HomeMy WebLinkAboutChapter 9 - Financial Plan
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FINANCIAL PLAN
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SEBASTIAN MUNICIPAL AIRPORT
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Chapter Nine - Financial Plan
INTRODUCTION
This chapter deals with the schedule of proposed capital improvements resulting from the recommendations of
this master plan, the cost estimates for their development, and a financial plan for the Sebastian Municipal
Airport. This chapter is designed to assist the Airport Management in achieving their primary goals to maximize
revenues and minimize operating expenses, while at the same time providing excellent facilities to the flying
public. Consequently, these goals are the focus of this plan.
The analyses conducted in the previous chapters has evaluated airport development needs based upon current and
forecast activity, environmental factors, and operational efficiency. However, a key component of the master
planning process is the application of basic economic, financial, and management rationale to each development
item so that a responsible and efficient implementation process can be assured. In short, this chapter will
concentrate on those factors, which will help make the plan successful. Therefore, this section of the Master Plan
is often the primary reference for decision makers. Proper understanding of the effects of a decision either for or
against a recommendation will be essential in maintaining a realistic and cost effective program that provides the
maximum benefit to the community.
The following development program has been evaluated from a variety of perspectives. It is not dependent
exclusively upon the City of Sebastian for funding. In fact, with proper and timely decision making on the part of
responsible officials, it is quite possible for the City to undertake approximately $22.9 million in improvements at
Sebastian Municipal over the next 20 years. Several factors apply to the above statement, which must be fully
understood by all parties involved. First, decision makers should understand that several sources for development
funds exist. For the most part, the development program is dependent upon sources other than those from the
City. However, this does not mean that the City will not have to provide its share of the costs.
The process of collecting and distributing aviation user funds is quite variable but follows essentially the same
guidelines. Services are provided for a fee, and part of that fee is used to fund additional development. The
primary source of aviation user funds that have been identified in this plan will come from the state level. Each
year the Florida Department of Transportation (FDOT) Aviation Office manages an aviation work program of
state grants to airports for capital construction and planning studies. FDOT will provide up to 80 percent of the
funding for most airport development projects; however, only 50 percent is provided if the project is directly
related to economic development. These funds are also used to leverage funds from the Federal Aviation
Administration (FAA). On the federal level, the FAA manages the Airport Improvement Program (AIP). Funds
from this program are derived from the collection of various aviation related fees. These funds are distributed
under appropriations set by Congress to all airports in the U.S., which have certified eligibility. They are
distributed through grants administered by the FAA, however, the primary feature of AlP funding, which must be
recognized and properly considered, is that these funds are distributed on a priority basis. These priorities are
established by each FAA Regional Office based upon the number and dollar amount of applications received.
Since this program provides up to 90 percent of the funding for eligible projects, it can be very beneficial to
airport development programs such as the one in this chapter. However, the City of Sebastian will be competing
with other communities in Florida and the FAA Southern Region (Kentucky, Tennessee, North Carolina, South
Carolina, Georgia, Alabama, Mississippi, Florida, Puerto Rico, and the U.S. Virgin Islands) as well as the entire
country, for these development grants.
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Consequently, close coordination of the airport's priorities with the FAA and FDOT will help enhance both
agencies participation. It is extremely important to maintain this coordination and to act expeditiously in securing
the local share for either federal or state grants. Local shares of airport development projects can vary from
approximately five percent to 50 percent. Likewise, there exist some economic development grants from the state
that may also be utilized for the funding of eligible projects. The development program outlined on the following
pages discusses some of the options available for providing the local share of the various proj ect costs.
The final source for development funding is the private sector. This source is frequently ignored and often does
not receive adequate credit for its investment. There are several areas where private development sources can
contribute needed improvements to the airport. Since some non-public facilities are not eligible for significant
state or federal funding, the burden of financing their development would fall upon the City of Sebastian.
Because of the potential costs associated, the result might be a tendency to reduce or eliminate basic facilities
such as fixed based operator (FBO) buildings, hangars, automobile parking, and utilities from the plans.
Therefore, the aviation users and commercial operators serving the City of Sebastian and Indian River County
area must expect to pay at the local level to support this funding, through items such as fuel flowage fees or
aircraft tiedown fees. However, the community's interest in a public airport is to serve the economic well being
of the community, and the principal benefactors of a public airport are local business and industry. Because of the
importance of many of the improvements to the employers and subsequently, the community as a whole, the
private and public sector must work together to ensure that adequate funds are available.
CAPITAL IMPROVEMENT PLAN
The initial step in establishing an airport development program is to determine the cost of each proposed
improvement. Cost data used in this study was collected from a variety of sources, including actual project
estirnates, published engineering indices, government agencies, and similar airport construction projects in the
area. In addition to the actual construction costs, financial consideration must be given to the engineering and
design work, plus minor construction items and contingencies, which have not been specifically enumerated. For
planning purposes, the base construction cost has been increased to reflect the anticipated engineering, testing,
survey, and inspection costs, as well as for unknown contingencies.
