River Hawk Aviation is contracted by the City to provide aviation related services at the Hickory Regional Airport. Such a company is known in the aviation community as an FBO (Fixed Base Operator). At a minimum, most FBOs offer fuel and parking. FBOs, such as River Hawk, offer additional services such as hangar storage, maintenance, aircraft charter and rental, flight training, and ground services such as towing and baggage handling.
River Hawk became Hickory Regional Airport's FBO after merging with the prior FBO, Profile Aviation. Due to several questionable actions by Profile Aviation, a mistrustful relationship developed between the City and that FBO. In 2007, Profile "merged" with River Hawk unannounced and unexpectedly. This "merger" was questioned by the City. The City retained aviation attorney Frank Newton to advise on the matter. Against counsel's advice, the City decided to recognize River Hawk as the proper FBO service provider.
Around the Spring of 2008, the City approached River Hawk with the intent of renegotiating the Concession Agreement (the contract between the City and the FBO) under which the previous FBO had operated, and the same contract under which River Hawk had been operating, and planned to continue to operate. This Concession Agreement called for roughly $120,000 per year to be paid by the FBO to the City in concession fees.
Under the City's new contract, the concession fee was increased by roughly $60,000, bringing the fee up to $180,000 per year. On top of this set fee was also placed a "floating" fee. A benchmark was established taking into account the current tax base at the airport. Aircraft owners that base (park) their aircraft at the airport pay a property tax on the value of the aircraft. If River Hawk added to this tax base (i.e. attracted more aircraft to be based in HKY) the "floating" fee would decrease. As the tax based decreased, this fee would again increase; to be capped at $75,000. So, it would be to the FBO's benefit to get more aircraft to make Hickory their base of operations.
The FBO hesitantly went along with this newly devised fee plan in an effort to reconcile their contentious relationship with the City which was inherited from the previous FBO. Bottom line is this, the concession fee was increased by over 100%. Is this something the City should have done to a local business in these economic times?
The City has repeatedly acknowledged its pleasure with the job the FBO is doing at the airport. In fact, over the first 18 months of operations, the FBO was able to attract 17 new aircraft to re-locate to Hickory. This equates to nearly $40 million of new tax base. Nowhere in the city is this level of growth even possible. The FBO spent over $100,000 to achieve this type of growth. The City receives nearly $80,000 in increased tax revenue, due solely to the FBO's efforts.
By increasing the tax base, the FBO's "floating" fee was nearly zeroed out. However, look at it this way. It cost River Hawk $100,000+ in order to save $75,000 - all the while the City benefits $80,000.
Due to the increased fees and the overall economic downturn that hit the aviation industry, over time the FBO defaulted on its commitment to the City. In short, the FBO was unable to make their scheduled concession fee payments to the City in full. After several months of default, the City formally put the FBO on notice and began legal proceedings. The FBO rectified the default by the deadline set by the City.
Recognizing the current economic conditions and likely forecasts, the FBO approached the City regarding plans to grow the company and expand its presence at the airport. This basically meant building more hangars in order to attract new customer base and to accommodate those already placed on a waiting list for hangar space. This would help the FBO increase its revenue streams and the side benefit is that this would also increase the City's tax base. In short, the City denied the FBO's request to expand. As a counter, the FBO proposed the City build the additional hangar(s) that the FBO would market/manage on the City's behalf. Again, this proposal was also rejected.
Here's the catch. In order to build additional hangar(s), Runway 1/19 would need to be closed. In fact, on Nov. 20, 2007, Council voted to close this very runway, but held off on the final step of closure until a "viable economic opportunity" presented itself. Does the fact that there is currently NO available hangar space coupled with the FBO's willingness to invest its own capital in airport development not constitute the "viable economic opportunity" required by the motion passed by City Council?
The FBO is not the first entity to request permission to build hangars at the airport. Within the past two years other pilots and nationally recognized pilot associations have presented Council with development plans. All proposals have been summarily rejected. Why?
Why the need for more land development? The answer is simple. We're out of space. Moreover, there is a waiting list for hangar space right now. What happens if this development does not happen? Again, the simple answer is this; we will begin losing tax base.
