Do they need to discuss the demand problem?
A new precedent has been set for air service into the Gunnison Valley: faced with an $89,000 shortfall for 2012-2013 winter service, board members of the Gunnison Valley Rural Transportation Authority (RTA) sought additional funds from their respective local governments. The municipalities agreed, making what are supposed to be one-time payments to help cover a minimum revenue guarantee (MRG) to United Airlines so it will provide direct service from Houston to Gunnison.
Mt. Crested Butte and Crested Butte both agreed to contribute $20,000, the city of Gunnison is giving $10,000, and the county is contributing $30,000. If the flight performs well, the municipalities may get some or all of their one-time contributions back. Valley officials are emphasizing that their contributions must be one-time donations, but as the cost of air service continues to rise, their contributions also raise questions about the RTA’s financial policies and goals.
The RTA is funded through a .35 percent tax on sales inside the city of Gunnison and a .6 percent tax on sales in the rest of the valley. The requests for additional funds raised some concerns about the RTA’s projected fund balance of about $250,000, and why those funds aren’t being used to cover the MRG to Houston.
“I’ve only been here a couple of years now, but before I got on board there was a lot of discussion about the fund balances… We’re going in the right direction, but I’m not sure what this board was thinking as far as an appropriate fund balance for us to carry,” said Commissioner Phil Chamberland.
“In the past, the goal with the fund balance was to get it up over $400,000,” RTA executive director Scott Truex said.
“From the discussion that we had in Crested Butte… I think it would be really great for this board to establish some type of a fiscal policy that says this is where we expect our fund balance to be,” said Crested Butte Mayor Aaron Huckstep. “That was a question a number of our councilpersons had: Why aren’t we using our existing fund balance to make up that shortfall?”
According to Huckstep, Truex explained to the Town Council that the fund balance covers more than air service and is also needed to help cover bus repairs and, eventually, replacements. But a financial policy would have given the RTA board something to point to as a guiding document.
Truex cautioned the RTA board, pointing out that a policy could tie their hands and limit their ability to respond to opportunities or repair buses. The board agreed, and some members acknowledged that $400,000 might be too small a balance.
“If $400,000 is our threshold in ground transportation, in air service that’s nothing. We’d need hundreds of thousands more to set it somewhere and make a difference [in air service],” said Gunnison Mayor Jonathan Houck.
Chairman Chris Morgan suggested, “If we want to develop a policy, we could develop a financial goals policy that would outline objectives that the RTA would like to meet without setting firm [rules]… so that if we come up with a situation where we can expand United or add new service and we can risk this money, we can do it.”
The board asked Truex to bring a draft financial policy to its next board meeting. In the meantime, Crested Butte Mountain Resort general manager Ethan Mueller thanked the RTA for finding additional funds for the Houston flight, allowing the flights to be put online for sale earlier. While he did not have exact numbers, he said the resort was seeing earlier bookings as a result.
But RTA airline consultant Kent Meyers pointed out that airfare is extremely high—a round trip ticket during Christmas from Houston to Gunnison is about $900, and during spring break round trip tickets are around $1,500.
“Airfares are way off the charts,” he said. Meyers is seeing the same numbers throughout many ski resorts, and it’s likely that United hasn’t adjusted rates for that timeframe. But he said he would do further analysis and call United directly.
“There are a lot of moving parts at United. We’ve seen a shift from an analyst we worked with several years to a new person [we have not met yet]. The same thing is kind of occurring at American Airlines too, so it’s not that unusual,” Meyers said. In light of that, he encouraged the RTA to continue pursuing a better relationship with United by drafting a good will letter thanking the airline for its continued partnership. “It’s pretty rare that you receive a letter anymore. I get a lot of bills, but I don’t get a letter,” he said.
Chairman Morgan said he would be happy to work with Truex to send a letter on official RTA letterhead, but Huckstep encouraged the RTA to take it a step further.
“With all due respect to everybody on the board, if I was one of those guys…I get a letter, look at it, that’s great, thank you, bye,” said Huckstep. “To me the letter will only go so far.”
He suggested that getting United officials to visit the valley would be more effective, and Mueller confirmed that CBMR had done a similar thing with American. “It’s a nice way to get their attention and to get them here, because that’s how you get them to focus on us, to get them here and see what the community is,” Mueller said.
“It should be noted we’ve done this in the past,” Truex said.
“But not consistently,” said Commissioner Paula Swenson.
“Well, they’re busy people,” Truex said.
In general, the board seemed to agree this would be a worthwhile avenue to explore, while continuing to stay ahead of the curve by planning early. Swenson asked for 2013-2014 air service to be added to the next agenda, and board member Roland Mason wondered if it would also be a good idea to elevate the airline challenges to the state level. He indicated that state representative Millie Hamner attended the latest Crested Butte Town Council meeting and was surprised to learn the challenges resort communities are facing.
“It might be worth contacting her or someone in state Tourism Association and seeing what we can do on a bigger level or maybe having state people talking to United,” Mason said.
Mt. Crested Butte Mayor William Buck agreed that outreach could be an important part of the puzzle, but he made one final point that got little further discussion at the meeting.
“Outreach is fantastic and we should continue with it, but we should also remember we have a demand problem here and we need to continually improve our product with things like the Pro Challenge… but I don’t want to lose sight of that. We definitely have a demand issue,” Buck said.