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Business Observer Friday, May 21, 2004 18 years ago

Airport Subsidy

Comments not all fair, balancedBy Fredrick J. Piccolo and GCBR's respone to his criticism.

Airport Subsidy

Comments not all fair, balanced

By Fredrick J. Piccolo

In opening the May 7-13 edition of The Longboat Observer, it was not surprising to see the juxtaposition of your philosophical veneer, regarding government subsidies, alongside the facts involved in SRQ's recent grant application. The surprise was the previous edition of the Gulf Coast Business Review where you presented a very "Joe Friday" - like article with "just the facts" regarding the issue of government subsidies. A number of the arguments you present in your recent commentary appear grounded in sound economic theory; however, there were a couple of areas that appear unfair and did not present a balanced comment in this reader's opinion.

Given you attended the April 26 meeting and the subsequent telephone conversation we had, your presentation of my efforts as some sort of slick sales job was offensive and not supported by any facts. (See, "Our View," page 8A)

If you recall, the genesis for the airport symposium was at the request of many elected officials and business leaders who have expressed concern about developments at the airport and wanted to know what they could do to help. It took nearly two months to get more than 50 busy leaders schedules together to hold the discussion. During that period the U.S. Department of Transportation published its Solicitation for Community Grant Proposals for the Small Community Air Service Development Program. In the solicitation guidelines¸ it was stated that local communities "that do contribute from local sources other than airport revenues are accorded priority consideration as required by the statute." When the solicitation came out a month before the symposium and contained a requirement that stated local communities could assist in securing air service based upon cash contributions, it became clear what the answer was to the "how can we help" question.

The quick timeline is the result of a 58-day window from publication of the solicitation to close out of application, not some calculated plot to cut off public discussion. In fact, the airport invited all the local media, including publishers, editors and reporters to the symposium. There was never an attempt to hide public discussion. Was the bi-county leadership put in a difficult position given the federal timeline? The answer is yes, and sometimes that is the challenge of leadership; both county commissions rose to the occasion.

Your discussion about whether it is good economic policy to subsidize private enterprise, and whether airports (and other traditionally government functions) should be sold to private entities is worthy of discussion; however, that was not the issue at hand. The airport was presented with a 58-day window to formulate a proposal, assemble community leaders, get community buy-in, write up the grant application using quantifiable data and present the best case we can to win the grant and improve air service.

In both the symposium and during our telephone conversation, the fact that the airport can fund the program itself was stated; however the federal government set the grant guidelines and prohibits the airport from underwriting the service through the federal revenue diversion regulations. The airport would probably agree on the point of helping itself, but law does not permit that. Given these circumstances, it would have been irresponsible of the Airport Authority if it did not approach the community concerning the opportunity that the grant presented.

The role and ownership of certain facilities versus private enterprise is a complicated topic once you get into the details. For instance, just a few weeks after the events of 9-11 the U.S. Congress provided a $5 billion cash bailout and a $10 billion loan guarantee program for the privately owned airlines. If the market should dictate survival of airports, should not it also dictate survival of airlines? In addition, the Transportation Security Administration was created at a cost of more than $5 billion annually to screen airline passengers. The Federal Aviation Administration provides air traffic services for the airlines at an annual cost in the billions as well. All of these items come from the general fund of the U.S. government.

Do we privatize all of these services and make the airlines (and subsequently the passengers) pay for all of this? The airport is transportation infrastructure just like the roads. Should we privatize the roadway system and charge tolls for every road you want to use, or assess a road impact fee for every automobile sold or charge the auto manufacturers a road fee for every car made? The air service grant program is funded by aviation user fees, not general tax revenues.

How would a private airport respond to changing conditions like 9-11? Your local airport has seen a 28% increase in public safety operating costs, has invested hundreds of thousands of dollars of its own business revenue in security improvements and diverted an additional $4 million of federal infrastructure funds to security improvements. Would any private enterprise be so public minded? How does the federal government recover all the investment it has already made in infrastructure? In times of national emergency or war, does the federal government have the right to take over privately owned airfields? Privatization could become a very slippery slope and isn't necessarily the panacea you make it out to be. Some items, such as transportation infrastructure have a public purpose and value to them. SRQ asked the local leaders if the airport had a public value to them for $250,000. The answer was yes.

We do not know if SRQ will get the grant, or if so, whether an airline will take it and ultimately be successful. The facts are that SRQ has provided nearly a $1 billion of value to the local community for many years at absolutely no cost to the local community. The entire aviation industry, and SRQ, in particular, is in a challenging time, and the airport has asked its community for a little help. Not as a slick trick, but because those were the rules presented to the airport. Even you, as publisher responded with a discount offer on advertising. Maybe that veneer has a small crack after all. Thank you for the opportunity to reply.

Fredrick J. Piccolo is president and chief executive officer of the Sarasota-Bradenton International Airport.

Editor responds

Dear Mr. Piccolo:

We said you "followed the tack of any good salesman." There was no mention of the word "slick." As we observed the symposium, your strategy appeared to be straightforward and what any "good salesman" would do: You needed to persuade your listeners to put up $500,000 in taxpayer money. You needed to "sell" them on why. That's what we all do every day - sell our ideas. Portraying your presentation as a sales effort should not have been interpreted as pejorative.

Nor did we suggest that you or the airport was attempting to hide public discussion. We acknowledge that you did not create the short deadline. But when we said, "Try not to give your prospective customer time to think; get him excited; get him to buy now!" - that again was a reference to how good salespeople sell. Don't get defensive; take credit. You were so convincing that, as we said, it seemed no one objected. You were good ¦ professional. Nice presentation.

And we understand that privatizing the airport was not the issue at hand. Getting the grant was and is. Nonetheless, community discussion about the airport's short-term and long-term future should consider all options - even while pursuing the grant. Privatizing should be on that list.

You ask: "If the market should dictate survival of airports, should not it also dictate survival of airlines?" Yes. You point out, for instance, that taxpayers are spending $5 billion a year to screen airline passengers and hundreds of millions more to subsidize the air traffic controllers. Then you ask: "Do we privatize all of these services and make the airlines (and subsequently the passengers) pay for all of this? ¦ Should we privatize the roadway system and charge tolls for every road you want to use?"

You'd get no argument here. None of us has a birth right to flying, driving - or health care for that matter. To a degree, those services are like everything else - scarce resources that should be allocated according to the pricing system of supply and demand. If that were the case, millions of Americans who rarely fly would be wealthier because their airline subsidies would be left in their own hands to determine their best, most efficient use - perhaps pay the tolls on the roads on which they choose to drive. But even if you couch the spending of tax dollars or subsidies for airports and airlines as a public benefit, as you do, the subsidies are still taking (by force) one's wealth and giving an unearned benefit to another.

You then point out how the airport has spent more than $4 million on security improvements. "Would any private enterprise be so public minded?" you ask. Of course it would, if such investments were in its own self interest and satisfied a need for which consumers willingly paid.

As for the government recovering its investment, presumably that would be in the price of selling or privatizing. National emergencies? That's a contract matter.

Finally, our offer to discount advertising was not a crack in our veneer. We don't really want to do it, but sometimes we all choose to do things we'd rather not just to get along.

Good luck in winning more taxpayer money to subsidize a low-cost carrier. We hope your efforts beat the odds. Meantime, we continue to encourage your board to think creatively: What would be the most profitable use of the land on which the airport now sits? Clearly (and unfortunately), it's not as a commercial airport.

- Editor

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