HomeMy WebLinkAboutStaff Report 311-09TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER
DATE: JULY 20, 2009
REPORT TYPE: Informational
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 311:09
SUBJECT: Progress Report # 3 on Negotiations with Santa Clara County and Other
Steps to Facilitate City Oversight of the Palo Alto Airport
This is an infonnational report and no Council action is required.
BACKGROUND
The 50-year lease between the City and the County of Santa Clara for the Palo Alto AirpOlt
(PAO) tenninates in 2017. On December 12, 2006, the County Board of Supervisors approved a
business plan for the Palo Alto Airport (PAO) that would:
1) Delay, by six months, action on the County temlinating its involvement in PAO in.2017
01' earlier if desired by the City in order to provide the City an opportunity to present the County
with viable development options for PAO and time to negotiate those options;
/
2) Limit future County capital investment in PAO to the local matching funds necessary for
essential, non-deferrable, Airport Improvements Project (AIP)-eligible maintenance projects, or
security-or safety-related projects mandated by Federal agencies;
3) Require the City to submit all future AlP grant applications; and
4) Raise tie-down rates and fuel flowage fees to help make PAO financially seJf~sustaining
and recover as much of the County's original investment in PAO (referred to as "Outstanding
Advance") as possible prior to the lease expiration,
On December 18, 2006, in response to the Board of Supervisors' offer of an early termination of
its lease with the City, the Council authorized the ereation of the Palo Alto Working Group
(P AA WG) to analyze P AO operations and develop one or more viable business models for PAO.
CMR:311 Page 1 of 10
On June 4, 2007, the PAAWG recommended that the City Council:
1) Direct the City Manager to negotiate an early tennination of the existing P AO lease
with the County;
2) Appoint an interim manager for PAO; and
3) Issue an RFP for the long-term management of PAO, ensuring that its asset value to the
eommunity is maintained and that its economic value is preserved into the future.
On November 13,2007 (CMR 418:07), the Council directed stMfto begin negotiations with the
COlmty on an early termination of the lease and to commence work on the items set forth in the
November 13, 2007 staff report. The Couneil also directed staff to provide progress reports to
the City Council every six months. On December 8, 2008, the Council adopted the PAO
Mission Statement proposed by the Palo Alto Joint Community Relations Committee
(PAAJCRC), a joint County/City committee formed in 1987 to address PAO issues and
eoordinate PAO activities. The Council also accepted the proposal from R.A. Wiedemann &
Associates for preparation of a Palo Alto Airpprt Business Plan and Community Value Analysis
(P AO Business Plan), authorized the City Manager to execute a $105,000 contract with R.A.
Wiedemallll based on its proposal, and adopted a Budget Amendment Ordinance in the amount
of $80,000 for increased funding for the preparation of the Airport Business Plan (CMR's
361 :07,418:07 and 440:08).
DISCUSSION
As directed by the Council, this third biannual progress report on City oversight of the PAO
updates the aetion and information items presented to the Council in the November 18, 2008
second report. This report update: 1.) a discussion about staff c~mcerns with negotiations with
the County; 2.) a response to a Council discussion about the possibility of closing PAO; 3.) an
update on the status of the Palo Alto Airport Business Plan and Community Value Analysis; and
4.) staff's progress on the 12 PAO action items assigned by the Council on November 17,2007
and reported on in previous biallllual reports, including one new item staff has added to the
original list of 12.
Staff concerns with negotiations with the County
The first of the 12 action items ,is an update on negotiations with the County ine1uding the
"Outstanding Advance." Due to City staffs concern about a change of direction on the part of
County staff in the negotiations for an early termination of the lease, the update on negotiations
has been separated from the remainder of the list of 12 items for discussion here.
The outstanding advance is the difference between the County's total capital investment,
including grant matching fees, and the net revenue generated over the term of the PAO lease.
The outstanding advance as of June 30, 2008 was $757,285, and, by June 30, 2009, the County
estimates that it will be about $600,000.
CMR:311:09 Page 2 of 10
In previous discussions, County staff had expressed a strong desire to return PAO to the City
because the PAO operated at a loss, the County had all of the risk, and there was no potential to
increase revenue. Last year, the City and the County tentatively agreed to an early transfer of the
lease on July 1, 2011. Initially, County staff proposed waiving the outstanding advance if the
City would take back the airport prior to 2017. However, in a January 2009 meeting, County
staff seemed less interested in terminating the lease early and backed down from recommending
a waiver of the outstanding advance. At two recent meetings of the County Airport Commission,
County staff suggested that it had never offered to return the airport to the City prior to 2017.
Later in an e-mail, County staff suggested it was the City that was creating the urgency to
terminate the lease early, and that although the early termination would be up to the City, the
County was still willing to manage PAO to the best of its ability and abide by the terms of the
lease until 2017. City staff believes that the County Board of Supervisors opened the door to an
early termination of the lease by adopting its Deeember 12, 2006 ·PAO business plan which
suggested the City could take back the airport earlier than the 2017 lease termination date if it so
desired.
The County business plan, for the remainder of the lease term, also limited spending to essential
non-deferrable projects mandated by the FAA and direeted its staff to re-coup as much of the
outstanding advance as possible by increasing fees each year. The increase in fees began in Juae
of 2008 with an 8% increase in tie down fees and a 10 cent per gallon increase to the fuel fee.
