Just as Palo Alto is planning an ambitious takeover of Palo Alto Airport operations from Santa Clara County, the facility is in a danger of losing out on much-needed grant funding after the Federal Aviation Administration determined that the county has violated several provisions in its federal grant agreement.
The violations, which the FAA's Office of Airport Compliance and Management Analysis uncovered in December, relate to the South County Airport in San Martin, which the county also operates. The county recently decided to reject a permit request from a skydiving operation, Garlic City Skydivers, to use that airport. The rejection led Garlic City to sue, and the FAA found the county violated its grant agreement by turning down the skydiving request.
According to the FAA director's determination, the airport "can safely accommodate an on-airport drop zone" in South County Airport, and the county had "unreasonably denied" the request from Jeff Bodin and Garlic City. The denial violated the "economic nondiscrimination" clause in the grant agreement, the FAA found.
The agency ordered the county to take "immediate steps" to grant the skydiving permit, an order that the county has appealed.
The ramifications of these violations could spread far beyond the small facility south of Morgan Hill. The FAA's determination means that all of the airports operated by Santa Clara County, including the busy Palo Alto Airport, will not receive any funding until the matter is resolved.
Carl Honaker, the county's director of Santa Clara County Airports, referred inquiries about the violation to county attorneys. He told the Weekly that the FAA had postponed its decision on the appeal until the end of June.
Santa Clara County manages the Palo Alto Airport on Embarcadero Road under a 50-year lease that is set to expire in 2017. The Palo Alto City Council decided last year to seek an earlier takeover of airport operations, and staff is hoping to complete the switch in the second half of the year.
Currently, the city is looking to hire an airport manager and plans to submit to the FAA an updated "airport layout plan" -- a document that details the airport's design and improvements.
But Rob Braulik, assistant director of the city's Administrative Services Department, wrote in a new report that the local airport is "subject to the consequences of the County's violation" and that the FAA "will not act upon any requests for financial assistance" for the Palo Alto Airport until the matter is resolved.
Palo Alto officials have been trying in recent months to soften the FAA's stance by pointing to its pending management of the airport's operations. So far, the FAA has indicated that even if the city were to take over the airport by July, 1, the federal agency would not waive the county's non-compliance and consider any current grant application from the city, according to Braulik's report.
Braulik told the Weekly that the disagreement between the county and the FAA would not prevent the city from pursuing the takeover of airport operations later this year.
"This obviously has an impact on the county's ability to retain funds to make improvements to the airport," Braulik said. "But because this is an issue between the county and the FAA, we will just continue to do the work that is necessary to take over the airport between July and September."
Palo Alto's decision to assume airport oversight from the county before the lease expires was driven by concerns from the airport community about the county's inadequate investment in and poor maintenance of the bustling facility. It was further bolstered by a 2010 report from the consultant Ralph E. Wiedemann & Associates. Wiedemann analyzed the airport's operations and existing contracts and found that the facility could potentially generate major profits for the city -- possibly as high as $16.2 million by 2037. These profits would, however, have to be reinvested in the airport.
The city's aggressive drive to take over the airport is also reflected in the proposed budget City Manager James Keene released earlier this week, which allocates $300,000 into a new "airport fund" in the Public Works Department. According to the budget, the city plans to develop a business plan to "guide all aspects of the transition."
"This plan will address a wide spectrum of issues, including assurances that airport operations will be self-supporting and other key goals and objectives," the budget document states.
The Weidemann report had also identified various business models for the city's oversight of the airport, including hiring a third party to manage the airport and having the city manage the airport on its own. Palo Alto had recently hired another consultant, CommuniQuest, to consider these models. The company recommended the city manage the airport itself, according to Braulik's report.
Third-party management is "quite possibly the lowest financial risk of the two management options," wrote Klaasje Nairne, CommuniQuest's project manager. But "day to day involvement by the City is key to the success of the future operation."
"There is current instability in the relationship with the County and City," Nairne wrote. "Tenants are displeased and have voiced that opinion to City management. Under third-party control and management, this tension is likely to repeat itself."
City management would be able to directly address the concerns of airport users and to recruit and supervise airport staff. Nairne also analyzed the financial data and found that the airport "can operate as a self-sustaining enterprise fund, even with a full complement of staff and some very healthy administrative overhead charges."
The airport manager would be an employee of the city's Public Works Department and would be responsible for "managing, promoting, coordinating and supervising the daily operations of the Palo Alto Airport," according to the job description. The person would serve as the liaison to the county and the FAA.
City staff plans to meet FAA officials next week to discuss the airport layout plan and other procedures that the city must complete before assuming control of the Baylands facility.