MBS INTERNATIONAL AIRPORT COMMISSION

 

December 21, 2006

 

MINUTES

                                                                           

The meeting was held in the Skyroom Restaurant, 8600 Garfield Road, Freeland, Michigan 48623.  Chairman Eugene Gwizdala called the meeting to order at 1:00 p.m.  Roll was called by Debbie Meisel.

 

COMMISSIONERS

 

Present                                              Staff                                      Other 

Patrick H. Beson                               Jeff Nagel                              John Palen, Midland Issues

George J. Biltz                                   A. T. Lippert                         Bill Hewitt, WSGW

Kenneth W. Distler                            Ryan Riesinger                       Rich Bostwick, NWA

Darnell Earley                                    Debbie Meisel                       Angela Osmond, DHS-TSA

Brian K. Elder                                                                                Cheryl Wade, Midland Daily News  

Eugene F. Gwizdala                           Guests                                   Wilma Kasten, Midland Daily News

Wilmer Jones-Ham (arrived 1:08)      Martin Wander, RS&H         Justin Engel, Saginaw News    

Jon Lynch                                          Mark Wilcer, RS&H               

Hollis H. McKeag                             Pat Frame, RS&H

                                                         Joe Jackson, RS&H

                                        

PLEDGE OF ALLEGIANCE 

 

MINUTES:  Mr. Biltz made a motion to approve the minutes of the Regular Commission Meeting held on November 16, 2006.  Dr. Distler seconded the motion.  The motion was unanimously approved by the Board.

 

NOVEMBER 2006 WARRANT AND CASH & INVESTMENT SUMMARY:  Dr. Distler made a motion to approve the Warrant Registers for the November Payroll Account Check Numbers 82734-82809, void checks 82779-82791; the November Operations and Maintenance Check Numbers 37084-37163; and the November Cash and Investment Summary.  Mr. McKeag seconded the motion and the Board unanimously approved it.

 

PUBLIC COMMENT:  None

 

TEN-YEAR PLAN:  Mr. Nagel stated that the Ten-Year Capital Plan is used as an internal budgeting tool only and does not commit funds for all listed projects.  Some items will be purchased in 2007 and some will not.  The plan is provided to the commission for information purposes only.  No motion for approval is requested.  Mr. Early made a motion to receive the 2007-2016 Ten-Year Plan.  Mr. Biltz seconded and the motion unanimously carried.

 

2007 BUDGET:  Mr. Nagel stated that the proposed 2007 budget was included in the packet.  The budget compares each account with the 2006 budget and shows the percentage difference between the two.  The 2006 year-end numbers will be presented in the annual audit.  The Finance Committee met to review the budget and recommended that the budget be presented to the full commission for approval.  Mr. Nagel deferred to Mr. McKeag, chairman of the Finance Committee.  Mr. McKeag stated that the committee reviewed the budget and compared it to the 2006 budget noting only minor fluctuations between the two years.  Mr. McKeag made a motion to approve the 2007 Budget with Mr. Elder seconding.  After a short question and answer period Chairman Gwizdala asked for a roll call vote.  Ms. Meisel took roll as follows:  Mr. Beson, yes; Mr. Biltz, yes; Dr. Distler, yes; Mr. Earley, yes; Mr. Elder, yes; Mr. Gwizdala, yes; Ms. Jones-Ham, yes; Mr. Lynch, yes; and Mr. McKeag, yes.  The motion unanimously carried.

 

2007 AIRFIELD PROJECTS DESIGN CONTRACT:  Mr. Nagel stated that the 2007 Capital Improvement projects consist of several airfield projects including general aviation taxiway extension, Taxiway A rehabilitation, terminal apron rehabilitation, runway blast pad rehabilitation, and airfield marking.

 

The first step in this project is to design the work.  Mr. Nagel has contacted Peckham Engineering and they have provided a contract which covers this work.  The total fee for the work is $92,954.00 which is reimbursable as a project expense once MBS receives the FAA grant. 

