Title
Consider a memorandum/resolution providing a Minimum Revenue Guarantee (MRG) to attract new Air Service to Killeen Regional Airport.
Body
DATE: May 19, 2026
TO: Kent Cagle, City Manager
FROM: Jarrod Provost, Assistant Director of Aviation
SUBJECT: Minimum Revenue Guarantee (MRG) to attract new Air Service to Killeen Regional Airport
BACKGROUND AND FINDINGS:
In February 2021, Killeen’s Aviation Department applied to the U.S. Department of Transportation for a Small Community Air Service Development Program (SCASDP) grant to fund a Minimum Revenue Guarantee program as part of a broader effort to launch and sustain nonstop daily air service. The city strengthened its application by forming an Air Service Development Task Force with regional partners such as chambers of commerce, colleges and universities, hospitals, Killeen ISD, Killeen Economic Development Corporation, Fort Hood, representatives from state and federal legislative delegations, and multiple city departments. This partnership helped demonstrate regional public and private support through 18 letters of support, local cash, and in-kind commitments toward the required match.
The purpose of the grant is to fund a Minimum Revenue Guarantee (MRG) to support the initiation of nonstop daily service to a new destination or to an equally well-connected hub. The MRG is an air service incentive that offsets passenger revenue shortfalls, thereby reducing the financial risk for airlines when launching or expanding new routes.
On July 27, 2021, the DOT awarded Killeen a grant totaling $1,000,000, supported by $310,000 in public and private cash contributions and $70,000 of in-kind services from the city. This included commitments from KEDC and AdventHealth Central Texas Hospital, additional funding from the City of Killeen’s Aviation Department operations fund, waived landing fees for 24 months, and marketing support from the City’s Communications Department.
The current grant is not sufficient to remain competitive for new air service. The goal is to maintain a competitive position in the air service market to attract a new airline to GRK, with all funding to be provided through Aviation Funding, the DOT grant, and other contributions, with no taxpayer dollars utilized.
Additional funding of $750,000 per year for three years, totaling $2.25 million, is requested to strengthen the grant and enhance marketing and air service development efforts, thereby improving competitiveness in the marketplace.The full amount may not be utilized if new air service or airline goals are achieved.
THE ALTERNATIVES CONSIDERED:
N/A
Which alternative is recommended? Why?
N/A
CONFORMITY TO CITY POLICY:
This item conforms to local and state policies.
FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
Revenue and expenditures are contingent upon securing an airline and would begin once service is initiated.
Upon implementation, the financial impact is anticipated as follows:
• Year 1: $1,000,000 in federal grant revenue with offsetting program expenditures; $200,000 in local grant contribution revenue with offsetting program expenditures; $110,000 in Aviation Enterprise operating expenditures for marketing and advertising; and $750,000 Aviation CIP expenditure for Minimum Revenue Guarantee
• Year 2: $750,000 Aviation CIP expenditure for Minimum Revenue Guarantee
• Year 3: $750,000 Aviation CIP expenditure for Minimum Revenue Guarantee
Is this a one-time or recurring revenue/expenditure?
Recurring for up to 3 years
Is this revenue/expenditure budgeted?
No
If not, where will the money come from?
Funding for the $1.0 million federal grant revenue and related program expenditures, $200,000 in local contribution revenue and related program expenditures, and the first two years of the City-provided Minimum Revenue Guarantee will be included in the FY 2027 Proposed Budget within the Aviation CIP Fund. Funding for the third year of the Minimum Revenue Guarantee will be included in the FY 2028 Proposed Budget within the Aviation CIP Fund.
The $110,000 for marketing expenditures will be included in the FY 2027 Proposed Budget within the Aviation Enterprise Fund.
Is there a sufficient amount in the budgeted line-item for this revenue/expenditure?
Sufficient appropriations will be included upon adoption of the applicable fiscal year budgets.
RECOMMENDATION:
City Council approve the Aviation Department request for $750,000 each year for three years (maximum $2.25 million), as well as utilize the SCASDP grant of $1 million and authorize the City Manager or designee to execute all necessary documents and any and all amendments within the amounts set by state and local law.
DEPARTMENTAL CLEARANCES:
Purchasing
Finance
Legal
ATTACHED SUPPORTING DOCUMENTS:
Presentation