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11-B 12-D,E,F AIS AGENDA INFORMATION SHEET PROJECT: Consider an ordinance adopting new hangar rental fees at Cox Field Airport, a resolution expanding the Airport Advisory Board, a resolution appointing members to the Airport Advisory Board, and a resolution adopting a lease policy and master lease for private hangars at Cox Field Airport. BACKGROUND: The Airport Advisory Board during the course of several meetings considered several issues related to the policy for private hangars at Cox Field Airport and the master lease agreement. As a consequence of those discussions, City Council, at its August 13,2001, regular Council meeting, considered the Airport Advisory Board's recommendations on these issues, and the City Council then acted on each of the issues to be included in future policies. DESCRIPTION: The Agenda Information Sheet for the August 13, 2001, meeting is included with these materials, appropriately annotated to show the action taken by City Council on each of the several issues. As a consequence of that action, City Council is being asked to consider an amendment to the Code of Ordinances to establish formal T-hangar rental fees at Cox Field Airport, along with resolutions expanding the Airport Advisory Board, appointing new members to the Airport Advisory Board, and adopting a lease policy and master lease for new private hangars. RECOMMENDED ACTION: Consider approval of the various ordinances and resolutions presented for consideration. STAFF CONTACT: Thomas E. Haynes, Project Coordinator; Larry W. Schenk, City Attorney COST: See detailed discussion in the materials regarding fees. COUNCIL DATE: Consider approval of the various documents presented for consideration at City Council's consolidated Council meeting of Thursday, October 4, 2001. ADDITIONAL MATERIALS: See prior Agenda Information Sheet for August 13,2001, Council meeting and the respective ordinance and resolutions for consideration. ANNOTATED AGENDA INFORMATION SHEET PROJECT: Review survey information and recommendations of the Airport Advisory Board regarding private hangars; review survey information regarding Airport Advisory Board membership; review information regarding fees for T-Hangars at Cox Field Airport. BACKGROUND: At City Council's March 26, 2001, meeting, City Council instructed that City Staff undertake a study, survey, and review of the City's current policy regarding construction of private hangars at Cox Field Airport. Among the directives was for the City Staff to survey other cities with comparable or similar airports to determine the basis by which private hangars are constructed at those airports. In addition to conducting the survey and reporting the results to the Council, the Council also requested the staff to seek recommendations from the Airport Advisory Board, separate and apart from the survey, as to critical issues related to the policy for constructing private hangars. The Council also charged City Staff to include in the survey inquiries regarding the size and nature of Airport Advisory Boards at other airports, as well as to tabulate information related to the fees for use of T-Hangars at those airports. A recommendation from the Airport Advisory Board for use of the City's T-Hangars was already pending. The survey was conducted on the airports recommended by Ms. Tammie Stone, a representative of the airport branch of the Texas Department of Transportation. While all information requested in the survey was not available or was not received from the airports surveyed, significant information was accumulated. In addition, the Airport Advisory Board, during the process of considering its recommendations, also recommended additional cities to be included in the survey. Subsequent to the completion of the survey, and following several meetings with the Airport Advisory Board at which an issue paper was considered by the Board and recommendations made on the issues presented, the information has been accumulated and is summarized in a number of attachments to this agenda information sheet. DESCRIPTION: The following discussion summarizes the results, by the use of exhibits or text, of the survey of various cities on issues related to the policy for private hangars. It also summarizes other information related to the membership of the Airport Advisory Board and the fees for T-Hangar rentals: Summary of current agreements attached to this agenda information sheet is Exhibit 1, which is a tabular summary of the existing leases between the City of Paris and various occupants of private hangars at the airport. Review of Exhibit 1 will allow the reader to determine how the agreements have been revised over the years, to compare the size of the hangars to the length of the lease, and to issues related to the amount of insurance carried by the occupants. As you will note, the leases extend for initial terms of between twenty- five (25) and fifty-five (55) years, with additional options anywhere from ten (10) to twenty (20) years. The maximum possible terms under the outstanding and existing leases are -1- anywhere from thirty-five (35) years in length to seventy (70) years in length. Other information pertinent to the remainder of the discussion is contained in Exhibit 1 for future reference. II. Current Policy. The current policy of the City with regard to long term hangar leases is set out in Resolution No. 96-011, a copy of which is attached hereto as Exhibit 2. As stated in the lease, the minimum primary term was established at twenty-five (25) years, with two additional ten (10) year options, or a total of forty-five (45) years. Rental would be paid during the first ten (10) year option at an amount stated as the "fixed rental," and the second ten (10) year option would likewise require some rental at the amount of $0.06 per square foot (it is unclear