Guide to Evaluating Airport Governance Structures (2022)

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43   To provide additional context, perspective, and depth to the quantitative analysis of the airport governance database, the research team conducted several case studies. The case studies examine key topics related to airport governance, including the motivation behind transitions from one governance structure to another and the structural features that influence the effectiveness of airport governance. Case Study Selection Criteria In order to select a list of case study airports that has both breadth (representative) and depth (unique and exploratory), the research team relied on several criteria based on feedback from the ACRP project panel on the Proposal and Amplified Work Plan and the Case Study Plan. The guiding principle was to achieve the objectives of ACRP Project 01-42, which are to (1) identify the factors that can be used to evaluate airport governance models and (2) develop a framework airports can use to (a) evaluate whether the current governance model is meeting goals and objectives, (b) identify and evaluate governance alternatives to meet goals and objectives, and (c) identify implementation considerations in changing governing structure. The following criteria were used to select the case studies for this report. FAA Hub Classification (Commercial Service Airports) The FAA hub classification (see note 5) was used to ensure perspectives from all sizes of primary commercial service airport are represented. The research team identified four candidate airports in each FAA hub classification. While similar governance structures may be used at airports across all hub sizes, it is likely there are unique financial, political, legal, and personnel characteristics at airports of different sizes. Similarly, the evaluation of why and how to transi- tion from one governance arrangement to another is likely to vary significantly between a large hub and a small or nonhub airport. NPIAS Nonprimary Airport Classification The research team used the NPIAS classification of nonprimary airports to ensure a diversity of perspectives from nonprimary commercial service, reliever, and GA airports. Specifically, the categories considered were: • Nonprimary commercial service airport (2,500–9,999 enplanements) • Reliever airport • National GA airport C H A P T E R 6 Airport Governance Case Studies

44 Guide to Evaluating Airport Governance Structures • Regional GA airport • Local GA airport • Basic GA airport • Unclassified There are likely significant differences in financial, political, legal, and personnel circumstances across nonprimary airports, given the potential range of airports classified as nonprimary by the FAA. Based on feedback from the project panel, the research team decided to select two nonprimary case study airports. Geographical Diversity As part of its analysis of the data in the airport governance database, the research team dis- covered significant variation in governance structures across regions, particularly among com- mercial service airports. Therefore, the team varied the geographic locations of candidate airports selected for further examination. The research team relied on the FAA regions as the primary criterion to ensure geographical diversity. It is likely the unique culture and history of each FAA region plays some role in airports’ decisions to use or transfer to a specific governance arrange- ment. Also, the FAA region would likely be involved in any discussion of the switch to a new governance arrangement, particularly if the airport sponsor for AIP grants were to change. While relying on the FAA region as the primary unit of geographical diversity, the team also attempted to ensure a diversity of states in the candidate list, given the importance of state revised code and statute in determining allowable governance alternatives and how they can be structured. Recent Governance Transition Two of the key objectives of the ACRP Project 01-42 research effort are to identify how to evaluate existing governance structures, and to note implementation considerations in changing governance structures. Therefore, the research team felt it was essential to focus a portion of its candidate list on airports that had recently undergone governance transitions. Many of the recent governance transitions among airports have been to an airport authority. Given the lack of diversity in governance structures that airports are moving toward, the research team decided to focus on ensuring diversity in the governance structures airports were switching from to identify the factors used to evaluate moving to a new governance structure. The research team identified candidate case studies of airports that moved to an airport authority from a wide range of governance structures, including a city, county, state, and port authority. While the research team could not secure a systematic list of all governance transitions at airports in the United States, the team identified a broad list of governance transitions during the review of airport governance literature. This list was used to select case study airports based on having undergone a recent governance transition. Unique Governance Component While the research team has developed materials to effectively describe (literature review) and summarize (airport governance database) airport governance structures, the case studies allowed the team to conduct a deeper dive into specific governance arrangements and identify effective practices that could be disseminated to other airports. The research team also looked for case study candidates that might illuminate common governance challenges, such as multi- jurisdictional or multiorganizational challenges.

Airport Governance Case Studies 45   Willingness to Participate Finally, the research team looked for airports that are not currently in public discussion around a governance transition as it is unlikely they would be able to speak candidly about their perceptions. To increase the likelihood of participation, the research team also looked for airports where at least one team member had a contact or knew of a potential interviewee. Interviews with Airport Stakeholders The research team conducted in-depth interviews with officials at each airport to learn more about their governance structures. The interviews were designed to provide complementary depth to the breadth of the airport governance database by gathering rich qualitative data to build informative and generalizable case studies. The interview protocols were designed to provide insight into the following areas: • History of existing governance arrangement, including recent transfers of airport sponsors • If applicable, discussion of the rationale or factors that led to the decision to pursue a change in governance structure • Discussion of challenges in implementing a new governance structure following a transition • Discussion of advantages and disadvantages of current governance structure in achieving performance measures • Discussion of legal and/or political considerations in maintaining or transitioning gover- nance structure Interviews were conducted in person on-site except the SAN and DFW interviews, which were conducted over the phone due to COVID-19 travel restrictions. The research team analyzed the interview data by comparing the transcription of the key parts of the interviews to the notes of each researcher who participated in the interview. Key sections of the interview were used to develop the thematic areas of each case study, which were supplemented with primary and secondary sources of data, including government records and news accounts. The research team synthesized the interview data using qualitative analysis techniques (such as narrative analysis and thematic analysis) to derive considerations and evaluation methods for airports, boards, and elected officials to use during conversations related to changing gover- nance structures. Airport Case Studies Table 6-1 and Figure 6-1 show the eight case studies, which represent a cross section of airports in the United States. Specifically, the case studies include an airport from each FAA commercial service hub classification and two GA classifications from the NPIAS. While many of the case studies currently have airport authorities, several have undergone recent transitions from a variety of other governance arrangements, including from a city and a port authority. The case studies analyze key aspects of airport governance such as the influence of politics in airport funding and decision-making, the type of representation on airport authority boards, and the factors that led to calls for a change in governance arrangement. The case studies also provide insight into several unique governance arrangements, such as the joint-use agreement between the City of Hailey and Blaine County to operate SUN and the airport district structure used to operate TRK. As Figure 6-1 shows, the research team conducted case studies in the Western-Pacific, Northwest Mountain, Southwest, Southern, and Eastern FAA regions.

46 Guide to Evaluating Airport Governance Structures LOCID Airport Name Hub Size/GA Classification Region Governance Structure Rationale SAN San Diego International L AWP Airport Authority Conversion from port authority to airport authority in 2003 DFW Dallas-Fort Worth International Airport L ASW Airport Authority Unique arrangement and history between City of Dallas and Fort Worth ONT Ontario International Airport M AWP Airport Authority Conversion from LAWA to OIAA in 2016 LEX Blue Grass Airport S ASO Airport Authority Unique case: mayor of joint political unit (City of Lexington and Fayette County) appoints board members SYR Syracuse Hancock International Airport S AEA Airport Authority Conversion from City of Syracuse in 2014 to Syracuse Regional Airport Authority SUN Friedman Memorial N ANM Airport Authority Unique joint venture between City of Hailey and Blaine County; interesting joint powers district for air service funding IGM Kingman Airport & Industrial Park GA regional ASW City- operated Converted from airport authority back to city- operated in 2018 TRK Truckee-Tahoe Airport GA national AWP Special district Unique case: special district implements several unique programs in the community Table 6-1. Case studies list. Figure 6-1. Case studies map.

Airport Governance Case Studies 47   San Diego International Airport (SAN) FAA airport classification: primary commercial-service large hub Airport sponsor: San Diego County Regional Airport Authority (SDCRAA) Airport governance: airport authority Last governance transition: 2003 from port authority Enplanements (2019): 12,624,938 (+4.1% over 2018) Nonstop destinations (Feb 2020): 64 Planned airport development 2019–2023: $396,672,325 CPE (2019): $10.78 Nonaeronautical revenue (2019): $145,457,739 Overview of SAN SAN is a primary commercial-service large hub in San Diego County in Southern California. In 1928, the airport began operations as San Diego Municipal Airport–Lindbergh Field, 1 year after Charles Lindbergh initiated the first solo nonstop transatlantic flight from San Diego. The airport is just 3 miles northwest of downtown San Diego and encompasses 661 acres. It is the busiest single-runway airport in the country and is unable to expand in its current location on the San Diego Bay. In 2006, county residents voted against relocating the airport to Marine Corps Air Station Miramar (Davis 2006). Although the airport was running at 75% of operational capacity in 2019 and is projected to reach capacity in the next several decades, relocation is no longer an option. Scheduled commercial service operations began at SAN in the 1950s and United was the first airline to offer jet service in 1960. Today, the airport is served by 17 carriers that provide nonstop scheduled service to 55 domestic and nine international destinations. Southwest is the largest carrier at SAN, accounting for 39% of the passengers flown in 2019. The airport enplaned 12.6 million passengers in 2019, marking 6 consecutive years of record-breaking passenger totals. The airport’s load factor was 82.8% in 2019, up from 82.1% in 2018. Over 91% of all operations at the airport are by commercial service passenger or cargo airlines. GA and military operations comprise the other 9%. SAN’s single runway is 9,401 × 200 ft. There are two terminals that accommodate passengers. A $3 billion redevelopment plan began in 2020 and includes constructing a new attractive and efficient building to replace the existing 19 gates in Terminal 1. The existing terminal will then be demolished, and another 11 gates added. Recently completed large projects include an expan- sion of Terminal 2, a new consolidated rental car facility, a new customs facility for international arrivals, baggage handling system improvements, and roadway and parking improvements. Overview of SDCRAA The SDCRAA is an independent agency formed by state legislation on October 14, 2001. California Public Utilities Code Sections 170000–170084, also known as the San Diego County Regional Airport Authority Act (https://california.public.law/codes/ca_pub_util_code_div_17), establishes the authority. The SDCRAA assumed ownership and operation of SAN from the San Diego Unified Port District on January 1, 2003. The original legislation mandated three main responsibilities of the SDCRAA: operate SAN, plan for the future air transportation needs of the region, and serve as the region’s Airport Land Use Commission. The SDCRAA is governed by a nine-member board, with three additional members serving ex officio. The members are appointed as follows: three by the mayor of San Diego, two by the

