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Due to the extraordinary nature of the events of September 11, 2001, in conjunction with the posting of the City's CAFR on this webpage, the City is providing additional general information regarding the potential effects on the City's finances overall and on the finances of its Airport Department. The CAFR covers the period of July 1, 2000 to June 30, 2001. Accordingly, the CAFR does not take into account the effect of the events of September 11, 2001 on the reported information. Set forth below is a brief summary of some of these potential effects. The City does not intend to update the CAFR webpage or these summaries with additional information.
The Budget adopted by the City Council in June 2001 for FY 2001-02 contained conservative revenue estimates. The budget did not, however, anticipate the events of September 11 and their impact on the nation’s economy and our local revenue sources. In contrast to the strong revenue growth experienced over the last five years, collections in the City’s economically sensitive revenue categories were all showing moderate to significant declines even before the tragic events of September 11. While data for the majority of revenue sources is very limited, because it is so early in the fiscal year, it is clear that the current economic slowdown is translating into decreases in a number of the City’s key revenue sources.
The terrorist attacks on September 11, 2001, resulted in the disruption of the North American transportation system leading to a nationwide temporary suspension of all non-military aircraft operations and closure of all U.S. airports, including the San Jose International Airport, for several days. Air carriers have resumed services, although many of them are currently operating at reduced levels and have announced significant cutbacks in their national operations. Flight operations resumed at the Airport on September 13, 2001. The Airport and the airlines have implemented new safety and security measures, including those mandated by the Federal Aviation Administration.
Since these events, passenger traffic has dropped sharply. The Airport faces a potential significant reduction in revenues, including Passenger Facility Charges (“PFC”) revenues, concession revenues, parking revenues, and landing fees. Further, the Airport and the airlines are confronted with increases in operating costs due to the new security measures. The Airport is unable to predict the duration and the extent of the impact of the September 11 tragedy on the costs and revenues of the Airport, or on the airlines serving the Airport.
The Airport management is reviewing its budget for the current fiscal year to determine what operating and capital expenses can be reduced and/or deferred. Certain capital projects and some non-essential programs and expenses will be postponed or eliminated. However, such reductions are not expected to adversely affect current operations at the Airport. The Airport expects that it will continue to make timely payments of principal and interest on all of its outstanding bonds and other obligations and that it will be able to satisfy its rate covenants with respect to such bonds and obligations.
October 25, 2001
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