Monday, February 10, 2014

Lehigh Valley International Airport (KABE), Allentown, Pennsylvania

$230,000 utility bill the result of airport error

After mix-up goes unnoticed for six years, LVIA settles with its largest tenant for $70,000.

Imagine the shock of opening a $230,232 utility bill.

That's what happened to New World Aviation because of somebody else's blunder.

For six years the company was undercharged for electric and sewerage at Lehigh Valley International Airport. But then somebody at the cash-strapped airport discovered the error and demanded the money be paid.

What followed was a yearlong negotiation between the airport and New World, its largest tenant. The two sides settled last week.

New World Aviation will plunk down a $70,000 lump-sum payment, and the charter plane company will remain at the airport for at least another five years.

It's a fraction of the amount LVIA was short-changed, but both sides say there were legal questions about how far back the airport could reach to collect. As it stands, it's found money — like a 20-dollar-bill in the dryer — for an airport that desperately needs it.

"Unbeknownst to us, they were paying our [utility] bill and we were paying theirs for years," said Dean Browning, chief financial officer of New World and a former Lehigh County commissioner. "Needless to say, when the airport wanted [$230,000] in back charges, we were less than agreeable."

Making matters even more complicated was the fact that, in this dispute, Browning represents both "we" and "they." He's also a Lehigh-Northampton Airport Authority board member who was appointed in 2011, after the mix-up started but before anyone noticed.

It all began in 2006, when New World needed a second hangar at LVIA. In addition to its 63,701-square-foot Hangar 9, it moved into Hangar 3, expanding its operation to 38 employees and six planes. With a lease paying the airport $900,000 per year, New World became the airport's largest tenant.

The problem was, an airport employee mistakenly assigned the wrong utility meters to New World. While continuing to pay its normal utility bills for Hangar 9, New World started getting utility bills for a small airport-owned hangar where two car rental businesses are run.

Meanwhile, the airport got the utility bills for Hangar 3. So, while New World was paying surprisingly reasonable bills of roughly $200 a month for a 40,741-square-foot hangar, the airport was footing bills approaching $3,500 per month for a relatively small rental car office.

"I suppose our accounting office should have noticed," Browning said. "But we pay several lease and utility bills for various hangars."

No one from the airport noticed until 2012, when new airport Executive Director Charles Everett Jr. ordered a routine audit of all airport leases. Everett said he has no reason to believe the mix-up was anything more than a mistake, but he could not explain how it could have gone unnoticed for so long.

"I've never seen anything quite like this before," Everett said. "But we're happy to get it cleared up."

For the past year, the two sides have been negotiating through their lawyers in the hope of keeping the matter out of court. Airport officials argued that New World used the electricity, while New World officials pointed out that the authority caused the mix-up. Company lawyers also argued a statute of limitations applies to such under-payments.

"Basically, they said pay [$230,000], we said we'll pay $50,000. They came back with [$230,000] and we said, OK then $0," Browning said. "I did not participate in any of the discussions, but I understand that the negotiations were amicable throughout."

After months of closed-door negotiations, the two sides settled on $100,000. They initially agreed that New World would pay over the five years of its proposed new lease, beginning in June. The company then offered to pay the whole bill now for a reduced rate of $70,000, and the airport agreed.

Problem solved. Court avoided. Everyone's happy.

On the downside, New World recently saw a 1,700 percent increase in its utility bill.


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