HomeMy WebLinkAbout3/20/2002 - STAFF REPORTS (12) DATE: March 20, 2002
TO: City Council
FROM; Executive Director-Airports
2001/02 POST "9/11" AVIATION DEFICIT RECOVERY PROGRAM
RECOMMENDATION:
The Airport Commission unanimously recommends that City Council approve a
recovery plan to assist the Airport in covering a projected shortfall of$2.2 million for
fiscal year 2001/02.
SUMMARY:
The proposed action would authorize the use of existing reserves,waiver of collecting
certain airlines fees, and waiver of Police and Fire Department overhead payments
to the City, all designed to bring the Airport's budget back into balance from post
"9/11" impacts.
BACKGROUND:
Last fall, with the assistance of the Finance Department, the Airport was able to
accomplish a series of transfers between the Passenger Facility Charge fund and the
Airport Fund and was able to set up the various reserves as called for in our existing
bond issues. Based on this activity, the following was determined to be actual cash
balances in Airport Fund reserves as of 6/30/01:
Cash Balances as of 6/30/01 $3,250,131.
Receivables 2,489,894.
Payables (1,492,442.)
Accrued Wages 56 791.
Available Cash Subtotal $4,190,792.
O&M Reserve (2,314,900.)*
Debt Service Coverage Reserve (439,454.)*
Landside Reserve (100,000.)
Special Capital Project Reserve ( 150,000.)
Adjusted Cash balance 6/30/01 $1,186,418.
*Bond Finance Required Reserve
Afterfunding all the required reserves, the Airport had excess cash of$1.186 million.
These excess funds had been accumulated to provide the 25% match on a proposed
$4 million grant from FAA for terminal expansion (new hold rooms to accommodate
regional jets).
The events of"9111,"and necessary security changes have drastically impacted the
Airport's budget. Reductions amounting to as much as 25% in flight activity have
resulted. Atthe same time, a great deal of additional security measures were required
of the Airport. These changes, coupled with the need to fund long-standing match
requirements for grant projects that were all finishing this year, have resulted in what
we estimate as a $1.7 million shortfall. This budget shortfall would be even more
exacerbated if the Airport tried to fund the $500,000 in reserve set asides that are
chargeable to the airlines (Special Capital Reserve$300,000 and Landside Reserve ��
March 20, 2002
Page Two
$200,000.) The total negative impact to the Airport's 2001/02 budget is estimated at
$2.2 million.
Staff will soon be meeting with the incumbent air carriers as mandated by the
implementation regulations for the Aviation Transportation Security Act of 2001 to
discuss our recovery plan. Many airports have resorted to increasing airline "rates
and charges" to cover shortfalls, as we may do per our Airline Use Agreement.
However, such an action as forcing more cost on an industry that is reeling from
losses from post"9/11"impacts would be ill-advised and could lead to greater loss of
air service.
The Commission budget subcommittee on February 21, 2002, and the full
Commission on March 6, 2002, carefully reviewed the Airport's budget and the
impacts of "9/11." The Commission subscribes to aviation industry views that the
negative effects of "9/11" will be fully recovered within 18 to 24 months from the
incident,that airlines should not be impacted negatively(actually should receive relief
where possible),and theAirport must"stay-the-course"on its airservice development
and marketing programs. The Commission therefore seeks the City Council's help
in overcoming the 2001102 shortfall at the Airport as follows:
Projected Shortfall 2001/02 $2,200,000.
1. Less 6/30/01 excess reserves (1,186,418.)
2. Waive Reserve Fund airline collections (500,000.)
3. Less reduction in mandated O&M
(29,000.)
reserve by moving AD 155 expenditure
out of operating budget (25% of$115,000)*
4. Reduce Special Capital Reserve (100,000.)
5. Ask City Council
to waive Police & Fire overhead charges (318,485.)
6. Reduction in O&M Reserve from Item 5 above (73,621.)
(25% of$318,485)*
*Existing bond indentures require setting aside 25% of the Airport's Operation &
Maintenance cost in an O&M Reserve.
The attached Resolution would carry out the above plan by authorizing waiving of
reserve fund collection from the airlines, utilizing terminal development reserves and
authorizing the waiver of Police and Fire overhead payments to the City. The
pr9posed action would negatively impact the General Fund by $318,485.
Uh0A_____ -
ALLEN F. SMOOT, AAE
Executive Director-Airports •-'''�
APP40
City Manager ems'"
REVIEWED BY DEPT.OF FINANCE
ATTACHMENT:
1. Resolutions
RESOLUTION NO,
OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS,CALIFORNIA,APPROVING
2001/02 FINANCIAL RECOVERY PROGRAM
FOR THE PALM SPRINGS INTERNATIONAL
AIRPORT.
WHEREAS with the events of September 11, 2001, the country and aviation industry have
changed forever; and
WHEREAS at Palm Springs International Airport flight schedules have been reduced by as
much as 25% during some months which has resulted in monthly passenger reductions
averaging 18%; and
WHEREAS the dramatic drop in flights and passengers has resulted in an estimated budget
shortfall of$2.2 million for fiscal year 2001102; and
WHEREAS after careful consideration, the Airport Commission has developed a recovery
program which will salve the Airport's shortfall without adversely affecting the air carriers and
has recommended that plan to the City Council,
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm Springs as
follows:
Section 1. That the Executive Director-Airports is hereby authorized to forgo collection
from the airlines to fund the Special Capital Project Reserve($300,000) and
the Landside Reserve ($200,000) for fiscal 2001/02; and
Section 2. That the Director of Finance and Treasurer is hereby authorized to complete
the necessary accounting entries to advance the Airport $318,485 to cover
this fiscal year's Police and Fire overhead charges with advance to be repaid
without interest once the Airport post `9111" situation normalizes; and
Section 3. Thatthe Director of Finance and Treasurer is authorized to utilize $1,186,418
of existing Airport Reserves to cover budget shortfalls in 2001102 at the
Airport.
ADOPTED this day of , 2002.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
REVIEWED&APPROVED AS TO FORM