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LAKE HAVASU CITY AIRPORT STUDY

Prepared by

ARIZONA DEPARTMENT OF TRANSPORTATION TRANSPORTATION PLANNING DIVISION 206 South 17th Avenue Phoenix, Arizona 85007

September, 1976

Arizona Transportation Research Center Li brary 206 South 17th Avenue, #075R Phoenix, AZ 85007 TABLE OF CONTENTS PAGE

Study Purpose . l Summary .... 3 Recommendations 4 Airport Background 6

Lake Havasu City Socioeconomic Background 8 Lake Havasu City- Mohave County Comparisons 8 Growth Potential 16 Cone l us ion . . . 22 Lake Havasu City Airport Technical Aspects 23 Introduction .. 23 Airport Location 23 Airport Classification 23 Airport Compatibility 24 Airport Facilities .. 24 Airside Improvements 24 Landside Improvements 27 Airport Deficiencies 28 Land Interest 32 Airport Certification 33 Airport Capital Requirements 34 Lake Havasu City Airport Economic Analysis 36 Demand for Service. 36 Operational Profile 38 Evaluation of Options 41 Option #1: Do Nothing 41 Option #2: Receive and Operate Lake Havasu City Airport 42 PAGE Option #3: Develop an Alternative Airport 44 Option Summary 47

Appendix 48 Pictures 49 Exhibits

Exhibit A - Five-Year Construction Program. 58 Exhibit B - 2O-Year Recon Plan . . 59 Exhibit C - 2O-Year Recon Plan Showing Five-Year Development Program 60 STUDY PURPOS E

During the last several years , the Lake Havasu City Airport, which is cur­ rently privately-owned and operated by McCulloch Properties, Inc., has been the object of many studies. A study concerning the relocation of the airport from its current site on Pittsburg Point to an alternate site in the Standard Wash area was conducted by Trico International in 1973. 1 Another study consisted of an extensive appraisal of the fair market value of the private property which makes up roughly half of the current airport premises. This appraisal was done by Burke, Hanson and Homan, Inc., during the early part of 1976. 2

All of this activity, coupled with recent comniunication from McCulloch

Properties, indicates a strong desire on their part to bring about either the relocation of the airport in order to take advantage of the commercial value of the property or to at least avoid the operational losses generated by the airport by transferring its ownership to some public entity.

It is the purpose of this report to examine the following issues relevant to the Lake Havasu City Airport:

1. Investigation of the market area to be served by the airport, i.e.:

does the growth potential of the area reinforce the need for such

a facility?

1 Lake Havasu City Airport Perspectives, Tri co International , 1973 2An Appraisal of the Fair Market Value of a Portion of the Land Comprising the Lake Havasu City Airport, John T. Hansen and Douglas Kruse, 1976

-1 - 2. Evaluation of near tenn operating revenues and expenditures to deter­

mine the likely profit or loss potential over the next few years.

3. Examine the economic costs and benefits of some alternatives for deal­

ing with the airport facility.

4. Aid ADOT in the fonnulation of a policy which will enable it to handle

this case and similar cases as they arise in the future.

-2- SUMMARY

This study has brought out many points discussed in prior studies of the Lake Havasu Airport. However, many ideas developed here have not been developed in other studies and, to our knowledge, have never been considered in the analysis of the airport at its current location or in alternative locations. Some of our more important findings are: l. There is ample space for growth in Lake Havasu City. 2. There is a large amount of sold, yet unoccupied, property that would lend impetus to future development. 3. While developed land area implies a population potential of 100,000, limitations on access to water could restrict expansion. 4. There is no prospect for profitable or even break-even operations at the Lake Havasu City Airport for the foreseeable future. 5. The existing facility has several major deficiencies that would require remedial action if the airport is to meet FAA standards. 6. Public ownership of the airport would entail a high probability of continued operational losses as well as major capital outlay, the return on which could easily be negative. 7. The question of who should bear the financial burdens of owning and maintaining this airport is an issue of justice. Given that the Lake Havasu City facility cannot be self-supporting, policy makers must decide who shall make up the deficits.

- 3 - RECOMMENDATIONS 1. The existing airport site should be maintained as the Lake Havasu Airport. Discussion: While another site could be developed (as reviewed under Option #3, page 44), as a replacement airport, this is not considered feasible, since sufficient FAA ADAP funds and sponsors' match­ ing funds are not available for such an undertaking. Also, any new airport site would be more distant from the population area being served, and would require duplicating existing private and publfc airport capital investments. 2. The State Park Board should require that the airport continue to be main­ tained by McCulloch Properties Inc. (MPI), in accordance with their lease agreement until such time as successful negotiations with a public entity have been completed. Discussion: To date, the possibility of local government acquisitions of the airport properties has not been fully explored. Questions exist concerning whether Mohave County would accept ownership of the facility. Also, it has not been determined if some other quasi­ government or non-profit organizations have an interest in oper­ ating and maintaining this airport. The agreement between the State Park Board and MPI requires MPI to continue to operate the airport until the le~se is cancelled or until the agreement is waived. This covenant should be enforced. 3. ADOT should take an active role in precipitating negotiations between inter­ ested eligible sponsors, the State Park Board, and MPI. Discussion: To date, records do not indicate a past effort to bring inter­ ested airport sponsors together with MPI. In fact, it is not certain what MPI.'s position is regarding relinquishment of their airport interests. ADOT should review the Lake Havasu status in meetings with MPI officials. After this, prospective airport sponsors should be ascertained, and meetings with these entities should be held. Finally, ADOT should act as a mediator in final negotiations between the interested parties and MPI. 4. If an eligible sponsor successfully completes airport acquisition negotiations with MPI, ADOT should provide a Tr.ansition Grant to defray initial operational deficits.

-4- Discussion: Table 17, page 40, predicts a $40,000/year difference between airport revenues and operating costs. To offset this projected loss, a short term (two years) annual State subsidy to the local authority assuming airport control would appear reasonable. Nearly all other airports in the State have received construction grants in the past. Lake Havasu has provided years of service to the public without public subsidy. Therefore, to use State resources to make public acquisition of Lake Havasu airport more attractive would appear to be consistent with past state policy to assist local airports. It is considered proper that funding to implement this recommendation should be secured through a special appropriation from the General Fund. 5. State operation of the airport should be avoided. Discussion: Past policy established by precedent dictates t hat the State should not take over operation of this airport. Arizona ha never taken over operation of an existing airport. Recent telephone ~ontact with t en different western state aeronautics offices revealed that there is a uniform policy in this regard. If Arizona breaks this long standing position, similar requests from other communities for State assumption of operational responsibility for their airports may be expected. Such requests would be difficult to decline if one instance occurred where the State assumed operation responsibility of an airport serving a municipality or population center. 6. If MP! ceases operation of the airport and local government will not accept the operational responsibility for the airport, the following course of action is reconmended: A) The airport should be closed. B) The airport land under the control of the State Parks Board should be land-banked for future airport use. C) MP! should be approached to see if they will donate their fee-simple land to the airport land bank. This property is located in the center of the airport lands. D) Until the property within the airport land bank is required for airport purposes, the property should be posted and marked to insure that the State does not incur liability for any unauthorized air or ground operations.

-5- AIRPORT BACKGROUND

The construction of Parker Dam in 1938 created Lake Havasu and opened vast recreational opportunity along the entire length of the Lake. This recreational opportunity was, in all probability, part of the reason for the construction of the landing strip and rehabilitation center by the Army Air Corps during World War II. After the war, the facility was abandoned and received only occasional use by recreationally oriented aviators. In 1958, Robert McCulloch established a testing site there for outboard motors. He subsequently decided to extend his manufacturing operations to the area but was unable to do so because of land purchase problems. However, in 1963 McCulloch acquired the 26 section area where Lake Havasu City is now located and proceeded to establish manufacturing operations in the area. The new facilities generated new uses for the old airstrip and with the planned development of the city and attendant land sales promotion effort, substantial improvements were made to the airfield. The fly-in sales campaign conducted by McCulloch Properties from 1972-1975 and the testing operations for the J-2 gyrocopter generated substantial airport use. Also, during the period of 1964-1974 the population of the area increased from a mere handful to about 10,000 and this in itself generated quite an amount of private air traffic. This component of the airport utilization was supple­ mented by the initiation of commercial air service to the area in the early

196O 1 s by Colorado River Airlines.

