UNITED STATES DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, D.C. 

Friends of the East Hampton Airport, Inc. et al., 

 Complainants, 

v. 

Town of East Hampton, NY 

 Respondent. 

FAA Docket No. 16-15-02 

________________________________________ 

DECLARATION OF ARTHUR B. MALMAN IN SUPPORT OF THE ANSWER OF THE 

TOWN OF EAST HAMPTON, NEW YORK TO THE COMPLAINT BY FRIENDS OF 

THE EAST HAMPTON AIRPORT ET AL. 

________________________________________ 

I, Arthur B. Malman, being competent to make this statement and having personal 

knowledge of the matters set forth herein, do swear and affirm the following: 

BFAC Airport Finance Subcommittee Overview 

1. My name is Arthur Malman. I am the Chair of the Town of East Hampton (Town) 

Budget and Financial Advisory Committee (BFAC), a position I have held since 2011. 

2. The BFAC is a standing advisory committee with the stated purpose of examining “ways 

in which the Town can reduce costs and spending so as to reduce property taxes and ways 

to improve the budgeting process for capital projects as well as track and account for 

existing projects.” The BFAC has six members drawn from the public; a member of the 

Town Board acts as liaison to the Committee. Councilwoman Kathee Burke-Gonzalez 

has been the Board liaison to the BFAC since January, 2014. 

3. At the February 4, 2014, Town Work Session, Councilwoman Burke-Gonzalez 

announced the intent of the Board to direct the BFAC to conduct a financial analysis of 

the East Hampton Town Airport (Airport) including Airport income and expenses as well 

as new revenue. See Exhibit 1 (February 4, 2014, Town Work Session Minutes). The 

purpose of the analysis was to enable the Town to determine how much funding was 
DECLARATION OF ARTHUR B. MALMAN 

2 

available to meet anticipated Airport expenses, including debt service on bonding for 

Airport capital improvements. A copy of Councilwoman Burke-Gonzalez’s remarks is 

attached as Exhibit 2. 

4. On February 6, 2014, the Town passed Resolution 2014-147 (Exhibit 3) directing the 

BFAC to “undertak[e] a financial analysis of the East Hampton Town Airport including 

airport income and expenses as well as new revenue streams, which can serve as a 

baseline of agreed upon data for further discussions and policy decisions by the Board.” 

5. The Town identified additional community members who had been previously involved 

with airport matters to assist the BFAC in this process. Collectively, this group is known 

as the BFAC Airport Finance Subcommittee (Subcommittee). The Subcommittee 

meetings are open to the public, albeit sparsely attended. 

6. The mission of the Subcommittee is to analyze existing Airport operating expenses and 

foreseeable capital and maintenance needs in order to determine whether the Airport 

could generate sufficient cash flow to fund necessary capital projects without resorting to 

federal funding. The Subcommittee was not directed to examine what those capital 

projects should be. 

7. As one of its first steps, the Subcommittee gathered information about the Airport’s 

existing finances, including existing revenue streams, in order to conduct a debt capacity 

analysis that would determine how much money the Airport could raise to pay for capital 

improvements and other foreseeable expenses. The Subcommittee focused on the past 

five years of Airport financial data. 

8. The Subcommittee also reviewed information about anticipated future expenses, 

primarily capital expenses, as determined by the Town Board. This information 

included, for example, the 2014 Airport budget approved by the Town Board in 

November 2013. See Exhibit 4 (Resolution 2013-1216, adopting 2014 Budget); Exhibit 

5 (Approved 2014 Budget). 

9. The Town Board had also approved, on December 3, 2013, the 2014-2018 Airport 

Capital Improvement Plan (ACIP) (Exhibit 6), which identifies capital projects that are 

reflected in the current Airport Layout Plan and have completed environmental review 

pursuant to the New York State Environmental Quality Review Act (SEQRA). The total 

projected cost of the projects included in the approved ACIP is approximately $5.26 

million.

