Page 2: Let’s play Monopoly

Newsflash: $4 to $6 million dollars is not considered Monopoly money.

At Mammoth’s regular Town Council meeting Wednesday, Councilman Colin Fernie implied that previous Councils had approached public finances as if they were playing with Monopoly money.

The airport litigation settlement is clearly the gift that keeps on giving, as any politician serving now and into the future can reference the settlement and then, by comparison, claim he is the Oracle of Olancha, er, the Oracle of Omaha.

On Wednesday, Mammoth’s Public Works Director Grady Dutton made the same Airport Capital Improvement Program presentation he made last week at Planning Commission.

Again, he noted a $4 to $6 million “gap” between what the FAA (Federal Aviation Administration) might contribute to an airport terminal expansion project and the matching funds the Town would have at its disposal to apply towards the project.

Meaning, at some point, the Town will have to put up hard cash for the construction part.

But it’s “only” $4 to $6 million, so if we do no other due diligence and head down this path and it turns out we’re building a big-ass church (airport terminal) for Easter Sunday, we can at least be assuaged that our Monopoly playing Council has established a relatively benign stop-loss number.

Shit.

Currently, we’re filling less than 60% of available seats and have actually reduced the number of available seats for this winter’s service in an attempt to “right-size” supply to adjust to demand.

I commend Mammoth Lakes Tourism’s John Urdi for the “right-sizing.” For example, he said we have reduced service to San Diego to four days per week (versus daily service last year), and yet, we’ve had about 150 more passengers overall on that route this year.

This is how the business development argument goes. You build routes over time, and as those routes get established, you wean those routes off the subsidy teat. The subsidy teat is then extended to new routes.

Having a terminal with three gates means you can have three planes on the ground at once which means you have three times the opportunity to offer better arrival and departure times.

But here’s a key point, and I’ll return to it. as Urdi said Wednesday, “Developers look at this place [Mammoth] because it is accessible.”

Question is, access aside, do we have any indication that we can triple our business (the current trend of approx. 30,000 passengers a year) over a five-year period?

The Sheet recently spoke with Scott Stewart, the Principle of Community Flights, an air service management and development company based in Colorado.

Stewart formerly served as Executive Director of the Telluride Montrose Regional Air Organization.

“In general, declining seats is not a good sign,” he said. The reason for Mammoth’s right-sizing move, he theorized, may have been because the powers-that-be had taken a step too far for the current market.

In ski markets, he added, if you’re not doing 70% (seat occupancy) or better, you’ll have a hard time increasing seats and expanding markets.

At Council Tuesday, Urdi appeared to confirm this. He said 55 passengers on a 76-seat plane (72.3%) is the break-even point for subsidy on a lot of our commercial flights.

In 2013, we filled about 56% of our seats.

In 2014, passenger enplanements were off by 16% from 2013. December 2014 numbers were 20% down from 2013 – and we had more snow this year than last. I don’t have seat occupancy numbers offhand for 2014, but assume they are down from 2013.

What is the industry trend?

On his communityflights.com site, Stewart noted that between the 2007/2008 anf 2012/2013 ski seasons, Vail’s scheduled seats declined by 21%, Jackson’s by 17%, Steamboat’s by 33.5%, Sun Valley’s by more than 46%.

Sun Valley offered ~61,000 scheduled seats in 2007/2008. By 2012/2013, that number was around 33,000 – less than Mammoth.

Crested Butte’s scheduled seats declined from ~54,000 to ~35,000 between 2008/2009 and 2012/2013.

Question: Are we the geniuses who can create a 70% increase in seat capacity over the next five years while everyone else is heading the other direction?

Sheet: So why can’t we fill some of those empty seats we’re already paying for by offering cheap last-minute deals?

Stewart: Airlines look at the bigger picture. Yes, it may be logical to fill empty seats at the last minute with cheap seats for locals, but then, you end up training people to have those expectations. It doesn’t lead to revenue maximization.

A few other observations:

“Alaska Airlines a good partner. It participates to a greater extent in local marketing efforts than the majors.”

“Everybody’s a genius when it’s dumping. When it’s not, that’s when you learn who the geniuses are.”

Finally, back to the accessibility question. At Wednesday’s meeting, MMSA CEO Rusty Gregory, in making the pitch for lower developer fees/obligations, said developers have too many opportunities right now in all sorts of resort markets. If we don’t cater to them, he said, they’ll go elsewhere. Further, he said Mammoth is looked upon as a “laughingstock” for even contemplating something as passé as “inclusionary zoning” (i.e. having affordable housing units built into market-rate projects on-site).

I suppose my rebuttal would be, ‘Okay, if your pro formas require the certainty of lower development fees, then let’s make those pro formas work. In return, we require certainty that the airport we’re building to help you market your product doesn’t bankrupt us more than it already has. Therefore, MMSA and its development partners can assume the risk of fully subsidizing an airport terminal expansion.

In other Council news, Council approved a fundraising program for the ice rink.

Town Manager Dan Holler said that the rink roof project is priced in the $900,000 range.

This is how he hopes to pay for it.

The Town has made a $300,000 application to Mammoth Lakes Recreation. Holler says he’s also rounded up about $550,000 from DIF accounts and savings from the snow removal budget.

The fundraising program (through advertising sold along the rink boards) is supposed to make up the remainder.

I did propose to Council during the meeting that the fundraising program include some sort of match from a partner and identified the TBID as a potential source for that match.

The TBID Management Plan clearly states that TBID monies can be spent on “development of tourism-related infrastructure.”

In fact, now that I write that, why doesn’t TBID pick up the remainder of the construction cost and perhaps put fundraising program dollars towards rink operations?

While John Urdi may not wish to have his treasure chest raided for such an item, he has stated in the past that it’s not worth throwing discretionary marketing dollars away when we don’t have the snow on the ground. Seems perfectly reasonable that we would transfer those dollars to an infrastructure product which he can then market far into the future.