City Council Work Session


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  6.       
Meeting Date: 04/08/2020  
Submitted By: Alma Andrade, Acting City Clerk
Focus Area: Advance Infrastructure Development & Improvements
Advance Infrastructure Dev/Improvements Strategy : Encourage Investments

SUBJECT:
DISCUSSION/DIRECTION on the DOUGLAS MUNICIPAL AIRPORT RUNWAY NEEDS and FUTURE SUSTAINABILITY.
EXECUTIVE SUMMARY:
The City was offered a $1.8 million grant from ADOT Multimodal Planning Division Aeronautics Group for the reconstruction of the Douglas Municipal Airport Runway.  The Runway is in a critical state, and at times creating unsafe conditions for landing.  The following analysis provides a historical and current Airport synopsis and recommends a course of action in light of existing circumstances.

 
BACKGROUND:
The Douglas Municipal Airport’s needs have been apparent for some time now since last known improvements done on the Airport was a 5” overlay in 1997.  Since then, the Airport’s runway has slowly deteriorated with the most current rating of 19 out of 100 in the Pavement Condition Index (PCI) done in 2013.  The City has performed some work since then in the form of crack sealing, chip sealing and conducted regular maintenance including sweeping and clearing any debris.  The needs on the runway are clearly documented in the City’s Airport Masterplan and the requests to ADOT for funding since at least 2015.  The City’s main funding source for Airport infrastructure has been ADOT Aeronautics, which over the years has been intermittently funded by the State legislature.  While other Airports count on annual Federal funding from the Federal Aviation Administration (FAA), the Douglas Municipal Airport is not recognized as a NPIAS Airport due to the close proximity to Bisbee Douglas International Airport, which is an FAA Airport.  With an inconsistent source of funding from the State, the City is competing with various other Airports throughout the State.
 
City gets awarded $1.8 million grant
Despite the State not funding Aeronautics for the past 3 years, the City was fortunate to receive the opportunity to be awarded Phase I of the reconstruction of our runway grant from State Aeronautics.  In July 2019, the State contacted the City to notify us that we were most likely be offered the grant and requested if the City would be willing/able to meet the $180,000 match requirements.  At that time, the City had just adopted its 1 cent sales tax increase as well as was negotiating a land lease with the federal border wall contractor at $15,000 per year.  With the combination of a 1 cent sales tax increase and a one time revenue source at the Airport, the City was positioned to meet the match requirement.  Further, we discussed with the State of our strategy to fund the entire runway reconstruction in two phases, thus preparing our Capital Improvement Plan showing a Phase II runway reconstruction in the total cost of $1.3 million, which at the time was projected to be a total runway reconstruction cost of $3.1 million.  In August 2019 the State told us that in order to be considered for the grant, the City would need to procure (in accordance to state procurement rules) consulting services to perform a categorical exclusion environmental review of the site.  This was to ensure that the site was in proper conditions and no environmental factors that would preclude from performance of this type of construction project.  In September 2019, the City procured the services of Kimley Horn (approved by the State) to perform the environmental review and submit for ADOT’s review.  In December 2019, the environmental review was completed and submitted to the City for review.  The City reviewed and remitted to ADOT and the same month the City was officially offered the grant award of $1.8 million.  In order to meet the grant guidelines, ADOT required procurement of engineer/consultant services to produce cost estimates for the project that were necessary for the grant award.  In February 2020, Kimley Horn provided a quote for engineer/consultant services and agreed to provide services in advance and assist the City and provide cost estimates for the project.  In March 2020, the City completed the grant application and remitted to Mayor and Council for approval, which after further information staff recommended to table the item.
 