48 Guide to Evaluating Airport Governance Structures San Diego County Board of Supervisors, one by the East County area mayors, one by the North County inland mayors, one by the North County coastal area mayors, and one by the South County area mayors. The board members serve 3-year terms. A member of the airport authority leadership team who previously served at SAN under the port authority structure explained that “a nine-member board has been helpful to us. Anything smaller would make individual agendas much more difficult to manage. There is diversity on the board that allows for counterbalance. The board does not tie our hands.” The board is compen- sated $200 for each day of service, not to exceed 8 days of service per month. Several subcommittees operate under the board, including the Audit Committee. The board is given the authority to appoint the airport executive director, general counsel, and auditor. The San Diego County Regional Airport Authority Act also tasked the SDCRAA with planning for the region’s air transportation needs and serving as the region’s Airport Land Use Commis- sion. The SDCRAA has adopted land use plans that protect public health and safety surrounding all 16 of the county’s airports. The airport board reconvenes for the Land Use Committee in order to make decisions regarding land use for airports in the county. An airport advisory committee was also created by legislation under Cal. Pub. Util. Code Sec- tion 170054. The advisory commission is made up of local business, university, and economic development leaders. The group provides valuable input and advises on the planning and devel- opment of all airport facilities and assists with community support on air service development issues. The SDCRAA has a policy (Policy Section 1.21) in place outlining membership and meet- ing protocols. Transition from San Diego Unified Port District to SDCRAA SAN was owned and operated by the San Diego Unified Port District from when the Port of San Diego was created by the California legislature in 1962 until January 1, 2003. The port operated the airport along with two maritime cargo terminals, two cruise ship terminals, 22 public parks, and the Harbor Police Department. The transition of the airport from the port to the SDCRAA is an unusual one. Several triggers led to the creation of the SDCRAA. First, the Regional Government Efficiency Commission was tasked with looking at consolidating various agencies in the region, including the port, metropolitan planning organization, and transit agencies. The commission developed recommendations in 2001, including the development of an airport authority as a stand-alone entity (McGlone 2015). Secondly, there were ongoing concerns with the port’s management of the airport and the limited investment in its development. Some revenue diversion was likely occur- ring since the airport and port revenues were combined. Lastly, there were decades of ongoing discussions regarding the need to find a replacement airport due to its constrained land envelope and inability to accommodate future demand. Under the port’s jurisdiction, which only extends to the property on the bay, it would be difficult to pursue the option of airport relocation. One state senator took matters into his own hands, and cowrote legislation in 2001 to remove the airport from port jurisdiction and create the SDCRAA. The legislation was pushed through the system quickly and was passed by the state assembly on September 13, 2001, just after 9/11 and while several of the port’s leadership were out of the country in Montreal attending an aviation conference. The governor of California signed the bill into law on October 14, 2001. The port fought the transition through mid-2002 but all attempts failed, and it eventually had no choice but to go forward with what was outlined in the legislation. The senior director of the Aviation Division at the Port of San Diego, a forward-thinker and relationship-builder, was named interim executive director of the SDCRAA; she pushed for money from the port to

Airport Governance Case Studies 49   fund the transition and assigned an interim board to help oversee it. A seven-member team was chosen to work through every aspect of the transition. An innovative transition plan was quickly put into place. Nineteen functional teams were formed to delve into what was needed by specific category, including human resources, branding and marketing, environmental, legal, IT, and communications. The transition team conducted peer reviews of other large airports that had gone through a transition. A transition plan was put in place by October 2002. It was noted that staff were working both their current jobs for the port and working on the transition and it was a demanding time for the team. Everything had to be in place to meet the January 1, 2003, deadline and have the FAA operating certificate in hand. Although the airport made up 50% of the port’s revenues before the transition, there were just 140 employees in the aviation department, of 700 total at the Port District. Only these employees were to be transitioned to the newly formed authority. The SDCRAA still needed to fill many core operating positions. Legislation directed that police would still be provided by the port’s Harbor Police. Key Challenges in Implementation of Transition and Ongoing Challenges The transition brought on a lot of uncertainty and fear among the 140 employees who were transitioned from the port to SDCRAA. The transition plan emphasized addressing the needs of these transitioning employees, including change management education sessions to keep employees updated on the transition process, introduce the new operating model and concepts, and encourage open communication on issues and concerns as well as ideas and suggestions. Authority leadership took all concerns seriously and addressed them proactively in meetings and in publications, which helped alleviate some of the anxiety associated with moving jobs. One unique situation for the SDCRAA is its ongoing relationship with the Port of San Diego. The port, upon its inception in 1962, was made trustee of the state-owned tidelands and lands lying under inland navigable waters in the San Diego Bay, including SAN, by the California State Lands Commission (California State Lands Commission 2020). Currently, the SDCRAA has a 66-year lease for the 661 acres of airport land with the port authority for $1 per year. In addition, there are two parcels of airport land the port continues to earn revenue from based on fair market assessment: an 89-acre parcel that housed the old General Dynamics hangar (which brings in $10 million in rents per year) and a 47-acre parcel once owned by Teledyne Ryan ($3 million per year). In addition, the SDCRAA continues to use the port’s Harbor Police. In 2003, the cost of the police force was $7 million. By 2019, the SDCRAA had paid the port authority $20 million for police services at the airport; the SDCRAA cannot competitively bid out police services, as mandated by the San Diego County Regional Airport Authority Act. There also continues to be an occasional discussion regarding the dissolution of the indepen- dent airport authority. In 2018, a state assemblywoman introduced a bill to fold the SDCRAA back into the San Diego Unified Port District, stating the SDCRAA had outlived its purpose to try to move the airport to a new site and it was difficult to make key city transit decisions based on the independent airport authority structure (Keatts 2018). Opponents of the bill argued the SDCRAA has and needs broader representation from the whole region and should continue to be owned and operated independently from other agencies. This bill did not pass, but shows the ongoing issue faced by the SDCRAA to prove its place in the context of the constrained San Diego Bay area. Despite these challenges, an airport official highlighted that being an independent airport authority focused only on the airport has led to competitive advantages across the board in all its

50 Guide to Evaluating Airport Governance Structures functions. The president and CEO has broad authority, which is helpful in effective decision- making. The board is very efficient, which has allowed for capital development projects to come in under budget and on time. The airport authority structure has also allowed the SDCRAA to think out of the box and be innovative, for example the $1 billion Green Build sustainability project and the Airport Innovation Lab, which works with companies to develop solutions to help the SDCRAA enhance passenger experience, improve operational efficiency, decrease costs, and/or increase revenue. Dallas Fort Worth International Airport (DFW) FAA airport classification: primary commercial-service large hub Airport sponsor: Cities of Dallas and Fort Worth Airport governance: DFW airport board Enplanements (2019): 35,778,573 (+9.01% over 2018) Nonstop destinations (Jan 2020): 255 Planned airport development 2019–2023: $739,010,949 CPE (2019): $12.95 Nonaeronautical revenue (2019): $506,502,925 History and Overview of DFW DFW is a primary commercial-service large hub halfway between Dallas and Fort Worth, in Dallas and Tarrant counties respectively. DFW is 17,207 acres, and portions of the airport are in the cities of Irving, Grapevine, Euless, and Coppell. A small portion of airport property is also in Fort Worth. DFW opened in 1974; while a regional airport had been proposed as early as the 1920s, by 1961, the FAA grew frustrated with investing in two separate north Texas airports (Dallas Love Field and Greater Southwest International Airport) and there was no room for expansion at Love Field. The FAA ordered the cities of Dallas and Fort Worth to select a site for new joint regional airport by 1964 or else the FAA would unilaterally choose one for the region. The cities finally came to agreement on the new location, purchased the land in 1966, and con- struction on Dallas Fort Worth Regional Airport began in 1969. Although backed by most of the regional governments, the development of the regional North Central Texas Airport Authority to own and operate the airport did not get enough votes in a June 1967 election, mainly due to fears of higher taxes. Following the failure, Dallas and Fort Worth quickly moved to establish an appointed airport board. An agreement was signed between the two cities in 1968 to define the duties and powers of the board and to create the Joint Airport Fund to provide for the construction and operation of DFW. Based on the population of each of the cities, Dallas funded 7/11ths of the new airport expenses and appointed seven of 11 members on the DFW Airport Board. Fort Worth funded 4/11ths of the airport and has four members appointed to the board. Today, DFW is one of the busiest airports in the world and was the fourth busiest airport in the country in 2019. In terms of size, DFW is the second largest US airport behind Denver International Airport. DFW is home to American Airlines’ largest hub operation, and American accounts for 80% of the airport operations. There are 22 additional airlines that serve DFW. Service is provided from DFW to 193 domestic and 67 international destinations. In 2019, the airport served over 35 million passengers, the most in its 45-year history, and was Air Transport World’s Airport of the Year. DFW has seven runways to support operations. DFW also has five terminals and 164 gates. In 2019, American opened the Terminal E satellite facility that houses 15 gates with capacity for

