The economic viability of San Jose’ airport (SJC) is in a precarious position. Bond payments are now due for the $1.7 billion dollar airport expansion, and, ultimately, the payment could fall to the general fund if airport revenue cannot cover what is owed. In order to avoid a bailout by tapping into the general fund, it is important to run the airport in the black. There are two ways to do this: either increase revenue or reduce expenses.
The airport has already reduced costs by laying off airport staff. However, more cost-saving measures are needed in order to make SJC more competitive with other regional airports.
Despite this predicament, the City Council has actually increased the cost of doing business at the airport by voting for “feel good” measures like the San Jose living wage policy, passed by the council in 2009. Airport staff and airline personnel both warned the council that this policy would make our airport less competitive. Surprisingly, I was the only councilmember that voted “no.”
This mandate required companies at the airport to pay private sector workers above-market wages. Placing such constraints on private business may win some votes for the politicos, but such actions also end up raising costs for the airlines and the airport itself, which must now oversee this policy. Higher costs for airlines at SJC can reduce flights in and out of the airport and, in turn, reduce airport revenue.
One way to cover the upcoming bond payments would be to increase airport revenue. This has already been done without undermining the curfew by expanding food courts, retail, rental cars and advertising within the airport. Further revenue growth could be achieved with the expansion and development of the airport’s west side. This possibility has been under discussion for years, and the majority of the council voted on April 3, 2012, to accept development bids for this land.
One proposal currently before the council would bring in $3 million a year for the airport: $2.6 million a year for rent, and another $400,000 from selling jet fuel. This development would house corporate jet aircraft, and would also be able to fuel and repair these planes.
However, most of these new airplanes would be exempt from the 11:30pm to 6:30am curfew and able to fly in and out of San Jose airport 24/7. Any potential airport expansion would assuredly increase the total inventory of curfew exempt planes, and thus increase the probability of more disruptive noise at night. In my view, this new revenue would bring with it the unfortunate by-product of greater noise pollution late at night and into the wee hours of the morning. This begs the question: How much is a good night’s sleep worth?
Another way to cover bond payments and ensure that SJC operates in the black would require reducing expenses. On Mar. 8, 2010, the council had a study session to discuss solutions that would both save money and also abide by FAA regulations. Airport staff proposed saving $9 million by outsourcing police and fire services like other airports across the country. However, the council, in my opinion, has not acted on this recommendation due to outside pressure from powerful union interests.
If the ultimate goal is to run a profitable airport, my recommendation would be to go with the concrete, “known” cost savings of $9 million over the $3 million revenue projections derived from expansion. The former requires that we work more efficiently with the fiscal resources that we already have. The latter requires that we blindly trust that the accompanying late night noise consequences will not get too out of hand, and that if they do, we will have an effective and foolproof way of addressing resident’s complaints.
Because of the lack of legal enforceability inherent in such arrangements, I, for one, am skeptical of such deals. No matter what anyone says, no municipal code or contract language can stop curfew exempt planes from flying from 11:30pm to 6:30am.
I voted against the expansion last year and again last week, due to the fact that there are other options to run the airport in the black without disturbing the traditional quiet time of our city’s residents. After all, why disrupt the sleep of thousands of residents when we can provide the same or greater cost savings from simply managing staffing differently?
Pierluigi Oliverio is a councilmember for San Jose’s District 6.