The Federal Aviation Administration and the state's Aeronautics Division say the city of Beverly is violating federal aviation policy by failing to pay rent for the use of a building at Beverly Regional Airport.
In a letter to Mayor Mike Cahill, the agencies said the city must pay the airport seven years of back rent and enter into a lease to continue using the building. If not, the agencies will withhold federal and state funding for the airport, they said.
The letter, dated April 27, was signed by Gail Lattrell, director of the FAA's New England region, and Jeffrey DeCarlo, administrator of Massachusetts Department of Transportation Aeronautics. It gave the city 30 days to submit a plan to correct the violation.
"FAA will not consider discretionary funding for Beverly Regional Airport until this situation is corrected, and MassDOT will not provide state funding for the airport other than state match for FAA non-primary entitlement grants," the letter said.
The violation revolves around the city's rent-free use of a warehouse building on Airport Road to house the Department of Public Services' carpentry shop since 2016. Although the city owns the airport, the FAA said its airport revenue policy requires the city to pay fair-market rent for any "non-aeronautical use" of airport land or buildings.
The rent money would go to the airport's operating fund. The airport is run by an airport manager and a volunteer airport commission whose members are appointed by the mayor of Beverly and by the town manager of Danvers, which has two seats on the commission.
Cahill said the city has always understood that it was required to consummate a lease with the airport for the use of the building, but he said several changes in airport managers and other factors prevented it from getting done. He said the city is "certainly going to get it nailed down now."
"We're not going to get to the point where there's any negative impact on the airport's operation or its ability to get grants," Cahill said.
Beverly Airport Commission Chair Paul Trefry said the commission is happy that the FAA stepped in and is "willing to enforce the need for fair-market value that the Airport Commission attempted to get back in 2015."
"They at some point must have just said enough is enough," he said of the FAA. "They were not pleased that it has taken this long."
Based on an appraisal of the building and the land that the city is using, Trefry estimated the city owes back rent of about $320,000.
In a presentation to the Airport Commission on Monday night, Bryant Ayles, the city's finance director, estimated the fair market value of the city's occupancy of the warehouse building over the last seven years at $277,129. Ayles also said the city has invested nearly $1.4 million in the airport since 2016.
Although the airport has a separate enterprise fund for operations, Cahill said the city invests a lot money in the airport and continues to subsidize its operating budget.
"As the airport sponsor there's a symbiotic aspect to the relationship," he said. "A lot of city capital has been invested in the airport."
According to the letter, the city of Beverly is recognized by the FAA and the Massachusetts Department of Transportation Aeronautics Division as the "sponsor" for Beverly Regional Airport from a funding perspective. As sponsor, the city is "legally obligated" to abide by all policies that are attached to grants provided by the agencies, the letter said. Those policies include paying "fair market value" to lease any non-aeronautical land to help make the airport as "self-sustaining as possible."
Trefry said the FAA provides Beverly Airport with an average of about $1 million in funding per year. He said the commission is "very concerned" that the FAA will cut off funding, including for a planned $14 million runway reconstruction, if an agreement with the city is not reached.
Takeoffs and landings at Beverly Airport have nearly doubled since 2014, according to Trefry. He said studies have shown that the airport drives an estimated $35 million into the local economy.
The Airport Commission selected Gabriel Hanafin as the new airport manager in February. He is scheduled to start on June 5, Trefry said.
Staff Writer Paul Leighton can be reached at 978-338-2535, by email at [email protected], or on Twitter at @heardinbeverly.
Staff Writer Paul Leighton can be reached at 978-338-2535, by email at [email protected], or on Twitter at @heardinbeverly.
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