Comprehensive Annual Financial Report 2017

2017·3.9 MB·English

by  Massachusetts Port Authority

2017
MASSACHUSETTS PORT AUTHORITY
C O M P R E H E N S I V E A N N U A L F I N A N C I A L R E P O R T
Years Ended June 30, 2017 & June 30, 2016
gateway
your
to the
world.
NONSTOP FLIGHTS CONNECT BUSINESS TRAVELERS TO OPPORTUNITY, VACATIONERS TO FUN, AND FAMILIES TO HOME.
NEW Sao Paulo, BR Madrid, ES
Mexico City, MX
NEW Montreal-PET, QC, CA
Montego Bay, JM
Montreal-PET, QC, CA
Amsterdam, NL
Munich, DE
Aruba, AW
Nassau, BS
Beijing, CN
Ottawa, ON, CA
Bermuda, BM
Panama City, PA
Bermuda, BM
Paris-De Gaulle, FR
Bogota, CO
Paris-De Gaulle, FR
Bridgetown, BB
Cancun, MX Ponta Delgada, PT
Cancun, MX Port Au Prince, HT
Cancun, MX Providenciales, TC
Copenhagen, DK Puerto Plata, DO
Doha, QA Punta Cana, DO
Dubai, AE Reykjavik, IS
Dublin, IE Reykjavik, IS
Frankfurt, DE Rome-Da Vinci, IT
Grand Cayman, KY Santiago, DO
Halifax, NS, CA Santo Domingo, DO
Halifax, NS, CA Shanghai, CN
Hong Kong, HK Shannon, IE
Istanbul, TR Tel Aviv-Yafo, IL
Liberia, CR Terceira, PT
Lisbon, PT Tokyo-Narita, JP
London-Gatwick, EN, GB Toronto, ON, CA
London-Heathrow, EN, GB Toronto, ON, CA
London-Heathrow, EN, GB Toronto-City, ON, CA
London-Heathrow, EN, GB Zurich, CH
The world is nonstop at
Cover Photo:
GATEWAY TO THE WORLD
To better serve the needs of New England’s business and leisure travelers, Logan’s international
nonstop service has more than doubled in the past 10 years, growing from 26 to 54
destination cities around the world.
Designed and Printed by Millennium Printing Corporation | www.mpcprinting.com
Designed and Printed by Millennium Printing Corporation | www.mpcprinting.com
MASSACHUSETTS PORT AUTHORITY
C O M P R E H E N S I V E A N N U A L F I N A N C I A L R E P O R T
Years Ended June 30, 2017 & June 30, 2016
Prepared by the Massachusetts Port Authority
Administration and Finance Department
located in East Boston, MA

