Saturday, May 16, 2015

Humboldt County, California: Lack of flights impacting aviation fund

Humboldt County’s Aviation Enterprise fund is flying low, with the need to attract a second airliner becoming more pressing as backup funds are depleted, officials said.

At the beginning of the 2014-2015 fiscal year in July 2014, the fund already had a negative balance of over $525,500, which is now expected to dip to a negative $826,500 balance by June 30, according to the County Administrative Office’s third quarter budget report released this month. The fund’s structural deficit, which carries over from year to year, is currently around negative $350,000 and is expected to drop to negative $500,000 at the start of the next fiscal year.

“Basically you have your structural deficit, which adds to the negative fund balance,” Assistant County Administrative Officer Cheryl Dillingham said. “If you start with a fund balance of $0 and you have a $350,000 structural deficit, at the end of the fiscal year you’ll have a negative fund balance of $350,000.”

County Public Works Director Tom Mattson said this negative trend is due to an imbalance caused by the expenditures needed to operate the county’s six airports being greater than the incoming revenue.

“We have to have a minium level of staffing to run a commercial airport,” Mattson said. “We’re operating 20 hours a day, seven days a week. Realistically, we can’t cut any staffing and keep our commercial operations.”

The Arcata-Eureka Airport currently has only one airline service provider through United Airlines after the loss of Horizon Airlines in 2011. With fewer flights, the airport is bringing in less revenue from landing fees, fuel sales, terminal rental space, and parking. More recently, the airport lost the U.S. Coast Guard as a fuel customer and United Airlines ended service to Sacramento. Even the closing of the airport’s restaurant, The Silver Lining, in March will add to the negative fund balance, Dillingham said.

Mattson said just one new airline service would be a “significant revenue enhancer,” though he said he could not predict how soon it would reverse the Aviation Fund’s negative trend.

“The minute a new airline comes in, new revenue starts coming in,” he said.

The airport’s Program Coordinator Emily Jacobs and other county representatives have been meeting with airline service representatives with the hopes that one will catch. Jacobs said she plans to attend another conference in June, and said she cannot disclose any information about any ongoing negotiations.

“There is nothing to report at this time,” she said. “Things are positive and I will keep everybody posted as soon as there is some type of announcement to make.”

However, the fund cannot wait for another airline service to balance its budget before the end of the fiscal year. Should the deficit carry over to the next fiscal year, the fund would fall out of compliance with state law.

“The deficit combined with a negative fund balance causes the financing sources to exceed financing uses, which is not allowed per the state County Budget Act,” the budget report states. “The recommended budget for the Aviation Enterprise fund is required to be balanced.”

The fund’s current balance “raises concern” for the County Administrative Office.

“This is because enterprise funds are classified by accounting standards as ‘business-type activities’ and are supposed to stand on their own without the sort of short-term borrowing typical of the county’s governmental funds,” the report states.

While the Public Works Department has been using trust funds to cover short-term costs in the Aviation Fund, Mattson said it won’t be a viable option for next fiscal year.

“Think of that as a bank account,” he said. “We’ve drawn that down and we would like to pay it back. We don’t have the cash to draw down this year.”

With options running out, both Public Works and the Administrative Office are currently negotiating a $500,000 loan from Public Work’s Motor Pool fund to balance the Aviation Fund’s budget and provide another year to find a new revenue source.

“The budget has to be balanced,” Mattson said. “That loan allows us to balance the budget for the year and gives us time to figure out a way to get rid of the structural deficit and pay back the loan.”

As to why the Motor Pool fund is being chosen to make the loan, County Administrative Officer Phillip Smith-Hanes told the Board of Supervisors at its May 2 meeting that “there is no magic” to it.

“It’s just simply that that’s a place where we have quite a bit of cash, unlike in the General Fund,” he said.

The Motor Pool fund began the 2014-2015 fiscal year with an over $2.2 million budget. The finalized loan request will go before the board before the end of the fiscal year.

Meanwhile, Jacobs said that the airport will now have a new 70-seat jet from United Airlines starting on July 2 that will be used for a new 5:30 a.m. flight. The new jet will be the second to last returning flight each night, meaning that the airport will now have two morning flights. Jacobs said this flight and jet were added due to increased demand, which she said can also be used as leverage to attract another airline.

“When they see that the seats are full and people are using the airport, it gets them very interested much more than any kind of revenue guarantee or subsidy,” she said. “They want that connecting traffic. The best thing the citizens of Humboldt County can do to get more flights is to use this airport.”

Original article can be found here:  http://www.times-standard.com

No comments:

Post a Comment