As a child growing up in the San Fernando Valley, Bob Rodine would ride his bike with friends to the Van Nuys Airport to watch the airplanes at a time when aircraft factories were found throughout Los Angeles. "Baseball games would stop in the street when a P-51 flew over," Rodine recalled. Today, Rodine still goes to the airfield as a consultant and analyst for his firm Polaris Group. Rodine performs economic impact studies, financial modeling and business planning primarily for aviation-related clients. With more than 220,000 takeoffs and landings last year, Van Nuys is among the busiest airports in the country for general aviation, which is defined as non-military flights without a regular schedule. Rodine took time to discuss with the Business Journal his interest in Van Nuys Airport, the important role it plays in the San Fernando Valley and why he never learned to fly.
Question: Why are you so interested in Van Nuys Airport?
Answer: I think of the airport as an industrial activity. What's on the ground is crucially important to the San Fernando Valley. The current number is 12,000 jobs. When I first got involved and started looking at it, this was the single largest employment center in the Valley during a time of real economic distress. I felt protection of this institution from an industrial standpoint was crucial. I feel the same way today.
Any other reason?
Secondarily, anyone that climbs inside the airport and knows what happens here knows that it is important not just in the Valley but all over the city. There are companies that fly in here and then go to West Los Angeles or Santa Monica to do their business. This airport as a business aviation center is vital because you have airports like Santa Monica that tell business people to go away and airports like LAX that are hyper-congested.
How important is the airport to the local economy?
The latest economic impact study said $2 billion (in activity). I have not been able to get to the insides of the latest study so I cannot comment on the quality of the analysis. But looking at what the airport contributes in terms of 12,000 jobs and $2 billion of economic activity, that is not inconsequential in terms of significance for the San Fernando Valley. The jobs at this airport are among the highest valued jobs in the Valley. There is nobody slinging burgers here. People are doing mechanical work of a very technical nature on aircraft and electronics and they are manufacturing things for aircraft.
How can Valley residents support the airport?
The average resident in the Valley looking at it statistically probably isn't even aware of the airport. The thing that they can do for the airport is to ensure that people who are elected are aware of the merits and benefits of the airport and to be sure that people who are inclined to attack the airport do not get seats of responsibility in state or municipal government. We have to vote for people who are supportive of this asset.
How has the airport evolved over time?
I was out of the loop with respect to the airport until about 1993 when I became involved with the local chamber of commerce. At that time, the economy went into the tank because of the peace dividend and the pressures being brought to bear on the airport. That was a white-knuckle situation. We had elected officials that didn't like the complaints they got about the airport. We had a fairly aggressive but small citizenry who didn't like the airport.
What happened?
We got through that period. The city did some reasonably intelligent management things with respect to noise. The operators were very conscientious about noise issues. This airport has really matured in terms of being able to get along with the community. It's only recently that some community activists on the west side of the airport are seeking to find new constraint measures.
What are some of the main complaints?
One of the most frequent complaints recently has been aircraft that turn before they get to the flood control basin on the southbound departure. It was something they could not control on the field. The FAA controls it. The homeowners were just livid. A group of homeowners and airport officials and FAA people developed a plan to reduce the possibility of early turns and that problem I think has been put to bed.
What challenges does the airport faces in its operations?
Congress is addressing two uses that are of grave concern here. One is the privatizing of the FAA, and with that, the control of general aviation. One of the elements that has been proposed is there would be a panel made up of aviation experts that will oversee the management of private operators of the air traffic control system. Most of those people (on the panel,) if not all, will come from commercial aviation. The interests of commercial aviation are different from the interests of general aviation. I have been direct in writing letters to committees back in D.C. telling them, hey, this is nuts.
What's the second issue?
There has been a movement to change the way in which general aviation pays for use of the air traffic control system. When general aviators go to the gas station and get fuel, they pay a tax that goes to the Aviation Trust Fund to fund the FAA. What is being proposed is to go to a user fee. To my thinking that is utter insanity. When you have a tax, that tax is paid at the time the fuel is taken down and can go immediately to the United States Treasury. If you have a user system someone has to track every segment of 23 million operations of general aviation aircraft, record that, generate a bill, send it to the operator and hope that bill will get paid.
What challenges are facing tenants?
