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TO: Mayor Irvin and the Aldermen
FROM: Steve Andras, PE
Interim Manager, Aurora Municipal Airport
The Law Department
DATE: August 21, 2019
SUBJECT:
Fuel Sales at Aurora Municipal Airport
PURPOSE:
To repeal a 2014 requirement that requires operators at the Aurora Municipal Airport to sell aviation fuel at a 25% premium above the price they purchased it for.
BACKGROUND:
In 2014, with the stated goal of creating a "level playing field" between JA Air and Lumanair, the two fixed base operators (FBO) authorized to sell fuel at the Airport, the City Council adopted O14-058 which required each operator to sell fuel at no less than 25% above the price they paid for it. At the time, the City was concerned of the potential of "fuel dumping" - a practice where one FBO could sell fuel below market prices with the apparent attempt to hurt the business interests of the other. As a consequence, both FBOs are now selling fuel above market prices, which makes it less likely that aviators will purchase fuel at the Aurora Airport.
In 2018, Lumanair filed an informal complaint with the Federal Aviation Administration (FAA) alleging that requirements of O14-058 unfairly benefited JA Air.
DISCUSSION:
Though Lumanair's proportion of fuel sales at the Airport increased in the years that followed O14-058's enactment, the FAA found that the ordinance eliminates or severely restricts both FBOs from making reasonable and nondiscriminatory discounts, rebates, or other types of price reductions to volume purchasers in violation of grant assurances made by the City as a condition of receiving federal funds. The FAA also found that the issue could be problematic if one FBO chooses to exclude fuel sales as a profit center within its business model. It concluded by finding that the aviation public has a right to expect the benefits of competitive pricing at federally obligated airports. The FAA informed the City's attorneys that it was unaware of any other airport that mandated a minimum fuel price.
In light of preliminary finding by the FAA, as well as basic economic realities, repeal of O14-058 is in the best interest of the City, the FBOs, as well as those who use the airport. By artificially elevating the price of fuel sold at the Airport, the City is effectively reducing the amount of fuel that will sold at the Airport. Since the City collects a fuel flowage fee of $0.05 on each gallon of aviation fuel sold, the increased fuel prices have a negative impact on City revenues. Both FBOs are aware of the FAA's findings and do not have objections to the City's repeal of this Ordinance.
IMPACT STATEMENT:
Repeal of the language added by O14-058 should lead to lower fuel prices at the Airport, more competitive pricing, and ultimately a greater volume of fuel sold.
RECOMMENDATIONS:
That the City adopt this Ordinance.
cc: Building, Zoning, and Economic Development Committee
CITY OF AURORA, ILLINOIS
ORDINANCE NO. _________
DATE OF PASSAGE ________________
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An Ordinance amending Section 5-56 of the Code of Ordinances of the City of Aurora to repeal a requirement that operators at Aurora Municipal Airport sell aviation fuel at least twenty-five (25) percent above the purchase price such operator paid to purchase said aviation fuel.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, effective September 23, 2014, Section 5-56 of the Code of Ordinances provides in relevant part that each seller of aviation fuel at Aurora Municipal Airport must "must sell such aviation fuel at least twenty-five (25) percent above the purchase price such operator paid to purchase said aviation fuel;" and
WHEREAS, the Federal Aviation Administration (FAA) has found that the above requirement is harmful to competition and is contrary to assurances made by the City as a condition of its receipt of federal funds; and
WHEREAS, the City Council finds that the above requirement is not in the best interests of the City, the fixed based operators authorized by the City to sell aviation fuel at Aurora Municipal Airport, or the public.
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Aurora, Illinois, as follows: that Section 5-56 of the Code of Ordinances of the City of Aurora shall be and hereby is amended by striking its second paragraph in its entirety; and further
BE IT ORDAINED, that said amendment shall be immediately effective.