With the diminishing activity of real estate promotion McCulloch 1 s use of the airport is dwindling down to a more normal participation. In the future, most of the operations at the facility will result primarily from private aircraft with a small increment from commercial air carriers.

- 6 - In the absence of the heavy aircraft used by McCulloch in their real estate program the current facility has the capability of handling traffic considerably in excess of that which can be anticipated through the year 2000. In fact, the airport is more than adequate for most general aviation needs, and with some improvements could provide service for commercial carriers as well.

- 7 - LAKE HAVASU CITY SOCIOECONOMIC BACKGROUND

Lake Havasu City-Mohave County Comparisons Unlike most towns in Arizona , Lake Havasu Ciey is located with convenient access to a large body of water. A factor which, in combination with an aggressive sales campaign by McCulloch Properties, has contributed to the growth of the area. Table l below indicates the expanding nature of the area . In 1970, Lake Havasu City's share of the county's population amounted to slightly more than 20 percent. By 1974 this proportion had increased to more than 28 percent.

Future estimates foresee the continuation of this trend, and by 1980 some 35 percent of the county's population is expected to reside in the Lake Havasu City area. TABLE l POPULATION COMPARISON 1970-1980

LHC Area Population as a Percentage of Year Mohave County Lake Havasu City Area** Total County Population 1970 25,857 5,285 20.4% 1974 35,714 10,028 28. 1% 1980* 48,300 17,089 35.4%

*Projection based on data furnished by the Arizona Department of Economic Security~ 1975. **The Lake Havasu City area covers development within 20 miles of the city in all directi on s except west which is bounded by the lake. Source: U.S. Bureau of the Census, 1970 and 1974 census reports.

That this population growth is the product largely of immigration rather than increases in family size is evident from the housing statistics. Starting

- 8 - from a population of less than 100 persons and few buildings just 15 years ago , the Lake Havasu City area has undergone a construction boom of sizable propor­ tions. Consequently, the Lake Havasu City area has consistently accounted for 40 percent or more of the dollar value of new building permits in each of the last five years. Table 2 illustrates the relative proportions of building dollars of Lake Havasu City and the rest of Mohave County. Population growth projections suggest that this ratio should persist through 1980. TABLE 2 BUILDING PERMIT COMPARISON 1971 - 1975

LHC Area as a Percentage of Year Mohave Count,}'. Lake Havasu Citt Area Total Mohave Countt 1971 $25,684,466 $11,430,695 44.5% 1972 34,760,429 18,192~345 52.3% 1973 44,955,887 20,634,916 45.9% 1974 34,663,832 14,804,275 42 . 7% 1975 36,827,777 14,728,734 40.0%

Sou rce: Mohave County Planning and Zoning Department, Annual Report on Building Permits, 1971 - 1975. More than a high population growth rate, however, is at work here' in accounting for Lake Havasu City I s high proportion of construction expenditures. On average, the prices of new homes in Lake Havasu City have been uniformly higher than in other areas of the county. Table 3 traces the per unit costs of single family homes in Lake Havasu City and Mohave County. Though the gap has been narrowing, the value of single family homes has been, and still is, higher in the Lake Havasu City area.

- 9 - Pri ces of mul t i - fa mi ly un its show no signi f i can t difference betwee n Lake Havasu City an d t he rest of t he county. In con t rast, in terms of she er numb er of units cons t ructed, Lake Havasu City has ac counted for more t han 85 percent of such con struct ion over the last five years. The detail s can be observed in Table 4 below . TABL E 3 AV ERAG E COST OF NEW SINGL E FAMI LY HOM ES 1971 - 1975

Lake Havasu City Area Remainder of Mohave County No. of No . of Year Units Unit Value Units Unit Value 1971 231 $22 ,506 275 $13 , 234 1972 259 24 , 771 328 15,635 1973 272 29,867 250 21,606 1974 310 29 ,425 271 21,582 1975 432 27,571 289 25 ,918

Source: Mohave County Planning and Zoning Department ; Annual Reports on Building Permits, 1971 -1975 . TABLE 4 AVERAGE COST OF NEW MULTI - FAMILY UNITS 1971 - 1975

Lake Havasu City Area Remainder of Mohave County No . of No. of Year Units Unit Va 1ue Uni ts Unit Value 1971 117 $14,333 17 $ 9,800 1972 187 12,425 18 13 ,944 1973 207 13,866 10 11,904 1974 126 11,842 50 NA 1975 51 13 , 733 10 14,222 5- Year Total 688 105

Source : Mohave County Planning and Zoning Department~ Annual Reports on Building Permits, 1971 -1975. - 10 - The construction boom has , of course, not confined itself to dwelling units. Commercial building in the past five years has amounted to nearly 50 percent of such construction in the county, while industrial construction has exceeded 80 percent of the county's total in this category. Tables 5 and 6 clearly demonstrate these facts . TABLE 5 NEW COMMERCIAL CONSTRUCTION 1971-1975

LHC Area as a Percentage of Year Mohave Countt Lake Havasu Citt Area Mohave County 1971 $ 3,495,979 $ 1,900,050 54.3% 1972 5,819,901 4,130,550 71.0% 1973 11,074,262 4,304,298 38 . 9% 1974 4,232,244 2,204,118 52. l % 1975 2,444,027 580,800 23.8% 5-Year Total $27,066,413 $13,119,816 48.5%

Source: Mohave County Planning and Zoning Department, Annual Reports on Building Permits, 1971 -1975. TABLE 6 NEW INDUSTRIAL CONSTRUCTION 1971 - 1975

LHC Area as a Percentage of Year Mohave Countt Lake Havasu City Area Mohave Countt 1971 $ 678,787 $ 411,000 60 . 5% 1972 1,381,500 l ,376,500 99.6% 1973 l ,054,000 977,392 92.7% 1974 168,960 l 04, 960 62. l % 1975 253,256 60,264 23.8% 5-Year Total $3,536,503 $2,930,116 82.9%

Source: Mohave County Planning and Zoning Department, Annual Reports on Building Permits, 1971-1975. - 11 - Meanwhile, an examination of the as sessed value of property in the Lake Havasu City area reveals that it has kept pace with the growth in population . If anything, this assessed valuation understates the growth in property values in the area. TABLE 7 ASSESSED VALUE COMPARISON 1971 - 1975

Year Mohave Count.}:'. Lake Havasu Cit.>_'. Area* Percent LHC Area 1970 $111,791,513 $24,422,805 21.8% 1971 116,876,372 28,648,712 24.5% 1972 119, 790, 140 33,487,600 28.0% 1973 139,263 9426 42,776,171 30.7% 1974 164,949,614 51,334,849 31. l % 1975 191,021,216 58,703,458 30.7%

*The assessed value used is that of School District #25 which encompasses all of the Lake Havasu City area including the developed area outside the bound­ aries of the Lake Havasu Irrigation and Drainage District. Sources: Mohave County Finance Department and Arizona Department of Education.

Lake Havasu City was hit especially hard by the economic recession in 1975. Unemployment shot up to over 16 percent in May of 1975 compared to a Mohave County total of 10 percent in the same period. Recovery, though, has been encouraging. Employment has increased to 110 percent of the earlier level between May 1975 and May 1976, while unemployment dropped by 6 percent in the same period (see Table 8). It seems feasible that the previous growth rate could resume, and it is our opinion that such will be the case.

