Skirting the Fence

Skirting the Fence The on-airport, off-airport rates & charges debate comes to a head — and a solution — at Scottsdale BY John F. Infanger, Editorial Director January / February 1999 SCOTTSDALE, AZ — There is, of course...

Recalls airport director John S. Kinney, "FAA took a look at the situation and said, yes, you have a discriminatory rate structure; fix it. That's what created the first go-round to come up with a regulatory document" for rates and charges.

"Each side could present compelling arguments," he continues. "In the Airpark, you're purchasing the land, and you need to pay the commercial tax rate ... and you need to put up the building. The folks on-airport say, Airpark tenants have the investment until the end of time and the ability to sell it and recoup their investment; meanwhile, we're trying to nurture and create a market on an airport where many (Airpark) tenants have their own fueling.

"So, how do you truly equalize the burden while at the same time recognizing the relationships created 20-25 years ago?"

Seeking a compromise
Two years ago, Scottsdale hired independent consultants, Airport Business Solutions (ABS) and The Aviation Group, to find an answer. Comments ABS president Michael Hodges, "It was a unique project from the standpoint of the airport having to be careful to protect the interests of the airport tenants which are its primary revenue source, while protecting the tenants of the Airpark who are vital contributors to the community."

An ABS analysis showed that tenants of the Airpark accounted for 10-15 percent of airport utilization, yet were actually paying 3-5 percent of airport revenues.

Explains Hodges, "We initially started by looking at a pure cost recovery structure for the Airpark's pro rata share of airport and operating cost. We looked at putting in gates and charging access fees based on size of aircraft; that way, it was truly a user fee. One of the problems was that certain users, such as recreational, may go in and out of a gate four or five times a day; it got to be unreasonable versus a corporate jet."

Adds Kinney, "There was a huge sticker shock associated with that. The Airpark folks just swelled up in opposition and felt that they became a stepchild overnight."

Implementing a plan
During the recent two-year reexamination process, a full-time person was hired, dedicated to collecting airport rates and charges, which Kinney admits were not being fully accounted for under the previous coupon system. "We've increased revenues in terms of collections, almost to the point of paying for that individual's salary package alone. It's also helped us with more of a community policing-type approach, because we have someone consistently interfacing with the tenants at the Airpark.

The new rate structure, approved in December, should improve the revenue stream even further, he says. It calls for all fuel farm operators to pay an 8 cents/gallon flowage fee. In addition, Airpark tenants also pay one-half the normal tiedown fee. "If you're doing condominium hangaring or office complexes so that you have capacity beyond your immediate fleet, then you would also pay 5 percent of that revenue," explains Kinney.

Says Hodges, "It's much more equitable than the previous system, one that most people felt comfortable with. It's a recognition that the Airpark tenants provide a definite benefit to the city and to the airport; it couldn't be a pure cost recovery system."

Regarding FAA's role, says Kinney, "They didn't have any direct guidance other than, ’control it at the gate.' They also felt that land-use measures were the best control."

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