Table of Contents
For Fiscal Years Ended June 30, 2017 and June 30, 2016
MASSACHUSETTS PORT AUTHORITY
Introductory Section
Pages
Letter of Transmittal 1
Certificate of Achievement for Excellence in Financial Reporting 9
List of Authority Board Members 11
Organization Chart 12
Executive Staff 13
Financial Section
Report of Independent Auditors 19
Management’s Discussion and Analysis 21
Financial Statements:
Statements of Net Position 54
Statements of Revenues, Expenses and Changes in Net Position 55
Statements of Cash Flows 56
Notes To Financial Statements:
1. Summary of Significant Accounting Policies and Practices 57
2. Reconciliation Between Increase in Net Position as Calculated Under GAAP and Net Revenues
as Calculated Under Accounting Practices Prescribed by the 1978 Trust Agreement 66
3. Deposits and Investments 67
4. Capital Assets 75
5. Bonds and Notes Payable 77
6. Pension Plan 83
7. Other Postemployment Benefits 89
8. Leases 91
9. Risk Management 92
10. Payments in Lieu of Taxes 93
11. Commitments 94
12. Litigation 94
13. Interagency Agreements 96
14. Subsequent Events 96
Required Supplementary Information:
Schedule of OPEB Funding Progress 97
Schedule of Pension Contributions 98
Schedule of Changes in the Net Pension Liability and Related Ratios 99
Supplementary Schedules:
I. Combining Schedule of Net Position as of June 30, 2017 100
II. Combining Schedule of Revenues, Expenses, and
Changes in Net Position for the year ended June 30, 2017 101
III. Combining Schedule of Net Position as of June 30, 2016 102
TABLE OF CONTENTS
Ta b l e o f C o n t e n t s ( C o n t i n u e d )
Supplementary Schedules (Continued): Pages
IV. Combining Schedule of Revenues, Expenses, and
Changes in Net Position for the year ended June 30, 2016 103
Statistical Section
S-1 Revenues, Expenses and Changes in Net Position 108
S-2 Most Significant Revenues and Related Rates and Charges 110
S-3 Historical Principal Operating Revenue Payers 113
S-4 Conversion of GAAP Revenues and Expenses to the 1978 Trust Agreement
Revenues and Expenses 114
S-5 Calculation of Net Revenues Pledged Under the 1978 Trust Agreement 115
S-6 Calculation of Total PFC Revenue Pledged Under the PFC Trust Agreement and
Calculation of Total CFC Revenue Pledged Under the CFC Trust Agreement 118
S-7 Calculation of Debt Service Coverage Under the 1978 Trust Agreement,
the PFC Trust Agreement and the CFC Trust Agreement 120
S-8 Debt Metrics Under the 1978 Trust Agreement,
the PFC Trust Agreement and the CFC Trust Agreement 122
S-9 Largest Private Sector Employers 125
S-10 Demographics and Employment Data 126
S-11 Number of Employees by Facility 128
S-12 Logan International Airport Traffic Metrics 130
S-13 Logan International Airport Market Share of Total Passenger Traffic 132
S-14 Logan International Airport Passenger Markets 135
S-15 Port of Boston Cargo and Passenger Activity 136
S-16 Port of Boston Principal Customers 139
S-17 Tobin Memorial Bridge 140
S-18 Insurance Coverage 141
S-19 Physical Asset Data 142
Annual Disclosure Section
Annual Disclosure Document – 1978 Trust Agreement 145
Annual Disclosure Document – CFC Trust Agreement 157

Appendices

Appendix CFC-1-Total Enplaned Passengers, By Type of Passenger CFC-1
Appendix CFC-2-Debt Service Coverage – Rate Covenant CFC-2
Introduction
T e r m i n a l E I m p r o v e m e n t s
The Terminal E Renovation and Enhancement project, completed in June 2017,
modified three gates at Terminal E to allow flexibility in accommodating larger
aircraft. It also improved the passenger experience for international travelers,
with modern amenities and an additional 95,000 sq. feet of terminal space.

Massachusetts Port Authority November 28, 2017*
One Harborside Drive, Suite 200S
East Boston, MA 02128-2090
Telephone [phone]
www.massport.com
To the Members of the Massachusetts Port Authority:
The past year has been one of extraordinary progress for Massport and our efforts
to fulfill our mission to be “a world-class organization that moves people and goods
and connects Massachusetts and New England to the world safely and securely while
being a good neighbor to people who live near our facilities.”
Our most significant accomplishments did not come without great effort. We have
succeeded with strategy, planning, and a strong partnership of government, the
private sector, labor, non-profit advocacy, and our neighboring communities. Achieving
our goals has required collaboration, creativity, optimism, intuition, tenacity and a willingness to explore new ideas.
We are pleased to submit the Comprehensive Annual Financial Report (“CAFR”) of the Massachusetts Port Authority
(the “Authority” or “Massport”) for the fiscal year ended June 30, 2017. This report was prepared by the Authority’s
Administration and Finance Department, and presents our financial results for the year as well as selected highlights to
illustrate our approach to tackling some of our most complex challenges.
Meeting the challenges of 2017 -- selected highlights
Staying ahead of security threats
Safety and security continue to be Massport’s number one priority, and we are constantly adapting security measures
to address new and emerging threats from terrorist attacks and gun violence. This includes making investments in new
technology, training, people – and even dogs. At Logan Airport, trained law enforcement officials are using “vapor wake”
dogs specially trained to detect vapors in the air from explosives hidden in baggage and cargo.
During the past five years, Massport has conducted over 300 Authority-wide exercises, drills and training events. These
events have focused on aviation and maritime security, fire-rescue and life safety, preparing and responding to hostile events,
and resiliency. We don’t simply talk about security threats – we practice and prepare for them on a continual basis.
In September 2017, Massport conducted the Logan Emergency Access Plan, its largest scale exercise to date, to simulate
an Active Shooter incident in a Logan Airport terminal. This training exercise involved more than 1,300 law enforcement,
fire rescue, emergency medical services, airport operations personnel and volunteers. Law enforcement participants included
the Massachusetts State Police, Massport Police, MBTA Police, Boston Police, Chelsea and Winthrop Police, the FBI, Customs
and Border Patrol, and others. Fire rescue and emergency services included Massport Fire Rescue, Boston Fire, Boston EMS
and MEMA (Massachusetts Emergency Management Agency). Airport operations personnel included Massport employees,
TSA (Transportation Security Administration) and staff from all of the major airlines serving Logan Airport. All involved
agreed that this exercise, and especially the interaction/collaboration between all of the various participants, was
extremely beneficial.