Estimates for each planning period are based on 2001 dollars. In future years, as the plan is implemented, these
cost presentations can continue to serve as management aids by adjusting the 2001 based figures for subsequent
inflation. This may be accomplished by converting the interim change in the National Consumer Price Index
(CPI) into a multiplier ratio through the following formula:
CPI Multiplier Ratio = X I CPI
where:
X = CPI in any given future year
CPI = National CPI in 2001
Multiplying the change ratio times any 2001 based cost or income figure presented in this study will yield the
adjusted dollar amounts appropriate in any future year re-evaluation. However, only National CPI data should be
used, as local or regional measures may vary. This information is available from the economic research
departments of most banks.
The recommended developments of the Capital Improvement Program (CIP) are divided into three planning
periods, which include a short term (2002 - 2007), intermediate term (2008 - 2012), and long term (2013 - 2022).
The short term incorporates projects that are crucial to the overall safe operation of the airport, as well as its
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benefit to the community as a whole. Each of the first seven years in the short term are presented individually to
provide a detailed estimate of the financial and operational requirements. Projects in the intermediate and long
terms are necessary for maintaining the capacity and safety of the airport, while at the same time enhancing the
revenue potential of the airport. Although the intermediate and long terms are not separated into individual years,
they do indicate the individual project costs. Of course each planning period also includes basic maintenance
components. As shown in Table 9-1, the total cost for the planned development of Sebastian Municipal will be
approximately $22.9 million through the year 2022.
I TABLE 9-1 I
SUMMARY OF DEVELOPMENT COSTS
Planning Period Estimate (2001 dollars)
Short Term (2002 - 2007) $10,551,785
Intermediate Term (2008 - 2012) $3,974,830
Long Term (2013 - 2022) $8,367,119
Total $22,893,734
Source: THE LPA GROUP INCORPORATED, 2001.
Of the $22.9 million dollar program, it is expected that a large portion will come from the FDOT aviation work
program and private investment sources. A brief description and listing of the individual project costs are
included in the following three sections. The tables represent the culmination of comparative analysis of basic
budget factors, need or demand, and priority assignments. Costs for the development items have typically been
broken down based on the previous funding experiences at the airport. The allocation of funds from any agency
does not imply that the funds are guaranteed from that particular source. They are simply potential sources used
as part of the financial feasibility and phasing of the various projects. Also, while all of the projects to construct
hangar facilities at the airport denote local share, this is expected in part to be built by private developers.
Nonetheless, the hangar projects also denote a state share, since these projects are eligible for FDOT funds.
Neither the development of conventional or t-hangar facilities are eligible for federal funding assistance.
The information contained in the following tables is meant to help guide airport management as they work with
the various agencies to obtain project grants. This data will be used directly to update the Joint Automated
Capital Improvement Program (JACIP) used by the FAA and FDOT to coordinate funding efforts. The JACIP is
a secure, internet based program, which allows the agencies and airport management to interact on a real time
basis as the airport needs and funding issues change. It should be noted that because a significant portion of the
20 year program is expected from FDOT, the years denoted in the following tables are intended to reflect FDOT's
fiscal year, which runs from July 151 to June 30th.
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Short Term Capital Improvement Program
The short term planning period has been subdivided into the individual years covering 2002 through 2007. It
should be obvious that the short term capital improvement program for Sebastian Municipal is very aggressive.
There are a number of reasons for this, not the least of which is the need to reconstruct significant portions of the
World War II era pavement at the airport. This includes rehabilitating the crosswind runway, which the best
alternative ended up being to re-open Runway 9-27. At the same time, the City has run out of developable space
at the airport for aviation users. As such, the first seven years of the capital improvement program attempt to
rectify these airfield and economic development needs as quickly as possible.
Completion of this seven year phase will result in the re-opening of Runway 9-27 and the de-activation of
Runway 13-31. The rehabilitation of the crosswind runway will also include the development of a full length
parallel taxiway to the north. The costs identified for re-opening Runway 9-27 also includes an update to the
Environmental Assessment previously conducted for this project, the relocation of two existing tenants, and the
clearing of obstructions in the two runway approaches. Once Runway 9-27 has been activated and Runway 13-31
closed, the following projects will open up the North Infield Area (which will now be referred to as the North
Quadrant) for development. Planned projects will provide the initial phase of an access road, water lines, sewer
lines, airfield access (taxilanes), an aircraft parking apron, hangar space, and other support facilities. Facilities
will also be constructed to provide on-site airport administration and maintenance space, as well as an aircraft
fueling facility. During the second half of the short term period, projects to light Runway 9-27, its parallel
taxiway, the North/South taxiway, as well as provide additional navigational aids will be conducted in the final
years of the short term planning period. Other improvements proposed during the short term include more aircraft
hangars, the acquisition of airport maintenance equipment, and additional infrastructure improvements. At the
end of the short term period, an update to the Airport Master Plan has also been programmed. The cost estimates
and time frame for each of these improvements are included in Table 9-2.
