Management Audit of the Airports
Division
Airport Division
Audit
12/11/99
October 29, 1999
Honorable Pete McHugh, Finance and Government Operations
Committee Chairman
Honorable James Beall, Jr., Committee Member
Board of Supervisors of the County of Santa Clara
70 W. Hedding Street, Tenth Floor, East Wing
San Jose, CA 95110
Dear Supervisors McHugh and Beall:
The Management Audit Division is pleased to present
this management audit of the Airports Division of the Roads & Airports
Department of the County of Santa Clara. This audit was conducted pursuant
to a directive of the Board of Supervisors under the Board’s power
of inquiry as provided in Article III, Paragraph 302 of the County Charter.
The purpose of this audit was to examine the operations,
practices, and finances of the Airports Division and determine if opportunities
exist for improving the efficiency, effectiveness, and economy of the
Division. The scope of the audit included all aspects of the Airports
Division: finances; staffing; organization structure; business practices;
planning and decision-making; and, use of equipment and resources. At
the request of the Board of Supervisors, a financial analysis of the
Airport Enterprise Fund was included as part of this audit.
Audit methods included interviews with Roads &
Airports Department executive management and financial staff, interviews
with Airports Division management staff and supervisors, a detailed
review of the financial records of the Airport Enterprise Fund from
FY 1995-96 through FY 1998-99, a review of Federal Aviation Administration
and County airport regulations, interviews with selected members of
the Airports Commission (all commissioners were offered the opportunity
to be interviewed but only those who responded to the offer were interviewed),
a review of all leases between the County and fixed base operator tenants
(FBOs), an analysis of aircraft storage rental rates and all other airport
charges and revenues, a review of the capital improvement plan and Master
Plan for the airports, a review of the agreement between the County
and City of Palo Alto regarding operation of the Palo Alto Airport,
an analysis of staff utilization and workload, interviews with selected
FBOs, and administration of a survey of 26 other airports in California
and follow up interviews with selected airports. Field work was conducted
between April and September, 1999.
A total of eight finding areas were identified and
31 recommendations developed through this audit. Recommendations were
made in the area of financial management, hangar lease rates, new hangar
construction, fuel flowage fee revenue collection, commercial development
and property management at the airports, staffing, the County’s
agreement with the City of Palo Alto pertaining to the Palo Alto Airport,
and management and policy direction of the County airports. When fully
implemented, these audit recommendations will improve the efficiency,
effectiveness, and economy of airport operations.
Due to the Airport Enterprise Fund’s current
cash position, we are recommending that it make an accelerated General
Fund loan pay-off this fiscal year of $400,000 and continue to make
payments to the General Fund in subsequent years of at least $75,000
per year to pay off General Fund loans and repay approximately $3.6
million in General Fund contributed capital.
We are recommending a number of actions to increase
the operating profits at the County airports so that all airports operate
profitably, the Airport Enterprise Fund is able to pay off its General
Fund obligations, and needed improvements can be made at all facilities.
These recommendations include: standardizing existing hangar rental
rates so that all tenants pay the same rental rates for comparable hangar
facilities; replacing less profitable tie-down spaces with more profitable
hangars to be operated by the County; continuing to enhance fuel flowage
fee collection procedures to ensure that this revenue source is maximized,
preparing and implementing a commercial development plan for unused
airport property, reducing budgeted staff positions at the airports
and reducing overtime expenses through a more efficient use of airport
staff; renegotiating the Palo Alto Airport agreement with the City of
Palo Alto to enable improved financial performance at that facility;
and, clarifying the management structure and policy direction of the
airports through a strategic planning process linked to the new master
planning process recently authorized by the Board of Supervisors.
If all recommendations are implemented, the County
General Fund would receive an unanticipated $400,000 this fiscal year
and at least $75,000 per year in subsequent years for a combination
of early loan pay-off and repayment of contributed capital. Airport
revenues would increase in the short term by between approximately $87,760
to $108,700 through hangar lease rate standardization. Budgeted costs
would decrease by approximately $53,860 through a reduction in budgeted
staff and overtime costs. Longer term revenue enhancements resulting
from new hangar construction could be as high as $771,000 per year after
construction costs are paid off. Though commercial development revenues
will depend on the exact type of development planned at the County airports,
a survey of 10 other California airports that have actively developed
non-aviation commercial activity report annual median revenues of $733,386.
We would like to thank the staff of the Roads &
Airports Department and particularly its Airports Division for their
full cooperation and assistance in the performance of this management
audit.
Respectfully submitted,
Roger Mialocq
Management Audit Division Manager
Project Staff
