Failure to manage Airport’s Book is no defense
FAA audit spells out what Shreveport needs to do
Past Acts do not meet standards
The Shreveport Airport Authority (SAA) Director of Airports, Henry Thompson, a seasoned airport veteran, whose career included 20 years at the San Francisco International Airport, arrived at his desk at the City of Shreveport. Once settled and having had a chance to review the books of the Shreveport Downtown Airport, he must have been shocked by the financial state of the second facility newly under his control.
The Red River snakes around this city airport at both ends of its primary runway. That same color marks the books with a current cash deficiency of $150,000 and deferred maintenance in excess of $380,000. Mr. Thompson knew how to deal with that—increase rents and the already below market lease charges had not been increased for six years. Such an adjustment is not only good business, but a requirement imposed by the Grant Assurances which the City signed when it accepted funds from the FAA. Here are the relevant clauses:
- Accounting System, Audit, and Record Keeping Requirements.
- It [the sponsor] shall keep all project accounts and records which fully disclose the amount and disposition by the recipient of the proceeds of this grant, the total cost of the project in connection with which this grant is given or used, and the amount or nature of that portion of the cost of the project supplied by other sources, and such other financial records pertinent to the project. The accounts and records shall be kept in accordance with an accounting system that will facilitate an effective audit in accordance with the Single Audit Act of 1984.
- It shall make available to the Secretary and the Comptroller General of the United States, or any of their duly authorized representatives, for the purpose of audit and examination, any books, documents, papers, and records of the recipient that are pertinent to this grant.
- Fee and Rental Structure.
It will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport, taking into account such factors as the volume of traffic and economy of collection.
- Airport Revenues
- submit to the Secretary such annual or special financial and operations reports as the Secretary may reasonably request and make such reports available to the public; make available to the public at reasonable times and places a report of the airport budget in a format prescribed by the Secretary;
Not surprisingly, the tenants did not agree with this newcomer and complained. As a local political commentator penned:
“To say Thompson has not become a BFF of the private airport crowd is an understatement. In fact, this group would buy him a one-way ticket to destination any where [sic]if he were to relocate soon—like yesterday.
Thompson is threatening the very lifeblood of private aviation—hanger leases and Minimum Standards.”
As evident in the Grant Assurances and ignored by the local commentary, federal law applies, and FAA Airports Compliance Manager (Southwest Region) Gary Loftus found substantial deficiencies.
- hangar use for non-aviation purposes.
- broken down trucks and trailers being stored at the airport
- a hangar packed with so much junk that there was no room for a plane
- hangar use as recreation areas, dog runs and homes.
- a bed mattress was delivered to another hangar
- four or five people were living in hangars.
⇒ 2017, the FAA prohibited the use of hangars as homes.
- hangar owners pay to lease land at the airport than market rates
- a non-commercial tenant, it costs 15 cents per square foot per year to lease the land.
- Tenants can then build their own hangar on the land with their own money.
- 70 leases with an average rent of about $1,200 per year.
- rent has not been raised since 2012
- Current airport rates are half of market value.
- about 100 aircraft based downtown with owners who don’t pay a penny to the airport, because they are subleasing from hangar owners without the airport’s approval.
- some hangar owners are turning a profit on these subleases.
- the airport authority has failed to enforce rules and regulations,
- Airport representatives say they have tried to fix the problems. They say they are trying to run the airport as a business, making up for budget shortfalls and enforcing rules
- Loftus said the management practices outlined in the audit have been going on for at least 30 years. As a result, “the airport is continually operating in the red.”
- “management practices do not meet the obligatory requirements for a federally obligated airport and could negatively affect future airport grant funding,”
That is a severe condemnation of the airport management for decades before Mr. Thompson’s arrival. The FAA self-sufficient rule is intended to assure that DTN is not a burden on the municipality; experience has shown that communities can resent such expenses.
Loftus pointed out that the violations could be a basis for limitation or denial of future FAA funding. Thompson and the City’s senior management team stated that their intention is to manage DTN as a business, charging just and reasonable rents, establishing and enforcing minimum standards, complying with the FAA hangar use requirements, and meeting all of the other federal obligations. The opponents will have to read the federal preemption sections of their law books (the Code Napoleon libraries may not have these texts).
With such invigorated efforts, DTN will likely grow, eliminate its reliance on City funds and become an economic generator for Shreveport!
A lesson from the above facts: airport managers and in particular, their Board Members with fiduciary duties should insist on annual audits with professionals who are expert in the FAA Grant Assurances.
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