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Report: Palo Alto Airport could be profitable

Original post made on Oct 4, 2010

Palo Alto's long and heated debate over the future of Palo Alto Airport will resume later this month, when a City Council committee considers whether the city should become more involved in managing the facility.

Read the full story here Web Link posted Monday, October 4, 2010, 9:55 AM

Comments (28)

Posted by K, a resident of East Palo Alto
on Oct 4, 2010 at 12:07 pm

Put more money into safety please. Save residents of EPA.


Posted by Joe, a resident of Barron Park
on Oct 4, 2010 at 1:00 pm

After reading the report, the process for closing the airport seems pretty clear. Stop the City of Palo Alto from accepting AIP (FAA Airport Improvement Funds)! Acceptance of each grant resets the 20 year clock on taking back control over the airport site from the obligations imposed by the FAA.

To make sure that AIP funds aren't accepted by the City, a vote should be required for each AIP grant with, say, 60% voter approval. Assuming no one on the city council will propose such a measure, a ballot initiative would first be needed to make this requirement a law.


Posted by paresident, a resident of Old Palo Alto
on Oct 4, 2010 at 1:46 pm

In the past, I didn't mind either way if the airport continued in Palo Alto. But recently while walking in the Baylands on a peaceful, sunny Sunday after a gruelling work week, one plane after another took off and landed breaking any peace of mind. I suggest everyone take a walk and experience this for yourself. Good riddance airport!


Posted by Anon., a resident of Crescent Park
on Oct 4, 2010 at 1:55 pm

>> one plane after another took off and landed breaking any peace of mind.

I've been saying this for months, if not years.

There cannot be an airport in the Palo Alto Baylands while Palo Alto pretends to be environmentally conscious or concerned ... it is a joke.

Go out there and the place looks like hell, and it's noisy, you cannot have a conversation in the area anywhere near the parking lots.

The clear path for what to do with this area to me seems to be get rid of the airport, plan some reasonable areas for recreational and entertainment development, open a lot more land up for nature, hiking and biking, and start to rehab that area with a mind towards sustainability and safety.

Also, it would be nice to do whatever is needed to upgrade the stinky sewage treatment plant. If you hike down in Sunnyvale their sewage treatment plant does not stink like ours ... there is something wrong that the city is as usual just ignoring.


Posted by bill, a resident of Barron Park
on Oct 4, 2010 at 2:07 pm

A no brainer. The Palo Alto government is not in the airport business any more than it's in the taxi business.

Read the report. If PA ran the airport, and if it ever made any profit (not a given), the profit could not be put into the General Fund, and losses would continue until 2017.

If it's such a great idea to operate the airport, why does the county want to end the lease? Let a private operator run the airport. First, it would bring in revenue we badly need, and secondly, it stops the black hole of continual losses.


Posted by GHS, a resident of Charleston Gardens
on Oct 4, 2010 at 2:19 pm

Good news that the city can have the airport and turn a profit, too.


Posted by James B., a resident of Midtown
on Oct 4, 2010 at 2:22 pm

"long-term windfall for Palo Alto" sounds good. Invest $25K/year (peanuts) for 5 years and then reap over $500K/year for the next 20 years after that.


Posted by Arnold, a resident of Embarcadero Oaks/Leland
on Oct 4, 2010 at 2:31 pm

"All money made at the facility would have to be reinvested in the Airport."

Directly, yes. Indirectly, no.

The airport employs more than 300 people who pay taxes. The airport is home to hundreds of airplanes and those have annual tax assessments. There are sales of merchandise and fuel that generate sales tax revenue.
etc.


Posted by Resident, a resident of Another Palo Alto neighborhood
on Oct 4, 2010 at 3:05 pm

I would love to see a nice restaurant, shopping and other support businesses along Embarcadero for the airport - together with a visitor center. We could garner so much more from the airport if we supported it rather than did our best to ignore it.

I love the sound and sight of the planes. They are a much better sound and sight than the ugly, noisy trains we have dividing up our town.


Posted by Crescent Park Dad, a resident of Crescent Park
on Oct 4, 2010 at 3:14 pm

No. No. No.

I don't care if the airport stays open or not. I do not want CPA in the airport business whatsoever. There is no expertise and they should not waste our time and money trying to gain the expertise.

Let someone else do it.


Posted by Carlito waysm, a resident of Old Palo Alto
on Oct 4, 2010 at 3:27 pm


Ha Ha Ha, those morons in the Palo Alto City Management(city council, Mayor, Vice Mayor etc).

