Benjamin Limmer

Finances at Burke Lakefront Airport

Burke and Hopkins Airports are, for financial, budgeting and reporting purposes, combined together. Actually, Burke expenses and revenues are line items in what is basically financial budgeting and reporting for Hopkins. That is because all Burke maintenance, operation and administrative expenses, and all rentals, charges, landing fees, use charges and concession revenues, are included in the calculation of airline rates and charges for Hopkins Airport. Revenues from Hopkins cover any deficit at Burke. Thus, Hopkins "surpluses" offsets Burke losses. The Burke Master Plan states that this situation, where there are two airports in a community with the main commercial airport subsidizing the reliever airport, is "typical."

The aforementioned phenomenon is up for interpretation, especially when discussing if Hopkins is in fact "subsidizing" the activity at Burke Lakefront. Dana Ryan, Chief Planning Officer for the City of Cleveland Department of Port Authority said the following in an email interview:

"I don't know if the correct word is "subsidizing," but in situations where a city owns multiple airports, such as Cleveland, it would be to the city's advantage if it operated the system through an enterprise fund. The enterprise fund ensures that those who gain benefit from the airport system (principally the airlines and passengers) pay for the system. It also ensures that no tax dollars from the city's general fund are used to operate or maintain the airports."

Regardless of the term coined to represent Hopkins and Burke sharing the same "piggy bank," whether or not this is "typical" as stated in the 1999 Master Plan is also up for argument. I asked Ryan about how "typical" this actually is given his experiences in Dallas, Texas:

"As I have understood, the situation in Dallas is similar. The City of Dallas owns Love Field (commercial service) and Redbird Airport (a designated reliever to Love and DFW). Redbird rarely operates in the black, yet it costs taxpayers no money because costs are covered by Love Field… However, as counter argument, in today's cash-strapped environment this practice is being questioned by the airlines. For instance, the Metropolitan Airports Commission (MAC) of Minneapolis/St. Paul owns and operates a commercial service airport (MSP) and six designated relievers. The relievers are operated in part through fees paid at MSP by Northwest and other airlines. Northwest is challenging the MAC to make the smaller airports more self-sufficient by raising landing and tenant fees at the reliever airports. If this is not feasible, the airline wants the MAC to divest itself of one or two reliever airports."

The Use Agreements with the airlines using Hopkins Airport, which currently expire in 2005, include a provision that the annual deficit at Burke is included in the residual cost formula for Hopkins, up to a limited amount (i.e. a specified maximum.) This amount is called the "Allowable Burke Lakefront Deficit." The airlines agree to have their fees cover the Burke deficits so long as the projected deficit does not exceed the Burke deficit for 2001. The formula is as follows: 2001 Burke deficit, minus the debt service on General Obligation (GO) Bonds for Burke improvements, multiplied by the Consumer Price Index (CPI) for the most recent month, divided by the CPI for the same month in 1975. See Table A, below.

The City's Airports are operated as what is called an Enterprise Fund, as mentioned above from Mr. Ryan. That does not mean that the Airports are required to be self-sufficient, and are not supposed to be either subsidized by the General Fund, nor are they to subsidize the General Fund. There is no explicit City Charter provision requiring that the Airports be operated in this manner, as there is for the City's utilities-water, electric and sewer.

There is a provision in at least one grant agreement between the City as grantee (or sponsor) and the FAA as grantor, dated June 13, 1995, that appears to be a general agreement whose language may apply to other grants that make reference to the general terms, which states that the City agrees that:

…All net revenues produced from real property purchased in part with Federal funds in this grant shall be used on the airport for airport planning, development, or operating expenses…airport fiscal and accounting records shall clearly identify actual sources and uses of these funds.

Thus, through agreement the City is restricted in how funds and revenue may be used.

Revenues

Burke's revenue sources are from concession and lease agreements, rentals, parking revenues, landing fees and other sources such as the Air Show and the auto race. The current lessees and concessionaires are listed at the end of this report in Table 1. There are 18 tenants, with 3 sub leasers, all accounting for roughly ½ of the total operating revenues according to the City of Cleveland Balance Sheets for 2001. Given a total operating revenue amount of $810,894 and a total leased square footage amount of 418,746, the average amount of rent paid per ft² is $1.94, far below the national average of reliever airports. In addition to this, the 1999 Burke Master Plan calls for increasing revenues through fiscal year 2017, revenues have been declining and when coupled with the troubles within the airline industry and the down economy, the outline in the plan may become irrelevant very quickly.

