Come Fly With Me: Will Detroit City Airport Get Dose of Fiscal Sanity?

Detroit Mayor Dave Bing has recommended outsourcing the management of the Coleman A. Young International Airport to save money, as recommended by the Mackinac Center back in 1998. When we did so the city had recently provided the airport with a $1.9 million subsidy. In 2007 (the latest year for which data is available), the subsidy was down to $900,000, but the city's ability to afford any subsidy has collapsed altogether.

Bing is not the first mayor to consider privatizing the airport's management. In 2008, Kwame Kilpatrick actually identified a potential contractor called Avport. While outsourcing has merit, at this point, the city should investigate just completely unloading the airport with an outright sale.

Our 1998 description of the airport's problems is worth reprinting:

Forty minutes up the road, Detroit City Airport's woes do not involve congestion but rather a lack of it. City Airport, which last year received a $1.9 million subsidy out of Detroit's general fund, has a low volume of commercial traffic due to its small runway size, poor location in a densely populated area, and proximity to Detroit Metro. This lack of usage led to a 19 percent drop in airport revenue from 1996 to 1997. At the same time, operating costs increased 12 percent and employee salaries and benefits shot up 17.8 percent and 71 percent respectively.

In addition, the airport is in a weak cash position. A strong cash position would allow the airport to meet salary obligations and other operating expenses, expand, and generally maintain the airport. The airport has not bled off its cash overnight. In 1979 the airport balance sheet showed a cash position of $505,543 dollars. Editor's Note: Budget numbers are presented without adjusting for inflation.

The city still had a financially viable airport. Today is a much different story. The airport's 1997 balance sheet shows a cash position of only $59,593, which was not enough to cover the $147,142 in salaries and wages paid to airport employees during the first month of fiscal year 1997.

Furthermore, despite the $1.9 million subsidy, the airport's accumulated deficit has leapt from $1,598,987 to $2,249,452 in one fiscal year. The accumulated deficit is simply the difference between the airport's assets and liabilities. Technically speaking, the airport would be bankrupt if it were not for the city's cash transfers (more than $3 million in the last two years). The airport is in trouble. How long will Detroit's taxpayers be required to subsidize its existence?

Now, as in 1998, we could not ask a better question ourselves.

Author's Note: Many more Detroit- and privatization-specific recommendations can be found in the Mackinac Center's Winter 2001 edition of the Michigan Privatization Report, which was almost exclusively dedicated to Motor City privatization issues, such as outsourcing housing inspections and selling the city's water system.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.