A quick proof of their incompetence: their fiasco that is going to result in a raise of our refuse rates, city streets in disrepair, conmute traffic not following the speed limits in residential neighborhoods, city employees that behave like they are doing us a favor instead of delivering a service for us,.....etc.

And now they want to "run" the local airport, of course they want to run anything that they run across, remember they still want to have their own Fiber Network in direct competition with the cable companies and other broadband providers.

Always looking for ways to spend money for bogus projects, and at the same time add more employees to the Cityt payroll to suck the blood out of the taxpayer's wallets.

> The analysis, compiled by the Kentucky-based firm R.A. Wiedman & Associates, estimates that the city would realize a profit of $13.5 million from the airport by 2037 if it were to take over operations next year. But to get to this point, the city would have to endure a deficit of $129,200 for the years 2012-17.

Who in their right mind would go for it with their own money?




Posted by Shut-It-Down, a resident of Another Palo Alto neighborhood
on Oct 4, 2010 at 3:35 pm

> The airport employs more than 300 people who pay taxes

Well .. it's time for a list of these employees, to see if this count is really accurate. The fact that they pay taxes is irrelevant to this matter, since almost all taxes paid from income go to the Federal Government. The only tax dollars paid by airport-related businesses are property taxes. So, time for a parcel map of the airport to be produced to see just how much is being paid by these businesses. Remember, the City of Palo Alto only gets 9% of each dollar paid in property taxes.

Most reports like this one rarely look at all of the costs associated with the airport, and only focus on a few that make it "profitable". For instance, the City has not been getting any rent from the use of this 100 acres of land, nominally costing about $5M an acre. Any future business model needs to consider charging those that use this property a fair market rent on their use of the land.

Other external costs, like charging for police and fire response when places crash, or create problems for other people. The airport should be charged a reasonable amount for each "service call" by the police/fire. Given that 25% of all fatal accidents seem to involve alcohol/narcotics use, the police need to start conducting fieack bold sobriety tests for pilots involved in crashes, or other situations where the safety of others has been put in harms way. The police also need to begin conducting random field sobriety tests for pilots, given that a crash can result in the deaths of many people, and there is no reason to exempt people who own/use airplanes from the same tests that we expect of operators of public transportation conveyances. There is every reason to demand that pilots take a "breath-a-lyzer" test before each flight. Pilots failing these tests would be denied the ability to store their aircraft at the PAO.

The City needs to demand that each aircraft, without exemption, be required to install, and maintain, a "black box" which would help to determine quickly, and accurately, the cause of accidents/crashes.

The costs of the levee maintenance needs to be considered, and all of the staff time that would be used to administer this activity would been to be accurately measured and added into the "overhead" costs of this facility.

Back in the 1950s/1960s, the airport was run by a private outfit. Every few years, finances became critical, and they kept coming to the City/County .. looking for a handout. It will be interesting to see if this report reviewed the airport finance issues of that period, and factored that experience into their operations/expense/maintenance model for operating the airport.

We also have to remember that the Federal Government pays for the tower operation--maybe $1-$2M a year. Claims by some of the pilots that these costs are paid for via "gas tax" are simply ludicrous. The cost of the tower is paid for by the US taxpayers--who by, and large, obtain no benefit from this airport.

The only rational thing to do is let the lease expire, and let the pilots figure out what to do. They can form a corporation, buy some land, and open their own airport. If they proves too expensive, then they can move their planes to another airport--and quit milking the Palo Alto taxpayers.

This airport is a public nuisance, and needs to be shut down.


Posted by Clean up the dump; keep the airport, a resident of Palo Verde
on Oct 4, 2010 at 3:41 pm

The toxic leach piles out there need to be cleaned up. The external costs of this impending disaster are HUGE! No way a "park" can disguise it. Keep the airport, it is good for Palo Alto. Byxbee Park is bad for Palo Alto...clean it up.


Posted by pat, a resident of Midtown
on Oct 4, 2010 at 4:55 pm

> "… city would realize a profit of $13.5 …"

This should read "… city COULD realize a profit …" There are no guarantees!

As for those 300 employees, they'd all be on the city payroll with big salaries, big benefits, big pensions.

This is a BAD idea.


Posted by pat, a resident of Midtown
on Oct 4, 2010 at 5:49 pm

> "The airport employs more than 300 people who pay taxes."

300 seems like a huge number of employees for a small airport, so I figured it would be a good idea to read the report. Web Link

Page 92: "… the Airport … sustains over 300 jobs in the area."

It does not say the airport has 300 employees. The org chart in the report shows 16 employees.