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TABLE 9-2
SHORT TERM CAPITAL IMPROVEMENT PROGRAM
Federal State Local Total
Development Item Share Share Share Cost
2002
Remove/Relocate Obstructions - Phase IA of Re-open Runway 9-27 $621,000 $34,500 $34,500 $690,000
Remove/Relocate Obstructions - Phase IB of Re-open Runway 9-27 $0 $150,000 $37,500 $187,500
Security Fencing $300,000 $16,667 $16,667 $333,333
2002 Subtotal $921,000 $201,167 $88,667 $1,210,833
2003
Reconstruct Runway 9-27 and Construct Parallel Taxiway - Phase 11 $1,107,000 $61,500 $61,500 $1,230,000
Access Road into North Quadrant - Phase I (including water and sewer) $0 $500,000 $125,000 $625,000
Airport Administration Building and Maintenance Building $0 $320,000 $80,000 $400,000
Fuel Farm $0 $200,000 $50,000 $250,000
2003 Subtotal $1,107,000 $1,081,500 $316,500 $2,505,000
2004
Aircraft Parking Apron along North/South Taxiway $360,000 $20,000 $20,000 $400,000
Taxiway into North Quadrant $990,000 $55,000 $55,000 $1,100,000
Infrastructure Improvements $0 $500,000 $125,000 $625,000
20 T -hangars (site already prepared) $0 $400,000 $100,000 $500,000
Medium Intensity Runway Lights (M1RLs) for Runway 9-27 $0 $197,120 $49,280 $246,400
2004 Subtotal $1,350,000 $1,172,120 $349,280 $2,871,400
2005
Rehabilitation of NorthlSouth Taxiway to 35' wide (includes 2 run-up areas) $361,352 $20,075 $20,075 $401,502
Medium Intensity Taxiway Lights (MITLs) for North/South Taxiway $0 $308,000 $77,000 $385,000
MITLs for Parallel Taxiway to Runway 9-27 - West of Runway 4-22 $0 $215,600 $53,900 $269,500
MITLs for Parallel Taxiway to Runway 9-27 - East of Runway 4-22 $0 $147,840 $36,960 $184,800
2005 Subtotal $361,352 $691,515 $187,935 $1,240,802
2006
Non-precision Marking Upgrade for Runway 4-22 $0 $9,240 $2,310 $11,550
Precision Approach Path Indicators (P APls) - Both Ends of Runway 4-22 $0 $147,840 $36,960 $184,800
Obstruction Clearing for Runway 4-22 RPZs and Approach Surfaces $0 $20,000 $5,000 $25,000
Runway End Identifier Lights (REILs) - Both Ends of Runway 4-22 $0 $147,840 $36,960 $184,800
Precision Approach Path Indicators (PAP Is) - Both Ends of Runway 9-27 $0 $123,200 $30,800 $154,000
Runway End Identifier Lights (REILs) - Both Ends of Runway 9-27 $0 $110,880 $27,720 $ I 38,600
Airport Maintenance Equipment $0 $200,000 $50,000 $250,000
Land for Environmental Mitigation $0 $200,000 $50,000 $250,000
2006 Subtotal $0 $959,000 $239,750 $1,198,750
2007
2 Multi Aircraft Clearspan Hangars $0 $3 12,500 $312,500 $625,000
20 T -hangars $0 $480,000 $120,000 $600,000
Master Plan Update $0 $240,000 $60,000 $300,000
2007 Subtotal $0 $1,032,500 $492,500 $1,525,000
Total for Short Term $3,739,352 $5,137,802 $1,674,632 $10,551,785
Source: THE LPA GROUP INCORPORATED, 2001.
Note: * indicates private funding source.
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Intermediate Term Capital Improvement Program
Developments proposed for the intermediate term cover a five year period from 2008 to 2012. Proposed projects
in this phase will continue to enhance and open up the North Infield Area for both aviation and non-aviation
related development. There are no real significant airfield improvements planned for this period, as the main
focus is for continued economic development of the airport. It is envisioned that the intermediate term will also
include any projects that could not be completed in the first seven years of the development program, as well as
any additional requirements to support revenue generating operations. Airfield enhancements do include the
improvement of the interior perimeter road for airport staff and a project to provide lighted airfield signage. This
term also includes the purchase of airfield equipment (such as mowers, vehicles, etc.), an airfield pavement
maintenance program, the periodic remarking of runway pavement, and the provision for another update of the
Airport Master Plan, at the end of the period. The individual projects and cost estimates for the intermediate
planning period are shown in Table 9-3.
