Jul. 20—Boulder staffers have released the results of an in-depth financial analysis of what it might take to eventually close the city's municipal airport.
Their findings suggest the city may net more than $400 million, in 2041 dollars, before the costs of potential environmental remediation are factored in, from closing its airport and selling off all the airport property as soon as its current contractual obligations to the Federal Aviation Administration are met. City staffers believe that could happen in 2041.
Anytime the city accepts grant funding from the FAA, it comes with a 20-year contract requiring that the airport remain open for another 20 years. The city last accepted FAA funding in 2021, but the memo suggests that the airport could legally be closed in 2041, when the current contract ends.
The news comes ahead of a long-awaited City Council discussion on Thursday about the future of the 96-year-old airport, which remains a hotly debated topic around town. It also comes in the midst of two airport-related ballot measures, one aimed at closing the airport and the other at turning the airport into a neighborhood, that qualified for this fall's ballot last month.
Council members will not take a formal vote at the meeting, but they're slated to discuss staffers' analysis and give an indication of whether they lean toward keeping the airport open long-term or eventually closing it down.
The financial dynamics underpinning the decision to keep or close the airport are complex, but there are a few highlights worth noting from the analysis. One piece of the analysis estimated what airport-related revenues and expenses could look like over the next 18 years in each of two broad financial scenarios. These are different from the four possible scenarios for the future of the airport that staffers released last summer.
Two scenarios
In the first financial scenario, Boulder would continue to use the airport site mainly for aviation indefinitely. The city would maintain existing airport facilities, invest in further developing the airport and continue to accept federal and state grant funding, including from the FAA, which would come with the condition that the airport stay operational. And in the second scenario, the city would maintain existing facilities at the base level required by the FAA, but would stop accepting FAA grant funding or spending additional money on the airport.
Based on a simple comparison of estimated revenues and expenses, Scenario One, which would keep the airport open in the long term, would bring in more revenue — and also be more expensive — over the next 18 years than Scenario Two, which would have the city making preparations to decommission it in 2041.
From now until 2041, the city would bring in an estimated $14.8 million more in revenue in the scenario where the airport stays open long-term. That's partly because the city could offer more opportunities for longer-term leases on the property and more opportunities for people or businesses wanting to invest in it. But in that same scenario, the city would spend about $16.7 million more during that time frame to maintain and improve the facilities for long-term use.
One catch is that either scenario would rely on additional revenue streams, such as public-private partnerships, in order to be financially feasible. As an example, the city may end up leasing out land to private developers, and if the airport were closed and the land were sold, those developments would need to be removed.
In Scenario One, the city could also receive federal and state grants to help cover some airport costs, which would lead to "similar unfunded totals," according to the memo. So, Scenario One gives the city more flexibility to meet its financial needs over the next 18 years. There would be fewer options for funding in Scenario Two, but less funding would be needed overall.
Another question staffers examined is what happens if the city decides to close the airport in 2041. In that case, all airport property would be sold at fair market value at that time. When that happens, the city will likely incur legal and real estate fees, environmental studies, and other transaction costs, as well as the costs of selling unamortized portions of any private developments on the property, the staff memo said.
In addition, the FAA has suggested the city may need to pay it back for land that was bought using FAA grant funding. Just under 38 acres out of the 176.4-acre airport property were paid for by FAA dollars, according to the latest estimates.
City staffers assumed the airport property has a 2024 market value of $2 million per acre, or about $352.8 million in total. That amount is expected to increase to about $550.2 million by 2041. The land that wasn't bought or acquired through government assistance will be worth an estimated $431.9 million in 2041 dollars, which leaves about $118.3 million that Boulder could need to pay back to the FAA.
Using those assumptions, if transaction costs come to about 4% of the total property value, the city will need to pay an estimated $14.1 million in 2024 dollars, or about $22 million in 2041 dollars.
Even accounting for these costs, the city could still net a positive balance of more than $400 million from selling off all of the airport property, including the land it owns. However, it does not include the costs of the environmental remediation that would likely need to be done on the land. The city did not calculate those costs in the analysis.
Questions loom
Several council members have already sent out Hotline emails expressing differing views on the staffers' analysis.
Councilmember Matt Benjamin wrote in his Hotline that he believed the cost of environmental remediation would be "extremely relevant" to the discussion, and he asked city staff to come up with a "ballpark" of how much the city might pay.
Benjamin wrote that the city of Chandler, Ariz., is redeveloping an 11.5-acre site near a local runway, and the cost of remediation there has come to about $7 million. In addition, he said, the site will need to be prepped for development, which local developers have told him can cost $2.5 to $3.5 million per acre.
"This is not a cost (or) expense the city usually considers, but if the city intends to remain the owners of some or all of the land, this is a cost the city will have to incur as the property owners," he wrote.
Meanwhile, Councilmember Mark Wallach sent out his own Hotline asking a variety of questions on the staff analysis. He raised the possibility that the city could cover airport expenses over the next 18 years through a variety of means, including the city's new infrastructure tax, a land loan or a "slow drawdown" over the years from city reserves.
Wallach concluded his message saying it would be in Boulder's best interests to regain ownership of the valuable asset that is the airport land.
"I know this is a difficult, complicated and contentious issue within this community, but I firmly believe that returning this asset to the control of Boulder makes complete economic sense. This valuable parcel was once our land to dispose of in the manner we thought best for the community; it should be our land again," he wrote.
Originally Published: July 20, 2024 at 10:00 a.m.
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