PHOENIX, Ariz. – The bad news for rental car customers at Sky Harbor International Airport is that a 33 percent increase in an item on their billing statements could be enacted as soon as December. 

The good news is that most customers probably will not notice it.

 

Any receipt printed from an airport-located rental company includes a $4.50 fee for each day the vehicle is in use, called the “rental car center customer facility charge.”  Thursday afternoon, the Business and Development Subcommittee accepted a proposed rate hike to $6, one-third of the current price, in the first of three necessary approvals for the change to be adopted by the city. 

 

Subcommittee members forwarded the motion with recommendation of approval to the Aviation Advisory Board for its Oct. 16 meeting.  If the Advisory Board accepts the proposal, it will be recommended to the City Council for consideration in early November.   The price change can go into effect as soon as 30 days after the Council approves the motion, although more likely it would be implemented Jan. 1, 2009, according to Tamie Fisher, deputy director of the Business and Planning Division. 

 

All vehicle rental businesses work out of a financially self-sufficient, consolidated building at Sky Harbor, which requires a shuttle ride to and from the terminals. Implemented in June 2002 at the rate of $3.50, the customer facility charge, or CFC, covers transportation costs associated with the shuttle system and rose to $4.50 in 2003. 

 

To finance the development of the center six years ago, the Aviation Department issued a bond sale of $270 million on a 24-year term and purchased bond insurance through the FDIC to obtain a better interest rate and avoid a debt service reserve fund.  In 2002, insurance surety for the department was at an A rating.

 

“Hardships in 2008 resulted in a downgrade to a BB rating, which triggered a requirement for us to fund a $21 million debt reserve fund in 12 equal payments in 12 months.  We have collaborated extensively with the rental car industry to explore all the options of repositioning the debt or funding the debt reserve fund and we believe the $1.50 increase will restore the debt reserve fund to its appropriate level by 2013, pending passenger activity,” said Fisher.

 

National travel trends have also taken their toll.  Through the end of August, Sky Harbor rental numbers were 70,000 fewer than the same period in 2007.  Last year, about 1.9 million rentals were processed at the airport, according to Project Management Assistant Robert Hawes. If current trends continue, it would mean an approximate loss of 105,000 transactions for the Aviation Department.         

 

“It’s a cyclical business,” said Project Management Assistant Robert Hawes.  “There are busy seasons and slow seasons.  February, March and April tend to be our busiest months, although this year we had a boost in January, due to the Super Bowl.”

 

Phoenix is not the only city with a major airport to increase its customer facility charge.  Dallas-Fort Worth is

comparable in size to Sky Harbor and also uses a consolidated rental center.  Recently, DFW upped its CFC to $6 when the airport decided to follow Sky Harbor’s initiative and fund its shuttle system with the fee.

 

Transportation costs are a variable expense, particularly in the area of gas for the shuttle buses.  The fixed rate of $4.50 has not allowed for the change in fuel prices, among other things.

 

“We get some questions about the percentage of fees here,” Fisher told the subcommittee.  “Phoenix is one of the largest airport markets in country, and has fees associated with the facilities developed for customer, but at a very low daily rate.  The bottom line for our customers is very comfortable, if not less than those such as Dallas.”

 

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