City of Oceanside’s Management of its Airport Funds in Question

It seems that there is a question as to where the Caltrans Division of Aeronautics money for land purchase around the Oceanside Airport actually went. And now, is the city is trying to bail itself out by seeking a private party to manage its airport? As more facts are uncovered regarding this debacle, it is becoming clearer that the City of Oceanside, like many others, may have thought they could pocket airport money, and get away with it. Read the story below. Sunday, September 23, 2007
Manager questions airport proposal Developer would lose money, he says
By Lola Sherman
The San Diego (CA) Union-Tribune

Given what city officials have said they want at Oceanside Municipal Airport, a private operator could lose $84,000 a month, an airport consultant and manager said last week.

Still, Leland Ayers said, he may be interested in working with the city to develop the airport.

The city is looking for a private operator to manage the 47-year-old airport at the west end of the San Luis Rey Valley. Proposals are due at City Hall next month.

On Thursday, the city will hold a 10 a.m. meeting at the airport to answer questions from potential bidders on a 20-to 30-year contract.

The city has sent out a request for proposals that would require an operator to pay a $1.2 million debt, build at least 16 more hangars, and construct an administration building with a restaurant. The operator also must pay the city 10 percent of gross profits.

A year ago, the county Board of Supervisors asked its staff to analyze whether the county should take over the airport when it appeared the city was considering closing it and developing the land. Supervisor Bill Horn, a pilot, urged the board to act.

Since then, a county report has said the airport is fraught with problems and on Friday, Horn said he does not expect the county will respond to the city’s request for proposals.

Ayers said Friday that his decision to submit a bid depends on whether city officials can explain how an operator could make money given the city’s demands.

Ayers probably won’t be the only potential bidder with the same questions.

Under the city’s requirements, an operator would sink almost $13 million into improving the airport, Ayers says. His Airport Hangar Management limited-partnership manages 40 hangars and fuel sales at Fallbrook Community Airpark and 34 hangars at French Valley Airport, owned by Riverside County.

A longtime consultant on airport operations, Ayers was mayor of Burbank in 1978 when he became the first president of the joint-powers authority operating the Burbank Glendale Pasadena Airport.

Rents on the 40 tie-downs and 50 hangars the city wants at the airport – there are 34 hangars and 46 tie-downs now – simply won’t pay the interest on construction loans and for day-to-day operations, including salaries for on-site staff and maintenance, Ayers said.

The request for proposals says there can be no flight school and no aircraft rentals, the two most lucrative enterprises at most airports.

Ayers cautioned Oceanside against washing its hands of airport operation, as seems to be the case.

Federal Aviation Administration grants for such improvements as new runway paving or perimeter fencing can be given only to government entities, not private operators, Ayers said.

“We are not interested in bailing Oceanside out of their mess,” he said.

Ayers estimates that the 3,000-foot runway at Oceanside needs $2.5 million in improvements.

The county’s report, which was issued in August, also criticized the state of the runway.

Peter Drinkwater, director of county airports, said Friday that Oceanside hasn’t taken care of its airport for years. Drinkwater and his staff wrote the report given to the supervisors.

One criticism of the city’s management of the airport listed in the county report – that the city’s general fund pocketed $2.6 million belonging to the airport – is exaggerated.

Still, the issue could play a role in how much debt the city should ask an airport operator to repay.

The county report cited a letter from Ben Meyers, president of the Oceanside Airport Association, to Mayor Jim Wood in May regarding more than $2.6 million the California Department of Transportation paid the city.

The letter said Caltrans paid Oceanside for five airport parcels it bought to widen state Route 76 in 1994. bThe money should have gone to the airport enterprise fund for airport operations, not the city’s general fund/b, the county report said.

The letter appears to be wrong, however.

Only one of the five parcels involved airport land, said Route 76 project manager Mark Phelan last week. Documents show the county paid $479,800 for the 1.2 acres of airport property, he said.

Most of the $2.6 million – including the $479,800 – probably did go to the city’s general fund.

A Feb. 14, 1994 memo from the city’s property agent, the late Richard Nagler, to then-city finance director Sandra Schmidt said almost $2.4 million from three of the five properties, including the airport piece, should be placed in the general fund. An additional $62,000 should go to the San Luis Rey River project and $170,000 for thoroughfare fees.

Schmidt, now director of finance and administration for Las Virgenes Municipal Water District in Calabasas, can’t recall if the money ended up in the general fund. But she said in a phone interview last week that she does remember the city was in financial straits at the time and looking for money from anywhere to forestall layoffs.

Joe Deggendorf was the airport manager at the time. He said he did not recall any of the Caltrans money going into the airport enterprise fund.

“Common sense would tell you where it (the money) was supposed to go,” Deggendorf said.

It wasn’t illegal for the money to be kept in the city general fund instead of being used for the airport, said Drinkwater, the county airport director. But he could question whether it was an ethical decision, he said.

City Manager Peter Weiss said it was unclear whether the money went to the general fund but the city is investigating.

The money is significant to the request for proposals because the $1.2 million debt a bidder is expected to pay includes $486,000 the airport allegedly owes the city’s general fund for advances over the past 17 years. The bidder would also be required to assume a $740,000 loan that was used to build 11 hangars.

But if the general fund already received $479,800 in 1994 for the airport property sale, some question whether the city essentially is asking for the money twice.

One potential bidder, Kurt Mihalco of Oceanside Airport Partners, based in Carlsbad, wrote Weiss that his firm would be interested in bidding on airport operations – but only without the $500,000 “surcharge.”

It’s expected to be a major part of the discussion at the Thursday meeting.

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