The recent adoption of new hangar rental fees at the Ashland Municipal Airport has raised the question of whether the city is subsidizing airplane owners.

The recent adoption of new hangar rental fees at the Ashland Municipal Airport has raised the question of whether the city is subsidizing airplane owners.

On July 21, the City Council voted unanimously to increase the monthly rent on many hangars by $5 a month. The rent for an older T-hangar with doors, for example, will go from $195 per month to $200.

But even with the rent increases, the airport's budget is showing a $7,976 deficit for this fiscal year.

The City Council agreed with an Ashland Airport Commission recommendation to keep the rent increases modest so that the airport here would remain competitive with Medford's airport. However, the Ashland airport has 56 hangars and a waiting list of 20 to 25 people hoping to get hangar space.

City Councilor Eric Navickas said he believes it's inappropriate to subsidize the airport when the city faces shortfalls throughout its budget.

"I see the airport as somewhat of a luxury amenity to our city. I see no reason why we should be taking on a deficit for that luxury amenity," he said.

At the July 21 meeting, Navickas proposed that the Airport Commission return to the City Council in six months with a plan for addressing the deficit. He wasn't able to get enough support from fellow councilors for that idea.

"You can try and raise your rates to meet the deficit and end up losing more business than you gain," City Councilor Russ Silbiger countered at the time.

In a later interview, Ashland Finance Director Lee Tuneberg said the airport shows a deficit because city policy requires it to keep 16 percent of its annual revenues in reserves.

When revenues are compared to expenditures, the airport is actually $9,024 in the black this fiscal year. But since the airport is required by city policy to have $17,000 left over, it falls short by the $7,976, according to this fiscal year's city budget document.

Long-term budget projections show the airport will fall short of having enough reserves on hand at least until 2015. The shortfall will go as high as $20,487 in 2013 when the ending fund policy will call for $20,000 in reserves and the airport will also be $487 in the red on its operations.

Tuneberg said the city is not subsidizing the airport. But he said he has suggested to the Airport Commission that it charge rental rates that will allow the airport to earn enough money to meet the policy on reserve amounts.

"We're not taking money and plunking it into the airport, but we're not putting away money to keep it financially viable for the long-term," Tuneberg said. "I believe they should charge market rates. If there's a waiting list, that says to me they could raise rates to create a better reserve. Others say, 'No. The waiting list will disappear. People will go to Medford.'"

Airport Commission member Alan DeBoer, a former Ashland mayor, said that while 20 to 25 people are on the waiting list for a hangar, not everyone on the list currently has an airplane.

The city could raise hangar rents more, but DeBoer said he believes the current rates have created stable, loyal customers, while charging higher rates would lead to turnover.

"Do you kick out a loyal customer to make room for a person with a lot of money? We don't want empty hangars. We want a bit of a waiting list," he said.

DeBoer has a plane but doesn't rent a city hangar.

He said he doesn't agree with the city's policy that the airport keep thousands of dollars in reserve because the airport's revenues are fairly stable. DeBoer said the airport also pays high charges to support the city's administration.

The airport pays $38,000 for city central services, which include administration, accounting, budgeting, legal work and federal reporting for the airport, Tuneberg said. All of the city departments complain about having to help shoulder central services, he said.

The airport is paying the Ashland Parks & Recreation Department $4,160 this fiscal year for parks workers to mow at the airport, Tuneberg said.

The Airport Commission has taken steps to improve the airport's financial health, DeBoer said.

In years past, the airport allowed private construction of hangars with the understanding that those hangars would eventually be owned by the city. The first of 11 privately built hangars is coming into city ownership in August and the city can begin collecting rent off the hangar, according to a city staff memo to the City Council.

DeBoer said the hangars will generate income for the airport as they become city property.

He said the Ashland airport is not just a hobby airport for plane enthusiasts.

Sky Research, an aerial research company, was attracted to Ashland because of its airport. The company pays good salaries, DeBoer said.

Sky Research was recently in the news for receiving $18 million in contracts to detect unexploded ordnance on old military bases. The business has other offices in Denver, Boston and Vancouver, B.C., The Associated Press reported.

The airport also attracts outside money, often in the form of Federal Aviation Administration money for work such as runway improvements. Intergovernmental revenue accounts for $150,000 of the airport's revenue for the fiscal year, compared to $100,000 from charges for services, $500 from interest on investments and $7,500 from miscellaneous sources, according to the city's budget document.

FAA grants usually cover 95 percent of work, with the city paying 5 percent, Tuneberg said.

DeBoer said tourists use the airport, as do business people. Many people who have trained at the airport have gone on to become helicopter and commercial plane pilots.

Because the Ashland airport experiences less fog than the Medford airport, helicopters and planes are often able to land in Ashland when they can't land in Medford.

"To someone who is severely injured and on life flight and can't land in Medford because of fog but can land here, is that a luxury?" DeBoer asked.

The Ashland airport isn't the only city department to have trouble keeping enough reserve funds on hand to meet city policy.

The Ashland Citizens Budget Committee and City Council have allowed some departments to eat into their reserve funds. In addition to allowing the depletion of reserves, the budget committee and council raised property taxes and laid off city workers to deal with budget problems.

The council has raised various fees, including sewer and water rates.

Staff writer Vickie Aldous can be reached at 479-8199 or vlaldous@yahoo.com.