government and the Augusta Aviation Commission, respectively. Section 6.5. Conflicting Ordinances or Resolutions. Any and all ordinances or resolutions or parts of ordinances or resolutions, except the Master Bond Resolution, in conflict with this First Supplemental Bond Resolution are to the extent of such conflict hereby repealed, and this First Supplemental Bond Resolution shall take immediate effect and shall be in full force and effect from and after its adoption. -30- AD ] 162781.6 Adopted February 1, 2005. ATTEST: . .... ~...- J . ~1';-~ .-~\ ~"I_'t.--' -:' - ~ '" Adop1ed January 20,2005. , ... ~ 1!. 3' ::~"r~' \ ATTEST: ~. iCL--- ere ry AO 1 1 6278 \.6 Jq AUGUSTA, GEORGIA By: Mayor AUGUSTA AVIATION COMMISSION ctctrBY~ ~ p Chairman / -31- EXIllBIT A REPORT OF THE AIRPORT CONSULTANT AD 1162781.6 APPENDIX B Augusta Regional Airport Augusta Aviation Commission Revenue Bonds, Series 2005 REPORT OF THE AIRPORT CONSULTANT Ricomio & Associates, Inc. 36 East Fourth Street, Suite 1206 Cincinnati, OH 45202 513.651.4700 (telephone) 513.412.3570 (facsimile) Rating Agency Dmft: Ricondo & Associates 11/29/04 [This page intentionally left blank] R I CONDO' li .:..SSOC'...Tl:~ November 29, 2004 Mr. Willis Boshears Executive Director City of Augusta Augusta Aviation Commission 1501 Aviation Way Augusta, Georgia 30906 Re: Augusta Aviation Commission Airport Passenger Facility Charge and General Revenue Bonds, Series 200SA (Non-AMT) & 200SB (AMT) Airport General Revenue Bonds, Series 200SC (AMT) Appendix A: Report of the Airport Consultant Mr. Boshears: This report sets forth findings, assumptions, and projections of the air traffic and financial analyses developed by Ricondo & Associates, Inc. (R&A), in conjunction with the planned issuance by Augusta, Georgia (the Consolidated Government) of its Airport Passenger Facility Charge and General Series 2005 Revenue Bonds (Series 2005 Bonds) for the Augusta Regional Airport (Airport) owned by the Consolidated Government and operated by the Augusta Aviation Commission (the Aviation Commission). This report is intended for inclusion in the Official Statement for the Series 2005 Bonds as Appendix B: Report of the Airport Consultant. The Series 2005 Bonds will provide funds, along with other available funds of the Consolidated Government, to fund the Capital Improvement Program (CIP) known as the 2005 Project, and to pay costs of issuance of the Series 2005 Bonds. The 2005 Project is comprised of components of the Aviation Commission's Terminal Building Project as well as two other projects at the Airport - Runway 8-26 Rehabilitation and Taxiway E Crack Sealing. This report includes examinations of the underlying economic base of the Air Trade Area (as defined in this report) for the Airport, historical and projected air traffic activity at the Airport; a description of existing Airport facilities; and projected revenues and expenses, with consideration for the anticipated impacts of the CIP through 2012. On the basis of the assumptions and analyses described in this report, R&A is of the opinion that Net Revenues of the Airport will be adequate to meet the Aviation Commission's rate covenant, 36 EAST FOURTH STREET. SUITE 1206, CINCINNATI, OHIO 45202 Telephone (513) 65 I -4700 Facsimile (513) 412-3570 CHICAGO. CINCJl\'NATI ,MIAMI, SAN ANTONIO. SAN FRANCISCO. WASHINGTON, D.C. Mr. WilIis Boshears Augusta Aviation Commission November 29,2004 Page 2 as set forth in the Master Bond Resolution adopted by the Augusta Richmond County Commission on ,2004 and by the Aviation Commission on _,2004 (the Bond Resolution), during the projection period 2007 (first year of debt service repayment) through 2012. Additional findings of these analyses include the folIowing: Economic Base · Population growth in the Air Trade Area between 1990 and 2003 was equal to that experienced nationwide yet lower than that experienced by the GA/SC Region (as defined in this report). Population growth in the Air Trade Area is projected to be lower than that for the GA/SC Region and the nation, yet steady through at least 2010. · Per capita effective buying income (EEl) for the Air Trade Area increased at a rate that was equal to that for the GA/SC Region and higher than that for the nation between 1998 and 2003. According to Sales and Marketing Management magazine, continued strong growth in per capita EBI for the Air Trade Area is expected between 2003 and 2008. · Although average annual unemployment rates for the Air Trade Area were higher than those for the GA/SC Region and the nation between 1993 and 2001, they were equal to or lower than the GA/SC Region and the nation in 2002 and 2003. · Nonagricultural employment in the Air Trade Area increased at a compounded annual growth rate of 0.7 percent between 1993 and 2003, compared to 1.6 percent nationwide during this same period. Information and transportation / utilities were the highest growing sectors in the Air Trade Area during this period. . The Air Trade Area offers a variety of cultural, recreational, and educational resources and activities. · The economic base of the Air Trade Area is diversified and capable of supporting increased demand for air travel at the Airport through the projection period. Air Traffic · With the discontinuation of ExpressJet service on October 30, 2004, the Airport has scheduled passenger service provided by two regionals/commuters - US Airways Express and Atlantic Southeast Airlines (ASA). Since Delta's replacement of mainline service with its regional carrier in December 2000, there has been no service by B - 4 Mr. Willis Boshears Augusta Aviation Commission November 29,2004 Page 3 major/national carriers with the exception of limited service during the month of April to serve demand generated by the Masters Golf Tournament. · As of November 2004, daily nonstop service is provided to two cities with a total of sixteen daily flights, with nine daily nonstop flights to Atlanta and seven daily nonstop flights to Charlotte. · Total enplanements at the Airport are expected to reach pre-September 11, 2001 levels by 2006/2007. Total enplanements are projected to increase from 162,946 in 2003 to approximately 201,800 in 2007, a compounded annual growth rate of6.7 percent during this period. Much of this increase can be attributed to the 15 percent increase from 2003 to 2004. Following this recovery from the effects of September 11,2001 (September 11) and the economic recession as well as a higher percentage of flights serving the Airport, total enplanements are projected to further increase to 232,100 in FY 2012. The increase between FY 2007 and FY 2012 represents a compounded annual growth rate of 2.8 percent, compared to 3.6 percent projected for the nation by the FAA. This compounded annual growth rate in enplanements for the remainder of the projection period is consistent with long-term historical growth at the Airport when enplanements are correlated with local socioeconomic factors. Financial Analyses · The 2005 Project is feasible in terms of providing modem facilities to serve customer needs at a cost that will produce reasonable levels of rates and charges to the users of the Airport facilities. · Cost per enplanement for the Passenger Airlines is projected to increase from $5.93 in 2004 to approximately $6.70 in 2007, the year in which the 2005 Project is completed. Cost per enplanement is projected to decrease to $6.32 in 2008 and is projected to increase to $6.72 in 2012. · Projected airline rates and charges together with other Aviation Commission revenues are sufficient to ensure that all Operation and Maintenance (O&M) Expenses, debt service and fund deposit requirements can be generated through reasonable user fees. Starting in 2007, the first year in which debt service will be repaid, revenues are sufficient to generate the rate covenant requirement for debt service coverage of 1.25x. Except as defined otherwise, the capitalized tenns used in this report are as defined in the Master Bond Resolution. The techniques used in this report are consistent with industry practices for similar studies in connection with airport revenue bond sales. While R&A believes the approach and assumptions utilized are reasonable, some assumptions regarding future trends and events may not B - 5 Mr. Willis Boshears Augusta Aviation Commission November 29,2004 Page 4 materialize. Achievement of projections described in this report, therefore, is dependent upon the occurrence of future events, and variations may be material. Sincerely. j ~ PRELl:I~ARY.D~FT II RICONDO & ASSOCIATES. INC. B - 6 TABLE OF CONTENTS 1. ECONOMIC BASE FOR AIR TRANSPORT A nON ...................................................................... II 1.1 Airports Serving Air Trade Area.......................................................................................... 11 1.2 Air Trade Area...................................................................................................................... 11 1.3 Population....... ...................................................................................................................... 12 1.4 Income .............................................................................. .................................................... 12 1.5 Employment ......................................................................................................................... 16 1.6 Economic Base ..................................................................................................................... 19 1.7 Summary ..............................................................................................................................29 2. AIR TRAFFIC.... .... ... ........... .............. ... ... ............... ..... .... ... ............................... ... .............. ... ...... ...... 31 2.1 Airlines Serving the Airport ................................................................................................. 31 2.2 Historical Passenger Activity ...............................................................................................33 2.3 Air Service................. ........................................................................................................... 36 2.4 Historical Aircraft Operations and Landed Weight.............................................................. 40 2.5 Aviation Industry................................................. ................................................................. 41 2.6 Projections of Aviation Demand .......................................................................................... 45 3. THE 2005 PROJECT .........................................................................................................................53 3.1 Existing Airport Facilities .................................................................................................... 53 3.2 The 2005 Project ..................................................................................................................54 3.3 The Terminal Building Project ............................................................................................. 56 4. FINANCIAL ANALYSES ................................................................................................................ 59 4.1 Financial Structure ............................................................................................................... 59 4.2 Financing Plan...................................................................................................................... 63 4.3 O&M Expenses .................................................................................................................... 67 4.4 Non-Airline Revenues.......................................................................................................... 71 4.5 Airline Revenues.................................................................................................................. 77 4.6 Application of Revenues ...................................................................................................... 79 RDting Agency Draft: Ricondo & Associates 11/29/04 B - 7 LIST OF TABLES Table No. 1.1 Historical & Projected Population .................................................................................................. 14 1.2 Effective Buying Income ................................................................................................................ 15 1.3 Civilian Labor Force & Unemployment Rates ............................................................................... 17 1.4 Employment Trends by Major Industry Division........................................................................... 18 1.5 Major Employers ............................................................................................................................ 20 1.6 Major New & Expanded Business Facilities ..................................................................................21 1.7 Per Capita Retail Sales ................................................................................................................... 24 2.1 Air Carrier Base..... ......................................................................................................................... 32 2.2 Historical Enplanements................................................................................................................. 34 2.3 Historical Enplanements by Airline................................................................................................ 37 2.4 Primary O&D Passenger Markets ..................................................................................................38 2.5 Nonstop Markets. ............................................................................................................................ 39 2.6 Historical Aircraft Operations ........................................................................................................42 2.7 Historical Landed Weight by Airline (thousand pounds) ............................................................... 43 2.8 Enplanement Projections................................................................................................................ 48 2.9 Operations Projections.......................................................................... .......................................... 49 2.10 Landed Weight Projections (thousand pounds) .............................................................................. 51 3.1 2005 Project & Funding Sources.................................................................................................... 55 4.1 Capital Improvement Program - 2004 - 2008 ................................................................................ 64 4.2 Sources & Uses - 2005 Proceeds .................................................................................................... 66 4.3 Projected Debt Service Requirement.............................................................................................. 68 4.4 Projected Operating & Maintenance (O&M) Expenses & Cost Center Allocations...................... 70 4.5 Projected Non-Airline Revenue...................................................................................................... 73 4.6 Terminal Building Rental Requirement.......................................................................................... 78 4.7 Apron Fees............................................................................................................................... ....... 80 4.8 Loading Bridge Use Fee ................................................................................................................. 81 4.9 Airline Landing Fee Requirement .................................................................................................. 82 4.10 Application of Revenue .................................................................................................................. 83 Rating Agency Druft: Ricondo & Associates Iln9l04 B - 8 LIST OF EXHIBITS Exhibit No. 1.1 Air Trade Area and Alternative Facilities....................................................................................... 13 4.1 Flow of Funds Under the Bond Resolution ....................................................................................60 Rating Agency Draft: Ricando & Associates 11129/04 B - 9 [This page intentionally left blank] B - 10 1. ECONOMIC BASE FOR AIR TRANSPORTATION The demand for air transportation is, to a large degree, dependent upon the demographic and economic characteristics of an airport's air trade area (i.e. the geographical area served by an airport). This relationship is particularly true for origin-destination (O&D) passenger traffic, which has been the foremost component of demand at Augusta Regional Airport (Airport). I The major portion of demand for air travel at the Airport, therefore, is influenced more by the local characteristics of the area served than by individual air carrier decisions regarding hub and service patterns in support of connecting activity. This chapter presents background information about the Airport and data for the Airport's air trade area that indicates it has an economic base capable of supporting increased demand for air travel during the projection period. 1.1 AIRPORTS SERVING AIR TRADE AREA Located in Augusta, Georgia, the Airport at Bush Field is the primary airport serving the Central Savannah River Area. The Airport is owned by the Consolidated Government and operated by the Augusta Aviation Commission (the Aviation Commission). Daniel Field is a general aviation airport located approximately seven miles from the Airport and serves general aviation aircraft. Daniel Field is owned by the Consolidated Government and is operated by an appointed commission separate and apart from the Aviation Commission. The Daniel Field Commission is a separate agency of the Consolidated Government. 1.2 AIR TRADE AREA The borders of an air trade area are influenced by the location of other metropolitan areas and their associated airport facilities. For purposes of these analyses, the primary air trade area for the Airport is the Augusta-Richmond County Metropolitan Statistical Area (MSA), as defined by the federal government's Office of Management and Budget. According to the federal govemment, an MSA is a geographical area with a large population nucleus (at least 50,000 people), along with any adjacent communities that have a high degree of economic and social interaction with that nucleus as measured by commuting. The Augusta-Richmond County MSA consists of Burke, Columbia, McDuffie, and Richmond counties in the State of Georgia (Georgia); and Aiken and Edgefield counties in the State of South Carolina (South Carolina). The Airport is located in Richmond County. The Hartsfield-Jackson Atlanta International Airport, approximately 160 miles west of the Airport, is the nearest large hub airport to the Airport.2 Other airports that could serve as alternative facilities to the Airport include the small hub facilities of Columbia Metropolitan Airport, which is approximately 85 miles east of the Airport; Charleston Air Force BaselInternational Airport, which is approximately 175 miles southeast of the Airport, and Savannah/Hilton Head International Airport, which is approximately 135 miles south of the Airport. The Airport is defined by the Federal Aviation Administration (FAA) as a non-hub airport. Based on location, accessibility, and services available at other commercial service airports within nearby service areas, it is recognized that the area served by the Airport extends to a secondary air trade area. This secondary air trade area includes an additional seven counties in Georgia and two I Based on U.S. DOT ticket sample data, 0&0 passengers accounted for approximatcly 88 percent of total passengers at the Airport in FY 2003 (see Table 2.5 in Chapter 2). 2 As defined by the FAA, a large hub airport enplanes 1.00 percent or more of nationwide enplanements during a calendar year; a medium hub airport enplanes between 0.25 percent to 0.999 percent; a small hub airport enplanes between 0.05 percent to 0.249 percent; and a non-hub airport enplanes less than 0.05 percent. Raling Agency Draft Ricondo & Associates 11/29/04 B-ll counties in South Carolina. Combined, the total air trade area for the Airport encompasses a 15- county area. It is the economic strength of the Augusta-Richmond County MSA, however, that provides the primary base for supporting air transportation at the Airport. As a result, only socioeconomic data for the Augusta-Richmond County MSA (hereinafter referred to as the Air Trade Area) were analyzed in conjunction with those for Georgia and South Carolina combined (the GA/SC Region) and the United States. Exhibit 1.1 presents the geographical location of the Airport's primary and secondary air trade areas, as well as its proximity to alternative facilities. 1.3 POPULA nON Historical population for the Air Trade Area, the GA/SC Region, and the United States is presented in Table 1.1. Population in the Air Trade Area increased from 435,763 people in 1990 to 499,684 people in 2000, and to 511,487 people in 2003. Between 1990 and 2003, population in the Air Trade Area increased at a compounded annual growth rate of 1.2 percent, which was equal to the growth rate experienced nationwide, yet below the 2.0 percent growth for the GA/SC Region during this same period.3 As shown, population growth for the Air Trade Area, the GA/SC Region, and the nation between 2000 and 2003 was not as strong compared to population growth between 1990 and 2000. Historical population trends for the Air Trade Area reflect a nationwide shift from urbanized areas to less populated adjacent areas. Richmond County, the most populated county in the Air Trade Area, experienced a moderate increase in population between 1990 and 2003 with a compounded annual growth rate of 0.3 percent. During the same period, Columbia COlmty and Edgefield County experienced increases in population at compounded annual growth rates of 3.0 percent and 2.3 percent, respectively, which exceeded the growth rates for the GA/SC Region and the nation. Table 1.1 also presents population projections for the Air Trade Area, the GA/SC Region, and the nation through 2010. As shown, population in the Air Trade Area is expected to increase from 511,487 people in 2003 to 526,373 in 2010. This increase represents a compounded annual growth rate of 0.4 percent during this period, compared to l.l percent for the GA/SC Region and 0.9 percent for the nation during this same period. 1.4 INCOME One measure of the relative income of an area is its effective buying income (EBI). EBI is essentially disposable personal income and includes personal income less personal taxes (federal, state, and local), non-tax payments including fines and penalties, and personal contributions for social insurance. EBI is a composite measurement of market potential and indicates the general ability to purchase an available product or service. Of the top 300 metropolitan and micropolitan areas in the nation, the Air Trade Area is ranked lO7'h in total EBI in 2003.4 Table 1.2 presents per capita EBI for the Air Trade Area, the GA/SC Region, and the nation between 1998 and 2003. As shown, per capita EBI for the Air Trade Area steadily increased from $13,478 in 1997 to $15,773 in 2003, representing a compounded annual growth rate of 3.2 percent 3 Strong growth in demographic and economic data included in these analyses for the GNSC Region is primarily influenced by the growth experienced by the Atlanta-Sandy Springs-Marietta MSA during the years depicted. 4 The Office of Management and Budget revised its geographic Census definitions to include Metropolitan and Micropolitan Statistical Areas, collectively called Core Based Statistical Areas (CBSAs). The CBSA Metropolitan Areas have at least one central urbanized core area of 50,000 people and the CBSA Micropolitan Areas have at least one urbanized core area of at least 10,000 people, but fewer than 50,000. Rating Agency Draft: Ricondo & Associates 11/29/04 B - 12 Augusta Regional Airport ~" ~,--.....- --- ~~---) f \\---- -----\, ~""'" :~:=I'-' \ Atlanta-+- ,/ \ S 7> \, // " \\~~"gusta \ ~~" , ,,-T" // 4( ,/ ,/" \ / ~ -<,.,,;j ~harleSlon /' '\ / l~!i"'.t!\~ ,~~.~,J l / ..:1~~~.i' /' (j~ / ! ~J ,./' ./ f / // Co co H (ll (, / ~fsavannah/Hilton Head l / I ,<.,0/ \ / , ?j J / I "f7~ l, // ,I 'Vv) ~ / ! ~ V !~ j / /'-.,-,..,. -- -------.-------,;{ ~, c/-<~ / t C','",'" ('@ii)Iii&i'(Ifo'llli)(/.^/ ,v _ I ('----: ~ /7 ~! ~'-../f ,) :/' ,! \::\/4)AU9::t/ / '~\::~ / II II ; / I j/,-.-_~,_---I '\ lol~iG'H: Y/C/ /S./S. ) (___~'-c_.,/->/,; .. ,A_ / / \ -''"~\ / ,~., // ///' .- ,/,,, \ 'v ".jl,' c:::=J Primary Air Trade Area Secondary Air Trade Area I / / :, Mileage from AGS Columbia........................... 85 Savannah/Hilton Head...... 135 Atlanta....... .............., ........160 Charleston........................175 ---- Source: Cartesia Software, Map Art, 1998. Prepared by: Ricondo & Associates, Inc.. Exhibit 1.1 Air Trade Area and Alternative Facilities S:J/Graphics Library/Misc, MapslAG5-Air Trade Area,a; B - 13 TABLE 1.1 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant Compounded Annual Growth Rate Historical Projected Historical Projected Area 1990 2000 2003 2010 1990-2000 2000-2003 1990-2003 2003-2010 Burke County, GA 20,579 22,243 22,949 24,733 0.8% 1.0% 0.8% 1.1% Columbia County, GA 66,031 89,288 97,505 111,179 3.1% 3.0% 3.0% 1.9% McDuffie County, GA 20,119 21,231 21,445 21,433 0.5% 0.3% 0.5% 0.0% Richmond County, GA 189,719 199,775 198,149 190,328 0.5% -0.3% 0.3% -0.6% Aiken County, SC 120,940 142,552 146,736 157,200 1.7% 1.0% 1.5% 1.0% Edgefield County, SC 18,375 24,595 24,703 21,500 3.0% 0.1% 2.3% -2.0% Air Trade Area 435,763 499,684 511,487 526,373 1.4% 0.8% 1.2% 0.4% GAlSC Region 9,964,919 12,198,465 12,831,867 13,899,870 2.0% 1.7% 2.0% 1.1% United States 248,709,873 281,421,906 290,809,777 308,935,581 1.2% 1.1% 1.2% 0.9% HISTORICAL & PROJECTED POPULATION Sources: U.S. Department of Commerce, Bureau of the Census (historical - all areas; projected - U.S.) Georgia Office of Planning and Budget (projected - Georgia and Georgia counties) South Carolina Office of Research and Statistical Services (projected - South Carolina counties) Prepared by: Ricondo & Associates, Inc. B - 14 TABLE 1.2 Augusta Aviation Commission Augusta Regional Airport Report o/the Airport Consultant EFFECTIVE BUYING INCOME Per Capita EBI GA/SC United Year Air Trade Area Region States Historical 1998 $13,478 $15,045 $16,895 1999 $14,045 $15,785 $17,691 2000 $14,106 $16,138 $18,426 2001 $14,679 $17,232 $18,491 2002 $15,774 $17,476 $18,375 2003 $15,773 $17,597 $18,662 Proiected 2008 $17,592 $19,843 $21,044 Compounded Annual Growth Rate 1998 - 2003 3.2% 3.2% 2.0% 2003 - 2008 2.2% 2.6% 2.7% Percentage of Households in Income Categories (2003 EBI) Less Than $20,000 to $35,000 to $50,000 Area $20,000 $34,999 $49,999 or more Air Trade Area 26.8% 25.1% 19.0% 29.1% GA/SC Region 23.5% 24.1% 19.3% 33.1% United States 22.4% 23.3% 19.0% 35.4% Sources: Sales & Marketing Management, Survey of Buying Power, 1999-2004 Prepared by: Ricondo & Associates, Inc. B - 15 between 1998 and 2003. This rate of growth was equal to the growth rate for the GNSC Region and higher than the 2.0 percent growth experienced nationwide during this same period. Table 1.2 also presents projections of per capita EBI for 2008, the latest year for which such projections are currently available. According to Sales and Marketing Management magazine, per capita EBI for the Air Trade Area is projected to increase from $15,773 in 2003 to $17,592 in 2008. This increase represents a compounded annual growth rate of 2.2 percent during this period, compared to 2.6 percent for the GNSC Region and 2.7 percent for the nation. An additional indicator of the market potential for air transportation demand is the percentage of households in the higher income categories. An examination of this indicator is important in that as personal income increases, air transportation becomes more affordable and, therefore, is used more frequently. Table 1.2 also presents percentages of households in selected EBI categories for 2003. As shown, 29.1 percent of households in the Air Trade Area had an EBI of $50,000 or more in 2003, compared to 33.1 percent for the GNSC Region and 35.4 percent for the nation. 1.5 EMPLOYMENT Recent employment trends for the Air Trade Area, the GNSC Region, and the United States are presented in Table 1.3. As shown, the Air Trade Area's civilian labor force remained relatively stable between 1993 and 2003, ranging from a high of 227,000 workers in 2003 to a low of approximately 212,000 workers in 1996. As a result, the civilian labor force in the Air Trade Area increased at a compounded annual growth rate of 0.5 percent between 1993 and 2003, compared to 1.9 percent for the GNSC Region and 1.3 percent for the nation. As also shown in Table 1.3, average annual unemployment rates for the Air Trade Area range from a high of 7.5 percent in 1993 to a low of 4.6 percent in 2000. Between 1993 and 2001 average annual unemployment rates for the Air Trade Area were consistently above those for the GNSC Region and the nation; however, in 2002 and 2003, average annual unemployment rates for the Air Trade Area were equal to or lower than those for the GNSC Region and the nation. An analysis of nonagricultural employment trends by major industry division is presented in Table 1.4, which compares the Air Trade Area's employment trends to those for the nation for 1993 and 2003.5 As shown, nonagricultural employment in the Air Trade Area increased from approximately 187,900 workers in 1993 to approximately 201,600 workers in 2003. This increase represents a compounded annual growth rate of 0.7 percent during this period, compared to the 1.6 percent growth experienced nationwide during this same period. With the exception of manufacturing, each of the major industry groups in the Air Trade Area experienced positive growth between 1993 and 2003, with the highest growth occurring in the infoITnation and transportation/utilities sectors. Manufacturing employment in the Air Trade Area decreased slightly from approximately 27,100 workers in 1993 to approximately 25,200 workers in 2003. This decrease to the manufacturing base between 1993 and 2003 was not unique to the Air Trade Area, as manufacturing employment nationwide decreased during this same period at a compounded annual rate of 1.4 percent. A slight shifting of the Air Trade Area's industrial mix occurred between 1993 and 2003, as manufacturing employment decreased from 14.4 percent of total employment in 1993 to 12.5 percent in 2003 and services employment increased from 37.6 percent of total employment in 1993 to 39.8 percent in 2003. These trends in the Air Trade Area's industrial mix were consistent with changes in 5 Nonagricultural employment data is not currently available for Burke County. Rating Agency Draft: Ricondo & Associates 11/29/04 B - 16 TABLE 1.3 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant CIVILIAN LABOR FORCE & UNEMPLOYMENT RA TES Civilian Labor Force (OOOs) GNSC United Year Air Trade Area Region States 1993 215 5,328 129,200 1994 213 5,441 131,056 1995 213 5,536 132,304 1996 212 5,658 133,943 1997 217 5,901 136,297 1998 219 6,049 137,673 1999 220 6,121 139,368 2000 221 6,220 142,583 2001 217 6,138 143,734 2002 218 6,224 144,863 2003 227 6,417 146,5 JO Compounded Annual Growth Rate 1993 - 2003 0.5% 1.9% 1.3% Unemployment Rates GNSC United Year Air Trade Area Region States 1993 7.5% 6.4% 6.9% 1994 6.6% 5.6% 6.1% 1995 6.9% 4.9% 5.6% 1996 7.1% 5.1% 5.4% 1997 6.6% 4.5% 4.9% 1998 5.7% 4.1% 4.5% 1999 5.4% 4.1% 4.2% 2000 4.6% 3.7% 4.0% 200] 5.0% 4.4% 4.7% 2002 5.4% 5.4% 5.8% 2003 5.2% 5.4% 6.0% Source: U.S. Department of Labor, Bureau of Labor Statistics Prepared by: Ricondo & Associates, Inc. B - 17 1.4 Air Trade Area I United States Nonameultura! Emolovment Nona.rieultural Emolovment 10005\ Percentage of Percentage of Compounded Percentage of Percentage of Compounded Total Total Annual Total Total Annual Industry 1993 Employment 2003 Employment Growth Rate 1993 Employment 2003 Employment Growth Rate Construction 1 12.000 6.4% 13.000 6.4% 0.8% 5,445 4.9% 7.293 5.6% 3.0% Manufacturing 27,!00 14.4% 25,200 12.5% -0.7% 16.774 15.1% 14.525 11.2% -1.4% Trade 26,500 14.1% 28,100 13.9% 0.6% 18,114 16.3% 20.517 15.8% 1.3% Information J 2.400 1.3% 3.300 1.6% 3.2% 2,668 2.4% 3,198 2.5% 1.8% TransportationlUtilities 4.000 2.1% 4,900 2.4% 2.1% 4,265 3.8% 4,758 3.7% 1.1% Financial 6,500 3.5% 7,200 3.6% 1.0% 6,709 6.1% 7.974 6.1% 1.7% Services 70,700 37.6% 80,300 39.8% 1.3% 37,880 34.2% 50,092 38.6% 2.8% Government 38,700 20.6% 39,600 19.6% 0.2% 18.989 17.1% 21,575 16.6% 1.3% Total 187,900 100.0% 201,600 100.0% 0.7% 110,843 100,0% 129,932 100.0% 1.6% INDUSTRY DIVISION TABLE AuguSla Avialion Commission Augusta Regional Airport Report of the Airport Consultanl EMPLOYMENT TRENDS BY MAJOR NONAGRICULTURAL EMPLOYMENT Construction 6.4Y. I I 5.6% Manufacturing I 112.5Y, I I I 11.2% Trade I I 13.9% I IS.S"'/. Informalion _1.6% I 2,l% Transportation/Uti I i tics ~ 2.4% I 3.~. Financial I_ - 3.6% I 6.1% Services 39.8"~ I I I I II 38.6~. Government I 119.6% , , 16,6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0"10 30.0"1, 35.0% 40.0% 45.0% ~nited States - OAir Trade Area I I 2003 PERCENT OF t:t:I I 00 Nonagricultural employment data is not currently available for Burke County. Includes mining employment. The information sector includes communications, publishing, motion picture and sound recording, and on-Iin~ services. Source: U.S. Department of Labor, Bureau of Labor Statistics Prepared by: Ricondo & Associates, Ine, the industrial mix nationwide, as manufacturing decreased from 15.1 percent to 11.2 percent and services increased from 34.2 percent to 38.6 percent during this same period. Major employers in the Air Trade Area, as measured by the number of employees, are presented in Table 1.5. As shown, there are approximately 50 firms in the Air Trade Area with 350 or more employees. The largest employers in the Air Trade Area are the United States Army Signal Center and Fort Gordon (Fort Gordon) with 17,400 employees and Savannah River Site (SRS) with 12,500 employees. Other major employers in the Air Trade Area include: the Medical College of Georgia with 4,660 employees, the Richmond County School System with 4,420 employees, and Avondale Mills with 3,500 employees. In terms of local employment, numerous companies included in the Fortune 500 for 2004 have a significant presence in the Air Trade Area including E-Z-GO/Textron with 1,280 employees, Kimberly-Clark with 1,200 employees, International Paper with 820 employees, Wal-Mart Stores with 740 employees, Murray BiscuitlKellogg's with 540 employees, BellSouth with 530 employees, Johnson Controls with 460 employees, Advance Auto Parts with 450 employees, Procter & Gamble with 450 employees, and John Deere with 420 employees. 1.6 ECONOMIC BASE This section reviews the local economy in greater detail to more clearly examine the basis for the economic strength of the Air Trade Area. 1.6.1 Construction Construction employment in the Air Trade Area increased at a compounded annual growth rate of 0.8 percent between 1993 and 2003, compared to 3.0 percent for the nation. In 2003, the construction sector accounted for approximately 13,000 employees in the Air Trade Area, representing 6.4 percent of total nonagricultural employment during this year. Table 1.6 presents major new and expanded businesses in the Air Trade Area between 1999 and 2004. As shown, new and expanded businesses had a combined investment of approximately $492 million and created approximately 3,000 jobs during this period. The largest investments by year include the $20 million expansion of John Deere in 1999, the new $30 million FlAMM facility in 2000, the new $4 million Standard Textile Augusta and Comcast facilities in 200 I, the $200 million expansion of Procter & Gamble in 2002, and the new $9.5 million Augusta Tissue facility in 2003/2004. Major development projects in the Air Trade Area include: · Augusta Canal Restoration. The Augusta Canal Authority and Augusta Tomorrow, Inc. are working together to restore the third level of the historic Augusta Canal. When completed in winter 2005, this $15 million restoration will provide recreational access through green space and stimulate developmental opportunities. · University Hospital Medical Building - Evans. This new $9 million medical professional building is part of the University Health Care System and is located on the Evans satellite medical center campus. The 60,000 square foot building was completed in early 2004. Ruling Agency Druft: Ricondo & Associates 11/29/04 B - 19 TABLE 1.5 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant MAJOR EMPLOYERS Employer Employees Product or Service U.S. Army Signal Center & Fort Gordon Savannah River Site Medical College of Georgia Richmond County School System Avondale Mills University Hospital Medical College of Georgia Health Augusta-Richmond County Columbia County School System Bechtel Savannah River Augusta V A Medical Center East Central Regional Hospital Doctors Hospital Shaw Industries E-Z-GOrr extron Dixie-Narco Kimberly-Clark Sitel SI. Joseph Hospital Advanced Glassfiber Yam Bridgestone/Firestone Aiken Regional Medical Centers Club Car/Ingersoll-Rand Tyco Healthcare-Kendall International Paper Morris Communications Columbia County Commission Wal-Mart Stores Quebecor World McDuffie County Schools Augusta State University Murray Biscuit/Kellogg's BellSoUlh CSRA Economic Opportunity Authority Shapiro Packing Augusta Sportswear Johnson Controls Advance Auto Parts Procter & Gamble Thermal Ceramics John Deere KennametallPG U.S. Department of Energy GIW Industries Castleberry/Snow's Brands Hubbell Power System Augusta Newsprint Carlisle Boral Bricks DSM Chemicals North America McDuffie Regional Medical Center PCS Nitrogen Fertilizer 17,400 12,500 4,660 4,420 3,500 3,200 3,000 2,600 2,500 2,000 1,980 1,800 1,400 1,380 1,280 1,200 1,200 1,100 1,030 1,000 950 900 880 850 820 800 750 740 710 610 540 540 530 500 500 460 460 450 450 440 420 420 400 390 380 380 370 370 360 350 350 350 Military Government Nuclear Defense Materials Higher Education Public Education Textile Fabrics Healthcare Services Healthcare Services Municipal Services Public Education Design & Construction Healthcare Services Healthcare Scrvices Healthcare Services Carpet Yams & Plastic Extrusion Golf Cars & Utility Vehicles Vending Machines Consumer Paper Products Call Center Healthcare Services Fiberglass & Roofing Car & Truck Tires Healthcare Services Golf Cars & Utility Vehicles Disposable Medical Supplies Bleached Paperboard Media Municipal Services Discount Stores Printing & Publishing Public Education Higher Education Cookies Telecommunications Social Services Beef Products Sporting & Athletic Goods Military Contract Services Auto Parts Distributor Soaps & Detergents Ceramic Fiber Tractors Metal CUlling Tools Federal Government Centrifugal Slurry & Dredge Pumps Meat Products High Voltage Insulators & Arresters Newsprint Tires & Wheels Bricks Caprolactam & Cyclohexanone Healthcare Services Inorganic Chemicals & Fertilizer Sources: Augusta Metro Chamber of Commerce Thomson-McDuffie County Chamber of Commerce Greater Aiken Chamber of Commerce Prepared by: Ricondo & Associates, Inc. B - 20 TABLE 1.6 Augusta Aviation Commission Augustu Regional Airport Report of the Airport Consultant MAJOR NEW & EXPANDED BUSINESS FACILITIES Company Activity New Jobs Products or Service lnve~1ment 1999 John Deere Bill's Dollar Stores Sitel Tractors Warehouse & Distribution Call Center Expanded New New $20,000,000 16,000,000 3,000,000 200 300 500 1999 Total 1,000 $39,000,000 2000 FlAMM Murray BiscuitlKellogg's Boral Bricks Helmac Products Balleries Cookies Bricks Pet Supplies New Expanded Expanded New $30,000,000 11,000,000 10,200,000 10,000,000 300 30 50 300 2000 Total 680 $61,200,000 2001 Standard Textile Augusta Comcast Garrell Aviation Civic Development Group Knology Textiles Call Center Airport Maintenance Support Call Center Call Center New New Expanded New New $4,000,000 4,000,000 J ,400,000 1,000,000 1,000,000 200 50 o 200 175 200 1 Total 625 $11,400,000 2002 Procter & Gamble Quebecor World Monsanto Murray BiscuitlKellogg's John Deere PCS Nitrogen Fertilizer Solvay Advanced Polymers Tyco Healthcare-Kendall General Chemical Soaps & Detergents Printing & Publishing Medicinal Chemicals Cookies Tractors Inorganic Chemicals & Fertilizer Plastic Materials Disposable Medical Supplies Inorganic Chemicals Expanded Expanded Expanded Expanded Expanded Expanded Expanded Expanded Expanded $200,000,000 35,000,000 30,000,000 30,000,000 23,000,000 14,000,000 8,000,000 4,000,000 1,000,000 50 100 12 100 20 o 25 18 4 2002 Total 329 $345,000,000 2003/2004 Augusta Tissue Rutgers Organics FedEx CRL Warehouse & Logistics FirstCo Augusta Auto Auction Augusta Sportswear Electrolux Paper Products Organic Chemicals Distribution Center Warehouse Tractor Parts Auto Auction Sporting & Athletic Goods Appliances & Equipment New Expanded New Expanded New New Expanded Expanded $9,500,000 6,600,000 4,500,000 4,000,000 3,500,000 3,400,000 2,000,000 2,000,000 45 20 70 40 25 80 o 40 200312004 Total 320 $35,500,000 1999 - 2004 Total 2,954 $492,100,000 Source: Augusta Metro Chamber of Commerce Prepared by: Ricondo & Associates, Inc. B - 21 · Mullins Crossing Shopping Center. With approximately 440,000 square feet of retail space, this center will include a Target, Kohl's, and II other retail shops, The first phase is expected to be completed by fall 2005, with subsequent phases including restaurants and upscale boutiques, · Hammond's Ferry. Construction will commence in 2004 for the redevelopment of 200 acres along the Savannah River, which will offer over 800 single-family homes, condominiums, and apartments, The riverfront portion will encompass a riverfront park that will be linked by the North Augusta Greenway Trail System, /.6.2 Manufacturing Manufacturing employment in the Air Trade Area decreased at a compounded annual rate of 0,7 percent between 1993 and 2003, compared to 1.4 percent nationwide during this same period. In 2003, the manufacturing sector accounted for approximately 25,200 employees in the Air Trade Area, representing 12.5 percent of total nonagricultural employment during this year. The headquarters of the top two manufacturers of golf cars are located in the Air Trade Area, With 1,280 employees in the Air Trade Area, E-Z-GO is the world's largest manufacturer of golf cars and a leading manufacturer of utility vehicles. E-Z-GO is part of Textron, a Fortune 500 company with a global presence in multiple industries, including operations in aircraft, automotive, industrial, and finance. With 880 employees in the Air Trade Area, Club Car is the second largest manufacturer of golf cars. Club Car, an Ingersoll- Rand brand, has a global distribution network that includes over 600 distributor, dealer, and factory branch locations, Leading consumer product companies, such as Kimberly-Clark, Kellogg's, and Procter & Gamble, have manufacturing facilities located in the Air Trade Area, Kimberly- Clark employs approximately 1,200 employees at their consumer paper products facility in the Air Trade Area, Murray Biscuit, a partner of Kellogg's, employs approximately 540 employees in the Air Trade Area, Since 2000, Kellogg's has invested approximately $41 million into the expansion of the Murray cookie manufacturing facility, which created approximately 130 new jobs in the Air Trade Area. Procter & Gamble employs approximately 450 employees in the Air Trade Area. In 2002, Procter & Gamble invested approximately $200 million into the expansion of their laundry detergent manufacturing plant, which created approximately 50 new jobs in the Air Trade Area, John Deere also has a significant presence in the Air Trade Area with approximately 420 employees, Since 1999, John Deere has invested approximately $43 million into the expansion of its commercial tractor products plant, including a new $23 million facility in 2002. Approximately 220 new jobs have been created in the Air Trade Area as a result of these expansions. According to the Augusta Metro Chamber of Commerce, FirstCo, a John Deere supplier, will invest approximately $3.5 million for a new manufacturing facility that will generate approximately 25 new jobs in the Air Trade Area once it is completed in summer 2005, Other significant manufacturing firms in the Air Trade Area include Avondale Mills (textile fabrics) with 3,500 employees; Shaw Industries (carpet yarns and plastic extrusion) with 1,380 employees; Advanced Glassfiber Yarn (fiberglass and roofing) with 1,000 employees; Bridgestone/Firestone (car and truck tires) with 950 employees; Tyco Rating Agency Draft: Ricondo & Associates 11/29/04 B - 22 Healthcare-Kendall (disposable medical supplies) with 850 employees; and International Paper (bleached paperboard) with 820 employees. I. 6.3 Trade Trade employment in the Air Trade Area, which includes both retail and wholesale trade, increased at a compounded annual growth rate of 0,6 percent between 1993 and 2003, compared to 1.3 percent for the nation. In 2003, the trade sector accounted for approximately 28,100 employees in the Air Trade Area, representing 13,9 percent of total nonagricultural employment during this year. Of that total, approximately 85 percent of these employees were engaged in retail trade, One indicator of growth in the trade sector is retail sales, defined as all net sales (gross sales minus refunds and allowances for returns) for establishments engaged primarily in retail trade. Of the top 300 metropolitan and micropolitan areas in the nation, the Air Trade Area ranked 105lh in total retail sales in 2003, Table 1.7 presents per capita retail sales for the Air Trade Area, the GAlSC Region, and the nation between 1995 and 1998 and between 2000 and 2003,6 As shown, per capita retail sales for the Air Trade Area increased from approximately $8,457 in 1995 to $9,207 in 1998, This increase represents a compounded annual growth rate of 2.9 percent during this period, compared to 4.4 percent for the GAlSC Region and 3.5 percent for the nation, As shown, per capita retail sales for the Air Trade Area, the GAlSC Region, and the nation increased between 2000 and 2001, yet decreased between 200 I and 2002 due to the effects of the terrorist attacks on September II, 200 I (September 11) and the economic slowdown. Therefore, between 2000 and 2003, per capita retail sales for the Air Trade Area decreased slightly at a compounded annual growth rate of 0,6 percent, compared to 0,2 percent for the GAlSC Region and 1.9 percent for the nation. Table 1,7 also presents projections of per capita retail sales for 2008, the latest year for which such projections are currently available.? According to Sales & Marketing Management magazine, per capita retail sales for the Air Trade Area are projected to increase from approximately $10,778 in 2003 to $11,973 in 2008. This increase represents a compounded annual growth rate of 2.1 percent, which is comparable to that projected for the GAlSC Region and the nation during this same period (compounded annual growth rates of 2.0 and 2.4 percent, respectively). The Augusta Mall is one of the largest shopping malls in Georgia with over 120 department stores and specialty shops and approximately one million square feet of retail space. The Aiken Mall is another significant shopping facility in the Air Trade Area with more than 50 retail stores and eateries and approximately 450,000 square feet of retail space, Other major shopping centers in the Air Trade Area include Augusta Exchange, Augusta Square, National Hills Shopping Center, Southgate Shopping Center, Surrey Center, and the specialty shops of downtown Augusta and Aiken, 6 Due to a change in reporting total retail sales in Sales & Marketing Management, Survey of Buying Power 2000, total retail sales for 1999 are not available. In addition, total retail sales beginning in 2000 are not compatible to earlier years due to a different benchmark and definition. 7 Projected 2008 per capita retail sales are not available for Burke County. Rating Agency Dmft: Ricondo & Associates 11/29/04 B - 23 TABLE 1.7 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant Year PER CAPITA RETAIL SALES 1 GAlSC Region Air Trade Area United States Historical ]995 1996 1997 1998 1999 2000 2001 2002 2003 $8,457 $8,601 $8,8]3 $9,207 N/A $10,969 $11,549 $10,943 $] 0,778 $8,823 $9,279 $9,568 $10,044 N/A $] 2,220 $12,716 $12,152 $12,291 $8,891 $9,214 $9,422 $9,856 N/A $12,010 $12,756 $12,480 $12,716 Proiected 2008 2 $]1,973 $13,600 $14,291 Compounded Annual Growth Rate ] 995 - 1998 2000 - 2003 2003 - 2008 2.9% -0.6% 2.1% 4.4% 0.2% 2.0% 3.5% 1.9% 2.4% I Due to a change in reporting total retail sales in Survey of Buying Power 2000, total retail sales for 1999 are not available. In addition, total retail sales beginning in 2000 are not compatible to earlier years due to a different benchmark and definition. 