"Airport Town Fears What May Happen If Air Travelers Continue to Stay Home"

Wednesday, September 26, 2001    

Airport Town Fears What May Happen If Air Travelers Continue to Stay
Home
By ROBERT GAVIN 
THE WALL STREET JOURNAL


SEATAC, Wash. -- Here, where the city is named after the airport instead
of the other way around, the economic pinch of declining air travel is
being felt as in few other places.
 
Incorporated in 1990, SeaTac's borders were drawn to ensure a
substantial flow of tax revenues by encompassing both its namesake,
Seattle-Tacoma International Airport, commonly called Sea-Tac, and the
hotels, parking lots and restaurants that surround it. Today, airport
and travel-service businesses account for nearly 75% of the city's tax
collections, and that dependence has city officials worried as the Sept.
11 terrorist attacks keep air travelers at home.

'A Little Nervous'

Air traffic at Sea-Tac airport is down about 15%, according to the Port
of Seattle. And Elizabeth Spencer, finance director for the city of
SeaTac, is estimating tax revenues could fall $3.3 million, or 15%, next
year unless air traffic picks up. In the short term, the city, with a
$10 million operating-budget surplus, can absorb such a loss. But,
admits Ms. Spencer, "I'm a little nervous. It's hard to say what the
long-term reaction [to the attacks] will be."

Ms. Spencer, of course, isn't the only local official nervous about air
travel and the impact on revenues. In many cities that derive a big
chunk of their revenue from an airport within their boundaries,
officials are anticipating that reduced air traffic will mean reduced
revenues.
 
In the county of Arlington, Va., home of still-closed Reagan National
Airport, across the Potomac River from Washington, D.C., officials
estimate the county is losing tax revenues at a rate of at least
$700,000 a month -- or about $8.3 million a year -- from businesses that
operate at or near the airport. With an expected surplus on the annual
budget of nearly $400 million a year, Arlington officials believe they
can absorb that loss in the short term without much trouble, but they're
worried about an extended closure of Reagan National. The airport hasn't
reopened because of security concerns.

And Jay Fisette, chairman of the county board, notes the revenue
estimates are based solely on direct losses to businesses at or near the
airport; they don't include yet-to-be-determined indirect effects, such
as losses to companies that supply airport businesses. "We know there
will be an impact, so our focus is getting the airport reopened," he
says.

In SeaTac, nearly all the effects of the drop in air travel will be felt
directly. The city's leading employers are nearly all airlines. The
biggest is Alaska Airlines, a unit of Seattle-based Alaska Air Group
Inc. Alaska Airlines operates about 25% of all flights in and out of
Sea-Tac. A spokesman for Alaska Airlines, which has its headquarters
here and employs more than 5,500 in SeaTac, says the airline is
operating about 85% of its schedule. But it hasn't laid off any
employees and has no plans to do so, he adds.

About 40% of SeaTac's property taxes, or $3 million a year, are paid by
airlines, which are assessed, in part, according to the number of people
the airlines fly into the airport.

The city also collects $1 dollar for every car that parks in airport or
satellite lots, generating nearly $5 million a year, about 20% of total
tax collections. Hotel- and motel-room taxes -- SeaTac has 6,300 rooms
-- generate nearly $1 million more.

Business Is Off

Matthew Murphy, executive vice president of Parmount Hotels LLC, which
operates a 146-room hotel in SeaTac, and Master Park LLC, which has
three parking lots, says the businesses were already feeling the slowing
economy, and the terrorist attacks have slowed things even more. "There
is an abundance of spaces and rooms in the market right now," says Mr.
Murphy, "but it's too soon for us to know for how long." He and other
hotel and parking-lot operators say business is off 20% to 30%.

Jay Holman, an assistant city manager, says SeaTac was well on its way
to preparing a budget for the fiscal year that begins Jan. 1, but now
the falloff in air travel following the terrorist attacks will require
city officials to "take another look" at proposed spending.

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