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Best Practices for Airport Leasing and Fees Management

Explore key policies and compliance documents for effective airport management. Learn about leasing, rent, and fee structures to ensure airport sustainability and compliance with regulations.

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Best Practices for Airport Leasing and Fees Management

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  1. Airport Leasing, Rents, and Fees Best Management Practices • Presenter • David C. Benner, Managing Consultant • Aviation Management Consulting Group Hershey, Pennsylvania March 28, 2019

  2. Introduction

  3. Introduction • Session Outline • Relationship Framework • Airport Sponsor Assurances • Primary Management and Compliance Documents • Leasing Policy • Rents Policy • Fees Policy • Development Process • Concluding Thoughts

  4. Relationship Framework • Why is this topic important? • Airport Sponsor Assurance compliance • To secure Airport Improvement Program (AIP) funds – a grant, an airport sponsor is required to give certain assurances to the FAA • Specific Assurances of Discussion • 22. Economic Nondiscrimination • 24. Fee and Rental Structure

  5. Airport Sponsor Assurances • Economic Nondiscrimination (#22) • Sponsor will make its airport available as an airport for public use on reasonable terms and without unjust discrimination to all types, kinds, and classes of aeronautical activities. • PMCDs • Rules and Regulations • Minimum Standards • Development Standards • Leasing/Rents/Fees Policies

  6. Airport Sponsor Assurances • Fee and Rental Structure (#24) • Sponsor will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport. • PMCDs • Rules and Regulations • Minimum Standards • Development Standards • Leasing/Rents/Fees Policies

  7. Primary Management and Compliance Documents • Definition • A compendium of documents that govern the operation, management, and development of the airport, including: • Rules and Regulations • Minimum Standards • Leasing Policy • Rents Policy • Fees Policy • Development Standards

  8. Primary Management and Compliance Documents • Purpose – in combination, these documents: • Contribute to the financial health of the airport • Facilitate (foster) orderly development • Promote the provision of quality products, services, and facilities • Protect the health, safety, interest, and general welfare of the public • Reduce the potential for conflict with lessees, consumers, and users • Reduce the potential for and provide a platform for the resolution of Part 13 (informal) and Part 16 (formal) complaints

  9. Primary Management and Compliance Documents • Roles • Set the stage for the way the airport does business • Play an important role in the operation, management, and development of the airport (large and small) • While these documents are interrelated, they function independently of each other • Must be consistent with, and not duplicate: • Airport Sponsor Assurance and other legal requirements • Compliance related directives issued by the FAA • Policies, Orders (e.g., 5190.6B), Advisory Circulars

  10. Primary Management and Compliance Documents

  11. Leasing Policy • Definition • Sets forth the policies for leasing airport land and improvements • Role/Purpose • Conveys the airport’s leasing policies/practices • Applies to entities who want to occupy/use airport property (new and/or renewal of existing agreements)

  12. Leasing Policy • New leases • Application • Negotiate (key terms and conditions) • Memorandum of Understanding (MOU) • Lease agreement • Approval process • Issue an RFI/RFQ/RFP (competitive process) • Existing leases • Upon expiration • Extend (or renew) existing lease agreement • Negotiate new lease agreement • Issue an RFI/RFQ/RFP Immediate Need Public Disclosure Solicitation

  13. Leasing Policy • Term • Base term • Options • Capital investment • Leasehold improvements • Reversion of improvements • Airport improvements • Amortization Period • Minimum • Maximum

  14. Leasing Policy • Subleasing • Permitted in the agreement • Consent required • Not permitted in the agreement • Approval required • Sublessee obligations • Sale, Assignment, or Transfer • Change in Controlling Ownership • Encumbrance or Mortgage Standard Sublease Form

  15. Rents and Fees Policies • FAA requirements • Methodology for general aviation must be: • Reasonable • Justified, and • Consistently applied • Goal of being as financially self-sustaining as possible given the circumstances that exist at the airport (Assurance 24)

  16. Rents Policy • Definition • Sets forth the policies for rent associated with airport land and improvements • Role/Purpose • Conveys the methodologies utilized by the airport sponsor to set and adjust airport rents • Applies to entities who lease airport land and improvements

  17. Rents Policy • Establishing rents • Methodology • Negotiation: open market, prudent, and no undue stimulus • Rent Study (best practices approach) • Appraisal (circuitous approach to rent) • Adjusting rents • Methodology • Negotiation, fixed, index (e.g., Consumer Price Index), rent study, combination, alternating • Frequency

  18. Rents Policy • Negotiation • Can result in a “market” transaction as long as… • It’s an open market… • The buyer and seller each act prudently and knowledgeably… • The price not affected by undue stimulus

  19. Rents Policy • Rent Study • Approach • Rental rates for similar aeronautical land and/or improvements at comparable airports are analyzed to derive an appropriate rental rate • Identify comparable airports and similar leased premises • Airports: infrastructure, approaches, tower, market, activity levels • Premises: use, size, location, terms and conditions • Restrictions: inability to support aeronautical use • Compilation and analysis of data

  20. Rents Policy • Rent Study • Conclusions Process • Determine based on component • Unimproved (raw) land • Improved land (with access and infrastructure to the property line) • Site improvements (ramp areas, vehicle parking) • Facilities (terminal building, hangars, office, and shop space) • Non-real estate (business) • Percentage rents (gross receipts) • Are they being charged in lieu of rent?

