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HomeMy WebLinkAbout08-02-12 Economic Development Council Minutes stt City of Bozeman Economic Development Council (EDC) Meeting Minutes August 2, 2012 10:30 am— 12:00 pm Madison room, City Hall, 121 N. Rouse Members Attending: Cheryl Ridgely (Bozeman Deaconess Hospital), Teresa McKnight, (Montana State University Innovation Campus) Tracy Menuez (Human Resource Development Council),Deputy Mayor Jeff Krauss (liaison) Daryl Schliem (Bozeman Chamber of Commerce) Anders Lewendal (Contractor), Stuart Leidner(Prospera Business Network) Members Absent: John Hoagland(Vice-President of Simms) Staff Present: Chris Kukulski (City Manager), Brit Fontenot(Director of Economic Development and Community Relations),Aimee Brunckhorst(was Kissel) (Deputy City Clerk— taking minutes) Guests /Public Present: Brian Sprenger(Airport Director), Scott Humphrey (Deputy Airport Director) Earl Mathers (Gallatin County Administrator) NOTE: These minutes are not word for word and should be considered in addition to the audio recording of the meeting. A. Call to Order Chairperson Daryl Schliem called the meeting to order at 10:33 a.m. B. Public Comment Daryl Schliem opened public comment. Seeing no public comment, Daryl Schliem closed public comment. C. Action Items 1. Recommendation to the Bozeman City Commission for the removal from the Economic Development Council of Mr. John Hoagland for accruing three or more unexcused absences. Daryl Schliem explained the situation on this item. 1 of 6 Minutes of the Economic Development Council for May 3, 2012 Motion and Vote made by Stuart Leidner, seconded by Anders Lewendal that the EDC recommend to the Bozeman City Commission that appointee Mr.John Howland be removed from the Economic Development Council for accruing three or more unexcused absences from EDC meetings. The motion passed unanimously. D. Non-Action Items 1. Bozeman Yellowstone International Airport(Airport Director Brian Sprenger). Brit Fontenot introduced Airport Director Brian Sprenger. Brian Sprenger, Airport Director introduced Scott Humphrey, Deputy Airport Director. Mr. Sprenger began a PowerPoint presentation that opened with pictures of the new terminal and the new stores in the airport. These stores are trials at this point. Scott Humphrey spoke regarding a recent Agreement made with the Yellowstone Foundation and said they have worked on this concept for about two years. This is not to enhance the airport revenue, but rather more as a marketing tool. The Foundation will put up static displays on the wall to highlight features of the park. Mr. Sprenger said the recent airport design has been focused on efficiencies for the airlines. One of the new additions is a large, bag make-up room. In the past, baggage handling was a limiting factor,but this new room has allowed for much more departures as has new terminals. Mr. Sprenger showed a graphic explaining how they have greatly expanded flights out of the state over the last 12 years. Mr. Sprenger explained changes that have been happening within the market and how those changes have affected this airport. He also said that Frontier has operated larger aircraft into Bozeman this summer with 60 additional seats. Mr. Kukulski spoke regarding a recent Headwater presentation at a Prospera lunch that emphasized the availability of flights in and out of Bozeman as a key piece in economic development. Mr. Humphrey spoke regarding the Newark flights saying they are seeing a lot more international connections than they thought they would at 10 to 15%. They have had good load factors on the Newark flight. It is a subsidized flight right now. In securing, one of the concerns was connections from Europe into the park. United will hopefully see the value in the service and continue it. Stuart Leidner asked whether there were advertising agreements set up with Newark. Mr. Sprenger explained airlines themselves won't advertise, but local offices will. Due to good booking in the summers, they decided it would be better to push that advertising into winter. 2 of 6 Minutes of the Economic Development Council for May 3, 2012 Without advertising, flights have been 80% full in summer. Winter season is booked to about 30%right now and has completely different booking patterns than in the summer. Deputy Mayor Krauss explained that the Tourism Business Improvement District advertised the Portland and Oakland flights. Daryl Schliem explained the Bozeman Tourism Business Improvement District and their partners Yellowstone Country, Big Sky Resort, West Yellowstone, and the Yellowstone TBID have a large $100,000 advertising push going out on the subway. Deputy Mayor Krauss spoke to the importance of the addition of the flight going direct to Chicago. Mr. Sprenger explained that United had wanted to try Chicago for the summer and were surprised