A locally based corporation that currently bases its aircraft fleet in Hickory is looking elsewhere to meet its need for more hangar space. This company has purchased an additional aircraft and is planning delivery of a second newly purchased aircraft next spring. Currently, these new purchases, totaling around $30 million of new tax base, are not slated to be based in Hickory. If this need for additional hangar space is not met in Hickory, it will be met by another airport. Not only will these newly acquired aircraft not be based here, but this company's aircraft that is based here will be moved as well. Not only will Hickory miss out on the $30 million of new purchases, but Hickory will lose the $20 million in aircraft assets that this company does base here due to this company's desire and need to hangar its entire fleet at the same airport. That's around $50 million worth of tax base that the City is willing to literally let fly away.
Conversely, by direct investment or allowing third party investment in our airport, we not only retain our current tax base, but we would see immediate returns of an increasing tax base by attracting new flight operations.
The "opportunity cost" to this type of gain is this - we lose a runway. What the City will not tell the public is that Runway 1/19 will be closed within the next 5 years regardless of the City's actions. NCDOT will only fund the upkeep on the primary runway, Runway 6/24. Due to the low traffic volume, the State will not fund secondary runways. Without proper maintenance, the FAA will close Runway 1/19. To prevent this, the City will have to shoulder 100% of the re-paving costs. Simply put, the City cannot afford to do this.
So this is the choice; be pro-active and close the runway now while there is someone willing, ready, and able to invest and develop the newly available land; or sit back and wait for the FAA to mandate the closure of Runway 1/19. By that time there conceivably will not be an FBO or other entity able to develop the land. Moreover, the cost of development now would be less than future costs.
As it happens, the City's Airport Task Force recommended to Council the need for land that has the potential for development. Unfortunately, after studying this issue for nine months, the conclusion was that aside from Runway 1/19, there was no available land for potential, immediate development. Moreover, the City hired a consulting firm that developed a plan and recommended the closure of this runway. This plan was presented at a public meeting held at the airport.
By the way, whatever happened to the Airport Task Force's report? Well, it was "unanamously received" by Council. No other action was taken. In fact, the case can be made that the City not only has ignored the report's recommendations, but has actually proceeded to act contrary to the report. Let's see, the City forms a committee to study an issue only to ignore any recommendations presented. Sadly, that seems par for how the City of Hickory operates.
The truth of Hickory's Regional Airport is this; it is the crown jewel of regional airports in Western NC. Aside from Charlotte and Greensboro, no other airport in Western NC has the amenities that Hickory can offer. Does this sound familiar?
Hickory was at the summit of another economic sector not too long ago - manufacturing. We had fiber optics, textiles, and furniture. We reached the top of the mountain and we sat there simply enjoying the view. Before we knew it though, it all disappeared. We went from sitting on the highest of mountains to finding ourselves in the lowest of valleys. All the while we wondered how did this happen? The very same thing is poised to happen again. This time, however, it will be with an aviation spin.
Hickory has an ILS (instrument landing system), we have the longest runway of any airport of comparable size, we have an FAA certified Part 145 maintenance facility, and we have the only Air Traffic Control Tower from Charlotte to Asheville. So what do we have to fear? This.....
Ten years ago Statesville did not have an ILS. Today they do. Statesville also extended their runway within the past five years in an effort to better compete with Hickory. Statesville also pro-actively closed their secondary runway. What's located there now? Only a dozen flight operations belonging to NASCAR race teams and a little home improvement company called Lowe's! Moreover, inside of five years Statesville will also have a control tower. Lincoln County is currently in a building frenzy at their airport. They too have plans of installing an ILS system in the near future. Why? They are planning for future growth.
Interesting little tidbit...Hickory currently has two runways. We used to have three runways. So what happened? Well, when the City closed the third runway - wait for it - development happened! Hangars were built, and new aircraft were based at Hickory, new jobs were created and the City's tax base grew. At every airport where a secondary runway has been closed, increased economic growth has followed.
Without strategic planning, Hickory will be eclipsed by Statesville and Lincolnton in aviation terms; just as we were made nearly irrelevant in terms of textiles/furniture/fiber optics.
Lastly consider this, if the City is blocking a local company from investing in Hickory (at the airport) and the City is not willing to invest in its own airport, then why should anyone else invest in Hickory? Moreover, why should we as citizens invest in our current city leadership?
8 comments:
Great piece James. Well written and researched.
Surely, City officials have some reason, pat or otherwise, for keeping that runway open. I'd like to know what the 'potential' advantage there is to it's remaining open. I've an idea it has to do with garnering larger commercial flights (remember Delta's 6 months?), but the days of a daily flight to NY or ATL from Hickory are over, and if that is the reason, they should close the runway.