10. In addition to the ACIP, an additional $5.19 million in capital costs were contemplated by 

the Town for the Airport. Those projects had been initially included in the draft ACIP, 

but were ultimately withdrawn because they were not yet contained in the Airport Master 

Plan and had not yet undergone environmental review under SEQRA. Those projects 

were listed on an expanded Airport Maintenance Plan (AMP) that totaled almost $5.2 

million. See Exhibit 7 (December 3, 2013, Town Work Session Minutes, ACIP and 

AMP). 
DECLARATION OF ARTHUR B. MALMAN 

3 

11. During the time the BFAC performed its analysis of the Airport’s finances and made its 

initial recommendations, the Town was moving forward to approve many of the projects 

on the ACIP and AMP. These projects included the following: 

a. The Town completed rehabilitation of the lighting on Taxiway “A,” which was 

funded with a bond in the amount of $353,600. 

b. The Town completed repair work on Runway 4-22 for use as a taxiway, which was 

funded with bonds totaling $360,000. 

c. The Town hired an engineering firm to review all of the airport’s capital projects. 

d. The Town began moving forward with a project to resolve airspace obstructions that 

have been identified by the FAA as posing problems for aircraft on instrument 

landings. 

Progress Report No. 1 and the Preliminary Debt Capacity Analysis (April 26, 2014) 

12. On April 26, 2014, the Airport Finance Subcommittee produced a Preliminary Debt 

Capacity Analysis and an initial Progress Report. (Exhibit 8). The purpose of this report 

was to evaluate the financial implications for the status quo (i.e., without any additional 

capital expenditures). The Preliminary Debt Analysis focused on both revenue and 

operating expenses to evaluate how much debt the Airport could take on. 

a. The Subcommittee did not independently assess how much money the Airport would 

need. It simply considered how much money the Town could raise with existing 

revenue streams. 

b. The Subcommittee considered four revenue and expense scenarios based on different 

assumptions of the number of aircraft operations. One scenario was the status quo 

which assumed no change in revenues due to decreased aircraft operations. 

c. The Subcommittee also considered the need for the Airport to retain sufficient fund 

balances (reserves) to address unforeseeable contingencies and expenses. 

d. In preparing the Preliminary Debt Capacity Analysis, the Subcommittee consulted 

with all BFAC Airport Finance Subcommittee members, the Town Finance 

Department, Airport management and other Airport stakeholders, including both 

fixed-base operators (FBOs). 

13. It is common practice in the financial industry to base a debt capacity analysis on 

conservative, i.e., the least aggressive, assumptions. The Subcommittee followed this 

practice and used conservative assumptions in creating the April 26 Preliminary Debt 

Capacity Analysis. 
DECLARATION OF ARTHUR B. MALMAN 

4 

14. For example, the Subcommittee assumed that revenue would remain at consistent levels, 

and would only increase in line with historic trends. Accordingly, for purposes of the 

Preliminary Debt Capacity Analysis, the Subcommittee assumed that the fuel flowage 

fee, which had remained at $0.15 for almost two decades, would remain at that level. 

15. Similarly, the Subcommittee assumed that the landing fee would increase at only a 

moderate level. After reviewing historic landing fees, BFAC member Peter Wadsworth 

recommended that, for the purpose of calculating debt capacity on a conservative basis, 

the Subcommittee should assume that landing fees would increase annually by only 5%. 

16. The results of the April 26 Preliminary Debt Capacity Analysis showed that under the 

four revenue scenarios examined, the existing Airport net operating revenue could 

support the debt service on between $5.1 and $8.5 million of tax exempt bonds over the 

next five years (2014-2018). In the scenarios examined, the Airport fund balance 

dropped from a starting fund balance of approximately $1.6 million to ending fund 

balances as of year-end 2018 in the range of $1.25 to $1.4 million. These conclusions 

were subject to the significant caveat that additional fund balances might be required for 

a variety of contingencies, including “seasonal variations in cash flow, economic 

downturns, emergencies, consultants’ fees and litigation.” 

