Proposed airport levy up 2.2 percent
The full Beltrami Regional Airport Authority will be asked to approve a $375,000 property tax levy for 2011, a 2.2 percent hike over this year.
That doesn't include a new debt service levy of $92,420 that will provide upfront money for a $1.33 million terminal construction bond issue, to be repaid at year's end by airport Passenger Facility Charges.
The Airport Authority - short two members -- met Wednesday evening. The full authority will vote on a levy for 2011 on Aug. 18.
Authority staff originally proposed a levy increase of 4.9 percent to $385,000, but Authority Commissioner Jim Lucachick balked at the hike, alluding it may have something to do with a more expensive than anticipated airport terminal expansion and renovation project, at $9 million.
The higher tax levy "appears to be covering your overage on terminal construction costs," Lucachick said to Airport Authority Executive Director Harold Van Leeuwen.
The levy is for terminal operations and maintenance and is separate from current construction, Van Leeuwen said. "There is no linkage. It's to pay the bills. It's very specific to operating costs."
He explained that the 4.9 percent increase is the first in three years, after having held down the levy for two years. When the Airport Commission became a free-standing, tax-collecting entity in 2009, new authority commissioners -- the same ones who were commission members -- decided the authority's first levy would equal the subsidies given it by Beltrami County and the city of Bemidji.
Last year's authority decided to continue the same levy level for another year.
Lucachick, a Beltrami County commissioner who joined the Airport Authority in January, wants to continue that freeze for another year.
"Small businesses have been going out of business because of the recession, and I have to go to them and say we need more for the airport?" he said. "I don't like doing that."
"We didn't say it would be flat forever," Van Leeuwen said. Costs such as fuel and utilities have increased, making it impossible to meet all expenses without a hike.
With no changes, Airport Authority accountant Bob Maas said he predicts a $1,200 cash balance in 18 months, not a good situation. All expenses would need to be the same as last year to stay afloat by using last year's levy amount, he said.
Lucachick said he liked that idea, suggesting not enough has been done to cut the airport budget as it is.
Authority Chairman Marshall Froyd pointed out several areas of the budge which carry cuts for next year and that some areas, such as fuel costs and liability insurance, can't be controlled.
Froyd asked Lucachick if he could support something in the middle, and Maas suggested $375,000, up from this year's $367,000 levy.
Lucachick asked Commissioner Jack Frost for his opinion, and Frost said he supported freezing the levy the first year to match prior county and city subsidies, "but the practicality is it could be pretty tight. Costs have gone up."
Frost said he was OK with a $375,000 levy.
Froyd again asked Lucachick if he would compromise, and he stood firm. "I'm not in favor of an increase when you haven't shown to me the ability to lower airport costs."
Lucachick also said he didn't think the authority should have raised Van Leeuwen's salary in a recession. "I'm going to hang with zero" levy increase, he said.
Van Leeuwen said the authority, looking ahead to when Van Leeuwen retires, ordered a wage comparison of airport managers at similar airports. They worked out a five-year timetable to reach the average salary, which has already been put off a year. No raise hike is asked for 2011, he said.
The idea is to have a competitive wage for when the need arises to replace Van Leeuwen upon his retirement in about five years, Froyd said.
"I note your opposition," Froyd said the Lucachick, adding that a $375,000 property tax levy will be recommended to the full authority on Aug. 18.
Authority members will also on that day approve a bond sale of $1.33 million, most likely using a process that calls for raising another $92,420 in property taxes as a debt service fee. The move will allow Moody's to give the airport a higher Aa3 bond rating and save the airport $123,000 over the life of the bonds.
The debt service will be used to guarantee the bond issue, and will be repaid to taxpayers at year's end from PFCs that are leveled on passengers arriving and departing.
:After the first year, the debt service levy would be abated each year," Van Leeuwen said. With the tax levied each year and abated by the PFCs collected throughout the year, it will remain revenue-neutral to taxpayers, except the first year.
In the 20th and last year, the PFCs can be used to lower the operating levy, he said.