Guide to Obtaining Community Support for Your Local Airport Whats Your Airport Worth

Guide to Obtaining Community Support for Your Local Airport

What's Your Airport Worth?

General aviation airports - Paying their way

How often have you heard someone say, "The airport's a drain on the taxpayers and doesn't pay its way?" Or "The airport's only used by the rich?" We know that's hogwash, but how do we educate the uninformed? We need a mechanism with which to educate them. Proving the economic benefit of the airport is one way to demonstrate to the community that the airport does play a vital role in the local economy.

A comprehensive report, titled "The Economic Impact of Civil Aviation on the U.S. Economy," conducted in 1991 by Wilbur Smith Associates and updated in April 1993, found that general aviation's annual economic impact on the nation's economy exceeds $42 billion per year.

To prove the point that general aviation airports provide economic benefits, consider the findings of two new studies. In one, the FAA acknowledges that a typical general aviation airport with 100 based aircraft and no commercial service saves time and reduces the travel costs of those who use that airport over the next best transportation alternative. In dollar terms, that transportation benefit alone is estimated by the FAA to be more than $1 million annually.

As another means of comparison, consider another study, a recent and comprehensive analysis of airport economic benefit - good old dollar benefit to the community. This particular study was completed by an independent international consulting firm for the Commonwealth of Virginia.

There are 80 public-use airports in Virginia, fewer than the national average of 110 per state. Admittedly, Virginia has two international airports, but the number of active aircraft in the state is only slightly less than the national average, as are the estimated hours flown in the commonwealth. Therefore, it's fair to compare Virginia's airports and its diverse economy with those of other states.

The study clearly shows that "Virginia's 80 public-use airports allow the State's business community to participate in national and international markets, and public and private funds invested in the Commonwealth's airports annually produce economic returns which far exceed the amounts spent to operate and maintain those facilities."

The basis of this information was the U.S. Department of Commerce's Regional Input-Output Modeling System (RIMS II), which admittedly does not encompass ALL economic benefits. The study also used a very conservative dollar multiplier of 2.8. Many experts believe that a multiplier of 4 or even 5 is realistic.

The Virginia study also concludes that:

  • Each dollar spent by aviation and/or aviation-dependent businesses generates an additional $1.52 in economic activity.
  • Airport jobs are desirable, and the average airport wage was 40 percent higher than the average Virginia salary.
  • For every job at the airport, nearly three are created in the visitor-related economy.
  • Aviation-related businesses and their employees annually contribute $105 million in local taxes.
  • Aviation facilities attract new industry to the commonwealth; and
  • Many visitors arriving by air spend about $70 per day in this geographical area.

The consultants also made an astounding announcement concerning the expenditure of more than $28 million spent on airport capital improvements. "Airport construction projects are particularly beneficial because dollars spent by state and local governments are highly leveraged with federal and private funds. The multiplier effects of construction spending are especially strong because each dollar spent on construction generates an additional $2 in economic activity. Together these two factors mean that airport development projects produce an impact on the State's economy that is more than 25 times the amount contributed by State and local funds."

One of the most important aspects of the study was that of general aviation's impact. Of course, the economic impacts associated with general aviation airports varied. The busiest, Leesburg, generates nearly $28 million a year in economic activity. But even the smallest general aviation airports contribute more than $100,000 annually to the economy. The point is that Virginia's average general aviation airport has only 23 based aircraft but contributes $1.6 million per year in economic activity, most of which is spent locally. Total payroll attributable to the average general aviation airport is more than $400,000.

Interestingly, even airports with less than 10,000 operations a year produced economic impact exceeding the amount of money necessary to operate and maintain the facility.

Enough of the facts and figures - what can be learned from this information? It is clear that if Virginia's general aviation airports generate these significant economic benefits, it can reasonably be assumed that similar airports across the country (and in your community) do the same.

Local general aviation airports produce identifiable economic benefits over and above the tax dollars spent on operating and maintaining the facilities, and benefits over the intangible benefits inherent with access to the nation's air transportation system.

Communities should try to understand the value of their own airports by embarking on an economic analysis. Without that information, the airport is vulnerable to those who criticize the airport for nuisance factors such as airplane noise or perceived safety risks.

Economic impact-jobs, sales, taxes-is often the only defense for an airport being surrounded by houses or coveted by real estate barons. Unfortunately, these impacts usually haven't been calculated or communicated to city or county officials and the media. This comes home to roost when officials, hard-pressed to pay for a new water treatment plant and harassed by anti-noise activists, sit down and look at the "high cost" of operating an airport.

You and your airport support group must challenge citizens who are concerned about local economic stability and growth, or who care about the tax base that pays for schools, roads, and hospitals, to care about their local airport. If you demand the facts, you will discover that deregulation and a changing national economy have not diminished the value of general aviation airports, but that they are needed now more than ever. By following the steps outlined in the next section, your group can prove to the community that airports are for people who don't fly.

