FOR IMMEDIATE RELEASE
Pikeville Air Service Project Partners Issue Response
Pike County Fiscal Court Resolution is Misleading,
Misinterprets and Misrepresents Many Key Issues
Pikeville, Kentucky (September 4, 2013) – The group leading the development of commercial air service in Eastern Kentucky today responded to the Resolution passed by the Pike County Fiscal Court on September 3, 2013.
The Resolution calls into question why Pike County Government didn’t have more involvement with the two contracts which were recently signed and which will lead to Eastern Kentucky’s first-ever commercial air service, beginning in March 2014. The Resolution also questions the City of Pikeville’s role in the project and the fact that the City is one of two parties in the recently concluded Air Service Agreement.
“The development of commercial air service in Pikeville has been a long-held community goal,” said Donovan Blackburn, Pikeville City Manager. “There have been numerous studies and plans that confirm the need for the development of such a service. Three years ago, representatives from four groups met and agreed to begin a renewed effort to recruit commercial air service to the Pikeville – Pike County Regional Airport. The four groups included the City of Pikeville, Pike County Fiscal Court (specifically Judge/Executive Wayne T. Rutherford), the Pikeville – Pike County Airport Board and the Pikeville – Pike County Chamber of Commerce (now the Southeast Kentucky Chamber of Commerce).
“It was agreed that our group would retain the services of Louisville-based consulting firm L.B. Schmidt & Associates, LLC and its president, Luke B. Schmidt,” Blackburn continued. “However, when it came time to finalize the arrangement, Judge Rutherford elected to withdraw, stating he did not have the support of Fiscal Court. While we respected Judge Rutherford’s decision, the remaining three partners agreed to support the recruitment effort, which led us to the recently announced service to Nashville with Public Charters and Corporate Flight Management recognizing the benefits that this service will bring to the region.”
The new service will operate under strict USDOT rules which will ensure safe and reliable service. Daily roundtrips between Pikeville and Nashville are slated to begin in March. Flights from Pikeville will connect to flights operated by all nine airlines currently serving Nashville to 49 nonstop destinations in the U.S., Canada and Mexico, including flights operated by low-fare carrier Southwest Airlines, which has a major presence in Nashville. Two companies are involved in providing the new Pikeville service.
Public Charters, Inc., of Avoca, Pennsylvania, will serve as the Indirect Carrier (operating under USDOT rules). As such, Public Charters will be responsible for all non-flying aspects of the program, including, ticket sales, ground handling of aircraft in both Pikeville and Nashville, baggage handling, etc. This will include a dedicated gate and ticket counter space at both airports as well.
Corporate Flight Management, of Smyrna, Tennessee, will serve as the Direct Carrier (again, operating under USDOT rules). Corporate Flight Management will be responsible for all flying aspects of the program, including providing the aircraft (which it owns), providing the flight crew and all aircraft maintenance.
In essence, Public Charters serves as the contractor for this project and Corporate Flight Management serves as the subcontractor. The role of Public Charters cannot be overstated. The company has contractual arrangements with some 15 online ticketing platforms (such as Travelocity) which will soon list the Pikeville – Nashville flights. Having access to these platforms for the purpose of selling tickets is vital to the success of this program.
More importantly, Public Charters and Corporate Flight Management each have significant experience in providing commercial air service to smaller communities. Both companies teamed up to provide the first-ever Alternative Essential Air Service flights between Manistee, Michigan and Chicago’s Midway Airport. This service has been in operation for almost nine months and during this time, only one flight has been cancelled. In fact, Corporate Flight Management has a 99% dispatch reliability factor, almost unheard of in the industry.
In order to support the new service, as it builds to a sustainable/profitable level, a revenue guarantee fund needed to be established. This is standard practice when it comes to community development of new air service markets in communities both large and small. In order to fund the revenue guarantee, the City of Pikeville successfully applied for a USDOT Small Community Air Service Development grant in 2011. The City was awarded $750,000 ($100,000 of which will be used to develop a marketing/promotion campaign for the new service).
