Audit: Mismanaged Detroit airport loses $500K a year, hangars 'dangerous'

Detroit — A new audit of the city's financially troubled municipal airport documents decades of mishandled contracts and close to half-a-million dollars annually in revenue losses linked to the facility's disrepair.

The June 3 review by the Office of the Auditor General also discovered that Coleman Young International Airport's hangars have broken down to the point that they "are causing a dangerous environment." There are four families of coyotes living on the property and birds have inhabited some of the hangars, "causing a bio-hazard" and "impacting the city's ability to rent these facilities to generate revenue," according to the audit.

Detroit's Airport Department also has failed to obtain approval from Detroit's City Council for lease contracts, secure agreements for other tenants or maintain its assets. The audit spanned July 1, 2016, to June 30, 2018.

"The Airport Department is not collecting the appropriate amount of revenue and no one is reviewing the amount of revenue collected, which reduces the amount of funds they have available for operating cost," the audit said. "In addition, the Airport Department is not provided with any certainty as to how long the tenants will occupy the premises."

The audit estimates the city is losing potentially more than $481,000 a year by failing to maintain the airport's units.

"The lack of investment makes it increasingly difficult to sustain the asset in a condition necessary to provide expected service levels," according to the audit. "Ultimately, deferring essential maintenance or asset replacement reduces the airport's ability to provide services and could threaten public health, safety and overall quality of life."

The audit comes amid the city's multi-phase study to determine the best use of the cash-strapped airport that the city has propped up for the last several years through subsidies from Detroit's general fund.

In an October 2017 pitch to land an Amazon headquarters, the Duggan administration touted its airport as an asset to support the Seattle-based retailer in “research, testing, aviation and other capacities.” Amazon later narrowed its list of finalist cities, eliminating Detroit from the running.

Rental rates have not been changed since 2006, the June 3 audit notes, and "leases may have been lost or misplaced" because some "are more than 30 years old."

The airport has 58 tenants. It rents units, including hangars and bays. 

None of the lease agreements had documentation indicating that they were reviewed or approved by the City Council as required under Detroit's City Charter, the audit notes.

The review determined 16 of 58 tenants — 28% — don't have leases. About 72% of the tenant leases were available for review. About 16% have leases that originated between 1988 and 2007, the audit found. 

Auditors also found that 7% of tenants don't have a rent amount listed and 14% are not paying the amount of rent listed in their agreements. 

The audit recommended that the Airport Department pursue annual or multi-year tenant leases with defined term limits; obtain, update and retain leases; and reviews of its revenue fee schedule "to determine if an increase in fees is appropriate" and document why any variance in rental amounts may have been granted. 

Efforts are underway to change the long-held practices flagged in the audit, said Brad Dick, the city's group executive of infrastructure. He added that he has learned the practices date back possibly two decades. 

"I'm a firm believer, whether we like government or not, it's here and it's how we function. It's how we get things done," Dick said. "You have contracts, they have to be looked at and approved by City Council. That's how you keep your process neat and clean."

AVFlight has been the fixed based operator for the airport since 2011. The most recent three-year contract was approved in April 2016. As part of the contract, the vendor also collects landing and aircraft parking fees on behalf of the Airport Department.

In April, Dick noted, the council approved a new lease agreement for the company that runs through June 30, 2020. The Duggan administration is working with purchasing to sort out contracts for several other long-term agreements. Those should be going before the council in the coming weeks, he said. 

Separately, with some short-term leases that are under 30 days, Dick said the city's Law Department is working on a proposal that would ask the council to sponsor a resolution allowing the airport to negotiate those agreements on its own. 

"We believe we have a good action plan in place," Dick wrote in a March 28 response to the audit findings, adding that the airport team was working to tighten "these long neglected processes with the airport."

Dick said upgrades are needed in areas throughout Detroit. A primary focus, he said, has been on police and fire and recreation centers. 

"We've obviously got lots of deferred capital maintenance around the city," he said. "However, we did set aside $4 million that was approved by City Council last fall for airport improvements."

The city just completed a $3.5 million runway improvement project and another $500,000 is going toward lighting upgrades, Dick said. 

An initial phase of the airport study revealed it would take an $83 million overhaul to return commercial passenger service to the airport. 

The investment scenario was the most costly among several outlined in the future use study released in early 2018. 

Detroit Mayor Mike Duggan has said he supports a plan for the 264-acre airport that would bring jobs. Recommendations are being finalized and expected as early as this summer, Dick said.

The audit also notes the recent renovation of an old Southwest Airlines office building that had been vacated in 1993. The building reopened in October as an aviation building for youth.

Donated money in the past year has also enabled the nonprofit Friends of the Detroit City Airport to renovate a building east of the terminal for youth education. 

cferretti@detroitnews.com