- 12 - TABLE 8 EMPLOYMENT CO MPARISONS

May 1975 May 1976 __, w Labor Force Employment Unemployment % Unemployed La bor Force Emp l oyment Unemp l oyment % Un emp l oyed Lake Havasu City 3,375 2,825 550 16.3% 3,450 3, l 00 350 l O. l % Mohave County 12,450 11 , 175 l ,275 10. 3% 13,075 12,050 l ,025 7.9%

Source: Wilma Richard, Arizona Department of Economic Security, 1976. The higher volatility of t he Lake Havasu Ci ty employment picture might be explained by the higher proportion of workers employed in manu facturing , mining , and construction in Lake Havasu City. All of these industries are highly cyclical in nature and subject to periodic boom and bust conditions. Notably , Lake Havasu City has a lesser percentage of government employees and self­ employed persons than the rest of Mohave County . The economic dominance of McCulloch in Lake Havasu City can be observed in the fact that among all employers with 25 or more employees , McCulloch provides 60 percent of the jobs. Tables 9 and 10 illustrate in fu rther detail these employment statistics. TABLE 9 EMPLOYMENT

Lake Havasu Mohave County City Area Mat 1975 % Mat 1976 % Manufacturing, Mining, Construction 2,625 23.9 l , 225 38.9 Transportation, Communications, Public Utilities 500 4.5 125 4.0 Trade 2,250 20.5 650 20.6 Finance, Insurance, Real Estate 350 3.2 75 2.4 Services l ,625 14.8 700 22.2 Government 2,000 18.2 275 8.7 Self-Employed l ,650 15 .0 100 3.2 TOTAL 11,000 100 3, 150 l 00

Source: Wilma Richard, Arizona Department of Economic Security, 1976.

- 14 - TABLE 10 EMPLOYERS WITH 25 OR MORE FULL - TIME EMPLOYEES 1975

Employer Employees % McCulloch Corporation 950 53.7 McCulloch Properties, Inc. 111 6.3 Nautical Inn 90 5. l Lake Havasu Community Hospital 87 4.9 Rodeway Inn 62 3.5 Lake Havasu Elementary School District 56 3.2 Medical Center 55 3. l State Bank 51 2.9 Barco of Utah 45 2.5 Lake Havasu Irrigation and Drainage District 45 2.5 Bluewater Properties 38 2. l Hobo Joe's 38 2. l 1'< amada Inn 36 2.0 Holly Development Company 29 1.6

Lake Havasu Fire Department 25 l. 4 l, 768 100

Source: Arizona Department of Economic Security. Lake Havasu City Office, 1975.

- 15 - Growth Potential There is ample room for growth in the Lake Havasu City area. To date, some 26 square miles have been graded, drained, and subdivided into lots. Still, only a small portion of these lots has been put to use. In 1975 there were 31,802 residential lots laid out, but only 3,029 or 9.5 percent were in use. As can be seen then, Lake Havasu City has a head start on expansion into the other 90 percent of the residential lots not yet in use. From 1971 to 1975 the number of lots in use has grown at a 17 percent annual rate. This strong trend has shown no tendency to moderate in spite of the 1975 recession. TABLE 11 LAKE HAVASU CITY AREA RESIDENTIAL LAND USE 1971 - 1975

SINGLE FAMILY RESIDENCES Year Total Lots Lots in Use Buildings Units 1971 23,215 l ,277 l ,273 l ,273 1972 25,353 l , 518 l, 513 l, 513 1973 27,936 1,769 1,763 1,763 1974 27,751 2,060 2,051 2,051 1975 27,587 2,476 2,466 2~466 Increase 1971-1975 4,372 l , 199 l , 193 1, 193 % Increase 1971- 1975 18.8% 93.9% 93.7% 93.7%

Source: Roy Marshall, Mohave County Planning and Zoning Department, 1975.

- 16 - TABLE 11 · (Continued) LAKE HAVASU CITY AREA RESIDENTIAL LAND US E 1971 -1975

DUPLEX Year Total Lots Lots in Use Buildings Units 1971 1,483 110 112 211 1972 l, 538 134 135 263 1973 l, 753 152 154 288 1974 l ,802 171 173 339 1975 1,802 179 181 353 Increase 1971 - 1975 319 69 69 142 % Increase 1971 - 1975 21.5% 62 . 7% 61. 6% 67 ; 3%

MULTIPLE FAMILY Year Total Lots Lots in Use Buil di ng_s Units 1971 1,356 143 137 656 1972 1,626 157 149 791 1973 1,870 197 186 946 1974 1,855 218 209 l ,040 1975 1,890 203* 218 1,087 Increase 1971 - 1975 534 60 81 . 431 % Increase 1971 - 1975 39.4% 42.0% 59. l % 65.7%

* Effect of rezoning.

- 17 - TABLE 11 · (Continued) LAKE HAVASU CITY AR EA RESIDENTIAL LAND USE 1971 - 1975

MOBILE HOME PARKS Year Total Lots Lots in Use Buildings Units 1971 455 118 118 118 1972 455 121 121 121 1973 523 135 135 135 1974 523 166 166 166 1975 523 171 171 171 Increase 1971 -1975 68 53 53 53 % Increase 1971 - 1975 14. 9% 44.9% 44.9% 44.9%

- 18 - TABLE 12 SUMMARY OF RESIDENTIAL LAND USE 1971-1975

Dwelling Year Total Lots Lots in Use Buildings Uni ts 1971 26,509 l, 648 l, 640 2,258 1972 28,972 l, 930 l, 918 2,688 1973 32,082 2,253 2,238 3,132 1974 31,931 2,615 2,599 3,596 1975 31,802 3,029 3,036 4,077 Increase 1971-1975 5,293 l , 381 l, 396 l ,819 % Increase 1971-1975 20.0% 83.8% 85.1% 80.6%

Source: Mohave County Planning and Zoning Department~ Roy Marshall, 1975.

- 19 - Estimates of the future population of Lake Havasu City anticipate dynamic expansion. Lake Havasu City official s are predicting a figure of 70,000 persons. The Office of Economic Planning and Development stated in a recently compl eted prospectus that an additional 20,000 dwelling units and 60,000 persons are expected to be accommodated within the Lake Havasu City area. Tabulation based on the number of subdivided lots, however , suggests an ~ven larger potential population. Table 13 indicates that the total number of dwelling units may exceed 40,000 . If this comes to pass, a population in excess of 100,000 would be expected. The assurance that the expansion will take place is buttressed by the fact that 95 percent of the residential lots have already been sold. The growth then would seem largely a question of time--a when, rather than if, situation. TABLE 13 POTENTIAL DWELLINGS UNITS

Dwelling Lots Units Single Family 27,587 27,587 Duplex l ,802 3,604 Multi -Family l ,890 9,450* Mobile Homes 523 523 31,802 41,164

*Based on an estimated five dwelling units per lot--equivalent to the current average. Source: Moh.ave County Planning and Zoning Department, Roy Marshall, 1976.

There is a potential roadblock to future development. The Bureau of Reclamation has allotted only 14,500 acre~feet of water to the Lake Havasu

- 20 - City Irrigation and Drainage District. In 1975 the population of 9,235 con ­ sumed 7,264 acre- feet of water. This would imply that there is an upper limit to population of around 20,000 persons . The manager of the Irrigation and Drainage District believes t hat the 14 ,500 acre- feet allowance can support up to 35,000 in habitants. A petition for an increased allotment will have to be filed with the Bureau of Reclamation at some future date. Whether such a petition would be approved remains a critical unknown at thi~ point. One good sign of the portent of things to come is the heavy commercial investment in t he area. McCulloch retains impo rtant interests in Lake Hava su City and is counting on continued growth for future profits . In addition, utilization of the available commercial property has proceeded at a faster pace than residenti al growth. The number of lots in use has grown at a 19 percent annual rate and nearly 18 percent of the space available for this purpose is already occupied compared to a 9.5 percent occupancy rate for residential property . Table 14 reveals the increasing commercial investment in Lake Havasu City. TABLE 14 LAKE HAVASU CITY AREA COMMERCIAL LOTS 1971-1975

Date Total Lots Zoned Lots in Use % Used Buildings Uni ts 12/31/71 1 , 117 138 12.4 133 289 12/31/72 l, 360 171 12.6 164 350 12/31/73 1,459 231 15.8 223 442 12/31/74 1,567 257 16.4 246 545 12/31/75 1,530 273 17.8 265 572 Increase 413 155 150 299 Percent Increase 36.9% 131 . 3% 130.4% 109.5%

Source: Mohave County Planning and Zoning Department, Roy Marshall, 1975.

