Either Increase Airport Revenue or Reduce Expenses

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.

19 Comments

  1. “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 interest”

      Dont you EVER not find a way to HATE public safety?  Powerful Union?  Dont think so sparky.  You and your council cronies found a way to solve that problem.  Could it possibly be that San Jose is a non-destination City?  No Ocean, no culture, no night life, and no hope with clowns like you in office.

  2. Police and Fire will be kicked out of the citys airport protection plans.  “To save money”….  Apparently not enough police are leaving/retiring fast enough to free up monies needed to payoff all of the debt the mayor and PLO have created….Come on PLO, just tell the creditors to give you an extension of a year or two…that shbould be enough time for the city manager to at least eliminate the police department and free up at least $650 million…..You have my vote for Mayor!!!

  3. Yes Pier, cutting public safety at the airport is a great idea in light of the increase in terrorism. That should make travelers feel safer coming to our airport. Good marketing idea.

  4. Dear PO,

    I just wanted to say thank you for such a great column post, just fantastic!  Another underhanded hit piece on public safety.  Gosh, we just love you too!  This post, along with your ‘timely’ post on sexual harassment really show your true colors.  Aren’t we supposed to be on the same team working to improve the city?

    Sincerely,
    SJ Firefighter

  5. The SJ City Council seems to forget that the flight path of planes from SJ Airport isn’t just over the homes of San Jose residents – Santa Clara residents are affected too, and aren’t represented by anyone on San Jose’s City Council.
    Some years ago the airport had to spend a lot of money retrofitting the homes of people under the flight path from SJ airport – new windows, insulation, heating/cooling – to try to minimize the amount of noise residents were exposed to.  The noise level is substantial in the takeoff flight path.

  6. So your “Brilliant” Plan is to Decimate Public Safety even further??? Seriously Pierre , where you any good as a bartender ? Because if you were , then you should seriously and in all sincerity , consider a Job change back to Tending Bar . San Jose’s Budget is comprised of three Funds , so why does everything fall to the General Fund ? especially when the two other funds are exponentially bigger than the General Fund .  It seems to me that YOU and The Mayor throw the term “General Fund” around , so that it gives residents the idea that, that is all the Money San Jose has . seriously misleading most people who don’t bother to educate themselves on city politics. It seems crazy to me that YOU and Mayor Reed blame all the citys Problems on City workers and their Earned Pensions , BUT take no responsibility for Mismanagement of this City . Take the long hard look a yourself , because you helped create the mess that this city is in by blindly following Mayor Reed

  7. Let’s see, $1.7 Billion in debt… let’s suppose the City does both- remove police/fire with outsourcing and accommodate Google.  It would take about 142 years to pay back the principle, without interest.

    You Council folks like to spend taxpayer money on pet projects, then you take away taxpayer services to pay for it.  Don’t act like you’re taking a stand now- the damage you and Reed’s majority have cost this City will be felt for centuries.

  8. So you want to sacrifice safety at the airport in the same way you’ve sacrificed safety throughout the city?  Yes, private security at a major airport is a great idea, just like having far fewer police officers on the street has worked so well. After all, the most important factor is always short term savings, not long term costs. You certainly have a vision.

  9. PO, I admire your courage. It’s a fair question to ask whether we should consider saving “$9 million by outsourcing police and fire services like other airports across the country.” The predictable, knee-jerk chorus of public safety union members on this site claim it will decimate public safety but have no data to prove this. A financially solvent city is a safer city.

    There were some obvious efficiency questions when fire marshals had the time to show up to every downtown festival or close down businesses or park in front of the old Saddlerack to flirt with drunk females, when four police cars were at every routine traffic stop and officers were standing in front of nightclubs watching girls and harassing law-abiding visitors to the downtown. I have great respect for the difficult work that public safety workers do when they actually do the real work of protecting our community… just don’t expect the public to sign off on combat pay for security guard work.

