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    Airport Subsidy Below The Radar: Audit Shows LB Airport Supported By LB Gen'l Fund Taxpayers For $2.8+ Million, Set For "Consent Calendar" With No Planned Discussion

    (April 8, 2003) -- A City Auditor office report showing LB Airport owes LB taxpayers $2.8+ million has been put on the City Council's "consent calendar," a list of items not scheduled for discussion or debate unless specifically requested by a Councilmember or a member of the public at the April 8 Council meeting.

    The debt -- effectively a LB General Fund taxpayer subsidy for an Airport that's supposed to be fiscally "self-sufficient" -- is contained in a note to the annual financial report of the Airport Enterprise Fund.

    The audit shows that certain LB Airport operational costs -- which are supposed to be maintained by fees charged air carriers, parking fees and the like -- have been subsidized,by LB taxpayers for a decade -- and increased in the most recent fiscal year despite a whopping General Fund deficit -- for the following:

    The City provides certain services to the Airport under a negotiated Memorandum of Understanding (MOU). Those services include, primarily, police and fire protection. At September 30, 2002, the Airport’s unpaid charges amounted to $2,882,891 and related to services provided by the City during fiscal years 1992 through 2002."

    An audit balance sheet shows a $2.8 million debt as "Due the City of Long Beach -- long term." The audit doesn't indicate when the City Council voted to accept "long term" (instead of prompt) repayment of debt. Or what the due date for full repayment is. Or what interest rate LB taxpayers are receiving for carrying the mounting sum.

    Although the audit indicates the debt was amassed during a ten year period between 1992-2002, a balance sheet indicates the General Fund subsidy for LB Airport services ballooned by roughly $675,000 between 2001 and 2002, not expressly indicated in the audit but presumably for added police and fire expenses.

    The audit portrays LB Airport's $2.8+ million General Fund cost accrued as a "debt," but in economic terms it is basically a subsidy of Airport operations carried by LB taxpayers. The "debt" is the amount by which LB taxpayers -- now facing a multi-million dollar deficit because Councilmembers' spending has exceeded City revenue -- have supported and are subsidizing LB Airport police and fire operating expenses.

    The audit notes that in the early 1990s, LB Airport bonds included a proviso -- not seriously debated by the City Council in the same way Aquarium bonds were debated -- which required LB Airport to maintain a reserve to pay LB Airport bond holders. During the early 1990s, when LB Airport had fewer flights than now and generated less Airport revenue, City Hall management -- with tacit Council approval -- used General Fund taxpayer money to make up for what Airport fees weren't generating. The Council could have raised Airport fees sufficient to make up the difference, but didn't. In contrast, City Hall regularly votes to raise fees charged LB taxpayers for City Hall services when City Hall says it lacks revenue.

    Although the City Council has occasionally raised Airport rates, it hasn't done so to levels sufficient to provide Airport sustaining revenue. Using LB taxpayers to subsidize the difference helps keep LB Airport artificially low...and attractive to air carriers and airport businesses, while simultaneously providing a way to market the airport to new carriers.

    If LB Airport failed to maintain sufficient bondholder reserves (which didn't happen), bondholders would be the ones affected. Instead, without Council objection, City Hall funneled General Fund taxpayer money to LB Airport, affecting Councilmembers' constituents...while LB officials continued to recite that LB Airport was "self-sufficient."

    In May, 2001, JetBlue took all vacant LB Airport flight slots...with the prospect of generating new landing fees. Roughly four months later, Sept. 11, 2001 greatly increased LB Airport's security costs. LB Councilmembers again refused to raise Airport fees sufficient to make up for the Airport's new security costs. As a result, the audit shows Councilmembers' constituents have paid even more to subsidize the difference.

    Although the Council has recently voted to increase some LB Airport fees, including some parking fees, LB officials have continued to blame Washington for failing to provide sufficient federal tax money [also paid by LB taxpayers in federal taxes] to defray LB Airport's security police and fire costs.

    The audit shows that LB taxpayers have been subsidizing certain LB Airport operational costs for the past ten years. This effectively drained LB General Fund money to subsidize LB Airport to a point where its fees were artificially lower than other Airports...and thus more attractive to carriers and airport businesses, providng a way to market LB Airport as "less expensive."

    By federal law, Airport revenue from landing fees cannot be used to provide LB General Fund services such as police and fire. At the same time, the audit indicates LB taxpayers have been, and are to, provide part of the cost of these services for LB Airport, its carriers and business interests.

    Council action (if any) on the Airport fund audit, agendized as a "consent calendar" item at the April 8 Council meeting, will be reported by

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