- 21 - Conclusion The trends all point to continued growth of Lake Havasu City . The area is new and attractive and has drawn both people and resources into its develop­ ment . That it will continue to do so seems likely. Proper handling of the airport facility can help to accommodate this growth . On the other hand, mismanagement of this asset could cause complica­ tions not only to those individuals already there, but to the thousands who have bought property for future development.

- 22 - LAKE HAVASU CITY AIRPORT TECHNICAL ASPECTS

Introduction Historically, airports have suffered operational restrictions due to encroachment. As development adjacent to the airport boundaries occurs, these built- up areas require that concessions be made in airport operations to insure compatibility between the inherently noise- producing aviation activities and the adjacent populated areas. The desirability of maintaining airport facilities in close proximity to the population area being served is obvious, yet a close- in airport normally suffers the most from encroachment. The ideal airport location then would be sited adjacent to a community with the airport providing all needed facilities. In addition, the airport boundaries would be surrounded by water, swamp, or other undevelopable area which would prevent encroachment. The Lake Havasu Airport approaches this ideal since water "pro­ tects" the airport on three sides. Unfortunately, the fourth side is downtown Lake Havasu City which is located directly in the flight pattern of incoming or departing aircraft.

Airport Location Airport location was given careful consideration, since it is located approximately two miles west of Lake Havasu City, which in turn, is 155 miles northwest of Phoenix. The "island" on which the airport is located was created by constructing a channel through Pittsburg Point Peninsula. The channel was subsequently bridged by the world-famous London Bridge. This bridge is the only overland access to the airport facility.

Airport Classification Classification as an air carrier airport was granted to Lake Havasu City on April 3, 1973 by the FAA. This classification is somewhat misleading since - 23 - air carrier service is provided only by Co chise Airlines, a small intrastate commuter airline utilizing light twin -engine aircraft. The majority of the operations conducted at this airport are by light aircraft. Only a very small percentage of the total flight operations are attributable to air carrier aircraft. This designation places the airport in a position to compete for air carrier airport funding under the FAA ADAP bill. This should make it considerably easier to secure FAA airport funds for airport development.

Airport Compatibility Airport compatibility with the immediate area is considered good. The land surrounding the airport is predominantly park land which has been so designated by the State. This park land and the water surrounding Pittsburg

Point provide a 11 buffer zone 11 around the airport land which effectively restricts encroachment. However, limited development in the form of a trailer park has occurred on the island in the approach zone to Runway 02. The exist­ ing airport terminal area is approximately three road miles west of the Lake Havasu central business district. This proximity to downtown Lake Havasu City will be considered in more depth later in this analysis.

Airport Facilities Airport facilities are separated into airside improvements and landside improvements.

Airside Improvements Airside improvements include an air carrier apron, two runways and a general aviation apron. The runway pavement and light aircraft apron show signs of deterioration indicating a need for immediate repairs and eventual rehabilitation. In addition, the physical location of all existing terminal facilities, both air carrier and general aviation,

- 24 - places them in violation of Federal Air Regulation Part 77, which concerns objects affecting navigable airspace. Insufficient distance exists between runway centerline and the buildings, aprons, and tiedown areas. If the facility is to be upgraded, the existing terminal area must eventually be abandoned and new terminal facilities constructed in a new location. Estimated capital costs and a plan to accomplish this relocation will be discussed later in this analysis.

Only one of the two runways is paved. The paved runway is 5,930 1 x

1 1 1 100 • It has the capability to be expanded to 6,400 x 150 • The addi- tional width is desirable and would be necessary.to meet air carrier standards. The extension possibilities are easily feasible since this can be achieved by simply reclaiming a now existing 500- foot runway displaced threshold. This additional increment of runway length will enhance the airport's capacity to accommodate air carrier and executive jet operations. A low-intensity runway lighting system is presently installed and is operational.

The remaining gravel-surfaced runway measures 5,650 1 x 100 1 and is designated 2-20. This runway could be widened to 150 1 to meet air carrier standards. It is unlighted, and by observation and discussions with local users, provides marginal service as a crosswind runway because it is poorly oriented. There is only 30 degrees difference in alignment between this alignment and the primary paved runway. Recorded wind data is not available to support the opinion that this runway does not serve a crosswind function, but observation of local vegetation and terrain analysis supports this hypothesis. A high-density trailer court is located within the approach to Runway 2, thereby degrading the usefulness of this facility considerably. Because of this off-airport property encroachment, it is considered necessary to displace the threshold of Runway 2 to provide the necessary approach clearance to this runway. - 25 - A short {approximatel y 2,000' long ) abandoned crosswind runway exi sts but appears to have never been fully developed. The app roxi mate bearing on this undeveloped runway is 14- 32. It is beli eved that the construction of this runway was considered necessary because of the crosswi nd conditions which prevail on the two runways previously discuss ed. While sections of this crosswind airstrip appear usabl e, devel opment was not carried far enough for substantial use to ever be realized. There are no taxiways . This makes it necessary for all arriving and departing aircraft to utili ze the runway system for taxiing purposes. The size of the terminal apron is considered adequate to accommodate existing scheduled air carrier aircraft. This apron is approximately 500 1 x 150' and abuts the displaced threshold to Runway 5. Aircraft utilizing this apron are therefore located within the runway primary surface. Because of this, parked aircraft are considered obstructions to air navigation. A six-foot-high security fence prevents inadvertent entry onto the terminal apron. The entire apron area is surfaced with bituminous concrete. This surface is in good repair. Past air carrier operation on this apron has not overloaded this apron from a structural standpoint and no evidence of distress is apparent.

The 200 1 x 1,400' light aircraft parking apron is surfaced with a light­ duty asphalt section. Many surface failure areas are evident. This apron is in very poor condition and, like the air carrier apron, is located in close proximity to Runway 5-23. This apron does not meet FAA aircraft parking setback criteria. All tiedown spaces appear to be occupied indi ­ cating a need for expansion in the near future. Approximately 60 light aircraft tiedown positions are available on this apron.

- 26 - Land side Improvements La ndside i mp rovements include a small paved auto parking lo t, a term i nal building, an off-airport fi re rescue facility, and paved access roa ds. Part of a termin al building addition is ut ili zed for vehicl e storage and the airport manager' s office. On e hangar is located in t he light aircraft parking area. Th e termin al bui lding and au to parking lot are small but adequa te to acc ommodate exist i ng functions. Like all air t erminal facili t ies , peak loading periods mu st certainly lead to terminal congestion . Expan sion possibili ties are limi ted because the terminal is sandwiched between Runway 5 and park desi gna t ed property. Terminal expansion would decrease available auto parking lot area which would lead to an undesirable building/ parking lot area imbal ance. Since the terminal is classified as an obstruction , improving or expanding terminal area facilities in the exist­ ing location would not appear to be prudent. The fire rescue facility presently being utilized to meet FAR Part 139 requirements i s located approximately two miles from the airport. Fire rescue rolling stock equipment is not maintained on the airport property. The FAA Grant of Exemption dated March 26, 1973, outlines explicit require­ men ts related to fire rescue equipment . These stipulations are demanding and costly to comply with. Of course , these requirements do not pertain unless an air carrier operation is in progress. The existing practice of calling for off-airport fire rescue standby assistance appears reasonable, but future concurrence in this method of meeting this need could be with­ held by FAA . If t his occurs , an on -airport fire resuce building and equipment would be required on the airport to meet FAR Part 139.