  21. Rents Policy • Appraisal • An appraisal is typically performed when a “value” is desired or required to facilitate the sale, acquisition, or financing of airport property • In some cases, a value may be used (or may be required by the lease agreement) to calculate rent • Can be used to determine the value of the interest held by a lessee (leasehold interest) or lessor (leased fee) in land and/or improvements • Leasehold interest • Leased fee estate

  22. Rents Policy • Appraisal • Leasehold Interest • “The interest held by the tenant (lessee) through a lease conveying the rights of use and occupancy for a stated term under certain conditions” • Leased Fee Estate • “The interest in a property that remains with the owner (lessor) after the right to use and occupy the property has been conveyed to another (this right is usually granted by a lease for a specific period of time).”

  23. Rents Policy • Appraisal • Fundamental approaches to value • Cost Approach • Current cost of replacements less depreciations plus value of land • Sales Comparison Approach • Direct comparison of similar properties that have sold in same/similar market • Income Approach • Based on estimate of the property’s net income potential

  24. Rents Policy • Special Development Considerations • Qualifications • Knowledge and experience of appraiser/consultant • General aviation industry, commercial/non-commercial • Instructions • Appraisal: cost, income, and/or sales comparison approaches • Highest and best use (aviation-related) • Location, access, conditions, and amenities • Dispute resolutions procedures/process

  25. Fees Policy • Definition • Sets forth the policies for fees associated with the use of the airport • Role/Purpose • Conveys the methodologies utilized by the airport sponsor to set and adjust airport fees • Applies to entities who use the airport

  26. Fees Policy • Establishing fees • Methodology • Market • Fee Study (best practices approach) • Adjusting fees • Methodology and frequency • Annual to coincide with budget year • Floors and ceilings of adjustment

  27. Fees Policy • Fee Study • Approach • Cost-recovery basis • Allocate non-funded costs to general aviation (cost center approach) • Planning, development, operation, management, and reasonable reserves • Ascertain the gap • Select and calculate fees required to close the gap (recover costs) • Cross check calculated fees against the market • Set based on reasonable cost-recovery target while striving for financial self-sustainability

  28. Fees Policy • Special Development Considerations • Types of fees and basis • Fuel flowage – cents per gallon sold/dispensed • Landing – cents per 1,000 lbs. aircraft weight • Ramp – fixed fee (by type) with a minimum • Facility – fixed fee (by type) with a minimum • Activity – dependent on type of operator and/or activity

  29. Development Process • Overview • Identify and understand influencing factors • Internal vs. external • Solicit stakeholder input/outreach program (for policies) • Consult resources and references • Utilize a structured development/review process

  30. Development Process • Internal Influencing Factors • Managerial (mission, vision, value, goals, objectives) • Existing management and compliance documents • Airport profile and history • Planning, development, financial, and economic • External Influencing Factors • Political • Community • National, regional, and local marketplace

  31. Concluding Thoughts • Importance of the Process • The process can be more important (and more beneficial) than the final work product (final documents) • Need to be kept current or developed • If consistent with the Airport Sponsor Assurances and other compliance related directives issued by the FAA… • PMCDs will reduce the potential for (and provide a platform for resolving) conflicts, complaints (14 CFR Part 13 or 16), and disputes (including lawsuits)

  32. Industry Resources • ACRP 01-38 • Title • Market Value Characteristics for Property at Small Airports • Objective • Help airport managers from small airports estimate market value or rent for airport properties and successfully negotiate agreements • Applicable Findings • Description of value vs. rent, FAA guidance, airport/property characteristics, methodologies, negotiation • Schedule • Currently under industry review

  33. Questions and Discussion • Session Outline • Relationship Framework • Airport Sponsor Assurances • Primary Management and Compliance Documents • Leasing Policy • Rents Policy • Fees Policy • Development Process • Concluding Thoughts 9085 East Mineral Circle, Suite 315 Centennial, Colorado 80112 (303) 792-5205 Direct dbenner@amcg.aero David C. Benner, C.M. Managing Consultant

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