Wednesday, July 29, 2015

Lower income led to Chico Municipal Airport (KCIC) deficit

Chico >> The financial bottom line at the Chico Municipal Airport is that expenses outpace revenues, according to Chico’s top financial official.

“That’s not necessarily a bad thing,” said Administrative Services Director Frank Fields. “But it takes a policy decision to let that happen.”

Fields was addressing the Chico Airport Commission, which has struggled for years with a budget that this year is $1.4 million in the red. Fields noted a city memo from 1953 that indicated the airport budget was in a deficit then.

“The solution has to be from increasing revenue,” Fields told the commission, which has tried to get a handle on the airport budget and kicked around some possibilities like charging for terminal parking.

As it stands now, any area — like the airport — that ends up in the red is subsidized by the city’s General Fund. The city is working toward ending deficits and building reserves, Fields said.

“The airport is upside down because of operating revenue and expenses.”

For years, incoming and outgoing funds were keeping relatively even, Fields noted, until Aero Union left the airport. A long-time airport tenant, the air tanker system manufacturer left a number of city-owned airport buildings vacant when it moved to Sacramento. The loss of rental revenue was about a 40 percent hit on the airport budget, he noted.

Ironically, following Fields’ presentation to the Airport Commission, the consulting firm AvPORTS made a presentation on the airport, focusing on how to attract a commercial airlines back to serving Chico. But it also has been asked to delve more deeply into the financial situation.

Under the city contract, AvPORTS is expected to evaluate the physical condition of the city-owned buildings at the airport, federal dealings, airport staffing, and develop a budget and long-term financial projections, among other tasks.

AvPORTS representative Steve Forrer told the commission that he hopes all the items on the to-do list will be done by the end of September, although the contract calls for an end-of-year deadline.

Not only would AvPORTS like the long-term management contract for the airport, but it wants to be ready to get started in January, should the City Council award it the 10-year contract it wants.

While Forrer said it wasn’t controversial, negotiating the long-term contract could take weeks because of its complexity.

The commission asked AvPORTS about the progress into applying for a Department of Transportation small community air service development grant that would help attract an airlines, but Forrer said that would be better done in 2016 and closer to a time when attracting air service is more likely.

Apparently the size and condition of the terminal is an issue in air service attracting, with the old building needing more waiting room if bigger planes fly into Chico, plus Transportation Security Administration security facilities. More airlines are moving to large aircraft because of the carrying capacity and efficiency, not to mention the cost of operating older aircraft.

After the meeting, Tom Reich of AvPORTStold the E-R, “Regarding the passenger terminal at CIC, if an airline was to serve the airport with aircraft that have more than 50 seats, additional passenger hold room space would be needed so that passengers have a place to wait after passing through TSA. Additionally, the baggage claim facility would need to be expanded to accommodate the increased volume of checked baggage.” 

In another matter, the Airport Commission also decided to discuss reversionary clauses in airport hangar leases at a later time. Some tenants who lease T-hangar space from the city, but have paid for the construction of their hangars, have issues with the reversionary clauses.

That means that if the ground lease ends, the city would have an option to claim any improvements made to the property without compensation.

The Airport Commission could take up that discussion at is Oct. 27 meeting.


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