ADOT Communicates Limitations on Project
ADOT contacted the City in March 2020, just before the March 11, 2020 Mayor and Council meeting to let us know of various limitations in our project.  ADOT let us know that the City would not get awarded the $1.3 million it originally requested for Phase II completion of the project, and the City may only get maximum of $500,000 (if any) towards Phase II.  With these developments, the City would need to fund the unfunded portion of the project that would be at least $800,000 and up to an additional $1.3 million in order to finish the project.  It was with these developments in mind that prompted staff’s recommendation to table this item in order to reassess the reconstruction project to something more affordable such as a mill and overlay project.  After the meeting, the City contacted Kimley Horn to work up estimates and comparisons on full reconstruction and improvement projects that include mill and overlay.  We also contacted the state to get further clarification if the project can be reclassified from a reconstruction project to an improvement project.  After speaking with Don Kriz, ADOT Aeronautics Group Manager, he informed the City that the $500,000 for Phase II was not a guarantee at all and would also require accepting any additional funding would need to go towards a reconstruction project and not an improvement project, therefore leaving the City to cover the rest of the costs for reconstruction.  He also told the City that ADOT would accept the City to utilize this year’s funding of $1.8 million for an improvement project, but again no additional funding from ADOT to do an improvement project.
 
Kimley Horn’s Projected Costs
On March 27, 2020 Kimley Horn provided projected costs (attached) for three options for the improvement of the Douglas Municipal Airport runway.  Option 1 was a full reconstruction projected to cost $4.4 million, option 2 a runway reconstruction with millings base at a cost of $3.3 million and option 3 of mill and overlay with a cost of $2.1 million.  In looking at the most affordable option of mill and overlay, this project includes a 3 inch overlay but did not include electrical improvements to the runway lights, which currently presents an issue in partial of the runway lights not properly working.  Option 3 provides a useful life of 7-10 years and the City would need to contribute a total match amount of $480,000 towards the project.   
 
City’s Finances and COVID-19
When ADOT told us of the restrictions in funding and we learned the costs involved to do a mill and overlay project, the Finance Department researched funding options for this project.  We looked at existing revenue sources first that include Airport revenue coming from the land lease to the border wall contractor at the Airport providing $15,000 per month, or $180,000 per year.   Next, was looking at federal, state or local funding sources, reallocate capital funding from other City projects and utilizing the City’s reserves.
In the midst of this analysis, came the COVID-19 crisis that the City and the entire world is being affected by it in some way.  As the crisis progressed and continues to progress, it has put all economies on hold including our Douglas economy in ways of seeing store closures and restrictions at the border that are limiting the cross border commerce that the City depends on for its majority of sales tax revenue.  With COVID-19 effects not going away in the immediate future, Finance has begun planning stages in revenue loss and is projecting approximately a loss of at least $500,000 per month in General Fund revenue, which represents about 35% of our total monthly revenues.  The loss of revenues is making the City reassess the current available revenues and reserves and the ability to commit to large match requirement with so much uncertainty around the COVID-19 crisis. 
Regarding revenue sources identified, we arrived that:
  • Federal funding would not be available to our Airport since it’s a non FAA Airport
  • State grants are also scarce to non-existing specifically in the funding of Airport projects and the amount needed for this project
  • The lease revenue from the border wall contractor is now up for consideration as to how to allocate the funding and whether the needs from COVID-19 emergency response, continuing City operations and the funding of more critical City infrastructure or public safety projects take priority.  Funding is also not enough to cover the cost.
  • Reassessing existing capital funds is also the same scenario, in the fact that funding from April to the end of Fiscal year in June will not come as projected and may not have the funding available from capital to consider a reallocation.  Some capital projects may need to be carried forward to future years. 
  • Utilizing city reserves is another option, but again, keeping our reserves available for more priority items in the time of this crisis is a big consideration in not expending reserves at this time.
 
