Every time a bell rings, an airport gets more subsidies

I woke up yesterday to this headline on the front page of my local paper:

Dispatch headline.jpg

The operative word here is, of course, "giving" with very little comparatively in return to show for it. My hometown of Brainerd just finished a major project to provide sewer and water to the airport, one that, even if it had gone well (it didn't) could hardly have been justified by any financial analysis we could have done (we didn't do any).

The Unanswered Questions

As a form of therapy, perhaps penance, I've written about this project many times. Almost exactly two years ago, I put together a list of questions we should be asking as we prepared to undertake a project substantially larger in size than our entire tax levy (it's a massive project for us). You can guess how many of these questions we stopped to consider before plowing ahead. (Hint: Given an over/under of 1, take the under.)

  • What do we estimate this investment will create in new revenue to the city over the next two decades? What other costs (police, fire, infrastructure, etc.) are associated with obtaining those revenue streams? Does this make any financial sense?
  • What long term obligations are we assuming by agreeing to this project? We obviously now must maintain all this new pipe, but what else are we committing future councils to?
  • Beyond getting the project built — which is the objective of those promoting it — what does success look like for the city? Is it an increase in the tax base? Is it a number of new jobs? What is success and how will we know we've achieved it? What are those measurements and who is doing the measuring/reporting?
  • In addition to committing this money and building this project, are there other things we need to do to ensure success? Are we prepared to do these things? Will future councils find it easy or difficult to continue to do these things?
  • What is failure — what is the worst-case outcome once this project is completed — and how would that impact us? In other words, what is our potential downside risk, how likely is that to happen and what steps can we take to avoid it?
  • At this point in the process, are there any other options still open to us besides a simple "yes" or "no" to moving ahead with this one approach? How do those other options compare to our current upside potential (success) and downside risk (failure)?

These were tough questions but, again, for us this was a massive project. 

So, as I'm already something of a social outcast on this project, I don't feel very restrained in providing some context for the very uplifting (sorry) reporting on the current state of the airport. From yesterday's article in the Brainerd Dispatch:

Brainerd Lakes Regional Airport is coming off a banner year in which the terminal served more than 20,000 enplanements (a term for each time a passenger boards a plane), an average monthly increase of 18.1 percent over the previous year. 

That seems like a big number — 20,000 — but on a busy summer day, the road in front of the airport carriers more than 20,000 vehicles. That's one day. The idea of moving 20,000 people between Brainerd and Minneapolis over the course of one year is quite underwhelming. 

Bus Beats Plane?

There is a local shuttle called the Executive Express that offers eighteen shuttles per day from Brainerd to the airport. The airport operates just two flights per day. I travel a lot and, for a variety of reasons — timing, cost, convenience, reliability, comfort— I take the shuttle quite often but also, for those same reasons, I never fly out of Brainerd. If each shuttle carries at least three passengers — and they always do or the shuttle wouldn't run — then a privately operated local business is providing nearly door-to-door service from Brainerd to the Minneapolis/St. Paul airport (MSP) for more total passengers than the Brainerd airport in their entire "banner year". 

Let me point out: I am not aware of any subsidy that Executive Express receives from the city, the county, the state or the federal government.

For a family of four, it is $70 per person for a round trip. I've priced many tickets out of Brainerd and the trip to MSP by plane doesn't beat that.

The True Cost of the Plane Ticket

And on the matter of subsidies, from the same article:

As the book closes on 2017 and 2018 begins, the airport is reaching a point where it's not only self-sustaining, but profitable. Currently, the airport benefits from federal grants that subsidize $50 for every ticket, as well as joint ownership between Crow Wing County and the city of Brainerd, which pitch in $300,000 every year. Profits are enough to meet the rest of the $1 million budget, but projected increases may also mean adding destinations to the 250 the airport already serves, more charter flights and bids for an additional carrier to complement their contract with Delta Airlines.