Also at the end of the text is an excerpt from the Master Plan showing the 15 year projection for cash flow, shown in Table 2. During the 1998 fiscal year, Burke's revenues were roughly 40% of the total expenses, and when estimated for the next 15 years, the percentage drops to around 17%. This is highly unlikely and seems to be attempting to justify further capital improvements in the airport, mostly because in the five years since the Master Plan was completed; this has yet to come to fruition. As one may imagine, the percentage has remained constant over the last few years.

Expenses

Expenses for Burke Airport include costs for personnel, materials and supplies, maintenance and operation, and administrative expenses. On the expense side of the equation according to Table 1, the total for fiscal year 2001 was roughly $1.8 million. The overall deficit was nearly $1 million, and probably will increase marginally over time. This doesn't spell trouble for Burke in the immediate future because the airlines at Hopkins who are "subsidizing" the activity at Burke have a "maximum allowable deficit" of over $2.2 million. This may justify the industry organizing to shape up the overall airport financial structure in the Cleveland area.

Interpreting the expenses using a variety of sources does prove to be quite troublesome. For instance, the City's Balance Sheets, the Mayor's Budget, the 1999 Burke Master Plan, and a 2002 Department of Port Control Analysis all show incredibly different figures for both the revenues and the expenses. There may be a variety of interests reflected in this phenomenon, but regardless of the case, the overall expenses will not rise to the amount set forth in the Burke Master Plan as shown in Table 2, with revenues shrinking to around 17% for expenses. The airport system in this region simply cannot afford such a move.

Impact of Burke on the Cleveland Economy

The impact of Burke on the local economy is a difficult issue, and one that is a matter for economists and other experts in the field to evaluate. In addition, the sensitivity of Burke has been becoming a growing problem due to the lakefront redevelopment plans from the City and many at Burke were incredibly reluctant to give out public financial information.

In making any analysis of Burke's impact, both the direct and indirect affects of the Airport must be considered; i.e. the impact of the users of the Airport, and the effect of the visitors drawn to the City and downtown by the two large public events held at the Airport, the Air Races and auto race.

In addition, while the employment by the City at the Airport is relatively small (below 20 people), the employment created by the lessees and concessionaires must be considered in evaluating the impact of the Airport. NOACA analyzed the economic impact of Burke and the other 4-reliever airports for Hopkins in a 1990 study. At that time at Burke, the on-airport employment was 173 full time employees (equivalent.) The application of employment multipliers resulted in an employment impact total of 345 positions. Out of 26,766 itinerant arrivals at Burke, the study concluded that an estimated 22,300 were visitors to the City. (Note: in 2001 Burke had 21,000 itinerant arrivals.)

The total payroll impact at Burke was estimated to be more than $6 million. Total output for Burke associated with Airport tenants were estimated at $14.4 million. Combining estimated sales, taxes, and average annual capital expenditures for each airport tenant derives output. The total output impact associated with general aviation visitors was estimated at $4.1 million. The total output impact for Burke was estimated at $22.6 million. This does not include externality effects, such as the impact of the Air Show and auto race.

The Future of Burke Lakefront Airport

Burke's main purpose is as a reliever airport for Hopkins International Airport. The importance of Hopkins is therefore tied to the importance of Burke. A report by the City in 1991 stated: "As our region's primary commercial airport, Cleveland Hopkins International Airport relies upon a system of air traffic reliever airports in order to provide the necessary capacity to accommodate the air travel needs of the Greater Cleveland area. The ability of Hopkins to meet present demand and future growth is only possible if a strong reliever system is in place, and Burke is the major component of that system." The report notes that of five federally designated Hopkins reliever airports, Burke is the only one in the City and under the control and direction of the City. The importance of minimizing delays for the commercial airlines using Hopkins is so important, the report says, that the airlines are willing to underwrite operating deficits at Burke.
The advantages of Burke are listed as follows by the City:

· Burke is one of the best equipped of the 5 reliever airports, and is the only one with capabilities to accommodate large aircraft.
· Burke's location is ideal for business users, and from a noise perspective; its position on the Lake does not generate noise complaints commonly occurring with other landlocked airports.
· In a 1988 survey of pilots using Burke, 77% said that if Burke were unavailable, their first choice as a replacement would be Hopkins.

The City in 1991 believed that Burke's potential for scheduled commercial airline service "should not be underestimated." Also, Burke, the City said, is an ideal location for cargo operations because it can handle nighttime and early morning flights without the noise issue.