- 27 - The one small hangar located on the airport is not being used for hangar purposes. All aircraft based here are kept in open storage on the apron areas.

Airport Deficiencies Airport deficiencies exist in several areas and include items that can only be rectified through programming capital construction. Before listing these deficiencies, it should be noted that few, if any, deficiency free air­ ports are operating in our National Airport System. At virtually every airport in existence, FAA clearance criteria is not met, adequate title interest in approach corridors has not been secured, navigation aids are inadequate or non­ existent, etc. Lake Havasu is no exception in this regard and major capital expenditures will eventually be necessary to alleviate runway and apron problems and terminal area conflicts. However, many capital requirements could be deferred in the interest of economy if operational concessions can be tolerated . Exhibit A outlines what is considered to be a reasonable five-year construction program. It is obvious that this program will not satisfy all airport require­ ments, but does consider what development is necessary based on traffic that can reasonably be expected to utilize this airport over the period. A

11 Reconnaissance Plan 11 (Exhibit B) shows the form ultimat~ development of this airport could take. Also, Exhibit C outlines the five-year construction program suggested. The necessity to conduct crosswind operations on this airport is reportedly commonplace. The primary runway is 5-23. The crosswind runway is designated

2-20. This 11 split 11 in runway alignments is considered inadequate since the runway heading difference is only 30 degrees between the two runways. This provides insufficient crosswind capability since it is reported that meteoro­ logical conditions occur with some regularity when both existing runways are

- 28 - subject to crosswind conditions. This deficiency could be relieved through construction of a new crosswi nd runway on an approximate heading of 14-32. Although it appears t hat adequate suitable terrain is available on Pittsburg Point to construct a 3,600- foot- long crosswind runway on this alignment, it would require acquisition of additional property which is designated as State Park Lands . Consequently, this possibility was not shown on the Reconnaissance Plan (Exhibit B). While Runway 5- 23 is paved , the runway pavement is deteriorating badly . It is felt that no more than 2- 5 years of useful life remain depending on traffic and maintenance effort expended. Therefore, major reconstruction of Runway 5- 23 must be considered a necessity in the immediate future if hea vy aircraft (over 12,500 pounds gross weight) are to continue to utili ze this airport. If only light aircraft operate on this runway, it may be possible to realize 6- 10 years more life through concentrated maintenance efforts. This

11 11 maintenance effort may be a seal coat (slurry, chip, or rubber ) in its highest form, or may be continued crack sealing and localized repairs as a minimum effort. Although there are indications that past maintenance has been good , there is a need for repairs and crack sealing to be made during 1976 or rapid deterioration of isolated paved areas may result. Runway 2-20 provides an all -weather gravel surface even under high moisture conditions. If this runway is to be retained in service, it should eventually be surfaced. However, this project is considered as low priority and is not considered in the five-year construction program (Exhibit A). The approaches to both Runway 20 and 23 route traffic over the Lake Havasu City area . Zoning or acquisition of naviga\ion rights should be secured at an early date. Historically, airport approach conflicts have resulted in airport operational constraints . The facility might even face a forced closure during

- 29 - the noise-sensitive evening and nighttirre hours. The approach to Runway 2 is · more severely compromised due to the trailer park located in this approach. It is considered imperative to secure the necessary navigation easements over this property upon transfer of the airport to a governrrental authority (if this occurs) si nce the present airport owner also owns the trailer park land . Wi t hout a navigation easement over this high-density area, the long- term viability of either runway is jeopardiied. The total lack of a taxiway system severely limits airport capacity. Air­ craft mu st now utilize the runway areas for taxiing, t hereby prohibiti ng other air operations while t he runway is being used for taxiway purposes. While construction of a taxiway system i s considered desirable, other airport improve­ ments are considered t o hold a higher priori ty as indicated in the fi ve-year construction program (Exhibit A). Apron areas provide sufficient ai'rcraft parking space for existi ng use levels. The terminal building apron can eas ily accommodate two multi -engine aircraft and t he adjoining light aircraft apron provides approximately 60 tiedown spaces. During pea k periods the terminal apron approaches 100 percent saturation with a11 60 light aircraft tiedown spaces being occupied. This would seem to indicate a need for apron expansion in the near future. As discussed earlier, these apron areas are located in close proximity to the runway system and therefore do not meet recommended FAA clearance criteria. The distance from runway centerline to existing aircraft parking line is 250 feet. FAA recommends that this distance be 650 feet. If this criteria is adopted, all existi ng apron areas would be considered unusable. The terminal apron provides an asphalt surfaced parking apron. The surface appears to be withstanding the heavy (50,000 pounds) aircraft loadings without

-30- signs of distress. The pavement is well mai ntained with painted aircraft parking lines and passenger guidelines well defined. Transit light aircraft utilize the terminal apron on a regular basis . While this practice i s accepted and nece ssary due to t he lack of alternate parking areas, it is a source of conflict when this same area must be us ed by heavy aircraft. The l ight aircraft parking area is paved with a light-duty asphalt surface that is badly deteriorated. Large sections of t he apron have broken up due to surface degradation leaving base material expos ed. Future accelerated surface fa ilure can be expected if maintenance is withheld . Since this apron is utili zed to capacity, expansion to accommodate approximately 20 more light air­ craft tiedown spaces is needed in the immediate future . This existing apron, li ke the air carrier apron, is located 250 feet from the runway centerline and therefore does not me et FAA criteria. From this, it is felt that future expansion neces sary to accommodate light aircraft parking requirements must be met in a newly developed area where sufficient setback from runway centerline can be achieved . Such an area is outlined in Exhibit Band Exhibit C. Terminal building fa cilities are adequate in size but suffer the same problem as the parking apron areas from a clearance criteria basis. The terminal building is located approximately 220 feet from runway centerline. FAA recommendations indicate that building- line setback be 750 feet from runway centerline. This indicates that continued utilization of the terminal buildi~g in its present location must be eventually discontinued and the existing structures relocated. This may appear to be a drastic revision to the existing layout; but if federal funding is to be made available for future projects, the FAA clearance must be met . The FAA criteria referred to is FAR Park 77.

- 31 - The nearest navigational aid serv i ng t he Lake Havasu Airport is located at Needles, California Airport . No other aid is available including VASI or an approach lighting system. Runway 5- 23 has a low inteniity lighting system that operates satisfactorily. However, this system appears to have reached the end of its useful life. Inspection of the low voltage wire serving this system is badly deteriorated and the fixtures themselves are of the 11 Flying Farmer 11 type. Such a system is definitely substandard for installation on an air carrier airport. Normally , lighting systems for this category airport would be rated at medium intensity.