17. Ultimately, the Subcommittee concluded from the results of the Debt Capacity Analysis 

that the existing revenue stream would be unlikely to meet the Town’s goal of making the 

Airport operationally self-sustainable and supporting a robust capital plan to ensure a safe 

and properly-maintained facility without additional revenues from new and existing 

sources, as was made clear in the May 20 presentation to the Town Board. Accordingly, 

the Subcommittee announced in the April 26, 2014, Preliminary Debt Capacity Analysis 

that it already had “begun to explore revenue enhancement opportunities such as paid 

parking, increased fuel flowage fees and increased lease revenues.” 

18. The Subcommittee transmitted its Progress Report and the Preliminary Debt Capacity 

Analysis to the Town Board on May 5, 2014 (the transmittal letter is attached as Exhibit 

9) and formally reported these findings at the Town Board Work Session on May 20, 

2014. See Exhibit 10 (May 20, 2014, Subcommittee Presentation); see also Exhibit 11

(Transcript of May 20, 2014, Town Work Session). 

19. Ultimately, the Subcommittee identified a number of potential ways to increase revenues, 

including parking fees, increased rents, development of Airport property, and increasing 

existing fees. The Subcommittee decided to focus initially on increasing existing fuel 

flowage and landing fees because the fee increase would increase revenues almost 

immediately with no initial expenses while the other measures would not yield revenues 

for many months or even years and/or would require initial investments: 

a. The Subcommittee had been studying the entire issue of fuel operations at the Airport 

and, as part of that study, realized that the fuel flowage fee had not increased for over 

20 years while fuel prices tripled and that the Airport fuel flowage fees were lower 
DECLARATION OF ARTHUR B. MALMAN 

5 

than several other airports where the Airport both owned and operated the fuel farm 

and bought and inventoried the fuel. 

b. The Subcommittee also reviewed prior landing fee increases at the Airport. In the 

period from 2006 to 2008 (when Airport management realized that revenues to 

maintain the Airport needed to be increased to maintain the Airport if FAA grants 

were not being sought) the landing fees were substantially increased at the Airport, 

especially for the larger aircraft. However from 2008 to 2013, with the national 

economic turmoil and discussion in the Town about possibly seeking FAA grants, the 

increases for certain larger aircraft were more modest. For example: 

 % increase 

Type of Aircraft 2006 2008 2013 ’06-08 ’08-13

Corp/Rev Multi Engine Turbine over 12,500lbs $100 $200 $250 100% 25% 

Corp/Rev Multi Engine Turbine over 25,000lbs $150 $300 $375 100% 25% 

Large Cabin Class Helicopters * $100 $350 $400 250% 25% 

 

*In 2006 these were classified as either Multi-Engine Turbine-$50 or Multi-Engine Turbine 

12,500 lbs or more-$100 

Fuel Flowage Fee Increase 

20. As part of its work, the Subcommittee analyzed fuel flowage fees at the Airport. Fuel is a 

major expense at the Airport, but with a fuel flowage fee of 15 cents a gallon, is only a 

minor source of income for the Airport. The Airport owns and operates the fuel farm and 

purchases all aviation fuel. The two FBOs buy aviation fuel from the Town. The FBOs 

then resell the fuel to their customers at retail prices they set, and pay the Town for the 

cost of the fuel plus the Town’s fuel flowage fee. 

21. We were not given information about the FBO’s profits from fuel and had no information 

on their actual costs. However, we could compute their estimated gross profit margins 

from prices they paid the town for fuel and sales at full retail. We then assumed an 

average discount of 50 cents per gallon to reflect the $1 per gallon discounts for based 

aircraft and information we got from outside sources on the probable discount 

arrangements on national accounts sales and direct sales to larger users. Finally we 

compared this with the information we were assembling from outside sources on the fully 

loaded average costs of delivering fuel from the farm to the ultimate customer. 