by the resilience. Billings and Missoula were tried as well with three month services with Bozeman a ten month service with two flights a day over half the year. Anders Lewendal asked Mr. Sprenger what they would like the flight map to look like by 2020. Mr. Sprenger said they would hope to see Texas, but explained the barriers to bringing Texas online. They are cautious to go after Texas if it will have an impact on Frontier. Frontier has changed their entire fare structure out of Bozeman. A one way ticket to an airport that has a Frontier presence can be purchased for half the cost of a round trip ticket. This fare structure is huge for the business clientele in this market. Frontiers fares charge the first ten seats a certain price, and if they haven't sold all the seats they will keep the prices low. Competition has provided a huge benefit to our airport. While Dallas, Texas is the most likely next destination, the unintended consequences could be significant. Houston is a different story as it is United Airlines and would not require the same level of guarantees or commitment. Mr. Sprenger showed an image of ten aircraft lined up with eight gates being used. This is common on a weekend and is unusual for an airport our size. Mr. Sprenger explained they are seeing a complete change in the airline fleet make up. 50 seaters are going away. The airplanes are getting bigger. Delta just announced they are parking 200 50- seat airplanes and replace them with about 88 100-seat airplanes. The 50 seat plane costs a lot but is good for stimulating a new market, but with fuel prices going up, things are changing. As bigger airplanes come in, could see a conversion to fewer destinations. EDC member Tracy Menuez joined the meeting. Mr. Sprenger explained our biggest competition is Billings, Salt Lake City, and Jackson Hole. Mr. Fontenot spoke about positioning our community as the gateway of Yellowstone Park. He asked whether the Jackson airport runway capacity cannot be expanded. 3 of 6 Minutes of the Economic Development Council for May 3, 2012 Mr. Sprenger confirmed Jackson airports runway limitation and explained that the Boeing 757 will begin to retire in the next ten years which is Jackson Hole's airplane of choice. The Jackson Hole strength is name recognition and they also have a very positive incentive program. EDC members, guests and Mr. Sprenger spoke further about this market. Mr. Fontenot asked where private planes fit into the market. Mr. Sprenger explained private planes are another part of the market. They are fickle. They can go wherever they want. Serving that population is part of the reason for the new customs building. Mr. Sprenger said they are now competing with other airports instead of being passive. Mr. Sprenger showed an image of historical passenger enplanements. The only time that dips were specific to our area was during the Yellowstone fires. Mr. Sprenger explained that this year they will see about 420 to 425,000 passengers. Within the last six months,we have out-boarded what Billings did last year. That being said, Billings is also having a great year this year. Billings' advantage is that they have the essential air service in central Montana to the oil fields. Mr. Sprenger explained that about a third of the passengers are people that live here flying out, a third are flying here to do business or visit family and about a third are tourists. He explained they stay fairly busy until the first part of November with the winter season from about Dec. 15th to the first of April. Mr. Sprenger showed an image of the top markets with Denver as 41, then Seattle and then Las Vegas. Boston will likely never have service. LaGuardia has perimeter constraints so probably would not be LaGuardia. Orlando is a slight possibility someday because of Allegiant. Mr. Sprenger showed a comparison of the different airports in Montana. They have done quite well against other airports in Montana. Mr. Sprenger said the average cost of a ticket compares quite well. On average our costs are less than Billings, however, not every market is the same. Our flights to the west coast are often cheaper than Bozeman but flights to the east coast are often cheaper in Billings with close to the same cost to Salt Lake City. Mr. Sprenger explained our general aviation airport is the largest in the state with 300 aircraft, several flight schools and a new air ambulance. They rely a lot on general aviation. Mr. Sprenger explained we have an 18 hour control tower here. We have grown so fast, that we had to build the tower ourselves. The FAA staffs it for 16 hours a day, with the airline paying for an additional 2 hours of staff. They bought the first radar in the country that an airport has purchased to make it safer. At least 4 lives have been saved because of the radar. This is a challenge as we are more involved in airport control than any other airport in the country. We will have approach control,but do not right now. They have been working with our congressional delegation. We will have that in place soon and remote to Boise. 