2 Projected 2008 per capita retail sales are not available for Burke County. Sources: Sales & Marketing Management, Survey of Buying Power, ]996-2004 Prepared by: Ricondo & Associates, Inc. B - 24 1.6.4 Information Recognizing the information-based economy, the new information sector combines communications, publishing, motion picture and sound recording, and online services. Information employment in the Air Trade Area increased at a compounded annual growth rate of 3.2 percent between 1993 and 2003 (the highest-growing sector during this period), compared to 1.8 percent for the nation, In 2003, the information sector accounted for approximately 3,300 employees in the Air Trade Area, representing 1.6 percent of total nonagricultural employment during this year, Communications is a significant part of the Air Trade Area's information-based economy. Morris Communications, a privately held media company with diversified holdings that include newspapers, magazines, book publishing, radio, and outdoor advertising, is the largest communications employer in the Air Trade Area with 800 employees. Quebecor World, a global company specializing in the delivery of print communication services to book and magazine publishers, retailers, catalogers, telephone companies, and direct mail customers, has 710 employees in the Air Trade Area, In 2002, Quebecor World invested approximately $35 million to expand its catalog facility, which created approximately 100 new jobs in the Air Trade Area, The telecommunications company, BellSouth, also has a significant presence in the Air Trade Area with 530 employees, According to the Augusta Metro Chamber of Commerce, approximately $9.0 million has been invested in call center operations in the Air Trade Area since 1999, With 1,100 employees in the Air Trade Area, Sitel is a technology-based company that provides customer relationship management strategies to companies that outsource their customer service operations. In 1999, Sitel invested approximately $3.0 million to construct a new facility in the Air Trade Area, which initially created approximately 500 new jobs. In 2001, Comcast, the largest cable and broadband communications provider in the nation, invested approximately $4.0 million for a new call center facility that created approximately 50 new jobs in the Air Trade Area. Civic Development Group, a full-service teleservice company that provides direct sales, and Knology, a regional company offering telephone, cable TV, and internet services, each invested approximately $1.0 million in 2001 to create new call center facilities that generated approximately 200 new jobs and 175 new jobs, respectively, in the Air Trade Area. 1. 6. 5 Transportation/Uti/ities Transportation/utilities employment in the Air Trade Area increased at a compounded annual growth rate of 2.1 percent between 1993 and 2003 (the second highest- growing sector during this period), compared to I.l percent for the nation, In 2003, the transportation/utilities sector accounted for approximately 4,900 employees in the Air Trade Area, representing 2.4 percent of total nonagricultural employment during this year. The Air Trade Area is located on Interstate 20 (running east and west from Texas to South Carolina) and the Savannah River, and provides close proximity to the Charleston and Savannah Ports, The Air Trade Area offers rail freight service provided by CSX Transportation and Norfolk Southern Railway, Greyhound and Southeastern Stages bus lines, and approximately 40 motor freight carriers that provide transportation services. In 2002, FedEx, a global provider of transportation, e-commerce, and supply chain services, opened 31 additional home delivery operation centers throughout the United States, Rating Agency Droll: Ricondo & Associates 11/29/04 B - 25 including Augusta, According to the Augusta Metro Chamber of Commerce, Fed Ex will invest approximately $4.5 million for a new ground distribution center in 2004, which will create approximately 70 new jobs in the Air Trade Area, 1.6.6 Financial Finance/insurance/real estate employment in the Air Trade Area increased at a compounded annual growth rate of 1.0 percent between 1993 and 2003, compared to 1.7 percent for the nation. In 2003, this sector accounted for approximately 7,200 employees in the Air Trade Area, representing 3,6 percent of total nonagricultural employment during this year. Based on 2003 revenues, numerous financial companies included in the Fortune 500 for 2004 have a presence in the Air Trade Area including Bank of America, Merrill Lynch, Wachovia, SunTrust Banks, Regions Financial, and SouthTrust. 1.6.7 Services Services employment in the Air Trade Area increased at a compounded annual growth rate of 1.3 percent between 1993 and 2003, compared to 2,8 percent for the nation. In 2003, the services sector accounted for approximately 80,300 employees in the Air Trade Area, representing 39.8 percent of total nonagricultural employment during this year, the highest employment level among sectors. Selected areas of the Air Trade Area's services industry are discussed in further detail below, including travel and tourism, cultural and recreational activities, medical and health, and higher education, Travel and Tourism In terms of employment, the travel and tourism industry accounted for approximately 19,000 employees in the Air Trade Area in 2003.8 According to the Augusta Metro Convention and Visitors Bureau, more than 1.5 million people visit Augusta annually and spend approximately $366 million in tourism expenditures. Major tourist attractions in the Air Trade Area include Augusta Museum of History, National Science Center Fort Discovery, Woodrow Wilson's Childhood Home, Riverwalk Augusta, Lucy Craft Laney Museum of Black History, Confederate Powder Works, Georgia Golf Hall of Fame, and Morris Museum of Art. In 2003, the Augusta Metro Convention and Visitors Bureau booked approximately 320 events with 165,000 attendees and 72,560 hotel room nights, compared to approximately 265 events with 138,000 attendees and 74,500 hotel room nights in 2002. With seven meeting rooms and approximately 54,000 square feet, the largest meeting facility in the Air Trade Area is the Augusta-Richmond County Civic Center Complex. This facility features an 8,500-seat arena, a 2,700-seat theater, and a 14,500 square foot exhibit hall that opens into a 23,000 square foot arena floor. Other major meeting facilities in the Air Trade Area include Radisson Riverfront Hotel Augusta with 22 meeting rooms and approximately 45,000 square feet, Savannah Rapids Pavilion with eight meeting rooms and approximately 25,000 square feet, Gordon Club with seven meeting rooms and approximately 20,000 square feet, The Clubhouse with two meeting rooms and approximately 12,000 square feet, and Augusta Towers Hotel and Conference Center with II meeting rooms and approximately 9,000 square feet. 8 U.S. Department of Labor, Bureau of Labor Statistics. Rating Agency Draft: Ricondo & Associates Iln9l04 B - 26 Augusta has the second-largest hotel room inventory in Georgia with approximately 65 hotel properties with more than 6,000 guest rooms. Major hotels in the Air Trade Area include Augusta Inn and Conference Center with 239 guest rooms, Radisson Riverfront Hotel Augusta with 234 guest rooms, Ramada Plaza with 200 guest rooms, Quality Inn and Sleep Inn Conference Center with 193 guest rooms, Belair Conference Center with 183 guest rooms, Augusta Towers Hotel and Conference Center with 179 guest rooms, and Augusta Suites Inn with 176 guest rooms, Cultural and Recreational Activities The Air Trade Area hosts a significant number of cultural and recreational activities. The Masters, one of Professional Golfers Association's four Grand Slam golf tournaments, is held annually at the Augusta National Golf Club. Since 1934, the golf course designed by Bobby Jones and Clifford Roberts attracts golf spectators from around the world for one week each April. The Air Trade Area has more than 21 private and 15 public golf courses, including Jones Creek, the number one rated public golf course in Georgia. The Air Trade Area is home to the East Coast Hockey League's Augusta Lynx (affiliated with the National Hockey League's New Jersey Devils and Vancouver Canucks), the South Atlantic (Single A) Minor League's Augusta Green Jackets (affiliated with Major League Baseball's Boston Red Sox), and numerous college sports teams affiliated with the various colleges discussed below, Major annual events in the Air Trade Area include the Augusta Futurity, National Barrel Horse Association Championship, Nike Peach Jam, Augusta Arsenal Soccer Shootout, Head of the South Regatta, and the Ladies Professional Golf Association's Asahi Ryokuken International Championship, Medical and Health With over 4,000 licensed hospital beds, the healthcare industry employs approximately 25,000 medical professionals in the Air Trade Area and is one of the largest medical centers in the southeast. The Medical College of Georgia (MCG) and Medical College of Georgia Health (MCG Health) are among the leading employers in the Air Trade Area with 4,660 employees and 3,000 employees, respectively, MCG is ranked as one of the top 20 medical schools in the nation and offers programs in dentistry, allied health sciences, nursing and graduate studies, as well as medicine. MCG Health is the clinical side of the medical school; and its medical center complex includes a 485-bed adult hospital, a I50-bed Children's Medical Center, an Ambulatory Care Center with more than 80 outpatient clinics in one setting, and a Specialized Care Center housing a 13-county Level I regional trauma center. The MCG Health System also includes a variety of centers and units at more than 90 satellite clinics. The Aiken Regional Medical Centers (ARMC) employ 900 healthcare professionals in the Air Trade Area, This 225-bed acute care hospital is currently undergoing a $15 million expansion, In July 2003, a new cardiovascular floor was completed that features 34 all- private rooms. Offering radiation and chemotherapy treatment in one location along with support services, the 15,000 square foot Cancer Care Institute of Carolina opened in April 2004. A new 34-bed Emergency Room and consolidated 36-bed Intensive Care Unit is scheduled to be completed in spring 2005, Other major medical facilities in the Air Trade Area include University Hospital with 551 licensed beds, Augusta VA Medical Centers with Raling Agency Draft: Ricondo & Associates Iln9/04 B - 27 440 licensed beds, Doctors Hospital with 350 licensed beds, Dwight David Eisenhower Army Medical Center with 300 licensed beds, and St. Joseph Hospital with 171 licensed beds. Hif[her Education The University System of Georgia is the fourth largest university system in the nation. Combined with other affiliates, it offers students higher education options at more than 13 institutions within a 150-mile radius of Augusta. These higher education institutions offer a wide range of academic programs, including certificates, associates, baccalaureate, masters, doctoral, and professional degrees. Augusta State University (ASU), one of the institutions include in the University Systems of Georgia, is the largest university in the Air Trade Area with more than 6,000 full- time and part-time students. ASU is a four-year college that offers 50 major programs, six bachelors programs and four associate degree programs, as well as graduate work in education, business, public administration, and psychology, including a cooperative doctoral program, In 2003, ASU completed Allgood Hall, a 123,000 square foot building that includes the College of Business Administration as well as parts of the Katherine Reese Pamplin College of Arts and Sciences. Still under construction, University Hall is another classroom building that is scheduled to be completed in fall 2004, Aiken Technical College (A TC) has approximately 3,400 enrolled students and offers 22 programs for an associates degree, five diploma programs, and 47 certificate programs in computer technology, industrial and engineering technology, health, public service, and business. In the past three years, A TC has opened three new buildings including the $5.4 million Dale Phelon Information Technology Center, the $3 million CSRA Manufacturing and Technology Training Center, and the $7.6 million Health and Science Building, Other colleges and universities in the Air Trade Area include Troy State University with 6,300 students, Piedmont Technical College with 4,450 students, Augusta Technical College with 4,000 students, University of South Carolina Aiken with 3,200 students, Medical College of Georgia with 2, I 00 students, Paine College with 935 students, and Kerr Business College with 520 students, 1.6.8 Government Government employment in the Air Trade Area increased at a compounded annual growth rate of 0.2 percent between 1993 and 2003, compared to 1.3 percent for the nation. In 2003, this sector accounted for approximately 39,600 employees in the Air Trade Area, representing 19,6 percent of total nonagricultural employment during this year. Fort Gordon and SRS are the top two major employers in the Air Trade Area with 17,400 employees and 12,500 employees, respectively, The U.S, Department of Energy also has a significant presence in the Air Trade Area with 400 employees, Fort Gordon encompasses approximately 56,000 acres of Army post located on the western side of Augusta. This military facility serves as the largest communications electronics-training center in the world, The training center has advanced communications technology that adapts the telephone to military usage by incorporating satellite communications and computer technology, Fort Gordon is also home to the Army's Computer Science School and to a joint services intelligence organization that supports the U.S. Department of Defense, In addition, its teaching facilities at Eisenhower Army Medical Center serve as a regional tri-service medial center serving five southeastern states and Puerto Raring Agency Draft: Ricondo & Associates 11129/04 B - 28 Rico. In total, Fort Gordon's annual economic impact on the Air Trade Area is more than $1.2 billion, including payroll, contracts, purchase, and federal school aid, The Savannah River Site (SRS) is a U.S. Department of Energy nuclear facility. With approximately 198,000 acres (310 square miles), SRS is located in parts of three South Carolina counties, including Aiken. SRS's mission is to reduce nuclear danger by transferring applied environmental technology to government and non-government entities cleaning up the site, managing the waste, and forming economic and industrial alliances, Westinghouse Savannah River Company is responsible for the daily operations of the facility, SRS has a significant economic impact in both Georgia and South Carolina, affecting more than a dozen counties, The current annual budget of SRS is approximately $1,6 billion, including a payroll of approximately $900 million, 1.6.9 Quality of Life Places Rated Almanac has rated Augusta as the second best city to live in Georgia, This rating is based on several factors, including cost of living, transportation, higher education, job outlook, healthcare, and recreations. Entrepreneur magazine has recognized Augusta as "One of the 10 Best Southern Cities for Business". In the January 200 I issue of Expansion magazine, the Augusta-Richmond County MSA was 13th out of 50 for the "Hottest Cities for Business Relocation." The considering factors were business environment, work force quality, operating costs, incentive programs, worker training programs, and ease of working with local officials, Where to Retire magazine ranked Augusta fourth among the nation's most affordable cities for retirement. Located in McDuffie County, the City of Thompson was recognized as a "Georgia Top Ten City of Excellence" by Georgia Trend magazine and Georgia Municipal Association in 2000, 1.7 SUMMARY A summary of the socioeconomic trends in the Air Trade Area includes the following trends: · Population growth in the Air Trade Area between 1990 and 2003 was equal to that experienced nationwide yet lower than that experienced by the GAlSC Region, Population growth in the Air Trade Area is projected to be lower than that for the GAlSC Region and the nation, yet steady through at least 20 I O. · Per capita EBI for the Air Trade Area increased at a rate that was equal to that for the GAlSC Region and higher than that for the nation between 1998 and 2003. According to Sales and Marketing Management magazine, continued strong growth in per capita EBI for the Air Trade Area is expected between 2003 and 2008, · Although average annual unemployment rates for the Air Trade Area were higher than those for the GAlSC Region and the nation between 1993 and 2001, they were equal to or lower than the GAlSC Region and the nation in 2002 and 2003. · Nonagricultural employment in the Air Trade Area increased at a compounded annual growth rate of 0.7 percent between 1993 and 2003, compared to 1.6 percent nationwide during this same period. Information and Rating Agency Draft: Ricondo & Associates 11/29104 B - 29 transportation/utilities were the highest growing sectors in the Air Trade Area during this period. · The Air Trade Area offers a variety of cultural, recreational, and educational resources and activities. · The economic base of the Air Trade Area is diversified and capable of supporting increased demand for air travel at the Airport through the projection period. Rating Agency Dran: Ricondo & Associates 11/29/04 B - 30 2. AIR TRAFFIC This chapter describes historical and projected aviation activities at the Airport and discusses key factors affecting trends in these activities, 2.1 AIRLINES SERVING THE AIRPORT As of November 2004, the Airport had scheduled passenger service provided by two regionals/commuters.1 These airlines include Atlantic Southeast (d/b/a Delta Connection) and US Airways Express, Table 2.1 presents the historical air carrier base at the Airport since 1995. Specific points concerning the Airport's historical air carrier base are presented below: · Atlantic Southeast (ASA) and US Airways Express have operated at the Airport during each of the years shown in Table 2.1, As of November 2004, Atlantic Southeast provides nonstop service to Atlanta with nine daily flights, and US Airways Express provides nonstop service to Charlotte with seven daily flights. · ExpressJet (a wholly owned subsidiary of Continental) initiated service at the Airport in March 2003. Continental was invited to test the Augusta market on a low financial risk basis. The initiation of service to the Airport represented little financial risk to Continental because of the incentives offered by the Aviation Commission and community. These incentives totaled approximately $1,500,000 and included rent, landing fee and fuel fee waivers for the initial period of operations, advertising allowance, and the provision of new facilities and all airline station equipment (furnishing, equipment, and computers) by the Aviation Commission, ExpressJet began service at the Airport with two flights per day to New York City and Houston. After 18 months of service, Continental announced the discontinuation of ExpressJet service from the Airport effective October 30, 2004. The airline cited lower business travel than what was desired to satisfY corporate revenue and profitability goals as the primary reason for discontinuation of service. The Aviation Commission observes that Continental did not attract the business traveler because of airfares and schedules, The airfares did not appear to be particularly competitive with other airlines at the Airport or those offered by airlines at competing airports. Continental's schedule was not competitive or convenient for business travelers -- with flights departing/arriving too late in the day for travelers to conduct business, The Aviation Commission's air service advisor has said that in the future the majority of ExpressJet passengers are expected to shift to ASA and US Airways and only a small portion would be lost from total Airport enplanements. Therefore, it has been assumed in the activity forecast that the Airport would lose approximately 8,000 annual enplaned passengers due to the exit of Continental. I Regional airlines gross less than $100 million. Commuter airlines are classified according to thc type of aircraft used (a maximum of 60 seats) and their operating frequency (at least five round trips per week between two or more points). Although technically classified by the FAA as a major and national airline, respectively, due to their level of gross operating revenues, Atlantic Southeast and Comair are included in the regional/commuter category in this report since they operate regional jets at the Airport. Rating Agency Draft: Ricondo & Associates 11/29/04 B - 31 TABLE 2.1 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant AIR CARRIER BASE Air Carrier 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 I Delta Carriers 2 . . . . . . . . . . US Airways Carriers 3 . . . . . . . . . . Air Carriers No Longer Serving the Airport ExpressJet 4 II . . As of November 2004. Delta Carriers include Delta, Atlantic Southeast and Comair. 3 US Airways Carriers include US Airways and US Airways Express. 4 Initiated service in March 2003. Continental discontinued ExpressJet service at the Airport October 30, 2004. Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. B - 32 . Delta discontinued mainline service at the Airport in December 2000, however it continues to provide limited service during the month of April each year to serve demand generated by the Masters Golf Tournament (the Masters), At the same time that Delta discontinued service at the Airport, ASA increased the size and frequency of its flights at the Airport. 2.2 HISTORICAL PASSENGER ACTIVITY This section presents historical trends in enplaned passengers at the Airport and the major factors influencing these trends, as well as historical market shares of enplanements by airline, 2.2.1 Enplaned Passengers The Airport is classified by the FAA as a non-hub facility based on its percentage of nationwide enplanements. Table 2.2 presents historical data on enplaned passengers at the Airport and the nation between 1993 and 2003. As shown, passenger activity at the Airport fluctuated between 1993 and 2000, averaging approximately 210,000 annual enplanements during this period. Following the economic downturn and September II, however, the Airport's enplanements decreased by approximately 27 percent from 2000 to 2002. As such, the Airport's share of U.S, enplanements reacted accordingly. Since 2002, the Airport's enplanements have been recovering. Enplanements in 2003 increased 10, I percent over 2002 levels due to factors described below. The Airport historically has experienced a high amount of passenger diversion to nearby competing airports. Hartsfield-Jackson Atlanta International Airport (Atlanta) is the primary competitor to the Airport due to its proximity to Augusta and its provision of frequent nonstop service to hundreds of destinations at a wide range of airfares. Airport leakage analyses prepared in October 2000 and February 2001 indicated that estimated passenger diversion to other airports was approximately 24 to 38 percent to Atlanta, approximately 9 to 10 percent to Columbia Metropolitan Airport (Columbia), and approximately 5 to 8 percent to SavannahlHilton Head International Airport and other airports. An alternative analysis prepared in September 2004 indicates passenger diversion from the Airport is primarily to Atlanta (approximately 21 percent) and Columbia (approximately 10 percent).2 This passenger diversion to nearby competing airports is primarily a result of the high level of nonstop service offered at these airports, and the higher than average air fare yields at the Airport. Specific details concerning enplaned passengers at the Airport between 1993 and 2003, as well as 2004 year-to-date, are discussed below: · 1993-1996. Enplanements at the Airport decreased from 237,485 enplanements in 1993 to 198,726 in 1996 (a compounded annual decrease of 5.8 percent during this period), This decrease was primarily due to the elimination of service by US Airways in 1995 and the economic recession in the early 1990's. By comparison, enplanements nationwide increased by a compounded annual growth rate of 5.9 percent. 2 Augusta Regional Airport Leakage Analysis, February 2001; Telephone Survey, October 2000. Leakage Analysis prepared by Seabury Airline Planning Group, LLC--the Aviation Commission's air service advisor, September 2004. Rating Agency Droll: Ricondo & Associates 11129/04 B - 33 TABLE 2,2 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant HISTORICAL ENPLANEMENTS Airport Airport U.S. U.S. Market Year Enp]anemcnts I Growth Enplanements 2 Growth Share 1993 237,485 469,300,000 0.05]% 1994 211,013 -11.1% 510,000,000 8.7% 0.041% 1995 201,289 -4.6% 530,000,000 3.9% 0.038% 1996 198,726 -1.3% 557,000,000 5.1% 0.036% 1997 206,171 3.7% 577,800,000 3.7% 0.036% 1998 218,54] 6.0% 590,400,000 2.2% 0.037% 1999 209,892 -4.0% 610,900,000 3.5% 0.034% 2000 201,921 -3.8% 641,200,000 5.0% 0.031% 2001 166,537 -17.5% 626,800,000 -2.2% 0.027% 2002 147,951 -] 1.2% 574,500,000 -8.3% 0.026% 2003 162,946 10.1% 587,300,000 3 2.2% 0.028% Compounded Annual Growth Rate 1993 - 1996 1996 - ]998 ] 998 - 2002 2002 - 2003 -5.8% 3.2% -11.0% 10,1% 5.9% 2.0% -2.0% 2.2% I Twelve months ending December 31. 2 Twelve months ending September 30. 3 Estimated by the FAA. Sources: Augusta Aviation Commission FAA (U.S. activity) Prepared by: Ricondo & Associates, Inc. B - 34 . 1996-1998. Passenger activity at the Airport increased between 1996 and 1998, from 198,726 enplanements to 218,541 (a compounded annual increase of 3.2 percent during this period), By comparison, enplanements nationwide increased at a compounded annual increase of 2,0 percent during this same period · 1998-2002. Enplanements at the Airport decreased from 218,541 in 1998 to 147,951 in 2002. This decrease represents a compounded annual decrease of 11,0 percent during this period, compared to 2.0 percent experienced nationwide. The following factors contributed to this decrease in enplaned passengers at the Airport: Delta discontinued mainline service at the Airport in December 2000, however they continue to provide limited service during the month of April each year to serve demand generated by the Masters Golf Tournament (the Masters), Delta replaced the mainline service with primarily turboprop aircraft operated by ASA which eliminated some leisure travelers, Economic indicators in the nation prior to September II were beginning to show-signs of a recession, In November 2001, the National Bureau of Economic Research officially announced that in March 200 I the U.S. economy had entered its 10th recession since the end of World War II. The loss of household wealth dampened consumer confidence and significantly reduced consumer spending, The effects of September II accelerated the downturn in consumer spending on consumer goods and services, including spending on air traveL · 2002-2003. Enplanements from 2002 to 2003 increased by 10.1 percent and may be attributed to several factors: The initiation of new commercial service utilizing regional jets by ExpressJet in March 2003 attracted back some leisure travelers who had abandoned Augusta when Delta ASA shifted to turboprop aircraft, ExpressJet's nonstop service to New York and Houston was also able to attract a small number of business travelers who previously had driven to Atlanta. Finally, some passengers who had been reluctant to fly due to September II, the economic recession and other factors began to return to the market mirroring a similar nationwide trend, · 2004 Year-to-Date. Based on data through October 2004, enplanements at the Airport were 8.4 percent higher during the first ten months of 2004, compared to a similar period in 2003. This increase is primarily due to market recovery. By comparison, and based on Air Transportation Association (AT A) most recent year-to-date statistics through September 2004, domestic passenger activity for AT A members was 4.7 percent higher than a similar period in 2003. 2.2.2 Enplaned Passengers By Airline From 1996 through December 2000, Delta was the only major/national airline that provided service at the Airport. During this period, Delta accommodated nearly 50 percent of the Airport's enplanements, Since the discontinuation of Delta's mainline service, the Airport has been provided service entirely by regionaVcommuter airlines except for limited mainline service provided annually during the Masters, This shifting of enplanements from Rating A1:,'Cncy Dmft: Ricondo & Associates 11/29/04 B - 35 the majors/nationals to the regionals/commuters was not unique to the Airport, and generally followed the nationwide trend of reg iona Is/commuters initiating service in markets abandoned by the majors/nationals, Table 2.3 presents the historical share of enplanements by airline at the Airport between 1999 and 2003, As shown, Atlantic Southeast contributed 65 percent of enplanements at the Airport in 2003, ExpressJet, which initiated service in 2003, shared 17.1 percent, while USAirways Express shared 15,6 percent of the Airport's annual enplanements in 2003, 2.3 AIR SERVICE 2.3.1 Historical Air Service An important airport characteristic is the distribution of its O&D markets, which is a function of air travel demands and available services and facilities. This is particularly true for the Airport, as it serves primarily O&D passengers. Table 2.4 presents historical data on the Airport's primary (i.e" top 20) O&D markets. As shown, the Airport served primarily short- to medium-haul markets in the periods depicted, with an average stage length (i,e., passenger trip distance) of 956 miles in 1998 and 1,016 miles in 2003, The average stage lengths were slightly above the average stage lengths nationwide during these same periods. The Airport's average stage lengths reflect the Airport's geographical location and strong Ilocal demand for major eastern (i,e" New York, Washington, and Boston), midwestern (i.e., Chicago) markets, and western (i.e., Dallas, Las Vegas, and Los Angeles) markets, The most significant change in O&D passenger levels at the Airport occurred in the Houston market, with O&D passengers increasing over 21 percent between 1998 and 2003. This increase was due to nonstop service initiated to this market by ExpressJet in March 2003, This nonstop service has been discontinued, One measure of the relative profitability of O&D markets served is the revenue yield per coupon mile (passenger flight stage), As also shown in Table 2,4, the average revenue yield per coupon mile for all of the Airport's O&D markets was $0.2215 in 1998, compared to $0.1379 nationwide; and $0.1978 in 2003, compared to $0.1182 nationwide, This higher yield for the Airport as compared to the nation is reflective of the Airport's service by regional/commuter airlines to hub airports and the fact that the Airport is not served by a low- fare carrier. Excluding Las Vegas and Los Angeles, 18 of the Airport's top 20 O&D markets exceeded the revenue yield per coupon mile for that of the nationwide average in 2003. The revenue yield per coupon mile for New York, the Airport's top O&D market, was $0,2327 in 2003, nearly double the nationwide average of $0.1182. As of November 2004, daily nonstop service is provided to two cities, Atlanta and Charlotte, with a total of 16 daily flights. Table 2.5 presents the Airport's nonstop markets as of November 2004, including the markets served, daily flights, and airlines providing nonstop flights. 2.3.2 Air Service Development Plan The Aviation Commission has an on-going three-part air service development plan to promote and develop air service at the Airport. The air service development program is Ruting Agency Draft: Ricondo & Associatcs 11/29/04 B - 36 TABLE 2.3 I , 1999 2000 2001 2002 2003 Airline Enplanements Share Enplanements Share Enplanements Share Enplanements Share Enplanements Share Atlantic Southeast 66,640 31.7% 79,047 39.1% 124,783 74.9% 118,028 79.8% 105,896 65.0% Delta Air Lines 1 102,852 49.0% 86,042 42.6% 5,767 3.5% 2,798 1.9% 1,133 0,7% Delta Carriers 169,492 80.8% 165,089 81.8% 130,550 78.4% 120,826 81.7% 107,029 65.7% US Airways Express 40,400 19.2% 36,832 18.2% 33,243 20.0% 24,408 16.5% 25,341 15.6% ExpressJet 0 0.0% 0 0,0% 0 0.0% 0 0.0% 27,865 17.1% All Others 2 0 0.0% 0 0.0% 2,744 1.6% 2,717 1.8% 2,711 1.7% Airport Total] 209,892 100.0% 201,921 100.0% 166,537 100.0% 147,951 100.0% 162,946 100.0% . , Augusta Aviation Commission Augusta Regional Airport Report of the A irport Consultant HISTORICAL ENPLANEMENTS BY AIRLINE Includes Comair. Enplanements in 2001 through 2003 represented the limited mainline service offered during the Masters. Consists of charter airlines. Totals may not add due to individual rounding. Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. to , W -.l TABLE 2.4 Augusta Aviation Commission AI/gl/sta Regional Airport Report of the Airport Consl/ltant PRIMARY O&D PASSENGER MARKETS FY J 998 FY 2003 Trip Total O&D Yield per Trip TotalO&D Yield per Rank Market Length I Passengers Coupon Mile Rank Market Length I Passengers Coupon Mile 1 New York MH 34,010 $0.2101 1 New York MH 30,820 $0.2327 2 Washington SH 23,530 $0.2906 2 Washington SH 16,640 $0.2838 3 Chicago MH 17,600 $0.2579 3 Houston MH 9,690 $0.1994 4 Dallas MH 12,150 $0.2180 4 Boston MH 9,260 $0.1582 5 Atlanta SH J 1,320 $0.9187 5 Dallas MH 8,640 $0.2000 6 Philadelphia SH 11,290 $0.2574 6 Chicago MH 8,360 $0.2643 7 Boston MH 10,550 $0.2050 7 Las Vegas LH 7,580 $0.0986 8 Los Angeles LH 9,410 $0.1153 8 Philadelphia SH 6,130 $0.2842 9 Baltimore SH 9,350 $0.2973 9 Tampa SH 6,040 $0.2753 10 Las Vegas LH 8,280 $0.1073 10 Kansas City MH 5,780 $0.1690 11 San Francisco LH 8,230 $0.1243 II Los Angeles LH 5,590 $0.1076 12 Houston MH 7,970 $0.2387 12 Atlanta SH 5,040 $1.0572 13 Nashville SH 7,920 $0.5416 13 Detroit MH 5,010 $0.2277 14 Detroit MH 7,530 $0.2425 14 Fl. Lauderdale SH 4,980 $0.2082 15 Orlando SH 7,480 $0.3312 15 San Antonio MH 4,960 $0.2565 16 Cincinnati SH 6,990 $0.4216 16 Baltimore SH 4,750 $0.2859 17 St Louis SH 6,660 $0.3704 17 Denver MH 4,700 $0.1685 18 Denver MH 6,300 $0.1839 18 Miami SH 4,290 $0.1970 19 Pittsburgh SH 6,300 $0.3251 19 Orlando SH 4,160 $0.3295 20 Tampa SH 6,110 $0.3456 20 Mcmphis SH 4,080 $0.2810 Other O&D Markets 196,280 Other O&D Markets 129.440 Total O&D Passengers 415,260 Total O&D Passengers 285,940 Total Airport Passengcrs 437,082 Total Airport Passengers 325,892 O&D % of Total Passengers 95.0% O&D % of Total Passengers 2 87.7% Average Average Airport ) 956 $0.2215 Airport ) 1,016 $0.1978 United States 848 $0.1379 Unitcd States 939 $0.1182 I (SH) Short Haul = 0 to 600 miles (MH) Medium Haul = 60 I to 1,800 miles (LH) Long Haul = over 1,800 miles 2 Statistical Sampling Anomaly ) Average calculated for all of the Airport's O&D markets. Sources: O&D Survey of Airline Passenger Traffic, U.S. DOT, Table 8. Prepared by: Ricondo & Associates, Inc. B - 38 TABLE 2.5 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant NONSTOP MARKETS Market Daily Nonstop Flights Airline Atlanta Charlotte 9 7 16 Atlantic Southeast US Airways Express Total Source: Official Airline Guide, October 20, 2004 Prepared by: Ricondo & Associates, Inc. B - 39 directed by the Airport Director and administered by a professional Airport marketing director. The air service development program includes the following three components: . Air Service Analysis and Market Research Program. The Aviation Commission has an ongoing process of air service data review, market analysis, and change identification, It monitors air service statistics for the Airport, competing airports and the commercial airline industry to keep abreast of trends and happening. It monitors airline network develop to identify potential opportunities for new or additional air service for the Airport, As a part of this program, the Aviation Commission reviews, analyzes, and evaluates the quality of existing air service and airfares. Through this analytical process air services and airfare deficiencies are identified and form a basis for air service or airfare proposals to airlines. · Airline Outreach Program. The Aviation Commission meets regularly with airlines serving the Airport and airlines that do not serve the Airport in an outreach program. The purpose of the meetings with the airline serving the Airport are to discuss air service deficiencies, airfare disparities, and present proposal for new or additional air service. The goal of this element of the plan is to call the attention of select airlines to opportunities at the Airport and providing them with quantitative information to support a decision to provide new or additional airfares or improve airfares. The Aviation Commission meets with airlines not serving the market to identify opportunities in Augusta and present air service proposal to these airlines. A major purpose of the outreach programs is to develop relationships with the schedule planning groups of airline of interest to Augusta, The Aviation Commission has developed such a relationship with a series of airlines over the years, · Air Traffic Retention Program. The Aviation Commission has an air traffic retention program to make the community aware of the benefits and necessity of supporting and using Augusta Regional Airport. As a part of this program, the Aviation Commission has retained the services of a marketing company to communicate the benefits of "Flying Augusta" to the public, The message is that using the Airport is convenience and it provides economic benefits to Augusta, In addition, from time to time, members of the Airport Staff and Aviation Commission speak to community and civil groups to create interest and emphasis the convenience, services, and hassled free experience the Airport offers. The goal of this element of the program is to retain the existing passenger base and win back local passenger that may be using other airports, 2.4 HISTORICAL AIRCRAFT OPERA nONS AND LANDED WEIGHT This section presents historical aircraft operations (takeoffs and landings) by major user category at the Airport, as well as historical landed weight by passenger airlines and all-cargo carriers. Rnting Agency Draft: Ricondo & Associates 11129/04 B - 40 2.4.1 Aircraft Operations Table 2.6 presents historical operations (take-offs or landings) at the Airport by major user category between 1999 and 2003, As shown, total aircraft activity at the Airport has decreased from 51,854 operations in 1999 to 41,797 in 2003. Specific points concerning trends in operational activity by major user category at the Airport are discussed below: · Majors/Nationals. Major/national activity decreased in 200 I following the discontinuation of mainline service by Delta in December 2000, As mentioned previously, Delta continues to provide limited service in April of each year as a result of the Masters golf tournament. · Regionals/Commuters. With the exception of 2000 and 2002, operations by regionals/commuters at the Airport steadily increased between 1999 and 2003, from 8,924 operations in 1999 to 11,452 in 2003. This increase, representing a compounded annual growth rate of 6.4 percent during this period, reflects the nationwide trend of the majors/nationals shifting their activity to their respective affiliated subsidiaries and/or code-sharing airlines. Activity by regionals/commuters decreased 8.6 percent in 2002 from 2001 levels due to the effects of September II and the economic slowdown nationwide. Regional/commuter operations then increased 15.9 percent in 2003 from the previous year's level, primarily due to the initiation of new service by ExpressJet in 2003. · General Aviation. General aviation activity at the Airport steadily decreased each year between 1999 and 2003, from 34,488 operations in 1999 to 23,872 in 2003, a compounded annual decrease of 8.8 percent during this period, Accelerating this decrease were the effects of September II and the economic slowdown nationwide during the latter part of this period. By comparison, general aviation activity for the nation decreased 1.0 percent from 1999 to 2003. · Other Air Taxi. Other air taxi activity (for-hire charters, fixed base operators, etc,) has increased from 331 in 1999 to 1,981 in 2003. · Military. Military activity at the Airport has been stable since 200], averaging approximately 4,500 operations per year during that period.. 2.4.2 Landed Weight by Airline Table 2.7 presents the share oflanded weight by airlines at the Airport between 1999 and 2003. As shown, as a result of the discontinuation of mainline jet service by Delta in 2000, overall landed weight at the Airport has decreased since 1999, from 342,231 thousand pounds in 1999 to 273,140 thousand pounds in 2003, Atlantic Southeast, USAirways Express, and ExpressJet accounted for 54.8 percent, 22.4 percent, and 22,0 percent of landed weight at the Airport in 2003, respectively. 2.5 AVIATION INDUSTRY The U.S. aviation industry was significantly impacted by a number of events that occurred in the early part of this decade (e.g" September II, the economic slowdown, the war with Iraq, and the outbreak of the severe acute respiratory syndrome (SARS) virus in Asia and Canada), both in terms of Rating Agency Dmft: Ricondo & Associates 11/29/04 B - 41 TABLE 2.6 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant HISTORICAL AIRCRAFT OPERA TIONS Fiscal Majors/ Regionals/ Airline General Other Year Nationals Commuters Total Aviation Air Taxi Military Total 1999 2,882 8,924 11,806 34,488 331 5,229 51,854 2000 1,982 8,890 10,872 33,340 760 5,828 50,800 2001 50 10,804 10,854 29,148 1,453 4,537 45,992 2002 6 9,878 9,884 28,114 1,566 4,480 44,044 2003 18 11,452 11,470 23,872 1,981 4,474 41,797 Compounded Annual Growth Rate 1999 - 2001 -86.8% 10.0% -4.1% -8.1% 109.5% -6.9% -5.8% 200 I - 2003 -40.0% 3.0% 2.8% -9.5% 16.8% -0.7% -4.7% 1999 - 2003 -71.9% 6.4% -0.7% -8.8% 56.4% -3,8% -5.2% Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. B - 42 TABLE 2.7 Augusta Aviation Commission Augusta Regional Airport Report of the Ai/port Consultant HISTORICAL LANDED WEIGHT BY AIRLINE I , 1999 2000 2001 2002 2003 Airline Landed Weight Share Landed Weight Share Landed Weight Share Landed Weight Share Landed Weight Share Delta Air Lines I 189,781 55.5% 132,522 45.7% 11,145 5.1% 660 0.3% 2,246 0.8% Atlantic Southeast 85,343 24.9% 100,608 34.7% 152,271 70.0% 166,398 78.0% 149,689 54.8% Delta Carriers 275,124 80.4% 233,130 80.4% 163,416 75.1% 167,058 78.3% 151,935 55.6% US Airways Express 67,107 19,6% 56,661 19.6% 54,170 24.9% 46,344 21. 7% 61,106 22.4% ExpressJet 0 0.0% 0 0.0% 0 0.0% 0 0.0% 60,099 22.0% Airport Total 2 342,231 100.0% 289,791 100.0% 217,586 100.0% 213,402 100.0% 273,140 100.0% . , (thousand pounds) III I .j:>, \.;.l Comair. add due Includes Totals to individual rounding. Source: Augusta Aviation Commission Prepared by: Ricondo & Associates, Inc. may not levels of operations and workforce, as well as revenues and profitability, These events resulted in substantial financial losses in the aviation industry each year between 2001 and 2003 and downgrades of airline ratings by the rating agencies, Several U.S. airlines and Air Canada filed for bankruptcy court protection during this period: · US Airways filed for bankruptcy court protection under Chapter lIon August II, 2002, US Airways and seven subsidiaries subsequently emerged from Chapter lIon March 31, 2003, securing approximately $1.2 billion in new financing and investment. The airline continues to face significant financial hardships partially due to increasing fuel prices and pressures from low-cost carriers according to US Airways' management. On September 12, 2004, US Airways and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter II, This filing became necessary to preserve cash and allow the Court to oversee US Airways' continued restructuring, including reaching new labor agreements to lower labor costs, · United filed for bankruptcy court protection under Chapter lIon December 9, 2002, and is expected to emerge from Chapter II in the latter part of 2004. · Hawaiian filed for bankruptcy court protection under Chapter lion March 21,2003, · Air Canada filed for reorganization under Canada's Companies' Creditors Arrangement Act on April I, 2003, Air Canada subsequently emerged from bankruptcy protection on September 30, 2004. · ATA Holdings Corporation, parent of ATA Airlines, sought protection from creditors under Chapter lIon October 26, 2004, In connection with the bankruptcy filing, AT A agreed to essentially sell its hub at Chicago Midway Airport and some other assets to AirTran Holdings, Inc, for $87.5 million cash, According to information obtained from Delta's filings with the Securities & Exchange Commission (SEe), Delta reported net losses of approximately $6.3 billion between 200 I and the third quarter of 2004. On November 1,2004, Delta announced $500 million in new financing from General Electric (GE) Commercial Finance. On November II, 2004, Delta announced that Delta pilots ratified a new contract to cut $1 billion in long-term, annual savings to the company. The GE agreement, along with approval of the concessions from Delta's pilot union, will allow Delta access to $600 million from American Express. Getting its pilots to agree to cost savings and restructuring approximately $2.6 billion in unsecured debt load are the two major initiatives Delta has been pursuing to avoid filing for bankruptcy court protection under Chapter 1 L On November 24, 2004, Delta announced that $607.5 million of unsecured debt had been tendered for exchange to holders of the $2.6 billion of unsecured debt. This amount was below the $680 million offered by Delta prior to the offer's expiration on November 23, 2004, The Air Transportation Safety and System Stabilization Act, enacted following the events of September II, provided an infusion of $5 billion in federal grants for direct losses incurred in recognition of the effects of the system shutdown resulting from the events of September II and their longer-term impact. In addition, $10 billion in possible loan guarantees were authorized for qualified applicants, with approximately $1.5 billion actually issued through September 30, 2004. With the enactment of the Aviation and Transportation Security Act in November 200 I, the Transportation Security Administration (TSA) was created, which established different and improved Rating Agency Draft: Ricondo & Associates 11/29/04 B - 44 security processes and procedures, As a result of these measures, fees and unfunded mandates have added more than $4 billion to the industry's annual costs. On April 16, 2003, President Bush signed an aid package of approximately $3 billion for the airline industry, part of a larger Iraqi-war spending bill. The aid package also included a six-month waiver of security fees owed the government for the last six months offederal FY 2003. The price of aviation fuel has steadily increased in recent years, from an average price of approximately $31 per barrel in 2003 to a record high of approximately $55 per barrel in October 2004. Some V.S, airlines have attempted to pass the higher fuel costs to consumers by increasing the fuel surcharge; however, some of these attempts have been unsuccessful as many airlines, particularly low-cost carriers, refused to match the increase, As the V.S. airline industry continues to recover from the effects of September II and other factors cited earlier, a number of trends have emerged, including more widespread use of simplified fare structures, continued growth of competition by low-cost carriers in long-haul markets, increased numbers of routes being transferred from mainline carriers to regionals/commuters, increased efficiency and productivity, and declining real fares, 2,6 PROJECTIONS OF A VIA nON DEMAND Projections of aviation demand were prepared on the basis of local socioeconomic and demographic factors, the Airport's historical shares ofV.S. domestic enplanements, anticipated trends in air carrier usage of the Airport, and comparisons to nationwide growth rates projected by the FAA Projections of aviation activity are prepared annually by the Statistics and Forecast Branch of the FAA for use in its planning and decision-making processes. During the past several years, the FAA has adopted a decision-theoretic forecasting system, generally accomplished in two stages. The near term projections (federal FY 2004 through federal FY 2005) for commercial aviation were developed utilizing a set of assumptions regarding future capacity together with expert judgment as to the strength and timing of the recovery from the events of September II and the economic slowdown. Projections for federal FY 2006 through federal FY 2015 were based on results derived from econometric models, According to the FAA's projections, the outlook for the 12-year projection period is for V,S. economic activity to continue the strong recovery that began during the second-half of federal FY 2003 well into federal FY 2004/2005. Aviation demand, which was relatively weak in federal FY 2003, is expected to recover strongly during this same period, However, continued international tensions, fuel prices, and the prospects of additional airline bankruptcies have increased the risk and uncertainty of these projections, both in the short- and long-term, In preparing the projections included herein for the Airport, several methodologies were assessed for reasonableness; however, the overall approach was similar to that adopted by the FAA in its nationwide projections (i.e., expert judgment as to the timing and extent of recovery from the events of September II and the economic slowdown, followed by long-term growth correlated with socioeconomic trends in the Air Trade Area), Two of the methodologies used and assessed are described below: · Market Share Approach. In this methodology, judgments are made as to how and to what extent the Airport's rate of growth in domestic enplanements will differ from that projected for the nation by the FAA. On a macro scale, the U.S, projection provides a Rnting Agency Droll: Ricondo & Associates 11/29104 B - 45 growth base reflecting how industry traffic in general is anticipated to grow in the future, The growth rate used for the Airport can be reflected as an increase or decrease in its future share of the market. · Socioeconomic Regression Approach. Statistical linear regression modeling is used in this methodology, with local socioeconomic factors as the independent variable and enplaned passengers as the dependent variable, Socioeconomic factors utilized in these analyses included population, income, and employment. Of interest in the analyses, among other factors, was how well each socioeconomic variable explained the annual variations in enplaned passengers at the Airport (i.e., the model's correlation coefficient), The resultant projections of activity at the Airport are based on a number of underlying assumptions including the following: · The Airport is still recovering from the effects of September II and the nationwide economic slowdown during the early part of this decade, Long-term activity at the Airport is projected to increase as a result of expected growth in socioeconomic conditions in the Air Trade Area during the projection period, · The Airport will continue its role of serving primarily O&D passengers and providing regionaVcommuter service to large hub airports. In addition, the Airport will continue to serve primarily short- to medium-haul markets. · As a result of the proximity of Hartsfield-Jackson Atlanta International and Columbia Metropolitan airports, as well as the higher than average air fare yields at the Airport, the Airport has historically experienced a high level of passenger diversion to nearby competing airports, It is anticipated that passenger leakage from the Airport's air service area will continue to occur to nearby competing airports throughout the projection period, · Continued high fuel prices in the short tenn will likely have an adverse impact on airline profitability, as well as hamper the recovery plans and cost-cutting efforts of certain airlines. Higher fuel prices may cause changes in air service at the Airport; however, the passenger demand for its major O&D markets will continue to be served during the projection period . Airline consolidation/mergers that may occur during the projection period are not likely to negatively impact passenger activity levels at the Airport due to its high percentage of O&D passengers. New airline alliances, should they develop, will be restricted to code sharing and joint frequent flyer programs, and should not reduce airline competition at the Airport. · For these analyses, and similar to the FAA's nationwide projections, it is assumed that there will not be any successful terrorist incidents against either D,S, or world aviation during the projection period. Additionally, it is assumed that there will not be a major contraction of the aviation industry through bankruptcy or consolidation during this same period. · Economic disturbances will occur during the projection period causing year-to-year traffic variations; however, a long-term increase in nationwide traffic is expected to occur. Rating Agency Drafi: Ricondo & Associates 11129104 B - 46 Many of the factors influencing aviation demand cannot necessarily or readily be quantified; and any projection is subject to uncertainties. As a result, the projection process should not be viewed as precise. Actual future traffic levels at the Airport may differ from projections presented herein because events and circumstances do not occur as expected, and those differences may be material. 