Last year, the City applied for a multi-county coal severance tax grant in the amount of $1 million from the Commonwealth of Kentucky. Grants made from the coal severance tax fund are specifically earmarked for economic development projects in Kentucky’s coalfield counties. As such, applying for the grant for the purpose of funding the revenue guarantee was appropriate, given the fact that commercial air service serves as a catalyst for economic development and it will assist in creating new jobs – primarily in Pike County.
By law, in order to apply for the multi-county coal severance tax grant, simple resolutions of support are required from the project’s home county (in this case, Pike County) and one additional county. In this particular instance, all that was requested of Pike County Fiscal Court and Floyd County Fiscal Court was the simple passage of the resolution of support (not one dollar of county money was requested).
Floyd County Fiscal Court, after ten minutes of review and deliberation passed the requested resolution of support recognizing the benefits that this service will bring to the region. It took Pike County Fiscal Court nearly four months to consider and finally pass the resolution. Finally, following a community forum on the issue hosted by the Appalachian News-Express, which indicated widespread support for the project, five members of Fiscal Court voted to approve the resolution. Governor Steve Beshear announced the award of the $1 million grant in November 2012.
(Since the governor’s announcement, the state grant has been reduced to $670,588, due entirely to the War on Coal, various EPA regulations which have resulted in a reduction in coal mining and receipts to the state’s multi-county coal severance tax fund. Recognizing the importance of this project to the future of Eastern Kentucky, Governor Steve Beshear directed his Finance Cabinet to find the funds to support this project. As a result of the governor’s leadership on this issue, $200,000 will be directed to the project through the Department of Local Government, with the remaining $470,588 coming from the Transportation Cabinet’s Division of Aviation. None of these funds will come from the multi-county coal severance tax account. Both grants will go to the City of Pikeville as originally planned and the City will serve as the administrator of these grants.)
(It should also be noted that this project enjoys widespread support among Kentucky’s leaders, including: Governor Steve Beshear, Congressman Hal Rogers, Senator Mitch McConnell, Senator Rand Paul, the entire regional state legislative delegation, Cabinet for Economic Development Secretary Larry Hayes, Department for Local Government Commissioner Tony Wilder, etc.)
The Pike County Fiscal Court Resolution passed on September 3rd calls several issues into question, including:
- The legality of the City’s role of party to the Agreement for Air Services with Public Charters
Since the City applied for both revenue guarantee fund grants, and serves as the sole administrator for both grants, it is entirely appropriate for the City to enter into agreement with Public Charters on this matter. The County Judge/Executive opted out of this project three years ago, as such, why would he have been consulted on this project? How can the County Judge/Executive justify taking a leadership role in this project?
- The legal right of the Pikeville – Pike County Airport Board to enter into a contract with Public Charters (Airport Use Agreement)
As provided for in Kentucky Revised Statutes (KRS) Section 183 (and various subsections), the airport board operates the airport on behalf of the community. Joint action taken by the City and the County creating the joint board occurred on October 7, 1985, thus granting the board all of the authority and power as authorized by various sections of the KRS Section 183. Appointments to the board are made by both the City of Pikeville and Pike County Fiscal Court. The board has the legal right to enter into contracts with various vendors, suppliers, etc. as a customary part of its daily business pursuant to Kentucky law. This is true of airport boards across the Commonwealth.
(Copies of KRS 183.133, KRS 183.137 and, KRS 183.140 which address the duties and responsibilities of airport boards in Kentucky, the right of airport boards to enter into contracts, and, the establishment of air carrier services accompany this release)
The concern stated within the county’s Resolution regarding ownership of the property where the airport is located is not relevant to this issue. The contract is not speaking in reference to the title of land but rather the Airport Board as a “joint creation” through the 1985 City/County joint action and adoption referenced above. As the result of this action, pursuant to KRS Section 183 the Airport Board has been given the authority to oversee and operate every aspect of the airport including the development of commercial air service.