County staff recommended another 8% increase to tie-down fees on May 19,2009; however, the
Board of Supervisors delayed any increase until the County Airport Commission can hear from
affected pilots. Despite the downturn in the economy and the loss of tie-down tenants, County
staff is recommending another 8% increase in two years to the PAO tie-down rent with no rent
changes at either of the County's other two airports. A recent survey of the PAO pilots (see
Attachment A) undertaken by the City's business plan contraetor, Wiedemaun and Associates,
revealed that significant changes in pricing will cause a number of pilots and at least one
club/flight school to move to other airports, thereby reducing the revenue reeeived from PAO
instead of increasing it. In June of 2007, there were 16 vacant spaces. A recent County Board of
Supervisors staff report stated that there is currently a 14% vacancy rate at PAO (50 vacant
spaces). If only 25 more pilots move to other airports, any increase in the income from the
proposed 8% fee inerease would be eliminated. If PAO were to lose a club/flight school, it will
take years to re-eoup the revenue loss.
City staff is very concerned that the County's decisions not to invest in PAO unless required by
the FAA and to re-coup as much of the outstanding advance by increasing fees beyond the
market rental, are forcing the City to take back the PAO early. If the City were to wait until
2017, there is a concern that the airport's condition will be severely impacted without an efficient
source of income to continue operating PAO.
Also, conceming the Outstanding Advance, City staff believes that it stems from money that
came frolll the County's General Fund and not the PAO enterprise fund, and that these initial
funds were used to build a levee and realign Embarcadero Road when the County leased both the
Airport and the Yacht Harbor from the City. The County has been unable to produce any
documentation showing this initial investment by the County general fund was to be paid back. If
the outstanding advance was to have been re-paid, it is reasonable to assume that the County
would have increased fees at the beginning rather than the end of the lease with the City. A
CMR:31 Page3 of 10
gradual increase in storage and fuel cost would have been less burdensome to the pilots, and
could have been spread out over a number of years instead of the 7 1/2 years remaining on the
lease. Therefore, the Council has taken the position that the outstanding advance was a grant, not
a loan, and should not be repaid by the City.
Response to Council discussion that PAO be closed
Closing the PAO was suggested at the Council meeting on December 8th of last year. It is
important to note that PAO projects are funded by FAA grant money, and a condition of those
grants is the guarantee that the life of the airport will extend for 20 years beyond the date that
funds are granted. Currently, there are two grants for which the 20 year requirement extends
beyond the 2017 lease termination date, including one, approved by Council, requiring the PAO
remain in operation until 2026. There are also five proposed projects requiring FAA grant
funding in the next three years (see graph on page 8). If approved, these grant requests for 2013
would require that the City guarantee to the FAA that the PAO remain open and operating as an
airport until 2033.
PAO Business Plan and Community Value Analysis
In December of 2008, the City entered into a contract with RA. Wiedemann & Associates for
the preparation of a Palo Alto Airport Business Plan and Airport/Community Value Analysis
(PAO Business Plan). Since then, Mr. Wiedemann and his staff have collected data by holding
group meetings, individual interviews, and a survey of all parties having an interest in PAO. In
addition to revealing that some pilots and businesses would move their planes and/or business to
other airports if the County continues to increase the tie down fee, the survey also revealed that
the average annual expense per plane was $21,000. This is a significant amount, most of which is
spent in Palo Alto. The final PAO Business Plan will include a market analysis, a financial
outlook, suggestions on a management structure, a pre-and a post-2017 financial plan and an
economic impact analysis. Wiedemann & Associates is expected to complete a draft of the
PAO Business Plan by the end of September 2009.
Item o.lNote
According to data collected by Aviation Resource Group International, PAO has been ranked
55th of approximately 20,000 general aviation airports in the United States for the number of
planes visiting its airport (67,432 in 2008). Staff believes this information will be highly useful
to "Destination Palo Alto" and supports the development of improvements targeting airport
visitors, such as a more welcoming terminal building.
Third biannual update on the action and informational items presented to Council on June 8,
2008 and December 8, 2008:
1. City/County Negotiations and the Outstanding Advance
Discussed above.
2. Federal A viation Administration (FAA) Grant Proposal Review
Page 4 of 10
FAA grant funding is based on a five-year airport improvement plan (AlP). Eligible projects
include those improvements related to enhancing airport safety, capacity, security, and
environmental concerns. Each year, the airport manager submits a five-year AlP to the local
branch of the FAA. The County's current proposed 5-year AlP projects are as follows:
PROJECT COST YEAR
:
1) Signage, Runwayrraxiway $150,000 200912010
: Marking Changes lAW FAA I
I RSAT Recommendations
2) Reconfigure Taxiways G $400,000 201112012
and Z to comply with FAA
Standards
i 3) Construct Helicopter $250,000 201112012
Landing Pad and Parking
4) Construct Exit Taxiway D $120,000 .20ll/2012
I
: 5) Pavement Maintenance for $300,000 200912010
I Existing Runway, Taxiways
I and Aircraft parking
: 6) Overlay Existing Runway $2,000,000 201112013
I and Taxiways
Ideally, the FAA funds 95%, the state funds 2.5% and the P AO the remaining 2.5% of an airport-
related improvement. In reality though, many factors can drive the PAO share significantly
higher. In 2000, the County did a major overlay project at PAO (similar to what the County is
proposing to do in 2012). The County's share of the cost for this project should have been about
$50,000, but by the project's end, the County costs were $620,000. This cost was added to the
Outstanding Advance balance. Cost over-runs, lack of state funding and delays in the City
plal1l1ing nrocess were the reasons given by the County for the increase in the PAO share of the
final project cost. The next major paving overlay project is tentatively scheduled for the year
2013. Given that the County plans to use any additional armual PAO revenues to reimburse the
Outstanding Advance, the source of payment for PAO's share of the cost is not yet identified.
