Officials from Sheridan County, the city of Sheridan and nearby municipalities met to informally discuss collaborating on local development efforts Friday and considered if, and how, they could jointly address the uncertainty surrounding the future of local air service.
State lawmakers identified the development of statewide commercial air service would be key to diversifying Wyoming’s economy and appropriated $15 million for the development of a commercial air service program during last year’s budget session. Because commercial air service is expensive, particularly in Wyoming, the state’s plan to get the most out of its funding is to leverage the combined purchasing power of several airports — which would theoretically include Sheridan, though local officials can choose not to participate in the contract — by bundling them into a contract with one air service provider.
With the state shifting its resources to building the capacity purchase agreement, though, the state fund that currently contributes to the subsidization of commercial air service out of the Sheridan County Airport is projected to run out of money by fiscal year 2020. The state has not selected that provider yet, but its focus on the capacity purchase agreement as caused local officials to worry they could be forced between abandoning their burgeoning local service and starting from scratch and taking on an immense financial burden.
Local officials have praised the reliability of Key Lime Air, which operates out of the Sheridan County Airport as the Denver Air Connection, and largely agree that a local commercial air service will be important to the continued growth of Sheridan and Sheridan County.
According to Sheridan County Administrative Director Renee Obermueller, the Denver Air Connection is critical to local economic development efforts and the growth of the local travel and tourism industry, while also offering Sheridan County residents more outlets for cultural and leisure activity. The Wyoming Department of Transportation’s Aeronautics Division attributes the creation of 79 local jobs to the commercial and visitor spending the airport attracts and the creation of 149 jobs to the day-to-day operations of the Sheridan County Airport.
If the Denver Air Connection’s operations out of the Sheridan County Airport cease, though, the airport would likely have to restructure.
The Sheridan County Airport currently receives a $1 million federal grant for the maintenance of its facilities. That grant is only available to airports that see at least 10,000 enplanements, which federal agencies define as passengers departing the airport. Meeting that minimum would be virtually impossible without the Denver Air Connection, and Obermueller said a crucial chunk of the airport’s funding would plummet as a result.
Key Lime Air has applied to serve as the state’s air service provider, along with Sky West Airlines, which operates out of several airports in the state. Obermueller said WYDOT’s Aeronautics Commission has indicated that it could announce which of those airlines it plans to enter negotiations with as early as next week. But, she noted, the state negotiating a contract with an airline would bring very little clarity to the discussion, as negotiations could easily fall through.
Considering what’s at stake, Sheridan Mayor Roger Miller asked what could literally prove to be the million-dollar question.
“What’s the back-up plan if the state works at the speed of government and doesn’t commit to a plan in the next six months?” Miller asked.
The state, Obermueller said, does not have a back-up plan; if local officials want the Denver Air Connection to continue operating out of Sheridan and Rock Springs without state subsidies they will have to find a way to pay for the service on their own.
“There’s a lot of blanks, a lot of X’s, a lot of things to be filled in right now,” Obermueller said. “But next week, after we know a little bit more, I think the CAST Board is really going to have to dive into what’s next. And that will take certainly participation from the city and the county as funders of the program.”
Sheridan County residents have already agreed to contributing to subsidies for local air service, Obermueller added, with the passage the Optional One-Cent Sales Tax in November.
Key Lime Air, along with several other airlines operating out of Wyoming, requests a minimum revenue guarantee to operate out of Sheridan, which is a fixed payment to ensure the company makes a profit if enplanements are low.
As the Denver Air Connection has become more established in Sheridan and ticket sales have increased, the size of its MRG has shrunk. That trend hit a speed bump this year, though, as an industry-wide hike in fuel prices cut into the service’s profits, even as its sold more tickets; the Denver Air Connection had 2,237 total passengers and 1,170 enplanements during its first year operating out of the Sheridan County Airport in 2015 and had 19,514 total passengers and 10,769 enplanements in 2018.
The combination of the loss of state funding and an unchanged MRG makes subsidizing the service a daunting prospect for local governments, whose budgets tend to remain relatively static.
If local officials are going to take on that responsibility, they will need to find a new source of revenue. Considering that reality, Miller asked the gathered officials whether they should begin gauging the public’s willingness to vote for a new tax to support air service, and offered a quarter-penny sales tax as an example.
“That’s something I think we really need to start to discuss and talk with people about,” Miller said.
Sheridan County Commissioner Mike Nickel pushed back against Miller’s suggestion, however, and said the scenario Miller presented was still hypothetical.
“I think we need to find out a little more information before we make such a drastic move as that,” Nickel said. “I think we’re getting closer to having to make that decision, and I think we should have it in the back of our minds, but I think it’s a little bit too soon to pose that to the public.”
In the state’s supplemental budget, which the Wyoming Legislature passed last month, the state agrees to provide $3 million extension to the current air service funding program. But that would only delay the decision on the future of the Denver Air Connection, Obermueller said.