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CITY COMMISSION AGENDA MEMO October 24, 2017

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CITY COMMISSION AGENDA MEMO October 24, 2017 CITY COMMISSION AGENDA MEMO October 24, 2017 FROM: Jesse R. Romo, Airport Director MEETING: November 7, 2017 SUBJECT: Ordinance No. 7321 Amending Section 7-146 of the Code of Ordinances Relating to Landing Fees at the Manhattan Regional Airport PRESENTER: Jesse R. Romo, Airport Director BACKGROUND It is common practice for airports to establish rates and charges for specific uses, such as landing fees. In October 1997, Ordinance No. 5064 was passed to establish rates and charges, specifically landing fees for Airline (Part 121) and Charter (Part 135) operators. It also established tie-down fees for based and transient aircraft. The landing fee created a two-tiered structure based on total weight: Aircraft Maximum Certificated Gross Landing Weight Landing Fee Over 12,500 pounds but under 60,000 pounds; rate per 1,000 pounds $0.40 60,000 pounds and over, rate per 1,000 pounds $1.50 Tie-Down Fees were set on a weekly and monthly basis: Tie-down Fees: Based aircraft $25.00/month Transient aircraft $7.50/day (first day waived with fuel purchase) DISCUSSION When Ordinance No. 5064 was passed, the Manhattan Regional Airport (MHK) was operating under the federally subsidized Essential Air Service Program. Beechcraft 1900, a 19-seat aircraft, were commonly used for commercial service with a maximum takeoff weight of 17,000 pounds. In late 2009, regional jet service began operating out of MHK. The ERJ 145, 50-seat aircraft, with a maximum landing weight of approximately 44,000 pounds replaced the smaller previously used aircraft. In May 2017, American Airlines began operating the CRJ700 three times a day to Dallas/Fort Worth (DFW). The CR7 has a maximum landing weight of approximately 67,000 pounds. Since 1997, this is the first time an aircraft under Part 121 (scheduled commercial service) has exceeded 60,000 pounds. MHK staff researched other airports in similar size to compare rates and charges for what a typical CRJ 700 at 67,000 pounds would pay in landing fees. See Enclosure 2 for comparisons of MHK to other airports in landing fees. Using current rates, MHK would be near the top of landing fee rates at approximately $100.50 in fees. The Airport Advisory Board (AAB) established a regulatory affairs committee that discussed and reviewed the ordinance. During the September 11, 2017, AAB meeting, the Board recommended amending the ordinance to $0.50 per 1,000 pounds with a 3% inflator rate. The proposed rate would read as follows: Aircraft Maximum Certificated Gross Landing Weight Landing Fee Over 100,000 pounds, rate per 1,000 pounds $1.50 Over 12,500 pounds but below 100,000 pounds; rate per 1,000 pounds 2018 $0.50 2023 $0.60 2028 $0.70 2033 $0.80 2019 $0.52 2024 $0.62 2029 $0.72 2034 $0.82 2020 $0.54 2025 $0.64 2030 $0.74 2035 $0.84 2021 $0.56 2026 $0.66 2031 $0.76 2036 $0.87 2022 $0.58 2027 $0.68 2032 $0.78 On or after January 1, 2037 Over 12,500 pounds; rate per 1,000 pounds $0.90 The proposed revised landing fee would bring MHK from being on the high end of the comparison chart to the lower end (from $100.50 to $46.90 for the 67,000 pound CRJ700), but assures the City of continued revenue increase through the inflator rate. See enclosure 2 for comparison of landing fee rates with other airports. The revised fee also maintains a consistent fee structure for charter operators, which generally utilize aircraft weighing over 100,000 pounds. In 2016, MHK collected a total of $29,053 from American Airlines in landing fees. Since the larger aircraft have begun service in May 2017, MHK anticipates an increase of 166% in landing fee collection. Conversely, the airline has also realized the same percentage increase in their cost to do business at MHK. Airport Administration analyzed actual landing fee revenue collection through August of this year and then added anticipated revenue collection for September-December to get an estimated revenue collection in 2017 of $77,430. The scenario presented includes an assumption of passing the proposed new rate in December. Airport Administration also analyzed anticipated revenue collection from landing fees for 2018 and beyond (including the inflation faction proposed starting in 2019). The analysis assumes the weight of landed aircraft from May-August 2017, which reflects the larger aircraft for the DFW route, and assumes the weight to remain under 100,000 pounds. Estimated revenues for out years ranged from $44,017 in 2018 up to $51,059 in 2022. In addition to the landing fee revision, the City also recommends deleting the reference to a “Tie-down” fee and its subsequent