There is also a concern that due to the current national economic situation, the FAA may reduce
its current 95% share in airport improvement projects.
3. Current FBO and City/County lease agreements and grant review
Two Fixed Base Operators (FBO) at PAO have long-term leases with the County that will expire
in 2017. Neither of the FBO's are willing to make any major future investment in the PAO
without a lease extension beyond 2017, which would allow time to amortize their investment. It
CMR:311:09 Page 5 of 10
,
:
I
is estimated that the combined net annual profits of the two FBO's, from their subtenants, are in
excess of$1 million armually. According to FAA grant rules, any income generated at an FAA-
funded airport must be spent at that airport. lfthe FBO leases expire in 2017, this FBO revenue
could be used to make improvements to the PAO. In 2008, the two FBO's eombined rental
payment to the County was approximately $135,000. The Palo Alto Airport Business Plan will
address FBO leases in greater detail. However, the amount of FBO net annual income
demonstrates that the airport can be self-sustaining and that FBO leases must be rewritten to
strikc a balance between their profit level and profit to the airport.
Thc term of thc lease between the County and the City is 50 years until 2017, with an annual
payment of 50 cents per year. Once the County made its initial investment in the PAO years ago
and ereated the Outstanding Advance, it has not made any major investment in the PAO except
for FAA grant eligible projects. This lack of investment is evidenced by the airport offices
(terminal), which are housed in a temporary trailer abandoned by a former tenant.
4. Airport comparisons
Data so far indicates that most California municipal airports have additional som'ces of income
from non-aviation uses and are operated by the respeetive city or county public works
departments as enterprise accounts. PAO income is solely derived from airport users, and City
operation and management may not be the best solution for PAO. A number of individuals and
organizations have expressed an interest in managing PAO. Interested parties include a company
that is currently taking over the management of the Oceanside Airport fi-om the City of
Oceanside in southern California. Mr. Wiedemann will include in his report the pros and cons of
the different kinds of airport management.
5. Staffing needs assessment
Currently, on-site, 7-day-a-week staffing at the PAO consists of two full-time airport operations
workers and a part-time supervisor. County management ofPAO also includes three managers
and one support staff employee located at the Reid-Hillview Airport. The off site managers are
responsible for applying for FAA grants, addressing noise complaints and performing other
administrative duties. Their expenses are equally divided among all three County airports. There
is also one senior accountant, located in the head offices of the County Roads and Airports
Division, who is responsible for collecting rental payments and prepruing accounting fOlIDs.
When the services of the accountant and any other County staff ru'e required, their time and
overhead is charged to the PAO enterprise fund.
6. USGS topographical maps and global warming
The San Frrulcisco Bay Conservation and Development Commission (BCDC) anticipates that in
2100, the bay waters will rise by one meter, high enough to submerge all the land within the
Palo Alto City limits east of 10 1, with the exception of portions of Bixby Park. The Army Corp
of Engineers and the County of Santa Clara Water District are taking this information into
account as part of their levee analysis. The answer to global warming and the increase in the
overall water level in San Francisco Bay is not just a question fbI' the PAO but for a large portion
Page 6 of 10
of the City and the entire Bay Area. Staff believes that, whatever the solution, PAO will remain a
viable airpOlt for many years to eome.
7. Comprehensive economic study & hazardous materials analysis
A. Comprehensive Economic Study
Mr. Wiedemann is proposing to complete a draft of the Comprehensive Economic Study in
September 2009. Once the report is reviewed and finalized by staff, it will be presented to the
Finance Committee for review prior to proceeding to the full Council for review and approval.
B. Hazardous Materials Analysis
A typical hazardous materials analysis is undertaken in three phases. The first phase is a historic
and current review of the use of any hazardous materials, such as the location of any
underground storage tanks and past investigations. The second phase is an actual onsite
investigation that may include test borings and soil sampling. The third phase is remediation of
any issues discovered in phase two. An outside contractor has completed the first phase. Due to
the long-term use of chemicals and aviation storage facilities at the airport, the contractor has
recommended a phase-two investigation be undertnken at several suspected locations. Staff
recommends that phase two be undertaken as soon as possible. Staff will return to Council with a
cost estimate for phase two of the Hazardous Materials Analysis and a request for funding.
8. Metropolitan Transportation Commission (MTC) general aviation review
The MTC is in the process of completing a future needs assessment to determine what the
commercial flight demand will be at the three Bay Area international airports. Following the
demand assessment, the MTC will begin an analysis of alternatives for reducing non-commercial
use and small commercial connector flights at the three international airports. Removing or
reducing this non-commercial trafflc will have little effect on P AO, because its nmway is too
short to accept jet traffic, and there is very little space to accept additional aircraft. One
alternative that may have an effect on PAO, due to its close proximity, is opening Moffett Field
to either non-commercial flights or general aviation. However, the cities of Sunnyvale and
Mountain View have already expressed their opposition to any increase in airport use at Moffett
Field, and it is doubtful that NASA, which currently controls Moffett Field, would allow non-
commercial flights or general aviation at Moffett Field. MTC staff estimates that it will take
several years to approve any proposed future increase in air traffic at Moffett Field. As a side
note, two other alternatives to be evaluated by the MTC are the impact that the bullet train will
make on Bay Area airports and the possibility of improving the south county airport to handle
commercial connector flights. Staff will continue to monitor MTC's evaluations and
discussions for potential impacts on PAO.
