25 Fiscal management; Strategic planning

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CITY COUNCIL AGENDA ITEM BRIEFING SHEET Submittal Date: Originating Department: Presented By: Agenda Item No.: 03/02/09 Council Date: City Council Edwin Pickle 25. 03/23/09 RECOMMENDED MOTION: Move to reevaluate construction of new hangers until after the new airport master plan is completed. POLICY ISSUES): Fiscal management; Strategic planning BACKGROUND: Council Member Pickle requested an action item on the construction of ten new hangers at Cox Field Airport. Although staff agrees that additional hangers at the airport would enhance services available to pilots and should increase flight activity, the plan outlined in the accompanying memo from the Airport Advisory Board has not been presented to staff for review. Upon preliminary review, construction of new hangers appears to be consistent with the current Airport Master Plan. There are, however, several areas of concern. First, the plan to finance the $480,000 cost assumes that annual revenue from the current hangers ($68,448) is available for use to service the debt for the new construction. If this revenue was going into an encumbered account for the airport and not being used, this would be a viable approach. Unfortunately, the $68,448 is going to the General Fund and helps support airport operations, expenses of which exceed its revenue. In addition, generally accepted accounting practices dictate that only the revenue derived from the new asset be considered when determining the return on investment (ROI). Other ROI considerations include the payback time (25 years using a simple payback method based on current rates and not incorporating other costs), the life expectancy of the hanger, the maintenance costs over the lifespan, and the time value of the $480,000. Second, if Council decides to encumber the revenue from existing hangers to service the debt on any new hangers, the loss to the general fund will have to be made up by increasing taxes or other revenue and/or decreasing expenses. It will take a little less than a %2 cent increase in the tax rate to compensate for the lost revenue to the General Fund. The third area of concern is that development of a new master plan will be underway within 60 days. While it is very likely that the need for new hangers will continue to be in the plan, new hangers may not make the list or it is more likely that other projects, such as drainage improvements or safety issues, may have a higher priority. In any event, it would be premature to commit to such a large investment prior to completion of the new master plan as it may prevent the City from investing in higher priority projects. Fourth, TxDOT has stated that they will no longer help Cox Field maintain three active runways. The Airport Advisory Board has discussed utilizing the abandoned runway to provide access to new hangers along the old runaway. The proposed plan contradicts previous discussions and the debt service would likely preclude development of hangers along the old runway for a period of time. Fifth, this is project is not budgeted in FY 2008-2009. Such a large expense would have to come out of reserves. City of Paris Revised 2/04/08 . 000125