22. We have been studying not only possible increases to the fixed fuel flowage fee but also 

if it should be replaced by other formulas based on a fixed percentage of gross profit and 

alternative operating arrangements for fuel operation and these studies continue 

23. When we began our work, the fuel flowage fee at the Airport was 15 cents per gallon, a 

level first set over 20 years ago in 1992. 
DECLARATION OF ARTHUR B. MALMAN 

6 

24. While the Subcommittee assumed a fuel flowage fee of 15 cents for purposes of 

conservatively calculating debt capacity, it also began assessing a future increase in the 

fuel flowage fee as a means of generating additional needed revenue 

25. One of our subcommittee members, Munir Saltoun conducted substantial on-line research 

on other airports and talking with various airport managers and other industry 

professionals about fueling, landing fees and other aspects of airport operations. One of 

the people he contacted was Steve Tibbets, who was then a senior manager of Eastern 

Fuel, but also had managed several airports in Rhode Island and provided to us much 

operational information and contacts with other industry people. 

26. On March 27th, we had a meeting at the Airport with various stakeholders including Steve 

Tibbets, Cindy Herbst of Sound Aircraft and Dave Peterson (representing the two FBOs), 

Jim Brundige, the then Airport Manager, and Subcommittee members Munir Saltoun, 

Peter Wadsworth and me. 

27. At the March 27 meeting, we discussed many of the items Cindy Herbst and I had 

previously discussed at a one-on-one meeting, but the discussion was focused on fuel and 

the fuel farm. Tibbets thought his company might supply fuel somewhat cheaper to the 

Airport and suggested that the fuel contract be sent out for competitive bidding through 

an RFP—and such savings could be passed on to aircraft owners in whole or in part. 

Cindy Herbst was adamant that she wanted the Town to stay with the Airport’s present 

supplier, AvFuel. We explained that Eastern had substantially the same FBO and Airport 

incentives as AvFuel. I believe that during this meeting (someone, it may have been our 

Airport Manager) said something to the effect of: Rather than fighting about AvFuel and 

fueling operations that the Town should just increase the fuel flowage fee by 15 cents. 

28. On April 11, 2014, I participated in a telephone conference with Subcommittee members 

Munir Saltoun and Bonnie Krupinski, Jim Brundige, Dean Hornig from Avfuel 

Corporation (the current fuel supplier at the Airport), and Cindy Herbst to address fueling 

operations and the fuel farm at the Airport. During the call, we discussed many options, 

including increasing the fuel flowage fee. Because the FBOs resell fuel purchased by the 

Airport, often at a mark-up, we also discussed ways that the FBOs and the Airport might 

share in the profits of fuel sales. AvFuel would not discuss pricing on its national 

contracts but we subsequently got most of the FBO averages from other industry sources. 

29. We attempted to gather information about the FBOs’ margins and profits to understand 

how we might structure a profit sharing system, but the FBOs were reticent to divulge 

proprietary information. 

30. The Subcommittee was already discussing an increase to 30 cents in April 2014. 

Ultimately, the Subcommittee concluded that the increase would be a conservative 

revenue enhancement. Among the reasons for recommending this specific increase, the 

Subcommittee considered the following: 
DECLARATION OF ARTHUR B. MALMAN 

7 

a. The fuel flowage fee had not been increased in over 20 years, although the FBO 

leases clearly stated that the Town could change the fee at any time. 

b. An economic analysis prepared for the Town in 2002 already recommended raising 

the $0.15 fuel flowage fee. See Exhibit 12 (2002 Economic Analysis). 

c. The Subcommittee reviewed fuel flowage fees at other east coast airports and 

concluded that a $0.30 fee was comparable with existing rates at those facilities 

which also had the relatively unusual system of the airport paying to build and 

operate the fuel farm and buying and carrying the fuel inventory. 

