Michael Dunn: A fair solution
In response to yesterday’s letter to the editor, I wanted to provide the following clarifications.
The statement that the annual $15,000 cost for maintenance by the city will be absorbed by the taxpayers is incorrect. The city will receive the following economic benefits from the new hangar development, which will much more than offset the cost for maintenance:
During the 40-year term of the ground lease, the five hangars will generate over $1.2 million in lease payments. During 2016, lease payment will be $17,500, exceeding the $15,000 cost.
New aircraft based at Bob Adams Field generate additional revenue for the city, due to increased fuel sales and associated profits.
The city gets a 3 percent transfer fee upon the subsequent sale of each hangar. The city increased the transfer fee 33 percent since 2003, which is now the highest transfer fee in the state. If all the hangars were to transfer ownership, based on the initial projected gross sales price of the hangars, the fee would be more than $97,000.
To date, we have invested almost $3 million in our hangar development. At the end of the lease term, ownership of all improvements reverts to the city.
Not only will the new development be fiscally self-sustaining, it will provide extra revenue to reduce airport funding requirements from the city’s general fund.
While the maintenance provision of the master lease is ambiguous, we based our understanding that the city would be responsible for the maintenance based on the following:
Our 2003 hangar project agreements have the same maintenance provisions as our current agreements. The city has maintained, and continues to maintain, common area improvements for the 2003 project.
The city has maintained, and continues to maintain, all other private-hangar common areas, per their airport ground lease agreements, from the time the airport was acquired from Routt County.
During our project approval process, city staff required (both verbally and in writing) that the lessee meet construction specifications for snow removal features, fencing type and location, automatic gate and asphalt, so the city could maintain those improvements more efficiently and cost effectively.
Maintenance of common area improvements by the lessee was never referenced in, nor was it a condition of, the final development plan, construction drawings or the RFP. In fact, the RFP states, “Developer is responsible for all costs incurred for development, planning, engineering, architecture, site prep, utilities and infrastructure, construction costs, hangar costs, and federal fees and taxes and other associated fees,” yet the RFP makes no reference to maintenance.
From the beginning, we have understood that related to the common areas, our only responsibility was to perform maintenance on the apron area adjacent to the building where city plows were unable to complete snow removal.
While the maintenance language in the agreements may be ambiguous and subject to differing interpretations, as always, actions speak louder than words. And the city has consistently maintained all airport ramp and common area improvements.
If the city was intent on modifying its longstanding policy of maintaining all common areas at the airport, including aprons and gates, this should have been clearly stated (as was the case with the sewer easement agreement) and should have been addressed far sooner than four years into the project.
Finally, I think the council provided its initial approval for the proposed lease amendment due to their deep understanding of the facts, as outlined above, and their desire to arrive at a fair and reasonable solution related to the maintenance issue.
Aviation Development Group LLC, manager
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