Thought worthy of a blog:
Jahn:
Two years ago in our recommendations on the http://www.flyorh.com, we urged the City to put out an RFP for the airport. Whoever came back with the best offer, whether it be Massport or an airline (Harry always thinking of you) or how about a start like Eclipse look for a NorthEast base? Who knows.
Bottom line we all know the airport is an asset, but it has only been a financial drain on the airport. Does the City run the Centrum--no!! Who runs Wachusett Mountain? The Crowley Family.
My only fear is that we waited so long, now less then 200 days left, MassPort is holding all the cards. If they threaten not to extend the current agreement, unless we long-term lease the airport, do you think the tax-payers of ORH are ready to start kicking in $2,000,000 per year.
Bottom line is that I think we are all in agreement. We need to privatize the airport. At the same time, we all want to make sure that we get the best deal and are not leasing the airport out below market value.
Same Time Next Year
-
It’s been nearly a year since I wrote about the problems that come from
having 11 bosses who are not on the same page about anything, as well as
suggestion...
4 months ago
19 comments:
So, Bill, you would stay with a sinking ship (the airport) that was demanding more and more resources (millions and growing) to stay afloat in the middle of a turbulent sea (current aviation industry) to make sure it sank in a place (someone else's lap) that still served your interests (revenue-generation), while your hesitation jeopardizes your safety (financial health)?
....for the record, if Massport wants to buy my silence so that I don't keep harping on upping the ante for the sale of ORH, they can make me an offer!
:-)
Harry Tembenis
Worcester, MA
Tom:
Let me see if I understand you. Not sure if it our hesitation, but the airport administration who has hesitated. As I have said before, the day MassPort agreed to extend the current agreement 3 years is the day that we should have put together an RFP for someone else to manage the airport.
My only concern now is that with so little time left in the current agreement (approximately 6 months) can we possibly put together this RFP, publicize nationally, receive bids and award the the RFP within 6 months. Based on the speed of many of the projects, I find this highly unlikely.
It appears to me that if we do in fact long-term lease the airport over the next 6 months, we may not get the highest return. At the same time what choice would we have if MassPort threatened not to extend the current agreement???
Tom, I understand what you are saying and actually agree with you. My point, however, was that two years ago we had more time and the future even looked brighter (Allegiant coming on board). If the process had started then, we may have gotten a better deal then what we may end up with MassPort.
Lastly I just am not sure how we can sign a long-term lease on a municipal asset without an RFP?
tell me what the "market value" is for an airport that is loosing millions of dollars per year and has a debt service for capital in the many hundreds of thousands. Massport can absorb that deficit and make the changes necessary. Give it to them and the city manager saves millions to put toward other efforts in the city. In essence, they are giving us a few million per year (and rising!!)forever.
Bill:
The "airport administration" is Massport. The city had to do that if they wanted to do so an obviously has chosen not to do it. The Commission is not independent of the city administration.Why do you think they (commission) can do that on their own?
Any goverment agency can make a deal with another government agency without an RFP (I think!).
Turn it over to Massport.
Doug:
I truly do not know the market value of ORH. That is whay I thought a well publicizes RFP would let us know the value. At this point, less then 6 months to go, I know that we do not have the time to get it done. I agree with your statements about MassPort being able to absorb the deficit and making the necessary changes.
Doug I do not agree that the Airport Commission could have voted two years ago to put together this RFP?? Sure they could have. That is water under the bridge.
As far as the RFP, Doug I am by no means an expert here but in the end the airport is a municipal asset. Leasing an asset to another entity, private or governmental, I would think would fall under the requirements of 40B which states anything worth over $20,000 requires an RFP. Could me completely wrong on this but that is my opinion.
Bill, absolutely it has been the city/airport administration who has hesitated. Yes, we should have anticipated this position when you mentioned it 2 years ago! I agree with Doug. Just get rid of it, by giving it to Massport.
Tom;
1. One of the reasons this is a "sinking ship" financially & operationally is failure to cut expenses, inability to land comm air service, & very possibly management.
2. See above as to why it demands "more and more resources to stay afloat."
3. "Turbulent state of airline industry." AGREED
4. Drop it in "someone elses 's lap" It certainly should not be in the city's lap as it is now. Do we really have any other chioces, but hand it off to another entity if we want to keep it open? The city should not be in the airport management business and MAYBE not even own the place.
5. "Hesitation" may very well be in the City's best interest if the hesitation results in more "revenue generation" I.e sell for a lump sum or lease at MARKET RATE.