rates from the Code. The City has never collected this fee so this revision has zero financial and operational impact. On October 17, 2017, the City Commission approved first reading of an ordinance amending Section 7-146 of the Code of Ordinances relating to landing fees at Manhattan Regional Airport. FINANCING Based on the City Commission passing these landing fee revisions, the City would expect to see an increase of approximately $48,000 in landing fees in 2017. In future out years there are also expected increases in landing fees with the flat $0.50 rate plus inflator based upon the larger planes being partially utilized by the airline. There are estimated increases of $15-22,000 per year over the 2016 amount of $29,053 for the next five years. ALTERNATIVES It appears the Commission has the following alternatives concerning the issue at hand. The Commission may: 1. Approve Ordinance No. 7321 amending Section 7-146 of the Code of Ordinances relating to landing fees at Manhattan Regional Airport. 2. Deny the recommended ordinance. 3. Modify to meet the needs of the Commission. 4. Table the issue. RECOMMENDATION Approve an ordinance amending Section 7-146 of the Code of Ordinances relating to landing fees at Manhattan Regional Airport. POSSIBLE MOTION Approve Ordinance No. 7321 amending Section 7-146 of the Code of Ordinances relating to landing fees at Manhattan Regional Airport. JR/kb Enclosures: 1. Ordinance No. 7321 2. Similar Airports Landing Fees Rates and Comparison ORDINANCE NO. 7321 AN ORDINANCE AMENDING SECTION 7-146 OF THE CODE OF ORDINANCES OF THE CITY OF MANHATTAN, KANSAS, RELATING TO AIRPORT RATES AND CHARGES. BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF MANHATTAN, KANSAS: SECTION 1. That Section 7-146 of the Code of Ordinances of the City of Manhattan, Kansas, is hereby amended to read as follows: Section 7-146. Rates and charges. (a) The Airport Director shall maintain a current schedule of airport rates and charges for commercial activities or the commercial use of the airport and its facilities, not covered in separate lease agreements, as follows: 1. Commercial Activities certified under FAR Part 121 and/or FAR Part 135 who operate aircraft with 19 seats or more will pay landing fees for each landing. Payments shall be made in accordance with the following schedules: Landing Fees for aircraft operating under Part 121 and/or FAR Part 135: Aircraft Maximum Certificated Gross Landing Weight Landing Fee Over 100,000 pounds; rate per 1,000 pounds $1.50 Over 12,500 pounds; rate per 1,000 pounds 2018 $0.50 2023 $0.60 2028 $0.70 2033 $0.80 2019 $0.52 2024 $0.62 2029 $0.72 2034 $0.82 2020 $0.54 2025 $0.64 2030 $0.74 2035 $0.84 2021 $0.56 2026 $0.66 2031 $0.76 2036 $0.87 2022 $0.58 2027 $0.68 2032 $0.78 On or after January 1, 2037 Over 12,500 pounds; rate per 1,000 pounds $0.90 (b) Landing Fees for transient aircraft shall be paid to the authorized organizations providing flight line service who will collect the fees and charges under agreement with the City. (c) All rates and charges or other fees due to the City for the use of the airport shall be immediately due and payable. (d) The Airport Director or his/her representative shall have the authority to detain any aircraft or deny ground transportation operators access to the airport for nonpayment of any rates and charges due to the City or airport tenants. SECTION 2. This ordinance shall take effect and be in force from and after its publication in the official city newspaper. PASSED BY THE GOVERNING BODY OF THE CITY OF MANHATTAN, KANSAS, THIS 7TH DAY OF NOVEMBER, 2017. ____________________________________ Linda Morse, Mayor ATTEST: ____________________________________ Gary S. Fees, MMC, City Clerk ENCLOSURE 2- SIMILAR AIRPORTS LANDING FEES RATES COMPARISON Landing Fee for What is your landing fee Airport CRJ700 using 67,000 structure/rates? lbs. Waco Regional Airport $0.40 $26.80 Joplin Regional Airport $0.48 $32.16 San Angelo Regional Airport $0.60 $40.20 Tyler Pounds Regional Airport $0.65 $43.55 Jack Brooks Regional Airport $0.72 $48.24 Columbia Regional Airport $.88 per 1,000 $58.96 $.40 per 1,000 (Cargo Carriers) Garden City Regional Airport $1.00 per 1,000 (Airline/Charters) $67.00 Stockton Metro Airport $1.10 per 1,000 $73.70 $0.90 per 1,000 (signatory) $60.30 Grand Island Regional Airport $1.25 per 1,000 (non-signatory) $83.75 Fort Smith Airport $1.25 per 1,000 $83.75 $0.40 per 1,000 - over 12,500 pounds Manhattan Regional Airport but under 60,000 pounds $1.50 per 1,000 - 60,000 pounds and over $100.50 Topeka Regional Airport $1.50 per 1,000 $100.50 PROPOSED RATE COMPARISON Landing Fee for What is your landing fee Airport CRJ700 using 67,000 structure/rates? lbs.
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