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Funding:
x
community markets to their extensive past guest databases. The larger properties
also place advertising to sell the destination further supporting the marketing
outreach and sparking the interest of potential winter travelers.
x
Air Service Sales Tax Funds (0.25% tax on sales within the City)
o Provide funding for winter air service in conjunction with agreed upon
participation from the SSRC pursuant to the contractual agreement between the
LMD and SSRC.
o Are collected in the prior calendar year and then used for program expenses in the
next budgeted calendar year. In other words, tax revenues generated in 2015 will
be used for 2016 program expenses. 2016 tax revenues will be used for 2017
program expenses.
o Are subject to an administrative fee totaling 1% of revenues paid to the City to
provide collection and finance services.
LMD Board
o Contracts with SSRC to manage the air program.
o Administers the program pursuant to the terms and conditions of the Air Program
Contribution Agreement between the LMD and SSRC (and approved by City
Council), as modified by the First, Second and Third Amendments.
o Allocates funding for flights with consideration of:
Current economic dynamics of the airlines and traveling public.
Steamboats target markets.
Non-stop connections to hubs. Approximately 40% of passengers into
Hayden originate at a hub airport, with 60% from points beyond. Hub
airports offer connections to approximately 150 additional cities.
Proximity to Steamboat. The closer the originating city to Steamboat,
typically the lower the cost.
Diversification of carriers, and addition of new carriers to promote
competition.
Worst case scenarios, i.e., full-cap expenditures, taking into account past
performance and risk.
SSRC
o Contracts with air service carriers to secure competitive air service into Steamboat
Springs (HDN), by funding appropriate minimum-revenue-guarantees (MRG),
often based on opportunity costs.
o Provides extensive marketing and sales of the air program with a significant
budget of $2.5-3 million. Efforts include air-specific online advertising, emails,
webpages, cable TV, PR, events, group sales and more.
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o Presents specific flight or airline costs to the LMD in Executive Session, due to
the confidentiality of contractual details with air service carriers.
o Establishes and maintains partnerships with four to eight air service carriers as
well as relationships with several hundred key airline contacts in different
departments including Network Planning, Revenue Management, Pricing,
Marketing, Leisure Sales and Operations.
o Hosts an annual Airline Partners Summit in Steamboat every February with
approximately 100 key airline attendees.
x
Funding Waterfall
o As a result of the execution of the Air Program Contribution Agreement as
amended in the First, Second and Third Amendments, a funding waterfall has
been established that prioritizes each funding source. Please refer to the exhibit
2016 Winter Air Service Waterfall illustrating the funding based on the 2016
proposed budget.
Operating Information:
x
LMD funds are collected by the State of Colorado and deposited with the City of
Steamboat Springs. The LMD works closely with the City Finance Director to ensure
compliance with statutory requirements such as periodic tax audits.
The Air Service tax is included in the collection of overall sales and use taxes by the City.
The City collects a 1% fee of both the LMD accommodations tax and the portion of the
sales and use tax allocated to Air Service. The City then provides accounting and
oversight services, including recordkeeping, annual audits, fund investments, etc.
The LMD Board of Directors does not receive any compensation or fees, and does not
directly handle any funds.
It is the practice of the LMD and SSRC to budget the full MRG exposure (often referred
to as CAPS). It is possible that the MRG costs actualize lower than the CAPS and realize
a savings.
The LMD has established a reserve account that is projected and forecasted for every
year and is used at the discretion of the LMD Board as approved by City Council.
The LMD utilizes a calendar year as its fiscal period. Program costs are recognized in the
year when paid. For example, the actual air program expenses for the 2015/16 season will
be received often in June of 2016. The full expense will be posted to 2016 even though a
portion of the expense is attributable to December 2015.
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LMD Accommodations Tax revenues are accrued in the year the tax is collected.
SSRC, with approval from the LMD Board, has established a program of approximately
122,500 round-trip available seats for the 2015/16 winter season which is an increase of
13% of seats flown in the 2014/15 winter season; 22% over 2013/14. The increase in
available seats is on peak dates and days of week. The 2014/15 season had 108,750 roundtrip available seats with a 69% load factor (percent of available seats). The 2013/14
season had 100,000 round-trip available seats and a 70% load factor.