    • Thanks for the less than complimentary vote of confidence in your public safety, Lily.  That’s okay.  We can take it.  I’ve grown used to your babble on here and sometimes it provides me with a good laugh, like right now.  I especially like you using the word, “Courage” with Pierluigi in the same sentence. How ironic.  Keep fighting the good fight SJFD and SJPD.  Last night was a fine example of courage, without expecting a compliment.

      • The San Jose chamber of commerce took out an add in the Willow Glen times last spring calling Pier “courages.” I wonder what Mr. Mahood and Pat Dando thinks about him today, since they wasted $400,000 on yes on measure B.

        Kamala Harris signed off last week , so now the SJPOA can sue the city of San Jose.

        House of cards are crashing, you still running for mayor?

      • Must be nice to be absolutely oblivious to the increase of all Crimes in San Jose . Heaven forbid anything Major happen in San Jose like it just did in Boston , Because people like yourself would be among the loudest screaming “where is our Public Safety”? Then and only then will realize how Severely Understaffed our Public Safety is . You say you respect public safety “when they actually Work” sounds more like you don’t.  They work 24 hr. shifts , and / or get forced to work overtime because there are not enough of them .  They see and do things most could not stomach . Remember this Lily , They get paid for what they might have to do ! that could be ; fighting fire , rescuing some one , gun fight , fight w/multiple individuals , respond to hang or shooting, gas explosion , all of these things put their lives in danger , something that they do daily even for ingrates like yourself

  10. The anti-airport NIMBYs were out in force last night, even though the Mayor and Council stressed that the curfew was not being changed. How many of them moved into their neighborhoods after SJC began handling jets back in the 1960s? We should instead sympathize with the SJSU aviation students who told the Council that they would benefit from jobs at an expanded airport.

    The Signature facility is projected to provide at least $3 million annually in rent and other fees to the airport, which has been working to attract more planes and revenue to pay off the costs of a recent $1.3 billion renovation.

    “I am pleased that we are moving forward with development of the Airport’s West Side which will generate significant revenues to the Airport and the General Fund, and accommodate future growth in the demand for general aviation services in Silicon Valley,” said San José Mayor Chuck Reed. “Signature Flight Support’s development proposal will help the City of San José accomplish both of these goals. I thank Signature for its confidence in San José, its significant investments at SJC, and for the new jobs and revenues that this project will generate.”

    • Just for giggles, divide $3M into $1.3B.  I believe the actual debt is $1.9B, as the former is just for the latest renovation.  But again just for laughs- we’re not even considering interest, just what is owed at this very moment.  You think in the next 2 centuries it will take to pay off the debt that another renovation will be needed, perhaps?

      It’s not a NIMBY thing, it’s a taxpayer thing. These elected leaders to stop wasting our money on golf courses, mansion hotels and non-essential services. 

      San Jose doesn’t need an airport and the cost is devastating.  It would be cheaper to buy every resident in the City a round trip ticket to Hawaii from SFO, including a limo from their house to the terminal.

  11. In the picture above, that is just how the airport looked one Saturday afternoon when I was flying out. We did not have to stand in line and wait to check bags or get through security. I was shocked. I had never seen the airport that bare.

  12. I agree completely that our elected leaders should stop wasting our money on golf courses, mansion hotels and non-essential services.

    That said, the most of the anti-airport people speaking last night just wanted to complain about noise. Did they move into the neighborhood not realizing there was a major airport nearby? It was clear that the NIMBYs just wanted to vent since it was clear that the council has no intention of getting rid of the airport curfew.

    It’s a laugh when you say SJ does not need an airport. It’s clear that Silicon Valley is an attractive place to locate a business because it has transportation facilities that connect it to the rest of the world.

  13. Its funny that Pierre isnt talkng much right now , what with all the Fatality Fires gong on , and multiple alarm fires , with all the Violence erupting around town . There are NOWHERE near enough PUBLIC SAFETY for San Jose , AND they continue to leave for better/greener pastures.That leaves San Jose very susceptible to an even bigger influx of crime , Graffiti and violence . Pierre talks a real big game , but why doesnt he suit up and help protect this city. Guaranteed , it would open his eyes to to see what Public safety goes thru o a daily basis