Blanding City hands airport hangar leases to FBO, discusses raw water sales, nuclear power
by David Boyle
Members of the Blanding city council approved a change in who administers airport hangar leases, discussed raw water sales, a carbon-free power project, and a community development grant at their latest meeting.
At their January 10 meeting members of the Blanding city council approved a resolution to hand over management of airport hangars to the city’s fixed base operator (FBO).
In 2022 Blanding City looked to answer the question of how to better fund operations and future capital improvements at the airport. One consideration was an increase in hangar rates for the first time in 27 years according to city staff.
A city staff proposed increase, from a $100 monthly airport hangar rate to $200 or $300, was met with pushback by the Blanding flight community in the spring of 2022.
Since that time the city created an airport advisory committee which has been working to balance the wants of the flight community with the need for funds for improvement.
At the January 10 meeting city manager David Johnson presented a contract addendum approved by the airport advisory committee that would have the airport’s fixed base operator manage the city airport hanger leases.
“We met with our fixed base operator and said we think you could make money easier than we could.”
Freedom Fuels is the Blanding airport FBO, contracted to provide services at the airport including providing fuel. The addendum will see the company also manage the city airport hangar leases.
Johnson explained the city and FBO will have a 50-50 cost share with the FBO managing day-to-day maintenance under $2,000 and the city covering larger maintenance costs. Johnson reports the addendum will be having the city take a $10,000 loss the first year, but a return on investment and revenue would be anticipated to be generated in five years.
Part of the agreement includes minimum rates charged for hangars. In 2027 a minimum increase of 50-percent would be required for the hangar rates, increasing at least another 40-percent in 2032 and another 30-percent in 2037.
“Basically what we’re doing for the first 15-years is we’re trying to catch up for the last inflation over the last 27 years. Then after the last 10 years or so, it’ll level out with inflation.”
The agreement will have the FBO honor existing lease contracts and the waiting list for hangars which gives priority to locals. In addition, the FBO will be allowed to have up to six hangars used as transient hangars. Hangar rates for pilots passing through are often charged at a higher rate and could be a key component in making hangar management profitable.
While some council members expressed some hesitancy about allowing up to six hangars to be used as transient hangars and what that would mean for available inventory. Members of the advisory committee at the meeting assured the council that the market would be unlikely to ask that and the city’s termination clause would also allow the city to end a partnership that severely reduced inventory for local flyers.
Members of the Blanding City Council also held a public hearing for a Community Development Block Grant. The federally funded grant is administered by the state of Utah. The Southeastern Utah Association of Local Governments anticipates receiving $778,000 in funding this year.
The funds can be used for public projects, but are limited in what they can be used for. For example, city council members asked if the funds could be used for replacing infield dirt at city ball fields. Since the city recreation baseball and softball programs require registration fees, the city can’t use the funds for infield dirt.
The city can however use the funds for a shade structure at the fields, which could also act as protection from foul balls. City Recreation Director David Palmer spoke at the public hearing in favor of using the funds for a shade structure. The hearing was a step that will allow the city to apply for the grant.
At the meeting members of the city council also discussed the latest with their involvement in a nuclear power plant that could provide half of the city’s energy usage in future years.
Blanding city is part of a group of members of the Utah Associated Municipal Power Systems (UAMPS) invested in working to create a nuclear power plant in Idaho.
The Carbon-Free Power Project as its known has been in process for years and remains on schedule to begin construction in 2026 with the first module providing power in 2029.
The project has been gaining momentum with a multi-year cost share agreement with the Federal Department of Energy and tax incentives from the federally passed Inflation Reduction Act in 2022. However, the project needs other power providers to come on board to be economically feasible.
A recent economic competitive test showed that the project would no longer be able to provide power at the target rate of $58 per megawatt hour.
With the failure of the economic competitive test UAMPS was able to negotiate to be 100 percent reimbursed should the project terminate if not enough energy providers buy in to the project in the next year. That same agreement negotiated a target price of $89 per megawatt hour. UAMPS General Manager Mason Baker explained the increase
“A Big contributing factor is the wholesale price of electricity and how it’s been spiking. It’s changed fundamentally from where it has been. $89 is certainly a large price increase but put in context the market price we were paying in December, typically a low price time of year. (...) The market price was an average of $275 an mWh.”
Johnson explained penalties for withdrawing early from the project outweigh the cost of waiting it out and seeing if the project will succeed.
“Essentially if they cancel the project we have the funds to cover that cost. If we decide to pull out, (...) we’re going to pay a lot more.”
Members of the city council also held a discussion regarding a policy to standardize raw water sales from the city. Although the council did not adopt a policy they did instruct staff to bring the policy back with additional information in a future meeting.
Blanding city sells raw water at a rate lower than safe-to-drink treated water, with rates fluctuating year to year based on drought conditions. The city’s raw water comes from the upper reservoirs, with one entity purchasing raw water directly from Recapture.
Upper reservoir raw water users include the city, the San Juan School District, the Church of Jesus Christ of Latter-day Saints, and the Blanding cemetery district.
While the schools, city, and church all pay a rate that is 75 percent of the city’s culinary rate, the cemetery district pays a flat rate of $175 per-acre foot. City staff reports the average city and institutional rate is $630 per-acre foot.
With an average use of 33-acre feet per year that would increase expenses at the cemetery district by about $15,000 a year, meaning a matching increase needed in revenue with most of it coming from the cemetery district property tax.
City staff also presented a proposed change to the sale of raw water from Recapture reservoir. The proposed policy would charge 25-percent of the culinary rate for users outside the city limits and 20-percent for Recapture raw water users within city limits.
As of now, Energy Fuel’s White Mesa Mill is the only entity that purchases raw water from the city’s supply at Recapture. The mill purchases up to 150-acre feet per year at a flat rate of $75 per acre foot.
The original low rate for raw water sales to Energy Fuels was with the San Juan Water Conservancy District. When the City of Blanding purchased 500 acre-feet of rights from the conservancy district in 1987 and an additional 300 acre-feet of rights in 1997 the city also inherited the long-term agreement with the White Mesa Mill.
After the contract ended the city increased the rate to $75 an acre-foot for the 150 acre-feet sold annually to the mill to this day.
The water is delivered via a pipe that Energy Fuels maintains meaning the cost to deliver the water is much lower to the city than other raw water users. Still Johnson maintains a consistent policy is important.
“I’m not just thinking about the mill, I’m thinking about in the future if there are other entities that come in and are willing pay to have water piped over to purchase excess raw water.”
Johnson referenced a spring of 2022 sale of 10-acre feet to the water conservancy district at the same rate as the mill. The sale was met with concern from several citizens.
City staff and council discussed the potential percentage to charge as well as other ways to standardize Recapture raw water sales. Council member Erik Grover offered the idea that the rate should at least cover the city share cost.
“They ought to at least pay the acre-foot price per water coming out of that pipe. Whatever our share cost is maybe we should tack that onto it instead of saying a flat rate on this 800-acre feet.”
When asked what the city pays for their water share costs, city engineer Terry Ekker gave a quick top-of-mind estimated range of $32 to $160 per acre-foot.
Council also discussed a long-term contract and also phasing price increases for both the cemetery and the mill. Council asked for staff to return with additional information for another conversation on the policy in the near future.