Airport Governance Case Studies 51   100 additional daily flights, mainly for regional service. In addition, American is construct- ing a $100 million parts fulfillment center and a $100 million catering facility. Construction of a $3.5 billion sixth terminal with 24 additional gates is on hold due to the COVID-19 pandemic. Overview of DFW Airport Board The DFW airport board was created as an interim board by joint agreement between Dallas and Fort Worth on September 27, 1965. After efforts to develop a regional airport authority failed, the board was continued, confirmed, and established as the operating board of directors for DFW by joint action of the two cities on April 15, 1968 (City of Fort Worth Ordinance No. 5941 and Contract No. 6014). Originally, the board was composed of just 11 members, seven from Dallas and four from Fort Worth. Each member is appointed by their respective city councils; the mayors of Dallas and Fort Worth are automatically appointed. Board members from Dallas can serve up to four 2-year terms, while board members from Fort Worth can serve up to two 4-year terms. The positions of board chairperson, vice-chairperson, and secretary rotate between Dallas and Fort Worth each year. In 2001, a twelfth nonvoting member was added to the board. DFW lies within the city limits of four host cities—Grapevine, Irving, Euless, and Coppell. After a tax-sharing agreement was proposed between Dallas, Fort Worth, and Grapevine, the city where the airport terminals are, the DFW board was restructured to include one member representing the neighboring host cities of Grapevine, Irving, Euless, and Coppell on a rotating annual basis to allow them a voice in the development and operation of DFW. The rotation occurs in September each year. DFW board appointments have shifted over the last several decades, and while mayors still sit on the board, the other appointees are now local business representatives and community members who have a vested interest in the airport and its operation. There are monthly meet- ings plus special meetings as needed. Quorum consists of an affirmative vote of two thirds of the members, which is any seven members with at least one from Fort Worth. Some recommendations from the DFW board must have city council approval from both Dallas and Fort Worth. These include budgeting, issuing debt, and approving certain property transactions. DFW staff work closely with both councils to ensure identical language is used in all resolutions. Approval is based on votes from both councils. All board meetings must follow the Texas Open Meetings Act, which allows for public participation and comment. There are five standing committees of the DFW board: operations, finance/audit, retirement/investment, concessions/commercial development, and executive compensation. The DFW board can manage and make decisions for the airport, and is tasked with executing contracting agreements, approving the purchase and sale of land, hiring and firing the CEO, and entering into airline agreements. Fire and police services are provided through the airport; DFW has been empowered by the cities to hire and fire police and create its own rules and regulations that protect airport property. Legal representation is paid for by the cities of Dallas and Fort Worth, and four attorneys from each city work at the airport. The CEO is given the authority by the DFW board to oversee all daily airport operations and make decisions regarding human resources, finance and accounting, development, marketing, and operations. Advantages of DFW Governance Structure The airport board structure allows DFW to quickly make decisions and get work accom- plished. The DFW board meets monthly to address items and the process is streamlined com- pared to that of a city-operated airport that may be required to get city council approval several times per week.

52 Guide to Evaluating Airport Governance Structures The DFW CEO gets policy direction from the board but has the trust of the board to auto- nomously make many decisions, including directing staff. The structure allows the airport to be nimble and efficient. The CEO has a close working relationship with all members of the board and is in frequent contact to ensure members are kept abreast of happenings at the airport. Challenges of DFW Governance Structure There are several challenges of the governance structure at DFW. The airport is owned by the two, often competing, cities of Dallas and Fort Worth. At the beginning of the airport’s existence, there was often tension, but the cities came to realize air service is a regional asset and a regional perspective was needed to help the airport succeed. Today, in terms of the airport, the cities and the board members are in agreeance the majority of the time. The competition can still occasionally make it more difficult to expeditiously concur, how- ever. For example, American Airlines recently relocated its headquarters. Both Dallas and Fort Worth were vying for American to base in their city, offering various incentives and drawing out the decision. After considering all the options, American chose to stay in Fort Worth on airport property. The majority of the board is members of the local communities, not affiliated with politics. This has helped to take politics out of decision-making. However, it can be difficult for members to take a proactive stance when needed to help push the airport’s agenda. There are also occa- sionally situations where board members do feel pressure to vote for or against something like a contract or vendor based on the Dallas or Fort Worth mayor’s or a council member’s position. One final challenge the airport board has had to face since the creation of DFW, and it is ongoing, is the development and renewal of the controversial Wright Amendment. The Wright Amendment of 1979 is a federal law that put operational restrictions on Dallas Love Field in order to allow DFW to grow and protect the new airport from competition. As part of a 1968 agreement, commercial service flights at Love Field, Greater Southwest International Airport, and Meacham Field were to be phased out after the opening of DFW. Southwest Airlines, which started operations at Love Field after the agreement was in place, filed a lawsuit to stay at Love Field. The Wright Amendment was developed to restrict commercial service activity at Love Field to service only four neighboring states. The Wright Amendment expired in 2014 but was revised to limit the size of Love Field to 20 gates. Another stipulation of the revised amendment is that Southwest cannot add flights at DFW without giving up gates at Love Field. The cities of Dallas and Fort Worth, as well as the DFW board, were heavily involved with discussions on the renewal of the amendment and the repercussions of ending it. It was a time-consuming effort for all parties involved. A 5-year law- suit continues for the City of Dallas and Love Field asking the court to settle who should get the gates Delta is claiming at Love Field. The Wright Amendment looks to continue to impact the region and DFW into the future. Ontario International Airport (ONT) FAA airport classification: primary commercial-service medium hub Airport sponsor: Ontario International Airport Authority (OIAA) Airport governance: airport authority Last governance transition: 2016 from Los Angeles World Airports (LAWA) Enplanements (2018): 2,498,993 (+11.18% over 2017) Nonstop destinations (Feb 2020): 25

Airport Governance Case Studies 53   Planned airport development 2019–2023: $80,258,254 CPE (2019): $8.72 Nonaeronautical revenue (2019): $38,894,207 Overview of ONT and Inland Empire Region ONT is classified as a primary commercial-service medium hub and is 2 miles east of down- town Ontario in San Bernardino County, California. The City of Ontario established the Ontario Municipal Airport in 1929, later renamed Ontario International Airport. An agreement between the City of Los Angeles and the City of Ontario stating they would jointly contribute to the further development and expansion of ONT was signed in 1967. The same year, ONT was officially added to the Los Angeles Department of Airports, later LAWA. In 2016, ONT’s control was transferred from LAWA to the City of Ontario, and the airport is currently owned and operated by the OIAA. Nine airlines (Alaska, American, China Airlines, Delta, Frontier, JetBlue, Southwest, United, and Volaris) provide scheduled commercial service at ONT to 25 destinations. In 2018, the airport served over 2 million passengers. The airport also has three cargo operators: it’s a hub for UPS, a larger FedEx facility is under construction, and Amazon’s Prime Air offers 11 daily flights. The airport handled 751,529 tons of cargo in 2018 and is in the top 10 US airports for cargo handled (Ontario International Airport 2020). ONT also passed Hartsfield-Jackson Atlanta International Airport in 2018 for the most outbound freight shipments (Strickland 2018). There are two runways at ONT, 26R/8L (12,197 × 150 ft.) and 26L/8R (10,200 × 150 ft.). One fixed-base operator (FBO), Guardian Jet Center, serves GA needs. The airport also has 700 acres of real estate available for development. ONT is between east-west highways I-10 and I-60 and along north-south highway I-15, so can be conveniently accessed by a large portion of the Southern California population. The airport is on the border of San Bernardino and Los Angeles Counties and is also close to River- side and Orange Counties. The Riverside-San Bernardino-Ontario metropolitan statistical area (MSA) population in 2018 was 4.62 million, a 0.9% increase from the year before. The region had a median household income of $65,671 in 2018, which was 5.9% higher than 2017. In San Bernardino County, the largest industries are healthcare and social assistance, retail trade, and transportation and warehousing (Data USA 2020). Overview of OIAA The OIAA was formed under a joint powers agreement (JPA) between the City of Ontario and the County of San Bernardino. The JPA gave Ontario 80% ownership and San Bernardino 20%. The OIAA was formed to provide an overall direction for the operations, development, management, and marketing at the airport. The OIAA took control of ONT operations in November 2016. The seats on the board are guided by the Brown Act and consist of two elected officials from the City of Ontario, the supervisor of San Bernardino County, and two at-large seats for appointed community or business leaders in the region (Wilson 2018). There are no term limits. Over the last 4 years, the board has included a Chinese-American business leader to bring the perspective of the large Asian population that lives and works close to ONT. There are four ad hoc sub- committees of the board with two members each: finance, air service and business development, safety and security, and information technology. The airport authority governance structure allows for autonomy by the management team to make decisions. The management team hires personnel, but new positions must be approved