The Delta service from Minneapolis/St. Paul (MSP) expands with an extra Saturday flight
February 13 March 26.
The nonstop jet service from Seattle (SEA) on Alaska Airlines will fly four times per
week; an increase from three flights per week over the 14/15 season.
An additional flight from Dallas is in place over the holidays for the second year.
United expanded weekend flights from Chicago to daily most of the season. This flight is
outside of the MRG program. These flights are significant in that they provide competition
on pricing, offer more flights for visitors, and SSRC/LMD does not have to pay regardless
of performance. This is possible due to the overall MRG program with United.
The LMD contracted nonstop summer flights daily from Houston in the summer of 2015,
from June 25 through September 7. This doubled capacity over summer 2014. The flight
is performing at expected load factor levels.
The air service contracting environment continues to be a challenge as airlines are still risk
adverse and choose to fly routes that are the most profitable, usually business routes.
SSRC and the LMD have responded by increasing seats only on higher demand dates and
days of the week so as to more closely align capacity with demand.
Yampa Valley Regional Airport (YVRA) collected about $4.3M in landing fees, sales tax
on fuel, security fees, and rents. YVRA operations are self-funding. The air service, made
possible with the MRG, assists in bringing in sufficient operating revenues to YVRA to
allow the airport to function without subsidies from the County.
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Enclosed documents:
x 2016 Proposed Budget
x 2016 Winter Air Service Waterfall
x Map of cities served
x Map of Local Marketing District
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ACCOMMODATIONS TAX
2013
2014
2015
2015
2016
Actual
Actual
Budget
Projected
Budget
303,093
$ 1,272,771
$ 2,053,930
$ 2,053,930
$ 2,816,630
$ 1,369,268
$ 1,626,301
$ 1,300,000
$ 1,500,000
$ 1,500,000
2,605
3,567
2,700
2,700
3,500
$ 1,371,873
$ 1,629,868
$ 1,302,700
$ 1,502,700
$ 1,503,500
723,016
$ 1,700,000
340,000
$ 1,210,114
as of 8/24/2015
Revenue
2% Tax Jan - December (net of state fees)
Interest
Total Revenues
Expenses
Air Service Costs (From Accom Tax)
330,761
250,000
250,000
300,000
49,862
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
10,000
20,000
10,000
7,741
9,568
15,000
15,000
35,000
13,693
16,263
13,000
15,000
15,000
50,000
740,000
$ 1,720,114
(785,300) $
762,700
402,195
848,709
$ 2,088,000
969,678
781,159
$ 1,272,771
$ 2,053,930
(216,614)
$ 1,268,630
$ 2,816,630
$ 2,600,016
$ 1,437,784
$ 1,437,784
$ 2,762,756
$ 1,120,962
$ 1,272,350
Revenue
$ 1,290,196
$ 1,300,000
$ 1,300,000
$ 1,400,000
Sales Tax
$ 1,177,006
54,988
96,774
60,000
60,000
60,000
37,478
47,385
45,000
45,000
45,000
Voluntary Assessment
15,730
19,486
17,000
17,000
17,000
(12,852) $
(14,538) $
(14,220) $
(14,220) $
(22,000)
$ 1,272,350
$ 1,439,303
$ 1,407,780
$ 1,407,780
$ 1,500,000
$ 1,120,962
$ 1,273,869
$ 1,324,824
82,808
$ 2,762,756
Total Expense
$ 1,120,962
$ 1,273,869
$ 1,324,824
82,808
$ 2,762,756
82,956
$ 1,324,972
$ (1,262,756)
$ 1,272,350
$ 1,520,740
$ 2,762,756
$ 1,500,000
Expenses
151,388
165,434
$ 1,437,784
2015 Actual
2016 Proposed
Budget (CAPS)
$1,111,732
$1,111,732
$1,111,732
$10,000
$10,000
$0
$1,324,824
$82,808
$1,324,972
$0
$0
$1,437,784
$1,000,000
$0
$888,114
Notes
First in, last out
Program is on hold
$450,000
$0
$0
$577,405
$0
$0
$4,473,961
$1,204,540
$4,762,602
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