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18 - AIRPORT HANGAR LEASE POLICYItem No. 18 memorandum TO: Mayor & City Council FROM: John Godwin, City Manager SUBJECT: AIRPORT HANGAR LEASE POLICY DATE: September 8, 2015 BACKGROUND: The airport advisory board has for a very long time discussed and debated making changes to the existing airport hangar lease documents. Some members believe the lease is too complicated and onerous, and may therefore be a hindrance to individuals constructing new hangars at Cox Field. STATUS OF ISSUE: As a first step, at its last meeting the board approved recommending a new ground lease policy for privately -built hangars for consideration by the city council. There are three major changes in the new recommended policy: The basic lease period would be extended from 25 years to 40 years, the lease cost per square foot would be increased from $0.25 to $0.40, and some of the insurance requirements are reduced. The policy is not the same thing as the lease agreement, but only the basis therefor. The board plans to bring back changes to the actual ground lease document at a later date. BUDGET: NA RECOMMENDATION: Approve recommended policy. COX FIELD AIRPORT PARIS, TEXAS LEASE POLICY (REVISED) FOR PRIVATELY BUILT HANGARS I. PURPOSE AND GOALS OF POLICY All leases for privately built hangars constructed after the effective date of this policy and located on Cox Field Airport property will be considered when the proposed use is consistent with the Airport Master Plan. It is the goal of the City of Paris to encourage high quality development, continued maintenance and enhancement of facilities, and balanced uses of the Airport including a diversity of based aircraft and businesses. This policy will help insure the Airport will receive an appropriate return on the City's airport asset while providing equitable development opportunities for present and future leaseholders. This policy addresses new leases, extensions, renewals, and lease rates by: • Establishing hangar development sizes with corresponding lease terms. • Establishing uniform lease rates for Cox Field Airport. • Encouraging full property utilization and preventing land- banking. • Ensuring compliance with all State and Federal laws and grant assurances. II. APPLICABILITY This policy is applicable to all privately built hangars constructed after the effective date of this policy and located on Cox Field Airport properties. III. INITIAL LEASE Initial leases require the submission of an application in a form specified by the City to be filed with the City Manager. Thereafter, if all prerequisites are satisfied, a Cox Field Airport Standard Ground Lease shall be prepared by the City and the appropriate support documentation shall be forwarded to the Airport Director and subsequently to the Airport Advisory Board for review to determine the viability of a proposed project and recommendation to the City Council. The lessee shall be required to carry a construction bond or proof of financial wherewithal to complete the construction of the proposed facilities. The term of the lease granted will be 40 years. IV. LEASES AFTER EXPIRATION OF INITIAL LEASES Tenants of hangars which are built by the Tenant as consideration for a long -term ground lease shall be given the right -of- first - refusal for the lease of such hangar upon the expiration of the initial lease. The monthly rental rate for such hangars shall be determined as set out herein. V. TERMS OF LEASES A. Background The City of Paris based this policy on recommendations of the Airport Advisory Board and the results of a study of other airports conducted by the Legal Department and presented in August 2001. The lease terms and rate termination methods have been adopted through a public vote of the City Council of the City of Paris and are herein incorporated. The term of Ground Leases on which the tenant intends to construct improvements begins at 40 years and may be renegotiable every 5 years. These terms were adopted to encourage development of the Airport and provide sufficient time for investors to amortize their investment. As a practical matter and good business for the City, Lessees and lenders have a reasonable length of time to realize an acceptable rate of return on the project prior to the potential reversion of the improvement to the City. B. Transferability The ground lease will be transferable providing the lessor and lessees approved and the new lessee assumes all responsibility and the lease agreement. Lessee agrees to pay the City of Paris, Texas, as lessor as rental for the use and occupancy of the leased premises and for then privileges, rights, uses and interest as above set forth accounting to the following. All construction should contribute to furthering the City of Paris's Airport Master Plan or Airport development objectives. VI. GROUND LEASES RATES The following is the ground lease rate to each new privately built hangar located at Cox Field Airport: $0.20 per sq. ft. per year, adjusted every five (5) years by an amount equal to the Consumer Price Index (CPI) for the previous five (5) years. All leases shall have a five (5) year CPI clause. VII. MAINTENANCE: GOOD CONDITION & REPAIR Requiring a tenant to maintain property and facilities in good condition and repair, while always important, becomes critical as end of long -term leases approaches. Securing title to leasehold improvements at the expiration of a lease is of little value to the City or Airport if the improvements are not representative of Airport standards or suitable for lease to a desirable tenant at rates meeting Airport expectations. Particular attention should be focused on major cost issues such as foundations, structural components of buildings, roofs, wall systems, hangar doors, electrical systems, etc. Sheet metal roofs and walls should be maintained to be free from leaks and significant damage and should be painted as necessary to prevent and retard rusting and to enhance appearance as original finishes deteriorate. Painting, carpeting, and other similar items are typical of maintenance and lease expenses expected of tenants. Good maintenance is an annual, on -going obligation. Any level of clutter, junky or unkempt appearance will not be tolerated. VIII. ENVIRONMENTAL CONDITION OF LEASEHOLD Tenant shall conduct its operation and maintain the leasehold in such a manner as to be free of environmental contamination. IX. COMPLIANCE WITH CITY BUILDING CODE Construction of all private hangars shall be conducted in full conformance with the City's Building Code, including the payment of all building inspection fees or other fees associated with construction. All necessary plans required for review and approval of the project shall be timely submitted. Any and all provisions of the City's Building Code applicable to hangar structures shall be complied with in full. X. TIME FOR CONSTRUCTION All privately built hangars shall be constructed within eighteen (18) months of approval of a lease agreement. Failure to timely complete construction of the hangar shall be considered a breach of the lease agreement and subject the tenant to all customary remedies for such breach. XI. USE OF THE HANGAR The hangar shall be used in accordance with the City's established policy for airport purposes only and in conformance with the requirements of the City's master lease agreement. For all new lease agreements covered under this policy, no hangar shall be used as a residence or shall be used for residential purposes. However, such items as a sink, bathroom, or associated facility to allow temporary overnight stay or perhaps occasional social uses of a portion of the hangar, will be permitted. XII. TAXES The tenant shall be responsible for all taxes, if any, including ad valorem taxes or other similar taxes, which may be assessed upon the hangar and other improvements, or any other equipment or property associated with the hangar. The lease shall require the tenant to accept full responsibility for payment of such taxes and to indemnify the City for any such payment. XIII. INSURANCE The master lease agreement shall include provisions requiring the tenant to maintain during the life of the lease general liability insurance. All costs of such insurance shall be borne by the tenant. XIV. MASTER LEASE AGREEMENT The City's master lease agreement, a copy of which is attached hereto and for all purposes incorporated herein, shall provide the framework for lease agreements between future private hangar tenants and the City. The master lease agreement may be revised or amended only with the approval of the City Council.