October 22, 2014
Final Reports
San Mateo Courts - Civil Grand Jury

2002-2003 Report:

San Mateo County Airports

Summary | Background | Findings | Conclusions | Recommendations| Response

Summary:

The Grand Jury reviewed airport operations at San Mateo County’s two airports—San Carlos and Half Moon Bay—and concluded that they do not operate in a manner that maximizes revenue. County General Fund support of the airports has exceeded $2,000,000, and the County General Fund has not been reimbursed.

The Grand Jury proposes creation of a County Airport Advisory Commission broadly representative of county residents, the aviation industry, and airport users to assist in long-term airport planning.

Issue: Does San Mateo County operate its airports to financially benefit the county?

Background:

San Mateo County owns and operates two airports: San Carlos Airport and Half Moon Bay Airport. The airports serve commercial, corporate, and recreational owners and operators.

The San Mateo County Board of Supervisors makes decisions regarding airport planning, policy, and expenditures. The Director of Public Works, reporting to the County Manager, oversees and supervises the county airport operations through the Airports Division.

The airports collect user fees and charges for hangar rentals, tie-down fees, fuel service charges, concession charges and rents, storage of aircraft and other property, and well water usage. Landing fees are not imposed.

Fees and charges are set at least once every three years by the Board of Supervisors based upon recommendations from airport management. Airport management surveys airports in other counties for comparable rates to develop recommendations regarding fees and charges.

Airport revenue and expenses from operations are segregated from the county’s General Fund in an “Enterprise Fund.” An Enterprise Fund accumulates revenue and expenses from any operation intended to be self-supporting and which neither contributes to, nor is subsidized by the County General Fund.

The airports apply for grants from the Federal Aviation Administration (FAA) to make capital improvements related to aeronautical operations (e.g. landing and taxiway installations, lighting, navigational systems, fencing, safety aids and other operational related infrastructure). As a condition of these grants, the county has entered into federal contracts that require:

  1. any capital recovery excludes facilities installed under FAA grants

  2. operation of the airports is continued for 20 years from the date of each contract

  3. land use controls are enforced in the airport vicinity
The FAA contract requirements do not apply to hangars, tie-downs, leases, or concession agreements for non-federally funded facilities, or to improvements other than aircraft operations.

The Grand Jury interviewed Airport Division and Public Works personnel, inspected facilities at both the San Carlos and Half Moon Bay airports, and reviewed master plans and financial records provided by the Public Works Department and the Internal Audit Division of the Controller’s Office.

The Grand Jury also performed a limited review of Santa Clara County airports; Reid-Hillview, a major regional airport comparable to San Carlos in size, installations, and scope of operations; San Martin a smaller airport, in some respects comparable to Half Moon Bay; and Palo Alto Airport, jointly owned with the City of Palo Alto.

Findings:

In 2000 the San Mateo County Controller found the airports had an accumulated deficit in excess of $2,000,000 from un-reimbursed past support from the County General Fund. More recently, the Controller reported that the Airport Division increased its operating cash balance from $644,000 to $1,229,000 for the year ending June 30, 2002. These funds have not been used to repay the accumulated deficit.

Most airports in Bay Area have long waiting lists for hangar space. Rental rates for off-site private hangars adjacent to the San Carlos airport are higher than those at the airport.

In 2000, the County Controller made recommendations for revenue enhancements of $198,000 that included increases in non-aviation storage fees, well water charges at Half Moon Bay, fees for governmental uses, general increases in hangar and tie-down fees, and rental increases. The Public Works Department agreed to implement these recommendations over time to avoid abrupt negative impact on airport users.

In 1999, the Santa Clara County Board of Supervisors ordered a management audit of its Airports Division. The independent auditor, Harvey M. Rose Accountancy Corporation, made a number of major recommendations. The following is a comparison of that audit’s recommendations with San Mateo County’s current practices (in italics):

  • Repay improvement contributions to the County General Fund. San Mateo County officials rejected this concept on the basis that FAA contracts disallow such recovery; and that it would present a financial burden to airport users.

  • Repay prior operating contributions. San Mateo County officials believe this, too, is disallowed by the FAA contracts.

  • Pay interest on unpaid improvement contributions. San Mateo County does not currently pay interest on unpaid improvement contributions.

  • Charge private operator rates for hanger rentals and tie-downs. The fees charged by San Mateo County airports are less than the market rate.

  • Charge market rates for concessionaires. San Mateo County is renegotiating its rental rates

  • Charge market rate fuel flowage charges. San Mateo County airports currently charge market rates.

  • Charge market rate land and building rentals and leases. The fees charged by San Mateo County airports are less than the market rate.

  • Charge fees for vehicles parked over night. San Mateo County does not charge transient parking fees.

  • Maximize compatible non-aviation commercial development. San Mateo County does not stimulate non-aviation commercial development.

  • Consider new hanger construction. San Mateo County is currently reviewing new hangar construction at San Carlos Airport.

  • Empower airport manager to make interim rate changes. The San Mateo County Board of Supervisors does not authorize airport management to make interim rate changes.

  • Utilize the county airport commission more fully. San Mateo County does not have an airport commission.

Conclusions:

County airports have historically been operated for the benefit of the flying public at the expense of the county.

San Mateo County has not examined its airport management to the extent of the independent audit performed for Santa Clara County.

The Santa Clara County audit report furnishes a useful analytical tool to consider revenue enhancement and oversight opportunities for the San Mateo County airports. The value of the overall financial analysis and detailed recommendations in the Santa Clara audit suggest it would be prudent for San Mateo County to reexamine its present policy regarding airport repayment with interest of contributions from the County’s General Fund.

Recommendations:

  1. The Board of Supervisors should:

    1. Require the Airports Division to repay the County General Fund for past airport capital improvement contributions to fullest extent allowable under FAA covenants

    2. Permit airport management to make interim rate adjustments to reflect current market conditions

    3. Create a county airport advisory commission responsible for long term planning that is representative of the geographical areas of the county, the aviation industry, airport users, and county residents.

  2. The County Manager should:

    1. Investigate the specific recommendations contained in the Santa Clara County airports audit to identify opportunities that might be implemented for the benefit of San Mateo County airports.

    2. Develop fee structure that ensures the county is fully reimbursed for all expenses and advances to airport operations on an ongoing basis.

    3. Develop and submit for approval by the Board of Supervisors, a repayment schedule with interest to reimburse past contributions from the County’s General Fund.

    4. Direct the creation and publication of separate financial reports for the two airports and inform the public of the financial performance of each airport.

Responses
© 2014 Superior Court of San Mateo County