The City of Kissimmee’s City Commission at its regularly scheduled meeting on September 17th held its second public reading of the proposed ordinance to implement transient landing fees at ISM. After providing the opportunity for public comment, the Commission approved the ordinance unanimously 5-0. The Commission met again at its regularly scheduled meeting on December 17th to discuss amending the Airport’s Rates and Charges Policy and approving the third-party agreement to collect landing fees. After providing the opportunity for public comment, the Commission voted unanimously to amend the Rates and Charges Policy to include transient landing fees and to approve the third-party agreement allowing the revenue collection. The landing fee information can be found on the Airport’s website at: https://www.flykissimmee.com/landingfees.
During this process, articles were published with misleading information, which misguided the opposition on social media and public forums. The articles misrepresented how airports are financially operated. Quotes from those articles will be addressed later in this writing. But first, a common statement has been made: “I pay my aviation taxes; therefore, I do not have to pay to use a public airport.” It is important to understand the difference between paying taxes and user fees and how they are utilized at public airports.
Aviation Taxes are collected by the government, in this case, Federal and State, and are placed into public funds to be distributed among airports. The airport owner must apply for these funds and it is a very competitive process due to multiple airports applying for limited funds. Once received, the funds may only be used for the approved specific capital project, not “various projects” or operating expenses. The grants typically require a local matching amount. In other words, it costs money for the local airport’s owner to receive a grant. These matching dollars are generated through the operating budget, or through user fees. The recent funding of ISM’s Taxiway “Delta” project is illustrated:
Aviation User Fees are the local funds the airport collects to offset operation and maintenance expenses. ISM’s User Fee revenue sources are ground/facility leases, fuel flowage fees, car rental concessions, and transient landing fees. The annual budget for ISM is approximately $2M and includes expenses for personnel, equipment, maintenance, utilities, insurance, etc. This operating budget is also used for the local matches required by the capital improvement grants received from the Federal and State governments.
Capital Expenditures Vs. Operating & Maintenance (O&M) Expenditures
Today’s estimated cost to rehabilitate ISM’s main Runway 15/33 is approximately $40M. Aviation taxes will fund the majority of the construction project and local airport funds will be needed to complete the project. It will cost the airport $800,000 under today’s 2% local match requirements. (This assumes both FAA and FDOT participation.) Those funds will be paid for by the airport’s O&M budget or reserves.
This is where a misunderstanding of airport financial operations begins. The cost to operate the runway requires the O&M budget. Expenses include maintaining the pavement, restoring the paint markings, replacing light bulbs, paying the electrical bill, paying personnel to inspect for maintenance issues, and paying personnel for safety (e.g. removing wildlife).
Once Aviation Taxes are used to complete capital expenditures, Aviation User Fees are required to cover the expenses of operating and maintaining the assets during their useful life. The overhead expenses to operate a multi-million-dollar airport facility are not decreasing. Leases written several years ago may not suffice for today’s financial requirements and may be difficult to renegotiate and adjust to today’s market rates. Therefore, landing fees, a revenue source recognized by the FAA, may be utilized by the airport owner to recover operational costs and ensure the airport’s reserve is healthy to assist with future capital improvement projects.
As previously mentioned, there were misleading articles* concerning airport financial operations. These are some of the quotes with responses:
Airports “already have a budget surplus.” The FAA considers it good management practice for airport owners to maintain a financial reserve to cover operating costs and future expenses. The FAA uses the term “reasonable” to suggest the reserve’s amount.
Airports “are already operating at a minimal expense to taxpayers.” ISM operates as an enterprise fund and collects revenue from only aviation users, not from the City of Kissimmee or Osceola County citizens and businesses.
So, if ISM is financially “self-sufficient,” why collect landing fees? The definition of “self-sufficient” means good management utilizes the revenue afforded to offset the expenses without incurring debt. Just because the budget can be ‘zeroed-out,’ at the end of the year, does not mean there isn’t an additional need to complete deferred maintenance, hire another employee, or improve property to attract the next revenue generator (e.g. aviation business, tie-down, hangar, etc.). Airports “receive federal grants that cover 90% of the cost for various projects.” As stated above, federal grants may only be used for specific capital projects, not O&M and ‘various projects.’
“Airports appear to be in good financial condition.” This is a subjective statement. For example, ISM has many pavement areas requiring rehabilitation but lacks the funding to complete all projects before the life cycle repeats itself. This (landing fee implementation) “stands to devastate the flight training industry.” This is also a subjective statement. There are landing fees in other states and this has not been the case. If this were true, airports would not implement landing fees. Furthermore, ISM’s based aircraft are exempt. ISM supports a robust flight instruction environment that is forecasted to grow. ISM benefits from its location, its workforce development, and its ability to improve land for future aviation uses. The City will continue to invest in the airfield by aggressively pursuing Federal and State funding to obtain capital improvements. The O&M budget will benefit from the established rates and charges policy, new leasing terms, and planned economic development projects. The transient landing fees will greatly assist in meeting the City’s goals and providing an airport environment all users will enjoy.
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