Wednesday, September 17, 2014

Final city cost for Cleveland Regional Jetport landing at $7.25M

After more than 18 months in operation, financial loose ends remain for the Cleveland Regional Jetport and the board that oversees it, the Cleveland Municipal Airport Authority.

Among those loose ends is the handling of the city’s final share of the price tag — $7.25 million.

The original plan was for the city’s portion of the $42.32 million facility to come from the sale of Hardwick Field, but that relied upon receiving a hefty price for the old airport property, which failed to materialize.

The Airport Authority realized $1.03 million from the sale of Hardwick Field, leaving roughly $5 million to be financed on the airport itself. A bond issue for $4.3 million and $700,000 from the city general fund will cover that amount.

The $2.2 million terminal building received only $700,000 in state and federal money. The rest was to be raised from private donations. The needed pledges fell short. Only $281,400 was raised and could be paid over three years by donors. Fundraising costs were more than $50,000. There is no ongoing fundraising campaign for the terminal.

A bond issue for the terminal has $1.35 million remaining on the principal balance, leaving the local total for both the terminal and airport at $6.35 million after deducting the proceeds from the sale of the former airport property.

Airport Authority member Verrill Norwood said the governing body needs to raise $1.5 million to cover the difference in cost between what the terminal project received from grants and what was ultimately spent on the terminal.

“I guess that’s the one thing we are not proud of ... that we didn’t get the $1.5 million,” Norwood said.

The Airport Authority received input for the terminal from its Terminal Design Committee, a consultant and fixed base operator Crystal Air. The committee visited other municipal airports for inspiration. The Airport Authority approved the suggestions of the design committee.

A restaurant area, rental cars and meeting facilities were main elements suggested for inclusion. The restaurant area did not become a reality, but the others did, according to Norwood.

A committee headed by Airport Authority chair Lou Patten was tasked with raising the money for the terminal.

“We haven’t had reports from that group in a long time,” Norwood said. “There was a group to outfit and design the terminal and then there was a group that was put together to raise money.”

That committee has not met for at least a year, according to Patten.

Patten said the committee had focused on having a good design for the terminal and had a list of potential donors.

“The director, part of his job is to market the airport and fund raise,” Norwood said. “I don’t get involved in that.”

Patten said he felt the committee would not meet again. Instead, according to Patten, Mark Fidler, Jetport director of operations, will be spearheading efforts to “bring in some additional funding.”

“We are going to try to refocus on that area,” Patten said.

Initial fundraising came mostly through opportunities to have the donor’s name on an item inside the terminal, such as the waterfall.

“It was a three-year pledge. You could choose to pay over three years,” Norwood said.

Kristi Powers, city public works support services manager, said she has received $179,400 of the $281,400 pledged.

“I have a total of 11 donors,” Powers said. “One donor who had originally pledged $30,000 later withdrew the planned donation. Most of the donors have broken their pledge up into annual payments.”

These annual payments are scheduled through June 1, 2017.

Now, local companies have the opportunity to advertise on digital screens at the Jetport as a way to support reaching the fundraising goal.

The budget for the Cleveland Regional Jetport is part of the city of Cleveland’s general fund.

City finance director Shawn McKay said the interest rate on the $4.3 million borrowed for the Jetport is 2.64 percent on the fixed-rate bond.

The old airfield sold for $1.03 million, rather than the appraised $1.78 million, leaving about $700,000 remaining to cover the Jetport. This money came out of the city’s general fund budget.

McKay said payments on the bond issue will come from the debt service fund.

“There are various places that we fund that (debt service) from depending on what particular project it is, but there is a transfer every year from the general fund to the debt service fund,” McKay said.

In spite of Hardwick Field being operated by the Cleveland Municipal Airport Authority, the shortfall in funds from its sale must be offset by the city and not the Airport Authority.

A separate bond issue has been authorized to cover the shortfall in fundraising for the terminal building, which was above the amount covered by a grant. The amount received in pledges covered the $136,000 debt service payment for the first year. McKay said this was a variable rate bond with the interest rate locked in for five years. How the rate changes after that is determined by the market, McKay said. The loan’s maturity date is May 2027.

“The terminal (bond) is at a variable rate based on the SIFMA (Securities Industry and Financial Markets Municipal) index plus 0.55 basis points. We budget this at 4 percent,” McKay said.

The bond was issued through the Tennessee Municipal Bond fund.

“As operations grow out there (at the Jetport) it’s very likely that they may be able to fund the payments through operations money,” McKay explained. “We are one year under our belt and there is still a lot of demand for hangar space, grounds receipts and things of that nature. Operations continue to grow.”

He added, “They are operating on a balanced budget this year, so incomes match their expenses. I think having that Jetport there is key to having the businesses and industries that we have attracted, and it is going to play a key role in (the future).”

The Jetport’s current approved budget totals $1.07 million.

The majority of the revenue comes from fuel sales that are projected to be $898,000. The remaining revenue is generated from ramp fees, hangar rental, land rental and other service-based income.


- Source:    http://www.clevelandbanner.com

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