TABLE 9-3
INTERMEDIATE TERM CAPITAL IMPROVEMENT PROGRAM
Federal State Local Total
Development Item Share Share Share Cost
Side Access Road in North Quadrant - (including water and sewer) $0 $112,000 $28,000 $140,000
6 Multi Aircraft Clearspan Hangars $0 $825,000 $825,000 $1,650,000*
Interior Perimeter Road $0 $127,075 $31,769 $158,844
Access Road into North Quadrant - Phase II (including water and sewer) $0 $202,325 $50,581 $252,906
2 FBO/Large Clearspan Hangars $0 $583,990 $583,990 $1,167,980*
Lighted Airfield Signage (16 signs) $152,460 $8,470 $8,470 $169,400
Airfield Equipment (such as mowers, vehicles, etc.) $0 $40,000 $10,000 $50,000
Airfield Pavement Maintenance Program -Crack Sealing $0 $10,000 $2,500 $12,500
Remarking of all Runway and Taxiway Pavements (3 times) $0 $58,560 $14,640 $73,200
Master Plan Update $270,000 $15,000 $15,000 $300,000
Total for Intermediate Term $422,460 $1,982,420 $1,569,950 $3,974,830
Source: THE LPA GROUP INCORPORATED, 2001.
Note: * indicates private funding source.
Long Term Capital Improvement Program
Improvements proposed as part of the long term planning period will allow Sebastian Municipal to make more
land available for both aviation and non-aviation tenants. As such, additional access and utility extensions have
been programmed to facilitate the development of the north side of the airport. However, a number of airfield
improvement projects are also planned for this term to accommodate the aviation activity that is anticipated to
occur during this timeframe. Facilities for a full service fixed base operator (FBO) are included among these
projects. In addition, the term reflects two phases to complete a full length parallel taxiway on the northwest side
of Runway 4-22. Additional projects would ultimately light the new parallel taxiway to Runway 4-22. Other
projects will support the continued operation of the airport such as the eventual rehabilitation of Runway 4-22,
purchase of airfield equipment, an airfield pavement maintenance program, the periodic remarking of runway
pavement, and the provision for future master plan studies. Table 9-4 provides a listing and cost estimate for
each of the projects in the 2013 to 2022 timeframe.
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TABLE 9-4
LONG TERM CAPITAL IMPROVEMENT PROGRAM
Federal State Local Total
Development Item Share Share Share Cost
Two Side Access Roads in North Quadrant - (including water and sewer) $0 $224,000 $56,000 $280,000
General Aviation Terminal (2,800 SF) $0 $198,841 $49,710 $248,55 I
FBO Apron Adjacent to General Aviation Terminal $0 $274,266 $68,566 $342,832
Parallel Taxiway to Runway 4-22 - North of Runway 9-27 $260,555 $14,475 $14,475 $289,505
Parallel Taxiway to Runway 4-22 - South of Runway 9-27 $329,729 $18,318 $18,318 $366,365
FBO Clearspan Hangar. $0 $467,192 $116,798 $583,990
FBO Fuel Facility $0 $240,000 $60,000 $300,000
Construct Second Taxiway into North Quadrant $652,500 $36,250 $36,250 $725,000
10 Multi Aircraft C1earspan Hangars $0 $1,420,538 $1,420,538 $2,841,076*
20 T -Hangars (includes parking lot) $0 $560,000 $140,000 $700,000
MITLs for Parallel Taxiway to Runway 4-22 - North of Runway 9-27 $0 $178,640 $44,660 $223,300
MITLs for Parallel Taxiway to Runway 4-22 - South of Runway 9-27 $0 $215,600 $53,900 $269,500
Rehabilitate Runway 4-22 $360,000 $20,000 $20,000 $400,000
Airfield Equipment (such as mowers, vehicles, etc.). $0 $40,000 $10,000 $50,000
Airfield Pavement Maintenance Program -Crack Sealing (10 times) $0 $20,000 $5,000 $25,000
Periodic Remarking of all Runway and Taxiway Pavements (5 times) $0 $97,600 $24,400 $122,000
Master Plan Update (2 times) $540,000 $30,000 $30,000 $600,000
Total for Long Term $2,142,784 $4,055,720 $2,168,615 $8,367,119
Source: THE LP A GROUP INCORPORATED 2001.
Note: * indicates private funding source.
AIRPORT CASH FLOW ANALYSIS
In addition to future capital improvements, consideration must be given to the airport's continued operation.
