"Baton Rouge airport facing deficit"

Monday, October 1, 2004

Airport facing deficit 
Administrator has 3-year plan 
By SCOTT DYER
The Baton Rouge (LA) Advocate


The Metropolitan Baton Rouge Airport is in the process of plowing through
some major financial turbulence, created largely by delays in state and
federal funding.

Metro Council Administrator Brian Mayers said the airport had a deficit of
$11.5 million at the end of the 2003 calendar year, but had whittled it down
to $8.4 million by September.

Mayers said city-parish officials have quietly adopted a three-year plan
aimed at getting the local airport out of the red by curbing spending,
pursuing state and federal grants and collecting new sources of revenue.

The plan calls for the airport deficit to be reduced to $6.4 million by the
end of 2004 and $834,412 by the end of 2005.

Mayers said the deficit can be blamed on several factors, including:

Decreases in airport operational revenues.

Delays in federal and state grants.

"Fronting" operational money to seed projects pending receipt of state and
federal grants.

Decreases in airport operational revenues.

Mayor-President Bobby Simpson said he thinks the airport is now on the right
track, and blamed the state for failing to deliver on $5 million that was
promised for the construction of a jet maintenance facility at Metro Airport
for Atlantic Southeast Airlines, a Delta Air Lines subsidiary.

"We still have not received all of the $5 million from the state. It's just
one of those deals where the last administration committed to it, but
somehow it didn't get on an agenda to convert it to cash," Simpson said.

During a televised debate Thurday night, Simpson's opponent, state Sen. Kip
Holden, D-Baton Rouge, tried to take credit for the ASA project.

"I brought in the Atlantic Southeast Airlines hangar to Baton Rouge, and
although the mayor has said the money is not there, the state has pledged
that it will give the full amount of money in this year's budget," Holden
said.

Simpson responded by lashing out at Holden and the ASA project.

"This was a commitment by the state, and today, we're still waiting,"
Simpson said.

In an interview, Mayers noted that former Gov. Mike Foster's administration
had committed to the $5 million grant for the ASA jet maintenance facility,
and based on that commitment, the city-parish put up $5 million to get the
project started in 2001.

By the time Foster had left office in the end of 2003, the city-parish had
still not received any of the $5 million promised by the state, Mayers said.

The city-parish finally received $2.3 million in early 2004, but is still
awaiting the other $2.7 million, Mayers said.

'Fronting' federal grants

Mayers said the airport ran into a similar problem due to its practice of
"fronting" city-parish money in order to obtain federal grant funds that
become available at the end of the fiscal year.

Mayers said certain federal grants become available at the end of the
federal fiscal year on an "expedited" basis.

The idea is that once a federal grant is obtained, it can be used to
reimburse the airport for previously spent engineering costs, Mayers said.

While the practice of fronting money for federal grants may pay off, Mayers
said, it's difficult to maintain the practice in tough financial times since
it may tie up to $1 million at any given time.

Mayers said the practice of fronting money for grants has been discontinued
pending the resolution of the financial woes at the airport.

Budgeting grant overruns

Another factor contributing to the airport deficit stemmed from the practice
of applying for 115 percent of federal grants in order to cover possible
overruns.

Reimbursement for the extra 15 percent for cost overruns cannot be
reimbursed until after the project is completed and closed out, which in
some cases can take years.

Mayers noted that the airport was forced to write off $2.2 million for the
overruns in 2003, even though it is still pursuing the money.

City-Parish Aviation Director Anthony Marino said he's tried to build in the
15 percent "overrun" allowance for federal grants to increase the size of
the projects.

But, Marino said, the airport's ability to qualify for grants will likely be
hurt by new city-parish restrictions against fronting local money for grants
and including an extra 15 percent in the initial grant request.

"These practices are the reason that we have been getting $20 million to $30
million in grants, when we used to only get $6 million or $7 million,"
Marino said.

Marino said city-parish auditors are in effect refusing to recognize signed
grant agreements as proof that federal and state money is on the way.

"The state and feds, for whatever reason, are not reimbursing people as fast
as they used to. So what do you do? Stop? Or do you keep going?" Marion
said.

Some solutions

To help solve the cash-flow problems, Marino said, he's considering
borrowing money to establish an airport reserve fund to help cover delays in
federal and state grants.

Another problem plaguing the airport in recent years has been decreases in
airport operational revenues, Mayers said.

The problem has been complicated by increases in operational spending,
Mayers said..

Mayers blamed the airport's operational deficit, which totaled $1.5 million
in 2003, on factors such as the slowdown in air travel after the Sept. 11,
2001, terrorist attacks, rising insurance and retirement costs, the
bankruptcy of U.S. Air, and additional costs of revamping the airport
terminal due to contractor default.

Mayers said the three-year plan to bail out the airport anticipates several
new sources of revenue, including:

Receipt of $2.7 million from the state in 2005 to fully reimburse the
city-parish for fronting money to build the ASA jet maintenance facility at
the airport.

Reducing the 2004 budget to reflect lower budget expectations. Mayer also
noted that the Metro Council Budget Office will also prepare quarterly
projections to make sure balanced budgets are maintained for 2005 and 2006.

Refinancing the debt on several airport construction projects from five
years to 20 years. The move will free up operational revenues to help pay
off the deficit.

Revising the lease agreements at the airport to comply with the FAA
requirements that such leases be updated regularly to reflect local market
costs. The Metro Council agreed last month to pay an extra $266,229 to the
airport for failing to make regular adjustments on the market value of the
city-parish Animal Control Center. In addition, the Metro Council agreed to
pay $253,574 to the airport for failing to make the annual market adjustment
on the city-parish lease for the Juvenile Detention Center.


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************