The Evolving Business Airport

In June, the two towns that own Palwaukee Municipal Airport just north of Chicago O’Hare –— Wheeling and Prospect Heights, IL — passed a piece of legislation that will forever alter the 2004 Illinois Reliever Airport of the Year’s role in the National Airspace System. The towns agreed to inaugurate a new Intergovernmental Agreement at the airport. Here, a former air traffic controller and corporate pilot at Palwaukee offers a retrospective on how the change in management structure at this storied airport could be a benefit both locally and nationally.

Operationally, the need for change had been apparent to many for years. The airport’s ability to keep up with industry changes and customer demands was often slowed by the 20-year old system of governance. To some, however, the move toward a more independent form of governance represented losing control of a valuable asset. The stage seemed set for a transformation. Major shifts in operational control are not new to Palwaukee however.

In the Beginning

Like most airports in 1933, Palwaukee started life as a small grass strip. When George J. Priester, the elder statesman at Palwaukee, purchased the airport in the early 1950s he envisioned a thriving general aviation airport close enough to draw customers from both Chicago and the nearby North Shore. By the 1960s, Priester Aviation was the local Learjet dealership in Chicago, and the airport was one of the busiest private fields in the nation. However, as a private airport, KPWK was unable to compete for AIP funding.

Priester Aviation owned the only fixed base operation and maintenance facility on the field. Despite what some saw as a lack of competition at Palwaukee, traffic operations neared the quarter of a million mark by 1967, the year FAA agreed to staff a new control tower built by the Priesters. It was not unusual to see four or five training airplanes in the traffic pattern for each of Palwaukee’s parallel runways, while business jets whisked out on the intersecting long jet runway between the little airplanes. Some 600 airplanes were based at Palwaukee then. Yet, some residents of neighboring Prospect Heights and Wheeling remained unconvinced of the airport’s value

As regional property taxes continued to rise in the 1980s, it became clear to George Priester and son Charlie that, in the face of rising costs and local pressure to turn the land into single-family homes, there was simply not a strong enough revenue base at Palwaukee to maintain control of the airport. Potential buyers however, were few in number.

By 1985, it was unclear whether the airport would be sold for development or taken over by the State of Illinois because of its strategic importance in drawing business traffic away from ORD. In the end, the City of Prospect Heights and the Village of Wheeling decided operational control of a local airport could not work effectively unless both neighbors took part. The transfer of control from the Priester family to the two municipalities was completed in 1986 and Palwaukee Airport became Palwaukee Municipal Airport.

The First IGA

The initial Intergovernmental Agreement (IGA) was written by two towns that had never owned or operated an airport before. In an attempt to delineate responsibility, an imaginary line was drawn east to west across the airport, something that would prove challenging in the future. Despite the doubts, Palwaukee prospered. During the sale, the Priesters kept the FBO, the maintenance facility, and the charter operation. A few years later the FBO was sold to Signature Flight Support. SFS is currently building a modern new operation at the base of the control tower.

In the mid-90s North American Jet became the second FBO on the field, bringing competition in maintenance and fueling services. (A third company, Service Aviation, also opened in the ‘90s but faltered, closing its doors in 2003.)

Today, Palwaukee is still home to four vibrant flight schools, a piston and two jet maintenance facilities, and two charter operators.

From the beginning, the operation of Palwaukee Municipal Airport incorporated a philosophy left over from its days as a private airport … buy only what you can afford. The municipalities agreed to operate the airport, but only if the facility was not given any taxing authority.

To this day, Palwaukee Municipal Airport has remained self-sufficient, a testament to both airport management and the Palwaukee Municipal Airport Commission that was formed to help govern the field. The PMAC reported directly to the two municipalities, but to the end remained only a recommending body.

Each time a new business concept, lease, or budget was developed, the documents would need to be voted on individually by the two municipalities after hearing the commission’s recommendations. Despite the influx of new AIP funds now available to Palwaukee as a municipal airport for removing old buildings, upgrading of runways, lighting, and the building of a new control tower, the need to garner approval from three bodies before action could be taken often meant months or years would pass before property could be developed.

A Kink in the Process

As with any business run by two equal partners, the governing bodies occasionally disagreed. The original IGA made no provision for how the two towns would work out disputes, other than taking those disagreements to the State of Illinois’ Department of Aeronautics, a solution that early on also proved unworkable. As city and village government personalities changed, political governance became a significant issue.

Despite the various governing obstacles, original airport manager Fred Stewart and later his successor, Dennis G. Rouleau, made progress in transforming the old airport into a modern facility. Old hangars were torn down, new T-hangars were built, runway 16/34 was completely rebuilt, new airport lighting and drainage were added, and two roads were rerouted to significantly increase the runway safety area to runway 16. Rouleau also initiated a community relations program that would make inroads into telling many positive stories about the airport, as well as a new airport noise control program that became a model for other facilities. Day-to-day operations however were still frustrating to many users both on and off the field.

A New Beginning

Not quite two years ago, after fielding input from corporate users, FBO management, the Priesters, the Palwaukee Airport Pilot’s Association, members of local government, and the Palwaukee Municipal Airport Commission began to re-explore the original IGA.

Many, many discussions later, the PMAC formed a working committee to assist counsel in drawing up a new document, one that would offer the airport the flexibility it needed to move quickly when opportunities arose. It also became clear that Palwaukee would need to change direction if it was to set a standard for small aircraft owners, who view Palwaukee as the best airport to base their aircraft.

Eighteen months after the process began, the working group presented the president of Wheeling and the mayor of Prospect Heights with the draft of an agreement that not only more clearly outlined the responsibilities of both owners, but would pass most day-to-day operational control to a new seven-member airport board, a body that would no longer be simply a recommender of change, but a group of dedicated citizens, most with considerable aviation experience, that would have the authority to determine the long-term direction of the airport. Control of many items, such as the annual budget, would remain with the two towns.

In order to guarantee that each town’s interests were well represented, the Prospect Heights’ city administrator and the Wheeling village manager sit on the board. A new chairman, someone not necessarily a resident of either town, will be chosen to keep the group on track and break tie votes when necessary. The remaining board members — two from each town — are appointed by the mayor and the village president. The two towns agreed to equally split airport sales tax revenues.

The new IGA structure also highlights a vastly improved business relationship between the two municipalities, one that focuses on the use of not only the airport’s new primary guiding documents such as airport minimum standards, rules and regulations, and rates and charges, but also accepts the inevitability of disagreement between parties. The IGA’s new arbitration clause was designed specifically to resolve differences while the airport continues to move ahead. Palwaukee’s new system of governance is now poised to effectively steer the airport into future.

Charles Priester, CEO of Priester Aviation, comments, “The movement to a new IGA management structure is simply the next step in a developing and maturing airport. All users will see a difference when the field is run by a group of people with the authority to make faster decisions, as well as the time and insights needed to plan for the future.”

One item that did not disappear with the old IGA was how the airport is financed. Palwaukee is still completely self-sufficient, relying solely on revenues generated from fuel flowage and hangar rental charges. No local tax money is used to run the airport.

As Airport Manager Dennis Rouleau comments, “The airport’s new governance structure makes the Palwaukee Municipal Airport even more business friendly than before which will translate into an even better quality of service for our users than we already provide.”