Besides the fact that the City of Sebastian desires to maintain a safe and efficient airfield to serve the community,
there are also laws that require the City to keep the airport open. As noted, the FAA's AlP provides major
assistance in the development of an airport. However, the major stipulation in accepting AlP grants is that the
City of Sebastian must agree to the assurances required by the FAA. Basically these assurances require the
airport sponsor to keep the airport facilities in operation for at least 20 years from the date of the last federal grant.
Thus, there are airport maintenance and operating costs to be considered in addition to funding the local share of
the development program. Ideally, the airport's revenues should be structured to reduce the burden of operating
expenses on the airport sponsor. The following sections take a brief look at the historic cash flow for the Airport
Enterprise Fund and then project that cash flow out to the end of the 20 year planning period.
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Historic Airport Operating Revenues
Currently the airport's revenue stream is divided either into a "rent" or "other" category. The single most
important revenue source for the airport comes from the airport's leaseholds. At Sebastian Municipal there are
both aviation and non-aviation related leaseholds. In addition to the financial support provided to Sebastian
Municipal, these aviation and non-aviation leaseholds also create economic benefits to the surrounding
communities of the City and Indian River County. The "other" category is used to record the aircraft fuel flowage
and tiedown fees owed to the City under some of the lease provisions. Table 9-5 provides a summary of the
revenues collected at Sebastian Municipal for the past six years.
I TABLE 9-5 I
mSTORIC AIRPORT OPERATING REVENUES
Revenue 1996 1997 1998 1999 2000 2001
Rent (leaseholds) $66,984 $77,547 $79,632 $118,226 $81,355 $190,198
Other $0 $0 $0 $4,039 $4,637 $3,451
Total $66,984 $77 ,54 7 $79,632 $122,265 $85,992 $193,6491
Source: Sebastian Municipal Airport Records.
Note: Obtained from an Unaudited Financial Statement.
It should be noted that the airport also generates a certain amount of property taxes each year for the City;
however, those dollars are not included in the airport's revenue stream.
Historic Airport Operating Expenses
Expenses at Sebastian Municipal are either categorized as personal services or for other operating expenses such
as materials and supplies. There is also a line item for the depreciation of airport facilities included in the
airport's operating expenses. Traditionally, the expenses related to materials and supplies have exceeded those of
the salaries and benefits for airport employees. A summary of the historic airport expenses over the past six years
has been included in Table 9-6.
TABLE 9-6
HISTORIC AIRPORT EXPENSES
Expenses 1996 1997 1998 1999 2000 2001
Personal Services $5,000 $14,179 $16,809 $21,613 $7,395 $36,4411
Materials & Supplies $26,257 $22,948 $12,694 $18,413 $77,150 $62,0281
Depreciation $6,148 $28,596 $39,800 $40,364 $55,217 $68,6621
Total $37,405 $65,723 $69,303 $80,390 $139,762 $167,1311
Source: Sebastian Municipal Airport Records.
Note: Obtained from an Unaudited Financial Statement.
Revenues versus Expenses
Because of restrictions imposed by FAA regulations, income generated by the airport must be used for airport
operations and improvement expenses. At issue is whether the airport will be able to generate adequate revenue
to cover the local share of costs for the proposed improvements, in addition to the expected airport operating
costs. Obviously a financial goal of the City of Sebastian is to keep the airport self-sufficient. As can be seen
from the revenues and expenses over the past six years, the airport has typically been able to cover the operating
costs. A comparison of these figures is shown in Table 9-7.
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TABLE 9-7
REVENUES VERSUS EXPENSES
Fiscal Year Revenues Expenses Surplus (Deficit)
1996 $66,984 $37,405 $29,579
1997 $77,547 $65,723 $11,824
1998 $79,632 $69,303 $10,329
1999 $122,265 $80,390 $41,875
2000 $85,992 $139,762 ($53,770)
2001 $193,649 $167,1311 $26,518 j
Source: Sebastian Municipal Airport Records.
Note: Obtained from an Unaudited Financial Statement.
In 2001, there was a one time transfer of $335,000 from the General Fund that was made for capital additions
only. This brought the 2001 balance to a surplus of$361,518.
Projections of Revenues and Expenses
The historic revenues and expenses must be projected out to determine what ability the Sebastian Municipal
Airport will have to fund the local share of the proposed development projects. This section describes how these
values were projected to provide an idea of future airport cash flows. It is important to also keep in mind that the
revenue and expense projections are based on the City of Sebastian's fiscal year, which do not match that of
FDOT's. Thus it becomes a bit difficult to directly compare annual airport cash flows with those monies required
in the airport's JACIP.
