The City of Fargo and the Fargo Municipal Airport Authority (MAA) have reached agreement on a new Memorandum of Understanding (MOU) between the two governmental entities. The decisions by the MAA and the City to approve the new MOU bring about a resolution of formal negotiations started over two years ago. The new MOU was constructed through mediation efforts with the assistance of former U.S. Magistrate Judge Karen Klein.
Although the two entities have worked cooperatively since the Airport Authority was established in 1969, the new MOU serves as amendment of the 50-year-old agreement between the parties, and resolves a number of issues or concerns, some of which remained unresolved for many years, as follows:
EMPLOYEE COMPENSATION:
- Airport employees will be paid according to the City’s established pay plan but, when a particular job position and the compensation for that position requires review, a new Airport Position Evaluation Committee (Airport PEC) will review the matter and make the decision.
- As to the matters presented to the Airport PEC, the decision of the Airport PEC shall be a final decision. It will not be reviewable by, or appealable to, either the MAA or the City Commission.
- The Airport PEC will consist of five members, appointed as follows:
- Two members will be appointed by the MAA Chairperson (with the consent of the MAA) with one member being an MAA Commissioner and the other being a city of Fargo resident who is neither a member of the MAA nor the City Commission; and,
- Two members will be appointed by the Fargo Mayor (with the consent of the City Commission) with one member being the Mayor or a City Commissioner and the other being a city of Fargo resident who is neither a member of the MAA nor the City Commission; and,
- The fifth member shall be selected and appointed by the two non-MAA, non-City Commission members.
EMPLOYMENT STATUS:
- The MOU settles the question of “who is the employer” of the Airport employees.
- The MOU states that Airport employees will be employees of the City of Fargo for purposes of payroll, pension, health insurance and other benefits, civil service, and applicable state and federal employment compliance requirements, City policy requirements and general financial and accounting standards;
- The employees will be subject to a command and reporting structure that recognizes the Municipal Airport Authority as the employer (or, “appointing authority” as described in civil service language) having the customary employment authority over the executive director and the employees serving beneath the executive director in the usual chain of reporting and command.
PROVISION OF SERVICES:
• The MOU settles the question of what services will be provided by departments within Fargo City Hall to assist the Airport.
* At the outset, in 1969, the City provided financial and payroll assistance. The level of assistance has expanded over the years to include more extensive employment benefits, administrative and financial services, as well as information technology and miscellaneous other City support. The agreement will maintain the level of City assistance without significant change.
• As to the cost for the services and support provided by the City the Airport Authority has always paid for City support and services out of separate Airport revenues. As to the general support provided at the city administrative level (Human Resources, Finance and IT services), other than the equipment and services that can be paid on a per-item basis, the so-called “centralized services” have been compensated by the Airport at an annual fixed sum, which had remained static at $50,000 since 1986.
* The Airport and City agreed that $50,000 was not an accurate reflection of the support provided by the City, but Federal Aviation Administration (FAA) regulations limit the compensation to a value proportionate to the levels of support provided to departments throughout the City.
* This MOU acknowledged the FAA has approved the cost allocation for the prior two years, at $98,144 (paid in 2017 for 2016) and $107,009 (paid in 2018 for 2017) and the parties now have a formula for future calculations.
COOPERATION AND COLLABORATION:
- The MOU acknowledges the need for compliance with various federal or state governmental regulations and to cooperate with each other for such purposes.
- The parties have acknowledged the need for more and better communication between the Airport and City Hall.
- The MOU identifies immediate steps to be taken in an effort to improve communication, cooperation and the overall relationship between the MAA and the City.
FINANCIAL ACCOUNTS:
- The MOU recognizes the Airport’s desire to establish a separate bank account to hold certain funds, for purposes such as future construction, as an investment account.
- Otherwise, Airport finances will continue as they have for the last 50 years with the City Finance Department handling bookkeeping, banking services and other general financial services.
- The parties agreed to discuss the suitability of additional alternate arrangements as well.
AGREEMENT DURATION:
- The MOU establishes an initial one-year agreement term followed by a three-year term and then successive five-year terms. For the initial one-year term, the agreement may be terminated by either party upon notice delivered on or before July 1, 2020. As to the three and five-year terms, the MOU may be terminated effective the 1st of January of any year upon one-year’s advance written notice to the other party.
HISTORICAL BACKGROUND:
- The Fargo Airport, now known as Hector International Airport, has been in its same general location since 1927, starting with a lease of a quarter of land by Martin Hector.
- On April 8, 1969, the Fargo City Commission adopted a resolution establishing the Fargo Municipal Airport Authority under the authority of N.D.C.C. Chapter 2-06 and, by agreement dated September 16, 1969, the City and MAA agreed to the following:
- Effective April 8, 1969, the City assigned, transferred, and conveyed all rights of the City to the MAA to operate, maintain, lease and collect revenues from the Airport (thereby transferring ownership and control of all Airport lands);
- That the City recognized that the MAA would have the right pursuant to Chapter 2-06 of the North Dakota Century Code to acquire additional property as an addition to the Airport;
- That the City would provide the MAA with the use of the City’s treasurer and auditing department;
- That the City “...will continue to regard the employees of the Airport Authority as City employees for the purpose of the City employees [sic] Pension Plan”;
- That the MAA would pay the City $30,000 annually plus any additional amounts necessary to reimburse the City for expenditures made by the City on behalf of the MAA.
- The 1969 agreement initially had a ten-year expiration date. However, in order to allow the MAA to be able to issue bonds payable from net revenues of the Airport and to improve the marketability of such bonds, the requirement of the $30,000 payment was modified to be subordinate to the bond payment obligations and the 10-year term was rescinded and repealed (agreements dated September 16, 1969 and amendment dated June 24, 1970).
- From the time of the 1969 Agreement to calendar year 1986, the MAA paid to the City $30,000 per year for services identified above (but later to include IT services as the same came into existence).
- In 1986, the MAA voted to raise the amount paid to the City by the MAA for said services to $50,000, which the MAA paid.
- Since then, the MAA has owned and operated Hector International Airport.
- Over the course of the past 50 years, both the Airport and the City of Fargo have grown, both in size and in complexity.
- Currently, 26 individuals (16 full time Airport employees and 10 full time ARFF (Aircraft Rescue and Firefighting) employees), more or less, are employed at the Airport, said employees being actively involved in all manner of operation and maintenance of the Airport facility.
- Those employees are on the payroll system of the City and are paid by City paycheck, are covered by the City workers’ compensation coverage, are enrolled either in the City’s retirement plan with the North Dakota Public Employee Retirement System or in the City employee pension plan as an employee of the City (pursuant to the agreement between the parties dated September 16, 1969), enrolled as the City’s employee for state and federal unemployment compensation benefits, covered by having employee and employer contributions for social security (FICA) via City paycheck and covered as a City employee under the City’s health and other benefits offered to City employees. The MAA pays any and all such costs associated with each of items identified above to the City.
- As and for a pattern and practice, those 26 employees, and their predecessors, have been paid on the City’s pay-plan—the compensation structure used for City employees.
- In particular, since 1992, the City determined the value of a particular job based upon its decision-making requirements—the “Decision Band Method”—and the methods for determining pay within the City have been established by adopted City policy.
- The City’s official pay plan provides a “step system” by which the compensation of a particular employee will be stepped up over time even when that employee remains in the same position.
- The City’s pay policy also provides additional payment to longstanding employees for their longevity.
- The Airport employees have participated in this since the inception of these policies and, prior to that, in accordance with whatever the City’s employment policies and procedures existed at the time.