Land Interest Land interest ih the airport properties is divided between fee-simple and property secured from the State of Arizona through long- term lease for airport purposes. The possibility of governmental acquisition of the total airport properties has been under consideration for some time and adequate land interest is an important part of this proposed action. The motivation for this interest - is manifold. First, since the airport is now owned and operated by a private entity, FAA funds are not available for airport projects . This severely curtails the possibility of undertaking any large improvement project(s). This becomes es pecially significant since air carrier ADAP (FAA) funds would be available for airport improvements if the airport were owned and operated by an eligible sponsor. A second consideration is the local and state interest in maintaining a public airport for Lake Havasu City on a long -term basis. With the airport owned and operated by a private corporation, continuation of the airport facilities for public use is not assured, although stipulations within the airport lease agreement require the lessee to maintain the airport. Because of the intricacies involved in possible land acquisition by a governmental entity and FAA requirements concerning adequate land interest for sponsor eligibility

- 32 - under ADAP, it is recommended that proposed land title documentation be sub­ mitted to FAA prior to title transfer to any governmental agency. This would assure that land title secured would be adequate and sufficient under FAA 1 s ADAP Program. The basic FAA requirement require that an eligible sponsor hold a 11 substantial 11 20-year interest in the airport property at the time a grant is executed. Therefore, if the airport is to be owned and operated by a governmental body; it is suggested that the property be secured fee simple or, at a minimum, that a 25-year unrestricted lease be secured. Airport Certification Airport certification as an air carrier airport was granted to Lake Havasu Airport on April 3, 1973. This status carries with it many obligations which are considered by the airport industry as both costly and burdensome. As a condition of this certification, the Lake Havasu Airport must be operated in accordance with FAR Part 107 and FAR Part 139. As a result of these require­ ments, the airport owner has developed an Airport Operations Manual which was approved by the FAA. This manual outlines specific responsibilities the airport owner must assume if airport certification is to be maintained. The require­ ments are voluminous and can best be understood and appreciated through review of the manual itself. Of prime concern are the costs involved in meeting fire rescue and airport security requirements to maintain air carrier service. Presently, the airport relies on off-airport support for fire rescue services While airport fire rescue service~ are presently acceptable due to an FAA waiver, this waiver is subject to review and change upon notice. Normal eight-foot security fencing requirements in the terminal area have also been waived under the existing FAA.waiver; but, again, if this waiver is withdrawn, considerable capital funds would be necessary to meet FAA standards. An existing six-foot-high security fence serves the terminal area.

-33- Airport Capital Requirements Airport capital requirements were developed in this analysis to ascertain what would be necessary to improve and expand this airport in order to meet anticipated future need~ . Evaluation of the existing airport layout discloses several conflicts with FAA clearance criteria. As discussed earlier, a "Reconnaissance Plan" was developed in an effort to meet FAA criteria, accommodate existing airport users, provide room for future expansion and do all this within the existing airport property boundaries. A copy of this plan is attached as Exhibit B. The plan outlines the ultimate development possible for the Lake Havasu Airport. With this plan, it is possible to provide future terminal and apron area to accommodate four air carrier parking positions. In addition, approximately 180 light aircraft parking spaces can be constructed as the need develops . Of course, short-term development would include only those facilities necessary to accommodate the existing requirements.

Initial planning, based on a five-year development 11 goal 11 includes replacing existing terminal area and light aircraft facilities as indicated in Exhibit C. This construction effort is estimated to cost $1,396,000 and will provide: 1. A small (2,500 square-foot) air carrier terminal 'building and utilities to support this building. 2. A paved terminal aircraft parking apron with sufficient area to park two multi-engine air carrier aircraft and ac~ommodate anticipated scheduled air taxi operations. 3. A taxiway link from the air carrier apron to Runway 5- 23. 4. A first stage development of the terminal building auto park­ ing lot sized to provide 50 auto parking spaces and construc­ tion of a 900- foot two-lane terminal entrance road.

- 34 - 5. A light aircraft parking apron, with a stabilized surface, sized to accommodate 80 tiedown spaces. 6. A light aircraft taxiway joining the apron to Runway 5- 23 . 7. For removal , relocation or demolition of structures and obstruc­ tions in the existing terminal area. 8. For reclamation of the 500- foot threshold on Runway 5 which will effectively extend Runway 5- 23 from 5,900 feet to 6,400 feet. 9. An 800-foot displacea threshold for Runway 2 effectively shorten­ ing this runway from 5,650 feet to 4,850 feet. This displaced threshold will provide adequate approach slope clearance over an existing trailer park and over the proposed light aircraft park­ ing apron.

Sources: Federal Aviation Regulations: Part 77, Department of Transportation, Federal Aviation Administration, January 1975. Advisory Circular, Department of Transportation, Federal Aviation Administration, July 26, 1968. Federal Aviation Regulations: Part 107, Department of Transportation, Federal Aviation Administration, March 1974. Federal Aviation Regulations: Part 139, Department of Transportation, Federal Aviation Administration, December 1974. Lake Havasu City Airport Operations Manual, Trico International, January 1975.

- 35 - LAKE HAVASU CITY AIRPORT ECONOMIC ANALYSlS

Demand for Service Preceding demographic data has painted a picture of dynamic growth. Large numbers of people have moved to Lake Havasu City, and if lot purchases are any indication, many more intend to do so at some future date. This in and of itself, however, can only establish a potential number of bodies who may or may not have some use for the airport facilities. Investigation of actual and probable utilization of the airport is required to determine the potential economic benefit or necessity of the facility. Aircraft operations--take-offs and landings--at Lake Havasu City have risen from 43 per day in 1969 to 67 per day in 1975. This is a growth rate between 7 and 8% annually. Scheduled carrier flights are estimated to account for about 10% of this total. Nevertheless, despite this growing utilization of the facility, expenses have always exceeded revenues. In no year did the returns generated by user charges cover the cost of operating the airport. Expenses appear to have uniformly exceeded revenues by around 20% each year.

- 36 - TABL E 15 LAKE HAVASU CITY AIRCRAFT OPERATIONS

Aircraft Aircraft Year Operations Operations/Oat 1969 15;606 43 70 17 ,834 49 71 33,159 91 72 32,461 89 Actual Figu res 73 22,883 63 74 24,064 66 1975 24,296 67

76 26,157 72 77 28, 161 77 78 30,318 83 Projected 79 32,640 89 Figures* 1980 35, 140 96 81 37,831 104 ·

Growth Rate = 7. 66% Annually

* Total aircraft movements at Lake Havasu defy analysis by linear regression techniques because of the enormous increase in traffic generated when, in 1971, McCulloch began its massive fly- in sales campaign . For the duration of this effort, through the end of 1972 aircraft operations were above normal by something like 50%. Operations have returned to near normal now with only moderate overstatement because of McCulloch flights.

- 37 - TABLE 16

Expenses as a Year Revenue Expenses** Deficit % of Revenue 1973 $231 ,969 $275,529 ($43 ,560) 117%

1974 266 ,368 333,339 ( 66 ,971) 124%

1975 170,940 221 ,240 ( 50,300) 127%

1976* 72 ,760 95,042 (22 ,282) 120%

* Five Month s Only, Jan-May, 1976 ** Does not include taxes paid.

Operational Profile There are two basic sources of revenue by which the airport might gain some sort of support: gasoline sales and rental income. Neither of these two sources has been or is likely to be sufficient to defray the total operating costs of the facility. To the present time the airport losses have been absorbed by McCulloch as part of their overall sales promotional campaign. As such, the expenses incurred could be viewed as cost of sales--an inevitable and necessary element of the marketing program . Since it is out of the question for any public entity to initiate a real estate promotional campaign in order to finance airport operations a different analysis is required.

- 38 - If the .Lake Havasu City airport were to operate as a public entity the operating statement might be expected to conform roughly to the figures presented in Table 17. Total revenue might approximate $34,000 with $22,000 yielded by gasoline sales and $12,000 yielded by rental fees. Expenditures for a pared down work crew of one supervisor and three personnel might be held to $51,000. Overhead consisting of utilities, repair, supplies, telephone and miscellaneous would probably amount to $23,200. Subtracting expenditures from revenues nets us an annual deficit of $40,000. In addition to this, of course, if the Lake Havasu City airport were publicly owned it would not be taxed. This would produce a reduction in revenues to various governmental and public entities of around $30,000. The combined annual public expense then would be about $70,000. It is probable that public ownership of the facility would necessitate some sort of subsidy to offset these operating losses.