2.6.1 Enplallement Projections Table 2.8 presents historical and projected enplanements for the Airport's majors/nationals and regional/commuters, As shown, total enplanements are projected to increase from 162,946 in 2003 to approximately 180,000 in 2004, an increase of 10.5 percent during this period (compared to the 15.0 percent year-to-date growth experienced through six months of 2004 compared to 2003 levels during a similar six-month period). It is expected that passenger traffic will continue to recover at the Airport through 2006/2007, As shown, total enplanements are projected to further recover from approximately 180,000 in 2004 to approximately 201,800 in 2007, representing a compounded annual growth rate of3,9 percent (compared to 5.5 percent for that of the nation during this same time frame), Beyond 2007, Airport enplanements are projected to increase to approximately 232,000 in 2012. This increase represents a compounded annual growth rate of 2,8 percent during this period, compared to 3,6 percent projected for the nation projected by the FAA. As described previously, the elimination of service by ExpressJet in late 2004 is not expected to have a significant impact on total enplanements, It is estimated up to 8,000 enplanements a year may be eliminated, With the elimination of mainline service at the Airport by Delta in 2000, it is anticipated that the Airport will continue to be served by the regional/commuter airlines with nonstop flights to the mainline carriers' hub airports. A nominal amount of major/national enplanements is shown to occur in future years as a result of limited service provided by Delta during the month of April each year to serve demand generated by the Masters. 2.6.2 Operations Projections Table 2.9 presents historical and projected aircraft operations for passenger airline, general aviation, all-cargo carrier, other air taxi, and military activity. As shown, total aircraft activity at the Airport is projected to increase from 41,797 operations in 2003 to 42,668 operations in 2004 (an increase of 2.] percent), and then increase to approximately 45,730 operations in 2012 (a compounded annual growth rate of 0.9 percent, compared to 2.0 percent projected for the nation by the FAA). Passenger airline activity at the Airport is expected to increase from 11,470 operations in 2003 to 12,318 in 2004 (a 7.4 percent increase), partially due to the initiation of service by ExpressJet in March 2003 as well as a partial recovery to pre-September, II levels, During the remainder of the projection period, it is anticipated that passenger aircraft activity will increase from ]2,298 operations in 2004 to approximately 14,000 in 2012, a compounded annual growth rate of 2,0 percent, compared to 2.8 percent projected nationwide for air carriers and air taxis combined by the FAA. In general, the passenger airline projections were developed based on historical relationships between enplaned passengers, load factors, and average seating capacities of aircraft utilized at the Airport, Specifically, average regional/commuter seats per departure for passenger airlines at the Airport are expected to increase from an average of 5] ,0 seats in Rating Agency Draft: Ricondo & Associates 11129J04 B - 47 TABLE 2,8 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant ENPLANEMENT PROJECTIONS Majors/ Regionals/ Year Nationals Commuters Total Historical 1993 195,920 41,565 237,485 1994 174,088 36,925 211,013 1995 137,437 63,852 201,289 1996 121,171 77,555 198,726 1997 128,312 77,859 206,171 1998 121,401 97,140 218,541 1999 102,852 107,040 209,892 2000 84,946 116,975 201,921 2001 2,998 163,539 166,537 2002 2,798 145,153 147,951 2003 1,133 161,813 162,946 Proiected 2004 700 179,300 180,000 2005 700 188,300 189,000 2006 800 196,000 196,800 2007 800 20 1,000 201,800 2008 800 206,800 207,600 2009 800 213,100 213,900 2010 900 219,100 220,000 2011 900 225, I 00 226,000 2012 900 231,200 232, I 00 Compounded Annual Growth Rate 1993 - 2003 -40.3% 14.6% -3.7% 2003 - 2004 -38.2% 10.8% 10.5% 2004 - 2007 4.6% 3.9% 3.9% 2007 - 20]2 2.4% 2.8% 2.8% Sources: Augusta Aviation Commission (Historical) Ricondo & Associates, Inc. (Projected) Prepared by: Ricondo & Associates, Inc. B - 48 TABLE 2.9 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant OPERATIONS PROJECTIONS Majors/ Regionals/ Airline General Other Year Nationals Commuters Total Aviation Air Taxi Military Total Historical 1999 2,882 8,924 11,806 34,488 33] 5,229 51,854 2000 1,982 8,890 ]0,872 33,340 760 5,828 50,800 2001 50 10,804 10,854 29,148 1,453 4,537 45,992 2002 6 9,878 9,884 28,1 ]4 1,566 4,480 44,044 2003 18 11,452 11,470 23,872 1,981 4,474 41,797 Projected 2004 20 12,298 ]2,318 23,850 2,000 4,500 42,668 2005 20 ] 2,240 12,260 23,930 2,000 4,500 42,690 2006 20 12,620 12,640 24,110 2,000 4,500 43,250 2007 20 ]2,800 12,820 24,290 2,000 4,500 43,6]0 2008 20 13,020 ]3,040 24,460 2,000 4,500 44,000 2009 20 ]3,280 ]3,300 24,630 2,000 4,500 44,430 2010 20 13,520 13,540 24,800 2,000 4,500 44,840 2011 20 13,740 ]3,760 25,060 2,000 4,500 45,320 2012 20 13,980 14,000 25,230 2,000 4,500 45,730 Compounded Annual Growth Rate 1999 - 2003 -71.9% 6.4% -0.7% -8.8% 56.4% -3.8% -5.2% 2003 - 2004 1L1% 7.4% 7.4% -0.1% 1.0% 0.6% 2.1% 2004 - 2012 0.0% 1.6% 1.6% 0.7% 0.0% 0.0% 0.9% Sources: Augusta Aviation Commission (Historical) Ricondo & Associates, Inc. (Projected) Prepared by: Ricondo & Associates, Inc. B - 49 2003 to approximately 53.0 seats in 2012. This is similar to the average regional/commuter seat size projected by the FAA nationwide (i.e., 52.9 seats) in 2012. Genera] aviation activity at the Airport is expected to increase from 23,872 operations in 2003 to approximately 25,230 operations in 2012 (a compounded annual growth rate of 0.7 percent during this period, compared to 1.3 percent projected for the nation by the FAA). Activity by other air taxi operators is projected to remain constant at approximately 2,000 operations each year between 2003 and 2012, comparable to its activity level during 2003, Future military activity at the Airport will be influenced by U,S, Department of Defense policy, which largely dictates the level of military activity at an airport, Similar to other air taxi operators, military activity at the Airport is projected to remain constant at approximately 4,500 operations each year during the projection period, comparable to its average activity level between 2001 and 2003. 2.6.3 Airline Landed Weight Projections Table 2.10 presents historical and projected airline carrier landed weight at the Airport. As shown, passenger airline landed weight is projected to increase from 273,140 thousand pounds in 2003 to 293,747 thousand pounds in 2004. This anticipated 7.5 percent increase in passenger airline landed weight is primarily due to the additional regional/commuter activity by ExpressJet and USAirways Express during this period, As also shown, passenger airline landed weight is expected to further increase to approximately 336,338 thousand pounds in 2012, a compounded annual growth rate of 2.1 percent during this period. In general, the overall increases in airline landed weight are expected as a result of anticipated shifts in aircraft utilized and/or increased operations at the Airport during the projection period. Specifically for the Airport, the projected fleet mix takes into account I) Delta's recent elimination of mainline service at the Airport; and 2) the increasing use of larger regional jets by the regionals/commuters (e.g., 70-seat regional jets). Raling Agency Draft; Ricondo & Associalcs 11129104 B - 50 TABLE 2.10 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant LANDED WEIGHT PROJECTIONS (thousand pounds) Majors/ Regionalsl Airline Year Nationals Commuters Total Historical 1999 189,781 152,450 342,231 2000 129,890 159,901 289,791 2001 3,390 214,196 217,586 2002 660 212,742 213,402 2003 2,246 270,894 273,140 Proiected 2004 2,539 291,208 293,747 2005 2,540 290,136 292,676 2006 2,542 299,454 301,995 2007 2,544 304,039 306,583 2008 2,545 309,585 312,130 2009 2,547 316,094 318,641 2010 2,549 322,139 324,687 2011 2,550 327,718 330,269 2012 2,552 333,786 336,338 Compounded Annual Growth Rate 1999 - 2003 -67,0% 15.5% -5.5% 2003 - 2004 13.0% 7,5% 7.5% 2004 - 2012 0.1% 1.7% 1.7% Sources: Augusta Aviation Commission (Historical) Ricondo & Associates, Inc. (Projected) Prepared by: Ricondo & Associates, Inc. B - 51 [This page intentionally left blank] B - 52 3. THE 2005 PROJECT This chapter presents a review of the existing Airport facilities, discusses the need for the 2005 Project and summarizes the 2005 Project at the Airport that is intended to be partially funded from the proceeds of the Series 2005 Bonds. All funding sources for the 2005 Project are discussed in the next chapter of this report. 3.1 EXISTING AIRPORT FACILITIES Augusta Regional Airport The Airport is located on Georgia Highway 56 Spur (Doug Barnard Parkway) at the termination of Tobacco Road, Interstate Highway 520 provides the main route to Doug Barnard Parkway and the Airport. The Airport occupies 1,248 acres immediately west of the Savannah River and about 7 miles south of downtown Augusta. A small part of the Airport property is located in South Carolina. The Airport's official elevation is 145 feet above sea level. Airfield Facilities. The airport's runway system accommodates a wide variety of aircraft, from small, single- engine aircraft to Airline and regional jets and military transports. There are two intersecting paved runways, 8-26 and 17-35. Taxiway systems connect runways with terminal building areas and other aircraft parking aprons, The Airport's taxiway system is comprised of seven taxiways that are lighted, paved, and identified by letter designations, Terminal Facilities. The existing passenger terminal (the Terminal) is an approximately 53,000 square foot facility consisting of three separate buildings originating from the Airport's use as a military facility, These structures were later joined to form the existing terminal. The three original structures were the infirmary, now utilized by the restaurant/concessions area, the dining hall, now utilized as the ticketing lobby, and a classroom building, now utilized by the rental car concessionaires. In the mid-1960's, the Airport Commission constructed a baggage claim and baggage handling space between the ticketing and administration structures and a public waiting structure between the ticketing and restaurant structure. The Airport Commission constructed two separate holdrooms in 1973 and a new administration suite in 1987. These additions, and less significant additions and renovations made by the Airport Commission over the years, have resulted in a terminal facility that is composed of numerous different structural systems, roofs, mechanical systems, floor elevations, electrical equipment, materials, and finishes, The main building contains passenger ticketing, baggage handling, concessions, public waiting areas, and airport administration, Two buildings to the east of the main building contain gate holding areas, individual security inspection stations, and public restrooms. Between the main and east buildings is a landscaped courtyard. The passenger holding buildings are connected to the main building by an open-air canopy structure. The passenger ticketing lobby and counters are located in the center of the tenninal building, The L-shaped counter, running diagonally across the lobby, has 12 ticket agent positions. The Airport has six aircraft gates, utilized by the passenger airlines. Apron Areas. The apron areas are used for aircraft parking and passenger loading/unloading, The Airport aprons are constructed of concrete/asphalt, asphalt, and perforated steel planking (PSP) tied down with stakes, The Airport aprons are characterized by the type of user and include Airline Apron, Air Cargo Apron, General Aviation Apron, Helicopter Apron and Garret Apron, which is utilized by Garret Aviation Services, Inc. (Garrett). Rating Agency Drnft; Ricando & Associates Iln9/04 B - 53 Other Airport Facilities. In addition to tenninal building facilities, landside facilities include aircraft maintenance, general aviation, airport support, and commercial facilities, Garrett, the largest commercial business at the Airport, has an aircraft maintenance center located at the Airport, It is one of the 12 Garrett Aviation Services centers located throughout the V,S, The Augusta facility provides engine maintenance, engine retrofits and upgrades, airframe maintenance, avionics installation and repair, interiors refurbishing, auxiliary power unit repair, spare parts, and limited fixed-base operations services, Most of the aircraft repaired are corporate aircraft. Garrett's main building consists of four hangar areas, office space, aircraft machine and maintenance shops, a recently added parts storage warehouse, a storage building, a sheet metal fabrication building, a work/accessory shop building, and an upholstery building. General aviation activity occurs at the south-central and south portions of the airport. The facilities include a general aviation terminal building, public and private aircraft parking, public and private hangars, flight training, and vehicle parking. During the week of the Masters, the general aviation terminal building and other facilities are reported to be crowded and special accommodations for the many visitors are provided in the passenger terminal building, A large conference room and several offices are available under the command center, which is located immediately north of the general aviation tenninal building. Other buildings on Airport property include the following: an air cargo facility comprised of a commercial aircraft repair shop, maintenance hangar, airport storage and Enterprise Rental Car service facility; two public-use hangars; one corporate hangar at the Airport; an unoccupied hotel; a vacant former bank building Airport Parking. Public Parking - Terminal building area parking consists of four lots, which support short-term and long-term public parking, The short-term parking area consists of two lots separated by the hotel. The south lot has 127 spaces and the north lot has 106 spaces. Additional short-term off-street parking is available on both sides of Aviation Way in front of the terminal building. The long-term parking area, located north of the terminal building, consists of 588 spaces. The employee parking area consists of 124 parking spaces, Rental Car Parking - The rental car companies share a 116-space parking area for automobiles ready for rental and for those being returned at the south end of the terminal building, Excess rental cars and cars being serviced are kept outside the terminal building area. Two of the rental car agencies use on-airport support facilities on Hangar Road, southwest of the terminal building area. Other rental car agencies have off-airport facilities, 3.2 THE 2005 Project The 2005 Project costs and funding sources are presented in Table 3.1. The total escalated cost of the 2005 Project is estimated to be $31,9 million. A portion of these costs was expended prior to 2004. Proceeds of the Series 2005 Bonds will be deposited into the Series 2005 Construction Account and applied to the payment or reimbursement of the costs of the 2005 Project. Rllting Agency Draft; Ricondo & Associlltcs 11129/04 B - 54 Projects with PFC funding presented on Table 3.1 were included in the PFC Amendment and Application filed with the FAA in July 2004. The Aviation Commission has received authority from the FAA to apply PFCs on a Pay-As-You-Go (PA YG) basis for certain project elements and to apply PFCs to the interest and principal components of debt service for those projects partially funded with proceeds of Series 2005 Bonds, This PFC Amendment and Application is discussed in Section 4,2. The Aviation Commission's 2005 Project consists of three capital improvement projects, which will be partially funded, with proceeds of the Series 2005 Bonds: 1. Terminal Building Project 2, Runway 8-26 Rehabilitation 3. Taxiway E Crack Sealing Terminal Building Project. As described in Section 3.1, the existing terminal facility is comprised of many of the original facilities from the Airport's previous use as a military facility. The Terminal Building project will replace the existing facility and it consists of multiple components including: Design and Bidding; Financial Feasibility; Building Construction; Non Hardstand Pavements; Utilities; Hardstand Pavements; Curbfront Renovations; North Side Multi-Modal Curb; Credit Card (Rental Ready / Return) Rehabilitation; and South Side Employee Parking. This project is discussed in detail in Section 3.3. The total escalated cost of the Terminal Building Project is estimated to be approximately $30.2 million. This project is expected to be paid with a combination of AlP, state funding, Aviation Commission funds, P A YG PFCs and proceeds from the Series 2005 Bonds. Runway 8-26 Rehabilitation. This project provides for the bituminous overlay of the entire 6,000-foot length of Runway 8-26 and rehabilitation of its lighting, The total cost of this project is estimated to be $1.6 million, of which $54,000 is expected to be funded from Series 2005 Bonds proceeds, Taxiway E Crack Sealing. This project includes sealing the cracks on Taxiway E to minimize surface water infiltration into the pavement section and thereby extend the life of the pavement prior to the need for rehabilitation. The total escalated cost of this project is estimated to be $103,000, of which the entire amount is expected to be funded from Series 2005 Bonds proceeds. The Commission plans to undertake other projects besides the 2005 Project in the 2004 - 2008 Capital Improvement Program (CIP) and these projects are presented in Table 4.1 in Chapter 4. Funding sources for these other projects do not include any proceeds from the issuance of the Series 2005 Bonds and are not expected to be funded with future bonds, Although the Commission has not developed a CIP beyond 2008, it is reasonable to expect capital expenditures will be incurred in those years. For the purposes of this financial analysis, it is assumed that Commission funds contributed to capital projects will be approximately $900,000, annually after 2008. 3.3 THE TERMINAL BUILDING PROJECT As described previously, the existing terminal is old and becoming increasingly more costly to maintain and does not provide adequate service for passengers and other users of the facility. The new terminal will meet the future demand for air travel. Necessity for this new terminal is generated by the functional obsolescence of the existing terminal, redundant and obsolete building systems that force up operating costs, inefficient building flow and structural inadequacies. The existing terminal Rating Agency Draft: Ricondo & AssocialC5 Iln9/04 B - 56 is not up to minimum building codes and significant resources would be required to meet those mmlmums, The construction program for the Project consists of the demolition, in phases, of the existing terminal facility and the construction, also in phases, of a new terminal facility, The ground floor of the new terminal facility will total approximately 80,000 square feet of space and will contain holdrooms, ticketing and baggage make-up areas, baggage claim and baggage claim handling areas, and space for security offices, restrooms, concessions, rental car offices, circulation areas, and other ancillary and support areas, The second floor of the new terminal facility will total approximately 13,000 square feet of space and will contain administrative offices, restrooms, and additional support space, The construction program also includes sitework related to access road, parking areas, and apron, including utilities, grading, drainage, paving, and marking. The new terminal facility will be constructed in the same footprint as the existing terminal facility while maintaining airline and concession operations, The construction timing has been scheduled over four phases and was designed to avoid any disruption of service during the Masters week. A floor plan drawing of the proposed new terminal is presented on the following page. The Aviation Commission has identified additional Capital Projects totaling approximately $4.5 million to be undertaken in 2005 through 2007. These projects have not been included in the CIP because they are contingent upon receiving future AlP entitlements. As AlP entitlements for 2005, 2006 and 2007 get appropriated, these projects will be constructed, If AlP funding is not appropriated, these projects will remain deferred until funding can be secured. Rating Agency Draft: Ricondo & Associates Iln9/04 B - 57 [This page intentionally left blank] B - 58 4. FINANCIAL ANALYSES This chapter examines the financial structure of the Airport; cost and financial implications of the 2005 Project, other projects included in the 2004 - 2007 CIP, and estimates of capital projects beyond 2007; Operating and Maintenance (O&M) Expenses and Non-Airline Revenue projections; airline rates and charges projections; airline cost per enplaned passenger projections; application of Revenues; and projected debt service coverage, 4.1 FINANCIAL STRUCTURE This section discusses Airport accounting practices, the requirements and provisions of the Master Bond Resolution as supplemented and amended by the First Supplemental Bond Resolution (collectively known as the Bond Resolution), and the rate-setting mechanism included in the Rate Ordinance passed on October 19, 2004, by the Aviation Commission for the Airport. 4.1.1 Airport Accountillg Expenses and revenues of the Airport are categorized into functional areas and rolled up into type of expense for rate-making purposes, The Rate Ordinance includes definitions of Cost Centers to which expenses and revenues will be allocated, Allocations of expenses to Cost Centers are based on percentages derived from discussions with Airport management and industry trends, Revenues are allocated into Cost Centers based on the type of revenue, Debt Service and Capital Expenditures will be assigned to Cost Centers based on the intended purpose of the expenditure, Cost Center definitions may be found in section 4.1.3. 4.1.2 BOlld Resolutioll The Bond Resolution authorizes the issuance of Airport Revenue Bonds by the Consolidated Government. The requirements of the Bond Resolution and the proposed methodology contained in the Airline Agreement were utilized to develop the application of revenues included in these financial analyses. The principal funds and accounts created in the Bond Resolution are presented in Exhibit 4.1. Sections of the Bond Resolution as they pertain to this report are summarized below: · "Revenues" means (i) all revenues, income, receipts and money derived from the ownership and operation of the Airport, including without limitation all rentals, charges, landing fees, use charges and concession revenue received by or on behalf of the Consolidated Government, Investment Earnings and all other income received from, and gain from, securities and other investments and amounts earned on amounts deposited in funds and accounts under the Bond Resolution or otherwise maintained with respect to the Airport, and (ii) all gifts, grants, reimbursements or payments received from governmental units or public agencies for the benefit of the Airport which are (y) not restricted by law or the payor to application for a particular purpose other than payment of certain Bonds or Contracts and (z) otherwise lawfully available for payment of Bonds or Contracts; provided "Revenues" includes PFC Revenues. The term "Revenues" does not include proceeds of insurance so long as such proceeds are to be paid to a party separate from the Consolidated Government in respect of a liability or are to be used to repair or replace portions of the Airport, "Revenues" are to be calculated on a cash basis rather than on an accrual basis. Rnting Agency Draft: Ricondo & Associates 11/29/04 B - 59 ~f\M 1'eJ woooPs AUJ:usta ReJ:ional Airport Augusta Regional Airport Revenue Bond Flow of Funds "Airport Revenue" "PFC Revenue" ~RPORTREVENUEFUND . All income and receipts . Less: Defined exclusions t REBATE FUND . Fund requi~ement, if any t OPERATION AND MAINTENANCE FUND . All income and receipts - . Less: Defined exclusions ~ AIRPORT BOND FUND . Principal/Sinking Account . Interest Account . Debt Service Reserve Account t OPERATING AND MAINTENANCE RESERVE FUND . Specified Requirement + RENEWAL AND REPLACEMENT FUND . Emergency Capital Requirements t SUBORDINATE SECURITIES FUND . Debt Service on Subordinate Obligations ~ CAPITAL IMPROVEMENT FUND . Fund Balance . Any Lawful Airport Purpose PFC REVENUE FUND . All PFC receipts . Including investment Income PFC BOND FUND . PFC Principal/Sinking Account . PFC Bond Interest Account . PFC Bond Reserve Account PFCs available for Other Obligations, if any PFC OBLIGATIONS FUND · Less: PFC Operating Expenses, or other obligations, if any PFCs available for PA YGO , PFC PAYGO CAPITAL FUND . Fund Balance · Any Lawful PFC Purpose Compiled by: Ricondo & Associates, Inc. Exhibit 4.1 Flow of Funds under the Bond Resolution B - 60 · "PFC Revenues" means all income and revenue received by or required to be remitted to the Aviation Commission from the passenger facility charges imposed by the Consolidated Government pursuant to the PFC Act, and the PFC Regulations, including any interest earned after such charges have been remitted to the Consolidated Government as provided in the PFC Regulations, all of which may he pledged pursuant to the PFC Act and PFC Regulations 9 158.13; provided, the term "PFC Revenues" also includes any interest or other gain in any of the accounts or subaccounts created herein or in any Supplemental Resolution resulting from any investments and reinvestments of PFC Revenues, · An Operation and Maintenance Reserve Fund is established equivalent to 60 days' Operating Expenses. · A Debt Service Reserve Account is established upon issuance of the Series 2005 Bonds equivalent to a reasonable reserve for the payment of principal of and interest on Bonds. · Under the Rate Covenant included in the Master Bond Resolution, the Consolidated Government has covenanted to collect rates, fees, and other charges for the services and facilities furnished by the Airport fully sufficient at all times for 100 percent of the Operating Expenses and for the accumulation in the Operation and Maintenance Reserve Fund of the Operating Reserve; and at least 125 percent of the Debt Service Requirement on all other Bonds payable for the year of computation, A summary of certain provisions of the Bond Resolution may be found in Appendix C, "Summary of Certain Provisions of the Bond Resolution," of the Official Statement 4.1.3 Rate-Setting Mechanism As previously described, the Consolidated Government has adopted a Rate Ordinance relating to rates, fees and charges, and regulations for airline use of Airport facilities to reflect revised (1) methodology for recalculating airline rents and fees and certain other changes to airline rate, fees, and charges, and (2) updating the terms and conditions associated with airline use and occupancy of the Airport. The Aviation Commission believes that the definitions and procedures contained in the Rate Ordinance are consistent with those in the Bond Resolution and the United States Department of Transportation policy of airline rates and charges. The Rate Ordinance provides a basis for calculating, charging, and collecting airline Terminal Building rents, Apron fees, Loading Bridge use fees, landing fees and other charges so that total Airport Revenues are sufficient to meet the requirements of the Rate Covenant The Aviation Commission intends to negotiate a Scheduled Airline Operating Agreement and Terminal Building Lease (Airline Agreement) that will address the occupancy of the new Terminal Building and establish procedures for periodically adjusting airline rents, fees, and charges so that Revenues will be at least sufficient to meet the requirements of the Rate Covenant in each year the Airline Agreement is in effect Prior to the execution of an Airline Agreement, the Aviation Commission intends to calculate, charge, and collect airline rents, fees, and charges according to the procedures set forth in the Rate Ordinance. Rating Agency Draft: Ricondo & Associates 11/29/04 B - 61 According to Airport management, the airlines have agreed in principle with the Aviation Commission's proposed capital improvements, and there are informal commitments to occupy space in the new Terminal Building. The airlines have shown support of the recently approved PFC application, discussed in Section 4.2. 4.1.4 Airline Rents and Fees under the Rate Ordinance As stated, the Rate Ordinance provides a basis for calculating charges, and collecting airline Terminal Building rents, Apron Fees, Loading Bridge Use Fees, Landing Fees, and other charges so that total Airport Revenue are sufficient to meet the requirements of the Rate Covenant. The Rate Ordinance establishes the following Airport Cost Centers to be used in the calculation of airline rents and fees: · Airfield Area shall mean those areas on the Airport that provide for the landing, takeoff, taxiing, parking, or other operations of aircraft, and the approach and runway protection zones, infield areas, and navigational aids, · Apron Area shall mean the paved aircraft ramp area adjacent to the Terminal Building that provides for the parking, loading, unloading, and servicing of aircraft, · Loading Bridges shall mean the passenger loading bridges serving the Terminal Building. · Terminal Area shall mean the access roads and parking areas servIng the Tenninal Building. · Terminal Building shall mean the passenger terminal building servIng the traveling public. · A viation Services shall mean the aircraft fueling activities and facilities and equipment dedicated to accommodating general aviation activity (i,e., public hangars, general aviation tiedowns, general aviation apron, and general aviation terminal) together with the facilities and equipment dedicated to aircraft fueling activities. · Other Buildings and Areas shall mean those portions of the Airport not included in the preceding Airport Cost Centers, including the facilities, installations, and improvements thereon. The Aviation Commission is proposing continuation of the current rate levels until DBO of the terminal building, anticipated to be the second quarter of 2007, at which time the Aviation Commission will calculate rates as established in the Rate Ordinance. · Airline terminal building space rentals are to be calculated according to a compensatory formula based on the recovery of Operating and Maintenance Expenses and Capital costs allocable to the terminal building cost center. Rnting Agency Draft: Ricondo & Associates 11/29/04 B - 62 · Apron Fees are to be calculated according to a compensatory formula based on the recovery of Operating and Maintenance Expenses and Capital costs allocable to the Apron Area cost center. · Loading Bridge Use Fees are to be calculated according to a compensatory formula based on the recovery of Operating and Maintenance Expenses and capital costs allocable to the Loading Bridges, . Landing Fees are to be calculated according to a total Airport Residual cost methodology, taking into consideration all Airport requirements and all nonairJine revenues. Airport requirements are defined to include 125 percent of the annual debt service requirement for outstanding Airport revenue bonds. The Aviation Commission is currently charging the following rates: · Terminal rental rates will continue to be $30 per square foot. · Landing fees will continue to be $1.50 per thousand pounds. · An Apron fee or Loading Bridge use fee is not currently being charged. 4.2 FINANCING PLAN Table 4.1 presents the Capital Improvement Program for 2004 through 2007 that was developed by the Aviation Commission including funding sources and an estimate of capital project costs for 2008, Actual expenditures may not occur in the years initially developed and presented on Table 4.1, however, the Aviation Commission intends to construct all 2004 through 2007 capital projects before the end of 2007, Although specific projects have not been identified post-2007, it is assumed the Aviation Commission will utilize approximately $900,000 in each subsequent year to fund the local share of its capital projects. The Aviation Commission had Authority to collect approximately $29 million in PFCs to cover a prior version of the Terminal Building Project and some other projects. The Aviation Commission filed a PFC Amendment in July 2004 to revise the scope and cost of the Terminal Building Project and on August 24, 2004, the FAA granted permission to amend the amount of the original PFC application to $31.5 million to partially fund the terminal building components of the 2005 Project including project costs, and finance and interest. Also, in July 2004, the Aviation Commission filed a PFC Application to fund approximately $2 million of projects, including finance and interest costs, included in the 2005 Project. The FAA issued a Final Agency Decision on November 4,2004, approving the PFC Application for a total collection of $2,007,000. As shown, the 2005 Project is anticipated to require approximately $13.4 million of the Series 2005A and Series 2005B Bonds and approximately $5.7 million funded from the proceeds of the Series 2005C Bonds, A list of the estimated sources and uses of funds for the Series 2005 Bonds is presented in Table 4.2. The Airport's Underwriter for the Series 2005 Bonds, based on expenditure estimates developed by the Aviation Commission and its consultants, provided the required bond issue size and debt service estimates based upon the following assumptions: RDling Agency Druft: RH::ondo & Associates 11/29/04 B - 63 TABLE 4. Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultanl CAPITAL IMPROVEMENT PROGRAM - 2004-2008 Series 2OO5C Bond Proceeds so o o o o o o o o o SO Series 2005A & Series 2005B Bond Proceeds so o o 54,000 o 790,000 o o o o S844,OOO Local Funds SO \33,000 o o o 404,000 o o 200,000 o S737,000 State SO 54,000 5,000 35,000 2,000 o o o o o S96,000 Discretion so o o ,337,000 o ,500,000 o o o o S2,837,OOO Entitlements S63,000 ,988,000 190,000 163,000 57,000 o o o o o S2,46 1 ,000 Passenger Facility Char~e(PA YG S3,000 o 5,000 o 1,000 o 266,000 145,000 o 16,000 5436,000 Project Cos 2004S S66,OOO 2,175,000 200,000 1,589,000 60,000 2,694,000 266,000 145,000 200,000 16.000 S7,411,OOO 2l!Q<l; Temlinal Area Improvements - Financial Feasibility G A Apron Expansion / Taxiway C Relocation LEO Communications Equipment B Runway 8-26 Rehabilitation (Construction) GA Apron - Partial Pavement Rejuvenation Terminal Area Improvements- Partial Construction. Building Terminal Area Improvements - Non Hardstand Pavements-Partial Const Terminal Area Improvements - Ulilities- Partial Construction South Fuel Farm Tank Replacement (4@ 10,000 gal) PFC Application Administrative Costs ANNUAL TOTAL S2,321,000 o o o o o S2,321,000 S3,047,000 o o o 447,000 103,000 S3,597,000 SO 995,000 o o o o S995,000 541,000 o o o o o 541 ,000 so o o o o o SO S662,000 o o o o o S662,000 S300,000 o 822,000 273,000 o o SI,395,000 S6,371,000 995.000 822,000 273,000 447,000 103,000 S9,011,000 2Q05: Terminal Area Improvements- Partial Construction, Building Terminal Area Improvements - Hardstand Pavements Tcrminal Area Improvements, Non Hardstand Pavements-Partial Coost Temlinal Area Improvements - Curbfront Renovations Tenninal Area Improvements ~ Utilities- Partial Construction Taxiway E Crack Sealing to I 0\ ~ 5436.000 o 5436,000 S3,474,OOO 844,000 54,318,000 SI,OOO,OOO o SI,OOO,OOO 54 I ,000 o 541,000 o o SO so o SO so o SO 54,951,000 844,000 S5,795,000 ANNUAL TOTAL :fQQ2; Terminal Area Improvements- Partial ConstructIOn, Building Terminal Area Improvements, Curbfront Renovations ANNUAL TOTAL ~ S2,266,000 280,000 4\3,000 o S2,959,000 54,349,000 o o 315,000 54,664,000 S704,000 o o 296,000 ,000,000 541,000 o o o 541 ,000 o o o o SO SO o o o SO SO o o o SO S7,36O,000 280,000 4 \3,000 611,000 S8,664,000 Partial Construction, Building Credit Card (Rental Ready I Return) Rehab South Side Employee Parking North Side Multi-Modal Curb Terminal Area Improvements- Terminal Area Improvements Tenninal Area Improvements Terminal Area Improvement~ SO o o SO S5,716.000 SO o o SO S\3,423,000 S3OO,000 202,000 400,000 S902.OOO 54,634,000 SO o o SO S219,ooo SO o o SO S2,837,000 SO o o SO S3,123,000 SO o o SO SI,831.000 S300,OOO 202,000 400,000 S902,000 ,783,000 S3 2008 2004 ANNUAL TOTAL ~ Miscellaneous Terminal Building Projects Miscellaneous A irfield Projects Miscellaneous Other Buildings and Areas Projects ANNUAL TOTAL TOTAL CAPITAL IMPROVEMENT PROGRAM TABLE 4. Augusta Aviation Commission Augusta Regional Airporl R.port oJthe Airport Consultant CAPITAL IMPROVEMENT PROGRAM - 2004-2008 Series 2oo5A & Series 2005 B Bond Proceeds Series 2OO5C Bond Proceeds so o 5,023,000 o 693,000 o o S157,000 o ,660,000 o ,606,000 o o Local Funds S202,OOO 1,128,000 2,608,000 o 296,000 o 400,000 State S35,000 56,000 123,000 o o o 5,000 Discretion S 1,337.000 o 1,500,000 o o o o Entitlements S163,000 2,045,000 725,000 o o o 90,000 Passenger Facility Charee (P A YG SO ,089,000 303,000 o 418,000 o 21,000 Project Co 2004S S 1,894,000 4,318,000 21,942,000 o 3,013,000 o 616,000 ER' Airfield Area Apron Area Tenninal Building Loading Bridges Tenninal Area A viation Services Other Buildings and Areas E S5,7 1 6,000 SI3,423,OOO $4,634,000 S219,000 S2,837,000 S3, 1 23,000 ,000 SI,83 S31,783,000 PROGRAM 2004 - 2008 TOTAL CAPITAL IMPROVEMENT 2007 CIP by to construct the 2004 in 2004 through 2007 was adopted by the Aviation Commission on May 27, 2004. Actual expenditures may occur in different years than shown bIlt the Aviation Conunission intends I Funding for CIP projects the end of2007. R&A LPA (AprilS, 2004); Remaining Funding Sources Funds So"",c: Project Costs, Slate Funds and 2003 FAA Prepared by: Ricondo & Associates, Inc. S3,732,000 to I 0'\ VI Table 4.2 Augusta Aviation Commission Augllsta Regional Airport Report o/the Airport Consultant SOURCES & USES - 2005 PROJECT Total 5 SOURCES OF FUNDS: Par Amounl - Series 2005A I Par Amount - Series 2005B I Par Amount - Series 2005C I Premium I Interest Earnings During Construction Aviation Commision Funds Federal Grants-In-Aid State of Georgia Grants PFC (pay-as-you-go) TOTAL SOURCES OF FUNDS $7,590,000 7,590,000 6,620,000 455,000 355,000 7,867,000 6,581,000 255,000 2,186,000 $39,499,000 USES OF FUNDS: 2005 Projecl Capitalized Interest (Net Funded) Debt Service Reserve Fund 1,2 Operation and Maintenance Reserve Fund 2,3 Renewal and Replacement Fund 2 Insurance Expense Total Issuance Costs 4 Rounding $31,877 ,000 2,330,000 2,173,000 978,000 1,000,000 703,000 436,000 2,000 $39,499,000 TOTAL USES OF FUNDS I Source: Merrill Lynch (November 19, 2004) 2 Funded with Commission Funds. 3 Equivalent to two months O&M. 4 Two percent of Par. 5 Rounded to nearest lhousand. Prepared by: Ricondo & Associates, Inc. B - 66 · Fixed-rate bonds are expected to be issued in three series of bonds on or about February 8,2005. · The first interest payment is due July I, 2007 and the first principal payment is due January I, 2008. · The average coupon interest rate is estimated to be 5.747 percent for the Series 2005 Bonds, · The debt service reserve requirement will be funded from an equity contribution from the A viation Commission, · Insurance expense is estimated at 150 basis points of total adjusted debt service, · Issuance Expenses are estimated at 2% of par value of the Series 2005 Bonds. · The construction period is net funded, The earnings rate is assumed to be reinvested at the prevailing U.S. Treasury bill and note rates (assumed to range from approximately 1.5 percent to approximately 2,0 percent). These investment earnings are used to reduce the overall bond size, Average life of the construction fund is 1.0720 years, · Capitalized interest is net funded and calculated through the May I, 2005 interest payment date. The capitalized interest funds are assumed to be reinvested at the prevailing U.S. Treasury bill and note rates (assumed to range from approximately 1.5 percent to approximately 2.0 percent), Average life of the CAPI fund is 1,4485 years, Table 4.3 presents the annual estimated debt service requirements resulting from the issuance of the Series 2005 Bonds. As shown, the Aviation Commission has no outstanding debt. As presented in Table 4.3, annual debt service requirements in 2007, the first year of DBO, on the Series 2005 Bonds is estimated to be approximately $1.6 million, Of this debt, approximately 76 percent of the debt, or approximately $1.2 million, is expected to be repaid annually with PFC revenues, 4.3 O&M EXPENSES The Aviation Commission adopted the 2005 budget on November 16, 2004. The following table presents historical O&M Expenses through 2003 and budgeted O&M Expenses for 2004 and 2005: Rating Agency Drnft: Ricondo & Assoc:intcs 11/29/04 B - 67 TABLE 4.3 Augusta Al'iution Commission A UgU;ifa Regional Airport Report of the Airport Consultunt PROJECTED DEBT SERVICE REOUlREMENT 20 20 2010 Pr~ed 2009 2008 2007 2006 B..!.!!!lLet 2005 Budget 2004 $436.425 762,063 380,650 $1.579,138 $436.425 760,350 380,650 .577,425 $436,425 762,488 380.650 $1,579,563 $436.425 758,188 380,650 $1,575,263 $436.425 757.738 380,650 $1.574,813 $436,425 758,175 380,650 $1,575,250 $0 o o $0 $0 o o $0 $0 o o $0 TOTAL DEBT SERVICE o 428 o $428 (534) o ($534) o .075 o ,075 o 3 o $113 o 09 o ($109 09,106 89,544 95,163 $393,8 o o o $0 o o o $0 o o o $0 o $0 1.198.488 $381,078 96,775 $380, ,198,9 $381.725 .194,6 $380,763 94,163 $380,54 .493,250 $475.813 o $0 o $0 TOTAL DEBT SERVICE COVERAGE Less: Available PFC NET DEBT SERVICE REQUIREMENT 7.000 o .076.000 o 05,000 o o 98,000 $17,000 o ,075,000 o 05,000 o o 97,000 $17.000 o ,077 ,000 o 105,000 o o $1,199,000 $17.000 o .073,000 o 104,000 o o 94,000 $17.000 o ,073,000 o 04,000 o o 94,000 7,000 o ,073,000 o 104.000 o o 94,000 $0 o o o o o o $0 $0 o o o o o o $0 nd $0 o o o o o o $0 co I 0\ 00 $0 o 335.000 o 46.000 o $1 $0 o 335.000 o 46,000 o o ,000 $0 o 335.000 o 46.000 o o ,000 $0 o 335,000 o 46,000 o o .000 $1 $0 o 335,000 o 46,000 o o ,000 $1 $1 $0 o 335.000 o 46,000 o o $381,000 $0 o o o o o o $0 $0 o o o o o o $0 $0 o o o o o o $0 SUBTOTAL NON-PFC-B Airfield Area Apron Area Tenninal Building Loading Bridges Tennin:ll Area Aviation Services Other Buildings and Area $381,000 7,000 o ,411.000 o 151,000 o o $1.579,000 $38 $17,000 o ,410,000 o 151,000 o o ,578,000 $38 $17,000 o ,412,000 o 151,000 o o .580.000 $38 7,000 o ,408.000 o 150,000 o o $1,575,000 $38 $17,000 o .408,000 o 150.000 o o .575,000 7,000 o ,408,000 o 150,000 o o $1,575,000 $0 o o o o o o $0 $0 o o o o o o $0 $0 o o o o o o $0 SUBTOTAL TOTAL' Airfield Area Apron Area Terminal Building Loading Bridges Terminal Area Aviation Services Other Buildings and Areas TOTAL DEBT SERVICE 9,2004) Source: Annual Debt Service - Merrill Lynch (November Prepared by: Ricondo & Associates. Inc. AUGUSTA REGIONAL AIRPORT O&M EXPENSES Year Actual Actual Actual Actual Actual Budget Budget Ended 1999 2000 2001 2002 2003 2004 2005 Total O&M Expenses $3,705,933 $4,662,986 $4 889,298 $5,212,] 51 $5,678,040 $6,080,406 $5,867,830 Enplaned Passengers 209,892 201,921 166,537 147,951 ]62,946 180,000 189,000 O&M Expenses per Passenger $17.66 $23.09 $29.36 $35.23 $34.85 $33.78 $31.05 Source: Augusta Aviation Commission Note: O&M Expenses differ from audited financial statements due to the re-c1assification of certain items for rate- making purposes. The Airport Consultant alld Aviation Commission have reconciled these items. As shown, expenses are expected to increase from $3.7 million in 1999 to $5.9 million in 2005, a compounded annual growth rate of 8.0 percent. This increase was primarily driven by increasing insurance rates that have since stabilized"an increase in professional services attributed to consulting fees related to the design and planning of the capital program, an increase in contract services related to contracted security costs which are partially reimbursed with TSA grants, and events or the cost of the air show which has been discontinued. These increases were partially offset by stable salary expenses and reduced maintenance expenses. Table 4.4 presents O&M Expenses at the Airport by type of expense and by Cost Center for budget 2004 and 2005 and projected 2005 through 2012. As shown, O&M Expenses are budgeted to be approximately $5.9 million in 2005 and projected to be $7.3 million by 2012. In general, projections of future O&M Expenses were based on a review of historical trends, the anticipated impacts of inflation, and impacts due to capital improvements and represent an overall compounded annual growth rate of 3, I percent from 2005 through 2012. Descriptions of some of the major expense categories include the following: · Salaries and Benefits. These expenses represent the salaries and wages associated with employment of all Airport personnel as well as other costs associated with employment, including fringe benefits, and other employee compensation and requirements. