Tupelo airport asking city for help

Tupelo StockBy Robbie Ward
Daily Journal

TUPELO – Tupelo Regional Airport Executive Director Josh Abramson said Tuesday struggling finances and fewer passengers require “fundamental changes” between the airport and the city of Tupelo.

After meeting in closed session for about an hour related to a lease at the airport, Tupelo City Council members did not take any action. However, Abramson said financial realities of the airport make leaning on city support necessary.

In July, the Daily Journal reported the airport needs at least $700,000 in permanent repairs for an older runway to support larger aircraft landing in Tupelo and then being dissembled by Universal Asset Management, an airplane disassembling and recycling company with a 20-year lease at the airport.

“We’ve lost $850,000 in funding in a year with no trend of it coming back,” Abramson said. “The airport has to be a part of the city’s capital plan.”

With an operating budget of $4.9 million this year, the airport has a $40,000 operating surplus. However, the balance sheet starts to look red when factoring the airport’s $2.6 million debt to the city.
Currently, Tupelo’s airport has a separate budget from the city’s annual budget. However, the city does provide an allocation for the airport listed under community services, the same category where it provides for nonprofits. In Fiscal Year 2013, the city allocated $158,500.

The city of Tupelo has little oversight related to funding at the airport. Beyond the mayor appointing airport authority members, the city has no other role with the airport’s governing body.
Abramson declined to disclose how much funding the airport needs but will turn in his formal request to the city for Fiscal Year 2014 funding next week. Mayor Jason Shelton and city finance leaders are in the process now of preparing the budget to present to the City Council.

While Abramson wants the airport to be a part of the city’s five-year capital budget, Shelton, working on the city budget for his first time as mayor, has said other city departments many need to postpone big-ticket purchases due to budget constraints.

Shelton said after the closed session Tuesday that he wasn’t ready to discuss how finances at the airport could impact the coming year’s budget.

“I can’t give a comment until I know all of the details,” he said.

With the airport losing commercial services connected to Memphis, fewer passengers have flown out of Tupelo. Currently, Silver Airways only offers connections to Greenville and Atlanta.

The airport anticipated a $1 million Federal Aviation Administration grant this year to help cover runway costs but only received $150,000 because of funding tied to passengers.

After meeting with the city, Abramson and airport authority members met in closed session for about a half hour with Keri Wright, UAM’s chief operating officer. After the meeting, airport and UAM officials said they wanted to work together to find a long-term solution to the funding problem.

“We need to work together,” Wright said.

UAM employs about 80 people, including workers at a warehouse in Verona. The company has landed more than 60 retired aircraft in Tupelo. Another 747 is scheduled to land Thursday at the airport, and Wright said airport officials are looking at ways to accommodate it.

Abramson also said the airport will likely look into asking other entities for funding, such as the Lee County Board of Supervisors.

“The airport is regional and impacts more than just the city of Tupelo,” he said.

robbie.ward@journalinc.com
Business editor Dennis Seid contributed to this story.

  • fairorright

    The Spin Zone at Tupelo Regional, a public airport, is open for business and is continuing to spin falsehoods and half-truths to deceive city officials. The TAA Board is already too dizzy and disoriented to make competent decisions.

    The real culprit is not “lack of funding.” If the manager was capable, it would take a little effort, experience and intelligence to correct the course and remain clear of the rocks. The real issue is
    mismanagement, poor oversight and an accounting nightmare designed to remove transparency.

    Why did the Director anticipate a $1M FAA Grant this year when it was quite obvious two years ago that his poor support of Silver, the new commercial air services, would result in a significant reduction in funding. The writing was on the wall but he chose to ignore it.

    The Director leads the public to believe that this funding would have been available for the improvements to the closed runway. FAA has strict compliance issues, terms and assurances that must be followed. The old runway, since it doesn’t serve the public, is ineligible. The airport has already been warned about revenue diversion which means that only rent and fee
    revenue from UAM can pay for the $1.8M loan yet there have been indications
    that this is being ignored.

    The real shame is that one of the assurances of the AIP Grant is that all efforts should be made to make the public airport self-sufficient. Nothing but the opposite has occurred including the huge subsidies that the City has provided despite the net operating revenue supposedly being generated by FBO operations. Oops, they aren’t paying for the loan that allows that operation to function.

    Falsehood: “Operating budget of $4.9M with a $40K operating surplus.” Really, then why did the City provide the airport $133,500 to cover cash flow? Someone needs to check this one out.
    This statement total includes capital project numbers to look good. It has no relevance to the airport’s operating climate.

    Check out the way the private management company, friends of the Director, is treated.
    They receive $50K a year to manage an operation that doesn’t pay one cent for the loan that created Tupelo Aviation Unlimited, the FBO. They received $24K for incentives last year even though their operations were declining. According to the lease, that meant that TAA should have received $36K of the $60K surplus but didn’t. And remember the accounting documents were so screwed up that adjusting entries couldn’t even be made by the auditor.