4of6 Minutes of the Economic Development Council for May 3, 2012 Mr. Sprenger spoke about the economic development advantage with their new customs services. Cargo coming in can now be cleared here. They are just learning what the benefits will be as this can allow for a Customs and Border Protection bonded warehouse or a foreign trade zone. They can now register weapons for hunters traveling overseas. Bozeman area hunters will no longer need to travel to Helena or Great Falls to register their weapons prior to flying out of Bozeman. Mr. Sprenger said the East Belgrade I-90 Interchange is now fully funded. Construction is anticipated beginning in late 2013 with completion in 2015. Knife River and the airport are donating land and 3.4 million in cash funding is coming from the airport. He explained the challenges seen in funding this interchange and spoke to the funding sources. Deputy Mayor Krauss asked about a two mill tax levy for the airport that existed twenty or so years ago. Mr. Sprenger explained the airport authority does not levy and has not for over twenty years. He said for capital projects they have passenger facility charges and airport improvement funding that comes mostly from ticket taxes. Money is funded by people using the airport. They can use internally generated funding for roads. Mr. Sprenger said airports are like small cities in that they have police, fire, roads (runways), etc. They have a good partnership with Belgrade where the airport contributes a lot of the capital funding and the city contributes a lot of the expertise and the operational funding. They have a vision and have only had five airport directors over the past 65 years. The terminal building built in 1977 is still our basis for the current terminal building. These Consistencies are our strength. The name change has been talked about for 65 years. It began as a city of Bozeman airport and then became a City/County airport, and then the Airport Authority was created in 1972. This structure has worked well so the airport because it allows the airport to be autonomous. City airports have their own challenges. Mr. Humphrey explained that the airlines are looking for airports that will shoulder more of the risk. The airlines want easy in, easy out. The airport knows the market well, so can shoulder a lot of the risk of starting a new service. Most airlines are asked to lock themselves in for five years. For all of our tenants, we have a 60 day out clause. The Airline industry profits ebb and flow with the economy. They are making the bulk of their money off the passengers,not the airlines. Mr. Fontenot emphasized that the airport is willing to take that calculated risk that this valley will continue to attract more and more people over time. Mr. Sprenger said this is the most competitive industry in the country. The ability for the airlines to shift their assets is important. They will not raise their rates to the airlines and actually try to edge that down. We put in the infrastructure in the airport in advance which is almost unheard of in the industry and in-source a lot of our knowledge. We do all of our RFP's in house and keep our costs low. We have a lot less administrative staff. We do not contract out at all and our staffing level is half that of Billings. We strive to develop the relationships with rental companies and made sure that everyone is happy and provide give and take between the companies. 5 of 6 Minutes of the Economic Development Council for May 3, 2012 Mr. Sprenger spoke to the area strengths which include population, MSU,winter and summer tourism,regionalism and the long term marketing that Big Sky did to the Midwest and east coast. Airport costs are also a huge strength. Challenges include airport growth, the airline industry in general, and Billings and Southwest Airlines. Southwest Airlines will only choose to come to one airport in Montana. If you look at where Southwest flies right now, and the circle of markets they can reach, Bozeman is a logical choice over Billings. The only problem is the high yielding oil traffic near Billings and Southwest Airlines is based in Texas. Ms. Menuez spoke about the oil company, Hexco here in Bozeman and how they chose to come here because they knew their executives and their spouses would prefer to live here. Mr. Sprenger explained that two to four years ago Billings would have won. We have now caught up and can make a very strong case. If we do not make the case it could have a devastating effect on the airline and local economy. The airport would probably see in the range of 20 to 25% less passengers if Southwest went to