Page 51: "For this business plan, it was assumed that the Contractor would provide labor for the Airport management and operation, rather than having City employees operate the Airport."

Page 85 says: "A total of 77 full-time employees and 140 part-time employees were identified as direct aviation-related at the Airport. Of these, 20 full-time and 114 part-time jobs involved flight training operations at the Airport."

Page 86: "There are 2.6 full, time equivalent employees working as County employees at the Airport…. A census of on-airport businesses (in addition to the County's employees) revealed that there are 75 full time equivalent employees and 139 part time employees."

Page 37: "Operating Expenses were derived from the following:
• Salaries and Benefits: This includes direct salary and benefit costs for two Airport Operations Workers and one part-time Airport Supervisor. It also includes the allocated percentage (31.07 percent in PY08) of Airports Administration staff salaries and benefits. The breakdown for this line item in 2008 is $232,950 for Operation staff (including the supervisor) and $187,617 for Airports Administration staff."

Projected salaries and benefits: $611,674 for 2017 and $1,406181 for 2037.

Page 45: "City Operation of the Airport
If the City is to be the sole operator of the Airport, there are several changes in the
staffing and management structure needed. In general, the City would need to implement the
following:
• Retain an Airport Manager several months before actually taking possession of the
Airport. In addition, an Assistant Airport Manager and a part time City worker would
need to be assigned to the Airport, once it was under City control.
• Set up of an Enterprise Fund (or similar fund) for Airport operation, where charges from
other City departments could be recorded as costs against Airport revenues. In addition,
a new expense category would include Airport Operations.
• The City would begin billing airport apron tenants and collecting lease revenues from
FBOs. (Fixed Based Operators)."

The city currently has utilities enterprise funds, which are subsidized each year with about $15M from the general fund. How do we know the airport wouldn't similarly be subsidized?

Still a bad idea!


Posted by Roy Thiele-Sardina, a resident of Menlo Park
on Oct 4, 2010 at 5:58 pm

Shut-it-down

Before you make un-substantiated claims about accidents involving pilots. please check your facts. here is the FAA article in which they determined less than 1% (not the 25% you wrote) of the accidents involved alcohol. I have attached the link to the FAA study below.

The FAA is VERY strict about alcohol. When you get your flight medical they ask you if you've been arrested (notice I didn't say convicted) of a DWI since your last medical. Then next to your answer they make you put your initials. then at the bottom they warn you that lying about that is punishable by jail time.

A DWI conviction is a "self reporting" requirement to the FAA. Also punishable by jail time for failing to do so. Several years ago a Northwest Pilot was convicted of violating the "throttle to bottle rule" and spent two years in federal prison. In fact the law regarding when you can consume alcohol before flying was changed after several incidences. While the legal requirement is 8 hours from consuming any alcohol until you can legally fly. the FAA recommends 24 hours.

So you show your ignorance about these statistics, make sure you are telling the truth. Since getting caught in one lie makes everything else you said in your post suspect......



Web Link

Roy


Posted by Lisa, a resident of Barron Park
on Oct 4, 2010 at 7:51 pm

The report is pretty much a rehash of Palo Alto Airport Working Group report from 2006. Santa Clara County, with extensive experience running 3 airports, says the Palo Alto airport isn't profitable and that the county is assuming all of the risk. Because of the age of the Palo Alto Airport's facilities, flood potential and the unwillingness of the City to grant development rights for more hangers, the County doesn't think the airport is worth the trouble.

As in the original report, this one says that the County is shifting costs onto the airport that paint the airport in a bad light. But, to make the business case work this time, the report skips over the costs of rebuilding the levy, raising and building new structures above flood level, and assuming that nearly $2,000,000 will be available from the FAA for rebuilding the runway. The money has to come from somewhere.

What's particularly troubling about this version of the Palo Alto Airport story is the implied threats about closing the airport. Palo Alto owns the land, but is encumbered by the FAA's AIP grant rules from closing the airport for 20 years after the last accepted AIP grant. The comparison to Meigs Field in Chicago is simply fear mongering. Meigs Field was shut in 2003 when Mayor Daily ordered crews to carve portions of the runway in the shape of large X's during the middle of the night. There were still planes parked at the facility and there was even an unconfirmed story of a flight that needed to divert because the Meigs runway was no longer serviceable. That's hardly a scenario for Palo Alto.

The report says that the big gain in airport profitability would allegedly appear once the current operators get kicked out of the airport and the City would keep their revenues. This assumes that the airport is run exclusively by the City. If a third party runs the airport, the FAA AIP rules put the City at risk of lawsuits from the incumbent operators because they can claim discrimination and favoritism.

