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Airport Agency Plugs Budget Gap

June 19, 2002|JENNIFER OLDHAM | TIMES STAFF WRITER

The double whammy of increased security costs and lost concession revenue brought on by the Sept. 11 terrorist attacks caused a $100-million shortfall in the 2001-2002 budget for the city agency that operates Los Angeles International Airport, officials reported Tuesday.

Officials met the shortfall by cutting other expenses and by tapping a healthy reserve, but uncertainty about the cost of complying with new federal aviation security laws could strain the airport agency's $790-million budget for the fiscal year that begins July 1. The plan is 19% greater than the $663-million budget for 2001-2002.

"Security is really driving everything we do," said Karen Sisson, the Airport Commission's chief financial officer. "It's impacting most every other objective we might have."

New security rules instituted after the skyjackings, including one that allows only ticketed passengers beyond checkpoints, forced concession revenue--the airport agency's second-biggest moneymaker--down 35% in 2001-2002.

The drop-off in concessions--which was not as severe as expected--spurred the agency to cut its budget by 16%, in part by instituting a hiring freeze and temporarily suspending all capital improvement projects.

Security costs almost doubled to $78 million in 2001-2002, including paying overtime to airport police officers, reimbursing the LAPD for additional personnel and operating a remote lot where people could pick up and drop off passengers while the central terminal area was closed. In the three days the airport was closed immediately after the attacks, security costs totaled $2.6 million.

Despite these costs, the airport agency said it will emerge relatively unscathed because it was able to reduce other expenses, dip into cash reserves and increase landing fees to make up for the shortfall. Strong cash reserves, gleaned in part from years of growth in concession sales before Sept. 11, and virtually no debt also helped the agency weather the effects of the terrorist attacks.

"We're going to finish the year much better than anyone predicted," Sisson said during a presentation to the airport agency Tuesday. "We're in a good position when compared with other airports."

The agency made up for the $100-million shortfall in 2001-2002 by reaping $68 million in savings from in-house cost-cutting and by taking $32 million from its reserves. These reserves were replenished recently when the city received a $35-million reimbursement from the federal government for construction costs on Taxiway C. The airport agency was able to apply for the funds after Mayor James K. Hahn lifted a ban on accepting federal grant money earlier this year.

The financial effect brought on by the terrorist attacks will continue to be felt in the new budget, Sisson said. Concession revenue is projected to be down 30%. Airline revenue, the airport agency's largest moneymaker, however, is expected to increase 22%--in part due to an increase in landing fees imposed earlier this year to cover the increased security.

Security costs are expected to nearly double from $35 million last year to $68 million to allow the agency to hire police officers, pay increased insurance premiums and compensate consultants studying how to redesign airport facilities to comply with new aviation security laws.

Those laws could conceivably add even more expenses to the agency's 2002-2003 budget, Sisson said.

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