The only reason people seem to want 19 to stay open is because it is easier to taxi to before takeoff - 50 yards versus 300. And that is the only reason I can figure, because it isn't due to commercial aviation. Runway 19 is shorter.
Hickory is suffering from a complete lack of strategic planning. Our City's leaders want to blame Washington and Raleigh, but most of the problem is local. With housing values falling and business investment virtualy nil, the quickest way to increase our tax base would seem to get more airplanes hangared here. Again we have clueless leadership that seems bent on wrecking every advantage we have. It's like having the gang that can't shoot straight except it's not funny - it's tragic. Nothing they touch is going well and why we put up with it is beyond me.
Great piece, you should send it to the HDR and other media outlets.
Dear Anonymous. This article has nothing to do with sports or obituaries. The HDR is not interested in real news or investigative reporting or they would already be doing "their jobs".
this piece needs to forwarded to larry clark at HDR. they need to report on such an expose.....use the airport properly or raise our taxes...who will forward this article. how crooked can the hickory city council be....do they know about this...if they do its time for the citizens to demand some answers....rudy, what is the story....you need to respond
Jill Patton and Brad Lail were on the airport task force and the Council, alledgedly, has discussed airport issues in closed session. The City Manager and Council know what is going on. Do the citizens? No. It's just like the rest of City business, an inside cabal knows what is going on and the rest of the people are playing soccer and watching Oprah.
The Council takes care of their cronies and has scant concern for the good of the City as a whole. As for the paper, what you see is what you get, sports, obituaries, and fluff pieces.
Part of what hasn’t been recognized here is that the sweetheart deal that Riverhawk’s predecessor got is DIRECTLY attributable to Mayor Rudy Wright.
Just after Mr. Wright took office, it was time to renegotiate with Profile Aviation. City Staff members had researched the earlier agreements and noted the problems – there was no control over Profile’s actions, essentially, and they acted as though they owned the airport. Hickory’s airport had a horrible reputation among pilots because of the way they were treated by Profile. Many opted to go to Morganton or Statesville for fuel (which was cheaper), service and overnight accommodations rather than to have to put up with the lack of service at Hickory.
There was a plan of action for improving things during the contract renegotiation. Unfortunately, Mayor Wright was good buddies with the guys that owned Profile. The result was that the discussion would occur in closed session at a council meeting and by the time Staff could meet the following morning already knew the negotiating parameters. Thus, nothing could be fairly negotiated because the other side already knew not only the strategy but the details of how it would be approached. Rudy was seen numerous times leaving Profile’s offices on Wednesday mornings, where presumably he’d briefed them on the prior evening’s meetings.
Imagine if the Panthers tried to play a football game, but the other side knew all their hand signals and how they intended to approach not only the game, but every single play. It’s much harder, if not impossible, to win that way – especially if the coach keeps intentionally sending you down the field the wrong way!
What ended up was a sweetheart deal that gave away the farm, all the cows on the farm, the crops yet in the ground and the farmer’s wife! That agreement was entered into over significant objections by virtually all of the staff members involved.
You can’t negotiate anything close to a fair deal under those circumstances. Look at the contract – there’s no independent audit provisions – Hickory’s income from the airport was based solely on what Profile TOLD them they made. There was no way to get to the books for an independent audit, no control over hours of operation, prices to be charged, etc.
Instead, all the control was given to Profile.
There was a chance to eliminate that when Riverhawk took over, but once again it was lost. We can thank Jill Patton and Brad Lail for failing to have any significant input into that, but in fairness, they had no records to review to know the issues. Instead, they knew only that which the contract allowed them to know – a contract that was overseen by Rudy for the benefit of his friends at Profile.
Hickory had a chance to take their airport back, but instead got a task force packed with people who either knew nothing about airports or were looking to skew the deal. How often does that kind of thing happen here? To figure it out, you really only have to look at who leaves and when. Tim Deike, who was the Airport Manager then, left about this same time. Coincidence? Or, like so many other department heads, did he realize that it’s not possible to fight that type of corruption without the support of a strong City Manager who has the balls to stand up for what’s right. Hickory could have easily taken over operations at the airport, and the income from those operations gone to make it self-sustaining. Instead, we end up with a tiny piece of the action, no control over the airport and once again the taxpayers get the short end.
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