 

Designing this work in the winter will allow MBS to bid the projects in early spring so work can be done this summer.

 

Mr. Nagel stated that Mr. Lippert has reviewed the contract and approved it as to form.  The contract must also be reviewed and approved by the MBS State Project Manager.  Mr. Biltz made a motion to approve the contract with Peckham Engineering for airfield design work subject to State approval.  Mr. Earley seconded and the motion passed unanimously.

 

RS&H PRESENTATION:  Mr. Nagel stated that the team from RS&H is at the commission meeting to provide a presentation on their work to date.  The contract with RS&H was signed on July 3, 2006 with a completion date of February 3, 2007.  The team has been working very hard to expedite the process so MBS can maximize efforts to receive funding next year.  It would be best to attempt to get discretionary funds as early as possible in January.  The Operations Committee met with RS&H and conducted an exhaustive review of their efforts.  Mr. Nagel asked Dr. Distler, chairman of the committee, to report to the board. 

 

Dr. Distler stated that the committee has met several times with members from RS&H.  Interviews were held by RS&H in the three communities and the uniqueness of the community and the airport were determined.  The committee was impressed with RS&H’s experience, quality, thoroughness, and their understanding of the airport’s needs.  Dr. Distler stated that RS&H will present a summary of what work they have done and what they propose.  Mr. Biltz, also a member of the Operations Committee, stated that the Commission made a decision that something had to be done with the MBS facility, that “do nothing” was not an option.  That was when the board turned to RS&H for guidance in the process.  RS&H will present what they have learned from the communities, about discretionary funding, renovation, and building new.  Mr. Biltz stated that there are four items that the committee learned and should be considered as RS&H goes through their presentation.  First, the funding cycle starts in January.  To exercise all the options in Washington, D.C. regarding funding, timing is important.  Second issue is the actual funding.  Funding has changed since the Traverse City terminal and others were built.  A large measure of funding was discretionary funds from the FAA.  Some of those changes are results from Homeland Security, the war in Iraq, and Afghanistan.  These changes put pressure in various ways on the budget in Washington and made the funding issue a different program from what it was.  The other two issues are the cost of renovation versus a new terminal.  Peckham Engineering gave some preliminary numbers in regard to renovations based on a certain number of assumptions.  RS&H were asked to go into more detail and make an apples-to-apples comparison with a new terminal.  Both renovation and new construction cost more than originally expected.  The committee still agrees that something needs to be done.  After the presentation from RS&H, the committee will make a recommendation.

 

Joe Jackson from RS&H introduced himself, Mark Wilcer, project manager for the project, Martin Wander, design architect, and Pat Frame, civil engineer. 

 

Martin Wander stated that he had interviewed all the commission members and several members in the communities to understand the area that is served by MBS what they think about their communities and the area.  He will continue to interview.  Mr. Wander proceeded with the presentation describing each community including architecture, tourism, rivers, industry, parks, history and many other assets.  He stated that there is diversity in every sense of the word.  Rich history in aviation with the WWII construction and the POW camp that was located at the airport.  Layering all of the different cultures and activities in one airport will give a richness to the airport.

 

Joe Jackson stated one of the things that RS&H feels is important to the financial plan is to establish a workable capital funding plan for the terminal and other needed projects.  The plan will maximize use of Federal, State & other grants, optimize use of Passenger Facility Charges (PFCs), consider other funding sources (bonds, CFCs, increased rents, etc.), and minimize use of local funds and cash reserves.  The FAA grants are made up of entitlements which are earned based on the number of enplaned passengers at MBS and discretionary funds are provided at the discretion of the FAA.  Mr. Jackson stated that although eligibility would be approximately 91%, eligibility for Federal funding does not necessarily mean that the all the Federal funds will be made available.  Therefore concentration must take place on the Federal grants.  Washington, D.C. has changed their outlook on funding because of Hurricane Katrina and the war on terrorism.  The availability of discretionary funding is a little finer than it has been in the past.  To achieve these grants MBS must have an action plan.  There must be public support, a consensus within the business community, Congressional coordination, agency coordination, and a FAA Benefit Cost Analysis to compete for discretionary funds.  The business community needs to communicate their support of updating MBS Airport and that it is important to them as the portal to the nation’s air transportation.  The plan will need to be executed throughout the life of the project.  Timing is key.  The first opportunity to make a case for the discretionary funds is in January. 