Billings. Other airlines would likely go to older fare structures. If we do get Southwest airlines we would likely see a 40% increase in traffic here. Southwest's smallest airplane is 130 seats. Anders Lewendal asked about commercial land near the airport. Mr. Sprenger said that airport owned land will become prime development land in the future with the new interchange. You have corridors in that area that will become prime corridors. He spoke about possible plans for the future. Mr. Sprenger said the Airport has contributed a lot to Belgrade's infrastructure system and will need to continue. The biggest challenge coming is improvements to the sewer. Several wells will also need to be added. When there is a public entity it is not simple. If the airport becomes involved in development, we will be looking at a gas station, convenience store and hotel. There are areas on the airport that are available for manufacturing on the south side of the armory. The possibility of a Free Trade Zone could be an untapped potential. Mr. Sprenger spoke about the trend for years towards Air-tropolis. Large cities are living and dying by their airports. Mr. Fontenot explained that an important part of the city of Bozeman's Economic Development Plan that has been adopted by the City Commission and being implemented now; is to support the efforts of the airport authority and others to maintain and support services to the airport in recognition of the importance of Gallatin Field to Bozeman's economy. Please let us know how we can help. Mr. Humphrey explained they feel they are at least 2 -3 years away before Southwest Airlines start looking at the smaller markets. Mr. Sprenger said Southwest's most recent airport addition is in Florida and they put out a guarantee to get Southwest with a $30 million guarantee over five years. 6of6 Minutes of the Economic Development Council for May 3, 2012 Mr. Sprenger said only one flight is currently subsidized for a summer and winter season with a 20%profit margin as part of the guarantee. Mr. Sprenger answered questions saying they do have charter services flying regularly to the oil areas. Billings has the advantage that tax payers are paying the bulk of the fare to places like Sydney. The economic cost of the essential air tax is understated. Butte is now on the essential air tax service program. How can you compare a community of$30,000 to Lewistown? It costs more for the government to provide that service in Lewistown than in Butte. Mr. Kukulski emphasized relationships that may exist with Southwest that we should be paying attention to? Mr. Sprenger said at the same time, they are very thankful for Frontier. Frontier is hubbing in Denver where they have to compete with other airlines. Mr. Sprenger spoke to the difficulties with communities paying for guarantees. Ms. McKnight asked about the PBS and other material broadcasted at the airport and specifically about outreach. She asked about the plans for marketing at the airport. Mr. Sprenger said they are open to that type of marketing, but Montana PBS manages that broadcast. Mr. Kukulski asked whether there have been any advances from he and MSU President Cruzado's talk with the Airport Authority Board. Mr. Sprenger said they developed a policy with the Yellowstone Park Foundation finding reciprocal benefit. They have had opportunities in the airport and the board wants to make sure they do it right. Overall wide ranging appeal is important. Mr. Sprenger explained the industry in general is regionalizing. The Reality is one decision, by one CEO,by one airline in Dallas could change everything. EDC members spoke about encouraging more companies like Oracle having mid and upper level meetings in Bozeman. Deputy Mayor Krauss said MSU should think about edu-travel. In the summer time,professors could start having meetings and seminars here. Responding to a question from Ms. Ridgely, Mr. Sprenger explained that Charter's bring in only about 5% of the airports revenue, but the Synergy's provide other benefits. The maintenance capabilities are expanded because they are maintaining corporate jets and smaller airplanes, competitive fuel, etc., is huge in making the airport viable. 7 of 6 Minutes of the Economic Development Council for May 3, 2012 E. FYI/Discussion 1. The upcoming EDC Vacancy will be handled in the standard format. F. Adjournment Stuart Leidner (Daryl Schliem left the meeting early) adjourned the meeting at 12:17 p.m. * NOTE—Full audio of this EDC meeting is available at: htlp://weblink.bozema,n.net/WebLink8/0/fol/46967/Rowl.aspx Daryl Schliem, Chairperson PREPARED BY: Aimee Brunckhorst, Deputy City Clerk Approved on: Economic Development Council meetings are open to all members of the public. If you have a disability that requires assistance,please contact our ADA Coordinator James Goehrung, at 582- 3232 (TDD 582-2301). 8 of 6