5.
Let's put the RFP together for a Jan 1, 2008. Let the city eat the deficit for 1/2 a year. I mean hell, just look a round the city at all the Christmas goodies being handed out by the Council. What's a 1/2 years deficit in the grand scheme of eventually off loading the airport?
And if we cannot off load the mangemnet of it or the entire asset then close it, drop the 139 designation or whatever else it takes to at least make it revenue neutral.
Folks, let us not forget that all deficits are not created equally.
E.g. If we're running a $1.5 M deficit and the airport and airport goes up in value $1m every year and we pay down half Million of debt each year then we have a negative cash flow of 1.5M but we have increased our equity in the place by 1.5M It's a wash, right?
Also, I am curious how the assessed value of whatever it is (25-30M) is arrived at? We all know, for what it's worth) that genearrly assessed values are set at about 75-80% of FMV???
Above post should read ..."AND" we have a negative 1.5 M cash flow... not "THEN"
Jahn:
I hear what you are saying, but there is no way in hell that they (the airport administration whoever that is??) will be able to put together an RFP in 6 months. Look how long it took to prepare an RFP for a 4 acre empty parcel of land?
Although I also fear that we may not being getting "market value" (whatever that is) for ORH by only dealing with MassPort, I do not see any other choice at this point. Lets just hope we negotiate a lease where we also share in the revenues, which MassPort will surely bring to ORH and make ORH an Enterprise account (like it is suppose) to be and not a liability.
Jahn:
by the way good point on dropping the 139 designation... Actually the more I think of it, that is not a bad idea.
The question is will the Airport Administration (whoever that is) drop the designation when we have three consultant reports that tell us not to lose the 139 designation?
Bill, then let's re-up w/Mp for 1 year. That gives us 18 months to RFP the place.
IMO, MP should not be allowed back (long term) unless it's at Market rates and with at least a guarantee of minimal Comm air service. Not sure what minimal is ?? I mean they have done waht for us in the last how many years as far as landing permanent comm air serrvice? Rumor is Allegiant approached us??
MP has no incentive to strip flights from Logam or Handscome and send them to us and apparently is past performance is any indicator , they have no incentive or reason get us comm air service.
Paving runways or making substantial improvements is not what we nec. need. Comm air seervice is the primary need now.
Also , as I mentioned before we're in danger os losing the $1m grant if dont get 10K passengers up there in 2007.
Give an airline tax free fuel, zero landing fees, and what ever else is req'd, lest we throww away a $1m Washington handout and it has to be done now b/c how are we ever going to reach 10K passengers in 2007 w/o a substatial # of vacation flyers during the weinter months
Jahn:
Good idea, but put yourselves in MassPort shoes. Assume that you are talking to ORH about a long-term lease right now and ORH comes to says lets extend the current operating agreement another year so we can get put together an RFP and drive up the cost to long-term lease the airport. If I was MassPort I would tell ORH if you need 18 months to put together an RFP, you are own your own July 1st, 2007. It in turn costs the city $2,000,000.
That's my point. We should have been doing this the past three years, not now. From a negotiating point we are in a very weak position with MassPort. By the way who says that they could even get this RFP done in 18 months???
At this point I would just be happy to see MassPort get a long-term leas, at least 30 years, which will 1) free us from the $2,000,000 deficit. The key at that point is to make sure the language is worded to ensure that we share in the success of ORH, which I feel will come under this arrangement.
By the way--great comments everyone.
Airports like ORH are valuable, critical to our economy. General and business aviation needs an effective voice in these decisions. There are some great ideas on getting people organized to support proper management and planning for the airport. Does ORH have an active support network?
No, we actually attempted to be part of the process but we bacically rebuffed. Instead we saw the only alternative being the internet (web site and this blog).
Sadly instead of being an ally to the airport, which we are, we were seen as a hindrance.
Guys, we've got to get our ideas and thoughts in some kind of order here, almost as if this is a cases study in college.
First let's list the options going forward:
1. Private managemnet co.
2. private owners
a. Sell outright
b. L T lease
3. City goes it alone.
4. Cont. current agreemnt w/MP
5. New agreement w/MP to :
a. buy outright.
b. L T Lease
c. Manage ORH only
Now let list the pros & cons for each line item and our assumptions if need be.
Also, if there is an option I failed to list, please add it.
I am thinking here, would this be a good case study for the MBA's at harvard or the like?
Anything is worth a try at thiss juncture??
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