A Red Herring User Fee Customs Service at Palomar Airport

If you ran a business or were a shareholder in one which offered a service to its clients that ran at a 50% annual loss over the first four years of operation, would you continue to support the funding of it?  Especially if we’re talking collectively in excess of an $800,000 cost vs. revenue deficit over this period?  Not likely, huh?  I wouldn’t either, which begs the question of the County of San Diego Airports, the San Diego County Board of Supervisors, and the Palomar Airport Advisory Committee.  Specifically, I’m referring to the “Users Fee Customs Service Program” provided and paid for by the County of San Diego, which primarily benefits companies with international business footprints and enjoys the convenience of flying out of Palomar rather than major airports such as nearby San Diego Lindbergh Field and Orange County-John Wayne.  The dollars associated with covering the cost of the program are derived from the Airport Enterprise Fund, which is sourced from lease revenues at all County of San Diego airports; no money is employed from the tax-payer supported County General Fund.

According to San Diego County Director of Airports Peter Drinkwater, the User Fees Customs Service Program was approved by the County Board of Supervisors in 2006 and implemented on a five-year trial period in January, 2008.  Initial annual revenue and expense projections were $360,000 and $356, 000 respectively, based upon an assumption of 100 aircraft at $300 each utilizing the service.  The goal was and still is for the program to be cost-neutral and self-funded; however, as we enter year four, revenue forecasts have fallen far below the original $360,000 target, while expenses have not decreased correspondingly.  The table below offers specific detail:

 FY                Revenue     Expense        Variance       Rev/Exp %

2007-08

$51,340

 $                

$51,340

---

2008-09

$109,600  

$476,082

($366,482)

23.00%

2009-10

$131,800

$302,772

($170,972)

43.50%

2010-11

$154,000

$306,494

($152,494)

52.90%

2011-12**

$174,012

$312,624

($138,612)

55.60%

Note:  Fiscal year 2008-09 included one-time facility costs.

Per Mr. Drinkwater, user fees were increased by 11% for 2012, but unless the number of aircraft utilizing the customs service doubles during this period, the cost deficit will again exceed well over $100,000; not even close to cost-neutrality.

As previously stated, tax-payer money is not involved in the User Fee Customs Service Program.  However, is this money-losing venture giving indigestion to the majority of leasing customers at County airports who have no need for the service?  Just curious.  Mr. Drinkwater informed me that “User Fee Customs Service provides an economic benefit to North County.   It is a service that helps to attract companies and accompanying jobs to the region.”  Perhaps so, but the devil is in the detail.  There wasn’t any accompanying information from Mr. Drinkwater to corroborate his claim of economic benefit to North County.  How many companies have been attracted to and re-located to North County as a result of this program? How many jobs have been created?  Such information would help support the User Fees Customs Service Program and indirectly offset the expense deficit.  Would it not be fair and prudent for those companies which use the service to fund it themselves, rather than at the expense of fellow airport customers who have no need for it?  Otherwise, one can only surmise that upon the conclusion of the five-year trial period, the User Fee Customs Service is either self-funded by the very businesses which benefit from it, or the program is shuttered.  At least in the private sector, one can expect such a result………………………