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Regional Assets vs Local Control
July 29, 2011 - Ernest Hohmeyer
I was standing at the Adirondack Regional Airport the other day with my two sons gawking over the A-10’s that had just landed.
As I looked around, I was reminded how beautiful this facility is and how much potential it has.
Since the airport was created over 60 years ago it was always envisioned as a transportation and economic hub. From the beginning, an industrial park was envisioned that would take advantage of both the airport facility and the railroad which ran by its outer boundary.
Despite the effort of several generations of local officials and citizens, the dream has never fully been realized. I was wondering as I was looking around the facility, if part of the problem was that it was a classic example of “sources and uses.”
Saying What You Really Mean
In “banker speak” you often get many requests for financing that initially appears to be for one reason but after further investigation of the business’s financials, you discover that the money is really needed for other things as well.
For example, it may appear that the entrepreneur has discovered that there just does not seem to be as much money in the drawer at the end of the day as there used to be. So, a plan is hatched to change or expand the business. However, in this make-believe example, by the time the entrepreneur talks to the bank or in my case the world of economic development financing, his available cash has grown short or his debt has increased. They speak in glowing terms of their new way to operate the business and the money needed to get this started.
Very quickly in this process, we developed with the entrepreneur a “Sources & Uses” chart that determines all the different things that the loan will be used for. Many times, a small business person will lump all of their needs into one (the “use” for the money). To keep things simple, they would prefer to have just one loan payment per month (“source” of money.)
For a small business person, already overwhelmed with being the bottle washer, cook and bookkeeper, simplicity can be a noble cause.
In terms of borrowing money however, this potentially could derail the operation of your business.
Let's say that in order to change the direction of the business, money is needed for new equipment, renovation of space, additional inventory and marketing. All of these could have different “shelf life.” In other words, the entrepreneur will reap the benefit of renovated space and new equipment hopefully for many years. However, their inventory may be perishable and their marketing a one-time shot to “get the word out.” It may not be wise to make payments over the next 10 to 15 years over something whose “use” is no longer bringing in money to the business.
Do We Need to Think Differently?
I was thinking of this management of “sources and uses” when it comes to our regional assets like the Adirondack Regional Airport, the Harrietstown & Tupper Lake business parks, the Paul Smith’s VIC, and others. Could their potential be enhanced by matching their regional “use” with regional “sources”?
Currently for example, the operation of the Adirondack Regional Airport falls under the responsibility of one town. Yet the “use” of the airport benefits many other towns and many other types of “users.” Why are they collectively not more equitably involved as “sources” of funding?
We could fill up many weeks of articles to talk about how different methods in the past had been used to “regionalize” the operation of the airport. At one time, there was an airport district and the towns still nominally support the facility. The major burden of the operation of the airport however, still falls on the Town of Harrietstown taxpayers. The town, in my opinion, has done an admirable job of what it can do to maintain the facility. In fact, quite a bit has been done in terms of improvements and new facilities.
But there is another issue here. While even I was surprised to see what had been done, can the town be the single “source” for all the potential “uses” that the airport can dream to be?
Sometimes, the hardest thing to admit in business is that what made the business successful years ago may not be the right approach to continue that success tomorrow.
If the Shoe Doesn’t Fit…
Is it time to consider that regional assets can no longer be operated to their full potential based on one single “source.” Do new models need to be considered and should a plan be put in place to begin that discussion?
For example, should an investment be made on analyzing other potential ways to operate the airport? Many ideas have been floated around for years and perhaps it's time to put paper and pencil together to see what makes sense.
Is there a way to create a bipartisan local official and citizen group from the “region” that looks at this “regional” asset? If an airport authority or other public options are too cumbersome or expensive, could interim hybrid models be developed such as a “Friends of the Airport” consortium?
Could a separate not-for-profit consortium be established, led by airport users, who would have an opportunity to contribute their ideas and resources to an “airport improvement fund” that would be tax-deductible? Perhaps, this could be a way to establish an endowment fund to help operate the airport.
More importantly however, should regional “sources” be formally engaged with not only maintaining the airport but also to build its incredible potential?
We first may need to admit; we cannot run it like it used to be.
Is the “Time Upon Us”…as a Region?
Saranac Lake has expressed interest in creating a “Biotech Boulevard.” Working together, we can create a regional clean industry “center” by utilizing the 290 acres available at the Harrietstown Business Park alone. Yes, you heard that right: there is 290 acres available of Town of Harrietstown and Paul Smith's College land already zoned “industrial” by the APA.
Taken one step further, can you imagine if we combined our efforts with the Tupper Lake Business Park and all of us used the marketing engine of the Adirondacks and Lake Placid to target our efforts?
Similarly, Paul Smith's College has made clear that the VIC needs to generate revenue. Efforts are underway to establish that goal and perhaps no further assistance by the region will be required. However, in this embryonic stage of brainstorming ways to do so, is the idea of a regional consortium that targets only the Paul Smith's VIC, a possibility to consider to develop its incredible potential?
In Macrowikonomics: Rebooting Business & the World, Tapscott and Williams talk about the qualities of today's leader needing to “let go,” and to be a “curator” of other people's ideas.
Perhaps we also need to keep in mind what our main mission is in each one of our businesses and organizations. For example, what should the role of government and how does that translate into some of these regional assets? Can we combine private and public “sources” for the great potential of their “uses”?
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