In this case, the airport board is chaired by an attorney who is knowledgeable as to what the law allows in terms of entering into contracts. As an additional precaution, the airport board is also advised by outside counsel, who did in fact review the Airport Use Agreement as it went through several revised drafts. This contract went through a careful and thoughtful process and was not entered into lightly. The board chairman also E-Mailed several drafts of the proposed contract to all board members as they were revised. Each board member was given ample opportunity to comment on the drafts as the process moved forward.
- The lack of a contract between the City of Pikeville and Corporate Flight Management (the actual operator of the flights)
As previously noted, Public Charters serves as the contractor for this project, with Corporate Flight Management serving as the subcontractor. It is entirely appropriate for the City to enter into contract with Public Charters for this purpose.
- The lack of a license for Public Charters to “do business in the Commonwealth of Kentucky”
As this project moves forward through the implementation phase to the first flight in March 2014, significant paperwork will be filed with the USDOT to launch this service. The public can rest assured that whatever licenses are required will be obtained by all of the parties involved. Since this is Public Charters’ first venture in Kentucky it is only reasonable to understand as to why they are not yet licensed.
- The City’s right to enter into the Air Service Agreement
By citing what can best be called “legalese” concerning the City’s sovereignty, government immunity, etc., this particular paragraph is confusing at best and totally ignores the fact that cities and towns across Kentucky enter into contracts every day.
The County does enjoy some sovereign immunity that Cities do not enjoy; however, even Counties do not enjoy total immunity from lawsuits. Their individual employees are still subject to liability claims which require the County to carry insurance just like the City. This is why the county purchases insurance from KACO. This is why the city also carries insurance and contractually requires Public Charters to carry a $25,000,000 policy as well, naming the City as an additional insured on its policy.
It is important to note that both contracts – the Agreement for Air Services and the Airport Use Agreement – provide the usual and customary protections and indemnifications for all parties.
“It is disappointing that when the community should be celebrating this achievement – the recruitment of commercial air service to Pikeville and Pike County – that Judge Rutherford has reprised his role to continue to question the work of many community leaders who only wish to move the region forward,” said Luke B. Schmidt, President, L.B. Schmidt & Associates, LLC, and project consultant. “I like and respect Judge Rutherford; however, the fact remains that action taken by Fiscal Court lead by Judge Rutherford will continues to undermine the progress and implementation of commercial air service to the people of Pike County,” said Schmidt.
“The War on Coal makes it imperative that all of us work together to do everything in our power to create new jobs,” continued Schmidt. “The City, the airport board and the Chamber are to be commended for providing the necessary leadership to see this project through. I have no doubt that this new air service will assist in creating new, non-coal dependent jobs in Pike County while still supporting the existing coal industry,” said Schmidt.
“The Pikeville City Commission will continue to work hard and fight to derail any attempts to stifle our plan to improve the quality of life for those we are elected to serve and represent. As the 13-county region’s center for education, employment, health care, retail shopping and transportation, citizens look to the City to create resources such as commercial air service that will enable us to grow while improving our ability to market our resources and our workforce,” said Mayor Pro Tem Jimmy Carter.
The City of Pikeville is a Fourth Class City and is the county seat of Pike County, the largest geographical county in Kentucky. Pikeville is the regional center for education, employment, health care, manufacturing, mining and tourism in a region comprised of nine Kentucky counties, three Virginia counties and one West Virginia county with a regional population of 345,000 people. The Pikeville – Pike County Airport Board owns and operates the city/county airport. The Southeast Kentucky Chamber of Commerce represents 500 members in eight Kentucky counties and has established a support network for businesses in Southeast Kentucky that are committed to improving the local economy, regional unity, political advocacy and economic development. These three entities by working together are leading efforts to establish scheduled commercial airline service in Eastern Kentucky. L.B. Schmidt & Associates, LLC is a full-service management consulting company based in Louisville, Kentucky and provides consulting services to this group in the area of facilitating airline service.