54 Guide to Evaluating Airport Governance Structures by the board. Management can make contracting decisions up to $100,000 and makes recom- mendations to the board on contracts over $100,000. The OIAA business plan has four objec- tives staff members adhere to when making decisions for the airport: lower costs, grow service, maximize nonairline revenue, and offer an exceptional customer experience. Transition from LAWA to OIAA LAWA had control and ownership of ONT from 1967 until the transition to the OIAA in 2016. The transition was precipitated by the shift in management philosophy at LAWA when a new executive director took over in 2007, coupled with service declines at ONT due to the 2008 economic recession. Before 2007, LAWA took a regionalization approach to the development of its airport system. However, the new executive director shifted focus to the modernization of Los Angeles International Airport (LAX) which, according to an interviewee, led to air service development and maintenance at ONT falling by the wayside. A lawsuit was filed in 2013 by the City of Ontario against the City of Los Angeles stating a lack of focus on the operations and development of ONT. Ontario argued that the transfer of control from LAWA to the OIAA would help the airport realize its potential as an economic engine for the region. There was a great deal of congressional and local support for the move; the FAA was also on board. The transfer process began in 2015 when all parties agreed to a settlement ($250 million); the transfer was finalized November 1, 2016. President Obama signed legislation approving the purchase and payoff of the airport. The legislation stated that PFCs (in addition to City of Ontario funds and reserves) could be used to pay back LAWA. The transition process took 6 months. ONT police shadowed the LAWA police force during that time. Many new agreements were put in place, including food and beverage, concessions, and parking management. These transitions went relatively smoothly. The protection and transition of LAWA employees was separately negotiated in collaboration with Los Angeles labor groups, and complaints filed against the City of Los Angeles were dismissed. Some employees were hired on at ONT and others decided to stay with LAWA to retain retire- ment benefits. The OIAA also revisited all leases on the airport to follow FAA rules on fair market value. OIAA hired a small staff of 54 full-time employees and offers a competitive benefits package. A double residual financial structure is currently used, so every dollar goes toward lowering cost (which expires in 2024). After the transition, the community and employees were happy to see growth at the airport. The airport’s traffic declines reversed in 2017 and passengers and freight had impressive growth through 2019. Challenges and Opportunities in Implementing New Governance Structure One challenge the OIAA faced during the governance transition was controlling costs, namely employee costs. Under LAWA there were 450 employees at ONT. The OIAA made the deci- sion to keep a lean and efficient staff and hire contractors to supplement. The OIAA contracted out airport operations, maintenance, and planning and engineering functions. They also use the Ontario Police, Fire, and IT Departments. All remaining LAWA employees at ONT either transferred back to LAX or became OIAA employees. One interviewee noted that the LAWA employees who worked at ONT and now had to drive elsewhere to keep their jobs were the most impacted by the transition. Building an airport authority from the ground up has given the OIAA the opportunity to try something different in the airline industry. They are not tied down by municipal and political

Airport Governance Case Studies 55   structure. The OIAA is focused on running the airport like a business and promoting it as an economic engine and community partner. The OIAA does a great deal of research to understand its market and its potential for commercial air service and cargo development. Another focus is real estate development; the OIAA is using models more typical outside the country. The man- agement team can think outside the box to come up with new processes, policies, and practices. ONT is now thriving, with a responsible growth mindset and investment into its future. Blue Grass Airport (LEX) FAA airport classification: primary commercial-service small hub Airport sponsor: Lexington-Fayette Urban County Airport Board (LFUCAB) Airport governance: airport board/airport authority Enplanements (2018): 735,564 (+7.7% over 2018) Nonstop destinations (Feb 2020): 17 Planned airport development 2019–2023: $71,898,206 CPE (2019): $10.23 Nonaeronautical revenue (2019): $11,261,639 Overview of LEX and Lexington Region LEX is a primary commercial-service small hub 6 miles west of downtown Lexington in Fayette County, Kentucky. The airport opened in 1942 as an army training facility and supply gateway. Eastern and Delta Air Lines began scheduled commercial service flights in 1946. The LFUCAB was formed at that time to own and operate the Blue Grass Field (Blue Grass Airport 2020). The airport does not receive any federal, state, or local taxpayer funds for operating purposes. Today, LEX has two runways. Runway 4/22 is 7,004 × 150 ft. and is used primarily by commercial- service airlines. LEX has nonstop service to 17 destinations via four airlines—Allegiant Air, American Airlines, Delta Air Lines, and United Airlines. In the last 5 years, the airport has experienced over 20% passenger growth. The second runway, 9/27, is 4,000 × 75 ft. and serves GA traffic. The airport is home to nine GA business tenants including one FBO, TAC Air. In 2019, the airport had 76,743 operations and was home to 144 based aircraft. The airport is nearing completion of a multiyear Taxiway Safety Enhancement Program. Other key recent and ongoing projects include a new aircraft rescue and firefighting facility, new baggage belt system, and a parking lot expansion. The Lexington-Fayette MSA was home to an estimated 517,056 people in 2019, which is an increase of 4.4% since 2014. The region’s economy has added over 15,000 jobs since 2014, an increase of 5.4% (EMSI 2020). The median household income in Lexington-Fayette was $56,784 in 2018, which was 2.2% lower than just 1 year prior and $5,000 below the national median household income. Major industries in the region include business services, healthcare and social assistance, educational services, and manufacturing. Major employers in the region aside from healthcare include the University of Kentucky, Kentucky State Government, Toyota Motor Manufacturing, Lexmark, Amazon.com, Conduent, and Lockheed Martin (Commerce Lexington 2020). Overview of LFUCAB The LFUCAB oversees the operations and development of LEX. An airport board has operated the airport since the commencement of commercial service operations in 1946. The terminology “airport board” is synonymous with “airport authority” as used in other states. The Kentucky

56 Guide to Evaluating Airport Governance Structures Revised Statutes Chapter 183 provides the enabling legislation and defines the purpose, duties, and powers of local airport boards in Kentucky (https://apps.legislature.ky.gov/law/statutes/ chapter.aspx?id=38012). From 1946 to 1972, the airport board consisted of six members: three city mayor appointees and three county executives. In 1972, local voters approved the merger of the City of Lexington and Fayette County. The Charter of the Lexington-Fayette Urban County Government consolidated city and county government into a single system. This merger impacted the airport board structure and now all members are appointed by the mayor of the Lexington-Fayette Urban County Government. Today, the LFUCAB has 10 members: one is the mayor (or this position can be delegated to a city councilmember); the other nine are appointed by the mayor. Each appointee can serve up to two 4-year terms, which are staggered. There are two subcommittees of the LFUCAB, each with five board members: finance/administration/operations and strategic planning. There are seven board meetings a year and the subcommittees meet an additional 8–10 times per year. The LEX executive director is given the authority to oversee all daily airport operations and make decisions regarding human resources, finance and accounting, development, and marketing. The executive director reports directly to the LFUCAB, which is actively involved in business oversight. The board is also tasked with policy development, such as salary structures and airport procedures. Advantages of Airport Board Structure at LEX Officials at LEX noted there are several key reasons why the airport board governance struc- ture is a success at LEX. The first is the commitment of the LFUCAB to forego politics and come together as a united front to promote the mission and vision of the airport. The current members and previous appointees come from a broad representation of local interests, from local businesses to pilots to lawyers. The mayors in the past have been thoughtful with appointee selections and the board members understand their role of oversight to promote the airport to fulfill its mission. The second key advantage is the autonomy given to the executive director to manage the airport and make decisions. The director noted he is in touch with each board member regu- larly, updating them on key decisions and keeping them informed of occurrences at the airport. The LFUCAB trusts he is making responsible choices on things such as personnel hiring and terminations, contractor selections, and purchasing and bidding, in accordance with the board’s broader policies. The last key advantage of the airport board structure is decision-making speed. Problems are addressed quickly and solutions can be developed swiftly. While there are sometimes federal and state regulations that must be followed procedurally, it is advantageous that there are not city or local regulations or red tape that must be followed like many locally owned airports. Challenge of Airport Board Structure at LEX and Lesson Learned As noted, the airport board structure provides a great deal of autonomy for the airport man- agement to make its own decisions on how to best run the airport. However, lack of LFUCAB oversight of airport management led to a misstep at LEX a decade ago. In 2008, four executives at LEX, including the executive director, were forced to resign due to several years of questionable spending and misuse of airport funds as reported by the Kentucky state auditor. It was noted at the time that additional financial controls, policies, and procedures were needed to ensure better