A profound lack of appreciation or understanding about the economic and other benefits of business aviation in particular. In every rent-setting period that I have seen since 1995 LAWA ( Los Angeles World Airports, a city agency that owns the airport) has presented to the operators a rent proposal that is grossly excessive. The operators have had to engage someone to rebut (that) in a professional manner.
How?
You have to speak to the folks who are coming to you for the increased rents and say to them, "Excuse me, we have assessed the details of your proposal and it is excessive." This is a very major challenge for the tenants. There has been a change in the mix of tenants at the airport in the last few years. The tenants now have been through a large number of rent negotiation periods. They have all been protracted and inconclusive at any point. As a consequence, it takes a huge amount of time and operators wind up paying fees to consultants like myself to overcome the charges LAWA is proposing.
Can you give an example?
One of my clients was negotiating a new lease. An outside appraisal firm had done an appraisal and wanted this client to pay something like $32,000 or $33,000 a year. This is a small operation; $33,000 a year on an acre was huge for him. LAWA had seen the handwriting on the wall with respect to this client. They had another appraisal done at $28,000 a month. So, I went to work analyzing the $28,000 appraisal and discovered a number of mistakes that were intrinsic to the appraisal and saw some assumption errors. When I got done with assessing this guy's appraisal I took the rent down to $22,000 a year without doing anything funny. My client went back to LAWA and negotiated a new rent. He gave them $2,000 above (that figure), $24,000 a year down from $33,000 a year. That I think says a lot of about the relationship between the operators on the airport and LAWA.
What did you learn from that?
Reality has to be fundamental to appraisals. LAWA was upset that I was not an MAI appraiser (a professional designation) and they accused me of being a lobbyist. I don't lobby, I just do analyses. They did everything in their power to get me disqualified. But it worked really well.
With the growth of jet aircraft, is the airport a place where rich people keep their expensive toys?
Since probably 2000 there has been a continuing increase, with the exception of the recession, in the number of turbine aircraft on the airport. Those aren't toys. Those are planes that go out and take people to factories, on business trips or go to financial centers and do deals. That is the reality. You can never dispel the homeowner's complaint these guys are just flying toys around, but they are really expensive toys. While the owners or operators may take them on vacation, that's maybe two weeks in the summer, two weeks in the winter, maybe a little bit more. The rest of the year that aircraft is working for its owner.
What will the airport look like in 5-10 years?
Generally, people should expect to see more business operations here. The demand for private transportation is growing every year. I have one report that I use in my operations analysis. In that report you will see the names of companies. They are not aircraft registered to John Billionaire, they are aircraft registered to companies. Companies in this day and age of the regulations given to us in the last eight years are more and more up against it in terms of their assets being employed for the merits of the financial statement, not for the benefit of the senior management. It will not please me to see diminished utilization by private aircraft but it is inevitable.
Is there a mandatory curfew in the airport's future?
I personally was involved in fighting it. I assisted VICA (the Valley Industry & Commerce Association) in fighting it. In an economic analysis I did and shared with Congressman (Howard) Berman when he was still in office, the analysis indicated that, within three years of the adoption of a curfew, the cost to the community would be $1.4 billion. I don't know that the Congressman (Adam Schiff) who introduced that legislation will continue to pursue it. He has tried a lot of different avenues to achieve it. I think he may have found his colleagues in Congress don't share his views.
What consulting work have you performed for airport clients?
There are many small operators on the airport for whom I've done rent work, I've done work for the (Van Nuys Airport) association in a number of different areas. I've done three different development plans - the financial modeling to test the economics, the actual write up of the business plan. I should tell you I never started out to be just an airport analyst. I worked in any area where anyone needs analytic skill and I continue to pursue that.
Have you done work at other airports?
I would happily do it for other airports. I have not been called upon.
Are you a pilot yourself?
No. I desperately wanted to learn. When I went to UCLA you had to be in the ROTC (Reserve Officers Training Corps). I went into Air Force ROTC. My real goal was to fly big planes for the Air Force. I went all the way through the basic course and completed the academic requirements and then stayed for the advance course where you work toward a commission. They sent us down for a physical in the middle of our junior year. I went screaming through that thing. The last thing on the test was color perception. I failed so miserably, it was unbelievable.
So are you color blind?
I am so red-green color blind it's amazing. It's why I always wear gray suits.
Source: San Fernando Valley Business Journal, April 3, 2017