Airport’s Future Sustainability and Options
For the past 11 years Airport operations have shown a steady decline in fuel sales and stationed aircraft.  Since 2009, fuel sales have decreased 40% or 10,604 gallon decrease.  The Airport has also gone from 27 stationed aircraft in 2007 to 12 in 2016.  Various conditions have led to the decline, which in part includes the deteriorating conditions of the runway and the 2008 economic recession.  Other factors include the location of the Airport which is located close to the Mexican border, which presents a challenge for new pilots who choose not to make the approach by flying over Mexican airspace, a shorter runway than BDI which presents a challenge to unexperienced pilots and larger and heavier aircraft to land and the lack of security or perception of security issues at the Airport. 
Other infrastructure needs at the Airport and critical to the safe operation of the Airport are included in our 5 year capital improvement plan:
  • Rehab Main Apron - $200,000
  • Rehab Taxiways - ?
  • Phase III Security Fencing - $400,000
  • New Heliport Construction - $220,000
  • Construction of New Terminal Building - $75,000
  • Improvements to New Beacon Light - ?
  • Airport Runway Lighting - ?
ADOT granted the City an extension to accept the grant no later than May 1, 2020.  With this short time frame, we are forced to look at a holistic view and future outlook of the Airport and how it plays into the entire City operations and how the City can continue to deliver essential services to the public with limited resources and growing needs.  These growing needs are in the form of street infrastructure needs, public safety capital needs such as communication infrastructure, downtown revitalization, parks and public spaces improvements and public transportation operation support.
With the established information and deadline of May 1, staff presents the following options for our Airport and the grant:
 
  1.  Accept the $1.8 million grant with 10% match and continue with the runway reconstruction grant with a total cost of $4.4 million.  The City would need to fund at best $2.3 million and at worst up to $2.8 million.  Funding at this range is currently not foreseeable in the City’s budget.  Reconstruction of the runway provides an approximate 20 year useful life to the runway.
  2. Accept the $1.8 million grant with 10% match and restructure the project to a mill, compaction and overlay project.  The City would not be eligible to receive the $500,000 for next year and only have $1.8 million from the grant.  Engineer projects a cost of $2.1 million for the project.  The City needs to come up with $480,000 match.  Mill and overlay would extend the useful life of the runway to about 7-10 years.
  3. Staff Recommendation: Do not accept the $1.8 million grant and don’t do improvements to the Airport runway.  Keeping in mind that the shortage in funding can be better utilized to mitigate the COVID-19 pandemic as well as addressing critical/essential infrastructure and capital needs for City services mentioned.  By declining the funds, the City may apply at a later time for funding and since the Airport currently gets little traffic and there is another Airport option nearby (BDI) for local aircraft, operations would not be greatly affected.  It must be said that ADOT funding is not guaranteed to be received in the future, and also not guaranteed is the receipt of the large grant amount necessary to rehabilitate the runway.  There are options in repurposing the Airport to helicopter aircraft operations and/or other economic development initiatives such as the border wall contractors land lease.
DISCUSSION:
Staff does not recommend Option 1, as it is not feasible at this time unless the State were to change its position and fund the project in its entirety.  Option 2 represents a better bargain and making the runway safe to land on; however, currently a $480,000 match is not financially feasible and it provides a small useful life for a rather large investment.  Also considering the future of the Airport and the extraordinary costs it takes to continue to fund the infrastructure without a steady revenue stream.  The Airport is not highly trafficked and there are two FAA Airports and Cochise College located nearby that service the Douglas area, which includes Bisbee/Douglas International Airport and Bisbee Municipal Airport. Option 3 is the staff recommendation at this time largely due to the prioritization of continuing to deliver critical and essential services to the public in light of the COVID-19 pandemic as well as the future sustainability outlook of the Airport and the large infrastructure needs required to safely operate and for limited use of a shrinking aircraft base.  The return on investment for this project is difficult to substantiate with the use of tax payer dollars that can be utilized for the greater purposes as mentioned above. 

"...that the Mayor and Council direct staff to...."

Fiscal Impact
Fiscal Year:
Amount Requested:
Budgeted Y/N:
Account (s):
FISCAL IMPACT:
Option 1: would require up to $2.8 million in matching funds, and Option 2: $480,000 in matching funds.  Option 3: does not have financial impact.
 
Attachments
Mpal Airport Aeronautics.
Preliminary Project Summary & Estimates


    

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