International flights carrying foreign goods are going to have to go through inspections someplace else following the Santa Maria Airport District Board of Directors’ decision to shut down its three-year-old U.S. Customs facility.
Earlier this year, the board voted to terminate customs services after a district staff report found that continued operation of the $218,000-plus facility would result in a loss of between $650,000 and $750,000 over the next five years.
While airport district officials have said the move will decrease taxpayer spending exponentially, some local businesses are frustrated by its impact on their ability to import and export goods.
Esmeralda Mendoza, vice president director of operations at Art Craft Paint Inc., said her company’s clients who need to go through customs would now have to travel to Long Beach or LAX. The change, she said, is an inconvenience and could make doing business with the company, which refurbishes airplanes, less attractive.
Jim Kunkle, owner and CEO of Central Coast Jet Center, said the elimination of customs will impact his business, too.
“We do handle a fair amount of aircraft that have to go through customs, and that will go away,” he said.
Still, airport officials said revenue required to keep the facility running wasn’t worth the overall cost to taxpayers.
“It’s approximately 5 to 6 percent of our operating cost,” said Santa Maria Airport’s general manager, Chris Hassert. “The board just wasn’t comfortable with that.”
The Santa Maria U.S. Customs facility processed its first aircraft in December 2006. Since that time, the staff report estimates total operating cost—including initial setup—at $645,560. And according to the report, annual revenue, which is generated by customs user fees and airport tenant fees, has leveled out at just more than $16,000.
“The most flights we’ve processed through customs in one month was seven,” Hassert said.
The airport, he explained, would need to increase the amount of flights per month to at least 33 to break even.
“We would need a big business [or multiple businesses] to generate that kind of usage,” he said.
One such company—a French maintenance and parts supplier—was actually part of the reasoning behind opening a customs facility
at the Santa Maria airport to begin with.
“We were looking at how to best attract that company,” Ted Eckert, president of the
district board of directors, recently told the Sun. “We tried to make the package as desirable as possible.”
That package, he said, included building a customs facility, establishing a foreign trade zone, and lengthening the runway—all of which the board eventually approved and went forward with.
“We were aware that several airports like ours opened customs and closed them,” he said. “And some continued to operate at a small loss and accept that.”
However, after briefly “romancing” each other, Eckert said, the company relocated and scaled back its operations, and the airport was left to find other companies in the field of importing and exporting. He explained they knew the business plan wouldn’t have made economic sense without the company, and that attempts to bring in others have fallen short.
“Now, as stewards of the public’s money, we’ve decided to close [customs],” Eckert explained. “If anyone in the public has an offer that would allow it to pay for itself, we’d love to keep it open. But we’re not going to continue to operate it at the taxpayers’ expense.”
Still, airport tenants like Art Craft Paint Inc.’s Mendoza feel the district hasn’t tried hard enough to attract more companies.
“You have to put some effort into marketing a product before you give up on it,” Mendoza said. “[Customs] is making money. It’s just not making as much as they would like.”
Mendoza also said she and her fellow tenants are worried about what impact the removal of customs will make on the airport’s foreign trade zone status.
Foreign trade zones allow international-trade companies to defer duty payment on items until they’re brought out for sale and into the U.S. market. The zones are designed to offset customs advantages available to overseas producers who compete with domestic industry.
Without customs agents present, tenants fear, the foreign trade zone will be rendered obsolete.
However, district board president Eckert assured worriers “the foreign trade zone won’t go away.” The district, he said, employs its own zone operator. But international commercial flights will still have to go through customs at another airport before coming to Santa Maria.
In the past, management for Port San Luis had expressed interest in bringing a customs facility there. Eckert said the airport district and port were discussing their options with regional port authorities, but “that has kind of been left hanging.”
Steve McGrath, harbor manager for Port San Luis, said the former harbor manager was trained and certified to run a customs facility.
“But that authority didn’t transfer. It resided with the individual,” he said. “There is a definite desire to see it return. That conversation, we have initiated on a very preliminary basis.”
The advantage to having customs at Port San Luis, he said, is it doesn’t require the construction or upkeep of a facility.
Another option for the airport district—to reopen customs at a future date, namely when the airport business park development is completed—has also been assessed. It would require approval, once again, from several state and local agencies.
“If there is a requirement for customs, we will looking into bringing it back. It can be done,” Eckert said. “It’s not overly easy, but it can be done.”
Contact News Editor Amy Asman at aasman@santamariasun.com.
This article appears in Jul 16-23, 2009.