    The Leases are even worse. Poor calculations and low rents have kept airport revenues at or below 2007 levels. The Director uses abatements and discounts to overstate the “bottom line.”

    UAM’s lease, if computed on comparables or FMV, would be 2.5 times what’s in the lease. UAM uses property all over the airport outside its leased space and doesn’t pay a dime for it. There are errors in the current calculations.

    AMS-Management Lease: Airport Management is not enforcing
    the terms. They have funneled more than $60K in aircraft maintenance to the
    “sister company” AMS-Tupelo.

    BOTTOM LINE: If TAA were still running the FBO, they would
    not owe $150,000 on the FBO Loan and they would be in better financial shape to
    support UAM. It’s time for a turnover. The City should dissolve the current
    Board, appoint a new one, bring in experience and expertise and demand the
    critical elements that are missing, HONOR, INTEGRITY and ACCOUNTABILITY.

    • mcgruff

      If all this is true, and I don’t doubt that it is, then why can’t the airport board just come out and say so? There will never be a solution until the problems are identified. Throwing money at it might be a short-term fix, but not a sustainable solution.

      And to fairorright: What do you think needs to happen? Is there a sustainable solution here?

      • fairorright

        Fair enough question, and not sure if I have the right answer. But I am sure that the current administration has not been transparent with the public or City Council regarding Tupelo Regional. TAA and the airport management are drowning in their self inflicted problems.

        The airport has very little experience, expertise or knowledgeable leadership to adequately address the serious issues that they face. However, more basic than that is the lack of principled management and guidance. There are no airport master plans, no airport business plans, no airport construction improvement plans, no balanced budget, no verifiable oversight, no true leadership to keep the ship on course.

        Blaming prior administrations do nothing but mask the real problems. The old runway problem needs to put aside until an independent engineering firm evaluates all ground infrastructure to assess their value for the purposes that they are being used.

        An honest assessment of the budget and the accounting procedures being used must be made. The current system must be scrapped since in hides the real revenue and expenses.

        An assessment of the Leases must be completed. In particular, the UAM, AMS-Management, AMS-Tupelo and the Silver leases have irregularities and terms that are inappropriate for government leases. At the same time a comparison of the rent structure which varies from lease to lease (in violation of FAA regulations) should be made. The UAM Lease,for instance was made on a $4M value of the facility and property. It is worth nearly 2.5 times that. After getting that data, the airport authority can then determine whether they can use the clause “in the best interest of a public airport” to increase the rent rates to those comparable facilities at airports similar in location, demographics, size and economic conditions.

        In order to accomplish all this without undo pressure and manipulation from the current administration there are only two options; get rid of the current Director and TAA Board whose lackadaisical oversight allowed this to happen or use an outside independent consultant to collect and analyze the data and then get rid of the Director and the TAA Board.

        • mcgruff

          I just managed to delete a long response full of follow-up questions, and I don’t have the patience to retype all of it.

          My primary follow-up question is this: Would reconstituting the TAA board and directorship solve the problem, or does the TAA board structure need to fall under additional city oversight, like the city clerk, CFO, legal council, etc.?

          Thank you for your detailed explanation of these matters. I hope the city council is reading your comments because they are extraordinarily useful.

          • fairorright

            Yes, removing the cause would remedy the current situation. Accountability, honesty and integrity from the leaders and managers are critical whether it is under City or Authority control. The wrong people got control and are following their own agenda with no regard for the public and their facility. The City already has its resources spread thin and to take over 1000 more acres would create more shortfalls on road repairs and service to the City’s taxpayers. The Mayor and City Council can make things happen since they hold the purse strings and appoint those that are responsible to conduct honest operations.

  • closeherdown

    Close her down! If they cant do a better job managing the place than this, they shouldnt be there anymore. I can think of much better places for the cities money to go then a dying airport that only goes to 2 places.

  • Just Wondering

    Hey City Council, check out this previous post……

    Josh Abramson you met with members of the National Guard in 2010. I was there. You were told that the old runway WOULD NOT handle the aircraft that UAM worked on. Your response was’ UAM is bring jobs’. You were also told that if any company was going to use the old runway it should be repaired before any company took possession. You and the airport board should be fired!!!! UAM will never bring more benefit to this area than we will spend keeping up that old POS runway….. Matter of FACT.

  • 1941641

    Too few passengers in and out of the Tupelo Airport has, as I remember things, always been the biggest problem. Too many passengers had rather drive to Memphis and take a flight out than take a flight out of Tupelo. The reasons for this are varied and I wouldn’t dare enter that discussion. It’s a real problem and I would say it always has been from the beginning.