whether this amount would be paid annually or monthly) or something established as the "fair market value" at the time the option is exercised. There is no language in the policy that describes how either fair market value or the fixed rental is to be established. The policy establishes a maximum primary term of forty-five (45) years, with a possibility of two additional fifteen (15) year options, or a total potential term of seventy-five (75) years. Again, payment of nominal rent would be due during the two option periods, again based on fixed rentals and fair market value. Finally the policy contained some rather undefined standards stating that the size of the hangar, type and number of aircraft, use of both the hangar and the aircraft, and the estimated income to the airport operation (presumably as a result of having the hangar there) would be taken into account when determining the lease terms. The current policy is vague on a number of the pertinent issues that needed to be considered in determining the term of a lease. Indeed, a review of Exhibit 1 fails to show a discernable consistent trend with regard to the length of the term of the lease as compared to say the size of the hangar, although there is a general trend that the larger the hangar, the longer the term. Likewise, there is no consistency in the amount of payments set out in the leases for the future options. It should also be pointed out that the option payments provided for in the leases do not provide for escalation based on any sort of consumer price index of the option payments. That is, presumably an optional payment of $100 per month beginning in 2019 will not represent near the amount of money that $100 per month represents in the year 2001. Current policy is there for Council's review and further deliberation. III. Exhibit 3 to the Agenda Information Sheet contains the results of the Legal Department's survey of other cities. You will note that information is included in the survey for some seventeen (17) municipal or municipal related airports. Inquiries were made regarding whether or not private hangars were available; whether or not ground leases were required incident to construction of the private hangars; whether or not ground lease rent was paid and the amount of that rent; the term of the primary lease; whether or not the lessee was responsible for taxes, if any were due; whether or not ownership of the hangar reverted to the City and when; the kind of insurance required; and information related to the existence of an airport advisory board. Without attempting to submit this information to any kind of detailed and systematic analysis, I think certain trends can be identified. First of all, all of -2- the responding airports had private hangars available. Secondly, all the responding airports had ground leases incident to those hangars. All but one other city and the City of Paris required the payment of ground lease rentals. The amount of the ground lease rental payment varied considerably, from as low as $0.07 per square foot per year to amounts based on the actual appraisal of the property. A number of the leases charged a ground lease in the neighborhood of $0.10 to $0.12 per square foot per year, with a CPI adjustment at some time interval. The terms of the leases also varied, there is no mention of options for extension. Terms were anywhere from ten (10) years to forty-five (45) years, with the majority of the lease terms from twenty (20) to thirty (30) years. All of the leases with the exception of one other city and the City of Paris had language in the leases requiring the lessee to be responsible for any taxes assessed, if any, as a result of the leasehold arrangement. All the leases had a provision for the ownership of the hangar to pass to the city at the expiration of the lease; most of the leases provided for an outright transfer at the end of the lease, while some had provisions dealing with some financial adjustment related to the transfer. With regard to insurance, some requirements were quite significant as to the amount of insurance required; others were less stringent. A discussion of the Airport Advisory Board information will be at a later time in this Agenda Information Sheet. IV. Issues with regard to a policy for private hangars. A series of issues were submitted to the Airport Advisory Board, as well as presented to the airports that were surveyed, for consideration in developing a more definitive policy for private hangars. A blank issue page is appended to this Agenda Information Sheet as Exhibit 4. Exhibit 4 was the document utilized in surveying other cities, as well as soliciting the recommendations from the Airport Advisory Board. Reference in this section will be made to Exhibit 2, the current policy; Exhibit 3, the survey of other cities; and Exhibit 5 attached hereto, the recommendations of the Airport Advisory Board. 1. Term length. Current Policy - minimum primary term twenty-five (25) years with two (2) ten (10) year options; maximum primary term forty-five (45) years with two (2) fifteen (15) year options. Total possible terms of forty-five (45) years to seventy- five (75) years. Considerations in setting the term includes size of hangar, type and number of aircraft, use of the hangar and aircraft, and estimated income to the airport. Survey Results - consists primarily of fixed primary terms without options. The terms are from ten (10) year to forty (40) years, with the predominate term twenty (20) to thirty (30) years. -3- Airport Advisory Board Recommendation - hangars up to 5,000 square feet, twenty-five (25) year terms; greater than 5,000 square feet up to 20,000 square feet, thirty (30) year terms; over 20,000 square feet, negotiable. APPROVED B Y CITY COUNCIL City Council should consider what arrangements should be adopted for inclusion in the future policy with regard to the duration of the lease. 