Since September 11, 2001, Massport security officials, airline representatives and members of all federal, state
and local agencies working at the airport have conducted daily briefings to share safety and security information,
an approach which has become a model for airport (and transportation) security across the United States.
* The information derived from the Authority’s audited financial statements is as of the date
of such audit, September 29, 2017. INTRODUCTION
1
Transforming Logan Airport terminals for the future
During the past 10 years, international non-stops from Logan Airport have more than doubled from 26 to 54. And since
2012, Massport has secured non-stop service to 12 international destinations including Tokyo, Beijing, Shanghai, Hong
Kong, Tel Aviv, Dubai, Doha, Istanbul, Mexico City, Panama City, Bogota and Sao Paolo. It has been estimated that the
annual economic impact to the New England Region from these 12 routes is $1.5 Billion.
After operating since 1974 with 12 gates designed to serve 1.5 million passengers, Logan Airport’s International Terminal
E is on the verge of a modernization project which will enable Massport to better serve the more than seven million
international passengers who traveled through Logan during fiscal year 2017.
In late March 2017, Massport completed a $170 million renovation, allowing Terminal E to better accommodate the recent
growth in international passengers. This renovation to Terminal E was certified LEED Gold by the U.S. Green Building Council
in the fall of 2017.
In 2018, Massport will begin phase 1 of the Terminal E Modernization project, which includes the addition of seven gates in
two phases (three gates were approved in the late 1990s and never built). The modernization includes an indoor connection
between Terminal E and the MBTA Blue Line aimed at encouraging more travelers to take the T. Following a rigorous 120-day
review, the Terminal E Modernization project was certified by the Massachusetts Environmental Policy Act (MEPA) in late 2016.
Making Terminal B passenger-friendly. With its horseshoe shape, Terminal B has always operated more like two
terminals than one. But when its two principal airlines, American Airlines and U.S. Airways merged in 2013, the layout of
Terminal B became an obstacle to customer service and airline operations because the airlines were located on opposite
sides of the terminal. In 2017, Massport began a $200 million project to consolidate the gates, baggage operations and
passenger checkpoints of the merged airlines to enable a more efficient operation.
Addressing the Logan Airport parking shortage without harming the environment
For the past three years, as the number of Logan passengers has dramatically increased to a record high of 37.5 million
in fiscal year 2017, the airport has been plagued with a chronic parking shortage during busy travel periods. In a survey,
12% of passengers reported they missed their flight because they could not find parking. Based on an in-depth assessment,
Massport concluded that an additional 5,000 spaces at the airport will alleviate this issue, and has been working diligently
to amend the parking freeze that has been in place since 1975.
In addition to improving customer service, Massport determined that the additional spaces will be beneficial to the
environment. The current parking shortage is actually increasing auto emissions at Logan as it is resulting in more vehicle
pick-up and drop-offs, and thus the addition of 5,000 parking spaces will reduce harmful vehicle emissions (CO, VOCs,
and NOx) by 23 percent as a customer who parks equates to two trips (one arriving, one departing) while one who is
dropped off and then picked up equates to four.
In July 2017, after a rigorous review and comment period, the Massachusetts Department of Environmental Protection
(DEP) amended the Logan Airport parking freeze to permit the addition of 5,000 spaces.
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