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Aviation director Orr, bosses disagreed on airport

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  • Foxx: Reckless act by N.C. legislature

  • Airport’s bond errors

    A 2010 report details about a dozen projects where the airport improperly allocated money from bond revenue. Among them:

    • The airport had planned to spend $21.3 million of tax-exempt Series B bonds and $2.1 million of taxable bonds for Concourse E improvements. In reality, the airport spent $27.4 million of Series A and B tax-exempt bonds on the project, and no taxable bonds.

    • The airport was supposed to spend $3.9 million of taxable bonds on an employee parking lot expansion. Instead, it spent $635,997 of Series B tax-exempt bonds on the project, not taxable bonds.

    The IRS launched a review of the spending errors.

    Ely Portillo

  • Airport’s 2012 results

     Category % change from ‘11
    Total passengers 41.2 million up 5.6
    International passengers 2.7 million up 3.2
    Airplane takeoffs, landings 552,093 up 2.3
    Concession sales $177.4 million up 15
    Rental car revenue $110.6 million up 8.3
    Parking revenue $41.4 million up 28
    Wilson Air Center revenue $19.1 millionup 13.8

The push to seize Charlotte Douglas International Airport from decades of city control and hand it to a state-appointed authority has gone from idle chatter to the brink of reality in a matter of weeks.

How could one of the city’s crown jewels, a successful multi-million dollar operation, be transferred to new ownership in less than a month?

The answer is complicated, but one reason cited by city and airport sources involves years of behind-the-scenes tension over airport management.

At the center of the controversy is 71-year-old aviation director Jerry Orr, who has bristled at city control of the airport.

Documents obtained by The Observer show that the conflict between Orr and his bosses came to a head in 2010. The documents outline an Internal Revenue Service audit and a later city report that found the airport violated federal tax law as it allocated millions of dollars in bond money to pay for airport improvements.

In April, 2011, the city placed stricter financial controls on the airport, removing some of the autonomy that Orr had enjoyed.

The city’s finance director, Greg Gaskins, said that the problem – stemming from more than $150 million in bonds from 2004 – was only an accounting issue. After the city review, the IRS decided not to fine the city and didn’t remove tax-exempt status from the bonds.

But several city officials told the Observer that then-City Manager Curt Walton believed the problem was serious. They said that Walton had considered disciplining Orr.

The officials asked not to be named because Orr’s relationship with Walton could be considered a personnel issue, which is private under state law.

After the Democratic National Convention last September, relations between the city and Orr became more strained. In November, the city transferred control of airport police from Orr to the Charlotte Mecklenburg Police Department.

That followed a highly publicized incident in November 2010 where a Mecklenburg teenager, Devonte Tisdale, is believed by law enforcement to have breached Charlotte Douglas security and stowed away in the wheel well of a jet. His body was found near Logan airport in Boston, where police believe it fell from a Boeing 737 as it prepared to land.

After the incident, Orr said he didn’t think security changes were needed. But Walton asked Charlotte police to investigate. In 2011, the CMPD investigation determined that the airport needed more people working security. It also said that perimeter fencing should be improved.

Walton retired in December, 2012. Soon after, reports began to surface that the General Assembly was considering creating an airport authority and taking away control from the City Council.

Orr told the Observer last week that he felt that Walton had wanted a more active role in overseeing the airport and wanted it to be run like any other city department.

Cities and municipal departments such as the airport issue bonds to raise money for large projects. The bonds are often exempt from taxes, which lets municipalities borrow money at a lower rate. The money must be spent only on the designated projects for each bond issue.

Orr said the 2010 financial review was just an accounting mix-up.

“I don’t think it was a really big issue,” Orr said. “Essentially, what we did was in the accounting process we co-mingled some money that was taxable bond money and non-taxable bond money.”

“It was kind of a misunderstanding,” Orr said. “We’ll never make that mistake again.”

Orr: not pushing authority

Rep. Bill Brawley and Sen. Bob Rucho, both Matthews Republicans, are leading an effort to create an independent Charlotte Regional Airport Authority that would oversee the airport. Rucho introduced a bill last week that would create an 11-member board with a majority of members appointed by surrounding counties and state politicians.

If the airport were to move to an independent authority, its finances would be removed from city oversight and approval. The board would oversee the airport’s finances, including the issuance of bonds.

Supporters of a more independent airport, such as Airport Advisory Committee member Ed McMahan, have told the Observer they became concerned by what they see as efforts for the city to exercise more control.

A Charlotte Douglas airport deputy director made a recent fact-finding trip to Asheville, where control of the airport was shifted from the city to an authority.

Orr said that he couldn’t comment on whether the 2010 bond review or the ensuing stricter financial controls are linked to the push for an authority.

“I’m not the one pushing the airport authority, so I really can’t answer that,” he said.

But earlier in January, before the authority bill was introduced at the General Assembly, Orr said in interviews that the airport would benefit from being run by an authority. He reiterated his position that the airport needs to function like a business, not as a city department.

Interim City Manager Julie Burch said she “has firmly stated to (Orr) that it is not appropriate for staff to be involved in advocating a policy position without proper authorization.”

Financially independent

The airport is currently owned and operated by Charlotte as a city department, reporting to the city manager and Charlotte City Council. However, the airport is set up as a financially independent enterprise, and is financed by fees, concessions, and federal grants, not local tax revenues.

Orr has guided the airport through more than two decades of growth, overseeing the construction of a new runway, parking decks and concourses. The airport currently has more than $820 million worth of bonds outstanding to pay for future expansion.

A long-time city employee, Orr started working for the airport in 1975 and became aviation director in 1989. He’s known for running meetings with a brusque style and a dry sense of humor, and has a reputation for not liking red tape.

He jokingly refers to the Transportation Security Administration, which provides checkpoint security, as “Thousands Standing Around,” and has made it clear after meetings with city officials that he prefers managing the airport to spending time at the Government Center.

Violating federal law

In February 2010, the IRS notified the city it was examining some of the airport’s bonds. The city’s outside legal counsel, Parker Poe, then reviewed four different series of bonds from 2004.

The review found that airport financial officials had misallocated how bond money was spent. The airport had borrowed the money for a number of projects, including Concourse E improvements, a fuel farm expansion, employee parking lot expansion, a rental car service facility and the design of a third parallel runway.

In its letter to the IRS, Parker Poe acknowledged that proceeds from two bonds were “allocated for federal tax purposes in a manner that jeopardizes the tax-exempt status of such bonds” and that the problem amounted to a “federal tax law violation.”

The city and Parker Poe insisted it was a one-time problem.

The review from Parker Poe said the airport still spent the bond money on airport projects, and that neither the airport nor any third party gained any improper benefits from the way the bond money was allocated.

To prevent a recurrence, the city put in place a five-page policy spelling out how the airport should account for money from grants and bonds, and specifying that the city’s finance office must approve all major expenditures at the airport. The policy also forbids the airport from moving appropriations and funds to different accounts unless the move is in compliance with accounting rules and the bond documents.

US Airways, the airport’s main client, learned of the bond review after it was completed. Spokeswoman Michelle Mohr told the Observer that managers weren’t worried.

“We know that errors of this kind happen from time to time ,” Mohr said in an email.

Portillo: 704-358-5041 Harrison: 704-358-5160
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