9. US Army Corp. of Engineers levee report
The San Francisquito Creek Joint Public Agency (SFJPA) is pursuing "medium-term" flood
control improvements downstream of Highway 101 and has targeted breaking ground on the
project in the spring of2011. The SFJPA has presented its medium-term alternative solutions for
CMR:3J1:09 Page 7 of 10
improvements to SF Creek to the Council and will vote on an alternative soon. In the meantime,
the Army Corps of Engineers/JPA Joint Feasibility Study of comprehensive flood control options
continues. The completion datc is still several years away and is highly dependent on Federal
Funds being approved each year.
10. Review of County Financial Statements
The City Auditor's June 2006 report on the Airport's financial condition was discussed at length
in the September 18,2007 staff report (CMR 361 :07). An update of the projected PAO financial
position will be included in the Comprehensive Economic Study. The PAO 2008-09 financial
report is due in late 2009. This report will give the City an indication of how last year's increase
to the tie-down and fuel fees affected revenues.
11. Council consideration and development of the Airport mission statement
On November 18, 2008, the Council adopted the following Mission Statement:
• To operate a safe, efficient and cost-effective airport providing for general aviation
operations within limits imposed by its size and location.
• To operate in conformity with all applicable laws and FAA requirements.
• To be self-supporting and operate without cost to the City's General Fund.
12. Outline of City obligations and responsibilities for PAO
An outline of City obligations and responsibilities for PAO, whether it operates or contracts out
PAO management, will be done as part of the Comprehensive Economic Study.
13. State Lands e1aim to ownership of Palo Alto Baylands
The California State Lands Commission believes that, by sovereign rights, it owns all of the
current and past wetlands in the state. Several years ago, the State Lands department and the
City of Palo Alto agreed to disagree as to which lands in Palo Alto were owned by the State
sinee both agencies are striving to protect wet lands. When both the PAO and the Yacht Harbor
were managed by the County of Santa Clara, the County entered into an agreement wherein the
State gave its permission for the County to have an airport and a harbor within the State's
jurisdiction. This agreement between the State and County should be terminated, and if
necessary, a new agreement should be negotiated between the State and the City prior to the
expiration or early termination of the lease with the County.
RESOURCE IMPACT
The resource impacts of the transition of PAO operations and management from the County to
the City will be considered as part of the Comprehensive Economic Study (CES) discussed
above. Staff will return to Council with an estimate and a request for funding of the Hazardous
Materials Level II analysis.
\.-lVl."" It :09 Page 8 of 10
POLICY IMPLICATIONS
This progress report is consistent with previous Council direction.
ENVIRONMENTAL REVIEW
An environmental impact assessment (EfA) may be required by the California Environmental
Quality Act (CEQA) and will be performed in conneetion with future Council decisions
regarding PAO.
ATTACHMENTS
Attachment A: Wiedemann and Associates Survey of Airport Users
Page 9 of 10
PREPARED BY:
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
cc: County of Santa Clara
JCRC
Chair of the P AA W G
CMR:311:09
Director, Administrative Services
Page 10 oflO
. ,
ATTACHMENT A
Palo Alto Airport
Draft Business Plan
Survey of Airport Users
Prepared for:
. City of Palo Alto, CA
Prepared by: '.f RA Wiedemann &
v~r Associates, Inc.
P.O. Box 621 • Georgetown, KY 40324 (502) 535-6570 • FAX (502) 535-5314
Appendix A:
Detailed Survey Results
Palo Alto Airport
Draft Bu,'iness Plan
Appendix A -Survey of Airport Users
June 2009
In early April, 2009, an Airport User Survey was developed and mailed to aircraft owners
that based their aircraft at Palo Alto Airport (Figure A-I). Approximately 500 surveys were
distributed. Prior to this mailing, the Airport User Survey was launched via www.Zoomerang.com
so that respondents could either complete and mail in the surveyor complete it online. The online
survey was administered via web link from the home page of the City of Palo Alto website
(www.cityofpaloalto.ol'g). Surveys were requested to be returned by May 1st. During this period,
a total of 145 visits were recorded on www.Zoomerang.com and 64 surveys were completed.
Additionally, 78 hard copy surveys werc submitted, for a total of 142 responses to the Airport User
Survey. A total of I 9 different cities and towns within California were represented in the responses.
AIRPORT USER SURVEY
1. Please list type of aircraft (specifY make & model)
A total of 129 based aircraft owners at Palo Alto Airport responded to this question. Aircraft
types included 148 single-engine aircraft and 9 multi-engine aircraft for a total ofl57 aircraft (some
respondents owned mUltiple aircraft). Nine other user surveys were submitted by users that do not
base their aircraft at P A O. They represented an additional 9 single engine aircraft, to bring the total
number of aircraft represcnted to 166.
2-3. Please estimate the total annual level of spending associated with your aircraft at your
home airport:
Using the cumulative totals for several expense categories, the average annual spending per
PAO based aircraft respondent included:
• $6,706 Annually for Fuel
• $5,999 for Maintenance
• $3,052 for Storage
• $2,350 for Aviation Related Taxes
• $2,276 for "Other."