 

Mr. Biltz asked what kind of funding experience RS&H has had in past.  Mr. Jackson stated that on the low end based on very ineffective pursuing of discretionary funding, possibly 12% of the project being through a Federal grant.  The high end would be nearly the full eligible amount.  A more realistic number would be somewhere in the middle, 50-60% of the eligible amount.  Every year there is grant money that is not allocated. The FAA will find an ongoing project to contribute to rather than turn it back to the trust fund.  That money could amount to a million dollars or more at various times over the life of the project. 

 

Mr. McKeag asked for verification that the state money comes from the aviation fund and that the governor cannot touch those funds.  Mr. Nagel stated that the 2 ˝% comes from the aviation fund through the Bureau of Aeronautics.  

 

Mr. Lynch asked what role does the articulation of public support and expression of consensus from the business community play in garnering a high level of Federal funding support for the project.  Mr. Nagel stated that it is a major role.  When Mr. Nagel went to Washington D.C. with contingent from Vision Tri-County it had immense impact by having the representatives see that there were people from diverse industries and communities supporting one project, MBS International Airport.  RS&H finds that a very strong argument to the project with Washington and it is important to establish it as soon as possible. Mr. Nagel stated that the Vision Tri-County is made up of the three presidents of the chambers of commerce and the three heads of the economic development groups.  All six have indicated to Mr. Nagel and to the people in Washington that this would be an important project to their communities for economic development.  Every member of Congress that the group visited with said to please come back once the Airport Commission has made a decision to move forward.

 

Mark Wilcer discussed the Concept Design Study.  This includes the size of the terminal and location.  RS&H used the existing ALP, did a site analysis, and initial concept site studies.  Mr. Wilcer stated that there were also extensive interviews held with some of the concessionaires or people who occupy, passengers, and staff to determine what the airport’s needs are.  RS&H tries to determine what the industry trend is.  A terminal cannot necessarily be designed so that the airline will come in but it can be designed to be more attractive from a cost benefit standpoint.  Other factors taken into account are the flow of traffic.  Generally ticketing, baggage claim, and the concourse will expand.  The terminal needs to have flexibility for the future which includes possible security changes.  Mr. Wilcer also explained the location of a future terminal in regards to the roadways, runway, taxiways, and parking.  The new terminal building estimate came in fairly close to the initial study; however comments made by various individuals such as a front canopy were taken into account and these changes along with a contingency increased the total amount.  As far as a remodel project, when phasing and temporary facilities are added, along with contingencies, that number increases as well.  Mr. Wilcer stated that the cost estimates for a new terminal are $48,300,000 and the costs of remodeling are $45,298,000. 

 

Dr. Distler informed the board that the presentation to the Operations Committee was in greater detail however today it was scaled down for the presentation.  Mr. Biltz stated that the current terminal study went into greater detail that the prior study and by doing so it also added more detail to the remodeling of the current terminal.  Mr. Biltz stated that in no way is the committee unhappy with the study that Peckham Engineering completed but that the changes created a more apple-to-apple comparison.