Calculating Economic Impact

The centerpiece of the AOPA Airport Support Packet is a modular approach to calculating the direct, indirect, and induced economic impacts of an airport.

"What's Your Airport Worth?" provides the information and instructions an airport group needs to perform an easy, simplified, cost-benefit analysis that quantifies the airport's economic contribution to the region. It offers a layman's method for accomplishing a credible study and adds modules of increasingly sophisticated information that comprise the building blocks for expanding the study. This building-block approach allows the airport group, using available expertise and resources, to decide how detailed an economic study it wishes to perform.

Any airport group can quickly perform a preliminary economic impact study of its public airport to prove that the facility attracts outside dollars and contributes economic benefits such as jobs, services, and taxes. Those numbers are an effective lobbying and public relations tool in defending or promoting the airfield. That kind of information also makes an excellent news item for distribution to the local media. As a demonstration of its simplicity, an example of this basic method conducting a preliminary study follows.

The preliminary study can also provide the impetus for an appropriate agency to conduct or fund an in-depth follow-up cost/benefit analysis. Using this basic method as a starting point sets the stage for a professional, detailed, and unassailable audit of additional transportation and aviation activity payoffs. Groups can use preliminary results to campaign for more intense (and costly) studies by experts using more sophisticated formulas. These formulas can then be provided to consultants and universities, which often undertake these more advanced studies at the behest of pilot groups and local government agencies.

The Basis of Economic Impact

The economic impact of an airport is a measure of the benefits it provides to the community. These benefits include the jobs, wages, and expenditures that take place at the airport. They also include the effects of these expenditures in moving from hand to hand through the community, enhancing economic activity far from the airport itself.

Economic benefits also include expenditures made by those transient passengers who use the airport but spend their money at other locations. Savings in time and money that the existence of the airport permits represent another economic benefit that resides with the community. Finally, economic benefits also include the intangible effect the airport has on business decisions to locate or remain in a specific area. Business location decisions based on airport availability are intangible and harder to identify and quantify. Unfortunately, these last benefits and the social values are difficult to measure.

Economic impact as a whole comprises direct, indirect, and induced impacts. Direct impact is associated with providers of services at the airport. These providers include the airport operator (public or private), FBOs, air carriers, freight haulers, concessionaires, government installations, educational institutions, military facilities, flight schools and maintenance operations, among others. The value of direct impact is the sum of all payroll, capital expenditures, operating and maintenance costs, taxes, and fees incurred by every provider of services. With some research, a total dollar-value figure can be obtained for almost any facility through the one-page economic survey found at the end of this section.

Strictly speaking, direct impacts should represent economic activities that would not occur in the absence of the airport. When approaching service providers on the airport with the survey form, it is important to convey to them that you will not provide sensitive financial information from the form to anyone else and that only form totals will be used. It's also best if you make the completion of the form anonymous with no direct reference to the specific business.

Indirect impact is associated with the users of airport services. These include both corporate and public users, government agencies, and aviation and non-aviation businesses. The value of this impact is the sum of the fees and charges paid, time and cost savings, and expense related to food, lodging, ground transportation, and similar outlays.

By quickly calculating the impact of itinerant operations and adding that figure to the direct economic impact, a total economic impact is developed.

Induced impact is often called "the multiplier effect." It gets this name because a dollar, once spent, does not disappear but continues to move through the local economy until it is incrementally exported from the community. Each new dollar spent effectively multiplies its own economic effect. There have been a multitude of economic studies done to definitively establish this multiplier for various geographic areas and segments of the economy. These studies indicate that multipliers ranging from two to seven are appropriate for airport economic estimates. Because induced impact is the portion of an impact analysis most subject to controversy, it is a good idea to use a very conservative multiplier figure. We recommend a multiplier of three in general but also recommend that you obtain a figure that is applicable for your airport area by contacting the chamber of commerce, economic development authority, or appropriate state agency.

Direct Impact

As an example, let's assume that an airport support group has paid a visit to all employers and businesses on a general aviation airport (theirs has about 80,000 annual local operations). Using the questionnaire, the group determines that the total for wages, fees, charges, taxes, and operations and maintenance (O&M) costs and capital improvements is $5.5 million ( direct impact) for the current year.

Indirect/induced impact

The group contacts the FAA airport district office or airports division of the regional office and learns that the same airport has 50,000 transient operations annually. Calculate the indirect economic impact this way:

Divide by 2 to determine annual transient arrivals.

50,000/2 = 25,000

Multiply by the average number of occupants per aircraft. Assume 2.5: (the FAA estimates 2.5 occupants aboard each general aviation flight.