• TOTAL $20,893
Combining all averages from these categories results in an average annual aircraft spending of
$20,893 (fuel, maintenance, storage, aviation-related taxes, and other) for the 129 respondents to this
question. Total spending for the 129 respondents to this question equaled $3,280,135. Some
respondents did not specifY annual spending breakdown by category as specified in the survey,
providing just total annual spending.
'M' B.A. Wiedemalln & Associates, Inc. A·l
Pulo Alto Airport
Drtt/t Business I1lan
GITY-tPALD ALTO
Alrcr~fl ('{moml, JII{""mtlt[oil
Eoonomlc Impftcl Assessment of
Palo Alto Airport
AIRPORT USER SURVEY
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JUlie 2009
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If the three flying clubs that responded were removed from the survey results (and the 23
aircraft that they represented in their answers) then the average annual spending at PAO per aircraft
is reduced to $18,462. Average breakdowns hy category of expenditure for non-flying club aircraft
were: $5,319 per year for fuel, $5,6\0 for maintenance, $3,195 for storage, $1,783 for aviation
related taxes and $1,957 for "other." '
4-5. Estimated Year{v Takeoffs at Palo Alto Airport and expected changes in the future:
Survey responses indicated that 137 aircraft users accounted for an estimated 115,466 annual
operations (57,733 takeoffs). One of the flying clubs reported having 80,000 annual operations. If
all three flying clubs removed from the total, the 134 remaining respondents averaged 206 annual
operations for a total 0[27,466 operations.
Of these respondents, 99 indicated that their activity would remain the same over the next
five years. Thirty respondents expected to increase their activity by a total of 11,200 operations
over the next five years. Eleven respondents indicated that they expected their activity to decrease,
and four of these are leaving PAO all together. Three respondents said that they al'e either going to
sell their aircraft or move due to high tie-down fees. The four respondents that stated that they were
,", R.A. Wiedemann & Associates, file. A-2
Palo Alto Airport
Draft Business Plan
going to leave spent a combined $33,896 per year on their aircraft at PAO,
June 2009
6. Lv there a pricing point at Palo Alto Airport that would cause you to relocate your aircraft
to a different airport?
One hundred and eighteen airport users responded to this question. Six respondents indicated
that there was not a pricing point that would cause them to move. The following is a sample of the
different types of responses:
•
• • • • • • • •
If prices increase,.may relocate aircraft,
business, or family
Must stay competitive with other airports
Have already reached pricing point/too high
If increase is greater than CPI/inflation
Yes, there is pricing point, but unspecified
Will sell aircraft or already have
Unclear
Wi II not move -unaffected by pricing
Yes, but not near that level yet
Percent of Total
28.0%
17.0%
11.1%
11.0%
11.0%
10.2%
5.9%
5.1%
5.1%
If several of these responses are combined, it becomes clear that significant changes in pricing in
the future will cause the relocation of aircraft and in some cases cause businesses to move to other
areas. Additionally, further price increases will cause some existing users to sell their aircraft (some
alrcady have). When these categories arc taken cumulatively, approximately 77.3 percent of
respondents indicated that either any increase at an, nr any increase that is significant (greater than
CPIlinflation or not competitive with other airports), will cause them to relocate their aircraft. Due
to the overwhelming response to this question, many responses are reprinted at the end of this
section verbatim.
7. If pricing or airport availability were to cause you to move your aircraft, would you be
willing to actually base your aircraft at any of the following alternative airports?
Moffett Federal (if available in the future)
San Carlos Airport
Mineta San Jose International
Reid Hillview
Hayward
South County Airport
HalfMoon Bay Airport
Other (speeify):
Percent of Total
36,9%
26.2%
12.9%
9.4%
9.0%
3.0%
2.6%
There were I6 respondents that specified other airports. Three identit1ed Livermore, two
,"r R.A. Wiedemann & Associates, Inc. A-3
Palo Allo Airporl
Draft Business Plan J/tne 2009
identified Watsonville and the rest were various other facilities in other counties, cities, and states,
8, Please estimate tlte percentage use (Business/Personal) of your aircraft?
A total of 135 Airport users responded to this question, The Airport users" indicated that 66
percent used their aircraft for personal reasons, while 32 percent used their aircraft for business
reasons, and 2 percent flew for other reasons, If these responses are weighted by the number of
nights flown, 83,2 percent of the nights were used for business reasons, while 16.4 percent of nights
were used for personal reasons and 0.4 percent of nights were flown for other reasons,
9. If possible, please explaill the importance of the business use of your aircrq{t to your
company or business
There were 90 responses to this question, Answers included the following general
categories:
% of Responses • Aircraft is criticaL No aircraft, no business 20,0% • Important part of business, al lows good service 29,9%
to existing clients and opcns new markets
• Provides access to hard-to-reach places where 15,5%
driving is too time-intensive • Use aircraft to commute to/from work weekly 10,0% • Offers time savings and increased effectiveness 7,7%
for executives who travel a lot
• Aircraft offers cheaper, faster, more convenient 6,6%
transportation than commercial nights
• Other miscellaneous 11.3%
Taken cumulatively, almost 90 percent of respondents to this question said their aircraft ranges from
critical importance (no aircraft, no business) to a cheaper, faster, and more convenient mode than
commercial travel for business,
Summary of Airport User Survey Results
In summary, there were several key points expressed as a result of the survey of Palo Alto
Airport users:
• A total of $3,280,135 was spent by 129 Palo Alto Airport users on their aircraft in
2008,
Average annual spending per aircraft was estimated at $20,900,
• One hundred and thirty-seven aircraft users that repolted an estimated 115,466
annual operations (57,733 takeoffs),
'M' R.A, Wiedemann &. A,fSociales. Inc, A-4.