The 1999 Master Plan Update supports the City's contentions, and lists specific improvements at Burke that are needed to allow it to increase its operations. See Master Plan Recommendations, above. See also, Councilman Michael Dolan's comments, below, which support the Master Plan's recommendations.

Other proposals have ranged from eliminating Burke as an airport, to keeping the airport, but adding other commercial and business operations or public amenities. One idea is to move Port facilities to the northeast, undeveloped end of the Burke property. This area is the former Confined Disposal Facility (CDF) known as Dike 12. It is presently in the possession of the Port Authority under a Local Cooperation Agreement (LCA) with the Army Corps, which built and filled the CDF Dike 12. The idea is to move and consolidate port facilities, creating a multi-modal Port, with air, water, highway and railroad access.

Some believe that Burke Airport should be closed in favor of housing, parks and other non-aviation developments. At least one community leader in the development business, speaking anonymously, suggested that the land at Burke could be used best for housing. He noted in a 2002 interview that housing in Cuyahoga County is a concern because of the lack of space for new housing, and particularly medium cost housing. He also asserted that his company has built housing on fill in Chicago, and that housing could be built on Burke, as long as it is not high-rise.

A Waterfront Steering Committee issued a report in February 1985 recommending that the western part of Burke be developed for commercial or residential use, that the Airport be maintained, that a bike path be built on its perimeter, and that the eastern end be developed as a waterfront park.

A Cleveland Waterfront Master Plan Update was issued June 17, 1989 by the Cleveland Waterfront Coordinating Task Force, and presented to Governor Richard Celeste. Its recommendation as to Burke was that a study be conducted acceptable to both pro development officials and the FAA to determine the best use of the Airport. The Report did say that they talked to the FAA about the use of the eastern end of Burke for park purposes, but the FAA said it could not be used because it is part of the airport's clear zone. As to closing Burke, the Task Force found that the FAA is not wedded to Burke as an airport if another site exists as an adequate reliever airport for Hopkins. Finally, the Task Force urges that there not be competing studies by development promoters and the FAA, but rather that a joint study and report be issued by professionals acceptable to both sides.

In 1990, the Northeast Ohio Areawide Coordinating Agency (NOACA) commissioned The Cleveland Airport Reliever Study, which was conducted by Aviation Planning Associates, Inc. of Cincinnati, Ohio, and released in April 1992. The study was financed in part by an FAA planning grant. The study reports that three of the 5 reliever airports for Hopkins have towers, Burke, Cuyahoga County and Lost Nation. The FAA operates Burke's tower while private contractors operate the other two. Burke's tower operates 24 hours per day, 4 days per week, 23 hours on Fridays, and 16 hours Saturdays and Sundays. Cuyahoga County's tower operates 16 hours per day, seven days per week, and Lost Nation's tower operates 14 hours per day, seven days per week.

NOACA states that Burke is the primary reliever for Hopkins, due to its location in downtown. Both of Burke's runways are longer than those of any of the other 4 reliever airports. Burke's primary runway is 6,198 feet long, and its secondary is 5,200 feet. Cuyahoga County's longest is 5,101 feet, while Lost Nation's longest is 5,013 feet. Cuyahoga County has only one runway, as does Lorain. The other 3 have two runways each. Burke has much more itinerant ramp area than the other 4 reliever airports (Burke's 60,000 square yards vs. Cuyahoga County's 46,680), and parking (Burke's 750 spaces vs. 250 at Cuyahoga County). Burke's terminal building is also far larger than any other (67,000 square feet vs. 6,000 square feet at Cuyahoga County). However, Burke has only the fourth largest amount of hangar space compared to the other 4 airports-37,665 square feet, vs. 150,326 at Cuyahoga County, 137,385 at Lost Nation, and 41,000 at Lorain.

In 1990 Burke had 73-based aircraft, which increased to 80 by 2002, while Cuyahoga County had 126 based aircraft (a 55 aircraft decrease from 1986.) In 2002 Cuyahoga County has 186-based aircraft. Lost Nation had 144 based aircraft in 1990, Lorain had 115, and Medina had 68. Burke had the highest number of operations in 1990 among the 4 reliever airports.