 

Martin Wander reviewed the pros and cons for the terminal remodeling and a new terminal complex. Pros for terminal remodeling are lower site cost, no environmental issues, limited impact on Garfield Road, reserves the north quadrant for future development, and minimal airfield development.  Cons for terminal remodeling are airline & passenger inconvenience, limited future expansion, challenges with site circulation, conflict with future GA, significant impact on ongoing operations during construction, and linear concourse less convenient to passengers.  Pros for a new terminal complex include no impact on passengers or airport operations during construction, flexibility for future changes, significantly improved operations, direct access to taxiways and runways, potential for future airport development, lower long term costs, and potential reuse of existing facility and infrastructure.  Cons for a new terminal complex include higher first cost, relocation of the remote communications air/ground tower, and additional costs for apron and taxiways.  Mr. Wander stated that they know that a more efficient building will allow the airlines to operate more efficiently and then they would be more likely to make more money.  That would more likely allow them to maintain or grow their operations.  It also gives a new airline minimal cost to move in.  There are also lower long term costs.  Renovating the current terminal will last 10-20 years but at a certain point there is a limited flexibility.  Mr. Wander opened discussion for any questions.

 

Mr. McKeag asked the size of the new terminal.  Mr. Wander stated that is 75,000 square feet which can handle 250,000 to 275,000 enplanements per year with expansion capabilities to 350,000 enplanements per year.

 

Mr. Lynch asked whether the additional apron and taxiway is included in the cost.  Mr. Wander stated yes.  Mr. Lynch asked is there a potential reuse of the facility and would that in turn be a liability?  Mr. Nagel stated that the value of the facility is the location not necessarily the building.  It has the ramp, utilities, and parking lot.  Mr. Lynch had concern regarding that projections are based on growth when over the last several years MBS has experienced a decrease in passenger traffic.  Mr. Nagel stated that the 75,000 square feet is just a little over the 65,000 square feet current building.  In the past MBS has had 275,000 enplanements.  The need for a building project is not related to tremendous passenger growth but related to the poor condition of the existing facility.  RS&H has worked with MBS, the airlines, the master plan, and the FAA terminal forecast and picked a moderate level of enplanements. 

 

Mr. Earley asked about the higher cost per passenger in a remodeled terminal.  Mr. Wander stated that per square foot an older terminal is a less operational cost than a new terminal.  Two main costs would include bringing the codes up to date and updating the appearance of terminal, however usually on an old terminal the updating is not extensive.  With a new terminal the cost per passenger is actually lower because so many more passengers can be handled per square foot in a more efficient building.  It also is more efficient for the airlines and they may be able to work with fewer employees.

 

Mr. Wander also replied to an earlier question regarding the size of the terminal by stating that he cannot say that if MBS builds a new terminal they will come however it can be said if MBS doesn’t build they won’t come.

 

Mr. Earley stated that maybe there is a correlation between the facility and passenger growth when the facility is observed as a much more regional type facility; if it were modernized and more convenient.  Although MBS is geographically 35 miles north of Bishop there is a huge market in the mid and eastern part of the state that could work towards a more regional facility.  Could a new terminal make MBS more regional and more attractive for possible growth?   Could emphasis on a new facility and lower operating cost per passenger make MBS a more regional airport and would that be a consideration in making a decision on the terminal?  Mr. Wander stated that it is hard to quantify that.  However, if you have an airport that shows what the community wants to be or what the community is, it then supports the industry which then can grow better and support the airport.  Both need to work together.  If the community wants to get another industry to come to the area, the industry needs to see a new airport that says the area is a great new modern place.  Mr. Earley stated from a planning standpoint, the terminal could be remodeled but if we looked further ahead and do more long term planning, given the variables to support the concept of remodeling or building new, it would appear that a new terminal would position MBS better in terms of achieving the goal of growing past a local commuter hub.  Mr. Wander stated the board needs to make their decision based on the information given, however for a few million dollars you get a lot more for your money with a new terminal.  This is the beginning of a 50 year decision. 

 

Mr. Beson stated that he feels that it is important to listen to the experts; it will payoff in the future.  Mr. Wander stated that the level of service and quality is important such as how long does a passenger wait in line at security, how comfortable is it when the passenger waits for their bag, are people able to sit down when waiting for someone or do they have to stand.  It needs to be comforting and welcoming.  Mr. Beson stated that people remember their experiences and it may determine whether they come back or not.