- 39 - TABLE 17 PUBLICLY OWNED PROFORMA STATEMENT OF REVENUES AND EXPENDITURES

Revenue: Contributions from Gasoline (Net) $22,000 Other Revenue 12,000 Total Revenue Available $34,000

Expenses : Labor Supervisory Personnel $15,000 Operations Personnel 26,000 Payroll Tax, Etc. 10,000 Total Labor $51,000 Operational Utilities $ 8,000 Repair & Maintenance 10,000 Supplies 1,000 Telephone 700 Miscellaneous 3,500 Total Operational $23,200

Total Operating Expense $74,200 Operating Loss (Estimated) ($40,000) Tax Loss (Estimated) ( 30,000) Total Loss (Estimated) ($70,000)

- 40 - Evaluation of Options It is recogni zed that the number of alte~native courses of action may well be limitless if all variations were to be considered. The presentation here of six possible plans does not pretend to portray every option, or even necessarily the best option. They do present, however, some reasonable and obvious possibilities given the current situation. Analysis in terms of financial costs and returns is developed in Table 18 . For the purposes of comparison some assumptions were made. First, the maximum capital requirement, $4 million in this case, was applied to each option to help illustrate the alternative uses of funds. One alternative use of funds is short term investment. This use enables the state or other public entity to retain high liquidity, yet gain a return of about 6% . Most public monies not in current use are usually maintained in such accounts. Finally, the tax revenues shown cover all public entity returns on the facilities or land under consideration. Option #1: Do Nothing Action for action's sake is pointless motion. Often doing nothing can accomplish much in terms of avoiding unnecessary expenditure and waste of resources. The plan for this option is simple, easy to implement and maintain. The public agencies considering the Lake Havasu City airport issue can merely refuse to take over the property. There would be no hassles of airport management, no scrambles for funding. The net rate of return to the taxpayer here would approximate 1%. Of all the plans considered, this is the only qne that is certain to avoid financial loss.

- 41 - Wh at is likely to happen t o t he Lake Havas u City Airport i f t hi s course is taken by t he publ ic agencies ? On e of two de velopments could be expected to follow . Either t he airport will remai n open or it will be closed. Of all t he plans con sidered, t hi s is the onl y one t ha t entails the poss ibility of the airport' s closure. That the fa cility will remain open is considered t he more likely probabil ­ i.ty. Even so, i t can be anticipated t hat as McCulloch' s interest in land sa les wanes , so t oo , will the l evel of services prov i ded by the airport. The primary effects of t he lower l evel of service would be the incapacity to handl e larger aircraft (over 12,500 lbs) and inability to meet standards for CAB certified air carrier operations . These limitations might not be as drastic as they might at first sound. Once McCulloch discontinues its real estate marketing plan there will be no further regular operations of large aircraft at the facility. Addi ­ tionally, operations by certified air carriers are currently nil . Should Cochise Airlines obtain CAB certification--a prospect by no means certain--it would still be possible to provide service to Lake Havasu City under waiver conditions. This is a common practice since there are few ~irports in the nation which do meet all of the FAA standaras. The possibility does remain, though, that McCulloch may choose to abandon air service facilities altogether. This would, of course, cease all air operations on the current site. This would result in some measure of incon­ venience to the owners of the 60 based aircraft and participants in the 20,000 annual aircraft operations at Lake Havasu City. The impact of such inconven­ ience has yet to be measured. The effects on local business would be negative. However, this chain of events would not be an unmitigated disaster. There is

- 42 - something to be said for the value of peace and quiet. Nor should it be believed that closure of this particular facility would preclude the development of an alternate site by private interests if such a course of action would seem warranted by the circumstances. The negative prospects encompassed in either a lowering or abandonment of airport facilities may be sufficient to mandate substantial local publ ic expenditures in order to insure local air service capabilities. Nevertheless , such a prospect as posed by discontinuation of service should not out of fear or mental ossification be automatically relegated to the category of unthink­ able. Institutions once established need not carry on in perpetuity if their function has vanished or their cost has grown too great. Option #2: Receive and Operate Lake Havasu City Airport Since the usefulness of the airport to the McCulloch promotional program is declining, the company has expressed a certain eagerness to divest itself of the responsibility of maintaining it. Forced to operate in an environment of profit or loss, private corporations can be expected to attempt to jetison their losing propositions. The Lake Havasu City Airport is one such proposition. It seems likely that McCulloch may be willing to donate the airport to some public agency. This could serve the purposes of ending their cash losses in its operation, obtaining certain beneficial tax advantages, and still maintain other contingent rights of access to adjoining state park lands. The alternative courses examined below assume such a donation. Should the public agency be required to pay for the airport the ultimate return would be reduced accordingly. Alternative 2A envisions public assumption of Lake Havasu City Airport and upgrading the facility along the lines of the 5-year construction program outlined in Exhibit A. This plan would serve the purpose of meeting FAA

- 43 - specifications wherever possible and assuring a high probabil ity that if an air carrier service is viabl e it will have a place to land . The cost to pu t the airport into condition would approximate $1 .4 million. Under the comparative schematic shown in Table 18 the consequences of this plan would yield a return of -2. 84% . The estimated utility of the improvements vi z a vi z creating the conditions for CAB certified carrier operations would need to meet or exceed this annual cost in order to justify the outlay of public funds for this purpose from whatever source the monies are obtained . Examination of the service to be provided by such carriers, including number of persons to be served, goods transported, cost of alternative modes of transportation, etc. should be evaluated as a prerequisite to the indicated capital investment. Alternative 28 envisions public own ership of the airport, but without any additional capital investment. This option would retain minimum service levels for most aircraft operations. There would be limitations as discussed earlier concerning the landing of larger aircraft as well as potential hassles over CAB certified carrier service. These limitations may or may not prove critical depending upon future developments. The financial cost of this plan is less than 1% per year. The attraction of this alternative is that it would serve to assure the existence of the airport while minimizing the monetary losses. · Option #3: Develop an Alternative Airport Due to certain operational handicaps and the potential value of the underlying real estate it may well be more logical to develop an alternate site. The current location of the facility on Pittsburg Point results in an incoming or outgoing flight pattern that passes directly over Lake Havasu City. If traffic into the airport increases this may prove a growing headache.

- 44 - Furthermore, if the airport is to expand to meet any possible future demand it may have t o push out into prime recreational real estate displacing established businesses and residences . Development of a new facility at a new location , could avoid these difficulties . Alternative 3A might be characterized as the last resort plan . Should the public agencies fail to negotiate an acceptable settlement with McCullouch on transfer of the existing property, such a plan may be forced upon them if McCulloch decided to close the airport. If closure of the facility were deemed an unacceptable eventuality the public authorities might be faced with the necessity to provide for an alternative site. Construction of an airport of comparable capabilities is estimated to cost approximately $4 million . Of all the options, this one would be the most costly with a net return approaching - 5%. Alternative 3B entails the development of an alternative site with the cost offset by the proceeds from the sale of land donated by McCulloch. It is assumed that the land underlying the current airport could be sold for its appraised value of around $2.35 million . A higher price would increase the attractiveness of this plan, while a lower price would enlarge the costs. Revenues would be increased through the implementation of higher taxes on the sold land (the current tax rate is abnormally low) . The expected yield here would be $82.5 thousand per year. The bottom line return would be between -1% and - 2%. Should the underlying real estate be fully developed we would have Alternative 3C and a potential net return near +5%. The advantage of this plan is that it would assure airport service, avoid the possible problems of land and air space of the current site, while holding out some hope that future growth might erase the initial net loss position.

