Sensing the pressure of a sluggish economy, Bemidji Regional Airport Authority members lowered its first property tax levy by 22 percent this week.
The new taxing authority had set $450,000 as its initial tax take in May, but on Wednesday -- pushed by Beltrami County commissioners -- the Airport Authority voted Wednesday evening to instead levy $367,000 in 2010.
"We need to assist the community to be viable in these economic times," said Airport Authority member Joe Vene, also a Beltrami County commissioner, who offered the motion to levy rescind the prior levy and instead levy $367,000.
The latter amount is what the city of Bemidji and Beltrami County together provided the airport which changes now as the new Airport Authority assumes its ability to levy property taxes. The two local governments each provide $183,500. The initial tax offering was intended to be revenue neutral to taxpayers.
But in May, the Airport Authority decided to levy $350,000 instead, with the extra amount used as leverage to match state and federal funds of at least $1 million. Airport Improvement Program funds handled by the federal government need a 10 percent local match, and will be used to buy a new snowblower unit for the airport.
Other funds will match monies for other airport improvements.
"It's going to be difficult for at least two years," Airport Authority Executive Director Harold Van Leeuwen told authority members of the lower levy. "We want to be able to not lose those funds. At some point, that money will have to be put back."
While the airport can encumber Airport Improvement Funds for projects now, it has up to three years to provide the matching funds, Van Leeuwen said, meaning that if the levy doesn't include matching funds in 2010, it should in 2011 or 2012 at the latest.
"We do have time to do this, and we may do this incrementally," he said.
Authority member Roger Hellquist, a Bemidji City Council member, disagreed.
"I don't like to rehash things we voted on before," Hellquist said. "Once said, once done. It was unanimous to raise the levy at that time."
Authority member Roger Johnson, also a city councilor, agreed with Hellquist but voted with Vene and Jack Frost, another Beltrami County commissioner, to go with the lower levy.
Johnson said the higher levy will need to be instituted at some point to achieve the matching funds.
"We'll get smoke now or smoke in two years," Authority Chairman Marshall Froyd said of the public reaction to a new property tax.
"Sometimes a retro look is good, and we may have acted in haste," Vene said of the May vote. Local governments have until Sept. 15 to set a preliminary property tax levy, after which they can only lower it until a final levy is adopted in December.
"There are substantial challenges in these challenging times, and this is the prudent thing to do," Vene said.
Frost noted the earlier unanimous vote, but said the Airport Authority's philosophy that the property tax levy is in two parts -- operational funds and capital matching funds -- won't wash with the public.
"We say we didn't increase the levy, but by definition we did," Frost said, as the capital improvements were added to the original operational levy figure. "That went up 22 percent, and that's what people will see."
"We discussed it would be a PR deal with the citizens we all serve," said Hellquist. "To achieve a 90/10 match for improvements, we increased the operating levy at that time. I thought it was good logic. It still makes good logic. I think we did the right thing."
"We will be deferring capital, and we will need to fix this in an incremental fashion," Van Leeuwen said. "We will have levy increases in the future, and we will have to go right up against that (state-imposed levy limit) cap."
Airport Authority members had earlier thought that the 2010 levy could be kept level for several years.
"But a 22 percent increase now is disingenuous in these hard times," Frost said.
The Airport Authority is now working on a terminal expansion and renovation that could reach $10 million to $12 million, but Van Leeuwen said that bonds will be used for that project, paid back by federal funds and passenger fees.
He hopes, however, that the airport's cash flow isn't affected and noted that the city and county still have some $75,000 in airport reserve funds that haven't yet been transferred over to the authority.
"My biggest concern is keeping strong public support for the airport," Van Leeuwen said.
Bemidji Regional Airport annual shows an operating loss of $300,000 to $500,000 a year without including depreciation costs, Sandy Nelson, CPA with Miller McDonald Inc., told the authority on Wednesday.
The 2008 audit shows an operating loss of $1.51 million, which includes $1.14 million in depreciation and amortization costs.
Net income for 2008 was $1.192 million, but Nelson said it would be a $1 million net income loss if federal and state grants weren't included. The airport received $1.74 million in Airport Improvement Program funds and $598,909 in Passenger Facility Charge revenue.
Miller McDonald provided an "unqualified opinion" on the 2008 audit, which Nelson said is the highest ranking that can be given to an audit.
There were no major adverse findings in the audit, Nelson said. Some can't be avoided as the authority is a small operation, which recently added its fourth employee. In one, the authority's auditor prepares the financial statements, which more properly should be prepared by another party and presented to the auditor.
Van Leeuwen reported that the authority will receive $30,430 from the state for marketing efforts, which will grow to $43,470 with the required local match.
Authority members voted to continue an air service agreement with Trillion for $19,580 and will work to revamp marketing efforts with Grow Bemidji, under Joint Economic Development Commission leadership, for $23,910.
Van Leeuwen introduced Karen Weller as filling the new position of assistant director. Weller most recently was manager of airline operations and facilities for the Metropolitan Airports Commission in the Twin Cities.