TUPELO – Debt is a dirty word these days.
But running a business or household often means debt is a necessary evil that must be accommodated.
And that’s where the Tupelo Regional Airport finds itself – having to deal with a $3.3 million debt that has become the proverbial yoke around its neck.
“If it weren’t for that debt, we’d be doing OK,” said airport Executive Director Josh Abramson, who’s been on the job for almost a year. “But there is no short-term fix to the debt.”
The arrival of aircraft recycling company Universal Asset Management will lighten the load a bit, but not much.
Last month, the Memphis-based company said it was shifting its wide-body aircraft disassembling and warehousing operations from Arkansas to Tupelo, a move that Universal says will bring 100 jobs within three years.
Wide-body jets – Boeing 747s and 767s, for example – will land at Tupelo Regional, then be taken apart at the old Army Aviation Support Facility. Salable parts of the planes will be stored in the former International Paper warehouse in the Tupelo Lee Industrial Park South; the rest of the plane will be scrapped.
UAM officials say about 90 percent of each plane will be recycled.
Two weeks ago, the Tupelo Airport Authority – which oversees the operations of Tupelo Regional – approved a 20-year lease with the company, which will pay $85,000 in each of the first two years of the agreement. In the third year, it pays $105,000. From years four to 20, it will pay $110,000 yearly, with a 1.25 percent increase each year, starting the fifth year.
UAM also will pay 65 percent of a prorated portion of utility charges, including connection fees for water, waste water, natural gas electricity, phone and other utility charges.
The company is paying that portion because the remaining 35 percent of the office space will be unoccupied until another tenant takes it.
So how did the airport rack up so much debt?
In 2007, the airport authority settled a lawsuit with two former fixed-base operators for $1.5 million. About $1.2 million is left to be paid.
Another $1.8 million was tacked on in 2008 when the authority approved the relocation of the Army Aviation Support Facility to its new location.
In 1997, a nearly $4 million grant was used for improvements at the old Army facility, which, like the new one, sits on airport property.
But because of the move to the new $30 million AASF, the old facility won’t be used for its original purpose. And under grant guidelines, if a facility is no longer used for the purpose originally intended, then the note becomes payable immediately.
For the airport authority – and by extension, the airport – that means taking on the remaining $1.8 million left on the note.
The Army Air National Guard paid the airport $1 a year to lease the property for its old facility. It has the same deal for the new facility.
“So in 2007-2008, the airport obligated itself to $3.3 million in debt,” Abramson said.
The $1.8 million was payable when the Guard moved to its new facility, which was long before UAM announced its plans for Tupelo.
So having UAM move into the old facility provides at least some revenue to help offset about $20,000 the airport must pay each month in total debt service.
Making way for UAM
Attracting aviation businesses like UAM is part of Abramson’s plan to help support the airport’s operations.
“I want to attract different types of aviation businesses,” he said.
A flight school and a charter operation are some of the options he’s weighing.
But even with UAM and other businesses coming on board, Abramson admits that it would be a “big challenge” to get the airport being self-supporting anytime soon.
“The debt is the biggest liability,” he said. “Imagine what we could do with $20,000 a month if we didn’t have to service that debt.”
UAM’s payments to the airport will help – but still more money has to be spent for the company.
For example, there’s the $50,000 in trees that will be used to help shield the view of UAM’s operations from Air Park Road and West Jackson Street.
Then there’s the need to repair and strengthen some of the pavement around the airport to accommodate the larger aircraft.
The Mississippi Development Authority is helping with a $350,000 grant, designated for UAM’s move into Tupelo.
“The majority of the grant is for relocation expenses, with the balance being used in conjunction with the community on public infrastructure assistance,” said MDA spokeswoman Melissa Medley.
The state agency also is providing a $1.5 million, 20-year loan, at 3 percent interest, to go toward the $1.8 million the airport must pay to the U.S. Treasury for the old AASF facility. The remaining $300,000 will have to come from the city.
In addition, Abramson said about $1 million is needed for the work that needs to be done to the pavement, but he said that should come from the Federal Aviation Administration, through its Airport Improvement Program. The AIP is a grant-in-aid program that is a major source of funding for development and planning for the nation’s airports.
“The pavement at an airport needs repair and maintenance no matter if you land a 747 or not,” Abramson said. “There’s work to be done. There’s damage from the Army vehicles, damage from the helicopters. There was damage before that first UAM jet landed.”
Airport and UAM officials have indicated that an average of one wide-body plane a month will land at the airport during initial ramp-up of operations.
Abramson said the airport’s main runway can handle that.
Keri Wright, UAM’s chief operating officer, said as business picks up, three to five planes could land during any given month at the airport.
The company projects business to increase some 20 percent in the next few years. To handle that growth, UAM said it needed a place to go and Tupelo was the right fit.
It also said it would create 100 jobs within three years. The $350,000 MDA grant is tied to that promise.
If not, MDA has a clawback provision where it can revoke the money, Medley said.
“If the company should not meet the job goals in the amount of time allotted, then a portion of the grant would have to be repaid based on the percentage of jobs actually created,” she said.
Dennis Seid/NEMS Daily Journal