Let's note these subsidies individually:

Federal Government: $50/ticket x 20,000 = $1,000,000

City of Brainerd: $300,000 per year / 20,000 = $15/ticket

Crow Wing County: $300,000 per year / 20,000 = $15/ticket

Total Subsidy: $1.6 million, which can also be expressed as $80/ticket

Let's acknowledge right away that, without the federal subsidy, the idea of running the small local airport here is ludicrous. It could never happen. If the federal government even reduced the amount of funding for what is called Essential Air Service (EAS), we'd struggle to keep the lights on. We don't have the money to offset the federal contribution to the Brainerd airport, even with the restaurant we're now running there (which, in pure financial terms, is probably the most bizarre thing about the Brainerd airport).

The Future of Federal Subsidies

So how secure is the federal funding? For many years now, there has been a vocal contingent in Congress that has sought to dramatically reduce or eliminate it. The president's most recent budget proposed to cut it completely. The Hill reports:

Trump’s spending blueprint argued that EAS should be eliminated because the flights “are not full and have high subsidy costs per passenger” and that “several EAS-eligible communities are relatively close to major airports.”

It's hard to argue with the president on those points, but even if rural legislators manage to keep the funding in place at current levels, there are other administration priorities that threaten to undermine the financial stability of small airports. From The Hill:

The president’s budget called for spinning off air traffic control from the federal government and handing it over to a nonprofit or nongovernmental agency in an effort to modernize operations.

Critics argue that the interests of the general aviation industry and small airports would not be adequately represented under such a model, and worry that an outside agency would impose new fees and taxes.

With JFK international airport in New York the scene of a nightmare of cascading problems last week that continue yet, the infrastructure needs of America's major airports are getting a lot of overdue attention. And while the annual cost for essential air service is a rounding error in the JFK upgrade budget estimate, it's not clear how hard rural legislators will fight to defend something widely seen by their constituents as a luxury of the wealthy, despite assertions to the contrary.

A Distracted Delusion

For the city, $300,000 per year on the airport is 5.6% of our tax levy. We've struggled in recent years to fund basic upgrades and critical maintenance to our buildings and other legacy facilities. The amounts we've chosen to invest — while wholly insufficient to what is needed — are comparable to our ongoing airport subsidy. If we were forced as a community to choose between priorities, it's hard to see how the public would choose the airport, especially given that a fair percentage of our population has never traveled outside the county (yes, that's true, although I can't find the reference link). There is no way we dig deeper to offset federal cuts.

And what is this idea of the profit? The Brainerd Dispatch claims: "As the book closes on 2017 and 2018 begins, the airport is reaching a point where it's not only self-sustaining, but profitable." What?!? I am going to assume that the word "profit" there is being applied in a way that actually doesn't mean profit. And certainly not "self-sustaining" in that the airport funds itself annually. It's hard to believe that any publication could print the words "profitable" and "subsidize" in the same paragraph with any degree of earnestness.

Yet, the idea of a self-sustaining and profitable airport as a strong community asset is just the kind of story we need to express our optimism about the future. It doesn't matter — at least for now — that it's not true, almost dishonestly so. We're in for a penny, in for $8.6 million, and so we might as well continue to tell ourselves that somehow this is an investment that makes sense. From the Brainerd Dispatch:

Wright said this [the success of the airport] points to the rise of aviation as an artery of the lakes region, much as the Mississippi River, then the railroad, served Crow Wing County's transportation and economic needs. Crucial functions in society—such as package delivery systems or emergency medical transportation—are already leaving the roads and taking to the skies.

Mass transit, Wright noted, may follow suit.

"It has become the new train or the new bus or the new transportation system that our nation depends on," he said.

Yes, just like the rest of our transportation system — perhaps even more so — essential air service is a bottomless pit of subsidies that drain critical resources from struggling communities while fomenting a distracted delusion of imminent prosperity, if we only believe.

It's no way to build a strong town.