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Thursday, Mar 28, 2024

Airport Tenants Await Decision on Rate Adjustments

Tenants at Van Nuys Airport will have to wait a bit longer on a response from Los Angeles World Airports on the possibility of postponing rental rate adjustments until a detailed examination of the facility’s finances can be performed. Agency Executive Director Gina Marie Lindsey is expected to discuss Van Nuys at the Jan. 11 Airport Board of Commissioners meeting taking place at Los Angeles International Airport. In December, the Van Nuys Airport Association sent a letter to Lindsey and other officials at LAWA asking that the process to adjust rental rates be suspended in order to do an independent financial audit of the airport and a study on turning over operations to a private contractor. Under the city charter, LAWA is required every five years to adjust rental rates to fair market value. But with the recession slowing activity at the airport and major tenant’s laying off workers, the association believes that an increase in rents would make the situation worse. Historically, the adjustment process begins with LAWA and the leaseholders negotiating a new rental price. If the talks stall, then appraisers are brought in to put a value on the property. Tenants would see a rate change in either February or July depending on their lease. But one leaseholder said the appraisal process would support a reduction in rent and in turn not serve the long-term interests of the tenants or the airport, which faces a budget deficit. Instead, alternative solutions must be looked at to stabilize the situation, thus the suggestion of studying a third-party contractor at Van Nuys. “We want to reverse the job loss,” said Curt Castagna, chairman of the association’s rent subcommittee and a leaseholder at the airport. “We can do that by coming together and come up with creative ideas to maintain and improve cash flow but not put more burdens on businesses to make up the shortfall.” Those shortfalls have typically been present at Van Nuys, which for years has been subsidized from the LAX budget. The decrease in flight activity, however, has the association turning a spotlight onto the airport’s operation, especially as LAWA took measures – a fuel flowage fee increase, a proposed deficit recovery charge – that made some tenants feel like the budget was being balanced on their backs. The current budget projects a $2.3 million shortfall. Representatives from LAWA and the airport have stressed that cost cutting has always been a priority to reducing the deficit. This year, for instance, savings were realized by leaving administration positions empty, cutting police and fire positions, and redeploying other positions to LAX. Meetings between airport officials and tenants have touched on the budget. “We are assisting them to identify ways to bring down costs,” said Van Nuys Airport spokesperson Diana Sanchez. Aggressively managing the rents to handle the deficit is not going to solve the problem, added Robert Rodine, a consultant with clients at the airport. The Valley airfield differs from the approach that can be taken with concessionaires at LAX because there are federal guidelines that need to be followed, Rodine said. Looking over the budget it is his opinion that there is a higher personnel count at Van Nuys when compared to similar sized airports and there are expenses unrelated to operation aspects that can be reduced, he said. “The folks at LAWA are going to have to recognize the absolute necessity of accepting some deficit at VNY or reducing their costs,” Rodine said. The suggestion to turn over operations of the airport to a private contractor may find difficulty gaining traction at the airport agency. In December 2008, KH Consulting Group released a report on the four airports operated by LAWA in which it identified Van Nuys as a good candidate for private management. In the months that followed the release of the study there were no active discussions following up on that recommendation.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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