Airport runs budget deficit for second consecutive year in 2010

Balance has been tipped by lucrative high altitude testing contracts

The Gunnison-Crested Butte Regional Airport is facing a second consecutive year with a budget deficit, according to a draft budget. But airport manager John DeVore and Director of Airport Administration Kathie Lucas left out a couple of substantial line items in the revenue column of the budget that should more than tip the balance.

But when DeVore and Lucas presented their draft budget to the Board of County Commissioners on Tuesday, November 24, commission chairperson Paula Swenson was concerned only with the airport’s cash flow as it appeared in the budget.
“Projected revenues are up, but projected expenses are up too. In the current economy, it sends up a lot of red flags when we see a constant decrease in our reserves. Every year we are spending those reserves continuously,” she said.
“We’re going into a two-year cycle here,” she continued. “We’re showing a $120,000 loss going into the end of ‘09 and then we’re going right into a $180,000 projected loss in 2010. So we’ve got back-to-back years… and that’s where the red flag goes up for me.”
DeVore said added requirements from the Federal Aviation Administration were pushing the airport’s expenses higher than they had ever been, and the revenue being generated by traditional means hasn’t been enough to cover them.
“The FAA has requirements for what we have to provide for fire-fighting coverage. That drives number of personnel we have on staff,” he said. “Because of that we hired additional ARFF personnel.”
Revenue generated last year through the terminal and airline fees didn’t meet projected marks. Other federal requirements that could affect the airport’s budget next year haven’t been decided, leaving uncertainty about expenses.
Assistant County Finance Director Ben Cowan told the commissioners, “A lot of the airport’s revenue is very volatile, so you never know what you’re going to get.”
Other revenue sources, like contract payments from airlines, are fixed to increase as much as 6 percent each year, but haven’t been enough to match the increase in expenditures. The airport could negotiate with the airlines for higher payments, but that would only lead to higher costs for customers.
Despite the uncertainty, DeVore pointed out, “The pattern has been that we close out the year spending less than the revenue we bring in.”
He says part of the reason it seems to work out at the end of the year is that all costs associated with airport maintenance and operations that can be contained are guarded to make sure that they don’t go unchecked.
Employees aren’t scheduled for overtime and the staff does most of the maintenance and upkeep at the airport. Even DeVore himself is currently repainting walls inside the terminal.
“The only other way we could absorb the costs would be to pass them on to the airlines. In the wintertime, when you’re doing flight agreements, the [Rural Transit Authority] is paying for flights. So if we charge the airlines more, then we drive up the RTA’s costs,” DeVore said. “It’s a real balancing act.”
But last year, the scales were weighted in the airport’s favor when aerospace companies Boeing and Qinetiq chose Gunnison to host high-altitude testing exercises for two aircraft.
Boeing spent two months at the airport this summer; Qinetiq has been here since August, and recently asked to stay through February 28. Each company brings more than 30 employees to stay in Gunnison hotels and eat at local restaurants to support their testing, pumping millions of dollars into the local economy.
According to DeVore, Boeing has said they spend about $250,000 each week they are in town testing, and Qinetiq claims to spend $16,000 a day in the Gunnison Valley.
And, DeVore said, the money isn’t likely to stop flowing in the near future. When Boeing has completed testing on the Osprey, they have indicated that they want to start testing a helicopter in 2011. But the draft budget for 2010 shows only $20,000 in revenue being generated by those contracts.
DeVore says the airport charges Boeing $450 an hour for firefighting coverage and could take in $40,000 to $50,000 during the company’s two-month stay.
But the commissioners weren’t ready to jump into a guarantee with Boeing to make the airport available next year.
In September, the commissioners heard some recoil from community members that saw the high-altitude testing as more than an economic driver. Several people who live in subdivisions surrounding the airport saw the testing as an intrusion into their lives and a disruption to their quality of life.
“I’ve gotten a number of calls about this, and even though those people opposed to the testing may not represent the majority of people, their concerns are definitely something we have to consider,” commissioner Hap Channell said.
But the economic incentives to continue the testing may prove to be more than the commissioners can ignore.
Commissioner Jim Starr said, “I know the noise created by these aircraft has bothered some people, but I think we ought to consider it, especially considering our budget woes.”
During the public hearing, the discouraging voices were met by an equal number of supporters of the testing, who believed the economic, and even entertainment, value of hosting the testing outweighed the disruption it causes.
Still, Channell was looking for a way to balance the airport’s budget without relying on the revenue generated by the testing. Commissioner Swenson asked that DeVore and Lucas return after the ski season, when the airport does most of its business.
“We’ll meet and discuss the outlook so we have plenty of time to prepare if there are going to be real issues for next year,” Swenson said.