Palo Alto Airport
Bllsiness Plan June 2009
• Impact of price increases: Approximately 77 percent of respondents indicated that
either any increase at all, or any increase that is significant (greater than
CPI/inflation or not competitive with other airports), will cause them to relocate their
aircraft.
• The top three airports that based aircraft users would consider moving to are:
Moffett Federal (if available in the future) 36.9%
San Carlos AirpOlt 26.2%
Mineta San Jose International 12.9%
Business users indicated that they rely on the usc of the Palo Alto Airport for:
• Convenience to their office facilities or commute to other office locations
• Conducting business at the airpOlt.
• Providing aviation-related services which are dependent on an airpOlt location.
Comparing the results of this Airport user survey with those from the Palo Alto Airport
Association (PAAA) membership survey conducted in 1995, there are a couple of similarities.
These similarities are:
• Terminal Facility/Services: The 1995 survey noted a need for a nice restaurant on
the airfield or within a block for pilots and to encourage fly-ins, in addition to better
restroom facilities, and enhanced services such as pilot's lounge with access to
weather information where pilot's could share operations and maintenance
information. Respondents to the 2009 Airport User Survey mentioned that the
existing restaurant is closed too often, that restroom facilities were inadequate, and
there is an overall lack of services offered at the Airport.
• Business Impacts of the Airport: The 1995 survey mentioned a number of facility
improvements that are necessary to support continued and effective business use,
such> as: A WOS for night-time operations; ability to contact Bay Approach when the
ATCT is not manned; and, a full-service FBO to serve transients, Respondents to
the 2009 Airport User Survey reiterated how important pricing was, in terms of
suppOlting the economics of aircraft use for business purposes.
Detail of Question #6 -Pricing Point
During review of the responses to the Palo Alto AirpOlt User Survey, it became clear that
pricing is a very important issue for users. Listed below are the responses to Question #6, 'Is there
a pricing point at Palo Alto Airport thai would cause you to relocate your aircraft to a difJerent
airport?' This verbatim listing provides insight into attitudes of airport tenants toward pricing
changes at the Airport.
,~, R.A. Wiedemanll & Associates, Inc. A-J
Palo Allo Alrpol't
Draft Business Plan June 2IJ09
• Eventually the airplane is my primary commute vehicle and Palo Alto is the best location.
Palo Alto has to stay comparable to others.
• Yes would move to Palo Alto if hangar were available for $350 per month.
• Yes $125/month for a tiedown is somewhat expensive. Ifthis increases or their charges are
imposed, I would consider not using my plane for commuting to PAO.
• This airport is already more expensive than others. There are no hangars available at the
airports.
• Use fees for landing and taking off or much higher tie downs would lead me to consider
alternatives. Limited access to PAO would likely impact whether I do business in Palo Alto
or immediately surrounding area.
• Yes the hangars rental are very high and we may move to Oregon. State taxes are out of
control with the "use tax." Oregon does not have this.
• Yes, if the tie down fee increases beyond a reasonable amount.
• I currently pay $250 for my hangar in Jackson. It would be hard to justify paying more than
that for a tie-down in Palo Alto.
• Closeness to home is the best feature ofPAO.
• As a flight school wc will move if the economic climate at PAO is not conducive to our
business.
• The point at which I lose money or decide the risk isn't worth the profit.
• Tie down cxpenses are killing us. Please do not raise them. Alternatively, we need a volume
discount.
• It's already so high that I think often about relocation.
• It is hard to provide a specific number, but if the tie-down or tax fees go up too much higher
than current levels I would either relocate the airplane or sell it. I do not tie the airplane
down at SJC, for example, because the fees are simply too high to be acceptable. I cannot
afford to pay for even the current hangar rent at PAO, for example, and tie down the airplane
in an attempt to maintain reasonable operating costs.
• My tie-down space is the single largest annual expense after maintenance. In the past 13
years I've had the plane at PAO, the cost has increased with the cost of living, which is fair
enough, though expensive. However, if the cost were to be increased beyond the rate of
inflation--especially in these reeessionary times--I would have to look for alternatives, either
relocating the plane or selling it.
• No. I am moving to the Lake Tahoe area later this year and will maintain a part-time
residence in Palo Alto.
• Yes, but not sure what that point is. It depends on the options available. One option would
be to sell the plane. Very undesirable!
• There is no single factor (price point) that would cause us to move. I do not think current
prices are unreasonable. I wish you would spend more money on improving the airside
facilities and less on security fences.
• If hangar and fuel prices increase too much above nearby airports
• A further increase in tiedown fees would likely push me to seriously consider moving the
plane to San Carlos Airport.
• Tiedown is already too expensive.
• Yes, though it also depends on pricing at neighboring airports such as San Carlos and Reid
1"' R.A. Wiedemann & ASSOciates, Inc. A-6
Palo Alto Airport
Draft Bus/ness Plan
Hillview.
• Yes -very difficult.
June 2009
• Yes, The hanger prices are 3x that of other regional airports. I chose PAD because it is close
10 home/work. I am considering moving the airplane.
• No.
• If tie-down rent went up any more, I was going to move to RHV. However, I just sold the
airplane.
• Yes. While Palo Alto is the most convenient for us, there are several alternatives that are
close enough to consider if the price difference is significant.