31. At the May 17, 2014, Subcommittee meeting, Peter Wadsworth presented a draft 

supplemental debt capacity analysis that examined the effects of revenue enhancements 

not already included in the Preliminary Debt Capacity Analysis, including increasing the 

fuel flowage fee from 15 to 30 cents a gallon. See Exhibit 13 (BFAC Subcommittee 

Minutes, May 17, 2014). That analysis demonstrated that increasing the fuel flowage fee 

together with $500,000 of revenue enhancement from 2015-18 would provide sufficient 

debt capacity to fund approximately $6.957 million of capital projects and maintain at 

least $2.4 million in reserves as of year-end 2018. The draft Report concludes: “While 

the committee has not expressed an opinion on what would constitute an adequate level 

of fund balances, the resulting $2 to $3 million is clearly preferable to the $1.2 million 

under most scenarios in the Preliminary Debt Capacity Analysis, which included no 

revenue enhancements and maxed out debt.” Exhibit 14 at 2 (May 17, 2014, Draft Debt 

Capacity Analysis). 

32. At its June 2, 2014, meeting, the Subcommittee formally agreed to recommend an 

increase in the fuel flowage fee to 30 cents. See Exhibit 15 (June 2, 2014, BFAC 

Subcommittee Minutes). 

33. At the June 3 Town Work Session, Airport Director Jim Brundige discussed two 

proposed resolutions: Resolution 2014-672 (raising the landing fees by 10%) and 

Resolution 2014-673 (raising the fuel flowage fee to $0.30 per gallon. Exhibit 16 (June 

3, 2014, Work Session Minutes). 

34. At the June 5, 2014 Town Meeting, the Town agreed to table a Resolution to increase the 

fuel flowage fee to permit additional comment, in large part to respond to concerns raised 

by Cindy Herbst of Sound Aircraft. See Exhibit 17 (Transcript of June 5, 2014, Town 

Board Meeting). 

35. At the June 17, 2014, Town Work Session, the Subcommittee presented a detailed 

discussion on the fuel flowage fee issue to explain the basis for its recommendation to 

increase fuel flowage fees; I could not attend but saw the presentation on the video of the 

meeting. The Subcommittee’s presentation from that meeting is attached as Exhibit 18. 

A complete transcript of the June 17 meeting is attached as Exhibit 19. (Transcript of 

June 17, 2014, Town Work Session). Because the underlying financial basis for the 

proposal had been presented in the Draft Debt Capacity Analysis, the Subcommittee 
DECLARATION OF ARTHUR B. MALMAN 

8 

focused its presentation on the reasons for: (1) increasing the fuel flowage fee as opposed 

to other revenue enhancement measures; and (2) increasing the fuel flowage fee to 30 

cents. The goal of the presentation was to explain why that particular increase was fair to 

both the Town and the FBOs, who remained able to make a reasonable profit on fuel 

sales. This was particularly important in light of the concerns raised by Sound Aircraft. 

Cindy Herbst also presented comments at that meeting. 

36. At the June 19, 2014, Town Meeting, the Town approved Resolution 2014-673 

increasing the fuel flowage fee to 30 cents effective on July 1, 2014. The Resolution is 

attached as Exhibit 20. The full transcript of the meeting is attached as Exhibit 21. 

 

Landing Fee Increase 

37. As part of its background research on Airport finances, the Subcommittee also reviewed 

landing fee rates at East Hampton Airport. The Town charges a range of landing fees 

based on the category and characteristic of the particular aircraft. Historically, landing 

fees were increased at relatively low levels somewhat regularly. In recent history, 

landing fees were increased significantly in 2006 and then again 2008. After a pause due 

to the economic downturn, landing fees were increased again in 2013. Exhibit 22 (HTO 

Landing Fees, 2006, 2008, 2013). 

