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Pendleton council lops off chunk of airport debt

Antonio Sierra

East Oregonian

Published on July 11, 2018 4:43PM

Last changed on July 11, 2018 5:20PM

Being both the bank and the debtor has its benefits.

With five “ayes,” the Pendleton City Council wiped away more than $259,850 in debt owed by the Eastern Oregon Regional Airport at Tuesday’s meeting. The move will further reduce the millions of dollars of debt the airport holds, but it will also mean less money for the general fund.

Across decades, the airport borrowed as much as $2.5 million from the general fund and other parts of the budget to subsidize operations.

The city is obligated to pay those interfund loans back by state law, and the city’s auditing firm has for years urged the city to address the debt.

As the airport continued to accrue debt over the years, the city charged itself interest, ranging from 1 percent to 7 percent. The city has been paying back the interest, but according to City Manager Robb Corbett, the interest payments act like “IOUs” rather than a payment backed by cash.

For the past several months, staff have argued that the city isn’t bound to charge itself a high interest rate and state law allows the city to declare a retroactive rate lower than what was originally charged.

The council’s action on Tuesday reset its interest rate to 1 percent, resulting in the $259,850 debt reduction

The airport’s gain will be a loss for the general fund, which has been the airport’s primary subsidizer.

The general fund, which pays for services like public safety and parks and recreation, will be reduced by $201,400.

Paired with a separate $200,000 payment the council agreed to in June, the city has reduced the airport debt by $459,850 over the course of two months.

The council took action on several other issues.

• The council unanimously approved a $185,629 change order to increase the price of the first phase of the new fire station project from $1.9 million to $2.1 million.

Public Works Director Bob Patterson said some bids came in higher than anticipated, but he still expected the total cost of the station to come in at its original $9.4 million estimate.

• The council agreed to provide a $2 million match if the city secures a $25 million BUILD grant from the U.S. Department of Transportation.

The grant would cover the project costs of realigning the Interstate 84 Exit 209 interchange to alleviate traffic in that area. Patterson said the grant application is due July 19.

• The council agreed to a 10-year, $118,180 lease with Queen B Storage to use the old Blue Mountain Recovery Center property.

The city will continue to market the 4.76 acres to industrial companies for development, and the city can terminate the lease at any time provided they give Queen B 180 days notice and reimbursement for any improvements Queen B made to the property.

Queen B already leases 8.82 acres of land from the city, a point of contention from Pendleton resident Gale Marshall, who said the city’s lease rate was too low and drove his own RV storage company out of business.


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