Once constructed and fully utilized, the planned capital improvements for Sebastian Municipal will also create an
increase in the airport's operating revenues. These anticipated increases in airport revenue will initially come
from new t-hangar leases, but will also include other general aviation facility leases, commercial leases, fuel sales,
and tiedown fees. Due to the amount of developable space that will be made available once Runway 9-27 is re-
opened, the potential exists for non-aviation related leaseholds to provide the most significant impact on the
revenue stream. In fact, the FAA requires that all leases, especially non-aviation related, obtain at least fair
market value. At the time of this writing there are a number of older, existing leaseholds that are well below fair
market value, thus preventing the City from realizing the true revenue potential. The current City staff is well
aware of this disadvantage and are taking the proper steps to ensure all future leaseholds are at fair market value.
Additionally, the City needs to continue the current practice or writing airport leases which provide revenue
generation from several different, separately recognized sources. A lease which only calls for a lump sum
payment from the lessee does not clearly identifY what the lessee is paying for and makes it more difficult to alter
the lease if the lessee's conditions change in such a way as warrants an adjustment in the lease terms. Each of the
following four revenue components must be considered in all future leases with the airport. While the current
City staff utilizes these elements in the drafting of all new leases, they are documented here for future reference.
Land Rent - Land is an airport's major resource and airport management should be compensated for its
use. Airport land should be leased, not sold, at fair market value comparable to commercial and industrial
rates.
Facility Rent - The airport should be adequately compensated by users who rent or lease space in airport
owned facilities, e.g. terminal buildings, hangars, fuel farms, etc.
2002
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Percentage of Gross or Gross Receipts Fee - This fee is based on the fact that the airport's existence
creates the market on which a commercial operator depends. Airport management should be
compensated for the expense of maintaining the airport and creating that market opportunity.
Other Fees - These are charges to direct users of the airport. A typical example would include the
collection of fuel flowage or tiedown fees.
All future leases (and lease renewals) at the Sebastian Municipal should incorporate these four revenue sources,
when applicable. Each should clearly identify the services to be provided and the normal operating contingencies.
To provide flexibility, leases should stipulate dates in the future when terms can be renegotiated. The increase in
revenues generated from the existing and future airport leaseholds during the planning period are reflected in
Table 9-8. These future leasehold projections have been divided into three subcategories. The first includes the
projection of all existing leaseholds through the planning period. This data was provided by the City and reflects
the staffs goal to get all of the airport leaseholds to a point, albeit gradually, where they better reflect current
industry standards for rates and charges. The next category provides a projection of additional leases that should
occur over the course of the planning period. This forecast essentially includes one additional leasehold each
year, throughout the entire planning period. The average annual revenue from the current leaseholds was applied
to each of the new leaseholds projected. This approach is considered conservative because it uses an average
derived from the existing leaseholds (some of which are below industry standards) and it does not recognize
future business park leases. The timing and amount of potential revenue that can be realized if the City is able to
attract a number of non-aviation corporations into the industrial park on the north side of the airport is difficult to
project. The final lease category includes the revenue that is expected to be generated from the new 20 t-hangars.
For the short term planning period, $300 per month was utilized, and it was anticipated that the 20 t-hangars
would be fully occupied by 2006. While the facility requirements only identified a need for 19 t-hangars by the
end of the planning period, additional units are shown rented out during the 20 year term. These additional units
will result from the statewide demand for such facilities as well as the potential for existing tenants on the airport
to desire a t-hangar. A rate of $450 and $550 a month was applied to the intermediate and long term planning
periods, respectively.
Airport fuel sales at Sebastian Municipal are also expected to increase over the next 20 years. Both the amount of
gas and the fee owed to the City per gallon were projected in order to calculate the fuel flowage fees over the
planning period. First the number of gallons sold in 2001 was increased at the rate that aircraft operations were
projected to grow (average annual growth of 2.9 percent). Next, the current fuel flowage fee of $0.02 per gallon
was increased a penny each year, for three years to $0.05 per gallon, which is more in line with the industry
standard. This rate was gradually increased to reflect a $0.07 per gallon fee towards the end of the planning
period. Tiedown fees were based on the projected number of aircraft expected to be on the airport's ramps during
the planning period. The current rate owed to the City for tiedowns was also incrementally increased throughout
the planning period to calculate the amount that could be collected over the planning period. By combining the
projections for fuel flowage and tiedown fees, the estimate for the "other" revenue category was made. Table 9-8
provides the projection of these individual revenue sources while Table 9-9 provides a total for the overall
revenues expected at Sebastian Municipal during the planning period.
