Officials consider new regional airport authority to help St. Cloud airport's finances

ST. CLOUD – Officials that run the city's money-losing regional airport are trying to take a new approach to stem taxpayer losses and better position the 51-year-old facility for success.

They are pinning their hopes on the creation of a new regional airport authority that would relieve financial pressure by sharing costs with other local governments and potentially unlock millions of dollars in federal aid.

A year ago, three counties — Stearns, Sherburne and Benton — began the lengthy process of winning crucial approval by the Federal Aviation Administration.

"Of course, COVID was right around the corner," said Bill Towle, airport director. "It really stalled out most of 2020. Now we're getting right back into it."

St. Cloud and regional airports across the country are struggling for survival as competition intensifies to lure commercial carriers and private business. As significant travel restrictions were imposed to control the spread of COVID-19, air carriers took aggressive action by slashing routes, particularly to regional airports with lower ridership and higher costs.

City taxpayers kick in about $875,000 each year to keep the St. Cloud Regional Airport afloat, a particular strain at a time when the pandemic is already squeezing city finances. The airport's operating budget is $1.05 million this year, down 13% from 2020 due to decreased use and fewer passengers.

To help offset the losses, the city is freezing two positions at the airport, according to the city's 2021 budget.

For years, regional airports across Minnesota have taken on debt or stretched finances to extend runways and improve amenities to appeal to carriers and air travelers. In the last few years, St. Cloud has added 500 feet to its main runway, repaved some taxiways and made other improvements aimed at encouraging the building of new hangars.

But the airport has struggled to attract new commercial carriers and flights due to its proximity to Minneapolis-St. Paul International Airport, which is 70 miles away and pulls about 7% of its originating traffic base from the St. Cloud area.

St. Cloud's only commercial carrier, Allegiant, offers year-round flights to Mesa, Ariz., and seasonal flights to Punta Gorda, Fla. In early February, Allegiant announced flights to Destin, Fla., on the panhandle from June to August.

The nine-member airport board met for the first time at the end of February to begin work on winning federal approval, which Towle hopes to get by the end of the year.

The airport is the sixth largest in Minnesota, following MSP, Rochester International, Duluth International, Bemidji Regional and Brainerd Lakes Regional, according to 2019 numbers. Of those, St. Cloud is the only municipally run airport.

"For the most part, airports in this country are not self-sufficient but there's not a hard and fast rule for breaking even," Towle said. "It typically involves air service — commercial air service. That's generally how lots of these airports generate revenue to offset expenditures."

But Towle said it's important to consider an airport's economic benefit to the region and weigh how much economic activity it generates against the required tax support.

Although St. Cloud Regional Airport operates at a loss subsidized by the city, a 2019 study showed the airport had an economic impact of about $44 million in the tri-county area.

"Is it worth it? For the most part, the answer is yes," Towle said. "It's a great bang for your buck."

The Duluth Airport Authority also operates at a loss — which was about $8 million in 2019, due mostly to depreciation costs totaling close to $10 million. However, the airport received $13.5 million in federal and state funding that year.

"We rely very, very heavily on the grant system, both from MnDOT and the federal grant system," said Tom Werner, executive director.

The airport also maintains a line of credit with the city of Duluth, which allows cash flow for projects that are reimbursable.

"[The] bottom line is we have not had to go to the taxpayers of our region to ask for money at all in order to keep that airport safe and secure," Werner said. "And we're quite proud of that."

Revenue generators at airports include parking fees and income from restaurants, gift shops and rental cars.

In 2019, Duluth International brought in $1.5 million in parking revenue, $630,000 in car rentals and $90,000 in concessions.

Similarly, Rochester International Airport brought in $890,000 in parking and $1.2 million in car rentals.

The St. Cloud airport offers free parking. The 2019 study estimated the airport could bring in upward of $145,000 each year with a fee — if travelers are willing to park at the airport.

The new regional structure would increase the airport's chances of nabbing federal funding and better reflect the airport's users, a majority of which are from the region, not city residents, according to St. Cloud Mayor Dave Kleis. That's why the board thinks it makes sense to share airport costs over the entire region.

"For the first time, the vast majority of the users [will be] paying a small amount and that keeps those costs down by spreading it out over a larger region," Kleis said.

Once the regional authority is established, the city will still pay about $620,000 annually for the next decade to support operating expenses, as well as provide fire and police services for 10 years.

Because the airport has so few flights, it only saw a 25% decrease in total passengers last year, a fraction of the 62% drop at MSP. Towle said Allegiant maintained the same flight frequency throughout the year so it was eligible to receive CARES Act funding.

St. Cloud is also one of seven cities in Minnesota and Wisconsin where travelers can book airport shuttle service for Sun Country flights departing from MSP. Sun Country announced the shuttle service for St. Cloud in early February.

Towle said he thinks the shuttle service will show the demand for service from central Minnesotans. "That's data that we can take to an airline that might be interested."

Staff writer Katie Galioto contributed to this report.

Jenny Berg • 612-673-7299