Agenda Item Wording:
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Second reading and adoption of Ordinance No. 2021-11, authorizing the conditional 35-year lease of a parcel of approximately 65,000 sq feet of unimproved property at the Visalia Municipal Airport to Aircraft Mechanical Services (AMS) Inc for the purposes of a new aircraft maintenance facility, at the rate of Twenty-Eight Thousand and Eighty Dollars ($28,080) annually.
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Deadline for Action: None
Submitting Department: Administration - Airport
Contact Name and Phone Number:
Jody Miller, Airport Manager, 713-4282, Jody.Miller@visalia.city
Nick Mascia, Assistant City Manager, 713-4323, Nick.Mascia@visalia.city
Department Recommendation:
Staff recommends that Council conduct the second reading and adoption of Ordinance 2021-11 authorizing the City Manager to execute a ground lease agreement with AMS, Inc. for approximately 65,000 sq feet of unimproved property at Visalia Municipal Airport for the purpose of constructing a new aircraft maintenance facility at Visalia Municipal Airport. This is a thirty-five (35) year lease term, after which the parcel and any structures or improvements would revert to full ownership by the City of Visalia. The lease rate will be twenty-eight thousand and eighty Dollars ($28,080) annually, further adjusted annually based on the California Consumer Price Index. The ordinance will go into effect thirty (30) days after its passage.
Background Discussion:
AMS, Inc. has long operated aircraft maintenance facilities here at Visalia Municipal Airport and have consistently added income to the Airport not only through their monthly lease payments (for their current facility, which they will remain in even after the proposed new hangar is completed) but also through ancillary avenues tied to their operations such as tie-down fees, fuel sales, and other fees. The new facility would allow AMS, Inc. to greatly expand their operations by giving them the capability to service not only more aircraft but larger aircraft as well. By having this service on property here at Visalia Municipal Airport it would allow the Airport to attract flight operations that traditionally would have gone to other area airports that had the capability to service their specific aircraft. AMS, Inc. has had no major issues as a current tenant and has kept all their existing buildings in good condition.
The proposed lease being over five (5) years triggers the need for an Ordinance. The proposed Ordinance and Ground Lease Agreement is contingent upon AMS, Inc. obtaining final Federal Aviation Administration (FAA) approval for the construction of the proposed Aircraft Maintenance Hangar on the unimproved parcel. If the FAA does not approve the proposed construction project of a new Aircraft Maintenance Facility the conditional Ground Lease Agreement, and Ordinance would be null and void, and the proposed parcel would revert back at that time to City of Visalia/Visalia Municipal Airport control and able to be used for any project deemed appropriate for the parcel including a new lease with any future prospective tenants.
After the completion of the initial thirty-five (35) year lease term, full ownership of any structures and improvements made to the parcel by AMS, Inc. would revert to the City of Visalia per the agreement. Following the initial 35 year lease, AMS, Inc. would hold the options to rent the property at fair market value for three (3) five (5) year options. Once the three (3) five (5) year options have lapsed, AMS, Inc. would have no further first claim to the rental. While these agreements are in place, AMS Inc. is required to maintain the building to all proper standards (FAA standards/requirements and City Building Code) and have the property available for inspection or verification of conformance by City staff or representative. Ground lease arrangements are commonplace on airports facilities including several (seven) active leases of similar nature at the Visalia Municipal Airport. Visalia Municipal Airport is observing both long term and day to day benefits of lease agreements like this. Further the lease does not pose a hindrance to any future development as the site chosen was to be earmarked for future hangar development in our Airport Layout Plan (see enclosed site map).
Fiscal Impact:
Visalia Municipal Airport would receive twenty-eight thousand and eighty dollars ($28,080) annually for the ground lease plus annual California Consumer Price Index increases, as well as full ownership of any structures and improvements to the proposed parcel upon the completion of the thirty-five (35) year lease term. Staff utilized Colliers Market Data Reports to obtain the annual lease rate. The County average is between 46 and 77 cents per square foot, however those properties used to establish the average do not have the building revert back to the City/Airport at the conclusion of their lease. The agreed upon lease rate is 38 cents per square foot.
The monthly lease payment will be deposited into the Fixed Base Operators (FBO) Revenues fund along with all of the current FBO lease payments for general use within the airport. Additionally, there would be considerable ancillary revenue in the form of fuel sales, tie-down fees and other fees gained by Visalia Municipal Airport via increased Air Traffic from the proposed Aircraft Maintenance Facility.
Prior Council Action: At the December 20th 2021 Council meeting, Ordinance 2021-11 had its introduction and first reading.
Other: N/A
Alternatives: None Recommended
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to conduct the Second Reading and adopt Ordinance No. 2021-11 authorizing the lease of a parcel of approximately 65,000 sq feet of unimproved property located at Visalia Municipal Airport to AMS, INC as specified within the staff report.
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Environmental Assessment Status: To be completed by AMS, INC. during process of obtaining Federal Aviation Administration (FAA) approval for the construction of the proposed Aircraft Maintenance Facility on the requested parcel at Visalia Municipal Airport.
CEQA Review: N/A
Attachments:
1: Proposed Ordinance 2021-11.
2: Proposed Ground Lease for Aircraft Mechanical Services, Inc.
3: Proposed build site