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TABLE 9-8
EXPECTED REVENUE INCREASES
Year Existing Additional T-hangar Fuel Flowage Tiedown
Leaseholds Leaseholds Leaseholds Fees Fees
2002 $157,609 $5,200 $10,800 $3,370 $810
2003 $157,609 $10,400 $18,000 $5,202 $1,620
2004 $157,609 $15,600 $28,800 $7,137 $2,430
2005 $157,609 $20,800 $43,200 $9,179 $3,360
2006 $157,609 $26,000 $72,000 $9,446 $3,360
2007 $227 ,609 $31,200 $79,200 $9,719 $3,360
Intermediate Term
(2008 - 2012)* $229,465 $46,800 $127,680 $11 ,483 $3,858
Long Term
(2013 - 2022)* $242,584 $85,800 $198,000 $17,469 $5,540
Source: THE LPA GROUP INCORPORATED, 2001.
Note: * Average Annual Amount
TABLE 9-9
TOTAL PROJECTED REVENUES
Year Revenues
2002 $177,789
2003 $192,831
2004 $211,576
2005 $234,148
2006 $268,415
2007 $351,088
Intermediate Term
(2008 - 2012)* $419,286
Long Term
(2013 - 2022)* $549,393
Source: THE LPA GROUP INCORPORATED, 2001.
Note: * Average Annual Amount
The revenue projections in Table 9-8 reflect what is believed to be the minimum amount of income that the City
should expect over the course of the planning period. Even so, it should be remembered that these estimates are
only a tool to determine if the airport can reasonably be expected to cover operating costs, while at the same time
maintaining and improving the facility.
Operating expenses at Sebastian Municipal have generally increased for various reasons over the past six years.
During this timeframe the City went from only a part-time airport manager, to a full time airport manager and
part-time maintenance position. The attention this staff provides to the facility is long overdue and benefits the
City by ensuring that the airfield operates and develops in a safe and efficient manner, while at the same time
becoming an economic engine for the community. As a result of this needed attention being placed on the airport
facilities, the amount spent on supplies and materials has increased. As the airfield continues to develop, these
costs are projected to increase, not only to support new facilities, but also for those that may not be enhanced until
a later date. Similarly, as the airport develops, depreciation expenses will also increase. All of these operating
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expenses have been projected to increase throughout the planning period. The average annual growth rate of the
Consumer Price Index (CPI) for the southeast United States, between 1997 and 2001, was utilized for this
projection. These expenses have been combined and are reflected, without inflation, in Table 9-10 for Sebastian
Municipal through the end of the planning period.
I TABLE 9-10 I
TOTAL PROJECTED EXPENSES
Year Expenses
2002 $214,730
2003 $219,454
2004 $224,282
2005 $229,216
2006 $234,259
2007 $239,413
Intermediate Term
(2008 - 2012)* $255,685
Long Term
(2013 - 2022)* $301,460
Source: THE LPA GROUP INCORPORATED, 2001.
Note: * Average Annual Amount
To calculate the airport's expected operating income (or loss), the totals for projected revenues and expenses were
compared in Table 9-11.
TABLE 9-11
PROJECTED REVENUES VERSUS PROJECTED EXPENSES
Year Total Revenues Total Expenses Operating Income (Loss)
2002 $177,789 $214,730 ($36,941)
2003 $192,831 $219,454 ($26,623 )
2004 $211,576 $224,282 ($12,706)
2005 $234,148 $229,216 $4,932
2006 $268,415 $234,259 $34,156
2007 $351,088 $239,413 $111,675
Intermediate Term
(2008 - 2012)* $419,286 $255,685 $163,601
Long Term
(2013 - 2022)* $549,393 $301,460 $247,933
Source: THE LPA GROUP INCORPORATED, 2001.
Note: * Average Annual Amount
Project Feasibility
Under this analysis, the airport will not have enough income to cover operating expenses during the first few
years of the short term planning period. Of more consequence to the purpose of this study, Table 9-11 does not
include the local share of the CIP costs required for future development. For this section, project feasibility is
defined by the ability of City of Sebastian to pay the local share of project costs. As such, a problem exists when
it comes to the source of local funds for future capital improvements. However, this situation can quickly change,
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especially considering the conservative approach undertaken in this analysis with respect to the expected
leasehold revenue. To explain, it is believed that the City has two distinct advantages that will eventually enhance
the airport's revenue stream. The first is that the undeveloped land at the airport represents the only City property
available for industrial and/or commercial development. Once Runway 9-27 can be re-opened, thus allowing
Runway 13-31 to be de-activated, the City will have approximately 143 acres of additional land for development
at the airport. A majority of this land cannot be used by aviation related businesses and therefore wou1'd be
available for a non-aviation related business park. The revenue potential of this park was not included in the
projections of this study. However, if the area is properly marketed, just the commitments of a few corporations
would support the financing needed to open up this land. The second distinct advantage is that the City of
Sebastian has positioned itself to make all of this possible. At the time of this writing, the engineering and design
for the re-opening of Runway 9-27 is underway. As well, over the past two years there have been remarkable
improvements in the management of the airport, not the least of which has included building the necessary
relationships with the FAA and FDOT. To this end, the City has also worked with the community to create a
development plan which provides compatibility on all ends.