All in all, this report validates any reasonable person's assumption that there's no business case for keeping the airport.


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Oct 5, 2010 at 7:11 am

Palo Alto cannot be in the business of running a general aviation airport and it would probably be an even greater money loser if it's run by the city. There are many good reasons to close down this source of danger, nuisance, air and noise pollution and not one good reason to keep it open. We must turn the bay lands into a true environmental haven and get rid of this monstrosity.


Posted by John, a resident of Barron Park
on Oct 5, 2010 at 8:06 am

Not only that, it's an economic nightmare. Keeping the Palo Alto Airport open demands that the facility become economically viable. To do that, according to the report, more hangers need to be built and the facility must be made flood proof by raising the structures there and expanding the levy to accommodate rising water levels. The Palo Alto General Plan needs to be altered to do these improvements. The only money to pay for most of the work would be FAA AIP grants, which requires that the airport stay open for 20 years after the grant gets accepted. There's nothing in the plan about what happens in a major quake when the runway and tower could be severely damaged.

Given all of these problems, no wonder the County wants out sooner rather than later. Only 25% of airport users are actually from Palo Alto, and more than half the use of the facility is generated by a single flying club, not generic commercial activity that airport supporters would have everyone believe. The final nail is the fact that AIP grant rules mean any profit the airport would make must stay at the airport, and not flow back to the city. Yikes!


Posted by Resident, a resident of Another Palo Alto neighborhood
on Oct 5, 2010 at 8:16 am

This airport is well utilized, we can all tell this by observation. All these pilots, passengers, support staff, spend time in Palo Alto regardless of where they live and could be spending money in Palo Alto is there were some facilities in the area.

Regardless of who runs the airport (I tend to think that the city of Palo Alto has no experience that shows they could run it efficiently), our city could be making money from businesses in the immediate vacinity. Even Ming's and Scotts which were the only restaurants in the area have both gone. Edgewood Plaza has also gone.
All these potential Palo Alto tax $$ are going straight onto 101 and out of town.

What a wasted opportunity.


Posted by Paul, a resident of Downtown North
on Oct 5, 2010 at 9:58 am

Anything can look profitable if the accounting is structured to support that objective.


Posted by close it down, a resident of Crescent Park
on Oct 5, 2010 at 10:46 am

"In short, the City of Palo Alto could not earn any money from the Airport to use elsewhere," the report states. "All money made at the facility would have to be reinvested in the Airport."


Says it all. There is no money to make here. Time to close it down.
Then the space could be used to generate money. It just can't be done while there is an airport on it.


Posted by Shut-It-Down, a resident of Another Palo Alto neighborhood
on Oct 5, 2010 at 1:35 pm

Roy:

The study you cite is not as general as the one published in 2000, which looks at all of the crashes between 1994 and 1998, from the point of view of a number of drugs/intoxicants:

Web Link

The number in this study claims that the high alcohol content of dead pilots' was 7% (not the 25% posted, or the 30-odd percent referenced in the article cited above. However, this Y.2000 FAA study also looks at other drugs/narcotics, which increases the actual percentage of fatal general aviation The substances that this study looked for were:

Controlled Dangerous Substance Schedules I and II Marihuana, Cocaine, etc.
Controlled Dangerous Substance Schedules III-V Diazepam, Phentermine, etc.
Prescription Drugs Amitriptyline, Imipramine, etc.
Over-the Counter-Medications Pseudoephedrine, Acetaminophen, etc.
Alcohol levels equal to or greater than 0.04% (40.0mg/dL) The values included in this tabulation incorporate cases in which the source of the alcohol is both known and unknown.
The study shows that almost 50% of all the pilots in this study (1700-1900 samples) had one of these substances in his/her system.

> The FAA is VERY strict about alcohol. When you get your
> flight medical they ask you if you've been arrested (notice
> I didn't say convicted) of a DWI since your last medical.