The based aircraft mix between Burke and Cuyahoga County was fairly similar in 1990:

Based Aircraft Mix Comparing Burke Airport and Cuyahoga County Airport

The operational fleets mix comparing Burke and Cuyahoga County was fairly similar in 1990:

Operational Fleet Mix Comparing Burke Airport and Cuyahoga County Airport

About 43% of Burke's operations were local in 1990, with 57% itinerant, while Cuyahoga County had 40% local operations and 60% itinerant. (That had changed to 20% local and 66% transient in 2002.) Burke had by far the highest hourly capacity, a figure calculated from operations numbers, fleet mix, runway and taxiway configuration and weather conditions. Burke's high capacity was attributable to the airport's parallel runways. Another statistic is annual service volumes, a reasonable estimate of an airport's annual operational capacity based on weighted hourly capacity and a ratio of annual operations to average daily operations in the peak month of the year. Cuyahoga County had the lowest estimated annual service volumes among the 5-reliever airports. Burke was second last.

The based aircraft mix between Burke and Cuyahoga County in 2002 was as follows:

Based Aircraft Mix Comparing Burke Airport and Cuyahoga County Airport - 2002

Noise is considered a development constraint at Cuyahoga County Airport, though not at Burke.

The 1992 NOACA study concluded that should one of the reliever airports close, the system would be deficient in geographical coverage, operational capacity, storage capacity or all three. If this occurs, another airport in the immediate geographic area will be required. If a closure occurs, NOACA recommends that follow on studies be conducted to determine the exact location, size and role of the replacement airport.

In 1993, the City released its Master Plan for Burke, announcing an $80-120 million expansion and development plan for Burke. The Plans included building a 4,000 foot runway in the northeast corner of the airport property within the next 10 years, diking and filling a 70 acre site on the north side of the airport (which is now the active CDF, Dike 10B), building a 5,400 foot runway on the landfill site within 20 years, turning the 4,000 foot runway into a taxiway, removing smokestacks at Cleveland Public Power, purchasing all weather landing equipment, constructing support facilities including a new tower, eliminating the current taxiway to allow for economic development, building three new hangars, and renovating the terminal. Also, the City said it would hire a marketing firm for Burke. The City planned to pay for the improvements with revenue bonds, to be paid for through landing fees at Burke and Hopkins, and FAA grants. The all weather instruments for landing and the removal of the CPP stacks have been accomplished. The 1999 Master Plan Update revised some of the plans, and also extended the need for some expansion to 2017.

In a 1997 report entitled The Future of Northeast Ohio's Airports: Framing the Coming Debate, issued October 14, 1997, Professor Edward Hill of Cleveland State University, and Editor of "Economic Development Quarterly," proposed ideas to deal with the region's air service needs. He noted that even after Hopkins is expanded it will be incapable of handling the increased volume of air service demand. For a number of reasons he concludes that the solution is to maximize existing air service capacity and in making incremental investments that improve the competitive position of all Northeast Ohio airports. Yet he raises the question as to whether over the long term Burke should stay in operation. For one, he asks whether increased traffic at Hopkins will interfere with Burke's flight operations. He also questions whether Burke's business is better suited for either Akron-Canton or a smaller airport, such as Cuyahoga County, and whether the Burke property is better suited for housing and recreation.

The Greater Cleveland Growth Association created an "Air Service Strategic Planning Task Force," that issued a report on September 15, 1998 entitled Analysis of Air Service Demand and Capacity for the Cleveland Region. It mainly discusses Hopkins, and the need for expansion of that airport. The only comment on Burke states: "Expansion of existing facilities at Burke to supplement Hopkins also could advance economic objectives in that they are well located vis-à-vis a substantial segment of the flying public. Burke's development and expansion would strengthen downtown development-primarily its tourist/convention industries."

The City of Cleveland's Civic Vision 2000 Plan proposed to keep the airport use, due to its critical role in the region's airport network. Civic Vision also urged that the airport be moved to the north and east on existing and new fill. The Plan also proposes developing 6 acres on the western end of Burke for non-aviation uses. In addition, The Plan recommended improvements on the southern side of Burke to enhance its appearance and mitigate its negative impact on surrounding downtown development. The main improvement was the proposal to add a double row of trees adjacent to the bike trail along North Marginal Road.

A report issued by Oster Research Group of Ankeny, Iowa, in May 2002, entitled a Survey of the Need, Resources and Opportunities for Revitalization of Greater Cleveland, identifies Burke as a "premier" site for large scale developments in the downtown area and thus, matches a focus area for this year's capstone course at Cleveland State University.

Benjamin Limmer is a planner for University Circle, Inc. He lives in Cleveland.