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Professional Services. This category includes services provided by outside contractors such as professional (accounting, auditing, consulting, etc.), custodial, equipment maintenance, ambulance, and indirect charges. The compounded annual growth rate for these expenses for 2005- 2012 is 3,0 percent. · Utilities and Refuse. Utilities expenses include the cost of gas, electricity, water, waste disposal and trash removal for the Airport, The compounded annual growth rate for these expenses for 2005- 2012 is 4.9 percent. Rating Agency Draft: Ricondo & Associalcs 11/29/04 B - 69 TABLE 4.4 Augusta Aviation CommissIOn Augusta Regional Airport Report of the Airport Consultant PROJECTED OPERA TlNG & MAINTENANCE (O&M) EXPENSES & COST CENTER ALLOCA TIONS 2012 $4,016,000 424,000 490,000 76,000 8,000 283,000 73,000 9,000 192,000 43,000 173,000 84,000 104,000 438,000 6,000 96,000 47,000 180,000 315,000 214,000 57,271,000 20 53,899,000 412,000 467,000 74,000 8,000 275,000 71,000 9,000 186,000 42,000 168,000 82,000 101,000 425,000 6,000 93,000 46,000 175,000 306,000 208,000 57,053,000 2010 53,785,000 400,000 445,000 72,000 8,000 267,000 69,000 9,000 181,000 41,000 163,000 80,000 98,000 413,000 6,000 90,000 45,000 170,000 297,000 202,000 56,841,000 Pr~ed 2009 53,675,000 388,000 424,000 70,000 8,000 259,000 67,000 9,000 176,000 40,000 158,000 78,000 95,000 401,000 6,000 87,000 44,000 165,000 288,000 196,000 56,634,000 2008 53,568,000 377,000 404,000 68,000 8,000 251,000 65,000 9,000 171,000 39,000 153,000 76,000 92,000 389,000 6,000 84,000 43,000 160,000 280,000 190,000 56,433,000 2007 53,464,000 366,000 385,000 66,000 8,000 244,000 63,000 9,000 166,000 38,000 149,000 74,000 89,000 378,000 6,000 82,000 42,000 155,000 272,000 184,000 56,240,000 2006 53,363,000 355,000 367,000 64,000 8,000 237,000 61,000 9,000 161,000 37,000 145,000 72,000 86,000 367,000 6,000 80,000 41,000 150,000 264,000 179,000 56,052,000 Budget 2005 53,264,920 344,350 349,520 61,780 8,160 230,000 58,740 8,870 156,380 35,920 140,500 69,820 83,600 356,110 6,290 77,370 39,850 145,420 256,230 J 74,000 55,867,830 Budget 2004 52,852,919 452.050 337,520 55,759 18,260 193,600 56,950 8,165 228,440 24,215 121,250 46,730 347,080 261,825 7,530 66,029 50,850 146,402 247,950 556,882 56,080,406 E EXPENSES OPERATING AND MAINTENAN Salaries and Benefits Professional Services Utilities and Refuse Service Contractors Equipment Rental Insurance Communication Postage Advenising, Public Relations, Printing & Binding Travel and Dues Bank and Credit Card Fees Education,Training and Licenses Contract Labor Materials and Supplies Publications lJj , -.J o Equipmcnt and Fumiture Events Repairs & Maintenance Allocated Overhead and Transfers Maintenance projects and equipment TOTAL OPERATING AND MAINTENANCE EXPENSES 51,818,000 364,000 2,763,000 30,000 727,000 1,163,000 406,000 57.271,000 51,763,000 353,000 2,680,000 29,000 705,000 1,128,000 395,000 57,053,000 1,710,000 342,000 2,599,000 28,000 684,000 ,095,000 383,000 ,000 5 51,659,000 332,000 2,520,000 27,000 663,000 1,061,000 372,000 56,634,000 5 I ,608,000 322,000 2,444,000 26,000 643,000 1,029,000 361,000 56,433,000 5 I ,560,000 312,000 2,371,000 25,000 624,000 998,000 350,000 56,240,000 5 I ,452,000 303,000 2,118,000 o 605,000 908,000 666,000 56,052,000 51,408,000 294,000 2,054,000 o 587,000 880,000 644,830 S5,867,830 ALLOCA nON OF OPERA TING AND MAINTENANCE EXPENSES: Airfield Area 51,459,000 Apron Area 305,000 Terminal Building 2,128,000 Loading Bridges 0 Terminal Area A viation Services Other Buildings and Areas TOTAL ALLOCATED O&M EXPEN5ES 608,000 912,000 668,406 56,080,406 56,84 per year. per year and utility innation equal to 5% to3% innation equal s equippcd with loading bridges in May 2007. of Cost of Goods Sold. Assumes Assumes the new terminal is open and Operating & Maintenance Expenses are shown net Source: Augusta Regional Airport (Actual) Prepared by: Ricondo & Associates, Inc. . Insurance. These expenses include the cost of general liability, worker's compensation, terminal operator and other insurance, The compounded annual growth rate for these expenses for 2005- 2012 is 5,0 percent. . Advertising, Public Relations, Printings & Binding. This category includes expenses incurred for advertising and other promotional programs, The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. · Materials and Supplies. This category of expenditures includes office and operating supplies that are ordinarily used within one year after placed into service, The compounded annual growth rate for these expenses for 2005- 2012 is 3,0 percent. · Allocated Overhead and Transfers. These expenses includes the allocation of services provided by the City to the Airport. The compounded annual growth rate for these expenses for 2005- 2012 is 3.0 percent. . Maintenance Projects. This category includes major non-routine repairs of building structures and other integral systems, which significantly prolong or protect the useful life of an asset, but are replacements rather than improvements. The compounded annual growth rate for these expenses for 2005- 2012 is 3.1 percent. 4.4 NON-AIRLINE REVENUES Unlike many airports of similar size, the Airport has a substantial business enterprise with significant annual cash flow, As presented in a later table, Non-Airline Revenues are expected to represent 84 percent of total Airport Revenues in 2004 and are projected to range from 82 percent to 86 percent of total Airport Revenues for 2005 through 2012. The Aviation Commission owns and operates the fixed base operations at the Airport and net Revenues from this Cost Center (Aviation Services) generate approximately half of all Airport Non-Airline Revenues, Aviation Services will be discussed in more detail in a following paragraph. The following table presents historical Non-Airline Revenues through 2003 and budget for 2004 and 2005: AUGUSTA REGIONAL AIRPORT NON-AIRLfNE REVENUES Year Actual Actual Actual Actual Actual Budget Budget Ended 1999 2000 2001 2002 2003 2004 2005 Total Non-Airline Revenues $5,338, I I I $5,602,491 $5,437,082 $6,112377 $6, J 10,216 $5,732,40 I $5,777 ,920 Enplaned Passengers 209,892 201,921 166,537 147,951 162,946 180.000 189.000 Non-Airline Revenue per Passenger $25.43 $27.75 $32.65 $41.31 $37.50 $31.85 $30.57 Source: Augusta Airport Commission Note: Total Non-Airline Revenues differ from audited financial statements due to the re-classification of certain items. The Airport Consultant and the Aviation Commission have reconciled these items. As shown, Non-Airline Revenues are expected to increase from $5.3 million in 1999 to $5,8 million in 2005, a compounded annual growth rate of 1.3 percent. Rating Agency Draft: Ricondo & Associatcs 11/29/04 B - 71 Table 4.5 presents Non-Airline Revenues at the Airport by type of revenue and by Cost Center for budget 2004 and 2005, and projected 2005 through 2012. As shown, Non-Airline Revenues are budgeted to be approximately $5.8 million in 2005 and projected to increase to approximately $7.4 million in 2012, This increase represents a compounded annual growth rate of 3,7 percent for 2005 through 2012. In general, projections of future Non- Airline Revenues were based on a review of historical trends, the anticipated impacts of inflation, expected rate/revenue increases, impacts related to CIP and the projected growth in activity, Specific points concerning these projections are discussed below: 4.4.1 Airfield Area The primary source of Non-Airline Revenues in the Airfield Area Cost Center is currently charter landing fees, however, the Aviation Commission started collecting General Aviation landing fees in 2004. Airfield Area Non-Airline Revenues are expected to increase from approximately $21,000 budgeted in 2005 to approximately $35,000 in 2012. This increase represents a compounded annual growth rate of7,6 percent during this period, and is the result of the implementation of general aviation landing fees and charter growth, 4.4.2 Terminal Building Currently, Non-Airline Revenues from the Terminal Building Cost Center are primarily comprised of security revenues (to offset contractual security expenses). Concession revenues are currently minimal, however, upon completion of the new Terminal building, it is anticipated that the improved food and beverage and retail concession facilities will generate improved concession revenues. Revenues are budgeted to be $329,700 in 2005 and are projected to increase to $479,000 by 2012, representing a compounded annual growth rate of 5.5 percent, due to the expanded concession facilities as well as an improved terminal advertising program, 4.4.3 Terminal Area Revenues from the Terminal Area Cost Center consist of parking revenues, taxi permit fees and rental car contracts, Part of the Terminal Building expansion includes improved parking facilities and rental car facilities, These revenues are expected to increase from approximately $1.7 million budgeted in 2005 to approximately $2.3 million in 2012, This increase represents a compounded annual growth rate of 4.3 percent during this period and is the result of projected passenger growth as well as anticipated parking rate increases upon completion of the new facilities and renegotiation of rental car contracts. 4.4.4 Aviation Services Under the name Bush Field Aviation Services, the Airport provides services including fuel sales, parking, tiedown rental, and hangar space rental. The Airport contracts with McAir Aviation Services, Inc, for flight instruction and aircraft rental. The Airport also operates aviation facilities, Airport employees provide all services and the Airport purchases and resells fuel and other related goods. Net revenues from the Aviation Services Cost Center consist of fuel and other merchandise sales (net of cost of goods sold), general aviation ramp fees and labor services, catering fees, and other aircraft maintenance services and are expected to contribute 37 percent of total Airport Revenues budgeted for 2004. Rating Agency Draft: Ricondo & Associates IIn9104 B - 72 TABLE 4.5 Augusta Aviation Commis.l';on Augu~'la Regional Airport Report of the Airport Com;ultunt PROJECTED NON-AIRLINE REVENUE 2012 $25,000 10,000 $35,000 20 $24.000 9,000 S33,000 2010 S23,ooO 8.000 $31,000 Pr~ed 2009 $22.000 7,000 S29,000 2008 $21,000 6,000 $27,000 2007 $20.000 5,000 $25.000 2006 $19,000 4,000 S23,000 Budget 2005 $18.000 3,000 ,000 Budget 2004 $15.000 6.000 ,000 AIRFIELD AREA: Chaner Landing Fees General A viation Landing Fees TOTAL AIRFIELD AREA: $289,000 46,000 9,000 3,000 60,000 72,000 $479.000 $289.000 45,000 9.000 3,000 58,000 72,000 $476.000 $289,000 44,000 9,000 3,000 56,000 72.000 $473,000 $289,000 43,000 9.000 3,000 54,000 72,000 $470,000 $289,000 42,000 9,000 3,000 52.000 72,000 $467,000 $289.000 40,000 9.000 3.000 50,000 72,000 $463,000 $289,000 o 9,000 3,000 7,000 o $308.000 $2 $289,000 22,000 9,000 2,500 7,200 o $329,700 $2 $498.000 22,000 9,000 2,500 7,200 o $538.700 TERMINAL BUILDING: Airline Security Revenue Food & Be\'emge Concession Telephone Concession Miscellaneous Concessions Tenninal Advertising Other Building Rentals (TSA) TOTAL TERMINAL BUILDING $1,081,000 7,000 1,157,000 14,000 $2,259,000 ,053,000 7,000 ,127,000 4,000 ,000 $1,025.000 7.000 1,097.000 13,000 $2,142,000 $997.000 7,000 1.067,000 13.000 $2,084,000 $968,000 7.000 ,036.000 12.000 $2,023,000 $941.000 7,000 1,007,000 12,000 $1,967,000 $836.000 7,000 895,000 11,000 $1,749,000 $803.000 7,200 860,000 10,800 $1,681,000 $721.200 7,200 925,000 10,800 $1,664,200 TERMINAL AREA: Automobile Parking Taxi Rental Car Commissions Rental Car - Ready Return Renml TOTAL TERMINAL AREA to I -...I W $2,20 $9,861,000 $10,169.000 (6,500.000) (6.695.000) (81,000) (83,000) $3.280,000 $3,391,000 $9,563,000 (6,3" ,000) (78,000) $3,174,000 $9,274,000 (6,127,000) (76,000) $3,071,000 S8,994,000 (5,949,000) (74,000) $2,971,000 $8,723,000 (5,776.000) (72,000) $2.875,000 $8,460,000 (5,608,000) (69,000) $2,783.000 $8,005,620 (5.341,420) (62,390) $2,601,810 $6.747,644 (4.344.180) (57.252) $2,346,2 Id NET A VJET FUEL SALES $189,000 ( 126.000) $63,000 $189,000 (126.000) $63,000 $189,000 ( 126,000) $63,000 $189,000 (126,000) $63,000 $189,000 ( 126,000) $63.000 $189,000 126,000) $63.000 $189.000 ( 126,000) $63,000 $189,250 ( 126,250) $63,000 $185,200 ( 133,450) $51.750 1 OOLL Fuel Sales Less: Cost of Goods NET $20,000 (16,000 $4,000 $20,000 (16.000) $4,000 $20.000 (16,000) $4,000 $20,000 (16.000) $4,000 $20,000 (16.000) $4,000 $20,000 (16,000) $4,000 $20,000 (16,000) $4,000 $20,380 16,350) $4,030 $20,380 (8.680 ,700 Sold OOLL FUEL SALES Auto Fuel, Diesel & Oil Sales Less: Cost of Goods Sold NET AUTO FUEL, DIESEL & OIL SALES $8.000 12,000) ($4,000) $8,000 ( 12.(00) ($4,000) $8,000 12,000) ($4,000) $8,000 12,000) ($4.000 $8,000 ( 12.000) ($4.000) $8,000 (12,000) ($4.000) $8.000 (12,000) ($4.000) $8.300 (11,850) ($3.550) $5,000 (9,000) ($4,000) Miscellaneous Merchandise Sale Less: Cost of Goods Sold NET MISCELLANEOUS MERCHANDISE SALES $74.000 209.000 10,000 16,000 27,000 4.000 1,000 $3.795,000 $72.000 203,000 10,000 16.000 26.000 4,000 1,000 $3,675.000 $70.000 197.000 10.000 16.000 25,000 4,000 1,000 $3.560,000 $68,000 191,000 10.000 16.000 24,000 4,000 1.000 $3.448.000 $66,000 185,000 10,000 16.000 23,000 4,000 1.000 $3,339,000 $64,000 180.000 10,000 16,000 22.000 4,000 1,000 $3.235,000 $62,000 175,000 10.000 15.000 21,000 3,000 1,000 $3,133,000 $60,000 170,000 10,000 14.000 20,000 2,000 1,200 $2,942,490 $52.000 150,000 o 14.000 25,000 13,000 o $2,659,662 General Aviation Ramp Fees General Aviation Labor Services Cntering Facilities Use Ground Handling Fees Aircraft Cleaning and Security Services Miscellaneous TOTAL AVIATION SERVICES TABLE 4.5 Augusta Aviation Commisj"ion Augusta Regional Airport Report a/the Airpon Consultant PROJECTED NON-AIRLINE REVENUE 20 $356,000 137.000 93.000 o 28,000 20 $356.000 137,000 90,000 o 27,000 2010 $356.000 37,000 87,000 o 26,000 Pr~ed 2009 $356,000 137,000 84,000 o 25,000 2008 $356.000 137,000 82.000 o 24,000 2007 S356,000 37,000 80,000 o 23.000 2006 S356,000 37,000 78,000 o 22,000 Budget 2005 S356,220 136.770 75.620 o Budget 2004 S356.22 36,769 93,600 25,000 2,624 14,000 3.000 S631,000 4,000 3,000 $627,000 4.000 3.000 S623,000 14.000 3.000 S619,000 14,000 3.000 S616,ooO 14,000 2.000 $612,000 7,000 2,000 S602,000 21,720 7,400 6.000 S603,730 7,425 7,200 $638.839 Rental Car Service Miscellaneous TOTAL OTHER BUILDINGS AND AREAS: Area Rental $232,000 S225,000 S218,000 S212,000 $206,000 S200,000 $2 J 0,000 Miscellaneous and Interest Income S246,000 S7,445,000 $239,000 $7,251,000 S7.061,000 S6,875,000 S6,690,000 $6.514,000 .000 S6.02 $5.777.920 $5,732,401 TOTAL NON-AIRLINE REVENUES law enforcement officers which offsets a portion of Contract Labor Expense. Represents revenues net of reimbursement from the Transporation Security Administration (TSA) fa Assumes service area rentals double III new lennina! location. Source: Augusta Regional Airport (Actual Prepared by: Ricondo & Associates. Inc. to I --.,J """ Net fuel, diesel and oil sales comprise 90 percent of net Aviation Services revenues with most of these revenues coming from the sale of Avjet fuel. Avjet fuel is sold to commercial airlines (both scheduled and nonscheduled), general aviation, military customers and a small amount is utilized for ground equipment and testing, General aviation customers purchase the largest percentage of the fuel volume, 45 percent of total fuel volume from 1999 through budget 2004, and commercial airlines purchase 36 percent of total fuel volume from 1999 through budget 2004, However, due to the higher profit margin on general aviation sales, general aviation customers contributed approximately 75 percent of total net fuel revenues from 1999 through budget 2004 with commercial airlines contributing approximately 10 percent of total revenues. Military customers have purchased approximately 17 percent of total fuel volume at the Airport over the 1999 through 2004 period and contributed approximately 15 percent of the net revenues. The following charts illustrate the relationship between fuel volumes and net fuel revenues, Average Avjet Fuel Volume (1999-2004) Airlines - non- scheduled 4% o General A vial ion OM ilitary \ o Airlines - scheduled Airlines - scheduled", 33% o Airlines - non-scheduled \ General Aviation 45% Raling Agency Draft: Ricondo & Associates 11/29/04 B - 75 Average Net Avjet Fuel Revenue (1999-2004) o General Aviation Airlines _ Airlines - non- scheduled 2% OM ilitary o Airlines - scheduled / o Airlines - non-scheduled General Aviation 75% Airport management constantly monitors competing airports to ensure its fuel prices are competitive, Based on historical activity, operation forecasts, discussions with management over future fuel pricing strategies, and assumed inflationary impacts on the profit margins, it is projected that general aviation customers will contribute 77 percent of the total net fuel revenues for the period 2005 through 2012. For that same period, commercial airline and military customers are expected to contribute approximately seven (7) and 15 percent, respectively, Net revenues from the Aviation Services Cost Center (after subtracting cost of goods sold) are expected to increase from approximately $2.9 million budgeted in 2005 to approximately $3,8 million in 2012. This increase represents a compounded annual growth rate of 3,7 percent during this period, and is primarily due to the increased net revenues from fuel sales as well as the result of inflationary impacts on other revenues during the projection period. 4.4.5 Other Buildings and Areas Revenues from the Other Buildings and Areas Cost Center consist of hangar and building rentals, tenant services and rental car service area rentals. A portion of these Revenues is generated from Garrett. Previously owned by General Electric Company, Garrett was recently sold to the Carlyle Group to become part of the joint company of Garrett Aviation Services, Piedmont Hawthorne Aviation and Associated Air Center. The Carlyle Group has combined Garrett Aviation Services with Piedmont Hawthorne, the second largest fixed base operator in North America and provides among other services, heavy aircraft maintenance services, The station manager expects this change in ownership to yield additional customers. Total Revenues from Other Buildings and Areas are expected to increase from approximately $603,730 budgeted in 2005 to approximately $631,000 in 2012. This increase Rating Agency Draft: Ricondo & Associates 11/29104 B - 76 represents a compounded annual growth rate of 0.6 percent during this period, and is the result of an increase in the rental car service area. 4.5 AIRLINE REVENUES The balance of the revenues generated at the Airport is comprised of terminal building rentals, apron fees, loading bridge fees, and landing fees payable by the airlines. As described previously, it is the Aviation Commission's intention to continue charging existing rates of $30 per square foot in the terminal and $1,50 per thousand pounds for the landing fee until DBO of the terminal building, The Aviation Commission does not currently charge apron fees or loading bridge fees but will implement collection of these fees at DBO, Upon implementation of the cost based calculation of rates (anticipated to be in 2007), the following components comprise the requirement for the various airline rates: . O&M Expenses. The expenses attributed to the various rate-setting areas. · O&M Reserve. This requirement represents the amount necessary to maintain an O&M Reserve Fund equal to one-sixth of annual O&M Expenses, The initial O&M Reserve will be funded with Aviation Commission funds. · Debt Service. Debt service requirements (net of PFC) resulting from the Series 2005 Bonds attributable to the rate-setting areas. · Debt Service Coverage. As required by the Bond Resolution, revenue bond debt service coverage must be maintained at least equal to 1.25 times annual debt service. . Capital Improvement Factor. Because the proposed Airline Agreement incorporates a residual type rate-making methodology, a recovery for future capital improvements needs to be incorporated into the rates. The Aviation Commission is proposing a Capital Improvement Factor assessed to the airlines, which is equivalent to a portion of the net revenues in the Aviation Services cost center as a means to accumulate funds for future capital projects. · Non-Airline Revenues. In the residual airport landing fee calculations, Non-Airline Revenues will offset the rate base requirements. The specific rate-setting formulas are described below: 4.5.1 Terminal Rental Rate The terminal rental rate calculation combines terminal cost center-specific O&M Expenses, O&M Reserve requirement, debt service (net of PFC) and the incremental increase in debt service coverage, This net requirement is divided by the useable square feet to determine the terminal rental rate. Table 4.6 presents the terminal rental rate for 2004 through 2012. As shown, the terminal rental rate is projected to increase from the currently charged $30,00 per square foot in 2004 to $34,19 in 2007, first year after DBO and then is projected to increase to $38.13 per square foot by 2012, Rating Agency Dmft: Ricondo & Associates 11/29/04 B - 77 TABLE 4.6 Augusta Aviation CO/1lmissiofl Augusta Regional Airport Report Of the Airport Consultant TERMINAL BUILDING RENTAL REQUIREMENT 2012 $2,763,000 14,000 335,000 84,000 $3,196,000 20 $2,680,000 14,000 335,000 84,000 $3,113,000 2010 $2,599,000 13,000 335,000 84,000 Projccted 2009 $2,520,000 13,000 335,000 84,000 $2,952,000 2008 $2,444,000 12,000 335,000 84,000 $2,875,000 2007 $2,371,000 o 335,000 84,000 $2,790,000 2006 8,000 o o o $2, Budge 2005 $2,054,000 o o o Budget 2004 $2,128,000 o o o Operating and Maintenance Expenses Operating and Maintenance Reserve I Debt Service Requirement - net of PFC Coverage on debt service (25%) TERMINAL BUILDING REQUIREMENT (84,000) 2,000 84,0(0) $3,029,000 ,000 (84,000) $2,947,000 $3,03 (84,000) $2,868,000 (84,000) $2,791,000 o $2,790,000 8,000 o 8,000 $2, $2,054,000 o $2,054,000 $2,128,000 o $2,128,000 Year Coverage NET TERMINAL BUILDING REQUIREMENT Prior Less: $3, $2, 81,612 81,612 81,612 81,612 81,612 81,612 52,102 52,102 02 52, 2.3 Useable Space (Square Feet) to I -...J 00 $38.13 $37. $36. 4 $35 $34.20 $34.19 N/A N/A N/A FOOT) A VERAGE RENTAL RATE (PER SQUARE N/A N/A N/A N/A N/A N/A $30.00 $30.00 $30.00 Current Terminal Rental Rate 24,34 24,34 24,34 24,34 24,34 24,34 5,127 5,127 20,858 Total Leased Airline Space (Square Fcct $928,000 $903,000 $879,000 $855,000 $832,000 $832,000 $454,000 and annual increases funded via rates after $454,000 $626,000 AIRLINE RENTAL REVENUE Assumes O&M Reserve Fund is initially funded with Commission Funds Assumes 90,000 square foot new terminal building opens in 2007. to two months Operating and Maintenance Expenses. terminal at a level equal DBO of new Source LPA and Airport Management Assumes Rounded which time calculated rates apply. terminal at terminal rental rates remain at cUITCntlevel ($30Isq ft) until DBO of new to thousand. Ricondo & Associates, Inc. Prepared by: 4.5.2 Apron Fee The apron fee calculation combines apron cost center-specific O&M Expenses, O&M Reserve requirement, debt service (net of PFC) and the incremental increase in debt service coverage. This net requirement is divided by number of parking positions to yield the unit rate per parking position. Table 4.7 presents the apron fee for 2004 through 2012, As shown, the Aviation Commission is not currently charging an apron fee. The apron rate is projected to be $52,000 per parking position in 2007 and projected to increase $61,000 per parking position in 2012, 4.5.3 Loading Bridge Fee The loading bridge fee calculation combines loading bridge cost center-specific O&M Expenses, O&M Reserve requirement, debt service (net of PFC) and the incremental increase in debt service coverage. This net requirement is divided by number of bridges to yield the unit rate per loading bridge, Table 4.8 presents the loading bridge fee for 2004 through 2012, As shown, the A viation Commission is not currently charging a loading bridge fee. The loading bridge rate is projected to be $29,000 per bridge in 2007 and projected to increase $30,000 per bridge in 2012, 4.5.4 Landing Fee The landing fee calculation combines total airport O&M Expenses and O&M Reserve requirement, total airport debt service and debt service coverage and the capital improvement factor to yield the Airfield Requirement. Total airport Non-Airline Revenues, other airline revenues, PFC revenues available for debt service and coverage and prior period debt service coverage are deducted from the Airfield Requirement to yield the Net Airfield Requirement. This net requirement is divided by the landed weight to determine the landing fee rate, Table 4.9 presents landing fees for 2004 through 2012. As shown, the Aviation Commission will charge the current landing fee of $ 1.50 per thousand pounds landed weight in 2004 through 2006. The projected landing fee for 2007 is calculated to be $1.05 per thousand pounds landed weight, is projected to decrease to $0.90 in 2008 and is projected to increase to $1.20 per thousand pounds landed weight in 2012. 4,6 APPLICA nON OF REVENUES Table 4.10 presents the available revenues and the application of those revenues to the various funds for the Airport for 2004 through 2012. Specific points regarding the application of revenues are presented below: · All Airport Revenues, including PFC revenues available for debt service and coverage, are combined to develop Available Revenues each year. · Airline cost per enplaned passenger is projected to increase from $5.93 in 2004 to $6,70 in 2007, the first year of nBO of the new terminal building, and is projected to decrease to $6.32 in 2008 and increase to $6,72 by 2012. Rating Agency Omit: Ricondo & Associnlcs 11/29/04 B - 79 TABLE 4.7 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant APRON FEES Budget Budget Projected 2004 2005 2006 2007 2008 2009 2010 20 2012 Operating and Maintenance Expenses $305,000 $294,000 $303,000 $312,000 $322,000 $332,000 $342,000 $353,000 $364,000 Operating and Maintenance Reserve I 0 0 0 2,000 2,000 2,000 2,000 2,000 2,000 Debt Service Requirement - net ofPFC 0 0 0 0 0 0 0 0 0 Coverage on debt service (25%) 0 0 0 0 0 0 0 0 0 APRON AREA REQUIREMENT $305,000 $294,000 $303,000 $314,000 $324,000 $334,000 $344,000 $355,000 $366,000 Less: Prior Year Coverage 0 0 0 0 0 0 0 0 0 NET APRON AREA REQUIREMENT $305,000 $294,000 $303,000 $314,000 $324,000 $334,000 $344,000 $355,000 $366,000 Number of Parking Positions N/A N/A N/A 6 6 6 6 6 6 UNIT RATE PER PARKING POSITION N/A N/A N/A $52,000 $54,000 $56,000 $57,000 $59,000 $61 ,000 Parking Positions Utilized N/A N/A N/A 3 3 3 3 3 3 APRON FEES $0 $0 $0 $156,000 $162,000 $168,000 $171,000 $177,000 $183,000 I Assumes O&M Reserve Fund is initially funded with Commission Funds and annual increases funded via rates after DBO of new terminal at a level equal to two months Operating and Maintenance Expenses. ! The Commission does not currently charge an Apron Use Fee under the terms of the Ordinance. It is assumed that a calculated Apron Use Fee will be charged beginning in 2007. Prepared by: Ricondo & Associates, Inc. O:l I 00 o TABLE 4.8 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant LOADING BRIDGE USE FEE 2012 $30,000 o o o 20 $29,000 o o o 2010 $28,000 o o o Projected 2009 $27,000 o o o 2008 $26,000 o o o 2007 $25,000 4,000 o o $0 o o o 2006 Budget 2005 $0 o o o $0 o o o Budget 2004 Operating and Maintenance Expenses Operating and Maintenance Reserve 1 Debt Service Requirement - net of PFC Coverage on debt service (25%) LOADING BRIDGE REQUIREMENT $30,000 $29,000 $28,000 $27,000 $26,000 $29,000 $0 $0 $0 o $0 Coverage NET LOADING BRIDGE REQUIREMENT Year Prior Less: o $27,000 o $26,000 o $29,000 o $0 o $0 o $30,000 o $29,000 o $28,000 N/A N/A N/A Number of Loading Bridges $28,000 $27,000 $26,000 $29,000 N/A N/A N/A UNIT RATE PER LOADING BRIDGE tl:l I 00 $30,000 $29,000 N/A N/A N/A Loading Bridges Utilized LOADING BRIDGE REVENUES $30,000 two months Operating and Maintenance Expenses. be charged beginning in 2007. $29,000 $28,000 $27,000 to at a level equal wi $26,000 after DBO of new terminal s assumed that a calculated Loading Bridge Fee $29,000 $0 rates $0 initially funded with Commission Funds and annual increases funded via the terms of the Ordinance. It $0 Assumes O&M Reserve Fund is The Commission does not currently charge a Loading Bridge Fee under Ricondo & Associates, Inc. Prepared by: TABLE 4.9 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant AIRLINE LANDING FEE REQUIREMENT 2012 $7,271,000 36,000 ,579,000 395,000 ,316,000 20 $7,053,000 35,000 1.578,000 395,000 1,274,000 $10,335,000 2010 $6,841,000 35,000 1,580,000 395,000 1,233,000 0,084,000 Projected 2009 $6,634,000 34,000 1,575,000 394,000 1,194,000 $9,83 2008 $6,433,000 32,000 1,575,000 394,000 1,155,000 $9,589,000 2007 $6,240,000 31,000 1,575,000 394,000 1,119,000 $9,359,000 2006 $6,052,000 o o o o Budget 2005 $5,867,830 o o o o Budget 2004 $6,080,406 o o o o Operating and Maintenance Expenses Operating and Maintenance Reserve I Debt Service Requirement (principal & Interest) Coverage on debt service (25%) Capital Improvement Factor AIRFIELD REQUIREMENT $10,597,000 $7,445,000 928,000 183,000 30,000 ,198,000 395,000 $7,251,000 903,000 177,000 29,000 1,197,000 395,000 $9,952,000 $383,000 $7,061,000 879,000 171,000 28,000 ,199,000 394,000 $ ,000 $6,875,000 855,000 68,000 27,000 ,195,000 394,000 4,000 7,000 $6,690,000 832,000 162,000 26,000 ,194,000 394,000 $6,514,000 832,000 156,000 29,000 ,493,000 o $6,052,000 $6,021,000 454,000 o o o o $5,867,830 $5,777,920 454,000 o o o o $6,080,406 $5,732,40 I 626,000 o o o o Less: Nonairline Revenues Terminal Rental Revenues Apron Fees Loading Bridge Fees PFC Revenues available for Prior Year Coverage TOTAL CREDITS to I 00 N debt service and coverage $6,23 I ,920 ($364,090) $6,358,40 ($277,995 $10,179,000 $418,000 $9,732,000 $352,000 $9,5 $3 $9,298,000 $291,000 $9,024,000 $335,000 $6,475,000 ($423,000) NET AIRFIELD REQUIREMENT 347,000 342,000 337,000 ,000 33 325,000 320,000 5,000 3 305,000 294,000 ,Ooo-Ib Units) Total Airline Landed Weight $1.20 2 .1 $ $1.04 $0.96 $0.90 $1.05 N/A N/A N/A AVERAGE LANDfNG FEE RATE (000 LB) N/A N/A N/A N/A N/A N/A $1.50 50 $ .50 $ ,000 Pound Unit of Landed Weight Current Landing Fee Rate (per 8,000 level equal to two months Operating and Maintenance Expenses. $4 $383,000 $352,000 $317,000 $291,000 a initially funded with Aviation Commission Funds and annual increases funded via rates after DBO of new terminal at current level ($1.501000 Ib) until DBO of new terminal at which time calculated rates apply. Ricondo & Associates, Inc. $335,000 $473,000 $458,000 ,000 $44 AIRPORT LANDING FEE REVENUE O&M Reserve Fund landing fees remain a Assumes Assumes Prepared by: TABLE 4.10 Augusta Aviation Commission Augusta Regional Airport Report of the Airport Consultant APPLlCATJONOF REVENUE Budget Budget Projected 2004 2005 2006 2007 2008 2009 2010 201 2012 Airline Revenue Tenninal Rentals $626,000 $454,000 $454,000 $832,000 $832,000 $855,000 $879,000 $903,000 $928,000 Apron Use Fees 0 0 0 156,000 162,000 168,000 171,000 177,000 183,000 Loading Bridge Use Fees 0 0 0 29,000 26,000 27,000 28,000 29,000 30,000 Landing Fees 441 ,000 458,000 473,000 335,000 291,000 317,000 352,000 383,000 418,000 Total Airline Revenue $1,067,000 $912,000 $927,000 $1,352,000 $1,311,000 $1,367,000 $1,430,000 $1,492,000 $1,559,000 Non-Airline Revenue 5,732.401 5,777,920 6,021,000 6,514,000 6,690,000 6,875,000 7,061,000 7,251,000 7,445,000 Total Airpon Revenue $6,799,40 I $6,689,920 $6,948,000 $7,866,000 $8,00 I ,000 $8,242,000 $8,491,000 $8,743,000 $9,004,000 PFC Revenues available for debt service & coverage 0 0 0 1,493,000 1,194,000 1,195,000 1,199,000 1,197,000 1,198,000 A vailable Revenues $6,799,40 I $6,689,920 $6,948,000 $9,359,000 $9,195,000 $9,437,000 $9,690,000 $9,940,000 $10,202,000 Aoolication of Revenue Operating and Maintenance Expenses $6,080,406 $5,867,830 $6,052,000 $6,240,000 $6,433,000 $6,634,000 $6,841,000 $7,053,000 $7,271,000 Bond Debt Service (Principal and Interest) 0 0 0 1,575,000 1,575,000 1,575,000 1,580,000 1,578,000 1,579,000 Revenue Credit Account 0 0 0 394,000 0 0 1,000 0 0 Operating and Maintenance Reserve 0 0 0 27,000 32,000 34,000 35,000 35,000 36,000 Renewal and Replacement Reserve 0 0 0 0 0 0 0 0 0 Capital Improvement Account 718,995 822,090 896,000 1,123,000 1,155,000 1,194,000 1,233,000 1,274,000 1,316,000 Total Application of Airport Revenue $6,799,401 $6,689,920 $6,948,000 $9,359,000 $9,195,000 $9,437,000 $9,690,000 $9,940,000 $10,202,000 Scheduled Airline Enplancments 80,000 89,000 96,800 201,800 207,600 213,900 220,000 226,000 232,100 Airline Cost per Enplaned Passenger $5.93 $4.83 $4.71 $6.70 $6.32 $6.39 $6.50 $6.60 $6.72 - - - = A vailable Revenues less Operating and Maintenance Expenses $3,119,000 $2,762,000 $2,803,000 $2,849,000 $2,887,000 $2,931,000 Revenues A vailable in Revenue Credit Account 0 394,000 394,000 394,000 395,000 394,000 Net Revenues available for Debt Service and Coverage - - - - 3,243,000 3,119,000 3,156,000 3,197,000 3,282,000 3,325,000 Annual Debt Service ,575,000 ,575,000 ,575,000 ,580,000 ,578,000 ,579,000 Coverage on Debt Service (With PFC revenues & Revenue Credit Account) - N/A N/A N/A .98 2.00 2.03 2.05 2.08 2. Prepared by: Ricondo & Associates, Inc. I::Jj I 00 \;J · Estimated debt service coverage calculations are also presented for 2007 through 2012, As required in the Bond Resolution, net revenues are required to be at least 1.25 times the amount required to be paid for total capital charges in that year, As shown in the table, debt service coverage exceeds the 1.25 requirement in each year of the financial projection, · Coverage may be calculated annually on a rolling basis and is projected to be funded from PFC revenues and general airport revenues in the first year in which debt service repayment begins, Funds maintained in the Coverage account may be utilized in the debt service coverage calculation, Rliling Agency Draft: Ricondo & Associates Iln9/04 B - 84 AO 1153175.14 MASTER BOND RESOLUTION ADOPTED FEBRUARY 1, 2005 BY THE AUGUSTA-RICHMOND COUNTY COMMISSION ADOPTED JANUARY 20, 2005 BY THE AUGUSTA AVIATION COMMISSION AIRPORT REVENUE BONDS TABLE OF CONTENTS ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.4 Section 101 Definitions.......,.........................,.,........,...........",.........,......,.......,.""",."""".,......,..4 Section 102 Construction Of Certain Terms............................................................................. .16 Section 103 Table of Contents; Titles and Headings. .................:..............................................16 AR TI CLE II THE BO NDS ............................................................................................................1 7 Section 201 Authorization; Designation of Bonds. ...................................................................17 Section 202 Bond Details,...,..............................."............,.......,......,.............,.,.,......,.,.",......... .17 Section 203 Execution and Authentication of Bonds. ...............................................................17 Section 204 Registration of Bonds. ................. ................. ................................,....................... .18 Section 205 Place ofPayn1ent.............,.,.,............,.,..............,.. ...... ........,...., '........ "" .".,...,.,.,.,..18 Section 206 Persons Treated as Owners, ...................................................................................19 Section 207 Transfer and Exchangeability of Bonds................... ................................... ...... .....19 Section 208 Destruction of Bonds. ...,.,................,.........,....,.....".............,...,.",."",.",."..."",.,..20 Section 209 Mutilated, Lost, Stolen, or Destroyed Bonds.........................................................20 AR TI CLE III RED EMPTIO N OF DO NDS .................................................................................21 Section 301 Redemption of Bonds. ..,.,.,..,...,.....,.,.,.............""..".... ....,..........", ,...",.."........,....21 Section 302 Notice of Redemption. ............,......,.......,...............,...........,.,........,.....,.,.,.........".. .21 Section 303 Consolidated Government or Bond Registrar May Give Notice of Redemption, .22 Section 304 Effect of Notice of Redemption. .......................................... ................................. .23 Section 305 Conditional Redemptions.. .............,....,.........,."....,........,.,.,..........:.,.............,....... .23 Section 306 Redemption Among Series. ......... ......................................................................... .23 Section 307 Selection of Bonds to be Redeemed. .....................................................................24 Section 308 Purchase in Open Market.... ........ ............................................................ ...............24 ARTICLE IV PLEDGE OF REVENUES AND FLOW OF FUNDS ........................................25 Section 401 Pledge of Revenues; Limited Obligations; Contract Liens..................,.................25 Section 402 Funds, Accounts, and Subaccounts. .................................................... ................. ..26 Section 403 Revenue Fund, PFC Revenue Fund, and Operation and Maintenance Expense Fund. .........,..........................,..............."..,.,..........,.................,.,...........".............. .29 Section 404 Debt Service Fund...........,.,.... .......,.,.,.... ....., ,..' ..........."............ '........................ ....30 Section 405 Operation and Maintenance Reserve Fund. ...........................................................34! Section 406 Subordinate Securities Fund. ......... .................................................................... ....34; Section 407 Renewal and Replacement Fund................... .........................................................3 5: Section 408 Capital Improvement Fund. ...................................................................... ........... ..351 Section 409 PFC Debt Service Fund. ...... ........ ..... ...................... ...................................... ....... ..36' Section 410 PFC Obligations Fund....,........ ....................................,..............................,...........3 8 Section 411 PFC Capital Fund............................. ..........,........................,..........,...........,.......... .39 Section 412 Deposits and Security of Funds and Accounts. .....................................................39 Section 413 Investment of Funds and Accounts.... .................................................................. ..39 -}- AO 1153175.14 Section 414 Valuation ofInvestments. ..... ..................,.............,.............................,............,.... ,39 Section 415 Application of Excess in Debt Service Fund and PFC Debt Service Fund, ..........40 Section 416 Disposition of Moneys After Payment of Bonds and Contracts, ...........................40 ARTICLE V ADDITIONAL BONDS; CONTRACTS; OTHER OBLIGATIONS.................41 Section 501 No Bonds Except as Permitted in the Bond Resolution, ............................,..........41 Section 502 Additional Bonds. .........................,.,.."...."".."....,...........,.,.....",.........""............. .41 Section 503 Subordinate Lien Bonds. ....,.............,..... ...........'..,..,......... '.......,.,.,.... .,........,.. ,.., ,..43 Section 504 Special Purpose Revenue Bonds; Other Airport Obligations. .....,...........,.............45 Section 505 Special Purpose Facilities. ............... ......................................................................45 Section 506 Adoption of Proceedings and Validation, ..............................................................45 Section 507 Proceedings Authorizing Additional Bonds, ,..............................,.........................45 Section 508 Applicability to Additional Bonds. .. ,....................................",................... ...........45 Section 509 Credit Facilities. ...................,...................,.............,.,....................",.........,.,.,...,.., .46 Section 510 Other Obligations. ....,......,.."...;...........................,..............,.,.,................... "..........47 AR TI CLE VI GENERAL PRO VISIONS ....................................................................................48 Section 601 Rate Covenant. ...................,................,...,................................",.......................... .48 Section 602 Maintenance of the Airport in Good Condition. ..,................................,................49 Section 603 Insurance. .......................",..........,.,.,.",.............".,.................,.,.,.....,...,.,.,...,........ ,49 Section 604 No Sale, Lease, or Encumbrance; Exceptions. ......................................................50 Section 605 No Impairment of Rights. .... ..........,....... .......... .............................. ............ ...... .... ..51 Section 606 Satisfaction of Liens. .............................,.,...,..........."...",....,.,...,..........".............. .51 Section 607 Enforcement of Charges and Connections....",.................................... ..................52 Section 608 Payments. ..........................,...,...............................,....,...........,..........,.,................ ..52 Section 609 No Loss of Lien on Revenues, ..,............................................................................52 Section 610 Annual Budget. ...........,........,.,..,..................,.,..,...,.".,..............,.,........,.,.,.,.,...,.... .52 Section 611 Rebate Fund and Tax Provisions. ............................. ............ '...... ..... .................... .52 Section 612 Uneconomic Facilities. .................................,...,..,...............,.........................,.,.... .54 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES......................................................55 Section 701 Definition of Events ofDefault........... ...,..,.,.,.....,................",........,., "" .,........,.....55 Section 702 Remedies. ...,.............,.,.,.......,.",.."...................,.......,.............. ....,.......,................. .56 Section 703 Remedies Cumulative. .......,...........,............,... ,.......,.,.".,....................................,. .57 Section 704 Waiver of Default. ..................................................................................,............ ..58 Section 705 Application of Moneys After Default. ...................................................................58 Section 706 Rights of Credit Issuer. ........................ ................................................................ ..611 I ARTICLE VIII BOND OWNERSHIP .........................................................................................621 I Section 801 Manner of Evidencing Ownership of Bonds. ........................................................62i Section 802 Call of Meetings of Bondholders. ....... ....................... .......................... .......... ...... ..62; I -11- AO 1153175.14 AR TI CLE IX DE FEAS AN CE ....................................................................................................... 63 Section 901 Provision for Payment. .......,.,'...',.,...., ".,'.. ,......., ........., ,.,.,.,,'... ....., ..... ...,.. .....", .", ,63 Section 902 Release of Pledge. ..................................................,...........,......., ,.............. ,......... ..63 AR TI CLE X SUPPLEMENTAL RESO L UTI 0 NS .....................................................................64 Section 1001 Supplemental Resolutions Not Requiring Consent of Bondholders, .....................64 Section 1002 Supplemental Resolutions Requiring Consent of Bondholders"...........................66 Section 1 003 Notice of Supplemental Resolutions. ,...,."...,...................,..",.,..."..,..."...., ........,.,.67 Section 1004 Bond Opinion for Supplemental Resolutions. .......................................................67 ARTICLE XI SALE OF BONDS ..................................................................................................68 Section 1101 Sale of Bonds. .....................,...,'.............,.., ..,.........,.,................,.......""."".,....,.,..,68 AR TI CLE XII CO NSTR U CTI 0 N FUND....................................................................................69 Section 1201 Construction Fund......................................".,..,......,....,..............,."...,.........""..... .69 Section 1202 Purposes of Payments. .,....................,..,.,.,.......................,....,...,....,.,.,.,....."....",.. .69 Section 1203 Documentation of Payments. ............,..............,.....,.....,..........,............................ ..69 Section 1204 Retention of Payment Documents, '................, ......................................................70 Section 1205 Funds Remaining on Completion of Projects. ,......................................................70 AR TI CLE XIII MISCELLANEOUS PRO VISIONS .................................................................. 71 Section 1301 Augusta Aviation Commission as Agent of Consolidated Government. ..............71 Section 1302 Severability...,...........,.,...,........,.,..........,...,...,.........",.,."........,.,.,.,...."".........,...". 71 Section 1303 Requests of Consolidated Government. .................................................................71 Section 1304 Deputy Officer May Act. .. .... ....................................,................................. ...........71 Section 1305 Payments Due on Saturdays, Sundays, etc, ..,........................................................72 Section 1306 Effective Date. ..................... ........................................,.............."......................... 72 Section 1307 Applicable Provisions of Law,. ........... ...................................................................72 Section 1308 Repeal of Conflicting Resolutions and Resolutions. .............................................72 Section 1309 No Individual Responsibility of Members and Officers of Consolidated Government.........,.,.......... ......... ....."..".,.,.....,.,...,......,.,."........."...........".............. 