Exile on State Street: The $90 Million Runway to Somewhere, We Hope
Without an economic development strategy and an organization charged with overall responsibility, how do we, as citizens and taxpayers know that we are gaining or losing ground?
In my recent inaugural articles for Exile, I wrote of the Erie Region's lack of a comprehensive and coordinated economic development strategy, which has had serious consequences. The near demise of the KLM Family Brand chip factory in Waterford and the failure of the Inland Port Project are the two most vivid examples I cited.
These are, and were, to be projects of the future. But what about projects that have already been completed? How are they contributing to economic opportunity? Who is monitoring these projects to ensure that the anticipated impact is being achieved? Without an economic development strategy and an organization charged with overall responsibility, how do we, as citizens and taxpayers, know that we are gaining or losing ground?
In terms of such projects, one that comes to mind immediately is perhaps Erie County's most significant public works project in history: The Erie Regional Airport Authority's $90 million runway extension project – which in November, is nearing the two-year anniversary of its completion. As we approach the anniversary, the public should be asking several important questions.
First and foremost, what has been the economic impact of the runway extension? In terms of this, remember that the runway was to allow for larger planes, including cargo operations. Second, who is monitoring the impact? Third, what exactly are the standards or criteria to gauge the success of this hugely expensive investment in an arguably geographically obsolete airport? And finally, from a City of Erie perspective, how has giving away the airport to a new "regional" authority benefitted the City of Erie?
Since there is no regional organization currently charged with advocating and monitoring economic development projects on a macro scale, one must presume that the Erie Regional Airport Authority must be doing so since this was their baby. Since I have not been able to find any data or public statements that provide that information, I can only hope the information will be forthcoming from the Authority in the near future. I am not even sure I can comment on the fourth question I posed as to how the runway project has benefitted the City. I do believe, however, that I am able to comment on the enormous contribution the City made to the project and how its citizens got a raw deal and don't even know it.
A quick history lesson is necessary. The airport was originally founded by private interests in the 1920s. In 1936, the City announced that it would obtain funds through the Works Projects Administration to develop the airport as a Class A-1 Municipal Airport, which would meet all government flying regulations. The goal was to make the airport a commercially viable operation as opposed to one of limited private use.
In April 1936, the City and County contributed funds to buy additional land in furtherance of the project. The project was thereafter undertaken and became quite successful, the Erie Airport receiving national recognition for its improvements. Along the way, the County ended its collaboration, resulting in the City establishing the Erie Airport Authority in 1950. The Authority was composed of five members, all appointed by City Council. The following year the City purchased the airport and all of its assets, which in turn were leased to the Authority. This arrangement continued for the next 50 years or so until the Runway Extension Project was initiated.
The critical point of this abbreviated history is that the Airport belonged to the City, as it had made the initial investment to develop the airport for the entire region and, through its Authority, managed and continued to develop the airport through the years.
This all changed in 2008 when the Authority and the County of Erie entered into an "Intergovernmental Cooperation Agreement." The gist of the Agreement was that the County, through its power to levy and collect taxes, would guarantee the debt of the Authority's contribution to the construction of the runway extension. The cost of the project was estimated to be $88 million. In turn, the City (which is not even a signatory to the Agreement), would add four appointments to the Authority, which were to be given to the County. In addition, since the new runway would require the use of several of the golf holes at the Millcreek Township Golf and Learning Center, the City agreed to transfer ownership of the Erie Golf Course to Millcreek Township, with the County agreeing to assume the Erie Golf Course's existing debt of approximately $2 million.
On the surface, few members of the public, let alone taxpayers of the City, realized what was being given up by the City for the sake of hoped-for economic development for the region. Prior to my exit from office, my administration was working with then-Sen. Jane Earll to enact state legislation to authorize the creation of a regional airport authority.
In addition, Sen. Earll had obtained state funds to allow the City to conduct an appraisal of the Airport. The purpose of the appraisal was to determine the present value of the City's initial investment in the Airport. Once that was determined, the idea was to transfer the Airport and its assets, either by sale or long-term lease, to the new regional authority.
The estimated value of the City's investment was as high as $45 million. The new regional authority would issue bonds to pay the City, which could be funded through, among other things, a several dollars per ticket surcharge. With the proceeds of the sale or lease, the City would create several funds to undertake infrastructure improvements, neighborhood revitalization, public safety, economic development, and real estate tax relief. This would have had a direct and visible impact on the City.
Instead, what happened? The City essentially gave the Airport away to the new Regional Authority. It also threw in a golf course valued at $6 million.
What did it get in return? The assumption by the County of about $2 million in debt on the Erie Golf course.
By my calculations, the City contributed assets to the runway project valued at approximately $51 million and got $2 million in return for a net loss of $49 million! Imagine what kind of improvements the City could have undertaken with those funds. These would have been real investments that citizens would have seen in their neighborhoods.
So as we approach the two-year anniversary of this expensive project, citizens should be asking the Regional Airport Authority for results. How has this project directly benefitted the region? And from my perspective as a City taxpayer, what direct impact has there been to the City?
I hope that there is some positive data, although I believe it will be difficult to show that the City got anything to offset what it gave up. The fundamental problem with our region's economic development strategy is that we really don't have one, at least one that is collaborative and considers regional development and local impact together. We spent $88 million on the runway. We are soon to spend millions more on a County-funded hotel.
Who is ensuring that these projects are meeting expectations, or are they just expensive boondoggles? One thing I know for certain: The City of Erie cannot afford another one.
Rick Filippi can be contacted at rFilippi@ErieReader.com.