2. Options. Current Policy - provides for two (2) ten (10) year options at expiration of the minimum primary term; two (2) fifteen (15) year options at the expiration of the maximum primary term. b. Survey - options were not encountered in a significant number of the cities surveyed. Board Recommendation - the Board recommended there be no options in new lease agreements. However, the Board did recommend that, at the end of the initial term, the City would seek competitive bids for the next primary term of the hangar, and based on those bids, the tenant who had originally built the hangar and was then in the hangar would have the opportunity to exercise, within thirty (30) days, a right of first refusal. APPROVED B Y CITY COUNCIL The City Council needs to determine whether or not options should be continued to be offered as part of the lease term. 3. Should plans for the hangar go through the City's typical building plan review process? a. Current Policy - is silent on this issue. Survey - they were not included in the survey per se, generally the information indicated that all such hangars had to comply with the specific standards applicable to them in each respective building code. Board Recommendation - the Board recommended that all hangars goes though the City's building plan review, including permits and fees. The Board also recommended standards specific to hangars be developed. APPROVED B Y CITY COUNCIL -4- The City Council needs to determine whether or not construction of hangars must be in full compliance with the City's building code, and whether or not additional standards should be developed for hangars. Should special consideration be given in hangar leases which are used for business or economic development purposes in contrast to purely personal use? What should those considerations be? The City's current lease does not prohibit living quarters per se, and some people live in the hangars. Should future leases allow this? Current Policy - the current policy makes vague reference to issues such as the use of the hangar and the income to the airport operation, but no specific reference or special consideration given to hangars associated with business or economic development activity as opposed to personal use. Survey - certain cities do give preference to hangars associated with economic development or business activity, but they are not a majority. It was commented that doing so is difficult to enforce. Likewise, none of the cities surveyed indicated the hangars were used for living quarters. Board recommendation - the Board recommended future leases prohibit tenants from living in the hangar or having full living quarters in the hangar. However, such items as a sink, bathroom, or associated facility to allow temporary over- night stay or perhaps social use of a portion of the hangar was recommended. APPROVED B Y CITY COUNCIL The City Council needs to consider and determine whether or not there should be some sort of incentive for business use hangars. The Board acknowledged that, if such an incentive was appropriate, it should probably come more from the Paris Economic Development Corporation. Likewise, the Council needs to determine whether or not future leases will allow tenants to live in the hangars. 5. Should there be a specific beginning and end date for construction of a private hangar? a. Current Policy - the current policy is silent on this issue. b. Survey - certain cities responded that they do require a beginning and end date for construction of the private hangar. c. Board Recommendation - the Board recommended that each lease require the construction of the hangar to be completed within eighteen (18) months. APPROVED B Y CITY COUNCIL -5- 6. Should the lease provide for ground lease payments? Ground lease payments or payments made for lease of the ground on which the improvement is located. Current Policy - the current policy does not require ground lease payments. None of the current leases for private hangars in the City of Paris require the payment of ground lease payments. Survey - almost all of the cities surveyed require the payment of ground lease payments for private hangars. The City has received informal information from those associated with or working with TxDot indicating that future leases should include the requirement for ground lease payments. Board Recommendation - the Board recommended a ground lease payment of $0.12 per square foot per year, adjusted every five years with a Consumer Price Index adjustment. APPROVED B Y CITY COUNCIL The City Council must consider whether or not ground lease payments should be charged for future leases, and determine the amount of that lease payment. 7. Should the lease place the burden for taxes, if any taxes are due, on the hangar tenant? a. The Current Policy - the current policy is silent on the issue of who would be responsible for taxes, if any taxes are determined to be due. Survey - with the exception of one other city and the City of Paris, all the leases for all of the other cities surveyed would place the responsibility for payment of taxes, if any taxes are due, squarely on the tenant. The City Attorney is recommending that a clause be included in the lease to place the tax responsibility on the tenant. The City Council needs to determine whether or not future leases will place the responsibility for taxes on the tenant. -6- CITY CO UNCIL DETERMINED THAT TENANT PA Y TAXES, IF ANY How much and what insurance should be required? The City's form lease requires $250,000.00 personal injury, $500,000.00 event, and $100,000.00 property damage coverage in each policy. The question is whether or not more extensive insurance coverage, including fire and casualty insurance on the actual hangar, should be an obligation of the tenant. a. Current Policy - the current policy is silent on the entire issue of