72 Section 1310 Bond Resolution Constitutes a Contract. ...............................................................73 -111- AO 1153175.14 MASTER BOND RESOLUTION A MASTER BOND RESOLUTION PROVIDING FOR (1) AUTHORIZATION FOR AUGUSTA, GEORGIA AIRPORT REVENUE BONDS TO FINANCE OR REFINANCE THE ACQUISITION, CONSTRUCTION, RECONSTRUCTION AND IMPROVEMENT OF AUGUSTA REGIONAL AIRPORT AT BUSH FIELD, (2) VARIOUS SECURITY PROVISIONS FOR DIFFERENT TYPES OF SUCH AIRPORT REVENUE BONDS, (3) CONDITIONS REQUIRED FOR THE ISSUANCE OF SUCH AIRPORT REVENUE BONDS, (4) COVENANTS WITH RESPECT TO REVENUES ARISING FROM AIRPORT SERVICES AND FACILITIES, (5) COVENANTS WITH RESPECT TO THE RIGHTS AND REMEDIES OF THE HOLDERS OF AIRPORT REVENUE BONDS, (6) CREATION AND MAINTENANCE OF VARIOUS FUNDS AND THE DISPOSITION THEREOF, AND (7) OTHER RELATED MATTERS: WHEREAS, under and by virtue of the authority of the Constitution and laws of the State of Georgia, including specifically, but without limitation, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, known as the "Revenue Bond Law," as amended (the "Revenue Bond Law"), and an act of the General Assembly of the State of Georgia (Georgia Laws 1995 p. 3468 et seq.) (the "Act"), Augusta, Georgia (the "Consolidated Government") is authorized to undertake the acquisition, construction, reconstruction and improvement of airports for its own use and for the use of the public; and WHEREAS, the Consolidated Government owns Augusta Regional Airport at Bush Field (the "Airport"); and WHEREAS, the Airport is operated for and on behalf of the Consolidated Government by the Augusta Aviation Commission, a board appointed by the Consolidated Government to manage and provide oversight for the Airport and all other property incidental thereto; and WHEREAS, the Revenue Bond Law authorizes the Consolidated Government to issue revenue bonds to finance, in whole or in part, the cost of undertaking the acquisition, construction, reconstruction and improvement of the Airport and to issue revenue bonds at any time payable from all or any part of the revenues derived from the Airport; and WHEREAS, each series of Bonds will be issued in accordance with the initial provisions for such series in this Master Bond Resolution, including the conditions required for the issuance thereof, and pursuant to a bond resolution supplementing this Master Bond Resolution (each a "Supplemental Bond Resolution") providing for the particular terms of such Bonds. NOW, THEREFORE, BE IT RESOL VED by the Augusta-Richmond County Commission: IN CONSIDERATION of the purchase and acceptance of the Bonds from time to time, ! the provisions of this Master Bond Resolution shall be deemed to be and shall constitute a I contract between the Consolidated Government and the holders from time to time of the Bonds and, upon fulfillment of the requirements specified herein, the parties to Contracts and certain other agreements secured by a lien on revenues, and the covenants and agreements herein set AO 1153175.14 forth to be performed by or on behalf of the Consolidated Government shall be for the equal benefit, protection and security of the holders of any and all of the Bonds so issued or to be issued and any and all of the parties to Contracts and such other agreements (such holders and parties, together, the "Beneficiaries"), without preference, priority or distinction as to lien or otherwise except as provided herein or in any Supplemental Bond Resolution; and nothing herein expressed or implied is intended or shall be construed to confer upon or to give to any person or corporation, other than the Consolidated Government or the Beneficiaries, any right, remedy or claim under or by reason of this Master Bond Resolution or any covenant, condition or stipulation hereof; and all the covenants, stipulations, promises and agreements herein contained by or on behalf of the Consolidated Government shall be for the sole and exclusive benefit of the Consolidated Government and the Beneficiaries; AND FURTHER, that the Consolidated Government, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect and to secure the performance and observance by the Consolidated Government of all of the covenants expressed herein, in the Bonds and in the Contracts, pursuant to the Revenue Bond Law, does hereby assign, pledge, charge and grant a lien and security interest in the following to the Beneficiaries and their successors and assigns forever, to secure the performance of the obligations ofthe Consolidated Government herein set forth: (1) All right, title and interest of the Consolidated Government in and to all revenues arising from the Airport whether received by the Consolidated Government directly or indirectly, through the Augusta Aviation Commission; (2) All right, title and interest of the Consolidated Government in and to all monies and securities from time to time held under the terms of this Master Bond Resolution or any Supplemental Bond Resolution, in the funds hereunder or transferred to the Consolidated Government hereunder or pursuant hereto; and (3) Any right or interest from time to time hereafter by delivery or by right of any kind granted, bargained, sold, alienated, demised, released, conveyed, assigned, transferred, mortgaged, pledged, hypothecated or otherwise subjected hereto, as and for additional security herewith, by the Consolidated Government or any other person on the Consolidated Government's behalf or with the Consolidated Government's written consent to the extent permitted by law; PROVIDED, that the revenues of each category hereinafter described shall be pledged to . and secure only those Bonds or Contracts that are specifically designated as being so secured in the Supplemental Resolution authorizing same; AND SUCH REVENUES as and when received by the Consolidated Government, or by the Augusta Aviation Commission on the Consolidated Government's behalf, and any other rights, interests, moneys and securities pledged, shall immediately be subject to the lien and pledge of this Master Bond Resolution without any physical delivery thereof or further act in the lien and pledge and the obligation to perform the contractual provisions hereby made shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise -2- AO 1153175.14 against the Consolidated Government, without regard to whether such parties have notice thereof; AND UPON the terms herein set forth for the equal and proportionate benefit, security and protection of all present and future Beneficiaries from time to time secured by this Master Bond Resolution or any Supplemental Bond Resolution without privilege, priority or distinction as to the lien or otherwise of any of the Bonds or Contracts over any of the other Bonds or Contracts except in the case of funds and accounts held hereunder for the benefit of particular holders of the Bonds or holders of particular series of Bonds or as otherwise described herein; PROVIDED, HOWEVER, that if the Consolidated Government, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, premium, if any, and interest on the Bonds and obligations on Contracts due or to become due thereon, at the time and in the manner set forth in the Bonds and Contracts according to the true intent and meaning thereof, or shall provide, as permitted hereby, for the payment thereof, and shall well and truly cause to be kept, performed and observed all of its covenants and conditions pursuant to the terms of this Master Bond Resolution and any Supplemental Bond Resolution, then upon the final payment thereof this Master Bond Resolution and the rights hereby granted shall cease, determine and be void, except to the extent specifically provided herein; AND THIS MASTER BOND RESOLUTION FURTHER WITNESSETH, and it is expressly declared, that the Series 2005 Bonds and all other Bonds issued and secured hereunder and all Contracts executed and secured pursuant hereto are to be issued, executed, authenticated and delivered, and all said property, rights and interest, including, without limitation, the revenues derived by the Consolidated Government from the operation of the Airport and any other amounts hereby assigned and pledged, are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as herein expressed, and the Consolidated Government has agreed and covenanted; and does hereby agree and covenant with the Beneficiaries as follows: -3- AO 1153175.14 ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101 Definitions. The following terms shall have the meanmgs specified below, unless the context clearly requires otherwise: "2005 Project" means the Projects listed in the First Supplemental Bond Resolution. "2005 Project Account" means the account of the Construction Fund to be funded with proceeds of Series 2005 Bonds and used to pay Costs of the 2005 Project. "Additional Bonds" means Bonds, other than the Series 2005 Bonds, issued pursuant to Section 502. The term "Additional Bonds" does not include Subordinate Lien Bonds or Special Purpose Revenue Bonds. "Airport" means Augusta Regional Airport at Bush Field and all related improvements and facilities now in existence and as hereafter acquired, added, extended, improved and equipped less any portion thereof sold or otherwise disposed of pursuant to Section 604 and excluding those airport facilities now known as Daniel Field. "Airport Consultant" means a firm of consultants experienced in the planning, management or financial feasibility of airports or airport-related projects and having a nationally recognized reputation for such work, which has been retained by the Consolidated Government or whose selection has been approved by the Consolidated Government. "Airport Director" means the chief administrative officer of the Airport. "Airport Finance Officer" means the director of finance of the Airport. "Airport Purpose" means any action or undertaking by the Consolidated Government reasonably related to the development and promotion of the Airport as a destination for air commerce or as industrial or commercial sites or related to the development and promotion of air transportation and commerce by air. "Annual Budget" means the annual budget of the Augusta Aviation Commission (which shall specify all costs, obligations, and expenses properly allocable to the Airport), as amended or supplemented in accordance with established procedures of the Consolidated Government, adopted or in effect for a particular Fiscal Year. "Attesting Officer" means the individual presently holding the office of Clerk of " Commission of the Consolidated Government and any successor who might hereafter hold such office, and any individual, body, or authority to whom or which may hereafter be delegated by I law the duties, powers, authority, obligations, or liabilities of such office, and includes any deputy clerk, if one is so appointed. -4- AO 1153175.14 "Augusta Aviation Commission" means the Consolidated Government's Augusta Aviation Commission or any successor agency, department or branch of the Consolidated Government having responsibility for the operation of the Airport. "Average Annual Debt Service Requirement" means, with respect to any series of Bonds, the sum of Debt Service Requirement for each year in which such Bonds will be Outstanding divided by the number of years that such Bonds will be Outstanding. "Balloon Bonds" means any series of Bonds 25 percent or more of the original principal amount of which is due in any 12-month period; provided that, in calculating the principal amount of such Bonds due in any 12-month period, such principal amount shall be reduced to the extent that all or any portion of such amount is required to be redeemed or amortized prior to such 12-month period. "Balloon Bonds Reserve Account" means the Balloon Bonds Reserve Account within the Debt Service Fund established in Article IV, "Balloon Date" means any Principal Maturity Date for Balloon Bonds in a Balloon Year. "Balloon Year" means any 12-month period in which more than 25 percent of the original principal amount of related Balloon Bonds mature or are subject to mandatory redemption. "Beneficial Owner" shall have the meaning specified in Section 210. "Beneficiaries" means the holders of any Bonds and the parties to Contracts, "Bond Counsel" means any firm of nationally recognized bond counsel experienced in matters relating to tax-exempt financing retained by the Consolidated Government. "Bondholder" or "holder" means the registered owner of one or more Bonds. "Bond Register" means the registration books maintained and to be maintained by the Bond Registrar. "Bond Registrar" means any bank or trust company designated as such by the Consolidated Government in the Bond Resolution with respect to any of the Bonds, Such Bond Registrar shall perform the duties required ofthe Bond Registrar in the Bond Resolution, "Bond Resolution" means this Master Bond Resolution as it may from time to time be modified, supplemented, or amended by Supplemental Resolutions. I "Bonds" means any revenue bonds authorized by and authenticated and delivered : pursuant to the Bond Resolution, including the Series 2005 Bonds and any Additional Bonds. ! "Capital Improvement Account" means the Capital Improvement Account within the Capital Improvement Fund established in Article IV. -5- AO 1153175.14 "Capital Improvement Fund" means the Capital Improvement Fund established III Article IV. "Capitalized Interest Account" means the Capitalized Interest Account within the Construction Fund established in Article IV. The term "category" or "category of revenues" means General Revenues or PFC Revenues, as the context may require. A "category of Revenues," unless otherwise determined by the Consolidated Government, includes Investment Earnings or other moneys in funds or amounts derived from such portion of Revenues. "Chief Officer" means the individual presently holding the office of Mayor of the Consolidated Government and any successor who might hereafter hold such office, and any individual, body, or authority to whom or which may hereafter be delegated by law the duties, powers, authority, obligations, or liabilities of such office, "Code" means the Internal Revenue Code of 1986, as amended, and any applicable regulations thereunder. "Conditional Redemption" means an optional redemption described in Section 305. "Consolidated Government" means Augusta, Georgia, a municipal corporation and a county created and existing under the laws of the State. "Construction Fund" means the Augusta, Georgia Airport Construction Fund established in Article IV. "Contracts" means all Credit Facility Agreements, including any related Reimbursement Obligations and all agreements with respect to Reserve Account Credit Facilities, including any related Reimbursement Obligations. "Contract Payments Account" means the Contract Payments Account within the Debt Service Fund or the PFC Debt Service Fund, as the context may require. "Costs," with respect to any Project, means the total cost, paid or incurred, to study, plan, design, finance, acquire, construct, reconstruct, install or otherwise implement the Project, including improvements to another Project, and shall include, but shall not be limited to, the . following costs and expenses relating to such Project and the reimbursement to the Consolidated Government for any such items previously paid by the Consolidated Government: (i) the cost of all lands, real or personal properties, rights, easements and franchises acquired; (ii) the cost of all fmancing charges and interest prior to and during construction ! and for up to six months after completion of construction (or such longer period as may be permitted by the Revenue Bond Law); -6- AO 1153175.14 (iii) the cost of the acquisition, construction, reconstruction, implementation or installation of the Project; (iv) the cost of engineering, architectural, planning, development, and supervisory services, fiscal agents' and legal expenses, plans and specifications, and other expenses necessary or incident to determining the feasibility or practicability of the Project, administrative expenses, and such other expenses as may be necessary or incident to any financing with Bond proceeds; (v) the cost of placing the Project in operation; (vi) the cost of condemnation of property necessary for construction implementation and operation; (vii) the costs of issuing any Bonds to finance the Project; and (viii) any other costs which may be incident to the Project prior to completion and implementation. "Credit Facility" means any letter of credit, insurance policy, guaranty, surety bond, standby bond purchase agreement, line of credit, revolving credit agreement, or similar obligation, arrangement, or instrument issued by a bank, insurance company, or other financial institution that is used by the Consolidated Government to provide credit support or liquidity support, or both, with respect to any specified Bonds. The term "Credit Facility" shall not include a Reserve Account Credit Facility. "Credit Facility Agreement" means an agreement between the Consolidated Government and a Credit Issuer pursuant to which the Credit Issuer issues a Credit Facility and may include a related Reimbursement Obligation. The term "Credit Facility Agreement" shall not include an agreement with respect to a Reserve Account Credit Facility. "Credit Issuer" means any issuer of a Credit Facility then in effect for all or part of the Bonds, The term "Credit Issuer" shall not include any Reserve Account Credit Facility Provider. Whenever in the Bond Resolution the consent of the Credit Issuer is required, such consent shall only be required from the Credit Issuer whose Credit Facility is issued with respect to the Bonds for which the consent is required. "Debt Service Fund" means the Augusta, Georgia Airport Debt Service Fund established in Article IV, "Debt Service Fund Investments" means (a) Government Obligations, (b) demand deposits or certificates of deposit of banks which have deposits insured by the Federal Deposit Insurance Corporation; provided, however that the portion of such certificates of deposit in excess of the amount insured by the Federal Deposit Insurance Corporation must be secured by direct obligations of the State of Georgia or the United States which are of a par value equal to that portion of such certificates of deposit which would be uninsured and (c) the local government investment pool created by O.c.G.A. Section 36-83-8. -7- AO 1153175.14 "Debt Service Requirement" means the total principal and interest coming due, whether at maturity or upon mandatory redemption, in any specified periods, and with respect to Balloon Bonds, the amount required, if any, to be deposited to the Balloon Bonds Reserve Account and the PFC Balloon Bonds Reserve Account, provided that with respect to any Bonds secured by a Credit Facility, the Debt Service Requirement therefor shall include (1) any commission or commitment fee obligations with respect to such Credit Facility and (2) the outstanding amount of any Reimbursement Obligation and interest thereon; provided, however, that: (a) interest on Bonds to be paid with amounts on deposit in the Capitalized Interest Account shall be excluded from the determination of Debt Service Requirement; (b) the Debt Service Requirement of General Revenue Bonds shall not include the principal and interest requirements of Bonds also having a lien on PFC Revenues to the extent that PFC Revenues are to be received and set aside exclusively for the purpose of paying such debt service; and (c) For the purpose of calculating the Debt Service Requirement on Balloon Bonds which do not have a Balloon Year commencing within 12 months from the date of calculation, such bonds shall be assumed to be amortized in substantially equal annual amounts to be paid for principal and interest over an assumed amortization period of 20 years at an assumed interest rate (which shall be the interest rate certified by a Financial Advisor to be the interest rate at which the Consolidated Government could reasonably expect to borrow the same amount by issuing Bonds with the same priority of lien as such Balloon Bonds and with a 20-year term); provided, however, that if the maturity of such bonds is in excess of 20 years from the date of issuance, then such Bonds shall be assumed to be amortized in substantially equal annual amounts to be paid for principal and interest over an assumed amortization period of years equal to the number of years from the first full Fiscal Year after the date of completion of the related Project to maturity and at the interest rate applicable to such Bonds. "Debt Service Reserve Account" means the Debt Service Reserve Account within the Debt Service Fund established in Article IV, "Debt Service Reserve Requirement" means an amount determined from time to time by the Consolidated Government as a reasonable reserve for the payment of principal of and interest on Bonds for which a subaccount in the Debt Service Reserve Account or the PFC Debt Service Reserve Account is created or added to pursuant to a Supplemental Bond Resolution, "Depository" means the depository of each fund established under the Bond Resolution, and any successor depository of such fund hereafter designated by the Consolidated Government and the Augusta Aviation Commission from time to time pursuant to a Supplemental Resolution, "Event of Default" means any of the events defined as such in Article VII. "Expenses of Operation and Maintenance" means all expenses reasonably incurred in I connection with the operation, maintenance, repair, ordinary replacement and ordinary reconstruction of the Airport, including without limitation salaries, wages, the cost of materials, services and supplies, rentals of leased property, if any, management fees, utility costs, the cost of audits, Paying Agent's and Bond Registrar's fees, payment of premiums for insurance -8- AO 1153175.14 required by the Bond Resolution and other insurance which the Consolidated Government deems prudent to carry on the Airport and its operations and personnel, and, generally, all expenses, exclusive of depreciation or amortization, which are properly allocable to operation and maintenance; however, only such expenses as are reasonably necessary or desirable for the proper operation and maintenance of the Airport shall be included. "Expenses of Operation and Maintenance" also includes the Consolidated Government's obligations under any contract with any other political subdivision or public agency or authority of one or more political subdivisions pursuant to which the Consolidated' Government undertakes to make payments measured by the expenses of operating and maintaining any facility which constitutes part of the Airport and which is owned or operated in part by the Consolidated Government and in part by others. "Expenses of Operation and Maintenance" does not include any payments on Bonds, Contracts (including continuing commissions or commitment fees or amounts equivalent to principal on related Bonds) or Other Airport Obligations. "Expenses of Operation and Maintenance" are to be calculated on a cash basis rather than on an accrual basis. To the extent Expenses of Operation and Maintenance are allocable to particular related facilities, a lien on the portion of Revenues related thereto shall not provide a claim on such Revenues ahead of the use thereof for payment of such allocable Expenses of Operation and Maintenance, "First Supplemental Bond Resolution" means the Supplemental Bond Resolution with respect to the Series 2005 Bonds adopted by the Consolidated Government on February 1, 2005 and by the Augusta Aviation Commission on January 20,2005. "Fiscal Year" means the 12-month period used by the Consolidated Government for its general accounting purposes, as it may be changed from time to time, The Fiscal Year at the time this Master Bond Resolution was adopted began on January 1 and ended on December 31 of the same year. "Fitch" means Fitch Inc., or, if such limited partnership is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the Consolidated Government. The notice address of Fitch is One State Street Plaza, New York, New York 10004. "Forecast Period" means a period of three consecutive Fiscal Years following the Fiscal Year in which the Airport Director estimates a substantial portion of the Project or Projects, the Costs of which are to be financed by the issuance of Additional Bonds, will be placed in continuous service or commercial operation. "Funds" means each of the separate funds and accounts created pursuant to Article IV. "General Revenue Bonds" means Bonds secured by a Senior Lien on General Revenues. "General Revenues" means all revenues, income, receipts and money derived from the! ownership and operation of the Airport, including without limitation all rentals, charges, landing I , fees, use charges and concession revenue received by or on behalf of the Consolidated, Government from the ownership and operation of the Airport, Investment Earnings and all other income received from, and gain from, securities and other investments and amounts earned on -9- AO 1153175.14 amounts deposited in funds and accounts under the Bond Resolution or otherwise maintained with respect to the Airport. "General Revenues" excludes (i) all gifts, grants, reimbursements or payments received from governmental units or public agencies for the benefit of the Airport except those that are (y) not restricted by law or the payor to application for a particular purpose other than payment of certain Bonds or Contracts and (z) otherwise lawfully available for payment of Bonds or Contracts; (ii) PFC Revenues and Special Purpose Revenues; and (iii) proceeds of insurance so long as such proceeds are to be paid to a party separate from the Consolidated Government in respect of a liability or are to be used by the Consolidated Government to repair or replace portions of the Airport, "General Revenues" are to be calculated on a cash basis rather than on an accrual basis, "Governing Body" means the Augusta-Richmond County Commission and any predecessor or successor in office to such present body. "Government Loans" means loans to the Consolidated Government by the government of the United States or the State, or by any department, authority, or agency of either, for the purpose of acquiring, constructing, reconstructing, improving, bettering, or extending any part of the Airport. "Government Obligations" means (i) direct obligations of the United States of America for the full and timely payment of which the full faith and credit of the United States of America is pledged or (ii) obligations issued by a person controlled or supervised by and acting as an instrumentality of the United States of America, the full and timely payment of the principal of and the interest on which is fully and unconditionally guaranteed as a full faith and credit obligation of the United States of America (including any securities described in (i) or (ii) issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), which obligations, in either case, (y) are not subject to redemption or prepayment prior to maturity except at the option of the holder of such obligations and (z) may include U.S. Treasury Trust Receipts. "Interest Payment Date" means each date on which interest is to become due on any Bonds, as established in the Supplemental Bond Resolution for such Bonds. "Interest Account" means, respectively, the Interest Account within the Debt Service Fund and the PFC Debt Service Fund established in Article IV. "Investment Earnings" means all interest received on and profits derived from investments made with Revenues or any other moneys in the funds and accounts established under Article IV or Article XII. I I "Master Bond Resolution" means this Master Bond Resolution adopted by the Augusta I Aviation Commission on January 27, 2005 and by the Consolidated Government on February 1, I 2005. "Maximum Annual Debt Service Requirement" means the largest aggregate Debt: Service Requirement of Bonds secured by the applicable category of Revenues during any Sinking Fund Year beginning after the date of calculation. -10- AO 1153175.14 "Moody's" means Moody's Investors Service, Inc. or, if such corporation is dissolved or liquidated or otherwise ceases to perfonn securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the Consolidated Government The notice address of Moody's is 99 Church Street, New York, New York 10007, "Net General Revenues" means General Revenues net of Expenses of Operation and Maintenance. "Operation and Maintenance Fund" means the Augusta, Georgia Airport Operation and Maintenance Fund established in Article IV. "Operation and Maintenance Reserve Fund" means the Augusta, Georgia Airport Operation and Maintenance Reserve Fund established in Article IV, "Other Airport Obligations" means obligations of any kind, including but not limited to, Government Loans, revenue bonds, interest rate swap and other hedge contracts, capital leases, installment purchase agreements, or notes (but excluding Bonds and Contracts), incurred or issued by the Consolidated Government to finance or refinance the cost of acquiring, constructing, reconstructing, improving, bettering, or extending any part of the Airport or any other cost relating to the Airport, which do not have a lien on any category of Revenues, except pursuant to Section S02(c). "Other Available Moneys" means, for any Fiscal Year, the amount of unencumbered funds on deposit or anticipated to be on deposit, as the case may be, on the first day of such Fiscal Year in the Revenue Credit Account The amount of such funds treated as "Other Available Moneys" shall not exceed 25 percent of the Debt Service Requirement of the General Revenue Bonds for any Fiscal Year. "Outstanding" means, when used in reference to the Bonds, all Bonds that have been duly authenticated and delivered under the Bond Resolution, with the exception of (a) Bonds in lieu of which other Bonds have been issued to replace lost, mutilated, stolen, or destroyed obligations, (b) Bonds surrendered by the owners in exchange for other Bonds under Section 209 or Section 304, and (c) Bonds for the payment of which provision has been made in accordance with Article IX. The tenn "parity" or "parity secured" when applied to two or more series of Bonds means each such series of Bonds has a lien of equal rank on the same category of Revenues; provided the existence of an additional lien on a different category of Revenues securing one or more series of such Bonds does not prevent such one or more series from being "parity secured" with the other Bonds with respect to the category of Revenues on which they have liens of equal rank. "Paying Agent" means any bank or trust company authorized by the Consolidated Government in the Bond Resolution to pay the principal of, premium, if any, or interest on any Bonds on behalf of the Consolidated Government Such Paying Agent shall perfonn the duties required of the Paying Agent in the Bond Resolution. -11- AO 1153175.14 "Permitted Investments" means obligations in which the Consolidated Government is permitted to invest moneys of the Consolidated Government pursuant to applicable law, Obligations in which the Consolidated Government is permitted to invest proceeds of Bonds are described, as of the date of adoption of this Master Bond Resolution, in Section 36-82-7 of the Official Code of Georgia Annotated. "Person" or "person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, body, authority, government, or agency or political subdivision thereof "PFC Act" means the Aviation Safety and Capacity Government Expansion Act of 1990, Pub. L. 101508, Title IX, Subtitle B, ~~ 9110 and 9111, as amended from time to time, "PFC Balloon Bonds Reserve Account" means the PFC Balloon Bonds Reserve Account within the PFC Debt Service Fund established in Article IV. "PFC Capital Fund" means the Augusta, Georgia Airport PFC Capital Fund established in Article IV. "PFC Debt Service Fund" means the Augusta, Georgia Airport PFC Debt Service Fund established in Article IV. "PFC Debt Service Reserve Account" means the PFC Debt Service Reserve Account within the PFC Debt Service Fund established in Article IV. "PFC Facilities" means facilities for the construction and implementation of which the Airport has received approval to expend PFC Revenues under the PFC Act, including facilities financed with PFC Revenue Bonds. "PFC Obligations Fund" means the Augusta, Georgia Airport PFC Obligations Fund established in Article IV. "PFC Regulations" means Part 158 of the Federal Aviation Regulations (14 CFR Part 158), as amended from time to time, and any other regulation issued with respect to the PFC Act. "PFC Revenue Fund" means the PFC Revenue Fund established in Article IV, "PFC Revenue Bonds" means Bonds secured by a Senior Lien on PFC Revenues. "PFC Revenues" means all income and revenue received by or required to be remitted to the Augusta Aviation Commission from the passenger facility charges imposed by the Consolidated Government pursuant to the PFC Act and the PFC Regulations, including any interest earned after such charges have been remitted to the Augusta Aviation Commission as provided in the PFC Regulations, all of which may be pledged pursuant to the PFC Act and PFC Regulations ~ 158.13; provided, the term "PFC Revenues" also includes any interest or other gain in any of the accounts or subaccounts created herein or in any Supplemental Resolution resulting from any investments and reinvestments of PFC Revenues. If at any time pursuant to -12- AO 1153175.14 the PFC Act and PFC Regulations, there is permitted to be paid Expenses of Operation and Maintenance for PFC Facilities from passenger facility charges, "PFC Revenues" shall mean PFC Revenues less Expenses of Operation and Maintenance with respect to PFC Facilities "Principal Maturity Date" means each date on which principal is to become due on any Bonds, by maturity or mandatory sinking fund redemption, as established in the Supplemental Bond Resolution for such Bonds. "Principal Account" means the Principal Account within the Debt Service Fund or the PFC Debt Service Fund, as the context may require. "Project" means the acquisition, construction, reconstruction, improvement, betterment, extension, implementation or equipping of the Airport and, as described in the Bond Resolution, any specific capital facilities or group of related capital projects at the Airport, in each case, financed, in whole or in part, with the proceeds of any Bonds. "Rating" means a rating in one of the categories by a Rating Agency, disregarding pluses, minuses, and numerical gradations. "Rating Agencies" or "Rating Agency" means Fitch, Moody's, and Standard & Poor's or any successors thereto and any other nationally recognized credit rating agency then maintaining a rating on anyBonds at the request of the Consolidated Government If at any time a particular Rating Agency does not have a rating outstanding with respect to the relevant Bonds, then a reference to Rating Agency or Rating Agencies shall not include such Rating Agency. "Rebate Fund" means the Augusta, Georgia Airport Rebate Fund established III Article IV. "Record Date" means, with respect to any semiannual Interest Payment Date, the 15th day of the calendar month immediately preceding such Interest Payment Date, and, for any Bonds paying interest other than semiannually, any record dates designated by the Consolidated Government in a Supplemental Bond Resolution, "Reimbursement Obligation" means the obligation of the Consolidated Government to directly reimburse any Credit Issuer for amounts paid under a Credit Facility or any Reserve Account Credit Facility Provider for amounts paid under a Reserve Account Credit Facility, whether or not such obligation to so reimburse is evidenced by a promissory note or other similar . instrument The term "related" means, when used to refer to Bonds, sub accounts, category of Revenues or liens, the item modified by such term has a definite relationship to the subject as described in the Bond Resolution. I I "Renewal and Replacement Fund" means the Augusta, Georgia Airport Renewal and! Replacement Fund established in Article IV. I "Reserve Account Credit Facility" means any letter of credit, insurance policy, line of credit, surety bond, or similar obligation, arrangement or instrument issued by a bank, insurance -13- AO 1153175.14 company, or other financial institution, together with any substitute or replacement therefor, if any, and related Reimbursement Obligation, if any, complying with the provisions of the Bond Resolution, thereby fulfilling all or a portion of a Debt Service Reserve Requirement "Reserve Account Credit Facility Provider" means any provider of a Reserve Account Credit Facility. "Revenue Bond Law" means Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, as amended, "Revenue Credit Account" means the Revenue Credit Account established In Article IV. "Revenue Fund" means the Augusta, Georgia Airport Revenue Fund established In Article IV. "Revenues" means General Revenues and PFC Revenues. "Senior Lien" means a lien on one or more categories of Revenues that entitles the Beneficiaries of such lien to have a claim on such Revenues prior to any other Person and ahead of the use of such Revenues for any purpose other than payment of Expenses of Operation and Maintenance; provided one or more series of Bonds, Contracts and related Beneficiaries may have parity Senior Liens on the same categories of Revenues pursuant to the terms of the Bond Resolution, "Senior Lien Bonds" means Bonds having a Senior Lien on one or more categories of Revenues. The term "series" means all Bonds which (i) are issued on the same date, (ii) have the same tax status (tax-exempt or taxable under the federal income tax and subject or not to the alternative minimum income tax), and (iii) have the same lien status and priority with respect to each category of Revenues on which any such Bonds have a lien; as well as all Bonds delivered in lieu of or in substitution for such Bonds pursuant to provisions of the Bond Resolution with respect to exchange, transfer and replacement (for mutilation, loss, theft or destruction) of Bonds. "Series 2005 Bonds" means the Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005A and the Augusta, Georgia Airport Passenger Facility Charge and General Revenue Bonds, Series 2005B in the aggregate principal amount not to exceed $14,500,000, and the Augusta, Georgia Airport General Revenue Bonds, Series 2005C in the aggregate principal amount not to exceed $7,000,000, issued under the First Supplemental Bond Resolution. "Sinking Fund Year" means the twelve month period ending on January 1 of each year. "Special Purpose Facilities" means facilities which (i) will not result, upon completion, in a material reduction in Net General Revenues, (ii) will not be of such a type or design that the subsequent closing thereof (with the functions thereof not provided by a substitute facility) will -14- AO 1153175.14 materially impair the general operations of the Airport and (iii) the Consolidated Government has designated as "Special Purpose Facilities," For purposes of this definition, "material reduction" means Net General Revenues for the first complete Fiscal Y ear following completion of such facilities will be either (1) more than 10 percent below Net General Revenues during the preceding Fiscal Year or (2) less than the amount required by Section 601. "Special Purpose Revenue Bonds" means bonds or other obligations secured by a lien on Special Purpose Revenues and not secured by a lien on General Revenues or PFC Revenues, "Special Purpose Revenues" means revenues, income, receipts and money arising from or generated by one or more Special Purpose Facilities. "Standard & Poor's" or "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or, if such corporation is dissolved or liquidated or . othetwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the Consolidated Government The notice address of Standard & Poor's is 55 Water Street, New York, New York 10041. "State" means the State of Georgia. "Subordinate Lien" .means a lien on one or more categories of Revenues which is not a Senior Lien. "Subordinate Lien Bonds" means bonds or other obligations which have a Subordinate Lien or no Lien, but in no event a Senior Lien, on Net General Revenues or PFC Revenues or both. "Subordinate Securities Fund" means the Augusta, Georgia Airport Subordinate Securities Fund established in Article IV. "Supplemental Bond Resolution" means a bond resolution of the Consolidated Government supplemental to this Master Bond Resolution (which bond resolution itself may be supplemented by one or more bond resolutions) to be adopted prior to and authorizing the issuance and delivery of any series of Bonds, including the First Supplemental Bond Resolution. Such a bond resolution as supplemented shall establish the date or dates of the pertinent series of Bonds, the schedule of maturities of such Bonds, the name of the purchaser(s) of such series of Bonds, the purchase price thereof, the rate or rates of interest to be borne thereby, whether fixed . or variable, the interest payment dates for such Bonds, the terms and conditions, if any, under which such Bonds may be made subject to redemption (mandatory or optional) priorto maturity, the form of such Bonds, the liens relating to such Bonds, the Contracts, if any, relating to such Bonds, and such other details as the Consolidated Government may determine. "Supplemental Resolution" means (i) any Supplemental Bond Resolution and (ii) any modification, amendment, or supplement to this Master Bond Resolution other than a Supplemental Bond Resolution. -15- AO 1153175.14 "Tax-Exempt Bonds" means any Bonds the interest on which has been determined, in an unqualified opinion of Bond Counsel, to be excludable from the gross income of the owners thereof for federal income tax purposes. "Term Bonds" means Bonds which mature on one Principal Maturity Date yet a portion of which are required to be redeemed, prior to maturity, under a schedule of mandatory redemptions established by the Bond Resolution. "U.S. Treasury Trust Receipts" means receipts or certificates which evidence an undivided ownership interest in the right to the payment of portions of the principal of or interest on obligations described in clauses (i) or (ii) of the term "Government Obligations," provided that such obligations are held by a bank or trust company organized under the laws of the United States acting as custodian of such obligations, in a special account separate from the general assets of such custodian. Section 102 Construction Of Certain Terms. For all purposes of the Bond Resolution, except as otherwise expressly provided or unless the context otherwise requires, the following rules of construction shall apply: (a) The use of the masculine, feminine, or neuter gender is for convenience only and shall be deemed and construed to include correlative words of the masculine, feminine, or neuter gender, as appropriate. (b) All references in the Bond Resolution to designated "Articles," "Sections," and other subdivisions are to the designated Articles, Sections, and other subdivisions of the Bond Resolution. The words "herein," "hereof," and "hereunder" and other words of similar import refer to the Bond Resolution as a whole and not to any particular Article, Section, or other subdivision. (c) The terms defined in this Article shall have the meanings assigned to them in this Article and include the plural as well as the singular. (d) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as promulgated by the American Institute of Certified Public Accountants; provided "Expenses of Operation and Maintenance" and "Revenues" are determined on a cash basis. Section 103 Table of Contents~ Titles and HeadiD!!s. The table of contents, the titles of the articles, and the headings of the sections of the Bond Resolution are solely for convenience of reference, are not a part of the Bond Resolution, and shall not be deemed to affect the meaning, construction, or effect of any of its provisions. [End of Article I] -16- AO 1153175.14 ARTICLE II THE BONDS Section 201 Authorization; Desi2:nation of Bonds. The Bonds authorized under the Bond Resolution may be issued and sold from time to time in one or more series, and shall be in substantially the form set forth in the related Supplemental Bond Resolution, but such variations, omissions, substitutions, and insertions may be made therein; and such particular series designation, name identification, legends, or text may be endorsed thereon, as may be necessary or appropriate to conform to and as required or permitted by this Master Bond Resolution and any Supplemental Bond Resolution or as may be necessary or appropriate (for Tax-Exempt Bonds) to comply with applicable requirements of the Code. The Bonds also may bear such legend or contain such further provisions as may be necessary to comply with or conform to the rules and requirements of any brokerage board, securities exchange, or municipal securities rulemaking board. The Series 2005 Bonds shall be secured as described in the First Supplemental Bond Resolution and Additional Bonds shall be secured as described in the related Supplemental Bond Resolution and pursuant to Sections 502 and 503. Section 202 Bond Details. Except as may be provided in a Supplemental Bond Resolution, the Bonds shall be issued in fully registered form in the denomination of $5,000 each or integral multiples thereof and shall be dated as provided in the pertinent Supplemental Bond Resolution. Each Bond authenticated prior to the first Interest Payment Date thereon shall bear interest from its dated date. Each Bond authenticated on or after the first Interest Payment Date thereon shall bear interest from the Interest Payment Date thereon next preceding the date of authentication thereof, unless such date of authentication shall be an Interest Payment Date to which interest on such Bond has been paid in full or duly provided for, in which case from such date of authentication; provided that if, as shown by the records of the Paying Agent, interest on such Bond shall be in default, such Bond shall bear interest from the date to which interest has been paid in full on such Bond or, if no interest has been paid on such Bond, its dated date. Each Bond shall bear interest on overdue principal and, to the extent permitted by law, on overdue premium, if any, and interest at the rate borne by such Bond. The principal of, premium, if any, and interest on the Bonds shall be payable in any coin or currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts. Section 203 Execution and Authentication of Bonds. The Bonds shall be executed by the Chief Officer, Chairman of the Augusta Aviation Commission and Attesting Officer and shall be sealed with the official seal or a facsimile of the official seal of the Consolidated Government The facsimile signature of the Chief Officer and the Attesting Officer may be imprinted on the Bonds instead of their manual signatures. Bonds bearing the manual or facsimile signatures of a person in office at the time such signature was -17- AO 1153175.14 signed or imprinted shall be fully valid, notwithstanding the fact that before or after delivery of such Bonds such person ceased to hold such office, Prior to the preparation of definitive Bonds, the Consolidated Government may issue interim receipts, interim certificates, or temporary Bonds, exchangeable in any case for definitive Bonds upon the issuance of definitive Bonds. Only such Bonds as shall be authenticated by the endorsement thereon of a certificate substantially in the form contained on the form of Bond set forth in the Bond Resolution, executed by the Bond Registrar by the manual signature of one of its authorized signatories, shall be secured by the Bond Resolution or shall be entitled to any benefit under the Bond Resolution. Every such certificate of the Bond Registrar upon any Bond purporting to be secured by the Bond Resolution shall be conclusive evidence that the Bond so certified has been duly issued under the Bond Resolution and that the owner is entitled to the benefit of the Bond Resolution. It shall not be necessary for the same signatory to sign the certificate of authentication on all of the Bonds secured under the Bond Resolution or on all Bonds of any series. Section 204 Reeistration of Bonds. The Consolidated Government shall cause the Bond Register for the registration and for the transfer of the Bonds as provided in the Bond Resolution to be kept by the Bond Registrar. The Bonds shall be registered as to principal and interest on the Bond Register upon presentation thereof to the Bond Registrar which shall make notation of such registration thereon; provided that the Consolidated Government reserves the right to issue coupon Bonds payable to bearer whenever to do so would not result in any adverse federal tax consequences. Any Bonds may be issued, registered and maintained in a book-entry only system of registration to the extent provided for in a Supplemental Bond Resolution, Section 205 Place of Payment. The principal of and redemption premium, if any, on any Bonds shall be payable to the Bondholder at the principal corporate trust office of the Paying Agent, upon presentation and surrender of such Bond. Payment of the interest on each Bond shall be made by the Paying Agent on each Interest Payment Date to the person appearing as the registered owner thereof as of the close of business on the Record Date preceding the Interest Payment Date by check mailed to such registered owner at its address as it appears on the Bond Register, or at such other address as is furnished in writing by such registered owner to the Bond Registrar prior to such Record Date, notwithstanding the cancellation of any such Bonds upon any exchange or transfer thereof subsequent to the Record Date and prior to such Interest Payment Date. Notwithstanding the foregoing, however, interest on the Bonds of any series shall be payable to any registered owner of more than $1,000,000 in aggregate principal amount of the Bonds of such series by deposit of immediately available funds to the account of such registered owner maintained with the Paying Agent or transmitted by wire transfer to such registered owner ' at an account maintained at a commercial bank located within the United States of America, if the Paying Agent receives from such registered owner written deposit or wire transfer -18- AO 1153175.14 instructions prior to the Record Date preceding the Interest Payment Date for which the deposit or wire transfer is requested. The Consolidated Government may, by Supplemental Resolution, provide for other methods or places of payment, including wire transfer, as it may deem appropriate for any Bonds. Section 206 Persons Treated as Owners. The person in whose name any Bond is registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of either principal or interest shall be made only to or upon the order of the registered owner thereof or such registered owner's attorney duly authorized in writing. