The St. Cloud Regional Airport is banking on a recently announced $750,000 federal grant to land an airline at the airport that’s been virtually deserted since Delta terminated service in and out of St. Cloud in late 2009. Despite a $5 million makeover of the terminal two years ago, St. Cloud’s airport has mostly sat idle as the city desperately seeks new commercial airline partners. St. Cloud received $750,000 in federal stimulus funding to assist with a portion of the renovation, but the project has thus far amounted to a passenger boarding bridge to nowhere.
The latest federal subsidy comes under the little-known Small Community Air Service Development Program (SCASDP), which provides temporary help to small airports to attract and maintain local air service through marketing and revenue guarantees. St. Cloud officials said the taxpayer gift would go a long way toward courting a new carrier, mostly by offsetting the financial risks involved with getting new service off the ground. In other words, the federal government is subsidizing the airport so the airport can subsidize the airlines. “One hundred percent of it will go towards what we call a minimum revenue guarantee. It’s really putting a pot of money somewhere set aside that in the event that airline loses money or has some start up costs or whatever it might be that they’re able to pull from that and make themselves whole,” airport director Bill Towle told the St. Cloud Times.
While increasing St. Cloud’s chances of attracting air service, analysis by the Freedom Foundation of Minnesota suggests the program fails to deliver for communities more often than not. In fact, a federal audit found that half of SCASDP grants failed to meet their objectives or failed to continue to provide air service capable of competing in the marketplace after the subsidies dried up.
Federal auditors have consistently raised questions about the overall lack of effectiveness of the $20 million per year FAA program. An Office of Inspector General 2008 audit revealed that just 30 percent of subsidy recipients were successful in achieving and sustaining their desired results for at least one year. The 40-page report concluded that “70 percent of the grants in our review failed to fully achieve their objectives. Specifically, 50 percent of the grants were unable to achieve any of their articulated grant objectives or were unable to sustain grant benefits beyond the grant horizon.”
On paper, St. Cloud’s bid appears to align well with the audit’s recommendations for maximizing the possibility of success. Airports that woo new air service tend to fare better than airports that attempt to improve an existing air service, according to the audit. Other important variables include offering revenue guarantees, marketing support and high level community involvement.
While there are no guarantees, St. Cloud’s strategy includes all of those key elements, including raising additional financial support from the community. Nevertheless, the decade-old program has been excluded from the FAA Reauthorization bill working through Congress. The subsidy is destined to become a rare example of a Washington program that both sides of the aisle agree does not work, according to House Transportation and Aviation Committee staff in Washington.
In the end, St. Cloud will have secured one of the program’s first and last taxpayer gifts from the SCASDP. FAA records indicate that a $1,000,000 grant was awarded jointly in 2002 to Brainerd/St. Cloud airports during the first round of SCASDP funding. The records do not specify exactly how the subsidy was used to pursue the program’s mission of supporting and sustaining long-term air passenger service after federal funding runs out. A 2005 Government Accountability Office (GAO) report found that $250,000 of the first grant was reimbursed to the federal government. Neither federal DOT nor Brainerd and St. Cloud airport officials responded to FFM’s requests for information.
In fact, three more Minnesota airports received subsidies during the program’s decade-long existence: Duluth in 2003 ($1 million), Hibbing in 2005 ($485,000) and Marshall in 2005 ($480,000). The Hibbing Airport even received special designation in 2005 under SCASDP as an Air Service Development Zone. GAO investigators, however, could not even determine what qualified an airport for Air Service Development Zone status or any actual benefits tied to the designation.
One official from an unspecified airport told the GAO that “positive local publicity for the airport” was the only effect they could report in connection with the designation. As for Minnesota’s five recipients of SCASDP grants, only Duluth currently offers non-subsidized passenger airline service. Marshall and St. Cloud do not have regular passenger air service, while Delta has tentatively announced plans to drop its subsidized flights to Hibbing and Brainerd.
The numbers in chart form are listed below:
SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM
MN Grant Recipients 2002-2011
2002- Brainerd/St. Cloud $1,000,000
2003- Duluth 1 ,000,000
2005- Hibbing 485,000
2005- Marshall 480,000
2011- St. Cloud 750,000
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