Airport Governance Case Studies 57   super vision. The LFUCAB has since developed broad policies that provide guardrails for manage- ment to operate within but still allow a level of flexibility to the executive director. To provide additional accountability and guide the board, LEX has developed the Blue Grass Airport Governance, Policies, and Procedures Manual, which expressly outlines LFUCAB’s role. This document is a road map for new airport board members and helps explain airport opera- tions and how the board supports the airport’s vision, mission, and core values. It also outlines board meeting procedures. A few new policies that provide additional oversight include the Business Conduct, Integrity, and Ethics Policy; Purchasing and Procurement Policy; and the Travel, Business Expense, Entertainment, and Reimbursement Policy. The manual has been a successful tool to reaffirm expectations board members and airport employees should adhere to. The subcommittees defined in the document allow for greater financial oversight and policy development. Syracuse Hancock International Airport (SYR) FAA airport classification: primary commercial-service small hub Airport sponsor: Syracuse Regional Airport Authority (SRAA) Airport governance: airport authority Last governance transition: March 3, 2014, from City of Syracuse Enplanements (2018): 1,139,568 (+12.48% over 2017) Nonstop destinations (Feb 2020): 24 Planned airport development 2019–2023: $39,343,435 CPE (2019): $9.86 Nonaeronautical revenue (2019): $17,518,619 Overview of SYR and Syracuse Region SYR is a primary commercial-service small hub 5 miles northeast of downtown Syracuse in Onondaga County, New York. While the original Syracuse City Airport opened in 1928, the current airport site was originally established in 1942 by the Army Air Forces as the Mattydale Bomber Base. On July 22, 1946, the City of Syracuse took over the base on an interim basis under a lease. On September 17, 1949, the Clarence E. Hancock Airport, named after the congressman from the 36th district, opened to the public with service on four airlines (American, Buffalo, Colonia, and Robinson Airlines) offering 30 flights per day (SYR 2020). Today, SYR is served by six airlines (Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, JetBlue Airways, and United Airlines) with nonstop service to 24 destinations. The airport has three cargo operators (FedEx, UPS, and Wiggins Airways) and services GA traffic with two FBOs: Million Air and Signature Flight Support. SYR has two runways: 10/28, which is 9,003 × 150 ft., and 15/33, which is 7,500 × 150 ft. In 2019, the airport had 64,845 operations and was home to 49 based aircraft. In 2018, the airport completed a $60 million passenger terminal renovation and upgrade project. The Syracuse MSA is home to over 648,000 people, which is a decrease of 1.7% (11,520) since 2014. The region’s economy has added over 5,000 jobs since 2014, an increase of 1.7% but well below the national average of 7.3% (EMSI 2020). The Syracuse region’s 2019 median household income was $58,200, $2,000 below the national median household income. Major industry clusters in the region include electronics manufacturing, metal and product manufacturing, and higher education (Chmura JobsEQ 2020). According to data from D&B Hoovers (2020), major employers include Upstate University Medical System, Syracuse University, and Lockheed Martin Corporation.

58 Guide to Evaluating Airport Governance Structures Overview of SRAA The SRAA, created under New York State’s Public Authorities Law, is a public benefit corpo- ration charged with operating SYR and providing safe, secure, efficient, and low-cost air trans- portation service to the 12-county region served by SYR. The SRAA consists of 11 members; seven appointed by the mayor of Syracuse, one by the county executive of Onondaga County, one by the town board of DeWitt, one by the board of education of the East Syracuse Minoa School District, and one appointment is shared on an alternating basis by the board of education of the North Syracuse School District and the town boards of Salina, Cicero, and Clay. Members of the SRAA are unpaid volunteers, but are entitled to expense reimbursement while carrying out SRAA business. SRAA members serve a term of 4 years except for the rotating member, who serves a 1-year term. While board members are appointed by elected officials, one interviewee described the board as “politically appointed, but not political.” Transition from City of Syracuse to SRAA SYR was owned and operated by the City of Syracuse from its initial purchase from the Army Air Forces in 1946 until 2014. As one interviewee noted, the airport faced many of the same financial challenges that large city-owned airports like Chicago O’Hare (ORD) face. Specifi- cally, the interviewee highlighted the model for police services: the airport had to pay overtime rates because policing was provided by City of Syracuse police officers working overtime at the airport. This led to tension between the airport and city officials over strategies to make the airport self-sustaining. Over the 1990s and early 2000s, the air service dynamics in the region changed with the entry of low-cost carrier Southwest Airlines into Albany and eventually Rochester. According to interviewees, this resulted in increased leakage of passengers from the Syracuse catchment area to other airports as passengers chased lower airfares. As early as 2003, Syracuse Mayor Matt Driscoll supported transferring the airport to an authority to lower fees to air carriers, increase air service, and spur regional development. The initial effort to create a regional airport authority stalled, however, due to a dispute with the Town of DeWitt regarding its involvement. In 2009, Mayor Driscoll negotiated an agreement with the Town of DeWitt, East Syracuse Minoa School District, Onondaga County, North Syracuse School District, and the towns of Salina, Cicero, and Clay. Syracuse Common Council signed a home-rule message requesting the creation of the airport authority, and local Assemblywoman Joan Christensen submitted the enabling legisla- tion. However, with a mayoral election upcoming, Mayor Driscoll declined to move the home- rule message forward. CenterState Corporation for Economic Opportunity, the joint economic development and chamber of commerce for the Syracuse region, began advocating for transferring the airport from city-operated to an airport authority with the goal of lowering costs at SYR, which would make the airport more competitive for new air service. CenterState became very involved in air service and appointed a vice president of air service development to coordinate business involvement in air service development efforts. Interviewees noted that CenterState became frustrated with the lack of urgency from city officials in trying to improve air service. Because of this, many business members of CenterState supported the transition of SYR to an airport authority. In November 2010, under the same agreement with the surrounding towns and school dis- tricts, new Mayor Stephanie Miner and the Common Council passed a home-rule message to the state legislature, paving the way for the enabling legislation to be considered. In August 2011, Governor Andrew Cuomo signed the enabling legislation into law to create the SRAA. Over

Airport Governance Case Studies 59   much of 2012 and 2013, the SRAA set up its board and worked with the city to transition airport functions, one of the first being police services. In July 2012, the SRAA initiated a process to replace city police officers with a private firm to provide security and police officers at the airport. Transitioning police services was a priority because 83% of the airport’s $4.1 million security budget was spent on overtime wages for police in 2012 (McCormick 2012). The move to the private firm saved the SRAA nearly $2 million per year (Baker 2016). In addition, the SRAA began a $60 million expansion of the terminal, which featured a centralized security checkpoint. During this period, the SRAA also developed its policies, procedures, and governing documents, which was a time-consuming effort. The city and the SRAA also worked with trade unions, operations union, and crew leader unions to transfer employees. The final application to transfer the airport to the SRAA was submitted to the FAA on December 24, 2013. The official transfer from the City of Syracuse to the SRAA occurred on March 1, 2014. Since the transition, SYR has seen gains in air service, particularly among low-cost carriers. The switch from a more restrictive city residency requirement to a require- ment that employees live in Onondaga County has also brought improvements in talent attrac- tion. According to interviewees, the overall management has become less political, with only the executive director reporting directly to the SRAA board. Challenges in Implementing New Governance Structure and Lessons Learned One of the major challenges during SYR’s transition was a lawsuit filed by the Syracuse Police Benevolent Association over the way the SRAA procured police services during the transition period (July 2012–March 2014). The police union filed a complaint with the Public Employment Relations Board shortly after the SRAA hired the private security firm, alleging the officers hired by the private firm during the transition were performing police duties and entitled to overtime pay in that capacity. The Public Employment Relations Board ruled in favor of the police union in 2015, ruling that the City of Syracuse and SRAA should have continued to use its existing police force until the airport was officially transferred to SRAA. In 2016, the police union, the City of Syracuse, and SRAA reached a $3 million settlement for overtime over the 21-month transition period (Baker 2016). While the transfer from the City of Syracuse to the SRAA has achieved many goals, including a more businesslike approach to running the airport; greater efficiencies and cost reductions; and air service gains, particularly among low-cost carriers; some inefficiencies continue to impact SRAA. Specifically, the financial system the airport is using is still tied to the city’s, which has led to inefficiencies in SRAA’s procurement and budgeting processes. The SRAA is also still under concessions and parking contracts that were signed by the city and have not been renegotiated. While most employees were transferred over to the SRAA, 15 remain City of Syracuse employees. Finally, the SRAA’s ability to finance large-scale capital projects is relatively limited as its bonding authority remains tied to the City of Syracuse and is capped at $44 million. Interviewees noted that SRAA has much more autonomy and less red tape when implement- ing airport improvements and making decisions. Customer satisfaction is much better than it was before the transition. The SRAA members are like-minded and there is an overall business and strategic approach to running the airport. Interviewees stressed that, in retrospect, one of the key lessons learned was that the opportunity to transition from one governance structure to another is limited and there should be a clean break of all functions, personnel, systems, etc. from one entity to another.