Another significant element of the future revenue stream and project feasibility is that the current City staff has
made it a priority to ensure that the terms of existing leaseholds be enforced. As shown in Table 9-5, prior to
1999 none of the required fuel flowage or tiedown fees were ever collected from the tenants owing them.
Similarly, the spike in rent experienced between 2000 and 2001 reflects the City's work that year to collect back
rent owed to the airport. This also explains why the "existing leasehold" projection shown in Table 9-8 is lower
between 2002 and 2006, than in 2001. Nonetheless, the City will still need to provide additional revenue for
future capital improvements to occur at the airport over the short term planning period. As such, it needs to be
recognized that this investment will benefit the City in many ways. As the airport develops, not only will it
continue to be self sufficient, but it will also generate additional dollars for the City's tax rolls. These dollars are
in the form of additional property taxes generated by airport tenants, which go towards various infrastructure
improvements throughout the City of Sebastian. Also, by maintaining a general aviation airport, the City enjoys
many other significant benefits. On an economic development side, general aviation airports provide a way for
corporations to recognize the community, thus considering it for future business. This gives the City a
considerable advantage when trying to attract additional job and revenue producing companies. Supporting the
airport also enhances public safety in the community. For example, general aviation airports like Sebastian playa
major role in providing law enforcement and aero-medical services, as well as the necessary facilities in times of
disaster (forest fires, hurricanes, flooding, etc.) or national security (military operations). These benefits need to
be considered ifand when questions surrounding the airport's financial status arise.
One thing is certain, due to the way various grants are administered, the City will have to have some mechanism
to keep the different development projects going. Essentially, even with a positive cash flow in the Airport
Enterprise Fund, it is difficult at times for an airport sponsor to "front" the monies necessary to conduct
significant airport improvement projects. Recently the FAA has made this easier by providing the full amount of
their smaller grants up front, but other agencies, such as FDOT still require reviews of the individual invoices
before payment is made. The best tool for the City in this regard is to incorporate either grant or revenue
anticipation notes into the funding process. Grant or revenue anticipation notes will allow the City to issue short
term obligations (notes) for the purpose of providing interim funds until the project is financed. This is extremely
helpful in instances where engineering or planning costs are significant in the preparation period or where grant
dollars have been committed but not distributed. Typically such anticipation notes can be used for up to 50
percent of the total project cost. A concluding consideration on the feasibility of the projects proposed in this 20
year program is that to the extent possible, the City should seek out funding from the private sector. Frequently at
general aviation airports this source is not utilized as often as it could be nor does it receive the proper credit when
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it is a source for development funds. There are several areas where private development sources can contribute,
thus all options should be considered.
FINANCIAL PLAN SUMMARY
The past two years have put the Sebastian Municipal Airport into a position that enables it to become a significant
economic engine for the City, while at the same time, preserving its ability to adequately provide access to the
nation's airspace system. For all of this to continue, the City needs to market the airport while developing the
facility. Of most importance is the development that directly impacts the income potential for the airport.
However, such capital improvements to the airfield will require additional support from the City as well as the
other identified funding sources. FAA discretionary funding is especially important in the short term, because the
financial independence of the airport relies heavily on the re-opening of Runway 9-27 and closing of Runway 13-
31. This project is eligible to take advantage of existing federal funding levels, which are essential for the
project's success.
Similarly, airport management agreed that an aggressive short term CIP would take advantage of the funding
levels currently available to Sebastian Municipal. All possible sources of federal, state, and local funding will be
sought for the projects. As mentioned previously, federal discretionary money is required in the early part of the
planning period in order for the airport to develop as envisioned. Because this type of funding is highly
competitive and often difficult to get, these funds are not guaranteed to any particular sponsor, so it is important
for the City to continue to keep the airport's needs in front of the FAA and be ready to commence projects
immediately upon securing funds. The present AIP reauthorization will expire on September 30,2004. While it
is highly probably that a similar program will replace it, there are no guarantees on how the funds will be
distributed to the various categories of airports. Therefore, the effort to re-open Runway 9-27 needs to occur right
away, thus allowing the ability to pursue other economic development options.
Overall, Sebastian Municipal is a significant economic catalyst for not only the City of Sebastian, but also for the
surrounding communities of Indian River County. The City's future financial support of Sebastian Municipal is
actually an investment in the area's continued economic growth. With the proper investment, the Sebastian
Municipal Airport will be one of the largest economic engines for the area as well as one of the largest creators of
jobs for the surrounding community.
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