Nearly two hours of the City Council work session on Monday evening was spent discussing the status of the McKinney National Airport, which the City of McKinney has owned for three months.
Open dialogue and discussion between members of the council punctuated the meeting and Mayor Brian Loughmiller said he was pleased with the transparency of the discussion.
A report was presented by Executive Director Ken Weigand, Mark Jaraczewski, assistant director and general manager of the FBO, and Eric Pratt, airport maintenance manager. It focused on the accomplishments made during the past 12 years, the lower than anticipated revenue to date and the questions surrounding the fiscal year 2014 budget, particularly the city’s startup costs of owning the fixed base operations.
Among the list of accomplishments Weigand listed are the three taxi lanes now at the airport, a new replacement runway that includes preparation for a 1,500 foot expansion, and a new control tower.
Weigand also told council that having the airport designated to a national airport “puts us at the top of the list with competing Dallas airports.”
The fixed based operations (FBO) transition of the airport officially began in mid-September of 2013. The transition included cleanup and repairs on location, new IT hardware and the hiring of 16 employees, driving start up costs higher than anticipated, Weigand said.
Although the FY 2014 budget shows a deficit in revenues to date, Jaraczewski, who began his tenure as assistant director in Oct. 28 of 2013, said that McKinney National is “very competitive in fuel pricing.” He said that although the overall sales of fuel are lower than projected, the weather in the months of November through February makes it more difficult to meet the budget because the number of flights are normally down.
City manager Jason Gray said “We are still trying to appreciate the seasonality of this (airport revenues). Clearly we’re a little behind where we expected to be at this point.”
Renovation of the terminal building, combined with a need for many repairs following the former tenant’s departure, as well the installation of new technical infrastructure, required additional funding, which the airport board of directors and city officials project to be in the neighborhood of $1.2 million.
Several council members questioned the FY 2014 budget, which Weigand said doesn’t reflect the $5 million debt service. According to the city’s Chief Financial Officer Rodney Rhoades, that debt service would run approximately $400,000.
Some council members appeared to be confused over which funds were used for funding the airport startup costs, and where the monies in each fund came from. Councilman Randy Pogue (At-Large) and Loughmiller questioned Weigand and his staff about the “construction fund,” asking if the monies drawn from that fund were meant for other airport projects. Rhoades said that the funds in the construction fund were a combination of funds received from state subsidies, reimbursements and the general fund and were not earmarked for other airport projects.
Of particular concern to Councilman Ray Ricchi (Dist. 4) are the now $1.2 million in additional startup costs which the city incurred as it took over the airport’s FBO. “We are going to be $1.2 million short of tax payer’s money,” Ricchi said. “Nothing in this business model changed, unless I’m not aware of it. Where did we miss the boat?”
Rhoades said that the original budget for startup costs for the FBO was approximately $270,000. However, he added, a number of facilities related issues were found after the purchase of the hanger that necessitated the increase to about $1.2 million. He said that “the only other expenses that we may encounter would be tile work and carpet replacement in the terminal,” explaining that the $1.2 million amount is the “cap on startup costs.”
Ricchi said, “All the expenditures (for startup costs) weren’t included in the original pro forma” and questioned the large amount of money being spent, reminding those present that “this is tax payer money.”
“You (city and airport staff) all have done an outstanding job. Thank you for that. My concern, and it’s always been my concern, is the lack of due diligence and the total truth of everything that was presented and not vetted. The due diligence (on the purchase of the buildings at the airport) was poor at best. The construction budget is being used for the startup, when it was supposed to be used for the reducing the debt,” Mr. Ricchi said.
Gray responded by saying that “operations are actually performing fairly close to projections, based on the information we had at the time.”
Councilman Roger Harris (At-Large) said that the airport board did bring several different pro formas to council to consider prior to their approving the purchase of the airport properties.
“As a council, we discussed it and decided to proceed, and we charged the staff to negotiate the project. With all the scenarios provided, it’s not surprising that we find ourselves here today with a relatively low amount of revenue. It’s hard to say what is actually a result of the FBO. I think it really looks good,” Mr. Harris said.
Pogue asked the CFO to compile an “overall bigger picture” of all the funds that make up the total funding for the startup costs and share that information with each council member.
“I’m a believer in the airport. We paid $24 million, are putting another $1.2 million into it and are looking at another $17 million down the road,” Ricchi said. “Wow, that’s just a lot of money.”
On Tuesday morning, Mayor Pro Tem Travis Ussery confirmed that the information identifying the origins of all of the funding for the airport projects had not been presented to council in the same manner as they were during Monday’s meeting.
Ussery said, “This is an educational process for council as we define the priorities (for the airport) long and short term. We are inching our way along in learning how to manage an airport.”