60 Guide to Evaluating Airport Governance Structures Friedman Memorial Airport (SUN) FAA airport classification: primary commercial-service nonhub Airport sponsor: Friedman Memorial Airport Authority (FMAA) Airport governance: airport authority Last governance transition: 1994 from Blaine County Airport Commission Enplanements (2018): 93,280 (+7.66% over 2017) Nonstop destinations (Feb 2020): 6 Planned airport development 2019–2023: $20,018,035 CPE (2019): $12.59 Nonaeronautical revenue (2019): $1,198,449 Overview of SUN and Sun Valley Region SUN is a nonhub commercial service airport in Blaine County in the Wood River Valley region of Central Idaho. The site of the airport was used for aviation activities as early as 1916. The owners of the site, the Friedman family, donated the land to the City of Hailey in 1931 to create an airport, which was officially recognized in 1932 (Friedman Memorial Airport Master Plan). The airport’s infrastructure has grown steadily through a series of investments by the City of Hailey, Blaine County, Idaho, and the FAA. Commercial air service began in August 1960 with the arrival of West Coast Airlines and has grown significantly since to serve the cities of Hailey, Carey, Bellevue, Ketchum, and Sun Valley, including the Sun Valley Resort, providing visitors access to significant outdoor recreational opportunities including skiing, mountain biking, and fishing. Blaine County has a total population of 22,800, which represents a 6.3% increase since 2014 (EMSI 2020). The largest employment sectors in the region include tourism, construction, and consumer services (Chmura JobsEQ 2020). Today, SUN is served by three air carriers (Alaska, Delta, and United) with service to six destina- tions (Chicago, Denver, Salt Lake City, Los Angeles, Seattle, and San Francisco). In 2018, SUN had over 93,000 enplanements, an increase of 7.7% over 2017 (FAA 2019a). The airport is also home to 156 aircraft, including 47 jets, and had 26,500 operations in 2018 (https://adip.faa.gov/ agis/public/#/airportData/SUN). Additionally, SUN and its FBO, Atlantic Aviation, accommo- date several dozen large business jets during the airport’s annual fly-in event in conjunction with an annual major conference held at the Sun Valley Resort. SUN has one runway, 13/31, that is 7,550 × 100 ft. SUN’s location in a valley with mountains to the north, east, and west makes it very challenging from an operational perspective (Friedman Memorial Airport 2018). Specifically, operations at SUN are primarily one way in and one way out, with arrivals landing from the south and departures departing to the south. In 2006, the airport conducted a site selection and feasibility study to examine possible new airport sites to address the compliance issues. As of August 2011, the FAA suspended indefinitely any further work on the Environmental Impact Statement, citing higher-than-expected project costs and environmental considerations. The community has adopted a dual-path approach for future airport operations, either at the existing airfield or at a replacement site. Overview of FMAA SUN was operated by the Blaine County Airport Commission until 1985 when the City of Hailey and Blaine County signed a JPA to operate the airport. That arrangement lasted until 1994, when Blaine County and the City of Hailey signed another JPA to create the FMAA, a public entity under Idaho Code Section 67-2328. Originally, the board had five members: two

Airport Governance Case Studies 61   appointed by Blaine County, two appointed by the City of Hailey, and one appointed by unanimous vote of the other four members. Members were appointed to 2-year terms and compensated $200 per month plus expenses. As the community explored the potential relocation of the airport, Blaine County and the City of Hailey revised the JPA in 2011 to reflect the dual-path approach to the airport. The 2011 JPA authorized two structures for the FMAA. The first was the existing structure in the 1994 agreement; the second structure was a seven-member board with three members appointed by Blaine County, three members appointed by the City of Hailey, and one independent member appointed by unanimous vote of the other six members. The FMAA is currently operating under the seven-member board because the community was planning for a replacement airport at the time the agreement was passed. Term lengths are determined by the county commissioners and the city council. To pass, a motion must have two votes from county-appointed board members and two votes from city-appointed board members. Managing Community Expectations in Regional Airport Authorities An interesting aspect of the SUN case is that the discussion around choosing and modifying a governance structure has been greatly impacted by the future potential relocation of the airport. According to interviewees, there is disagreement in the community about the role and location of the airport. The airport is at the southern end of Hailey and close to Bellevue, in the southern part of the Wood River Valley. Thirteen miles north are the cities of Ketchum and Sun Valley, including the Sun Valley Resort. Much of the disagreement over the possible relocation of the airport stems from the perception that most of the environmental, noise, and safety impacts of airport activity are borne by the residents of the two less affluent cities (Hailey and Bellevue) while many of the benefits are realized by the more affluent cities of Ketchum and Sun Valley (Thorne 2016). As the community has pondered the future size, expansion, and location of the airport, Blaine County and the City of Hailey have modified their JPA to reflect the possibility of a regional airport located outside Hailey. Specifically, the 2011 agreement contains provisions that, should the FAA approve the construction of a new airport, the existing board would only be able to deliberate, make decisions, and exercise powers at the existing airport while only county-appointed members would be able to deliberate on matters pertaining to the replace- ment airport (Friedman Memorial Airport 2011). The entire seven-member board would only reconvene to discuss real estate transactions around decommissioning the existing airport. Currently, the board and community have settled into the dual-path approach of maintaining the existing airport to ensure compliance with FAA regulations and standards and allowing for the airport to meet current and reasonable future demand, while also continuing the discussion around future airport needs and possible relocation should demand exceed the capabilities of the existing airport. Another key lesson from the SUN experience is the role politics can play on airport authority boards involving more than one community. Many communities look to airport authority structures to remove or reduce the politics involved in operating the airport. However, as long as elected officials can appoint delegates (or themselves) to authority boards, the potential for political influence in decision-making remains. The current FMAA board comprises three former city council members from Hailey, the three current commissioners from Blaine County, and an independent member selected by the other six members. Despite efforts to encourage compromise and collaboration, the governance structure of the FMAA is susceptible to political gridlock given that two members from both Hailey and Blaine County must vote in favor of a resolution or motion for it to pass.

62 Guide to Evaluating Airport Governance Structures Kingman Municipal Airport (IGM) FAA NPIAS airport classification: nonprimary regional GA Airport sponsor: City of Kingman Airport governance: city-operated Operations (2019): 28,478 Based aircraft (2019): 106 Last governance transition: May 2, 2018, from Kingman Airport Authority (KAA) Planned airport development 2019–2023: $5,641,446 Overview of IGM and Northwest Arizona IGM is 9 miles northeast of downtown Kingman in Mohave County, Arizona, at the site of the former Kingman Army Airfield. Opened in 1942, the Kingman Army Airfield was one of the largest aerial gunnery training bases during World War II and one of the largest reclamation sites for military aircraft. The airport was declared surplus by the Department of Defense (DOD) in 1949 and was conveyed to Mohave County. In 1980, the Mohave County Airport Authority was created to operate the airport. The county for the most part did not value the airport as an economic contributor to the region and it was the opinion of many that the property was only an abandoned military base and mushroom farm. The airport was transferred to the City of Kingman in 1988 and operated by the KAA from 1992 until 2018. Today, the airport is owned and operated by the City of Kingman. IGM is classified as a regional GA airport by the FAA’s NPIAS. The airport had commercial air service until 2015; it is currently served by air cargo operator UPS and is an FBO for GA ser- vices Air’Zona Aircraft Services. IGM has two runways in use: 03/21, which is 6,827 × 150 ft., and 17/35, which is 6,725 × 75 ft. In 2016, the airport had 28,478 operations and was home to 103 based aircraft (https://adip.faa.gov/agis/public/#/airportData/IGM). Given the favorably dry weather at IGM, the airport is a heavily used storage facility for commercial airline aircraft, with over 190 aircraft currently stored there. An additional 1,100 acres of the former Kingman Army Airfield has been repurposed into the Kingman Industrial Park, which is home to over 2,500 employees and 65 businesses, including American Woodmark, Honeywell Aerospace, and Tru Serve (D&B Hoovers 2020). The City of Kingman is home to over 29,000 people and has a median household income of $45,528, well below the national average of $52,000 in 2019 (EMSI 2020). The Kingman region is home to large industry clusters in utilities, wood product manufacturing, and rail transportation (Chmura JobsEQ 2020). Overview of City of Kingman and IGM Today, IGM is owned and operated by the City of Kingman, under the Economic Development Department. The airport manager reports directly to the executive director of economic develop- ment, who in turn reports to the city manager. Airport staff are employees of the City of Kingman and all personnel decisions are handled by the human resources office for the city. While most pur- chases must go through the city’s procurement process, the airport manager has contract authority for purchases less than $5,000. Police services are provided by the county sheriff and fire services are provided under an agreement with the City of Kingman Fire Department and the Northern Arizona Consolidated Fire District. The city is advised on airport matters by the Kingman Airport Advisory Commission (KAAC). The KAAC is charged with promoting activities and development at the airport; it has seven members, four of which are airport tenants, either pilots or representatives of aviation busi- nesses. Two members may be nonresidents of the city but must reside in the area served by

Airport Governance Case Studies 63   IGM for at least 1 year immediately preceding appointment. Additional noncity residents may be appointed with a supermajority vote of the city council. Each member serves a 3-year term, without pay. The mayor and city council are responsible for appointing members to the KAAC (City of Kingman Municipal Airport 2020). Transition from KAA to City of Kingman From its conveyance from the DOD in 1948 until 1979, the IGM was owned and operated by Mohave County. During the 1970s, the Mohave County Airport Authority was created and appointed by county officials to operate the airport. On December 19, 1988, the airport was transferred from Mohave County to the City of Kingman. Initially, Kingman entered into an agreement with the Mohave County Airport Authority to run and manage the airport on behalf of the city. In 1992, the Mohave County Airport Authority changed its name to the Kingman Airport Authority and signed a lease extension to continue airport operations. According to airport officials, the KAA operated as a self-perpetuating board and selected their own replace- ments, who served 2-year terms. The KAA was organized as a nonprofit organization. One inter- viewee commented that the city’s position on the KAA was “they don’t ask us [City of Kingman] for money and we don’t ask them [the KAA] what they are doing.” The city did not want to be bothered by airport issues, so even though they still owned the airport, they were hands-off in their approach to overseeing the KAA. In 2003, the City of Kingman signed a 25-year lease agreement with the KAA to continue operating the airport and adjacent Kingman Industrial Park. According to interviewees, over the next decade, the KAA focused its attention on securing land releases and selling airport property to enhance the Kingman Industrial Park at the expense of maintaining the airport. The KAA was unresponsive to complaints about airport conditions from the airport user group of pilots, airport tenants, and industrial park tenants. Local media documented several complaints by pilots and other airport users of declining conditions, including airport pavement receiv- ing a D rating, weeds and unmown grass across the airfield, and hangar facilities with rotting wood (Smith 2017c). Additionally, several aviation-related businesses, including a flight school, left IGM due to disputes with management (Smith 2017d). The sale of airport property for the advancement of the industrial park, coupled with the lack of investment in airport facilities, led some airport users to claim the KAA was comingling nonaeronautical revenues with airport revenues and engaging in revenue diversion (Pope 2006, INGEN 2018). According to inter- viewees, throughout the mid-2010s, airport users filed several lawsuits against the KAA for their mismanagement of the airport. The potential for economic growth at the airport and the lack of results in spurring new development at the industrial park were key issues in the 2016 mayoral and city council elec- tions. One newly elected councilman expressed disappointment with the lack of development at the airport and industrial park and cited the KAA’s management as the primary reason (Smith 2017a). Another councilman was concerned about the lack of transparency and performance measures in the city’s 25-year lease with the KAA and called for a forensic audit of the KAA’s finances (Merrill 2017). Following the election, the KAA and the city council agreed to host four work sessions to discuss the future of the airport and industrial park. These sessions, held between May and August 2017, provided an opportunity for KAA officials to present informa- tion to the public on plans for future development at the airport as well as the organization’s finances. During the first three sessions, a group of airport users provided input on the poor conditions at the airport and highlighted the lack of responsiveness from KAA management in addressing their concerns. The KAA cancelled the last work meeting, scheduled for August 2017, because it claimed the meetings had digressed into strictly criticism and complaints. Following this cancellation, the city council began discussing legal options to return airport operation to