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, Section 207 Transfer and Exchan2eabilitv of Bonds. Bonds may be transferred by surrender for transfer at the principal corporate trust office of the Bond Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or the registered owner's attorney duly authorized in writing. The Consolidated Government shall cause to be executed and the Bond Registrar shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same series, maturity, interest rate, aggregate principal amount, and tenor, of any authorized denomination or denominations, and bearing numbers not then outstanding, Bonds may be exchanged at the principal corporate trust office of the Bond Registrar for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity, and interest rate, and bearing numbers not then outstanding. The Consolidated Government shall cause to be executed and the Bond Registrar shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive. The Bond Registrar shall not be required to transfer or exchange any Bond after notice calling such Bond for redemption has been given or during the period of 15 days (whether or not a business day for the Bond Registrar, but excluding the date of giving such notice of redemption and including such 15th day) immediately preceding the giving of such notice of redemption. In any exchange or registration of transfer of any Bond, the owner of the Bond shall not . be required to pay any charge or fee; provided, however, if and to whatever extent any tax. or governmental charge is at any time imposed on any such exchange or transfer, the Consolidated Government or the Bond Registrar may require payment of a sum sufficient for such tax. or charge. All Bonds surrendered for exchange or transfer of registration shall be cancelled and destroyed by the Bond Registrar in accordance with Section 208. -19- AO 1153175.14 Section 208 Destruction of Bonds. All Bonds paid by the Paying Agent at maturity or upon redemption prior to maturity shall be cancelled and delivered to the Bond Registrar for destruction. All Bonds cancelled on account of payment, transfer, or exchange shall be destroyed by the Bond Registrar and shall not be reissued, and a certificate that such Bonds have been destroyed shall be furnished by the Bond Registrar to the Consolidated Government on an annual basis. Section 209 Mutilated. Lost., Stolen. or Destroved Bonds. If any Bond is mutilated, lost, stolen, or destroyed, the Consolidated Government may execute and deliver a new Bond of the same series, maturity, interest rate, aggregate principal amount, and tenor in lieu of and in substitution for the Bond mutilated, lost, stolen, or destroyed. In the case of any mutilated Bond, however, such mutilated Bond shall first be surrendered to the . Bond Registrar, and, in the case of any lost, stolen, or destroyed Bond, there shall first be furnished to the Bond Registrar evidence satisfactory to it of the ownership of such Bond and of such loss, theft, or destruction, together with indemnity to the Consolidated Government and the Bond Registrar, satisfactory to each of them. If any such Bond shall have matured or a redemption date pertaining to the Bond shall have passed, instead of issuing a new Bond the Consolidated Government may payor cause the Paying Agent to pay the Bond. The Consolidated Government, the Bond Registrar, and the Paying Agent may charge the owner of such Bond with their reasonable fees and expenses for replacing mutilated, lost, stolen, or destroyed Bonds. In executing a new Bond and in furnishing the Bond Registrar with the written authorization to deliver a new Bond as provided for in this Section, the Consolidated Government may rely conclusively on a representation of the Bond Registrar that the Bond Registrar is satisfied with the adequacy of the evidence presented concerning the mutilation, loss, theft, or destruction of any Bond. [End of Article II] -20- AO 1153175.14 ARTICLE III REDEMPTION OF BONDS Section 301 Redemption of Bonds. Bonds of each series may be made subject to redemption as provided in the related Supplemental Bond Resolution. Section 302 Notice of Redemption. Unless waived by any registered owner of Bonds to be redeemed or contrary requirements are specified in the related Supplemental Bond Resolution, official notice of any redemption shall be given by the Bond Registrar on behalf of the Consolidated Government by mailing a copy of an official redemption notice by first class mail, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar. All official notices of redemption shall be dated, shall contain the complete official name of the Bond issue, and shall state: (a) the redemption date; (b) the redemption price; ( c) the series, interest rate and maturity date of the Bonds being redeemed; (d) the date on which notice of redemption was or will be sent to depositories as described hereafter; (e) if less than all the Outstanding Bonds of a series are to be redeemed, the Bond numbers, and, where part of the Bonds evidenced by one Bond certificate are being redeemed, the respective principal amounts of such Bonds to be redeemed; (f) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after such date; (g) the place where such Bonds are to be surrendered for payment of the redemption price (which place of payment shall be the principal corporate trust office of the Paying Agent) and the name, address, and telephone number of a person or persons at the Paying Agent who may be contacted with respect to the redemption; and (h) conditions. if such redemption is a Conditional Redemption, the details and timing for such -21- AO 1153175,14 Not later than 5 p.m. on the business day preceding any redemption date, the Consolidated Government shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. In addition to the official notice described above, except as otherwise specified in the related Supplemental Bond Resolution, further notice shall be given by the Bond Registrar as set forth below: (1) Each further notice of redemption given shall contain the information required above for an official notice of redemption plus: (i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue of the Bonds as originally issued; (iii) the rate of interest borne by each Bond being redeemed; (iv) the maturity date of each Bond being redeemed; and (v) any other descriptive information needed to identify accurately the Bonds being redeemed. (2) Each further notice of redemption shall be sent at least 35 days before the redemption date by legible facsimile transmission, registered or certified mail, or overnight delivery service to all registered securities depositories then in the business of holding substantial amounts of obligations of the types comprising the Bonds (such depositories now being DTC, Midwest Securities Trust Company of Chicago, Illinois, and Philadelphia Depository Trust Company of Philadelphia, Pennsylvania) and to two or more national information services that disseminate notices of redemption of obligations such as the Bonds (such as Financial Information Inc.'s Financial Daily Called Bond Service, Interactive Data Corporation's Bond Service, and Standard & Poor's Called Bond Record). Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Not less than 60 days after the redemption date, the Bond Registrar shall send a second copy of the official notice of redemption to the registered owner of any Bond or Bonds to be redeemed if, by such date, such registered owner has not surrendered its Bond or Bonds for redemption, Such notice shall be sent by registered or certified mail, with a return receipt requested. Any defect in any notice of redemption shall not affect the validity of proceedings for redemption of the Bonds. The Paying Agent shall hold amounts payable on redemption for Bonds which have not been surrendered for redemption for a period of not less than two years after the final maturity I date ofthe Bonds or any earlier date when all of the Bonds have been refunded or redeemed. Section 303 Consolidated Government or Bond Reeistrar Mav Give Notice of Redemption. Notice of redemption of Bonds to be redeemed shall be given by the Consolidated Government or by the Bond Registrar for and on behalf of the Consolidated Government whenever either: (i) such redemption is required to be made under the Supplemental Bond -22- AO 1153175.14 Resolution for such Bonds, or (ii) such redemption is permitted to be made under the terms of such Bonds and the Consolidated Government requests that such redemption be made. Section 304 Effect of Notice of Redemption. Official notice of redemption having been given in the manner and under the conditions provided in this Article, and moneys for payment of the redemption price being held by the Paying Agent as provided in the Bond Resolution and, if such redemption is a Conditional Redemption, the conditions therefor have been met, the Bonds or portions of Bonds called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Bonds or portions of Bonds on such date, and from and after such date interest on the Bonds or portions of Bonds called for redemption shall cease to accrue, such Bonds or portions of Bonds shall cease to be entitled to any lien, benefit, or security under the Bond Resolution, and the owners of such Bonds or portions of Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Upon surrender for partial redemption of any Bond, there shall be prepared for and delivered to the registered owner a new Bond or Bonds of the same series, maturity, and interest rate in the amount of the unpaid principal. Section 305 Conditional Redemptions. The Consolidated Government may, by the filing with the Bond Registrar a certificate of the Chief Officer or the Airport Finance Officer to such effect prior to the delivery of the notice of an optional redemption, make such optional redemption conditional upon the occurrence of certain events, including without limitation the receipt of certain funds by the Consolidated Government or the Paying Agent, the issuance of certain bonds or other obligations by the Consolidated Government or other parties and the receipt of governmental permits. If so conditioned, the redemption will not be made unless such events occur, the notice thereof will specify such conditions and the required timing thereof and, if such conditions are not met, a notice thereof will be given by the Bond Registrar to the registered owners of Bonds promptly after the date it is determined such conditions are not met. Section 306 Redemption Amont! Series. Subject to the redemption provisions of any Supplemental Bond Resolution authorizing Bonds and the requirements of the Bond Resolution limiting the use of certain categories of Revenues to certain Bonds, the Consolidated Government in its discretion may redeem the Bonds of any series, or a portion of the Bonds of any such series, before it redeems the Bonds of any other series. Within any particular series, any redemption of Bonds shall be effected in the manner provided in any Supplemental Bond Resolution. -23- AO 1153175.14 Section 307 Selection of Bonds to be Redeemed. If less than all of the Bonds of like maturity of any series shall be called for redemption, the particular Bonds, or portions of Bonds, to be redeemed shall be selected by lot by the Bond Registrar or in such other manner as the Bond Registrar in its discretion may deem proper. The portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the Consolidated Government shall treat each such Bond as representing that number of Bonds which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. Section 308 Purchase in Open Market. Nothing herein contained shall be construed to limit the right of the Consolidated Government to purchase with any excess moneys in a subaccount of the Interest Account or Principal Account related to Bonds (i.e., moneys not needed in the then current Sinking Fund Year to pay principal of and interest on the related Bonds), the related Bonds in the open market at a price not exceeding the callable price. Any such Bonds so purchased shall not be reissued and shall be cancelled. [End of Article III] -24- AO 1153175.14 ARTICLE IV PLEDGE OF REVENUES AND FLOW OF FUNDS Section 401 Pled2e of Revenues~ Limited Obli2ations~ Contract Liens. (a) All Net General Revenues shall be and are hereby pledged to the prompt payment of the principal of, premium, if any, and interest on the General Revenue Bonds, Obligations treated as General Revenue Bonds pursuant to Section 502( c) and the Consolidated Government's obligations under the Contracts related to General Revenue Bonds; provided that a Contract may have a Senior Lien or a Subordinate Lien on Net General Revenues, or no lien at all, but (A) no Contract shall have a lien on Net General Revenues that is senior to the lien on Net General Revenues securing the related Bonds, and (B) the lien of the Contract shall be in parity with the lien of the related Bonds only to the extent of the payment of principal of, premium, if any, and interest on such Bonds is made through such Contract as evidenced by Reimbursement Obligations; provided other amounts due on a Contract may be secured by a lien ranking immediately thereafter with the effect set forth in Section 705. The Net General Revenues shall immediately be subject to the lien of this pledge for the benefit of the Beneficiaries as set forth herein without any physical delivery thereof or further act, and the lien of this pledge shall be valid' and binding against the Consolidated Government and against all other persons having claims against the Consolidated Government, whether such claims shall have arisen in tort, contract, or otherwise, and regardless of whether such persons have notice of the lien of this pledge. This pledge shall rank superior to any and all other pledges which may hereafter be made of the Net General Revenues by the Consolidated Government. The lien of this pledge does not secure any obligation of the Consolidated Government other than the General Revenue Bonds, obligations treated as General Revenue Bonds pursuant to Section 502(c) and the Contracts relating to General Revenue Bonds. (b) All PFC Revenues shall be and are hereby pledged to the prompt payment of the principal of, premium, if any, and interest on the PFC Revenue Bonds, Obligations treated as PFC Revenue Bonds pursuant to Section 502(c) and the Consolidated Govenunent's obligations under the Contracts related to PFC Revenue Bonds; provided that a Contract may have a Senior Lien or a Subordinate Lien on PFC Revenues, or no lien at all, but (A) no Contract shall have a lien on PFC Revenues that is senior to the lien on PFC Revenues securing the related Bonds, and (B) the lien of the Contract shall be in parity with the lien of the related Bonds only to the extent of the payment of principal of, premium, if any, and interest on such Bonds is made through such Contract as evidenced by Reimbursement Obligations; provided other amounts due on a Contract may be secured by a lien ranking immediately thereafter with the effect set forth in Section 705. The PFC Revenues shall immediately be subject to the lien of this pledge for the benefit of the Beneficiaries as set forth herein without any physical delivery thereof or further act, and the lien of this pledge shall be valid and binding against the Consolidated Government and against all other persons having claims against the Consolidated Government, whether such claims shall have arisen in tort, contract, or otherwise, and regardless of whether such persons have notice of the lien of this pledge. This pledge shall rank superior to any and all other pledges which may hereafter be made of any PFC Revenues by the Consolidated Government. The lien of this pledge does not secure any obligation of the Consolidated Government other than the PFC -25- AO 1153175.14 Revenue Bonds, obligations treated as PFC Revenue Bonds pursuant to Section S02(c) and Contracts relating to PFC Revenue Bonds. (c) The Bonds and related Contracts shall be limited obligations of the Consolidated Government as provided therein payable solely from the related Revenues of a particular category pledged thereto. The Bonds and the interest thereon and related Contracts shall not constitute a general or moral obligation of the Consolidated Government nor a debt, indebtedness, or obligation of, or a pledge of the faith and credit of, the Consolidated Government or the State or any political subdivision thereof, within the meaning of any constitutional or statutory provision whatsoever. Neither the faith and credit nor the taxing power of the State, the Consolidated Government, or any political subdivision thereof is pledged to the payment of the principal of, premium, if any, or interest on the Bonds, the Consolidated Government's obligations under the Contracts or other costs incident thereto. The Consolidated Government has no authority to levy any taxes to pay the Bonds or the Contracts. Neither the members of the Governing Body nor any person executing the Bonds shall be liable personally on the Bonds by reason of the issuance thereof or on the Contracts by reason of the execution thereof. (d) Other Airport Obligations (other than obligations treated as Bonds pursuant to Section 502(c)) are not secured by a lien on any category of Revenues and will not have a lien on any category of Revenues, but such obligations, prior to an Event of Default, may be paid from Revenues from the Subordinate Securities Fund as described in Section 403 and Section 406. Section 402 Funds. Accounts. and Subaccounts. There are hereby established the following funds, accounts, and subaccounts with respect to the Airport, and the moneys deposited in such funds, accounts, and subaccounts shall be held in trust for the purposes set forth in the Bond Resolution. Upon the issuance of the Series 2005 Bonds, the Augusta Aviation Commission shall transfer amounts then on deposit in its existing Airport funds and accounts to the Operation and Maintenance Reserve Fund, the Debt Service Reserve Account, the PFC Debt Service Reserve Account and the Renewal and Replacement Fund, all as hereafter provided, and the remaining amounts, to the extent consisting of or derived from General Revenues, shall be transferred to the Revenue Fund, and to the extent consisting of or derived from PFC Revenues, shall be transferred to the PFC Revenue Fund created pursuant to Section 403. (a) With respect to General Revenues: (1) Augusta, Georgia Airport Revenue Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission. (2) Augusta, Georgia Airport Operation and Maintenance Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission. (3) Augusta, Georgia Airport Operation and Maintenance Reserve Fund, to be held initially by SunTrust Bank, as Depository for the account of the Augusta Aviation Commission. -26- AO 1153175.14 (4) Augusta, Georgia Airport Debt Service Fund, to be held initially by SunTrust Bank, as Custodian for the account of the Augusta Aviation Commission, and within the Debt Service Fund: (i) Interest Account, with subaccounts therein for each series of Bonds; provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on Net General Revenues. (ii) Contract Payments Account, with sub accounts therein for each series of Bonds; provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on Net General Revenues and are secured in parity by the same or identical Contracts with the same provider. (iii) Principal Account, with subaccounts therein for each series of Bonds; provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on Net General Revenues. (iv) Debt Service Reserve Account, with an account for each series of Bonds secured by a lien on Net General Revenues which has a Debt Service Reserve Requirement; provided a subaccount therein may be utilized for more than one series of Bonds if all such series are specified in the related Supplemental Bond Resolutions to share a pledge of such account and have a combined Debt Service Reserve Requirement. (v) Balloon Bonds Reserve Account, with sub accounts therein for each series of Bonds, provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on Net General Revenues. (5) Augusta, Georgia Airport Renewal and Replacement Fund, to be held initially by SunTrust Bank, as Depository for the account of the Augusta Aviation Commission. (6) Augusta, Georgia Airport Construction Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission, and within the Construction Fund the Capitalized Interest Account. (7) Augusta, Georgia Airport Rebate Fund, to be held initially by SunTrust Bank, as Depository for the account of the Augusta Aviation Commission. (8) Augusta, Georgia Airport Subordinate Securities Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission. (9) Augusta, Georgia Airport Capital Improvement Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission, and within the Capital Improvement Fund: (i) Capital Improvement Account. (ii) Revenue Credit Account. -27- AO 1153175.14 (b) With respect to PFC Revenues: (1) Augusta, Georgia Airport PFC Revenue Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission. (2) Augusta, Georgia Airport PFC Debt Service Fund, to be held initially by SunTrust Bank, as Custodian for the account of the Augusta Aviation Commission, and within the PFC Debt Service Fund: (i) Interest Account, with sub accounts therein for each series of Bonds; provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on PFC Revenues. (ii) Contract Payments Account, with further subaccounts therein for each series of Bonds; provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on PFC Revenues and are secured in parity by the same or identical Contracts with the same provider. (iii) Principal Account, with further subaccounts therein for each series of Bonds; provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on PFC Revenues. (iv) PFC Debt Service Reserve Account, with an account for each series of Bonds secured by a lien on PFC Revenues which has a Debt Service Reserve Requirement; provided a subaccount therein may be utilized for more than one series of Bonds if all such series are specified in the related Supplemental Bond Resolutions to share a pledge of such account and have a combined Debt Service Reserve Requirement. (v) PFC Balloon Bonds Reserve Account, with subaccounts therein for each series of Bonds, provided a subaccount therein may be utilized for more than one series of Bonds if all such series share exactly the same lien status on PFC Revenues, (3) Augusta, Georgia Airport PFC Obligations Fund, to be held initially as Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission. (4) Augusta, Georgia Airport PFC Capital Fund, to be held initially by Smith Barney Corporate Trust Company, as Depository for the account of the Augusta Aviation Commission. (c) Each account listed above shall be held within the fund under which it is created. All funds and accounts listed above are further described in this Article, except for (i) the Rebate Fund and (ii) the Construction Fund, which are further described in Articles VI and XII respectively. All such funds and accounts shall be held in the name of the Augusta Aviation Commission and shall be held by the Augusta Aviation Commission on behalf of the Consolidated Government. The Augusta Aviation Commission reserves the right, in its sole discretion, to create or to abolish sub accounts within any account from time to time. The Debt -28- AO 1153175.14 Service Fund and PFC Debt Service Fund, and each account therein, must at all times be trust accounts. (d) Any Depository or Custodian appointed under the Bond Resolution shall be a bank or trust company within the State which is duly authorized to exercise corporate trust powers and which is subject to examination by federal or State authority (including all national banks), of good standing, and has combined capital, surplus and undivided profits aggregating not less than $50,000,000. Section 403 Revenue Fund. PFCRevenue Fund. and Operation and Maintenance Expense Fund. (a) Revenue Fund; PFC Revenue Fund. The Consolidated Government, acting by and through the Augusta Aviation Commission, shall continue to collect Revenues derived from the ownership and operation of the Airport and shall deposit and continue to deposit all General Revenues in the Revenue Fund from time to time as and when received and shall deposit and continue to deposit all PFC Revenues in the PFC Revenue Fund from time to time as and when received, (b) Application of Revenue Fund. Moneys in the Revenue Fund shall be applied from time to time to the following purposes and in the following order of priority subject to the limitations set forth in paragraph (d) of this Section: (i) to deposit into the Operation and Maintenance Fund to pay Expenses of Operation and Maintenance; (ii) to deposit into the Debt Service Fund (other than the Contract Payments Account) the amounts required by Section 404; (iii) to deposit into the PFC Debt Service Fund the amount of any shortfall in the monthly deposits required by Section 409; (iv) to deposit into the Rebate Fund the amounts required by Section 611; (v) to deposit into the Operation and Maintenance Reserve Fund the amounts required by Section 405; (vi) to pay to any party to a Contract the amounts due thereon, including continuing commission or commitment fees and repayment of amounts equivalent to principal on related Bonds; (vii) to transfer the amounts, if any, required. to be paid to the Renewal and Replacement Fund pursuant to Section 407; (viii) to pay any amounts into the Subordinate Securities Fund pursuant to Section 406 required to be paid with respect to any Other Airport Obligations not secured by a Lien on Revenues; and (ix) to transfer the balance of the Revenue Fund to the Capital Improvement Fund, (c) Application of PFC Revenue Fund. Moneys in the PFC Revenue Fund shall be applied from time to time to the following purposes and in the following order of priority: (i) to deposit into the PFC Debt Service Fund (other than the Contract Payments Account) the amounts required by Section 409; (ii) to deposit into the PFC Obligations Fund the amounts required by Section 410; and (iii) to transfer the balance of the PFC Revenue Fund to the PFC Capital Fund. (d) Additional Provisions. Notwithstanding the foregoing paragraphs: (1) No payments with respect to Other Airport Obligations may be made from I General Revenues if such Other Airport Obligations relate to Special Purpose Facilities; . (2) No payments may be made with respect to any Other Airport Obligations unless all required payments have been made to each subaccount with respect to Bonds and on -29- AO 1153175.14 all Contracts; provided if required by the terms thereof, obligations treated as Senior Lien Bonds pursuant to Section 502( c) shall be paid with the other Senior Lien Bonds; (3) If at any time the amounts in any subaccount of the Debt Service Fund are less than the amounts required by the Bond Resolution, and there are not on deposit in the Capital Improvement Fund available moneys sufficient to cure any such deficiency, then the Consolidated Government, or the Augusta Aviation Commission, on behalf of the Consolidated Government, shall withdraw from the Subordinated Securities Fund and deposit in such subaccount of the Debt Service Fund, as the case may be, the amount necessary (or all the moneys in such funds and accounts, if less than the amount required) to make up such deficiency; (4) Amounts in the PFC Revenue Fund, after being used for deposits to related accounts of the PFC Debt Service Fund for payment of related Bonds and Contracts, and for . deposits to the PFC Obligations Fund shall be transferred to the PFC Capital Fund and used for the purposes set forth in Section 411; and (5) With respect to Bonds having a Senior Lien both on Net General Revenues and on PFC Revenues, payments for principal and interest on such Bonds and on Contracts related to such Bonds shall be payable first from amounts on deposit in the PFC Debt Service Fund. In the event that amounts on deposit in the appropriate account of the PFC Debt Service Fund are insufficient to make such payments, an amount equal to the insufficiency shall be transferred from any fund or account related to General Revenues (other than the Debt Service Reserve Account, the Balloon Bonds Reserve Account, the Rebate Fund, or any account or subaccount thereof) and transferred to the PFC Debt Service Fund. (e) Operation and Maintenance Fund. Moneys on deposit in the Operation and Maintenance Fund shall be disbursed for the purpose of paying Expenses of Operation and Maintenance. In each month, commencing with the 15th business day of each month, there shall be deposited to the Operation and Maintenance Fund an amount determined by the Airport Finance Officer to be necessary to be credited to said fund to pay Expenses of Operation and Maintenance. Section 404 Debt Service Fund. Sufficient moneys shall be paid in periodic installments from the Revenue Fund into the following accounts and subaccounts for the purpose of paying the General Revenue Bonds as they become due and payable and for the purpose of making payments under Contracts, (a) Interest Account. Unless otherwise provided in a Supplemental Bond Resolution, on or before the last day of each month, there shall be deposited in the related subaccount of the Interest Account one-sixth of the amount of the interest due with respect to each series of General Revenue Bonds on the next Interest Payment Date taking into account any other moneys on deposit therein, in the Balloon Bonds Reserve Account (to the extent available) or in the Capitalized Interest Account and available to make such payment, which amount shall not be less than the interest coming due on such General Revenue Bonds on such Interest Payment Date. Moneys in the related subaccount of the Interest Account shall be used solely to pay -30- AO] ]53175.14 interest on the Bonds when due or to pay Reimbursement Obligations for Credit Facilities under which the Credit Issuer makes all interest payments on the Bonds. The Consolidated Government shall also deposit and continue to deposit any payments from a Credit Issuer under a Credit Facility Agreement related to General Revenue Bonds in the related subaccount of the Interest Account from time to time as and when received, (b) Contract Payments Account, Unless otherwise provided in a Supplemental Bond Resolution or a Contract, on or before the 30th day preceding each payment date for amounts, other than for Reimbursement Obligations, due on Contracts, including continuing commission or commitment fees, there shall be deposited in the related subaccount of the Contract Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment, is not less than the amount coming due on such payment date. Moneys in the related subaccount of the Contract Payments Account shall be used solely for such payments when due. (c) Principal Account, Unless otherwise provided in a Supplemental Bond Resolution, on or before the last day of each month, there shall be deposited in the related subaccount of the Principal Account one-twelfth of the amount of the principal due with respect to each series of General Revenue Bonds on the next Principal Maturity Date, taking into account any other moneys on deposit therein and in the Balloon Bonds Reserve Account and available to make such payment, which amount shall not be less than the principal coming due on such Bonds on such Principal Maturity Date. Moneys in the related subaccount of the Principal Account shall be used solely for the payment of principal of the Bonds as the same shall become due and payable at maturity or upon redemption or to pay Reimbursement Obligations for Credit Facilities under which the Credit Issuer makes all principal payments on the Bonds. (d) Additional Provisions Relating to Interest and Principal Subaccounts. No further payments need be made into a subaccount of the Interest Account or the Principal Account whenever the amount available in such subaccount of the Interest Account and the related subaccount of the Principal Account, if added to the amount then in the related subaccounts of the Capitalized Interest Account and of the Debt Service Reserve Account, if any (without taking into account any amount available to be drawn on any applicable Reserve Account Credit Facility), is sufficient to retire all the General Revenue Bonds then Outstanding and Contracts to which such subaccounts relate and to pay all unpaid interest accrued and to accrue prior to such retirement. No moneys in any subaccount of the Interest Account or the Principal Account shall be used or applied to the optional purchase or redemption of Bonds prior to maturity unless: (i) provision shall have been made for the payment of all of the Bonds to which such subaccount relates and all other Bonds having a parity or higher ranking lien on any category of Revenues securing such Bonds; or (ii) the Bonds to which such subaccount relates are Senior Lien Bonds and such moneys are applied to the purchase and cancellation of such Bonds which are subject to mandatory redemption on the next mandatory redemption date, which falls due within 12 months, such Bonds are purchased at a price not more than would be required for mandatory redemption, and such Bonds are cancelled upon purchase and credited against the redemption otherwise to be made on such mandatory redemption date; or (iii) the Bonds to which such subaccount relates are Senior Lien Bonds and such moneys are applied to the purchase and cancellation of such Bonds at a price less than the amount of principal which would be payable -31- AO 1153175.14 on such Bonds, together with interest accrued through the date of purchase, and such Bonds are cancelled upon purchase; or (iv) the Bonds to which such subaccount relates are Senior Lien Bonds and such moneys are in excess of the then required balance of the related subaccount in the Interest Account or the Principal Account and are applied to redeem a part of such Bonds on the next succeeding redemption date for which the required notice of redemption may be given. (e) Debt Service Reserve Account. Upon the issuance of the Series 2005 Bonds, there shall be deposited into a subaccount of the Debt Service Reserve Account the amount specified in the First Supplemental Bond Resolution. There shall be deposited into the same or separate subaccount of the Debt Service Reserve Account the amounts specified in Supplemental Bond Resolutions with respect to Additional Bonds. After the issuance of any Additional Bonds, any increase in the amount of the Debt Service Reserve Requirement resulting from the issuance of Additional Bonds which also are secured by an existing subaccount of the Debt Service Reserve Account shall be funded upon the issuance and delivery of such Additional Bonds. The balance of each subaccount of the Debt Service Reserve Account shall be maintained at an amount equal to the Debt Service Reserve Requirement for the related Bonds (or such lesser amount that is required upon the failure of the Consolidated Government or the Augusta Aviation Commission to provide a substitute Reserve Account Credit Facility in certain events). There shall be transferred from the Revenue Fund on a pro rata basis (1) to each subaccount of the Debt Service Reserve Account the amount necessary to restore the amount of cash and securities in such subaccount of the Debt Service Reserve Account to an amount equal to the difference between (a) the Debt Service Reserve Requirement for the related Bonds (or such lesser monthly amount that is required to be deposited into the Debt Service Reserve Account upon the failure of the Consolidated Government or the Augusta Aviation Commission to provide a substitute Reserve Account Credit Facility in certain events), and (b) the portion of the required balance of such subaccount of the Debt Service Reserve Account satisfied by means of a Reserve Account Credit Facility, and (2) to any Reserve Account Credit Facility Provider the amount necessary to reinstate any Reserve Account Credit Facility which has been drawn down. Whenever, on the date that such interest or principal is due on any Senior Lien Bonds, there are insufficient moneys in the related sub accounts of the Interest Account or the Principal Account available to make such payment, the Augusta Aviation Commission, on behalf of the Consolidated Government shall, without further instructions, apply so much as may be needed of the moneys in the related account, if any, of the Debt Service Reserve Account to prevent default in the payment of such interest or principal, with priority to interest payments. Whenever by reason of any such application or otherwise the amount remaining to the credit of the related subaccount of the Debt Service Reserve Account is less than the amount then required to be in such subaccount of the Debt Service Reserve Account, such deficiency shall be remedied by not more than twelve equal monthly deposits from the related account or accounts of the Revenue Fund, to the extent funds are available in the related account or accounts of the Revenue Fund for such purpose after all required transfers set forth above have been made. (f) Reserve Account Credit Facility. The Debt Service Reserve Requirement for any Bonds may be satisfied in whole or in part by means of a Reserve Account Credit Facility, subject to the following requirements: (A) the Reserve Account Credit Facility Provider must have a credit rating issued by a Rating Agency not less than the greater of the then current Rating on the related series of Bonds or the highest long-term Rating of such Rating Agency; (B) the obligations of the Consolidated Government shall not be secured by a lien equal to or superior to -32- AO 1153175.14 the lien granted to the related series of Bonds; (C) each Reserve Account Credit Facility shall have a term of at least one (1) year (or, if less, the remaining term of the related series of Bonds) and shall entitle the holder to draw upon or demand payment and receive the amount so requested in immediately available funds on the date of such draw or demand; (D) the Reserve Account Credit Facility shall permit a drawing for the full stated amount in the event (i) the Reserve Account Credit Facility expires or terminates for any reason prior to the final maturity of the related series of Bonds, and (ii) the Augusta Aviation Commission, on behalf of the Consolidated Government, fails to satisfy the Debt Service Reserve Requirement by the deposit to the Debt Service Reserve Account or the PFC Debt Service Reserve Account, as applicable, of cash, obligations, a substitute Reserve Account Credit Facility, or any combination thereof, on or before the date of such expiration or termination; (E) if the Rating issued by the Rating Agency to the Reserve Account Credit Facility Provider is withdrawn or reduced below the greater of the Rating assigned to the related series of Bonds immediately prior to such action by the Rating Agency or the highest long-term Rating of such Rating Agency, the Augusta Aviation Commission, on behalf of the Consolidated Government, shall provide a substitute Reserve Account Credit Facility within sixty (60) days after such rating change, and, if no substitute Reserve Account Credit Facility is obtained by such date, shall fund the Debt Service Reserve Requirement in not more than twenty-four (24) equal monthly deposits commencing not later than the first day of the month immediately succeeding the date representing the end of such sixty (60) day period; and (F) if the Reserve Account Credit Facility Provider commences any insolvency proceedings or is determined to be insolvent or fails to make payments when due on its obligations, the Augusta Aviation Commission, on behalf of the Consolidated Government, shall provide a substitute Reserve Account Credit Facility within sixty (60) days thereafter, and, if no substitute Reserve Account Credit Facility is obtained by such date, shall fund the Debt Service Reserve Requirement in not more than twenty-four (24) equal monthly deposits commencing not later than the first day of the month immediately succeeding the date representing the end of such sixty (60) day period. If the events described in either clauses (E) or (F) above occur, the Reserve Account Credit Facility at issue shall not be relinquished until after the Debt Service Reserve Requirement is fully satisfied by the provision of cash, obligations, or a substitute Reserve Account Credit Facility or any combination thereof. Any amount received from the Reserve Account Credit Facility shall be deposited directly into the related subaccounts of the Interest Account and the Principal Account, and such deposit shall constitute the application of amounts in the related subaccount of the Debt Service Reserve Account or the PFC Debt Service Reserve Account, as applicable. Repayment of any draw-down on the Reserve Account Credit Facility (other than repayments which reinstate the Reserve Account Credit Facility) and any interest or fees due the Reserve Account Credit Facility Provider under such Reserve Account Credit Facility shall be secured by a lien on Net General Revenues or PFC Revenues, as applicable, subordinate to the lien of the General Revenue Bonds for payments into the related subaccounts of the Debt Service Fund or PFC Debt Service Fund, as applicable, and the Rebate Fund and payments on any Credit Facility Agreement securing the related Bonds. Any such Reserve Account Credit Facility shall be pledged to the benefit of the owners of all of the Bonds secured by it. The Consolidated Government reserves the right, if it deems it , necessary in order to acquire such a Reserve Account Credit Facility, to amend the Bond Resolution without the consent of any of the owners of the Bonds in order to grant to the Reserve Account Credit Facility Provider such additional rights as it may demand, provided that such -33- AO 1153175.14 amendment shall not, in the written opinion of Bond Counsel filed with the Consolidated Government, impair or reduce the security granted to the owners of Bonds or any of them. (g) Balloon Bonds Reserve Account. On or before January I of each Sinking Fund Year, there shall be deposited in the related subaccount of the Balloon Bonds Reserve Account an amount equal to the Debt Service Requirement on the respective series of Balloon Bonds less the Debt Service Requirement for such Balloon Bonds without taking into account paragraph (c) of the definition of Debt Service Requirement for the Sinking Fund Year ending on the next January 1, taking into account any earnings on deposit in the Balloon Bonds Reserve Account. Moneys on deposit in each subaccount of the Balloon Bonds Reserve Account shall be invested at a yield not in excess of the yield on the series of Balloon Bonds to which such subaccount relates. Moneys in the Balloon Bonds Reserve Account shall be used only for the payment of principal and interest on Balloon Bonds and may be transferred to the Interest Account and Principal Account of the Debt Service Fund and used to pay the principal of and interest on Balloon Bonds only in those years in which the Balloon Bonds have a Principal Maturity Date. Notwithstanding the foregoing limitation, withdrawals from the Balloon Bonds Reserve Account may be transferred to the Interest Account of the Debt Service Fund for the related series of Balloon Bonds to the extent there are insufficient moneys on deposit therein. In the event a withdrawal described in the preceding sentence is made, the Augusta Aviation Commission shall set rates, fees and charges in the immediately succeeding Sinking Fund Year to replenish such deficiency in the Balloon Bonds Reserve Account by the end of such immediately succeeding Sinking Fund Year. Following the end of each Fiscal Year, the Augusta Aviation Commission shall deliver to the Rating Agencies and the Underwriters a report of the Airport Consultant that the amounts on deposit and to be deposited in the Balloon Bonds Reserve Account and taking into account the Augusta Aviation Commission's funding assumptions will be sufficient to pay the principal of and interest on the Balloon Bonds served by the Balloon Bonds Reserve Account as they become due. Section 405 Operation and Maintenance Reserve Fund. At the time of the issuance and delivery of the Series 2005 Bonds, there shall be deposited from funds held by the Augusta Aviation Commission an amount equal to 60 days' Expenses of Operation and Maintenance (the "Operating Reserve"). Thereafter, there shall be deposited monthly to the Operation and Maintenance Reserve Fund an amount, if any, necessary to maintain a balance equal to the Operating Reserve as estimated by the Airport Finance Officer. Amounts held within the Operation and Maintenance Reserve Fund shall be disbursed. solely for the purposes of paying Expenses of Operation and Maintenance in the event there shall be insufficient money in the Revenue Fund to pay the same when due. Section 406 Subordinate Securities Fund. After all deposits are made as required pursuant to Sections 403, 404 and 405, there shall be deposited sufficient moneys to be paid in periodic installments from the Revenue Fund into the Subordinate Securities Fund for the purpose of paying Subordinate Bonds and Other Airport Obligations as they become due and payable. Such periodic installments shall be paid into the Subordinate Securities Fund in accordance with the terms of such Other Airport Obligations or as set forth in a Supplemental Resolution. In connection with the issuance of any Subordinate -34- AO 1153175.14 Bonds or Other Airport Obligations, the Augusta Aviation Commission may place additional restrictions on the use of funds on deposit in the Subordinate Securities Fund, and may agree that such fund will be a trust fund. Section 407 Renewal and Replacement Fund. At the time of issuance and delivery of the Series 2005 Bonds, there shall be deposited from funds held by the Augusta Aviation Commission the sum of$I,OOO,OOO to the Renewal and Replacement Fund. The Renewal and Replacement Fund shall at all times contain a balance of $1,000,000 or such greater amount as is recommended from time to time by the Airport Consultant (the "Required Amount"). If at any time during a Fiscal Year, moneys on deposit in the Renewal and Replacement Fund are less than the Required Amount, there shall be deposited, beginning with the first month of the Fiscal Year following the Fiscal Year in which such deficiency occurred and within a period of 12 months thereafter, on the last business day of each month, amounts into the Renewal and Replacement Fund from moneys on deposit in the Revenue Fund, after making the required deposits to the Debt Service Fund and the Subordinate Securities Fund, so that not less than the Required Amount will be on deposit in the Renewal and Replacement Fund. The moneys on deposit in the Renewal and Replacement Fund shall be used solely for non-recurring capital costs related to the Airport. Section 408 Capital Improvement Fund. Moneys transferred into the Capital Improvement Fund shall be applied to the Capital Improvement Account and to the Revenue Credit Account at the discretion of the Augusta Aviation Commission. Moneys in the Revenue Credit Account shall be transferred at the beginning of each Fiscal Year to the Revenue Fund and applied for such Fiscal Year as a credit in the calculation of such fees and charges as determined by the Augusta Aviation Commission that are related to the Airport. All sums accumulated and retained in the Capital Improvement Account shall be used first to prevent default in the payment of interest on or principal of any General Revenue Bonds when due and then shall be applied from time to time, to the following purposes and, prior to the occurrence and continuation of an Event of Default, in the order of priority determined by the Augusta Aviation Commission, in its sole discretion: (a) for the purposes for which moneys held in the Revenue Fund may be applied under Section 403, (b) to pay any governmental charges and assessments against the Airport or any part thereof which may then be due and owing, (c) to make acquisitions, betterments, extensions, repairs, or replacements or other capital improvements (including the purchase of equipment) to the Airport deemed necessary by the Augusta Aviation Commission (including payments under contracts with vendors, suppliers, and contractors for the foregoing purposes), (d) for lawful Airport Purposes and (e) to acquire Senior Lien Bonds by redemption or by purchase in the open market at a price not exceeding the callable prices as provided and in accordance with the terms and conditions of the Bond Resolution, which Senior Lien Bonds may be any of the Senior Lien Bonds, prior to their respective maturities, and when so used for such purposes the moneys shall be withdrawn from the Capital Improvement Account and deposited into the related sub accounts of the Interest Account and the Principal Account for the Bonds to be so redeemed or purchased. -35- AO 1153175.14 Section 409 PFC Debt Service Fund. Sufficient moneys shall be paid in periodic installments from the PFC Revenue Fund into the following accounts and sub accounts for the purpose of paying the PFC Revenue Bonds as they become due and payable and for the purpose of making payments under related Contracts. (a) Interest Account. Unless otherwise provided in a Supplemental Bond Resolution, on or before the last day of each month, there shall be deposited in the related subaccount of the Interest Account one-sixth of the amount of the interest due with respect to a series of PFC Revenue Bonds on the next Interest Payment Date taking into account any other moneys on deposit therein, in the PFC Balloon Bonds Reserve Account (to the extent available) or in the Capitalized Interest Account and available to make such payment, which amount shall not be less than the interest coming due on such Bonds on such Interest Payment Date. Moneys in the related subaccount of the Interest Account shall be used solely to pay interest on the Bonds when due or to pay Reimbursement Obligations for Credit Facilities under which the Credit Issuer makes all interest payments on the Bonds. There shall also be deposited from time to time any payments from a Credit Issuer under a Credit Facility Agreement in the related subaccount of the Interest Account from