State Auditor's Report

Dec 07 2007 State Auditor's Report BY admin TAGS How the Airport Works

 

Jake writes in with a quote and a comment:

 

""About $1.2 million was not collected by the Springfield-Branson National Airport because the authorization to collect a Passenger Facility Charge expired."" $1.2 million is a lot of lost revenue."

 

Jake is quoting from the state audit of the City of Springfield. The Missouri state auditor released it Thursday evening. Here's a link to the report. The auditor had five findings concerning the Airport, including the one mentioned by Jake. Here are the findings and the Airport's response to each one; audit findings are in bold face:

 

1) Approximately $1.2 million in revenue was not collected by the Springfield-Branson National Airport because authorization to collect a Passenger Facility Charge (PFC) expired.

 

The Airport respectfully disagrees with this finding. Here’s how PFCs work: the PFC program is overseen by the Federal Aviation Administration (FAA). It allows airports to charge passengers getting on a plane a fee for using the airport. The money collected is then used to fund FAA approved projects.

 

Airports charge the PFC only when they have an FAA approved project online. The PFC ends when the project is paid for. During the period citied by the auditor, a PFC project was not online—we were between projects. Key point: the PFC is charged project-by-project—it is not meant to be a continuous revenue stream. It is charged only when needed and approved by the FAA.

 

When the midfield terminal was officially approved for PFC funding, we began charging the fee again—there was no loss of revenue. Collection simply began nine months after the previous PFC expired.

 

Read more about the Passenger Facility Charge on the FAA web site. This page provides a clear and concise explanation of the program. This page provides PFC reports. Learn how the PFC program fits into the airport's overall funding by reading this previous blog posting.

 

2) The airport's lease agreements with six car rental companies for office space requires monthly lease payments based upon gross sales, and authorizes airport officials to verify gross sales are accurately reported by examining the books and records or by requesting an independent audit report. Airport officials indicated that gross sales amounts reported by the car rental companies are reviewed each month for significant fluctuations, but gross sales are not verified and independent audits are not requested. The airport receives approximately $1.5 million annually from the six car rental companies.

 

The Airport agrees with the finding. As a matter of routine, the airport business manager has always reviewed rental car accounting for obvious problems. However, we will do independent audits in the future.

 

3) The airport's lease agreement with a travel agency is not consistent with other airport lease agreements. The airport has leased office space to one travel agency since 1982, and in 2006 renewed the lease agreement for another 3 years. While lease agreements for the car rental companies and the food vendor base the lease amount on their gross revenue, the lease agreement with the travel agency is a flat rate of $30 per square foot of office space, or $992 per month.

 

The Airport responds: There are four different kinds of businesses that operate in the terminal: 1) airlines, 2) rental car agencies, 3) restaurant/gift shop and 4) the travel agency. It does not make sense to charge each kind of business the same way. Each is treated differently. Each business type operates on a unique business model.

 

For example, the airlines generate millions of dollars in revenue at the airport and make direct use of airport capital infrastructure that costs millions of dollars (the gates, the ramps, the taxiways, the runways, etc.). The travel agency occupies an office space of about a hundred square feet and makes a few dollars per business transaction.

 

Would it be fair to charge the travel agency the same rates as the airlines?

 

The Airport also notes that nothing prevents another travel agency from operating in the terminal. In fact, McDaniel Travel operated in the terminal, but decided to leave in the aftermath of the September 11th attacks.

 

4) Airport officials have been operating on a month to month basis with a company for parking lot management services since the contract expired in 2003. In 1997 the Airport Board solicited proposals and subsequently signed a 5-year contract that expired in 2003 for parking lot management services. Airport officials indicate proposals were not solicited for these services when the original contract expired because of the future plans to construct a new terminal, and proposals have now been solicited for management services at the new terminal site. The airport receives approximately $2.5 million annually in parking fees.

 

The Airport responds: When the parking contract expired in 2003 we allowed it to convert to a month-to-month basis. There were two reasons: the depressed economic condition of the aviation industry in the aftermath of September 11; and the plans for the new terminal. Under the terms of the contract, the Airport received 86 cents from every dollar collected in parking fees. If the contract was rebid, that amount was unlikely to be matched given the industry’s depressed condition. This year the Airport bid the parking contract for the new terminal.

 

5) The airport terminal has vacant office spaces available for additional vendors and there is no documentation to indicate the Airport Board has performed any procedures to market the open spaces to potential tenants. Additionally, according to airport officials the new terminal currently under construction will be much larger and have more spaces available to lease.

 

The Airport responds: The auditor is apparently referring to two offices in the baggage claim area. Both have counter space and are used seasonally by shuttle services. They are at the far end of the baggage claim area, off the beaten path. One office is being converted for Airport police use. We occasionally get inquiries from businesses interested in leasing them full time, but so far, no takers.

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