• If there was a substantial increase in storage and/or fuel costs, I would go to Moffett, if
available. The other airports mentioned don't make any sense.
• Palo Alto is already a profitable airport and the city profits in many ways from the general
aviation flights that are provided. Greed in the form of unwarranted fee increases would
cause me to seriollsly seek alternative location for my plane.
• If the tie down and other fees and charges increase to an unreasonable level.
• The other local choices are San Carlos, San Jose, and Hayward. San Caflos and Hayward
are slightly less expensive but farther away. San Jose is much more expensive and farther
away.
• I can drive to Hollister and keep the plane in a hanger for the same price as the increased
county outside tiedown rates. My new rate will be $308lmo. I plan to move my airplane
outside of Santa Clara County.
• Fuel I can always buy somewhere else, but increased tiedown fees would drive me away at
about 10% more than I am paying now.
• If it became much more expensive than it currently is.
• Tie-down fees are important for me as that is a fixed monthly fee.
• Yes, I'm already there. I'm in the process of making arrangements to move my airplane to
either SQL (where I have a hangar with another airplane), Hayward, or Reid-Hillview.
• I'm close to it now, but ifSJC and Moffett remain GA non-options, I'll probably just sell the
plane rather than relocate it. Relocating anywhere else would make flying inconvenient
enough that I probably wouldn't fly enough to warrant keeping a plane.
• I'm losing money now renting the plane through West Valley Flying Club so any significant
increase might tip me to sell it.
• Hangars are way too expensive, when compared to other counties. IOOLL fuel is also too
expensive. Why is it so much cheaper at, say, Tracy or HalfMoon Bay or Gustine? You're
losing my fuel business by pricing it so high. Knocking about 10-20 cents per gallon off
would dramatically increase business.
• 1 had no idea that I was spending this much, annually, on my airplane. This simple exercise,
for the sake of responding to this survey, gives me pause as it is. Any meaningful price
increase will see me retiring from flight.
• I don't know. '
• Will move if price increases.
• There probably is, but I do not have a specific price point in mind at the moment.
• Yes. Don't know at what point I would move.
• Remaining married is fundamentally incompatible with further increases in hangar rent, and
'Nr R.A. Wiedemann & Associates, Inc. A-7
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Draft Business Plan June 2009
my hangar is dominant in cost of my aircraft ownership. We are not wealthy, and this
expense is a point of friction at home. If the cost were to rise substantially, I would be forced
to seH this aircraft that I built myselfand is the fulfillment of my life's dream.
• Any landing fees will cause me to relocate. Any more rent increases may also mean that the
aircraft needs to be relocated.
• Have not thought about it that way.
• Not really. I live in San Francisco and choose 10 keep my plane because of the lower,
maintenance facilities and tie-down cost.
• Yes ... nol sure.
• Tie down costs above $175.
• No --r would sell the airplane.
• No.
• Yes. High storage and fuel costs drive away owners, particularly where business expenses
aren't supporting costs.
• I am currently a renter of aircraft based in Palo Alto. Palo Alto Airport rental pricing I
believe is on the high end of the range in the Bay Area already. However, I would accept a
modest increase in fees rather than closure oftne airport.
• Vcry near my limit now. Reid-Hillview is slightly farther to drive, and historically
maintained my plane (annual = thousands/yr, $13k last year includes an incident repair).
Longer runways and drier environment.
• That "point" was reached in summer of 2007. Losses were extreme -had to sell my
airplanes at the rate of I per year (IRS limit). Two sold in 2008 & 2009 -third going next
year.
• Storage fees would have to be $100 more per month than nearby airports to make us
relocate.
• Of course! [ own 3 aircraft and I have already moved 2 of them to places like Watsonville
and Central California. We fly because we love flying not necessarily afford it. When family
financial pressures overcome the joy we find other alternatives. Everyone t1ies
commercially. Where do we think these pilots come from? I have two sons less than 25 and
they are both pi lots. Why? The familiarity is passed down from generation to generation.
PAO should embrace flying and look for Fed Gov support as well. Flying is a contribution
to our nation -a precious resource. We need to recognize that. I have been at PAO for over
25 years -in the nineties I moved to San Carlos for two years beeause pricing became
outrageous.
• Hard to answer --pricing point for hangar/tie-down? For fuel? For maintenance? Or a
combo of the above? 'nle answer is YES, but I'm not sure how to quantify it.
• It is very close to that point now. I am considering a move to San Carlos due to prices and
the extreme neglect that the county is showing to PAO. Runways are degenerating,
increasing wear on the aircraft. We pay more for less than any other airport. Additionally,
unused space on the airport needs to be developed for more hangars" which would also
increase revenue for the city/county.
• We are already at the limit of hangar cost. Would consider moving to tie down if hangar
costs increase. Another issue is the decline of services at Palo Alto Airport.
• Yes. Aviation is already too expensive and each cost increment pushes me closer to selling
,", itA. Wiedemann & Associates, file. A-8
Palo Alto Airport
Draft Business Plan
the airplane.
June 2009
• Yes, iftiedown/storage costs were to escalate from their current level or local fuel taxes were
to make Palo Alto uneconomic to refuel.
• Yes but depends on pricing at other local airports.
• If you can't afford to stay you will be forced to move.
• A very small amount ok, but very large, no. Pricing very high now. If you have a pricing
problem give the Airport to San Mateo County.