- 45 - TABLE 18: ANALYSIS OF SOME OPTIONS 2A 28 3A 38 3C Receive & Upgrade Receive & Devel. Alt. Dev. Alt. AP #38 Land {In 1000 IS l Do Nothing Existing AP Oeerate As Is Aireort W/Donation F_lJ_llY Dev. l. Capital 4,000.0 4,000 4,000 4,000 4,000 4,000 2. Add' l Proceeds 2,350 2,350 3. Cost of Inv. - 1,396 -4,000 -4,000 -4,000 4. Net Available 4,000.0 2,604 4,000 0 2,350 2,350 Sources of Revenue 5. Tax #1 28.9 6. Tax #2 82.5 82 .5 7. Tax #3 329.9 8. Tax #4 10.3 10.3 l 0. 3 9. Investment Income 240.0 156.2 --- 141. 0 141. 0 10. TOTAL Revenue 279.2 166.5 250.3 82.5 223.5 470.9 Expenses 11. Operating Loss 40.0 40.0 40.0 40.0' ~ - - - - 40.0 - °' 12. Net Income 279.2 126.5 210.3 42.5 183.5 430.9

13. Rate of Return %. 6.98 3. 16 5.26 1.06 4.59 10. 77 14. Cost of Funds@ 6% - 6.00 - 6.00 - 6.00 - 6.00 - 6.00 - 6.00 15. Net Return% + .98 - 2.84 - .74 - 4.94 - l. 41 + 4.77

Sources: Construction cost estimate based upon Lake Havasu City Aireort Perseective, Trico International, Inc., 1973. Land value estimate based. upon An Aeeraisal of the Fair Market Value of a Portion of the Land Comerising the Lake Havasu City Aireort, John T. Hansen and Douglas Kruse, 1976. Notes: Line l. $4 MM is the common denominator of capital required for most expensive plan, i.e., cost of building an equivalent facility. 2. Expected proceeds from sale·of donated land. 3. Cost for purchase of existing facility or construction of alternate. 4. Net .capital available for other uses. 5. Tax income to all Arizona government entities on cu rrent facility. 6. Tax on commercial value of the property appraised at $2.35 MM . 7. Tax on developed value of commercial property of present site valued at $9.4 MM. 8. Tax on raw land of alternate airport site. 9. Investment income on net available (Line 4) at rate of 6%. 10. Total income from all sources. 11. Operating loss from running airport facility. 12. Net income, Line 10 minus Line 11. 13. Yield of net -income on beginning capital available $4 MM. 14. Cost to borrow capital at 6%. 15. Net rate of return. Negative figures ind ;:~te losses. Option Summary The range of possible rates of return, - 5% to +5%, amply illustrates the speculative nature of the enterprise. The state could come out ahead if the underlying property values can increase under full development . There is no assurance that this will happen. Availability of water looms as a substantial uncertainty in the future of Lake Havasu City . However, even if this difficulty can be resolved the question of when, if ever, the airport might attain sufficient activity to cover the cost of its operation remains unanswered. Major economic uncertainties multiply over time and events that cannot be foreseen today may significantly alter the most sophisticated and intricately laid plans. The elements of the Lake Havasu City airport case seem fairly clear. By itself, the airport stands little chance of being self-sustaining. Operating costs promise to outstrip revenues on a more or less continuous basis. Barring freak occurrences, we cannot anticipate a reversal of this situation. Who, then, is to bear the burdens and risks of operation? Up until now McCulloch has endured the costs as an adjunct to their marketing campaign and a condition of their lease agreement with the government. It would appear unlikely that McCulloch would abandon the airport. Weary as they may be of the operating expenses, the facility may be critical to their profits from other local McCulloch operations. Assumption of ownership by the public sector would have the effect of relieving McCulloch of the operational burdens and, of necessity, placing them upon someone else. Decisions regarding who shall be required to pay the costs of continuing this airport will be a question of public policy and philosophy. Whether it shall be the taxpayers of lake Havasu City, Mohave County, Arizona, or the United States who will bear these burdens is an issue that policy makers will have to address if Lake Havasu City airport is to become a publicly owned property. - 47 - APPENDIX

PICTURES AND EXHIBITS

- 48 - Lake Havasu City Airport

Low intensity runway edge lighting system on Runway 5-23.

- 49 - Above: Aircraft access road serving Lake Havasu City Airport and the London Bridge.

•.(... /t . ~-- ., •. 1 ' ~ ... _ :· _,, f-;~~-:·_ - . ·. k tt__"\ i~::·'". :-- t. .:.•· Left: Light aircraft apron r pavement failure area .

50 - Air carrier Convair 440 departing Lake Havasu City Airport on Runway 5.

Fire rescue building located in Lake Havasu City Central Business District approximately 3 miles from the airport.

- 51 - Left: Longitudinal crack between joints on Runway 5- 23.

Below: Touchdown area to Runway 2 showing brush on edge of 100' wide runway.

-

- - . -- - ;- ··-· ~-;_ . ! •• •;~ -:: ~-.-· ._...... - •.. • ,-_,. .: .-~sj~:~:•,:\,~;::·~.·; 1:~;.;;t}{~:~~~ :;~~~11~~~~~:~~71

52 - Air carrier apron terminal building, with light aircraft apron in background.

Refueling operation on air carrier apron.

53 - .,, ..

:-..a · ---~. ;,-

Above: Trailer park located within approach zon.e to Runway 2-20.

Left: Extensive crack patterns in blast. protection area on edges of Runway 5-23.

-~ .,. .

54 - Extensive random crack pattern on Runway 5- 23;

Hangar located on light aircraft parking apron.

- 55 - ~ ...... ~ ..,,.,.,,,,,..

Above: Air carrier apron showing deterioration of surface and trans­ verse crack pattern. ~-,1~~=· - - Right: Light aircraft parking apron showing extensive surface deterioratio

:-t' ~ :--: '· '- y. -;f/ ':. ·•.. '-JI,.' · ...... ~

.- ,. . ·:" .· · --~ ~ ... _;-

·. y-• . • , , ,: .·:'· ' :: ~.. :.,;~ ,:;./_~·-.:"~; ··_ 5 ~;:,t:~~c,''._:/~f ::f '.:~t} .•· .· > > ' , ./ ~?

- 56 - Right: Light aircraft apron pavement surface deterioration with air carrie apron in background.

..,,;:-

./~·

. Below: Airport maintenance being performed on the threshold to Runway 5.

: t \ :\.;;,_.: ~.. o,·, :~=· ..: .. ~: it :4',:2,,,,;_;; { ,})'.-. :':<>r;

.;. ,_ _. .,:i. ..- . .,, .,.. ~».- .... . ,: ,.' ~. -::-.·_; --~--'.-. ttz~it:.~~-~7 ..:, : ; ~~- \ ... :..·• ·:,,. i ~ ~. ,tiZ:. ~- '::.•.,.

--· .,·· _.~· .,; ~ •.• ,.,i,j.., "('

~, __ _ _ ;,', .. .,,, , o, .,f~r __ __ _ i

57 EXHIBIT A LAKE HAVASU 5- YEAR CONSTRUCTION PROGRAM

General Aviation: 1) Apron Construction, Stage I $148,000 2) T/W Construction, State I 25,000

3) Apron Construction , Stage I I 175,000

4) T/W Construction, Stage II 25,000 5) Utilities (water, electricity), Stage II 25,000

6) Utilities (sewer), Stage II 50,000 7) Road relocation 170,000

8) Abandon and clear old GA facilities 25,000 9) Hangar relocation 18,000

$661,000

Air Carrier: 1) Apron Construction, Stage I $285,000 2) Terminal Building Construction, Stage I 135,000 3) Auto Parking Lot, Stage I 70,000 4) Terminal Entrance roads 50,000 5) Taxiway, Stage I 45,000 6) Remove/abandon ol~ terminal area 25,000 7) Reclaim/remark Runway 5 threshold 5,000 8) Terminal utilities; sewer/water/power 120,000

$735,000

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ARIZONA DEPARTME~! (IF TRANSPORTATION TRANSPORTATION PLANNING DIVISION

SEPTEHEI 1111 ; i k .r- J

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EXHIBIT C ARIZONA DEPARTMENT OF TRANSPORTATION 20-Year Recon. Plan TRANSPORTATION PL~NNI!~ ~_IVISION Showing 5-year Develop­ i ment Program - -- •• - - I - --· - - -- • --~ ~ 60 ~ ,-,----- _ __S[PUIIEI 111~~ ------/ -: __ _ V . I 1______- ·