time to time as and when received. (b) Contract Payments Account. Unless otherwise provided in a Supplemental Bond Resolution or a Contract, on or before the 30th day preceding each payment date for amounts, other than for Reimbursement Obligations, due on Contracts, including continuing commission or commitment fees, there shall be deposited in the related subaccount of the Contract Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment, is not less than the amount coming due on such payment date. Moneys in the related subaccount of the Contract Payments Account shall be used solely for such payments when due. (c) Principal Account. Unless otherwise provided in a Supplemental Bond Resolution, on or before the last day of each month, there shall be deposited in the related subaccount of the Principal Account one-twelfth of the amount of the principal due with respect to a series of Bonds on the next Principal Maturity Date, taking into account any other moneys on deposit therein and in the PFC Balloon Bonds Reserve Account and available to make such payment, which amount shall not be less than the principal coming due on such Bonds on such Principal Maturity Date. Moneys in the related subaccount of the Principal Account shall be used solely for the payment of principal of the Bonds as the same shall become due and payable at maturity or upon redemption or to pay Reimbursement Obligations for Credit Facilities under . which the Credit Issuer makes all principal payments on the Bonds. (d) Additional Provisions Relating to Interest and Principal Subaccounts. No further payments need be made into a subaccount of the Interest Account or the Principal Account whenever the amount available in such subaccount of the Interest Account and the related subaccount of the Principal Account, if added to the amount then in the related sub accounts of the Capitalized Interest Account and of the PFC Debt Service Reserve Account, if any (without taking into account any amount available to be drawn on any applicable Reserve Account Credit Facility), is sufficient to retire all the PFC Revenue Bonds then Outstanding and Contracts to which such subaccounts relate and to pay all unpaid interest accrued and to accrue prior to such -36- AO 1153175.14 retirement. No moneys in any subaccount of the Interest Account or the Principal Account shall be used or applied to the optional purchase or redemption of Bonds prior to maturity unless: (i) provision shall have been made for the payment of all of the Bonds to which such subaccount relates and all other Bonds having a parity or higher ranking lien on any category of Revenues securing such Bonds; or (ii) the Bonds to which such subaccount relates are Senior Lien Bonds and such moneys are applied to the purchase and cancellation of such Bonds which are subject to mandatory redemption on the next mandatory redemption date, which falls due within 12 months, such Bonds are purchased at a price not more than would be required for mandatory redemption, and such Bonds are cancelled upon purchase and credited against the redemption otherwise to be made on such mandatory redemption date; or (iii) the Bonds to which such subaccount relates are Senior Lien Bonds and such moneys are applied to the purchase and cancellation of such Bonds at a price less than the amount of principal which would be payable on such Bonds, together with interest accrued through the date of purchase, and such Bonds are cancelled upon purchase; or (iv) the Bonds to which such subaccount relates are Senior Lien Bonds and such moneys are in excess of the then required balance of the related subaccount in the Interest Account or the Principal Account and are applied to redeem a part of such Bonds on the next succeeding redemption date for which the required notice of redemption may be given. (e) PFC Debt Service Reserve Account. Upon the issuance of the Series 2005 Bonds, there shall be deposited into a subaccount of the PFC Debt Service Reserve Account the amount specified in the First Supplemental Bond Resolution. There shall be deposited into the same or separate subaccount of the PFC Debt Service Reserve Account the amounts specified in Supplemental Bond Resolutions with respect to Additional Bonds. After the issuance of any Additional Bonds, any increase in the amount of the Debt Service Reserve Requirement resulting from the issuance of Additional Bonds which also are secured by an existing subaccount of the PFC Debt Service Reserve Account shall be funded upon the issuance and delivery of such Additional Bonds. The balance of each subaccount of the PFC Debt Service Reserve Account shall be maintained at an amount equal to the Debt Service Reserve Requirement for the related Bonds (or such lesser amount that is required upon the failure of the Consolidated Government or the Augusta Aviation Commission to provide a substitute Reserve Account Credit Facility in certain events). There shall be transferred from the Revenue Fund on a pro rata basis (1) to each subaccount of the PFC Debt Service Reserve Account the amount necessary to restore the amount of cash and securities in such subaccount of the PFC Debt Service Reserve Account to an amount equal to the difference between (a) the Debt Service Reserve Requirement for the related Bonds (or such lesser monthly amount that is required to be deposited into the PFC Debt Service Reserve Account upon the failure of the Consolidated Government or the Augusta Aviation Commission to provide a substitute Reserve Account Credit Facility in certain events), and (b) the portion of the required balance of such subaccount of the PFC Debt Service Reserve Account satisfied by means of a Reserve Account Credit Facility, and (2) to any Reserve Account Credit Facility Provider the amount necessary to reinstate any Reserve Account Credit Facility which has been drawn down. Whenever, on the date that such interest or principal is due on any Senior Lien Bonds, there are insufficient moneys in the related subaccounts of the Interest Account or the Principal Account available to make such payment, the Augusta Aviation , Commission shall, without further instructions, apply so much as may be needed of the moneys I in the related subaccount, if any, of the PFC Debt Service Reserve Account to prevent default in the payment of such interest or principal, with priority to interest payments. Whenever by reason of any such application or otherwise the amount remaining to the credit of the related subaccount -37- AO 1153175.14 of the PFC Debt Service Reserve Account is less than the amount then required to be in such subaccount of the PFC Debt Service Reserve Account, such deficiency shall be remedied by not more than twelve equal monthly deposits from the PFC Revenue Fund, to the extent funds are available the PFC Revenue Fund for such purpose after all required transfers set forth above have been made. The Debt Service Reserve Requirement for any Bonds may be satisfied in whole or in part by means of a Reserve Account Credit Facility as set forth in Section 404(f). (f) PFC Balloon Bonds Reserve Account. On or before January I of each Sinking Fund Year, there shall be deposited in the related subaccount of the PFC Balloon Bonds Reserve Account an amount equal to the Debt Service Requirement on the respective series of Balloon Bonds less the Debt Service Requirement for such Balloon Bonds without taking into account paragraph (c) of the definition of Debt Service Requirement for the Sinking Fund Year ending on the next January 1, taking into account any earnings on deposit in the PFC Balloon Bonds Reserve Account. Moneys on deposit in each subaccount of the PFC Balloon Bonds Reserve Account shall be invested at a yield not in excess of the yield on the series of Balloon Bonds to which such subaccount relates. Moneys on deposit in each subaccount of the PFC Balloon Bonds Reserve Account shall be invested at a yield not in excess of the yield on the series of Balloon Bonds to which such subaccount relates. Moneys in the PFC Balloon Bonds Reserve Account shall be used only for the payment of principal and interest on Balloon Bonds and may be transferred to the Interest Account and Principal Account of the PFC Debt Service Fund and used to pay the principal of and interest on Balloon Bonds only in those years in which the Balloon Bonds have a Principal Maturity Date. Notwithstanding the foregoing limitation, withdrawals from the PFC Balloon Bonds Reserve Account may be transferred to the Interest Account of the PFC Debt Service Fund for the related series of Balloon Bonds to the extent there are insufficient moneys on deposit therein. In the event a withdrawal described in the preceding sentence is made, the Augusta Aviation Commission shall set rates, fees and charges in the immediately succeeding Sinking Fund Year to replenish such deficiency in the PFC Balloon Bonds Reserve Account by the end of such immediately succeeding Sinking Fund Year. Following the end of each Fiscal Year, the Augusta Aviation Commission shall deliver to the Rating Agencies and the Underwriters a report of the Airport Consultant that the amounts on deposit and to be deposited in the PFC Balloon Bonds Reserve Account and taking into account the Augusta Aviation Commission's funding assumptions will be sufficient to pay the principal of and interest on the Balloon Bonds served by the PFC Balloon Bonds Reserve Account as they become due. Section 410 PFC Oblieations Fund. After making the required deposits to the PFC Debt Service Fund, these shall be transferred from the PFC Revenue Fund to the PFC Obligations Fund an amount equal to costs of administering the PFC program in such month and any Expenses of Operation and Maintenance ofPFC Facilities eligible to be paid from PFC Revenues. -38- AO 1153175.14 Section 411 PFC Capital Fund. All amounts remaining in the PFC Revenue Fund after being used for deposits to the PFC Debt Service Fund for payment of related Bonds and Contracts and to the PFC Obligations Fund shall be transferred to the PFC Capital Fund. Amounts held in the PFC Capital Fund shall be used to pay Costs ofPFC Facilities, the payment ofPFC Revenue Bonds and related Contracts. Section 412 Deposits and Security of Funds and Accounts. All moneys in the funds and accounts established under the Bond Resolution shall be held by the Augusta Aviation Commission, on behalf of the Consolidated Government, in one or more Depositories meeting the requirements of Section 402(d). Uninvested moneys shall, at least to the extent not guaranteed by the Federal Deposit Insurance Corporation, be secured to the fullest extent required by the laws of the State for the security of public funds. Section 413 Investment of Funds and Accounts. Moneys in the funds and accounts established under the Bond Resolution shall be invested and reinvested in Permitted Investments. Investment Earnings in each fund and account (except the Debt Service Reserve Account and the PFC Debt Service Reserve Account) shall be retained therein. Investment Earnings from the investment of moneys in each subaccount of the Debt Service Reserve Account and the PFC Debt Service Reserve Account shall be retained in such subaccount of the Debt Service Reserve Account and thePFC Debt Service Reserve Account at all times the balance is less than the respective Debt Service Reserve Requirement; thereafter and at all times the balance of such subaccount of the Debt Service Reserve Account and the PFC Debt Service Reserve Account is equal to or greater than the respective Debt Service Reserve Requirement, such Investment Earnings shall be deposited in the related subaccount of the Interest Account. The Supplemental Bond Resolution authorizing the issuance of any Bonds may specify maturity limitations and different allocations of Investment Earnings on investments of moneys in the funds and accounts relating to such Bonds. Moneys in each of such funds shall be accounted for as a separate and special fund apart from all other Airport funds, provided that investments of moneys therein may be made in a pool of investments together with other moneys of the Airport so long as sufficient Permitted Investments in such pool, not allocated to other investments of contractually or legally limited duration, are available to meet the requirements of the foregoing provisions. Section 414 Valuation ofInvestments. All investments made for any fund, account or subaccount under the Bond Resolution shall, for purposes of the Bond Resolution, be valued at fair market value on each related Interest Payment Date. -39- AO 1153175.14 Fund. Section 415 Application of Excess in Debt Service Fund and PFC Debt Service Whenever on any January 2 the amount of moneys in any account or subaccount of the Debt Service Fund (excluding the Balloon Bonds Reserve Account) or the PFC Debt Service Fund (excluding the PFC Balloon Bonds Reserve Account) exceeds the sum of the amount then currently required to be held therein plus the earnings on the account or subaccount for the immediately preceding Sinking Fund Year, the excess shall be transferred to the related account in the Revenue Fund or PFC Revenue Fund, respectively; provided any excess in a subaccount of the Debt Service Reserve Account or PFC Debt Service Reserve Account shall be transferred to the related subaccount of the Interest Account of the Debt Service Fund and the PFC Debt Service Fund, respectively. Section 416 Disposition of Monevs After Payment of Bonds and Contracts. Any amounts remaining in any fund or account established under the Bond Resolution after payment in full of the principal of, redemption premium, if any, and interest on the Bonds (or after provision for payment thereof has been made) and obligations treated as Senior Lien Bonds pursuant to Section 502( c), the fees, charges, and expenses of the Paying Agent and Bond Registrar, all amounts owing to any Credit Issuer, any Reserve Account Credit Facility Provider, and any party to a Contract, and all other amounts required to be paid under the Bond Resolution (including amounts required to be paid into the Rebate Fund), shall be promptly paid to the Augusta Aviation Commission. [End of Article IV] -40- AO 1153175.14 ARTICLE V ADDITIONAL BONDS; CONTRACTS; OTHER OBLIGATIONS Section 501 No Bonds Except as Permitted in the Bond Resolution. No Bonds, except for the Series 2005 Bonds, may be issued and no other obligations, except Contracts, which are secured by any interest in or lien on Net General Revenues or PFC Revenues may be entered into except pursuant to Sections 502, 503 or 504. Section 502 Additional Bonds. (a) Any portion or all of a series of Bonds may be refunded at maturity, upon redemption in accordance with their terms, or upon payment or redemption with the consent of the owners of such Bonds, and the refunding Bonds so issued shall constitute Additional Bonds with a Senior Lien on Net General Revenues or PFC Revenues, as the case may be, if all of the following conditions are satisfied: (1) The Consolidated Government shall have obtained a certificate of the Airport Finance Officer demonstrating that the refunding will reduce the total debt service payments on Outstanding Bonds, including payments on related Contracts, which are secured on a parity with the Bonds to be refunded, all on a present value basis; or (2) as an alternative to, and in lieu of, satisfying the requirements of (1), all Outstanding Bonds which are secured on a parity with the Bonds to be refunded are being refunded under arrangements which immediately result in making provision for the payment of such Bonds; and Bonds. (3) requirements of (b)(3), (5), (6) and (7) are met with respect to such refunding (b) Additional Bonds (including refunding Bonds which do not meet the requirements of subsection (a) of this Section) may also be issued on a parity with Outstanding General Revenue Bonds pursuant to a Supplemental Bond Resolution, and the Bonds so issued shall be secured on a parity with such Outstanding General Revenue Bonds, if all of the following conditions are satisfied: (1) There shall have been procured and filed with the Consolidated Government either: (A) a certificate of the Airport Finance Officer to the effect that the historical Net General Revenues, together with Other Available Moneys, for each of the two most recent audited Fiscal Years, were equal to at least 125 percent of the Maximum Annual Debt Service Requirement on all General Revenue Bonds which will be Outstanding immediately after the issuance of the proposed Additional Bonds and secured on a parity therewith, or -41- AO 1153175.14 (B) a report by an Airport Consultant to the effect that in each Fiscal Year of the Forecast Period the forecasted Net General Revenues, together with Other Available Moneys, are expected to equal at least the sum of (x) 125 percent of the Average Annual Debt Service Requirement on all General Revenue Bonds which will be Outstanding immediately after the issuance of the proposed Additional Bonds and secured on a parity therewith and (y) 100 percent of the maximum amount of debt service or other amounts payable in any subsequent Fiscal Year on all Subordinate Bonds and Other Airport Obligations. The certificate of the Airport Finance Officer that is required by (b)(1 )(A) may contain pro forma adjustments to historical Net General Revenues equal to 100 percent of the increased annual amount attributable to any revision in the schedule of rates, fees, and charges for the services and facilities furnished by the Airport, imposed prior to the date of delivery of the proposed Additional Bonds and not fully reflected in the historical Net General Revenues actually received during such historical period used. Such pro forma adjustments, if any, shall be based upon a report of an Airport Consultant as to the amount of General Revenues which would have been received during such period had the new rate schedule been in effect throughout such period. (2) If such Additional Bonds are to be secured by a Senior Lien on PFC Revenues, there shall have been procured and filed with the City either: (A) a certificate of the Airport Finance Officer to the effect that historical PFC Revenues for each of the two most recent audited Fiscal Years were equal to at least 100 percent of the Maximum Annual Debt Service Requirement of all PFC Revenue Bonds which will be Outstanding immediately after the issuance of the proposed Additional Bonds; or (B) a report by an Airport Consultant to the effect that in each Fiscal Year of the Forecast Period forecasted PFC Revenues are expected to equal at least 100 percent of the Average Annual Debt Service Requirement of all PFC Revenue Bonds which will be Outstanding immediately after the issuance of the proposed Additional Bonds. The certificate of the Airport Finance Officer that is required by (b )(2)(A) may take into account pro forma adjustments to historical PFC Revenues equal to 100 percent of the increased PFC Revenues attributable to any increase in the passenger facility charge imposed prior to the date of delivery of the proposed Additional Bonds and not fully reflected in the historical PFC Revenues actually received during such historical period used. Such pro forma adjustments, if any, shall be based upon a report of an Airport Consultant as to the amount of PFC Revenues which would have been received during such period had the increased passenger facility charge been in effect I throughout such period. (3) The Airport Finance Officer shall have certified, at or before issuance of the I Additional Bonds, that the payments required to be made into each account or subaccount of the Debt Service Fund have been made and the balance in each account or subaccount of the Debt -42- AO 1153175.14 Service Fund is not less than the balance required by the Bond Resolution as. of the date of issuance of the proposed Additional Bonds. (4) The Supplemental Bond Resolution authorizing the proposed Additional Bonds must require (i) that the amount to be accumulated and maintained in the subaccount of the Debt Service Reserve Account or PFC Debt Service Reserve Account for Bonds which are to be secured on a parity with such Additional Bonds, if any, be increased to not less than 100 percent of the Debt Service Reserve Requirement computed on a basis which includes all Bonds which will be Outstanding and secured on a parity with the Additional Bonds immediately after the issuance of the proposed Additional Bonds and (ii) that the amount of such increase be deposited in such subaccount on or before the date specified in Section 404(e) or Section 409(e). (5) The Supplemental Bond Resolution authorizing the proposed Additional Bonds must require the proceeds of such proposed Additional Bonds to be used solely to make capital improvements to the Airport, to fund capitalized interest on any Bonds, to refund other obligations issued for such purposes (whether or not such refunding Bonds satisfy the requirements of (a)), and to pay expenses incidental thereto and to the issuance of the proposed Additional Bonds. (6) The Airport Director and the Airport Finance Officer shall have certified, by written certificate dated as of the date of issuance of the Additional Bonds, that the Consolidated Government is in compliance with all requirements of the Bond Resolution. (7) The Consolidated Government shall have received an OpInIOn of Bond Counsel, dated as of the date of issuance of the Additional Bonds, to the effect that the Supplemental Bond Resolution and any related Supplemental Resolution authorizing the issuance of Additional Bonds have been duly adopted by the Consolidated Government. (c) Obligations which would be Other Airport Obligations but for the existence of a Senior Lien on a category of Revenues securing such obligations may be issued and so secured, and thereafter will be treated as Senior Lien Bonds, if all of the conditions of (b)(1) or (2), as applicable, and (b)(3) through (7) are satisfied treating such obligations as Additional Bonds and the issuance and security documents therefor as Supplemental Bond Resolutions. The Augusta Aviation Commission shall notify the Rating Agencies of its intent to so secure Other Airport Obligations. (d) If the Additional Bonds are to have Senior Liens on more than one category of . Revenues, the requirements of (b)(1) and (b )(2) must be met. Section 503 Subordinate Lien Bonds. (a) The Consolidated Government reserves the right to issue bonds or other obligations with a Subordinate Lien on Net General Revenues provided the conditions of this Section are met. In the event such Subordinate Bonds are issued, amounts in the Subordinate Securities Fund shall be used to pay such Subordinate Bonds. : (b) The Consolidated Government reserves the right to issue bonds or other obligations with a Subordinate Lien on PFC Revenues provided the conditions of this Section are -43- AO 1153175.14 met. In the event such Subordinate Bonds are issued, payments from the PFC Revenue Fund to the PFC Capital Fund shall be suspended and the amounts which otherwise would have been transferred to the PFC Capital Fund may be used to pay such Subordinate Bonds. (c) The documents and proceedings pursuant to which such Supplemental Bonds are issued or incurred shall contain provisions to the effect that: (1) Such Subordinate Lien Bonds shall be junior and subordinate in lien and right of payment in all respects to any General Revenue Bonds or PFC Revenue Bonds and any other Airport Obligations treated as General Revenue Bonds or PFC Revenue Bonds under this Master Bond Resolution. (2) In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization, or other similar proceedings in connection therewith, relative to the Consolidated Government or to its property, and in the event of any proceedings for voluntary liquidation, dissolution, or other winding up of the Consolidated Government, whether or not involving insolvency or bankruptcy, the owners of all Bonds issued pursuant to this Resolution then Outstanding and parties to related Contracts shall be entitled to receive payment in full of all principal and interest due on all such Bonds and related Contracts in accordance with the provisions of the Bond Resolution and related Contracts before the owners of any Subordinate Lien Bonds are entitled to receive any payment from the Net General Revenues or the PFC Revenues, as the case may be, or the amounts held in the funds and accounts created under the Bond Resolution on account of principal of, premium, if any, or interest on the Subordinate Lien Bonds or related Contracts. (3) In the event that any of the Subordinate Lien Bonds are declared due and payable before their expressed maturities because of the occurrence of an event of default (under circumstances when the provisions of paragraph (2) shall not be applicable), no owners of such Subordinate Lien Bonds or parties to related Contracts or Hedge Agreements may receive any accelerated payment from the Net General Revenues, the PFC Revenues or the amounts held in the funds and accounts created under this Bond Resolution until the owners of all Bonds Outstanding hereunder and parties to related Contracts have received payment in full of all principal and interest on all such Bonds and all payments on related Contracts. (4) If any Event of Default shall have occurred and be continuing (under circumstances when the provisions of paragraph (2) shall not be applicable), the owners of all Bonds then Outstanding hereunder and parties to related Contracts shall be entitled to receive! payment in full of all principal and interest then due on all such Bonds and related Contracts I before the owners of the Subordinate Lien Bonds or parties to related Contracts are entitled to receive any payment from Net General Revenues, the PFC Revenues or the amounts held in the funds and accounts created under the Bond Resolution of principal of, premium, if any, or interest on the Subordinate Lien Bonds or payments under related Contracts. (5) No owner of Senior Lien Bonds, or party to any related Contract shall be i prejudiced in its right to enforce subordination of the Subordinate Lien Bonds and related Contracts by any act or failure to act on the part of the Consolidated Government. -44- AO 1153175.14 Section 504 Special Purpose Revenue Bonds: Other Airport Oblieations. (a) Special Purpose Revenue Bonds may be issued without limit. (b) Other Airport Obligations (other than obligations treated as Senior Lien Bonds pursuant to Section 502(c)) may not be accelerated for purposes of being paid from Revenues and, upon an event described in Section 503(c)(2), or an Event of Default, may not be paid from Revenues until the owners of all Senior Lien Bonds and related Contracts have been paid in full. Section 505 Special Purpose Facilities. Facilities at the Airport may be designated by the Consolidated Government as "Special Purpose Facilities" by the filing of a certificate of the Airport Director with respect thereto if such facilities meet the definition of Special Purpose Facilities in Section 101. Section 506 Adoption of Proceedinl!s and Validation. The Consolidated Government shall adopt a Supplemental Bond Resolution authorizing the issuance of any Additional Bonds and, except for the First Supplemental Bond Resolution, reciting that the requirements of this Article have been satisfied, and shall set forth in such proceedings, among other things, the security therefor, the date or dates such Additional Bonds shall bear and the rate or rates of interest, interest payment date or dates, maturity date or dates, and redemption provisions with respect to such Additional Bonds and any other matters applicable to such Additional Bonds as the Consolidated Government may deem advisable. Any such Supplemental Bond Resolution shall restate and reaffirm, by reference, all of the applicable terms, conditions, and provisions of the Bond Resolution not modified by the Supplemental Bond Resolution. All Additional Bonds, any Supplemental Bond Resolution providing for Additional Bonds, and all proceedings relative thereto and the security therefor shall be validated as then prescribed by law. Section 507 Proceedinl!s Authorizine Additional Bonds. No Supplemental Bond Resolution authorizing the issuance of Additional Bonds as permitted under this Article shall conflict with the terms and conditions of the Bond Resolution, except to the extent that the Supplemental Bond Resolution is adopted for one ofthe purposes set forth in Section 1001 and complies with the provisions of Section 1001 for the adoption of Supplemental Resolutions without the consent of Bondholders. Section 508 Applicability to Additional Bonds. The provisions of the Bond Resolution shall be construed as including and being applicable to any future series of Bonds, and any such Bonds shall be treated, unless otherwise I specifically stated, as if such Additional Bonds were issued concurrently with the Series 2005 -45- AO 1153175.14 Bonds, pursuant to the terms of this Master Bond Resolution and the First Supplemental Bond Resolution. Section 509 Credit Facilities. In connection with the issuance of any Bonds, the Consolidated Government may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal of, premium, if any, or interest due or to become due on such Bonds, providing for the purchase of such Bonds by the Credit Issuer, or providing funds for the purchase of such Bonds by the Consolidated Government. In connection therewith the Consolidated Government may enter into Credit Facility Agreements with such Credit Issuers providing for, among other things, (i) the payment of fees and expenses to such Credit Issuers for the issuance of such Credit Facilities; (ii) the terms and conditions of such Credit Facilities and the Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facilities. The Consolidated Government may secure any Credit Facility by an agreement providing for the purchase of the Bonds secured thereby with such adjustments to the rate of interest, method of determining interest, maturity, or redemption provisions as are specified by the Consolidated Government in the applicable Supplemental Bond Resolution. The Consolidated Government may in a Credit Facility Agreement agree to directly reimburse such Credit Issuer for amounts paid under the terms of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created for purposes of the Bond Resolution until amounts are paid under such Credit Facility. Any such Reimbursement Obligation shall be deemed to be a part of the Bonds to which the Credit Facility relates which gave rise to such Reimbursement Obligation, and references to principal and interest payments with respect to such Bonds shall include principal and interest (except for principal amortization requirements with respect to the Reimbursement Obligation that are more accelerated than the amortization requirements for the related Bonds, without acceleration) due on the Reimbursement Obligation incurred as a result of payment of such Bonds with the Credit Facility. All other amounts payable under the Credit Facility Agreement (including any principal amortization requirements with respect to the Reimbursement Obligation that are more accelerated than the amortization requirements for the related Bonds, without acceleration) shall be fully subordinate to the payment of debt service on the related class of Bonds. Any such Credit Facility shall be for the benefit of and secure such Bonds or portion thereof as specified in the applicable Supplemental Bond Resolution. Notwithstanding the other provisions hereof, the Consolidated Government's obligations under a Credit Facility which requires the Credit Issuer to make all interest payments due on the Bonds may be secured to the extent of such amounts by a pledge of, and lien on, . revenues pledged to the payment of the related Bonds on a parity with such lien, or may be wholly or partially subordinate in lien and right of payment to the payment of the Bonds, as determined by the Consolidated Government. -46- AO 1153175.14 Section 510 Other Oblieations. The Consolidated Government expressly reserves the right, at any time, to adopt one or more other bond resolutions and reserves the right, at any time, to issue any other obligations not secured by the amounts pledged under the Bond Resolution, including bonds or other obligations secured by gifts, grants, reimbursements or payments described in (i)(y) of the definition of "General Revenues." [End of Article V] -47- AO 1153175.14 ARTICLE VI GENERAL PROVISIONS Section 601 Rate Covenant. The Consolidated Government acting by and through the Augusta Aviation Commission shall continuously own, control, operate, and maintain the Airport in an efficient and economical manner and on a revenue producing basis and shall at all times prescribe, fix, maintain, and collect rates, fees, and other charges for the services and facilities furnished by the Airport fully sufficient at all times: (a) To provide for 100 percent of the Expenses of Operation and Maintenance and for the accumulation in the Operation and Maintenance Reserve Fund of the Operating Reserve; and (b) such that Net General Revenues, together with Other Available Moneys, in each Fiscal Year (1) will equal at least 125 percent of the Debt Service Requirement on all General Revenue Bonds then Outstanding for the Sinking Fund Year ending on the next January 1 and at least 100 percent of the debt service or other amounts payable on all Subordinate Bonds and Other Airport Obligations payable from Net General Revenues then Outstanding for the year of computation; (2) will enable the Augusta Aviation Commission to make all required payments, if any, into the Debt Service Reserve Account, the PFC Debt Service Reserve Account, the Rebate Fund, the Renewal and Replacement Fund and on any Contract or Other Airport Obligation; (3) will enable the Augusta Aviation Commission to accumulate an amount to be held in the Capital Improvement Fund, which in the judgment of the Augusta Aviation Commission is adequate to meet the costs of major renewals, replacements, repairs, additions, betterments, and improvements to the Airport, necessary to keep the same in good operating condition or as is required by any governmental agency having jurisdiction over the Airport; and (4) will remedy all deficiencies in required payments from the Revenue Fund from prior Fiscal Years; and (c) If the Consolidated Government, acting by and through the Augusta Aviation Commission, fails to prescribe, fix, maintain, and collect rates, fees, and other charges, or to revise such rates, fees, and other charges, in accordance with the provisions of this section in any Fiscal Year, but the Augusta Aviation Commission, on behalf of the Consolidated Government, in the next Fiscal Year has promptly taken all available measures to revise such rates, fees and other charges after consideration of recommendations from an Airport Consultant, there shall be no Event of Default as described in Section 701(f) until the end of the second Fiscal Year following such failure to prescribe rates in accordance with Section 601 and only then if Net Revenues are less than the amount required by this section. -48- AO 1153175.14 The rates, fees, and other charges shall be classified in a reasonable manner to cover users of the services and facilities furnished by the Airport so that, as nearly as practicable, such rates, fees, and other charges shall be uniform in application to all users falling within any reasonable class. Neither the Consolidated Government nor the Augusta Aviation Commission shall enter into any agreement with a user of the Airport facilities unless such agreement permits the rates, fees and charges to be revised semiannually by the Consolidated Government or by the Augusta Aviation Commission, on its behalf (a) to comply with the requirements of this Section 60 I and (b) in the event of an unusual or extraordinary event resulting in a decline of Revenues by more than 10 percent (calculated on a budget basis) from the immediately preceding six month period. Section 602 Maintenance of the Airport in Good Condition. The Augusta Aviation Commission covenants that it has and will continue to enforce reasonable rules and regulations governing the Airport and the operation thereof, that all compensation, salaries, fees, and wages paid by it in connection with the operation, maintenance, and repair of the Airport will be reasonable, that it will operate the Airport in an efficient and economical manner and will at all times maintain the Airport in good repair and in sound operating condition, that it will make all necessary repairs, renewals, and replacements to the Airport, and that it will comply with all valid acts, rules, regulations, orders, and directions of any legislative, executive, administrative, or judicial body applicable to the Airport and the operation thereof. The Augusta Aviation Commission will not take, or allow any person to take, any action which would cause the Administrator of the Federal Aviation Administration, Department of Transportation, or any successor to the powers and authority of such Administrator, to suspend or revoke the Airport's operating certificates issued under the Federal Aviation Act of 1958, or any successor statute. The Augusta Aviation Commission shall comply with the requirements of the federal government, including the PFC Act and the PFC Regulations, with respect to grants-in-aid accepted by the Augusta Aviation Commission pursuant to the Airport Improvement Program and passenger facility charges collected by the Augusta Aviation Commission. Section 603 Insurance. (a) With respect to the Airport, the Consolidated Government will carry such public liability, fidelity, and property insurance as it may determine to be appropriate under the circumstances. All such policies shall be for the benefit of and made payable to the Augusta. Aviation Commission, on behalf of the Consolidated Government. Notwithstanding the foregoing, the Consolidated Government may elect to be a self-insurer with respect to any risks for which insurance is required under this Section 603(a). The cost of such insurance may be paid as an Operating Expense. (b) In addition, the Consolidated Government shall indemnify itself against the usual hazards incident to the construction of any Project, and without in any way limiting the generality of the above, shall: (i) require each construction contractor and each subcontractor to furnish a bond, or bonds, of such type and in amounts adequate to assure the faithful performance of their contracts and the payment of all bills and claims for labor and material -49- AO 1153175.14 arising by virtue of such contracts; (ii) require each construction contractor or the subcontractor to maintain at all times until the completion and acceptance of that portion of the Project for which the work is being performed insurance, in such amounts as the Consolidated Government or the Augusta Aviation Commission, on behalf of the Consolidated Government, may in its discretion require, against the following types of claims: (1) claims under workers compensation, disability benefit and other similar employee benefit laws applicable to the construction of the Project; (2) claims for damages because of bodily injury, occupational sickness or disease, or death of the contractor's or subcontractor's employees; and (3) comprehensive general liability insurance. All moneys received for losses under any such insurance policies, except public liability policies, are hereby pledged by the Consolidated Government as security for the Bonds until and unless such proceeds are paid out in making good the loss or damage in respect of which such proceeds are received, either by repairing the property damaged or replacing the property destroyed or by depositing the same in the Renewal and Replacement Fund. Adequate provision for making good such loss and damage shall be made within 120 days from the date of the loss. Insurance proceeds not used in making such provision shall be deposited in the Renewal and Replacement Fund on the expiration of such 120 day period. Such insurance proceeds shall be payable to the Consolidated Government or to the Augusta Aviation Commission, on its behalf by appropriate clause to be attached to or inserted in the policies. Section 604 No Sale. Lease. or Encumbrance: Exceptions. Except as expressly permitted in this section or elsewhere in the Bond Resolution, the Consolidated Government irrevocably covenants, binds, and obligates itself not to sell, lease, encumber, or in any manner dispose of the Airport as a whole or in part until all of the Bonds and all interest thereon shall have been paid in full or provision for payment has been made in accordance with Article IX. The Consolidated Government shall have and hereby reserves the right to sell, lease, or otherwise dispose of any of the property comprising a part of the Airport in the following manner, if anyone of the following conditions exists: (i) such property is not necessary for the operation of the Airport; (ii) such property is not useful in the operation of the Airport; (iii) such property is not profitable in the operation of the Airport; or (iv) the disposition of such property will be advantageous to the Airport and will not adversely affect the security for the Bondholders, and the Airport Director, Chief Officer and Airport Consultant shall certify as to the existence of the appropriate condition. All proceeds of any such sale or disposition shall be . deposited in the Revenue Fund unless the Augusta Aviation Commission directs amounts be deposited in the Capital Improvement Fund or the Augusta Aviation Commission is required to deliver such amounts to another Person. The Consolidated Government reserves the right to sell any portion of the Airport to any political subdivision or authority or agency of one or more political subdivisions of the State, provided that there shall be first filed with the Attesting Officer: (i) an opinion of Bond Counsel to the effect that such sale will not adversely affect the extent to which interest on any Tax- Exempt Bonds is excluded from gross income for federal income tax purposes; and (ii) an opinion of an Airport Consultant that such sale will not result in any diminution of Net General -50- AO 1153175.14 Revenues to the extent that in the then current and each succeeding Fiscal Year the Net General Revenues will be less than 120 percent of the Average Annual Debt Service Requirement on all General Revenue Bonds to be Outstanding after such transfer with a. lien on Net General Revenues. In reaching this conclusion, the Airport Consultant shall take into consideration such factors as the Airport Consultant may deem significant, including (i) anticipated diminution of Revenues, (ii) anticipated increase or decrease in Expenses of Operation and Maintenance attributable to the sale, and (iii) reduction in the annual Debt Service Requirement attributable to the application of the sale proceeds to the provision for payment of Bonds theretofore Outstanding. All proceeds of any such sale or disposition shall be deposited in the Revenue Fund unless the Augusta Aviation Commission directs amounts be deposited in the Capital Improvement Fund or the Augusta Aviation Commission is required to deliver such amounts to another Person. The Consolidated Government reserves the right to transfer the Airport as a whole to any political subdivision or authority or agency of one or more political subdivisions of the State to which may be delegated the legal authority to own and operate the Airport, or any portion thereof, on behalf of the public, and which undertakes in writing, filed with the Attesting Officer, the Consolidated Government's obligations under the Bond Resolution, provided that there shall be first filed with the Attesting Officer: (i) an opinion of Bond Counsel to the effect that such sale will not adversely affect the extent to which interest on any Tax-Exempt Bonds is excluded from gross income for federal income tax purposes; and (ii) an opinion of an Airport Consultant that such transfer will not result in any diminution of Net General Revenues to the extent that in the then current and each succeeding Fiscal Year the Net General Revenues will be less than 120 percent of the Average Annual Debt Service Requirement on all General Revenue Bonds to be Outstanding after such transfer with a lien on Net General Revenues. In reaching this conclusion, the Airport Consultant shall take into consideration such factors as the Airport Consultant may deem significant, including any rate revision to be imposed by the transferee political subdivision, authority, or agency. Section 605 No Impairment of Riehts. Neither the Consolidated Government nor the Augusta Aviation Commission shall enter into any contract or contracts, nor take any action, the results of which might materially impair the rights of the Bondholders. Section 606 Satisfaction of Liens. The Consolidated Government and the Augusta Aviation Commission hereby covenant and agree that they will from time to time duly pay and discharge or cause to be paid and discharged all taxes, assessments, and other governmental charges, if any, lawfully imposed upon the Airport or any part thereof or upon the Net General Revenues and PFC Revenues, as well as any lawful claims for labor, materials, or supplies which if unpaid might by law become a lien or charge upon the Airport or the Net General Revenues or PFC Revenues or any part thereof or which might impair the security of the Bonds, except when the Consolidated Government or the Augusta Aviation Commission, as the case may be, in good faith contests its liability to pay the same. -51- AO 1153175.14 Section 607 Enforcement of Charees and Connections. The Consolidated Government shall compel the prompt payment of rates, fees, and charges imposed for service connected with the Airport, and to that end will vigorously enforce all of the provisions of any resolution or ordinance of the Consolidated Government having to do with the same, and all of the rights and remedies permitted the Consolidated Government under law. The Consolidated Government by this Section expressly covenants and agrees that such charges will be enforced and promptly collected to the full extent permitted by law. Section 608 Payments. All payments falling due on the Bonds for principal and interest shall be made from the Net General Revenues or PFC Revenues, as applicable, or from other legally available revenues to the owners thereof when due in full, and all reasonable and authorized charges made by the Bond Registrar and any Paying Agent shall be paid by the Consolidated Government or the Augusta Aviation Commission, on its behalf, when due. Section 609 No Loss of Lien on Revenues. Neither the Augusta Aviation Commission nor the Consolidated Government shall do, or omit to do, or permit to be done or to be omitted any matter or thing whatsoever whereby the lien of the Bond Resolution on the Net General Revenues or PFC Revenues or any part thereof might or could be lost or impaired. Section 610 Annual Budeet. The Consolidated Government agrees to adopt an Annual Budget as approved by the Augusta Aviation Commission for the Airport for each Fiscal Year in compliance with the rate covenant as stated in Section 601. The Annual Budget and the annual audit of the Airport will make distinctions among different categories of Revenues to comply with, and evidence compliance with, the provisions or the Bond Resolution. Section 611 Rebate Fund and Tax Provisions. The Consolidated Government and the August Aviation Commission each hereby covenants and agrees to take any and all action which may be required from time to time in order to assure that interest on the Tax-Exempt Bonds shall remain excludable from the gross income of the owners of the Tax-Exempt Bonds for federal income tax purposes and each shall refrain from taking any action that would adversely affect such status. Prior to or contemporaneously with delivery of each series of Tax-Exempt Bonds, the Chief Officer, the Airport Director and the Airport Finance Officer shall execute a Certificate as to Tax Matters on behalf of the Consolidated Government respecting the use and investment of the proceeds of such series of Tax-Exempt Bonds. Such certificate shall be a representation and certification of the Consolidated Government, and an executed copy thereof shall be delivered to the Bond Registrar. The Consolidated Government shall not knowingly use, invest or participate in the investment of any moneys held under the Bond Resolution if such use or investment would -52- AO 1153175.14 cause interest on any Tax-Exempt Bonds to become included in gross income for federal income tax purposes. The Chief Officer, the Airport Director, the Airport Finance Officer or the Attesting Officer shall, and are hereby authorized to, execute and deliver, on behalf of the Consolidated Government: (i) such agreements, filings, and other writings as may be necessary or desirable to cause or bind the Consolidated Government to comply with any requirements for rebate under Section 148(f) of the Code, or (ii) such certificate or other writing as may be necessary or desirable to qualify for exemption from such rebate requirements. The Consolidated Government shall retain a qualified rebate analyst to calculate, from time to time, as required in order to comply with the provisions of Section 148(f) of the Code, the amounts required to be rebated (including penalties) to the United States and the Consolidated Government or the Augusta Aviation Commission, on its behalf, shall deposit or cause to be deposited into the Rebate Fund any and all of such amounts promptly following a determination of any such amount. All moneys held in the Rebate Fund shall be continuously invested in Permitted Investments. To the extent and at not later than the times required to comply with Section 148(f) of the Code, funds may be withdrawn from the Rebate Fund for the purpose of making rebate payments (including penalties) to the United States as required by Section 148(f) of the Code. Except as otherwise specifically provided in this Section, moneys in the Rebate Fund may not be withdrawn from the Rebate Fund for any other purpose. All earnings on investments held in the Rebate Fund shall be retained in the Rebate Fund and shall become part of the Rebate Fund. Moneys held in the Rebate Fund, including the investment earnings thereon, if any, shall not be subject to a pledge in favor of the owners of the Bonds under the Bond Resolution and may not be used to pay amounts due on the Bonds or under any Credit Facility Agreements or amounts required for the operation, maintenance, enlargement, or extension of the Airport. The Augusta Aviation Commission may create separate accounts in the Rebate Fund as it may deem desirable. If the Consolidated Government shall deliver to the Depository of the Rebate Fund a certificate, signed by an officer of the Consolidated Government, certifying that the Consolidated Government or the Augusta Aviation Commission, on its behalf, has filed all reports required to be filed with the United States pursuant to Section 148(f) of the Code and has made all payments required to be made to the United States pursuant to Section 148(f) of the Code, then the Depository of the Rebate Fund shall transfer to the Augusta Aviation Commission, on behalf of the Consolidated Government all moneys or investments remaining in the Rebate Fund, and such moneys and investments may be used for any Airport Purpose. The covenants, certifications, representations, and warranties contained in this Section shall survive payment in full or provision for payment in full of the Tax-Exempt Bonds until the end of the statute of limitations following the later of final payment of such Bonds (without -53- AO 1153175.14 regard to any defeasance or other provision for the payment thereof) or the last date as of which payments under Section 148(f) of the Code could be due to the United States. Section 612 Uneconomic Facilities. The Consolidated Government may acquire assets or property, including other airport facilities, and combine such assets or property with the Airport if there is first filed with the Attesting Officer an opinion of the Airport Consultant that such acquisition will not result in any diminution of Net General Revenues to the extent that in the then current and each succeeding Fiscal Year the Net General Revenues will be less than 120 percent of the Average Annual Debt Service Requirement on all General Revenue Bonds to be Outstanding after such transfer with a lien on Net General Revenues. In reaching this conclusion, the Airport Consultant shall take into consideration such factors as the Airport Consultant may deem significant, including (i) anticipated diminution of Revenues, and (ii) anticipated increase or decrease in Expenses of Operation and Maintenance attributable to the acquisition. [End of Article VI] -54- AO 1153175.14 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES Section 701 Definition of Events of Default. An "Event of Default" shall mean the occurrence of anyone or more of the following: (a) a failure to pay the principal or redemption price of any Senior Lien Bond when the same shall become due and payable, either at maturity or by proceedings for redemption or otherwise; or (b) a failure to pay interest on any Senior Lien Bond when the same shall become due and payable; or (c) a court of competent jurisdiction shall enter an order, judgment, or decree appointing a receiver of the Airport or any of the funds or accounts established in Article IV or Article XII, or approving a petition seeking reorganization of the Consolidated Government under the federal bankruptcy laws or any other applicable law or statute of the United States of America or the State, and such order, judgment, or decree shall not be vacated or set aside or stayed within 60 days from the date of the entry thereof; or (d) under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of any of the funds or accounts established in Article IV or Article XII, and such custody or control shall not be terminated or stayed within 60 days from the date of assumption of such custody or control; or (e) the Consolidated Government or the Augusta Aviation Commission shall fail to perform any of the other covenants, conditions, agreements, and provisions contained in the Senior Lien Bonds or in the Bond Resolution to be performed, and such failure shall continue for 90 days after written notice specifying such failure and requiring it to be remedied shall have been given to the Consolidated Government by the owners of not less than, or a Credit Issuer securing not less than, 25 percent in aggregate principal amount of the Senior Lien Bonds; provided, however, if the failure stated in such notice can be corrected, but not within such 90 day period, the Consolidated Government or the Augusta Aviation Commission, as the case may be, shall have 180 days after such written notice to cure such default if corrective action is instituted by the Consolidated Government or the Augusta Aviation Commission, as the case . may be, within such 90 day period and diligently pursued until the failure is corrected; or (f) an Event of Default under any Supplemental Bond Resolution relating to Senior Lien Bonds shall occur; or (g) the issuance to the Consolidated Government by a Credit Issuer of written notice stating that an "Event of Default" or the part of the Consolidated Government has occurred under any Credit Facility Agreement relating to Senior Lien Bonds; provided if the Event of Default relates solely to Bonds related to a particular category of Revenues and no other event has occurred which, with the lapse of time or the delivery of notice -55- AO 1153175.