64 Guide to Evaluating Airport Governance Structures the city. The city council also requested FAA presence during the work session, but was unable to develop a scope or list of questions requested by the FAA as a precondition for attending the meeting (Smith 2017b). One interviewee noted that the FAA had had very little involvement with or oversight of the KAA in the years preceding IGM’s decline. On November 7, 2017, Kingman city council passed a resolution declaring the KAA was failing to uphold the expectations of the lease agreement and the city would authorize legal action, if necessary, to transfer the operation of IGM from the KAA to the city (City of Kingman 2017). The city also hired an aviation attorney from Phoenix to handle the legal dispute. The attorney sent a letter to the KAA detailing claims from users of poor maintenance and a lack of economic development and a request that the KAA voluntarily terminate the lease and transfer property to the city. The letter also noted that because the KAA was devaluing the facility, the city would condemn the airport and the surrounding property and use its eminent domain authority to terminate the lease with the KAA. In addition, the letter stated the city would pay the KAA $0 for the acquisition of the property and termination of the lease because the property was owned by the city and the market value of the lease was effectively $0. The City of Kingman filed a Complaint in Eminent Domain and Application of Immediate Possession with the Mohave County Superior Court on December 5, 2017. The KAA filed a motion to move the hearing to federal court. However, the federal court remanded the case back to the Mohave County Superior Court on January 16, 2018. The court denied a motion to dismiss filed by the KAA on March 6, 2018; the KAA then filed and received a stay order so they could pursue a special action before the court of appeals. The court of appeals declined the special- interest hearing and the evidentiary hearing was held before Judge Steven Moss of the Mohave County Superior Court on March 21, 2018. On April 17, 2018, Judge Moss ruled in favor of the City of Kingman and ordered the operation of IGM be transferred within 15 days, during which the KAA could file an appeal with the Arizona Court of Appeals. On May 1, 2018, the Arizona Court of Appeals denied the KAA’s motion to stop the city’s possession of the airport and on May 2, 2018, the City of Kingman received approval from the FAA to take over operation of IGM (Smith 2018). Challenges in Implementing New Governance Structure and Lessons Learned During its first week of regaining operation of the airport, the City of Kingman hired an interim airport manager and a manager for the industrial park. The airport worked with city officials on creating new, separate airport funds within the existing city financial system and transferring funds from the KAA. Cosmetically, the city immediately swept the streets around the airport and industrial park, trimmed trees and weeds, and updated signage. The city also began the groundwork for creating the Airport Advisory Commission, which had its first meeting in July 2018 (Rains 2018). The commission comprises seven members appointed by the city council. Interviewees noted that while the city made some initial progress, the transition was very difficult because the court decision appointed a neutral attorney to review all requests for files from KAA computers to ensure client-attorney privileges were not violated. This made it very difficult for the city to access files such as existing contracts and grant agreements for over a year. Since the transfer, the city has hired a permanent airport manager who has worked with the city attorney to review all existing contracts, grants, and lease agreements and revise as needed. IGM is completing a new master plan and has set capital improvement plans that include over $20 million over the next 5 years for improvements (Kingman Economic Development 2020). While the nature and specifics of the legal challenges at IGM are unique, several lessons from the IGM experience are applicable to airports of all sizes. First, the lack of performance

Airport Governance Case Studies 65   measures, transparency, and recourse for the City of Kingman in its lease agreement with the KAA, coupled with the city’s lack of oversight, produced conditions that led to an emotionally charged dispute between the parties. Additionally, the city’s lack of involvement in appointing board members to the KAA led to a loss of accountability to the citizens and users of the airport, which then led to legal action. As municipalities consider long-term leases to air- port and port authorities, designing mechanisms that ensure professional, political, and legal accountability are necessary to avoid some of these pitfalls. Finally, one of the key findings of the court case between the City of Kingman and the KAA was that while the KAA was a body politic of Arizona, it did not have the same powers (in this case, eminent domain) as a municipal government. Therefore, it is critical for airport and port authorities to understand the limits and scope of their powers under state law to avoid potential overreach vis-à-vis other governmental entities. Truckee Tahoe Airport (TRK) FAA NPIAS airport classification: nonprimary national GA Airport sponsor: Truckee Tahoe Airport District (TTAD) Airport governance: special district (California) Operations (2019): 35,000 Based aircraft (2019): 103 Last governance transition: special district since inception in 1958 Planned airport development 2019–2023: $17,770,500 Overview of TRK and Lake Tahoe Region TRK is 2 miles southeast of Truckee, California; 12 miles from the north shore of Lake Tahoe and 33 miles from Reno, Nevada. The first iteration of TRK was about 5 miles from the current airport, in 1933, when an airstrip was cleared and used as an emergency landing strip by Boeing for the section of the transcontinental airmail route between San Francisco and Salt Lake City, across the Sierra Nevada (Lamb 2019). TRK is classified as a national GA airport by the FAA in the NPIAS, the level denoting airports that serve a high level of jet activity and serve national and global markets. The airport features two asphalt runways: 11/29, which is 7,000 × 100 ft., and 2/20, which is 4,650 × 75 ft. The airport has 210 paved tie-downs for transient parking and 230 hangars (198 T-hangars and 32 executive hangars). The terminal building opened in 2012 and fea- tures several amenities, including a pilot lounge, flight planning room, public meeting rooms, and a restaurant. The airport has several significant construction projects underway, including the reconstruction of taxiway bravo. According to the FAA’s TAF and 5010 Form (https://adip.faa.gov/agis/public/#/airportData/TRK), TRK had approximately 35,000 opera- tions and 109 based aircraft in 2018 and is forecast to remain steady in terms of operations through 2035. The Truckee-Lake Tahoe region is home to over 100,000 residents and has seen a population increase of 1.4% since 2014, with anticipated population growth of 1.2% over the next 5 years. The region has seen job growth of 9.8% since 2014, which exceeds the US growth rate of 7.3% over the same time period (EMSI 2020). The region has a highly educated and affluent popula- tion, with 22.7% of residents holding a bachelor’s degree (3.9% above the national average) and a median household income $63,200, which is $2,900 above the national average. The largest industry clusters in the region include healthcare and social assistance, retail trade, tourism, and accommodation and food services (Chmura JobsEQ 2020).

66 Guide to Evaluating Airport Governance Structures Overview of TTAD TRK is governed by the TTAD, which is a special district under California law. Special dis- tricts are formed and governed by local residents to establish or enhance essential services or infrastructure in their communities (California Special Districts Association 2016). Under the statute, airport districts in California may be formed by any territories of one or more counties, must have elections every 4 years, and must have five directors on the board. Today, there are 10 airport districts across California. TTAD was conceptualized in the mid-1950s by a group of Truckee business owners who were eager to have a modern airport that would bring tourists to the area and support travel to the upcoming 1960 Winter Olympics in nearby Lake Tahoe. In 1958, the public voted to create the 425-square mile TTAD. The first elected TTAD board donated time and financial resources to obtain initial state and federal funding to purchase property, build a runway, and construct a terminal building. Today, the TTAD board has five members who run for at-large seats in the district and are elected to 4-year terms on a staggered basis, with elections every 2 years. One interviewee noted that since the TTAD is in two counties (Nevada and Placer Counties), residents of either county can run for the board. As a govern- mental entity, TTAD is funded through property taxes within district boundaries, and collects $28 per $100,000 of assessed value (Lamb 2019). Dedicated Tax Revenue and Importance of Community Responsiveness The TRK case is an interesting example of the role accountability can play in governance structures. As a special district, TTAD collects property taxes from district residents in Nevada and Placer Counties. According to interviewees, TTAD collected between $8.5 and $9 million in property tax revenue in 2018. As the case of TRK illustrates, while this nonaeronautical funding source provides the airport great flexibility and nimbleness, it also provides several challenges around managing public expectations and providing a higher level of responsive- ness to citizens than is required at many airports. As one interviewee noted, “the way we get our revenue is both a curse and a blessing.” Airport officials also note that their access to prop- erty tax revenue makes the FAA and California less likely to provide discretionary funding for capital projects. In the 1970s and 1980s, there was significant community support to expand the airport given its role as an economic driver in the region. During this time, the airport constructed a second runway and new terminal. Over the course of the 1990s and early 2000s, there was signifi- cant residential and industrial development around the airport as the community continued to grow. As traffic at TRK grew, many residents began to express concerns over increased aircraft noise. While noise complaints around an airport are not unusual, the TRK case pre- sents an interesting dynamic because one of the primary funding sources for the airport is property tax revenue from some of the same citizens who were being negatively affected by increased airport noise. According to an airport official, many citizens also expressed concern that property tax dollars were being used to offset costs to wealthy aircraft owners and users of the airport. In 2005, these community concerns led to significant turnover on the board that reshaped the direction of the airport. Before 2005, the TTAD board had been composed entirely of airport users; the elections resulted in several new members who ran their campaigns on reducing the impact of aircraft operations on the community and having the airport become a true commu- nity asset rather than just a facility for users. In 2005, the TTAD also created the Airport Com- munity Advisory Team (ACAT), an advisory board appointed by the TTAD and comprising