25,000 x 2.5 = 62,500

Multiply that figure by the average dollars spent in the local economy by transient passengers. Local chambers of commerce or tourism officials can provide the average dollars spent by each visitor. Assume $100.

62,500 x $100 = $6,250,000 = Total Indirect Impact

Next, to determine induced impact, multiply the sum of direct and indirect impacts by the multiplier effect to determine total impact. Assume a multiplier of 3.

Induced impact = 3 x (direct + indirect impact) =
3 x ($5,500,000 + $6,250,000) = 3 x $11,750,000
= $35,2500,000

To determine total economic impact, add the direct, indirect and induced impacts.

Direct (total from questionnaire) $5,500,000
Indirect $6,250,000
Induced $35,250,000
TOTAL $47,000,000

Tax Impact

Another aspect of economic benefit is tax impact. In making quick assessments of tax impact, it is easier to use only the direct plus indirect values. In the case of a much smaller airport than the one previously discussed, assume this total to be $3 million. Assume that the local tax subsidy is $50,000. The portion of this money that ends up as property tax is typically 1 percent. Let's use only the airport economic impact figure for simplicity.

If a state sales tax is in place, the portion of the direct and indirect total that will be paid as sales tax is typically about one-tenth of 1 percent for each 1 percent of sales tax. If, for example, the sales tax is 5 percent, the portion of the direct and indirect total that will be paid as sales tax is five times one-tenth of 1 percent, or one half of 1 percent.

State income taxes and other miscellaneous taxes can easily reach three-fourths of 1 percent each.

Returning to this example, the tax impact would be calculated as follows:

Tax type Amount
Property tax (1% of $3,000,000) = $30,000
Sales/Use (0.5% of $3,000,000) = $15,000
State Income (.75% of $3,000,000) = $22,500
Miscellaneous $22,500
Total Tax Contribution $90,000

Compared to the $50,000 in tax support, this is a favorable balance and indicates a very strong return on taxpayer investment. Keep in mind, too, that these figures do not include federal taxes. Inclusion of federal taxes as well as the tax effect of induced impact are complexities well beyond the scope of this simplified approach.

For more exacting formulas exploring transportation benefits, the effects of increased aviation activity, and aviation's stimulation of business, contact the nearest FAA regional office for a copy of "Measuring the Regional Economic Significance of Airports."

Existing support groups nationwide have used economic impact as the pivotal weapon in their battle to save America's airports.

Finally, publish and distribute the results throughout the community, making sure the information gets the widest possible circulation. Prepare, preferably with the aid of a freelance writer or newsman, a complete final report and a summary highlighting the dramatic contributions of the airport. The full study should be available to all who want a copy. Summary pamphlets should be widely distributed throughout the community. You may elect to create a visual program, using slides and/or overheads, to enhance the material when presented to an interest group. Again, help may be available from a nearby high school or university photography club.

If possible, do not allow the study to become out of date. A periodic review should be conducted and material adjusted as changes occur. A new industry, increased flight schedules, a new operator - all of these reflect the continuing economic contribution of aviation to the community.

The direct impact formula was developed by Eckrose/Green Associates, an airport consulting firm in Madison, Wisconsin. Their formula is endorsed by the National Association of State Aviation Officials (NASAO). By adding the AOPA itinerant aircraft formula to the equation, a total economic impact is determined.

Many state aviation divisions have already conducted in-depth economic impact studies on airports within the state. Be sure to check with your state's division of aeronautics office.

Economic impact by state information may be found in the resource guide contained in this book.

Direct Economic Impact Questionnaire

We,_________________________, are conducting a survey to develop information concerning aviation's economic impact upon our community. We are asking all organizations directly involved with aviation and our airport to complete this questionnaire. The data you can furnish will enable us to tell a better story about the value of aviation. All information will be kept completely confidential, and only industry totals will be released.

We would like the data to be for (year) __________. If your data is for a different period, please indicate here____________________________.

  1. How many employees do you have at the airport?
  2. What is your annual payroll at the airport? $__________
  3. You employ additional people away from the airport who support your airport operation?
  4. If so, what is the annual cost of that support? $__________
  5. How much did you pay to the airport last year for:
    Operations/maintenance $__________
    Landing fees $__________
    Rentals $__________
    Other fees/taxes $__________ Subtotal $__________
  6. How much did you spend in the area for the following:
    Fuel, supplies, and equipment $__________
    Advertising $__________
    Local service (repair,
    janitorial, utilities, etc.)
    $__________
    Charitable contributions $__________
    Capital expenditures $__________
    TOTAL $__________ Subtotal $__________
    Grand total $__________

Check the box that best describes the airport's relationship to your business:

O Essential O Very helpful O Helpful O No influence

Did you choose your present location because of the airport?

O Yes O No