insurance. Survey - the amount of insurance required as determined in the survey varies widely among cities. However, it does appear that most of the other cities require either a broader range of insurance or a higher amount of insurance coverage, or both. Board Recommendation - the Board recommended the current requirement of general liability insurance be continued. However, the Board took the position that requiring fire or casualty insurance of the tenant to the benefit of the City as a co-insured should not be a requirement of the lease. The Board further recommended that the City should be responsible for obtaining its own insurance for this particular purpose. Related to this issue is a letter from City Clerk, Mattie Cunningham, detailing her discussion with the City's TML and other insurance carriers on this issue (Exhibit 6). This letter was presented to the Airport Advisory Board at the time this issue was deliberated. CITY COUNCIL DETERMINED THAT TENANT PROVIDE ADEQ UA TE INSURANCE TO REPLA CE BUILDING The City Council needs to determine how extensive and how much insurance the tenant should be required to obtain as part of the new policy on private hangars. Structure of Airport Advisory Board. Exhibit 3 includes as a separate part of the questionnaire information sought from the respective cities regarding whether or not they have an Airport Advisory Board, and if so how that Board is constituted. As you will note, most of the Boards have a membership of seven (7) members; however, two boards are eight (8) and nine (9) members respectively, two boards have five (5) members, and two boards have (6) members. The Airport Advisory Board of the City of Paris has varied in its number of members. The earliest resolution available in the City Legal Department files indicate that the board membership consisted of a Chairman and six members (seven (7) total) in 1970 (Resolution No. 1354); was reduced to five (5) members by Resolution No. 1538 sometime before -7- 1974; was later expanded to six (6) members by Resolution No. 1646 in 1974; was reduced in size to five (5) members by Resolution No. 1722 in December of 1975; and was expanded to its current membership of seven (7) by Resolution No. 89-095 in August of 1989. The survey also indicates that some boards have requirements with regard to the members who serve on those boards. In addition, the board members themselves have widely varying background as reflected in Exhibit 3. Some members have had the emphasis on pilots and airport related individuals; some boards have a cross-section of the community; some require residency as a condition of membership on the board, and one board requires a member of city council. The Paris Airport Advisory Board has recommended that the size of the board be expanded to eleven (11) members. APPROVED B Y CITY COUNCIL TO EXPAND TO NINE (9) It should be noted that one of the concerns expressed as a justification for expanding the board was the need to continue to have a quorum for board meetings. The most recent attendance record for the Airport Advisory Board is included in this agenda information package as Exhibit 7. It is worthy of noting that for the eleven (11) meetings held in calendar year 2001, the board had a quorum for each of those meetings. The City Council needs to determine and provide guidance to the staff as to whether or not a resolution should be prepared expanding or changing the size or makeup of the Board VI. Expenditure, revenue, and fee issues. The City Council also directed that further input be received regarding fees charged by the City for T-Hangars located at the airport. Included with the Agenda Information Sheet related to this discussion is an Exhibit 8 on the grant history and monies expended at the airport related to grants; a current revenue and expense statement (Exhibit 9); and a table of 1999/2000 rates and charges for general aviation airports, including the City of Paris, for comparison purposes (Exhibit 10). This material was derived from a publication by the Texas Department of Transportation. Within those categories of rates and charges are rental rates for T-Hangars for comparison purposes. The current rates charged at Cox Field Municipal Airport for T-Hangars is $49 per month for open hangars (1,344 square feet); $85 per month for closed hangars (1,344 square feet); and $100 per month for closed hangars 1,750 square feet in size and some 1,344 square feet in size. The Airport Advisory Board has recommended that the T-Hangar rentals be increased to $55 for open hangars, $95 for the closed 1,344 square feet, and $110 per month for the larger closed hangars. APPR 0 FED B Y CITY CO UNCIL AS FOLL 0 WS: $ 55. O0 PER MONTH FOR OPEN HANGARS (1,000 SF); $100.00 PER MONTH FOR CLOSED HANGARS (972 SF); $125.00 FOR CLOSED HANGARS -8- (1,000 AND 1,008 SF); $140.00 PER MONTH FOR CLOSED HANGARS (1,134 SF); AND $150.00 PER MONTH FOR CLOSED HANGARS (1,267 SF). Based on this information, including the revenues, expenses, comparison table, and recommendation of the Board, the City Council needs to provide guidance to staff as to whether or not the rates for T-Hangars need to be adjusted so that a resolution can be returned increasing those rates. COST: See detailed discussion above regarding fees and expenditures. RECOMMENDED ACTION: See recommendations for action under each issue above. STAFF CONTACT: Thomas E. Haynes, Project Coordinator; and Larry W. Schenk, City Attorney SCHEDULE: Not applicable. COUNCIL MEETING: Discuss and provide guidance to staff members at City Council's August 13,2001, regular Council meeting. Resolutions if necessary to implement changes will be returned in September for certain items and at the October Council meeting for other items. ADDITIONAL MATERIALS: See attached exhibits and other referenced material referred to in the text of this Agenda Information Sheet. -9-