38. Subcommittee member Munir Saltoun was tasked with analyzing landing fee data and 

began immediately reviewing how landing fees are calculated at similar airports. For 

example, Munir found that airports like Martha’s Vineyard and Nantucket charged 

landing fees in the range of $400 to $500. As part of that research, I secured from 

Anthony (Tony) Ceglio, the Airport Director at Suffolk County Francis S. Gabreski 

Airport (Westhampton), a comparison chart of landing fees at regional general aviation 

airports. Exhibit 23 (Email exchanges with A. Ceglio). 

39. While the Subcommittee used a conservative assumption (i.e., 5% annual increase in 

landing fees) for the Preliminary Debt Capacity Analysis, it also began, early on, to 

consider additional increases in landing fees as a source of additional revenue. For 

example: 

a. In early March, we received from the Town’s consultant, DY Consultants, a 

comparison of future landing fee options according to “conservative, moderate 

and aggressive” scenarios for increasing landing fees. This provided the 

Subcommittee with a better understanding of the range of options, and suggested 

that there was room to raise the landing fees. See Exhibit 24 (DY Consultants 

future landing fee forecasts). It is important to note the term “aggressive” was 

used in a comparative sense only; we did not understand that term to mean that 

the higher range of land fee increases were inappropriate in any manner. 

b. The Subcommittee also reviewed the effect on operations of past increases in 

landing fees. We concluded that those increases had essentially no effect on 

traffic. 
DECLARATION OF ARTHUR B. MALMAN 

9 

c. At its June 2, 2014, meeting, the Subcommittee agreed that it was appropriate to 

raise landing fees by 10% annually as a revenue enhancement measure. See 

Exhibit 15 (June 2, 2014, BFAC Subcommittee Minutes). 

40. At the June 5, 2014 Town Board Meeting, the Town passed a Resolution amending the 

landing fees. A copy of Resolution 2014-672 is attached as Exhibit 25. 

41. The Subcommittee has also reviewed the landing fee increases to test their effect on the 

ultimate consumer: the passenger in the aircraft. The result of that analysis has been 

surprising in that we determined that it would take more than a doubling of landing fees 

to have the customer see a 10% increase in the cost of his charter. To reach these 

conclusions we reviewed the fees charged by BLADE for the Manhattan to East 

Hampton trip, and the fee of $5-6,000 for six person jet charter from Richmond, Virginia, 

to East Hampton for our comparisons. 

Further Revenue Enhancement Measures 

42. The Subcommittee has monitored the effect of the 2014 fuel flowage fee and landing fee 

increases, and we conclude that the 2014 fee increases were reasonable as evidenced by 

the fact that both operations and fuel sales increased in 2014 over 2013 despite these 

increases. 

43. Furthermore, although we have not completed our day by day analysis, it appears that, at 

least on the days tested so far (after the Town increased it fuel flowage fees by 15 cents a 

gallon), the FBOs increased their own gross margins (based on the prices charged by the 

Town to the FBOs for fuel and their published retail prices on AirNav) by more than 15 

cents per gallon. This raises a question as to whether the Town's increase (amounting to 

only about 2 1/2 % of the published retail price to aircraft operators) had any material 

effect on aircraft customers – who may have actually seen a greater increase by the FBOs 

than called for by the fuel flowage fee increase. 

44. Since the Town Board approved the fuel flowage fee and landing fee increases, the 

Subcommittee has continued its work to explore additional revenue enhancement 

measures to assure the Airport will be self-sustaining. The Subcommittee has updated its 

Debt Capacity Analysis since the fee increases were instituted, and to account for the 

higher than projected volume of operations at the Airport. It also took into account the 

substantial increases in costs for implementing noise measures and for ongoing 

development of a 2015-2019 capital plan. The updated analysis increases the estimate of 

debt capacity during the 5 year forecast period (now rolled forward by one year to 2015-

19) for the most pessimistic scenario, without considering revenue enhancements, to 

about $5.6 million and predicts 2019 year end fund balances to be approximately the 

same as expected at the end of 2014. Thus, even with the recent fee increases, we 

conclude that the Airport must still pursue additional revenue enhancements to remain 

self-sustaining.