• Reduce fuel cost, current providers have monopoly contracts. Build more hangars to
increase revenue.
• Yes if affordable hangar space became available. Yes if the tie down fees increased
disproportionately or ifI can't get the maintenance and services that I need.
• Yes overall expense currently high relative to use.
• You are very close to my limit.
• Yes if rent, fuel, operation fees, storage fees as well as use friendliness became untenable,
we wou ld move to a more user friendly airport.
• Difficult to say, but 8 percent is very steep.
• No.
• More than San Carlos, or reduction in service.
• If significantly more overpriced than San Jose or Reid Hillview we would move. However
we like it here.
• Obviously. Is this some sort of make work project for hureaucrats? This has been done
multiple times for decades since I have been atPAO.
• No-Location is important for business purposes.
• Yes. I am basically fixed income, and ifI can't fit aircraft ownership into my budget, I will
sell the aircraft (which would likely move it away from Palo Alto).
• It's getting close to my limit now.
• Yes. The prices are considerably higher than the rest of California.
• At this point no. The only real variable is the tie-down. It would be cheaper anywhere else
but at this point is not offset by the convenience. I am considering a move to get a hangar
in spite of the convenience factor.
• Taxes and parking fees are very high. If they increase more then the cost of living I will sell
or move.
• Possibly; convenience is worth about to -20 percent at the moment.
• Yes, if parking and fees exceed fair market value for the bay area.
• Could consider relocating if storage and other use taxes were increased by 10-20 percent
over other nearby airports.
• The tie down fee, changed by the count at this time is excessive and to go up even fUithel'
(8% each year) it is out of line with surrounding airports. Probably >$150 per month
tiedown would make me move.
• Yes, if tie-downs exceeded San Carlos significantly, I'll relocate to San Carlos.
• I don't have another choice since I have a hangar at PAO.
• No. When I can't afford it, will sell plane and stop flying
• If fees increase to much I may move to hangar equipment in Hayward since turbine
operations are permitted there.
,", R.A. Wieflemann & Associates, Inc. A-9
Palo Alto Airport
Draft Bllslness Plan Jllne 2009
• The $120.50 is substantial compared to other airfields. A full hangar can be gained for that
elsewhere.
• This is a difficult question. Of course there always is a price that would cause me to move
but we are a long way from that price.
• If I gave a price point, I might be charged that much. Palo Airport users already pay much
more than other airports in the area. It should be $100 per month or less.
• No-within reason.
• Palo Alto has relatively poor asphalt surfaces, a lot of potential conflicts with birds and a
regular cross-wind. If tiedown prices arc raised too high the convenience of having my
aircraft close will be outweighed by costs.
• Of course but I don't know what it is off hand.
• Palo Alto is relatively most convenient for me than Reid Hillview. I'm willing to pay a small
premium for this convenience maybe 10 or 15 percent.
• Flying is a hobby for me now, and an expensive one so I am looking to manage expenses
where I can.
• Any increase in costs at Palo Alto compared to costs and another local airport.
• Although the airport management does a good job, it has always (last 25 years personal
knowledge) seemed that the city dcesn't appreciated the asset that the airport represents. If
some of the proposed improvements were made (Le. new terminal, shade hangars, etc., we
would be willing to accept a raisc in pricc.
• Hayward is closer and cheapcr and offers better services even a maintenance stall for
owners. I can get a hangar for $214 per month.
• The parking/tiedown fee is one of the highest. If it is to be increased by ) 0 percent I would
have to rethink about relocating.
• Hangar pricing is the big factor for me. It will either come down or I will relocated
• Definitely and it is approaching that pricing point now. $129.50 per month is simply far too
much to pay and is higher than any other airport far and wide San Carlos-San Carlos tie
down rates are S20 cheaper per month than Palo Alto's. I was previously at San Carlos and
would go back.
• The price point has been reached. Parking at Livermore is $75 per month. Palo Alto is
$129.50 per month. A few years ago there was a 2 year parking spot wait list. Now there
are 30 to 40 empty spaces.
• If the fees at Palo alto were to be greater than other airports by a significant amount I would
definitely relocated.
• Any increase in cost that is greater than the current CPI makes me increasingly considering
moving. That said Palo Alto Airport is essential for the conduct of my business and my
transportation.
• Over $200 per month and property tax would get me to ask "is it worth it" to feed the
financial wants wishes of Palo Alto.
• Palo Alto Aero is an intermediary. We should pay the county and city nota private compaflY
for hangars.
• My aircraft is currently hangared. Because of that, it looks like new and most owners of new
aircraft would be happy to pay fair market rent for hangar space. Other than that no.
• Probably there is, but it would depend on the alternative airports pricing.
I"' R.A. Wiedemann & Associates, Inc. A-IO
Palo Alto Airport
Dfl/lt Business Plan
• Convenient to home.
• If costs grew by 1.5x I would sell my plane.
• It's too expensive now.
June 2009
• An increase in tie-down cost move to South County or Byron. Fuel at PAO is higher than
most others.
• Yes if the tie-down fees were raised too much then it would be worth my time and move to
a nearby field.
• Yes, we are pretty much there. Any significant increases.
• Yes you have already passed it my airplane is for sale.
• Yes rates are high as is. Overall price of flying is increasing while my income has
dramatically decreased.
• Any increase over inflation would have me move to Half Moon Bay
• Not sure.
• Yes. Other locations within 20 miles are cheaper.
'Rr R.A. Wiedemallll&;Associates.IlIc. A-ll