 

Mr. Wander stated the level of service would be equal to the Traverse City Airport with the quality and amount of space and the quality of the finishes.  The terminal would be rated at a B+ level, not gold plated.  Mr. McKeag asked the cost of Traverse City.  Mr. Wilcer stated it was $52 million for the 120,000 square foot terminal with similar improvements from the airfield but a little more cost because of a bigger facility, and many of the same amenities such as the parking lot.  The terminal was completed a year ago.  RS&H has included three years of inflation in the MBS estimate.  The board may elect to break the packages down based on funding availability.  The site preparation and the foundation could be separate from the building.

 

Mr. Gwizdala referred to Dr. Distler, chairman of the Operations Committee.  Dr. Distler thanked RS&H.  He stated that the commission had a hard choice in choosing a project management firm but that he is confident that the right choice was made.  He stated that it is very obvious that to remodel the current terminal would be a big mistake and is very anxious to get moving on the first phase of a terminal building.  Dr. Distler made a motion to build a new terminal pending funding and to design the project in 2007.  Mr. Biltz seconded the motion. 

 

Mr. Elder asked how much of the project will be the cost to MBS.  Mr. Nagel stated that it is premature to give an estimate.  RS&H has provided their financial analysis in terms of the project cost.  They laid out an excellent funding strategy.  The commission has already started that strategy by supporting Mr. Nagel’s trips to Washington, D.C. and his community involvement in consensus building.  It will depend on Mr. Nagel’s efforts with commission help in terms of obtaining discretionary funding for the project.  The motion states pending funding and the funding decisions will follow the commission throughout the course of the project. 

 

Mr. McKeag stated that MBS has a study that hopefully will help the fare structure.  MBS is in a 7 year decline and the decline has to stop.  It is in industry’s hand.  A new terminal is not necessarily going to attract people; it is the rate structure that is driving them away.  Mr. McKeag’s feeling is that something needs to be done about the rates before a new terminal.  In order to get money from the Federal government MBS needs to be in an upwards climb.  He takes no consolation in that every airport in Michigan is on a decline.  Michigan is in a bad economic condition.  All the airports are not as bad as MBS who is in the 7th year of decline.  Rates are very important and need to be taken care of.  Mr. McKeag would rather not make the decision today on a new passenger terminal.  He feels the rates are far more important than building a new terminal.  He wants to see the results of the fare study before voting.

 

Mr. Biltz stated the rate study is underway and is due in February.  It was coordinated to be completed when the RS&H analysis was due.  RS&H completed their analysis early in order that funding could be started in January if MBS decided to go forward.  Mr. Biltz said rates are not under MBS’ control and MBS may not like the answers in the study but the airlines set the rates.  The purpose of the study was to understand the difference in rates between MBS and Flint.  Even when MBS gets the rate study there will be information regarding the differential but there could be no airline agreement or disagreement.  Discussions can take place with the airlines based on the study.  Mr. Biltz’s second comment was that the traveling passenger is the one who makes the final decision of where to fly from.  Rates are one factor and environment is another factor.  RS&H presented today that MBS’ environment is not particularly welcoming.  It’s not a good airport environment.  It’s not the worse airport.  We need to work on the rate side and the environmental side and the motion commits MBS to go down a path of the environmental side.  MBS has four or five years to work through it and get funding. Mr. Biltz hates to miss another year of the window for funding and endure another year of increase in the cost.

 

Mr. Earley verified that MBS is the largest airport north of 69 and east of 75.  MBS is in good location to serve those people.  He agrees that the rates are only one portion of the bigger picture which is positioning MBS for the future from a visionary standpoint.  MBS would be in a position that would not only provide competition but to also be able to service a large part of the state of Michigan.  With the competition of the airlines MBS may see some modifications in the rate structure.  More people will fly years from now.  If MBS would remodel the current building, the future would be limited.  If we build a new terminal then MBS is positioned to make all of these things happen.  Looking at it long term, the bottom line is a new terminal can be built for four million dollars more.  Mr. Earley stated that Mr. McKeag’s comments are well taken but should not be the driving factor of the future of MBS Airport.  The timing is right to move forward.

