The South Jersey Transportation Authority continues to rely on revenue from the Atlantic City Expressway to offset the cost of operating Atlantic City International Airport.

In 2011, airport operations were subsidized by $3.5 million in tolls — a nearly 10 percent increase over the $3.2 million used for airport operations in 2010, according to the authority’s most recent financial audit obtained by The Press of Atlantic City through the Open Public Records Act.

Put another way, the subsidy accounted for nearly a quarter of the airport’s $14.9 million budget in 2011. The previous year, the subsidy represented 21 percent of the airport’s $15.2 million budget.

The situation has been worse. Within the past five years, at times the subsidy has been as high as $4.8 million and made up as much as a third of the airport’s annual budget.

SJTA acting Executive Director Sam Donelson, however, said the authority cannot continue to rely so heavily on that financing. The airport should be a self-sufficient operation, he said.

“It certainly is unsustainable over the long haul,” Donelson said. “Ideally, our airport wouldn’t need a subsidy from the expressway at all. We definitely have to constrain costs and look to increase revenue in a way that won’t affect our ability to increase flights.”

Relying on expressway revenue to keep the airport afloat is not new for the transportation authority. The setup has been a part of the authority’s structure since the organization was created in 1991 in an effort to bring cohesiveness to the region’s transportation network.

That year, Atlantic City turned over control of the airport to the SJTA when it sold its share of airport property to the organization. The Atlantic City Expressway Authority and the Atlantic County Transportation Authority were dissolved and merged with the new authority, which was charged with turning the often-criticized airport into a commercially viable facility attracting major airlines.

To accomplish that, net revenue generated by the Atlantic City Expressway would be used to subsidize airport operations, according to the legislation that created the authority. Initially, that subsidy funded expansion projects, but later it was used to offset general operations.

Prior to the Sept. 11, 2001, terrorist attacks, the subsidy to the airport had been steadily decreasing.

“In fact, for the year ending in Dec. 31, 2000, the airport generated a small operating surplus,” according to the 2011 audit by Hutchins, Farrell, Meyer & Allison of Toms River. “However, the subsidy has been increasing since the events of Sept. 11, 2001, due to revenue losses resulting from declines in the airline industry and expense increases resulting from additional requirements, including full-time police presence and increased insurance costs.”

Due to the airport’s location on the grounds of the Federal Aviation Administration’s William J. Hughes Technical Center, the airport is required to be staffed by police around the clock.

“Because of the formation of the South Jersey Transportation Authority and allowing expressway revenue to be used toward expansion of the airport, I have personally witnessed the transformation of Atlantic City International,” said Donelson, who has been with the authority since 1994 and was recently named acting executive director. “What’s gone on is through no fault of anyone, but these issues have no doubt contributed to slower growth than everyone would like.”

Last year, discussion of a possible sale of the airport to the Port Authority of New York and New Jersey emerged after Senate President Stephen Sweeney, D-Salem, Gloucester, Cumberland, pointed to that possibility as a way of bringing in larger carriers. Language in the legislation that created the Atlantic City Tourism District establishes a format for distributing the proceeds of a sale of the airport among eight South Jersey counties served by the SJTA.

The SJTA, however, does not own the runways and taxiways. Those, along with most of the 5,052-acre site, are owned by the FAA. Portions are leased to the SJTA, which is also the enabling agency for FAA grants. Public discussion of a sale faded.

When the SJTA took control of the airport, it was handling 909,000 passengers a year, and a study completed in the late 1980s by the Casino Association of New Jersey predicted that once expanded, the airport had the potential to handle between 2.4 million and 7 million passengers annually. Passenger counts increased after the takeover and surpassed the million mark in 1998. After that, they fell but then regained ground.

Last year, the airport, which has had difficulty retaining carriers, saw 1.39 million passengers, a 2.3 percent decrease over the previous year. But 2010 was a banner year for the airport, bringing in 1.4 million passengers, a 27 percent increase over 2009.

The airport currently has only one carrier, Spirit Airlines. With that carrier, the airport boasts the lowest fares in the country, at an average of $157, according to statistics from the first quarter of 2011 released in July by the Research and Innovative Technology Administration.

Donelson said he has ideas for cutting expenses and raising revenue at the airport, but he declined to discuss the specifics until he speaks with the SJTA’s Board of Commissioners. He also pointed to some “obvious” smaller changes that already have been made to reduce costs. Paper towel dispensers in airport restrooms have been replaced with air dryers, resulting in a $40,000 savings, he said.

“I have some ideas, and those will be presented to the commissioners. Is it going to eradicate the subsidy in the near term? No,” Donelson said. “But it will reduce it for the remainder of this calendar year, and hopefully we’ll see a reduction in that subsidy year over year.

(c)2012 The Press of Atlantic City (Pleasantville, N.J.). Distributed by MCT Information Services.