Friday, June 29, 2012

Could cities help fund air service?

Idaho AG’s opinion says yes—with caveats

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By KATHERINE WUTZ
Express Staff Writer

Express file photo Horizon Air flights like the one shown above fly into Friedman Memorial Airport in part due to minimum-revenue guarantees that reduce the airline’s risk of losing money in a small market. Though these guarantees are currently funded by Sun Valley Co., an effort is under way to have cities contribute as well.

A state attorney general's opinion that it would be "legally defensible" for cities to contribute funds to minimum-revenue guarantees has paved the way for a possible partnership between three Wood River Valley cities to improve and protect air service.

Minimum-revenue guarantees are funding paid to airlines to guarantee that the carriers will make a certain amount of money in small, risky markets. Currently, flights to Friedman Memorial Airport from Seattle and Los Angeles are secured by minimum-revenue guarantees.

Fly Sun Valley Alliance President Eric Seder said that currently these guarantees—the amounts of which he declined to disclose—are funded solely by Sun Valley Co., partly through the alliance's sale of corporate ski passes donated by the resort. The alliance works to promote air service to the Wood River Valley.

"The cost has been going up radically, primarily due to increased fuel costs over the past few years," Seder said. "Sun Valley Co., unlike any other resort in the Rocky Mountains, is bearing 100 percent of the cost."

Alliance Executive Director Carol Waller said air service to five other resort areas, including Steamboat Springs and Telluride, in Colorado, is secured partly by publicly funded guarantees.

However, this type of funding had previously been thought unconstitutional under Idaho law, which does not explicitly give cities the authority to use general funds for air service.

Assistant Chief Deputy Attorney General Brian Kane stated in a letter dated March 13 to state Rep. Wendy Jaquet, D-Ketchum, that if operation of an airport can be shown to be a public purpose, and if minimum-revenue guarantees are shown to be crucial to the continued operation of the airport, cities contributing funds to them could be legal.

However, the letter contains a caveat that legality of the agreements would be "dependent on the actual agreements drafted and entered into," and it urges "great care" in drafting those documents.

Seder said that though nothing is set in stone, one scenario could be a joint agreement among the county and the cities of Ketchum, Sun Valley and Hailey that would allow those entities to enter into agreements for air service.

"It's just barely too early [to say]," he said. "There are a couple of things going on that I think will be resolved that would give me more confidence to say here's where I think we're going."

Jaquet said a joint powers agreement would not impact the current agreement between Blaine County and the city of Hailey that governs the actions of the Friedman Memorial Airport Authority.

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"It would just be for [minimum-revenue guarantees] and any kind of marketing to make sure those seats got filled," she said.

Funding for the cities' contributions would likely come from an increase in the local-option tax, a tax levied by small resort cities on lodging, by-the-glass liquor, tickets to events, retail sales and ski lift tickets.

"What we're working on now is a structure that would supplement the LOT for a short period of time, say five years, so the community can see how it works without making a long-term commitment," Seder said.

Any increase in the LOT would have to be approved by a majority of the voters in the given cities. Seder said the alliance is working with the cities in the hope of placing a question on their ballots in November.

Waller said the cities' contribution would not affect that of Sun Valley Co.

"Sun Valley is still committed to doing [its] part, but the reality is that the cost has increased just to keep the current service," she said. "If we want to increase service, the money is not available to do that."

Sun Valley Co. did not return a phone call by press time Thursday to answer how a partly city-funded minimum-revenue-guarantee agreement might impact its contribution.

Cities already fund Fly Sun Valley Alliance to varying degrees, but Waller said those funds go toward diversion busing to Boise, not to minimum-revenue guarantees—though busing is part of the contracts for minimum-revenue guarantees for Horizon Air, which operates the flights to Seattle and California.

Seder said that if LOTs were to be increased and could be used for minimum-revenue guarantees, that could open up service from other cities and help the area's economy.

"If we want to revitalize our economy, the one way you can do it for sure is by having more flights from more places," he said.

Seder said there is "no possibility" of flights to Friedman from any new destinations without additional minimum-revenue guarantees.

Kate Wutz: kwutz@mtexpress.com

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