----
Yes, this is true, as this article reports --

Driving-while-intoxicated history as a risk marker for general aviation pilots

Web Link

The Federal Aviation Administration conducts background checking for driving-while-intoxicated (DWI) convictions on all pilots. This study examined the association between DWI history and crash risk in a cohort of 335,672 general aviation pilots. These pilots were followed up from 1994 to 2000 through the aviation crash surveillance system of the National Transportation Safety Board. At baseline, 3.4% of the pilots had a DWI history. DWI history was associated with a 43% increased risk of crash involvement (adjusted relative risk: 1.43; 95% confidence interval: 1.15–1.77). The population-attributable risk fraction for DWI history was estimated as 1.4%. In addition to DWI history, male gender, older age, and inexperience were associated with significantly increased risk of crash involvement. The results of this study support DWI history as a valid risk marker for general aviation pilots. The safety benefit of background checking for DWI history needs to be further evaluated.
-----

However, the FAA doesn't seem to be "tough enough" to stop the pilots who kill themselves (and others) yearly, from drinking/smoking/ingesting drugs.

> you show your ignorance about these statistics, make sure you
> are telling the truth.

There is a difference between making a mistake and lying. As my links prove, the numbers published involving pilot drinking and fatal crashes is much higher than 1%--that you cite. I hope you will take the time to read the FAA study provided in this posting, and maybe do a little "googling" to increase your own knowledge of general aviation safety statistics.

By the way, all of the data involving pilots and drugs/alcohol come from the FAA, not from local sources. One of the most frightening things about the City of Palo Alto's running this airport is that they will claim that "it's not our job to keep track of safety issues--it's the FAA's". The FAA doesn't like talking to the "little people" about safety .. and it's pretty clear that from past situations, the City will not necessarily be pro-resident when it comes to safety issues.

I submit that your charge of "ignorance" is probably not sustained by the facts.

>Every thing else is suspect.

Really? .. Hopefully you don't live close enough to the Palo Alto Airport not to have to listen to the obnoxious noise, and fear of irresponsible actions by pilots that have resulted in about 170 accidents over the years.

I repeat—this airport is a public nuisance and needs to be shut down!


Posted by Anonymous, a resident of Another Palo Alto neighborhood
on Oct 5, 2010 at 3:14 pm

A $13.5M estimated profit in 2037. What's the ROI on that? If the airport could be making a profit, why is it consistently not breaking even?


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Oct 5, 2010 at 4:54 pm

Let's be clear-this airport has been a generous milking cow from which a few drank while all the rest of us PA residents were subsidizing. Under the most optimistic projections, this airport might make a profit which will have to be put back into it, which is meaningless to those who will continue to subsidize it by giving away the land for free and not getting anything except danger, obnoxious noise and toxic air in return. Such a deal. This is the equivalent of a bank certificate of deposit the investor is never allowed to withdraw while being forced to give the gains back to the bank in perpetuity.


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Oct 5, 2010 at 5:02 pm

"Even Ming's and Scott's which were the only restaurants in the area have both gone. Edgewood Plaza has also gone."
Which means that they were getting little to no business from the airport and were not benefiting financially from the aiport's presence nearby, which shoots down the theory that the airport has ever been a bonanza to local businesses. I know a number of pilots using this airport and they drive in from Los Altos Hills, Atherton or Portola Valley, and when they land they drive back home, not spending a dime in PA and contributing nothing but added traffic congestion and polluted air.


Posted by Anti-NIMBY-ite, a resident of Menlo Park
on Oct 11, 2010 at 5:34 pm

This has got to be the most vehemently negative set of posts I've seen on a topic in awhile.

I take great pleasure in having the baylands preserve so close to my home. The airport is one of its unique draws - you are able to walk right alongside the runway, observing as planes take off and land. And in a surprising exhibition of leniency on the homeland security front, you're able to sit right at the end of the runway and watch as aircraft fly overhead. It's fantastic, majestic, and inspiring.

The baylands airport is a known commodity. There are plenty of other preserves without an airport if silence and serenity is what you seek.

But I find large numbers of families who bring their children out to observer birds in the marsh, squirrels along paths, and ducks in the pond - the airport providing an intriguing backdrop.

A few months back, my wife and I came across a helicopter lesson on a field next to the terminal building. We watched for over 30 minutes as the machine practiced landings, hovering, and emergency stabilization maneuvers. What a treat!


Posted by Anon., a resident of Crescent Park
on Oct 11, 2010 at 9:54 pm

> walk right alongside the runway, observing as planes take off and land

that is interesting for about an hour ... being generous.

Then you might like to talk or enjoy nature out at the Baylands, and it is almost impossible with the never-ending roar and vibration of these constant airplanes.

And when that helicopter is hovering it makes a hell of a noise that nothing can be heard over for about 1.2 mile. It's really irritating to go out to the Baylands for a little exercise and peace and you cannot even hear what you are playing in your own earphones.

Not to mention if you read the news lately they are talking about how a lot of noise like this type of noise is actually toxic and bad for the health.




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