Airport Commission approves plan to repay FAA grant funds
July 17, 2020
The main topic of Monday's Alva Airport Commission meeting was how to repay borrowed Federal Aviation Administration (FAA) grant funds.
When the FY 2018-2019 audit was completed, Alva city officials learned money had been borrowed from some restricted funds to pay bills. The auditor said while not illegal, it was bad accounting practice. The funds should have been replaced before the end of the fiscal year. This borrowing also occurred in the preceding year but involved a smaller amount.
Airport Commission members were concerned because a total of $974,984 was borrowed from restricted airport funds that were being accumulated from FAA grants to be used in future projects. Adding to this concern, an FAA hotline complaint was filed. The FAA is requiring the city to provide a plan to repay the borrowed funds with interest.
During the meeting, City Business Manager Angelica Brady presented several schedules for repayment ranging from five years to ten years. All were figured at three percent interest, which is slightly above the current treasury rate.
Each of the plans was also divided into two amounts. Brady said the FAA wants two repayment schedules because funds were from two different years of FAA grants. One schedule was for $447,968 and the other for $527,016. The proposed monthly payments by the city range from $17,741.02 on the five year plan to $9,524.82 on the ten year plan.
Brady recommended the ten year plan saying she didn't feel the city should make a commitment they might not be able to uphold. She said the city is exploring the possibility of obtaining a loan to repay the funds immediately. That would have the advantage of getting funds back into the airport account right away while allowing the city to make payments over a longer period.
Mayor Kelly Parker, who is a member of the airport commission, said the bank loan might be a better option.
Brady added that the city already has commitments on vehicle and equipment lease-purchases that make it difficult to pay back the loan more quickly. Had they known they would be facing this, they might have opted to put off some of those purchases.
Flat City Budget
Due to this previous overspending and an unstable economy, the city adopted a flat budget with very little capital spending for the FY 2020-2021 year which began July 1. Brady said the only capital improvements will be grant-funded or will come from the remainder of the water-wastewater loan already in place.
She said department heads have been told there will be no new equipment purchases. If something breaks down and can't be repaired, the money for replacement equipment must come from other areas of their budget. Everybody is responsible for how they spend their budgeted money, she said. Some departments like the police and sanitation have begun doing some of the servicing of vehicles themselves to conserve funds.
The city has already made progress on the borrowed funds from the airport. Brady said they've whittled that total down to about $864,000.
Airport Commission Chairman Dale Logsdon mentioned the FAA would have to approve any repayment agreement. Brady said as long as the city provides a repayment schedule, she believes they will approve it. In the past, they have accepted repayments for terms as long as 40 years.
Commission member Paul Kinzie asked about city revenue projections. Parker said the city budgeted for flat revenues but it's "pretty uncertain." The first sales tax collection report for this fiscal year is about five percent under what was projected in the budget.
Kinzie said if classes at NWOSU go virtual as they did in the spring, Alva would suffer a "pretty good hit" in sales tax revenue. Other than utility bills (including water, sanitation and sewer charges), the main revenue for the city comes from sales and use tax.
Kinzie made a motion, seconded by Terry Turner, to accept the ten year payoff plan. The motion passed unanimously. The city still may investigate the bank loan option to get the airport paid back quickly.
At the beginning of the meeting, Mayor Parker reported Brady was hired as city business manager during the June council meeting. Brady had served as interim manager previously.
Parker said the city's finance committee discussed the prospect of the airport having a separate back account. At present, city funds are pooled in one bank account with each fund tracked separately. Parker said the separate airport account seemed a feasible option.
The city is also researching ordinances and purchasing policies that would prevent borrowing from restricted funds.
Brady said she is spending a lot of time with department supervisors citywide, educating them on the way a lot of things will be done. She said it was "taking longer than I would like."
Airport Manager Report
Airport Manager Greg Robison reported fuel sales were down significantly in June. Sales were down about $10,000 compared to June 2019. One reason is a pipeline patrol company plane had been coming in four days a week for fuel. That frequency has been reduced with two days of activity every two weeks. Robison is concerned the fuel trend will continue through 2021 or longer.
The airport sold $5,446.89 in 100LL avgas during June and $2,012.80 in Jet A fuel. Oil sales were $97.47 with tax of $9.01. There were five nights of hangar rental for $75. June's gross income from these items was $7,641.17.
With the decline in revenue, Robison suggested the commission consider staffing the airport five days a week instead of seven. He said they've been having a couple of days a week with no aircraft traffic. Kinzie asked about numbers on weekend traffic, and Robison didn't have that breakdown. Turner commented that he'd expect weekends to be busier than some weekdays.
Robison reported the PAPI (precision approach path indicators) lights are working on the north end of the airport's runway. However, it appears the south end PAPI lights suffered a lightning strike at some time, probably last fall. The parts alone for repair will cost about $3,000. There was some discussion about checking to see if insurance might cover some of that cost.
At the end of the agenda, visitors present were asked for remarks or inquiries. Local pilot Max McDermott asked who the airport manager works for, who is his boss? City Manager Brady said it was her. Mayor Parker added that state statutes do not let elected officials supervise employees of the city. He said if the city does not have a manager, the supervising board then has that responsibility.
Turner said he would think the board would be in charge of the airport manager, and the manager should report on day to day business to them. Parker said the way he interprets the state statutes, that is not permitted.
Logsdon commented that there are "lots of things we'd like to do, but laws and regulations prohibit it."
Meagan Caldwell asked about accounting of airport oil and gas well revenues. A letter to the city from the FAA stated, "Lastly, a review of the Airport Layout Plan depicts oil and gas wells, however, I could not locate an assurance in the audit that the receipts for this activity went to the airport fund."
Brady said she has addressed this concern with the FAA. Once she clarified how those receipts were handled, the FAA was satisfied.
A video of the entire meeting may be viewed at http://www.AlvaReviewCourier.com.