 

Chairman Gwizdala asked Ms. Meisel for a role call vote.  Mr. Beson, yes; Mr. Biltz, yes; Dr. Distler, yes; Mr. Earley, yes; Mr. Elder, yes, Mr. Gwizdala, yes; Ms. Jones-Ham, yes; Mr. Lynch, yes; Mr. McKeag, did not vote.  The motion carried; 8-0.

 

OLD BUSINESS:  Mr. Nagel stated that TSA designated the exit lane responsibility to the airport.  This has been an issue and has not been settled yet; it is still out for public comment.  MBS will assume the duties and has hired a company to provide the security however; staff is waiting for final word to come from TSA headquarters in Washington, D.C.

 

Mr. Nagel stated that Northwest Airlines has now contracted out numerous stations including Lansing, MBS, Traverse City and Kalamazoo.  MBS transitioned on December 11-12.  Members of management on the transition team said that it went better than many of the other transitions.  That is probably because they have learned from some of the prior airport transitions.  Mr. Nagel complimented Rich Bostwick for keeping MBS staff informed.  Air Wisconsin employees are now contracted to handle the Northwest flights from MBS.

 

Mr. Nagel updated the board on the surplus equipment sale that was approved at a prior meeting.  The plow truck was sold for $22,850 and the loader was sold for $7,000.

 

Mr. Nagel stated that notice was received the beginning of December that MBS did not receive a military jet team for an air show.  Thunderbirds will be out of the country a few weeks in July when MBS was looking at having the show.  The Blue Angels filled in the Michigan shows, one in Battle Creek and one in Detroit.  The two shows are fairly close together, a couple of weeks apart, which is surprising to Terry Grevious who did the paperwork for the air show.  Mr. Nagel will be meeting with the Marketing Committee once the fare study comes in and will discuss with them whether MBS should pursue a show for next year.  Mr. Nagel stated that he appreciated the support of the commission.

 

Mr. Beson asked what the security issues are that are being taken over from the TSA.  Mr. Nagel stated that currently the deputy is required to stay until the last departing flight of the night in case of an issue at the checkpoint.  When the deputy goes home there are still arriving flights coming in.  The gate in front of the checkpoint is closed and locked.  TSA has put a person there to make sure no one from the public gets into that sterile area.  When a deplaning flight comes in TSA opens the gate lets the passengers out, and closes the gate.  In the morning the TSA sweeps the area and opens up.  TSA has said that is not their responsibility, it is an airport responsibility.  Staff has been working with the TSA since October of 2005 with TSA staffing it on a month to month agreement.  TSA stated that based on their staffing they can no longer do it.  Mr. Nagel stated that the airport is doing it but with the understanding that once word comes from TSA headquarters and if it is not an airport responsibility, the airport will no longer do it.  There is a clause in the airline leases that says that MBS pays for the first 16 hours of law enforcement security and any time over that can be billed to the airlines.  The time between last flight going out and last flight coming in is four to five hours per night.  After last flight security closes the gate and locks it.  It is then ready for TSA in the morning.  It has been a very difficult issue to work with. 

 

Dr. Distler asked if the surplus equipment went to any of the local airports.  Mr. Nagel stated no.

 

NEW BUSINESS:  Mr. Nagel stated that Ryan Riesinger is the proud father of a baby girl born the day after Thanksgiving.  Mother and baby are doing well.

 

ADMINISTRATIVE MATTERS:  Next regular meeting is scheduled for January 18, 2007.

 

ADJOURNMENT:  There being no further business, Mr. Earley made a motion to adjourn.  Mr. Elder seconded and the Board unanimously passed the motion.  The meeting adjourned at 2:40 p.m.

 

 

 

                                                                                                                                                            Hollis H. McKeag, Secretary