Friday, September 28, 2012

Businesses ‘say yes’ to LOT for air

Air service could bring in customers, revenue

Express Staff Writer

Wood River Economic Partnership Director Doug Brown and airport spokeswoman Candice Pate don pilot hats at Friedman Memorial Airport Appreciation Day on Sept. 15 to promote a new local-option tax for air service. Brown said the major problem facing local businesses is a lack of customers, which more commercial flights would remedy. Courtesy photo

Second in a three-part series about the upcoming local-option tax vote and the debate surrounding its impact on the community, effect on local businesses and the legality of the proposed agreement to use public funds for air service.

The main drive behind the fight to use revenue from a new local-option tax to expand commercial air service is simple, according to the “Yes to Air” campaign’s literature: More flights mean more people, and more people mean more money flowing into the valley.

But while real estate agents and some business owners are throwing their support behind the proposed LOT for that reason, some consultants and business owners suggest the relationship between air service and economic development is not that simple.

According to several presentations made by Fly Sun Valley Alliance President Eric Seder and Fly Sun Valley Alliance Executive Director Carol Waller to local cities and Blaine County, 77 percent of passengers into Friedman Memorial Airport are visitors or second-home owners.

Two to three new flights would bring possibly 24,000 new visitors per year—visitors who could spend up to $40 million annually, Waller and Seder said.

But some business owners, such as Towne and Parke Fine Jewelry owner Tom Keenan, said I interviews that they worry that an additional LOT might cause them to lose local business that might not be balanced out by an increase in visitors.

“While I understand the need for the LOT, I don’t like the inequality of the current LOT,” Keenan said.

Keenan said that due to his shop’s location in Sun Valley, he must charge customers 8 percent tax, 6 percent of which is state sales tax and 2 percent of which is local-option tax. In contrast, his Hailey competitors only charge the 6 percent state sales tax, because LOT is not charged on retail goods in Hailey.

“I used to have a real good clientele out of Hailey,” he said. “I think people look and say, ‘I can pay 8 percent or I can pay 6 percent.’”

Doug Brown, director of the Wood Rive Economic Partnership, said he thought the new LOT would ultimately help businesses. He said WREP had analyzed the problems facing local businesses and found that there was only one major challenge: lack of customers.

“It’s pretty clear with the analysis that has been done by Sustain Blaine and Yes to Air, it’s just economically the best thing that our community can do,” he said.

Brown is also active in the Yes to Air campaign, a group of citizens headed by Waller who are campaigning for the proposed new LOT. He said that of the people who approach the group’s booth at Atkinsons’ Market in Ketchum, roughly 99 percent seem to be in favor of the new tax.

Sustain Blaine economic development group Executive Director Harry Griffith said commercial air service to more destinations would help businesses overall.

Griffith said that of the 24,000 new people expected annually once new markets are established, maybe 10 percent will cross a given store’s threshold and maybe 50 percent of the people who enter would buy something. However, he said, that would give each store a potential of 1,200 new customers—customers who might return and spend more if they are satisfied with the product or service.

“Do the math, and you come up with some pretty big numbers,” he said.

A January study of passenger demand conducted by aviation consulting firm Mead and Hunt reported that service to the San Francisco Bay Area potentially could result in an average of 30 more passengers daily each way, or 10,950 customers a year.

If 77 percent of those passengers were visitors rather than locals, that would mean more than $14.3 million a year to the economy from just that one flight, based on Sustain Blaine’s data estimating that each visitor to the valley spends roughly $1,700 per visit.

Mead and Hunt also showed that direct service to New York City could bring an average of 35 passengers a day and service to Denver could bring 19 passengers per day.

However, data from SkyWest airlines released in an environmental assessment earlier this month said that despite those estimates, airlines might have trouble filling the seats. The environmental assessment, also conducted by Mead and Hunt, shows that SkyWest flights have 24,000 empty seats landing in Sun Valley per year.

Seder said that though those figures may be correct, SkyWest is year-round and flies during shoulder seasons. Flights secured with minimum revenue guarantees, such as Horizon Air service, tend to be fuller and run seasonally.

Seder also said that signing an air service contract gives the community more of a say in how full the flights are.

But it’s not just visitors who would be using the flights. Griffith said large local companies, such as Smith, Scott and Power Engineers, would also benefit greatly from having commercial air service to more markets.

“For them, [air service] is absolutely critical,” he said. “They have international and national clients, they have employees that are on the road every week, and they need additional route options to places like the Bay Area. It is necessary for their business model to work.”

Next week: Legalities of the LOT

Kate Wutz:

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