Airport Governance Case Studies 67   six members (three pilots and three nonpilots) who serve 3-year terms. The ACAT’s mission is to develop solutions and strategies to minimize impacts of the airport on surrounding com- munities while generating ideas around garnering public benefits from the TTAD (Truckee Tahoe Airport 2020). One airport official noted that the creation of the ACAT was an attempt by the board to better understand the needs of the pilots and have the pilots better understand the concerns of the community. Since the turnover of the board in 2005, the TTAD and TRK are more focused on communi- cating with the community, rebalancing revenue from aeronautical sources and airport users, and providing services beyond operating TRK. Specifically, the TTAD has developed several programs to increase community awareness of the airport, including the annual air show and family festival, an on-site playground, and supporting the Young Eagles program. To address some of the noise concerns, TTAD has used property tax revenue to purchase land around the airport to turn into an open space and forest health program. Finally, to highlight the benefit of the TTAD to the community beyond the operation of TRK, the district provides free meeting rooms at TRK to nonprofit organizations and has developed a robust community sponsorship and agenda partnership program to share TTAD property tax funds with local nonprofit orga- nizations. Airport officials noted the governance structure at TRK works very well for the airport and the community. The airport cannot currently hire additional personnel with experience in administering community programs like the community sponsorship program. Having this staff would be advantageous to ensuring positive community interactions and communicating the airport’s value. Summary of Case Studies The case studies presented here highlight the diversity of airport governance arrangements at airports across the United States. While each case study is unique in many respects, several key themes emerge from the eight airports highlighted here. The authors have decided to use the accountability trade-offs framework presented in the literature review to contextualize the key themes from the case studies. Theme #1: Transitions of Airport Governance Structures Occur for a Variety of Reasons A theme that emerged throughout our conversations with airports that had undergone gov- ernance transitions was that the impetus for the transition varied. At SAN, concerns over the financial management of the airport by the San Diego Unified Port District, coupled with a desire to explore alternative locations to expand SAN, were at the heart of the effort to move to a regional airport authority model. Both SYR and ONT looked to move to an airport authority in hopes that a singular organizational focus on the airport would improve air service development efforts. In Kingman, the KAA’s lack of upkeep of IGM and focus on nonaeronautical development led the city to pursue legal proceedings to return the airport to city control. These cases highlight the tension and trade-offs in accountability when deciding between gov- ernance structures. The desire to improve financial management and air service development at SAN, SYR, and ONT suggests local officials wanted to increase professional and consumer accountability by transitioning to airport authorities while reducing the focus on accountability by elected political leaders and bureaucratic structures common to local government. The IGM case highlights how too little of one type of accountability, in this case political oversight by elected officials, can lead to a level of autonomy that can result in poor performance and ulti- mately legal action.

68 Guide to Evaluating Airport Governance Structures Theme #2: Transitioning from One Governance Structure to Another Is a Complex Multiyear Process that Is Very Political Transitioning from one governance structure to another is a complex process that involves systemic change and, in some cases, negatively impacts particular groups. It is therefore no surprise that politics often comes into play before, during, and after governance transitions at airports. In some of the transition cases we examined, the most political issues were centered on police and fire services. At SAN, a state senator in 2001 crafted legislation to create the SDCRAA, which the Unified Port District attempted to fight. While the legislation did pass, the port was able to include a provision mandating police services at SAN be provided by the port’s Harbor Police and could not be competitively bid out. At SYR, the push to move to an airport authority was delayed in 2009 because of an upcoming mayoral election. During the transition to the SRAA, the Syracuse Police Benevolent Association filed and won a lawsuit against the city for using a private security firm to handle police services during the transition. Officials at SYR noted that 5 years after the official transition there are still legacy contracts and financial systems tied to the City of Syracuse that need to be renegotiated or migrated, reinforcing the complexity and time required to transition airport governance structures. The political nature of airport transitions was highlighted in both the ONT and IGM cases where parties (the City of Ontario and the City of Kingman) engaged in legal proceedings to initiate the transition to a new governance structure. As airports are public infrastructure and often among the largest job and economic drivers in a community, governance transitions often involve the loss or reduction of control by one local government or set of elected officials and the gain of control by another local government or set of elected officials. As several case studies highlighted, this creates tensions between local governments that can spill over into legal disputes. The transition between city or county gover- nance and port/airport authorities also often involves a trade-off between consumer and labor accountability, where proponents of airport authorities argue for reduced labor costs to increase the airport’s responsiveness to consumers (airlines, passengers, vendors, etc.) and opponents argue that the replacement of labor union or government employees with private or nonunion police forces depresses local wages and reduces accountability of police. Theme #3: Airport Authorities Provide Increased Autonomy, Flexibility, and Responsiveness in Operating Airports One of the most prevalent themes in our case studies was that airport authorities provide increased autonomy, flexibility, and responsiveness compared to municipally operated airports. Officials at DFW, LEX, SAN, SYR, SUN, and ONT all said the airport authority structure gives the executive director or CEO autonomy to make decisions in a timely manner compared to airports operated by municipalities where there may be another layer of procedures or rules in addition to federal or state regulations. Each airport operated by an authority delegates vary- ing levels of autonomy to the executive director, particularly in the area of contract/spending authority. A common reason cited for increased autonomy and flexibility was the singular focus of the organization on the airport and the ability of leadership to make decisions based on pro- fessional standards and business best practices rather than politics. The arguments in favor of airport authorities highlight a critical accountability trade-off between professional and bureaucratic accountability as well as professional and citizen/elected representative accountability. Airport authority governance structures tend to prioritize the use of professional best practices and decision-making over the use of bureaucratic tools such as procedures and hierarchy to ensure effective performance. Specifically, because of the special- ized nature of airports, certifications such as the Accredited Airport Executive (AAE) by the

Airport Governance Case Studies 69   American Association of Airport Executives (AAAE) speak to the body of knowledge accu- mulated by an employee and provide a signal to board members of the expertise of a creden- tialed person. This allows a board or community to have confidence in relying on professional rather than bureaucratic accountability. Similarly, airport authorities have higher degrees of professional accountability and lower levels of elected official and citizen accountability as decision-making at authorities has a higher degree of insulation from politics than is common at municipally operated airports. Theme #4: While Not Directly Part of a Government Entity, Airport Authorities and Special Districts Can Remain Highly Political, Depending on the Structure of the Governance Arrangement Despite their increased reliance on professional accountability over elected official account- ability, airport authorities and special districts are not entirely removed from the political pro- cess. The structure of airport authority arrangements often determines the influence of politics in airport operation. Specifically, regional airport authorities whose boards have representation from multiple local government units can be very political. As the SUN case illustrates, differences in community goals between Blaine County and the City of Hailey over the possible relocation of SUN resulted in changes to the structure of the board and even the number of board members from each community. To foster collaboration, the FMAA board bylaws require support from two members of both the city and county to pass a resolution or motion. However, this has resulted in instances of gridlock and inaction. At DFW, long-standing disagreements between the cities of Dallas and Fort Worth resulted in a provision in the airport board bylaws that certain recommendations such as budgeting and issuing debt must have the approval of council from both cities. As TRK illustrates, special districts are unique in that board members are directly elected by residents of a locality. This sug- gests that in the case of special districts, airport managers may have more autonomy to act than in a traditional municipally operated airport, but they operate in a more political environment than a traditional airport authority. Theme #5: Even if Not Mandated by a Governance Structure, Airports and Communities Must Hold One Another Accountable for Performance One of the key themes from the cases presented here is that having multiple avenues and mecha- nisms for accountability, regardless of governance structure, results in better outcomes for air- ports. This was most evident in the IGM case, where a lack of oversight by the City of Kingman over the KAA led to long-term leases, deteriorating airport conditions, and a lack of recourse for airport users and the public. At TRK, the public’s ability to vote for representatives who would better balance the goals of increased airport development with reducing the impact of the airport on the surrounding community is an example of strong elected representative accountability that has ultimately led to a more harmonious relationship between the airport and the community. As the case of LEX illustrated, oversight by the Kentucky state auditor led to improved financial controls and procedures to ensure financial accountability while maintaining the autonomy of the executive director in an airport authority structure.