\4 or both, could become an Event of Default with respect to any other Bonds then Outstanding, such Event of Default shall be deemed to apply solely to the related Bonds and Contracts and the provisions of the Bond Resolution shall otherwise remain in full force and effect with respect to all other Bonds and related Contracts. Section 702 Remedies. (a) Upon the happening and continuance of any Event of Default specified in Section 701 (except in (g)), then and in every such case, upon the written declaration of the owners of more than 50 percent in aggregate principal amount of all Senior Lien Bonds then Outstanding affected thereby or upon the written demand of a Credit Issuer securing more than 50 percent in aggregate principal amount of the Senior Lien Bonds then Outstanding affected thereby, the principal of all Senior Lien Bonds then Outstanding affected thereby shall become due and payable immediately, together with the interest accrued thereon to the date of such acceleration, at the place of payment provided therein, and interest on such Senior Lien Bonds shall cease to accrue after the date of such acceleration, anything in the Bond Resolution or in the Senior Lien Bonds to the contrary notwithstanding. Upon any declaration of acceleration under the Bond Resolution, the Paying Agent shall immediately draw under the applicable Credit Facility to the extent permitted by the terms thereof that amount which, together with other amounts on deposit under the Bond Resolution, shall be sufficient to pay the principal of and accrued interest on the related Senior Lien Bonds so accelerated. The above provisions, however, are subject to the condition that if, after the principal of the Senior Lien Bonds shall have been so accelerated, all arrears of interest upon such Bonds, and interest on overdue installments of interest at the rate on such Bonds, shall have been paid, the principal of such Bonds which has matured (except the principal of any Bonds not then due by their terms except as provided above) has been paid, and the Consolidated Government also shall have performed all other things in respect to which it may have been in default under the Bond Resolution, and the Credit Issuer shall have reinstated the Credit Facility in the full amount available to be drawn thereunder by written notice to the Consolidated Government, then, in every such case, the owners of more than 50 percent in aggregate principal amount of all Senior Lien Bonds then Outstanding by written notice to the Consolidated Government, may waive such default and its consequences and such waiver shall be binding upon the Consolidated Government and upon all owners of the Bonds; but no such waiver shall extend to or affect any subsequent default or impair any right or remedy consequent thereon. Notwithstanding the foregoing, as long as the applicable Credit Issuer shall not then continue to dishonor draws under the Credit Facility, no Event of Default with respect to the related Senior Lien Bonds may be waived without the express written consent of such Credit Issuer. (b) Upon the happening and continuance of any Event of Default, any owner of Senior Lien Bonds then Outstanding affected by the Event of Default or a duly authorized agent for such owner may proceed to protect and enforce its rights and the rights of the owners of Senior Lien Bonds by such of the following remedies as it shall deem most effectual to protect and enforce such rights: -56- AO 1153175.14 (1) by mandamus or other suit, action, or proceeding at law or in equity, enforce all rights of the owners of Senior Lien Bonds, including the right to require the appointment of a receiver for the Airport or to exercise any other right or remedy provided by the Revenue Bond Law and to require the Consolidated Government and/or the Augusta Aviation Commission to perform any other covenant or agreement contained in the Bond Resolution and to perform their duties under the Revenue Bond Law; (2) by bringing suit upon the Senior Lien Bonds; (3) by action or suit in equity, require the Consolidated Government and/or the Augusta Aviation Commission to account as if it were the trustee of an express trust for the owners of the Senior Lien Bonds; (4) by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the owners of the Senior Lien Bonds; or (5) by pursuing any other available remedy at law or in equity or by statute. In the enforcement of any remedy under the Bond Resolution, owners of Senior Lien Bonds shall be entitled to sue for, enforce payment on, and receive any and all amounts then or during any default becoming, and at any time remaining, due from the Consolidated Government for principal, redemption premium, interest, or otherwise, under any provision of the Bond Resolution or of the Senior Lien Bonds, and unpaid, with interest on overdue payments at the rate or rates of interest specified in such Senior Lien Bonds, together with any and all costs and expenses of collection and of all proceedings under the Bond Resolution and under such Senior Lien Bonds, without prejudice to any other right or remedy of the owners of Senior Lien Bonds, and to recover and enforce a judgment or decree against the Consolidated Government for any portion of such amounts remaining unpaid, with interest, costs, and expenses, and to collect from any moneys available for such purpose, in any manner provided by law, the moneys adjudged or decreed to be payable. (c) From and after an Event of Default, notwithstanding Section 404(b), (c) or (d) or Section 409(b ), (c) or (d), deposits into the Interest Account, the Contract Payments Account and the Principal Account shall be made monthly in an amount equal to a fraction of the difference between the amount in such subaccount and the amount due to be paid from such subaccount on the next payment date with the numerator of such fraction being "1" and the denominator being the number of whole months between the date of such deposit and the payment date. Section 703 Remedies Cumulative. No remedy conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Bond Resolution or now or hereafter existing at law or in equity or by statute. -57- AO 1153175.14 Section 704 Waiver of Default. No delay or omission of any Bondholder to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default, or an acquiescence therein, and every power and remedy given by the Bond Resolution to the Bondholders may be exercised from time to time and as often as may be deemed expedient. Section 705 Application of Monevs After Default. If an Event of Default occurs and shall not have been remedied, all Net General Revenues and PFC Revenues shall be applied as follows and in the following order of priority (subject to the last paragraph of this Section 705): (a) Expenses of Receiver and Paying Agent and Bond Registrar - to the payment of the reasonable and proper charges, expenses, and liabilities of the receiver and the Paying Agent and Bond Registrar under the Bond Resolution with the amounts payable under this (a), ifrelated to a particular series and therefore to a particular category of Revenues, first from such category and second from other categories of Revenues in amounts as determined by the receiver or the Paying Agent, and if not so related to a particular series or category of Revenues, then from all Revenues as determined by the Receiver or the Paying Agent; (b) Expenses of Operation and Maintenance and Renewals and Replacements - then, within each category of Revenues, to the payment of all reasonable and necessary related Expenses of Operation and Maintenance and major renewals and replacements to the related facilities at the Airport; (c) Principal or Redemption Price, Interest on Senior Lien Bonds and Payments on related Contracts - then, within each category of Revenues, to the payment of the interest and principal or redemption price then due on the related Senior Lien Bonds and payments then due under related Contracts, as follows: (1) Unless the principal of all the Senior Lien Bonds related to such category of Revenues shall have become due and payable, all such moneys shall be applied as follows: first: to the payment to the persons entitled thereto of all installments of interest then due on the Senior Lien Bonds, in the order of the maturity of such installments (with interest on defaulted installments of interest at the rate or rates borne by the Senior Lien Bonds with respect to which such interest is due, but only to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference. If some of the Senior Lien Bonds bear interest payable at different intervals or upon different dates and if at any time moneys from the Debt Service Reserve Account or PFC Debt Service Reserve Account must be used to pay any such interest, the moneys in the Debt Service Reserve Account or PFC Debt Service Reserve Account shall be applied (to the extent necessary) to the payment of all interest falling due on the dates upon which such interest is payable -58- AO 1153175.14 AO 1153175.14 to and including the date six months after the date of application of such moneys. After such period, moneys in the Debt Service Reserve Account or PFC Debt Service Reserve Account plus any other moneys available in the Interest Account shall be set aside for the payment of interest on Senior Lien Bonds of each class (a class consisting of all Senior Lien Bonds payable as to interest on the same dates) pro rata among Senior Lien Bonds of the various classes on a daily basis so that there shall accrue to each owner of a Senior Lien Bond throughout each Fiscal Year the same proportion of the total interest payable to such owner of a Senior Lien Bond as shall so accrue to every other owner of a Senior Lien Bond during such Fiscal Year. second: to interest portions of Reimbursement Obligations related to Senior Lien Bonds pursuant to the terms of the related Contracts. third: to the payment to the persons entitled thereto of the unpaid principal of any of the Senior Lien Bonds which shall have become due at maturity or upon mandatory redemption prior to maturity (other than Senior Lien Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of Article IX), in the order of their due dates, with interest upon such Senior Lien Bonds from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Senior Lien Bonds due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the amount of such interest due on such date, and then to the payment of such principal, ratably according to the amount of such principal due on such date, to the persons entitled thereto without any discrimination or preference. If some of the Senior Lien Bonds mature (including for this purpose the mandatory redemption dates of Term Bonds) upon a different date or dates and if at any time moneys from the Debt Service Reserve Account or the PFC Debt Service Reserve Account must be used to pay any such principal falling due, the moneys in the Debt Service Reserve Account or the PFC Debt Service Reserve Account not required to pay interest under paragraph first above shall be applied to the extent necessary to the payment of all principal falling due prior to the date 12 months after the date of application of such moneys. After such period, moneys in the Debt Service Reserve Account or the PFC Debt Service Reserve Account not required to pay interest plus any other moneys available in the Principal Account shall be set aside for the payment of principal of Senior Lien Bonds of each class (a class consisting of all . Senior Lien Bonds payable as to principal on the same date) pro rata among Senior Lien Bonds of the various classes which mature or must be redeemed pursuant to mandatory redemption prior to maturity throughout each Fiscal Year in such proportion of the total principal payable on each such Senior Lien Bond as shall be equal among all classes of Senior Lien Bonds maturing or subject to mandatory redemption within such Fiscal Year. fourth: to the payment of the principal portions of Reimbursement Obligations related to Senior Lien Bonds pursuant to the terms of the related Contracts. -59- fifth: to the payment of the redemption premium on and the principal of any Senior Lien Bonds called for optional redemption pursuant to their terms. sixth: to the payment of all other amounts then due on Contracts related to Senior Lien Bonds. (2) If the principal of all the Senior Lien Bonds shall have become due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Senior Lien Bonds, with interest thereon as aforesaid, and due and unpaid payments under related Contracts, without preference or priority of principal over interest or payments on Contracts or of interest over principal or payments on Contracts, or of payments on Contracts over principal or interest, or of any installment of interest over any other installment of interest, or of any Senior Lien Bond over any other Senior Lien Bonds, or of any such payment under a Contract over any other such payment under a Contract, ratably, according to the amounts due respectively for principal, interest, and payments under Contracts, to the persons entitled thereto without any discrimination or preference. (d) If a series of Senior Lien Bonds has a Senior Lien on more than one category of Revenues, payments will be made thereto under (c) pro rata as to the number of Senior Liens; provided if after such payments amounts are owed on such Bonds and amounts are remaining hereunder, payments thereon will be made from any category of Revenues as to which such series has a Senior Lien. (e) Notwithstanding anything else herein to the contrary, payments made pursuant to (b), (c) and (d) shall be made by category of Revenues to related Bonds such that: (i) Amounts traceable to General Revenues are used only for General Revenue Bonds and related Contracts until, and unless, all such amounts are paid; (ii) Amounts traceable to PFC Revenues are used only for PFC Revenue Bonds and related Contracts; (iii) Amounts not traceable to particular categories of Revenues shall be used first as General Revenues for purposes of this section and then as PFC Revenues. -60- AO 1153175.14 Section 706 Riehts of Credit Issuer. Notwithstanding any other provision of the Bond Resolution, in t~e event that a Credit Facility shall be drawn upon in any amount for the payment of principal of or interest on any Bonds, then upon such payment the related Credit Issuer shall succeed to and become subrogated to the rights of the recipients of such payments to the extent of such payments and such principal or interest shall be deemed to continue to be unpaid and Outstanding for all purposes and shall continue to be fully secured by the Bond Resolution until the Credit Issuer, as successor and subrogee, has been paid all amounts owing in respect of such subrogated payments of principal and interest. Whenever moneys become available for the payment of any interest then overdue, the Credit Issuer shall be treated as to interest owed to it as successor and subrogee as if it had been the holder of the Bonds on which such interest is payable on any special record date therefor. [End of Article VII] -61- AO 1153175.14 ARTICLE VIII BOND OWNERSHIP Section 801 Manner of Evidencine Ownership of Bonds. Any request, direction, or other instrument required by the Bond Resolution to be signed or executed by holders may be in any number of counterparts or writings of similar tenor and may be signed or executed by such holders in person or by agent appointed in writing. Proof of the execution of any such request, direction, or other instrument, or of the writing appointing such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any purpose of the Bond Resolution. The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction, who, by the laws thereof, has power to take acknowledgments within such jurisdiction, to the effect that the person signing such writing acknowledged before him the execution thereof, or by an affidavit of a witness to such execution; provided that the execution of the form of assignment on the back of each Bond may be guaranteed only by an eligible guarantor institution (such as banks, stockbrokers, savings and loan associations, and credit unions) with membership in an approved Signature Guarantee Medallion Program. The fact of ownership of the Bonds by any holder, the amount and issue numbers of such Bonds, and the date of ownership shall be proved by the Bond Register. Section 802 Call of Meetines of Bondholders. The Consolidated Government or the owners of not less than 25 percent in aggregate principal amount of the Bonds of either the senior class or the subordinate class may at any time call a meeting of the holders. [End of Article VIII] -62- AO 1153175.14 ARTICLE IX DEFEASANCE Section 901 Provision for Payment. Bonds for the payment or redemption of which sufficient moneys or sufficient Government Obligations shall have been deposited with the Paying Agent or the Depository of the Debt Service Fund or the PFC Debt Service Fund (whether upon or prior to the maturity or the redemption date of such Bonds) shall be deemed to be paid and no longer Outstanding under the Bond Resolution; provided, however, that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given as provided in Article III or firm and irrevocable arrangements shall have been made for the giving of such notice. Government Obligations shall be considered sufficient for purposes of this Article IX.only: (i) if such Government Obligations are not callable by the issuer of the Government Obligations prior to their stated maturity, and (ii) if such Government Obligations fall due and bear interest in such amounts and at such times as will assure sufficient cash (whether or not such Government Obligations are redeemed by the Consolidated Government pursuant to any right of redemption) to pay currently maturing interest and to pay principal and redemption premiums, if any, when due on the Bonds without rendering the interest on any Tax-Exempt Bonds includable in gross income of any owner thereof for federal income tax purposes. The Consolidated Government may at any time surrender to the Bond Registrar for cancellation by it any Bonds previously authenticated and delivered under the Bond Resolution which the Consolidated Government may have acquired in any manner whatsoever. All such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Section 902 Release of Pledee. If all Bonds and obligations secured by a lien on a category of Revenues have been paid or provision for payment thereof made pursuant to Section 901, at the option of the Consolidated Government the terms and provisions of the Bond Resolution relating solely to such category of Revenues may be determined as void and of no further force or effect; provided the other terms and provisions of the Bond Resolution shall remain in effect until the election of the Consolidated Government after payment or provision for payment of all Bonds and obligations secured by a lien created pursuant to the Bond Resolution on any Revenues. [End of Article IX] -63- AO 1153175.14 ARTICLE X SUPPLEMENTAL RESOLUTIONS Section 1001 Supplemental Resolutions Not ReQuirine Consent of Bondholders. The Consolidated Government, from time to time and at any time, subject to the conditions and restrictions in the Bond Resolution, may adopt one or more Supplemental Resolutions which thereafter shall form a part of the Bond Resolution, for anyone or more or all of the following purposes: (a) to add to the covenants and agreements of the Consolidated Government and/or the Augusta Aviation Commission in the Bond Resolution other covenants and agreements thereafter to be observed or to surrender, restrict, or limit any right or power reserved in the Bond Resolution to or conferred upon the Consolidated Government or the Augusta Aviation Commission (including but not limited to the right to issue Additional Bonds); (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting, or supplementing any defective provision contained in the Bond Resolution, or in regard to matters or questions arising under the Bond Resolution, as the Consolidated Government may deem necessary or desirable and not inconsistent with the Bond Resolution; (c) to subject to the lien and pledge of the Bond Resolution additional revenues, receipts, properties, or other collateral; (d) to evidence the appointment of successors to any Depositories, Paying Agent(s), or Bond Registrar(s); ( e) to modify, amend, or supplement the Bond Resolution in such manner as to permit the qualification of the Bond Resolution under the Trust Indenture Act of 1939 or any federal statute hereinafter in effect, and similarly to add to the Bond Resolution such other terms, conditions, and provisions as may be permitted or required by such Trust Indenture Act of 1939 or any similar federal statute; (f) to make any modification or amendment of the Bond Resolution required in order to make any Bonds eligible for acceptance by The Depository Trust Company or any similar holding institution or to permit the issuance of any Bonds or interests therein in book-entry form; (g) to modify any of the provisions of the Bond Resolution in any respect if such modification shall not become effective until after all the Bonds Outstanding immediately prior to the effective date of such Supplemental Resolution shall cease to be Outstanding and if any Bonds issued contemporaneously with or after the effective date of such Supplemental Resolution shall contain a specific reference to the modifications contained in such subsequent proceedings; (h) to modify the provisions of the Bond Resolution with respect to the disposition of any moneys remaining in the Construction Fund upon the completion of any Project or to revise, enlarge or reduce the definition or description of any particular Project; -64- AO 1153175.14 (i) to create additional subaccounts or to abolish any sub accounts within any account, or to change the amount of the Debt Service Reserve Requirement, but not below the amount specified in such definition; (j) to modify the Bond Resolution to permit the qualification of any Bonds for offer or sale under the securities laws of any state in the United States of America; (k) to modify the Bond Resolution in connection with the issuance of Additional Bonds or Subordinate Lien Bonds permitted to be issued under the Bond Resolution prior to such modification, and such modification may deal with any subjects and make any provisions relating to the Additional Bonds or Subordinate Lien Bonds which the Consolidated Government deems necessary or desirable for that purpose; (I) to make such modifications in the provisions of the Bond Resolution as may be . deemed necessary by the Consolidated Government to accommodate the issuance of Bonds which (i) are compound interest bonds (including, but not limited to, provisions for determining the Debt Service Requirement for such compound interest bonds and for treatment of accreted value in making such determination) or (ii) bear interest at a variable rate; (m) to make such modifications in the provisions of the Bond Resolution as may be deemed necessary for the Consolidated Government to accommodate the issuance of PFC Revenue Bonds or the Series 2005 Bonds; provided such Supplemental Resolution takes effect not later than the first issuance of PFC Revenue Bonds or the issuance of the Series 2005 Bonds, respectively; and (n) to modify any of the provisions of the Bond Resolution in any respect (other than a modification of the type described in Section 1002 requiring the unanimous written consent of the holders); provided that (i) for any Outstanding Bonds which are assigned a Rating and which are not secured by a Credit Facility providing for the payment of the full amount of principal and interest to be paid thereon, each Rating Agency shall have given written notification to the Consolidated Government that such modification will not cause the then applicable Rating on any Bonds to be reduced or withdrawn, and (ii) for any Outstanding Bonds which are secured by Credit Facilities providing for the payment of the full amount of the principal and interest to be paid thereon, each Credit Issuer shall have consented in writing to such modification. Any Supplemental Resolution authorized by the provisions of this Section may be adopted by the Consolidated Government without the consent of or notice to the owners of any of the Bonds at the time Outstanding, notwithstanding any of the provisions of Section 1002. Any such . Supplemental Resolution of the Consolidated Government may modify the provisions of the Bond Resolution in such a manner, and to such extent and containing such provisions, as the Consolidated Government may deem necessary or desirable to effect any of the purposes stated above. As used in this Section, the term "modify" shall mean "modify, amend, or supplement" and the term "modification" shall mean "modification, amendment, or supplement." The provisions of this Section and Section 1 002 shall be interpreted by category of Revenues such that each provision of any Supplemental Resolution shall be reviewed for compliance with such sections upon its effect on the Bonds secured by the related category of Revenues and whether the consent of any holders, of a majority of holders of a certain categoryc -65- AO 1153175.\4 of Bonds or the consent of all such holders shall be determined with respect to each category of Revenues Supplemental Resolutions may be adopted containing provisions which (1) do not require the consents of any holders, (2) require the consents of some but not all holders of Bonds related to a category of Revenues, (3) require the consents of some but not all holders of Bonds related to several categories of Revenues, (4) require the consents of all holders of Bonds related to a category of Revenues, (5) require the consents of all holders of Bonds, or (6) are covered in a combination of some or all of (1) through (5). Section 1002 Supplemental Resolutions ReQuirine Consent of Bondholders. With the consent (evidenced as provided in Article VIII) of the owners of more than 50 percent in aggregate principal amount of the Outstanding Bonds of each class (senior and subordinate), voting separately by class, of each series of Bonds related to an affected category of Revenues or related Bonds, the Consolidated Government and the Augusta Aviation Commission may from time to time and at any time adopt a Supplemental Resolution for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Bond Resolution or of any Supplemental Resolution; provided, however, that no such Supplemental Resolution shall: (a) extend the maturity date or due date of any mandatory sinking fund redemption with respect to any Bond Outstanding under the Bond Resolution; (b) reduce or extend the time for payment of principal of, redemption premium, or interest on any Bond Outstanding under the Bond Resolution; (c) reduce any premium payable upon the redemption of any Bond under the Bond Resolution or advance the date upon which any Bond may first be called for redemption prior to its stated maturity date; (d) give to any Bond or Bonds (or related Contracts) a preference over any other Bond or Bonds (or related Contracts) not already permitted by the Bond Resolution; (e) permit the creation of any lien or any other encumbrance on Net General Revenues or PFC Revenues having a lien equal to or prior to the lien created under the Bond Resolution for the Senior Lien Bonds; (f) reduce the percentage of owners of either class of Bonds required to approve any such Supplemental Resolution; or (g) deprive the owners of the Bonds of the right to payment of the Bonds or from the Net General Revenues or PFC Revenues, without, in each case, the consent of the owners of all the Bonds then Outstanding of the category of Bonds affected thereby. No amendment may be made under this Section which affects the rights or duties of any Credit Issuer securing any of the Bonds, without its written consent. The provisions of this paragraph shall be strictly construed such that Supplemental Resolutions requiring the consents of owners of Bonds shall be limited to those clearly falling within one of the enumerated categories. If the Consolidated Government and the Augusta Aviation Commission intend to enter into or adopt any Supplemental Resolution as described in this Section, the Augusta Aviation Commission, on behalf of itself and Consolidated Government, shall mail, by registered or certified mail, to the registered owners of the Bonds at their addresses as shown on the Bond Register, a notice of such intention along with a description of such Supplemental Resolution not less than 30 days prior to the proposed effective date of such Supplemental Resolution. The consents of the registered owners of the Bonds need not approve the particular form of wording of the proposed Supplemental Resolution, but it shall be sufficient if such consents approve the substance thereof. Failure of the owner of any Bond to receive the notice required in the Bond Resolution shall not affect the validity of any Supplemental Resolution if the required number of -66- AO 1153175.14 owners of the Bonds of each class shall provide their written consent to such Supplemental Resolution. Notwithstanding any provision of the Bond Resolution to the contrary, upon the issuance of a Credit Facility to secure any Bonds and for the period in which such Credit Facility is outstanding, the Credit Issuer may have the consent rights of the owners of the Bonds which are secured by such Credit Facility pertaining to some or all of the amendments or modifications of the Bond Resolution, to the extent provided in the applicable Supplemental Bond Resolution. Notwithstanding the foregoing, if a Credit Issuer is granted the consent rights of the owners of any Bonds in a Supplemental Bond Resolution and refuses to exercise such consent rights, either affirmatively or negatively, then the registered owners of the Bonds secured by the related Credit Facility may exercise such consent rights. Section 1003 Notice of Supplemental Resolutions. The Augusta Aviation Commission shall cause the Bond Registrar to mail a notice by registered or certified mail to the registered owners of all Bonds Outstanding, at their addresses shown on the Bond Register or at such other address as has been furnished in writing by such registered owner to the Bond Registrar, setting forth in general terms the substance of any Supplemental Resolution which has been: (i) adopted by the Consolidated Government pursuant to Section 1001; or (ii) approved by holders or any Credit Issuer and adopted by the Consolidated Government pursuant to Section 1002. Section 1004 Bond Opinion for Supplemental Resolutions. So long as there are Tax-Exempt Bonds Out~tanding, no Supplemental Resolution may become effective prior to the receipt by the Consolidated Government and the Augusta Aviation Commission of an opinion from Bond Counsel that such Supplemental Resolution will have no adverse effect on the tax status of any Tax-Exempt Bonds and the adoption of such Supplemental Resolution was permitted by the terms of the Bond Resolution. [End of Article X] -67- AO 1153175.14 ARTICLE XI SALE OF BONDS Section 1101 Sale of Bonds. The Series 2005 Bonds shall be sold in accordance with the First Supplemental Bond Resolution and each series of Additional Bonds shall be sold from time to time as the Consolidated Government may determine by Supplemental Bond Resolutions. A certified copy of each Supplemental Bond Resolution shall be filed with each Bond Registrar. [End of Article XI] -68- AO 1153175.14 ARTICLE XII CONSTRUCTION FUND Section 1201 Construction Fund. The Augusta Aviation Commission shall. establish within the Construction Fund a separate account for each Project unless a Supplemental Resolution otherwise provides. Moneys in the Construction Fund shall be held by such bank as may from time to time be designated by the Augusta Aviation Commission, and applied to the payment of the Costs of the Project, or for the repayment of advances made for that purpose in accordance with and subject to the provisions and restrictions set forth in this Article. The Consolidated Government and the Augusta Aviation Commission each covenants that it will not cause or permit to be paid from the Construction Fund any sums except in accordance with such provisions and restrictions; provided, however, that any moneys in the Construction Fund not presently needed for the payment of current obligations during the course of construction may be invested in Permitted Investments maturing not later than (i) the date upon which such moneys will be needed according to a schedule of anticipated payments from the Construction Fund filed with the Consolidated Government by the Airport Director or, (ii) in the absence of such schedule, 36 months from the date of purchase, in either case upon written direction of the Augusta Aviation Commission. Any such investments shall be held by the Depository, in trust, for the account of the Construction Fund until maturity or until sold, and at maturity or upon such sale the proceeds received therefrom including accrued interest and premium, if any, shall be immediately deposited by the Depository in the Construction Fund and shall be disposed of in the manner and for the purposes provided in the Bond Resolution. Amounts held in the Capitalized Interest Account shall be transferred to the related Interest Account on or before the 30th day preceding each Interest Payment Date for related Bonds in the amount necessary to pay interest coming due on such Bonds on the next Interest Payment Date. Section 1202 Purposes of Payments. Moneys in each separate account in the Construction Fund shall be used for the payment or reimbursement of the Costs of the Project for which such account was established as provided in this Article XII. Section 1203 Documentation of Payments. . All payments from the Construction Fund, except for payments from the Capitalized Interest Account, shall be made upon a request therefor from the Airport Finance Officer or his designee specifying the payments to be made. The Augusta Aviation Commission shall maintain records with respect to the expenditure of such funds. In the event the United States government or government of the State, or any department, authority, or agency of either, agrees to allocate moneys to be used to defray any part of the Cost of any Project upon the condition that the Augusta Aviation Commission appropriate a designated amount of moneys for such purpose, and it is required of the Augusta Aviation -69- AO 1153175.14 Commission that its share of such cost be deposited in a special account, the Augusta Aviation Commission shall have the right to withdraw any sum so required from the Construction Fund by appropriate transfer and deposit the same in a special account for that particular Project; provided, however, that all payments thereafter made from such special account shall be made only in accordance with the requirements set forth in this Section. Withdrawals for investment purposes only may be made by the Depository to comply with written directions from the Augusta Aviation Commission without any requisition other than such direction. Section 1204 Retention of Payment Documents. All requisitions and certificates required by this Article shall be retained for at least five years by the Depository subject at all times to inspection by any officer of the Consolidated Government or the Augusta Aviation Commission and the Bondholders. Section 1205 Funds Remainine on Completion of Proiects. The Augusta Aviation Commission shall, when a Project has been completed, and may, when a Project has been substantially completed, file with the Construction Depository a certificate signed by the Airport Director estimating what portion of the funds remaining in the separate account relating to such Project will be required for the payment or reimbursement of the Costs of such Project. The Airport Director shall attach to his certificate a certificate of the architect/engineer certifying that such Project has been completed or substantially completed, as the case may be, in accordance with the plans and specifications therefor and a certificate of the construction manager approving the estimates of the Airport Director with respect to the portion of funds in the account required for Costs of the Project. Such funds that will not be used shall be (1) transferred to the Principal Account and used to redeem Bonds of the related series on the next redemption date or to pay principal of such Bonds on the next Principal Maturity Date, or for such other use as may be set forth in the opinion of Bond Counsel described below, or (2) transferred to the Interest Account and used to pay interest on Bonds of the related series, provided that there shall first be obtained and filed with the Construction Fund Depository an opinion of Bond Counsel to the effect that, under existing law, the application of such moneys for such other use or to pay interest on such Bonds (a) is allowed under State law, and (b) if such Bonds are Tax-Exempt Bonds, will not, by itself and without more, adversely affect the exclusion from gross income for federal income tax purposes of interest payable on such Bonds. When all moneys have been withdrawn or transferred from any separate account within the Construction Fund in accordance with the provisions of this Article XII, such separate account shall terminate and cease to exist. [End of Article XII] -70- AO 1153175.14 ARTICLE XIII MISCELLANEOUS PROVISIONS Section 1301 Aueusta Aviation Commission as Aeent of Consolidated Government. The Augusta Aviation Commission undertakes its covenants and agreements herein on behalf of the Consolidated Government pursuant to the Richmond County Code of Ordinances. The Consolidated Government hereby approves all such undertakings and approves the performance by the Augusta Aviation Commission, its officials, officers, employees and agents, of its and their obligations hereunder. In the event the Augusta Aviation Commission fails to act when action is required, or takes an action that is prohibited, hereunder or under the Revenue Bond Law, the Consolidated Government shall take such action as may be necessary to cause the Augusta Aviation Commission to take such action or to refrain from taking action when required by the Bond Resolution on the Revenue Bond Law. Failing that, the Consolidated Government hereby covenants and agrees to perform such obligations directly. Section 1302 Severability. In case anyone or more of the provisions of the Bond Resolution or of the Bonds shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of the Bond Resolution or of the Bonds, but the Bond Resolution and the Bonds shall be construed and enforced as if such illegal or invalid provision had not been contained therein. hi case any covenant, stipulation, obligation, or agreement contained in the Bonds or in the Bond Resolution shall for any reason be held to be unenforceable or in violation of law, then such covenant, stipulation, obligation, or agreement shall be deemed to be the covenant, stipulation, obligation, or agreement of the Consolidated Government or the Augusta Aviation Commission to the full extent that the power to incur such obligation or to make such covenant, stipulation, or agreement shall have been conferred on the Consolidated Government or the Augusta Aviation Commission by law. Section 1303 Requests of Consolidated Government. Whenever any action is to be taken by the Bond Registrar or the Paying Agent at the request of the Consolidated Government or the Augusta Aviation Commission under the Bond Resolution, if no other means of authenticating such request is required, such request shall be evidenced by a written instrument signed by the Chief Officer, the Airport Director or the Airport Finance Officer or by such other official or employee (one or more) as may from time to time be designated in writing by the Chief Officer. A duly certified copy of such designation must be filed with the Bond Registrar and the Paying Agent. Section 1304 Deputy Officer Mav Act Notwithstanding anything in the Bond Resolution to the contrary, any action which the Chief Officer is required, permitted, or otherwise authorized to take may be taken by the Deputy Officer, in the event of a vacancy in the office of the Chief Officer or the disability at the time of the Chief Officer. These actions shall include execution, delivery, or performance of any certificate, agreement, instrument, document, or other writing, including the execution of the -71- AO 1153175.14 Bonds. To this end, the Bond Resolution shall be construed so that all references to the Chief Officer may also be considered to be references to the Deputy Officer. The Attesting Officer shall determine whether the Chief Officer is disabled or whether there is a vacancy in the office of Chief Officer such that the Deputy Officer may act under this Section, and the determination ofthe Attesting Officer shall be binding and conclusive. Section 1305 Payments Due on Saturdays. Sundays. etc. Whenever a date upon which a payment is to be made under the Bond Resolution falls on a Saturday, Sunday, a legal holiday, or any other day on which banking institutions are authorized to be closed in the state in which the payment is to be made, or a date that is not a Business Day under the related Supplemental Bond Resolution, such payment may be made on the next succeeding business day or Business Day, respectively, without interest for the intervening period. Section 1306 Effective Date. This Master Bond Resolution shall take effect immediately upon its adoption. Section 1307 Applicable Provisions of Law. The Bond Resolution shall be governed by and construed and enforced in accordance with the laws of the State. Section 1308 Repeal of Contlictine Resolutions and Resolutions. Any and all Resolutions and resolutions, or parts of Resolutions or resolutions, if any, in conflict with the Bond Resolution are hereby repealed. Section 1309 No Individual Responsibility of Members and Officers of Consolidated Government. No stipulations, obligations, or agreements of any member of the Governing Body or of any officer of the Consolidated Government shall be deemed to be stipulations, obligations, or agreements of any such member or officer in his or her individual capacity. -72- AO 1153175.14 Section 1310 Bond Resolution Constitutes a Contract. The Bond Resolution constitutes a contract with the Bondholders binding the Consolidated Government, and therefore it is proper and appropriate for the Chief Officer to execute the same on behalf of the Consolidated Government and for the Attesting Officer to attest the same. . Adopted this February 1,2005. (S E A L) AUGUST A, GEORGIA By: Mayor l" ""~/.I :0 . ;;..... "'- Adopieathis January 20,2005. (S E A L) q4 ::a~~OM~SSION f Chairman Attest: ~E,'d2A~ .../yc~etary -73- AO 1153175.14