ASHLAND AIRPORT COMMISSION February 11th, 2002 MINUTES MEMBERS PRESENT: CHAIRMAN PAUL ROSTYKUS, LILLIAN INSLEY, BRENT THOMPSON, MARTY JACOBSON, WILLIAM SKILLMAN, ALAN DEBOER, KENNETH EHLERS STAFF: PAULA BROWN, DAWN LAMB, BOB SKINNER, FBO MEMBERS ABSENT: DONALD FITCH, LINCOLN ZEVE 1. CALL TO ORDER: 11:30 AM ADDITIONAL AGENDA ITEMS: A) Sandler Proposal 2. APPROVAL OF MINUTES: February 11th minutes accepted as written; moved approval – seconded; passed unanimously. 3. OLD BUSINESS: A. Airport Brochure Brochures are printed and will be distributed to the Chamber of Commerce and the Airport. Copies provided to Commission members. 4. NEW BUSINESS: A. Allan Sandler Proposal Sandler proposed two potential locations for hangar development. The space adjacent to the Sky Research Hangar (Site A) would be beneficial if qualifying for a SFBO status, but if hangar would be a non-commercial activity, the site adjacent to the Day/Scott Hangar (Site B) would work. Brown hopes for three to four more commercial hangars in front of the taxiway at Day/Scott site. If Sandler builds the 120” X 80” hangar at Site B it will limit future sites from four hangars to two. Commission addressed the points Sandler presented in his letter dated 1/3/02: 1) Sandler in agreement with master lease but will need to clarify some points with City attorney and staff. 2) Application for commercial hangar at Site A, 100 X 100 feet, operating under Secondary Fixed Base Operator standards for G, I & K. Utilization will be split 4900 sq ft for air frame/engine avionics work; 1300 sq ft for office and client rooms; and 3700 sq ft for airplane storage. Unisex restroom will occupy approximately 40 sq ft. A 1300 sq ft. mezzanine will be used for parts storage. 3) Hangar access, landscaping and parking, hangar elevations, construction and ADA requirements as well as setbacks are subject to conditions set by Planning and Engineering. 4) Rental rate approximately $.17 sq/ ft. with a lease period of 25 years with intention of five 5 year options. Sandler did comment that at the end of the five year periods he would like option to renegotiate the lease rate. The current hangar lease increases by ˝ CPI annually. Sandler is asking for a different basis with a renegotiating process for his lease. 5) $2,000 (Airport Improvement Fee) will be paid upon signing of the lease. Time limits according to Hangar Construction requirements will be followed. If before the 90 day option period Sandler decides to cancel then he would like the $2,000 refunded. Skillman asked if there was any assurance that the hangar will be utilized as specified. Sandler commented that any variations from the lease would be considered a breach of lease and would become a legal issue. Jacobson asked if the Commission really cared what the hangar was used for as long as rent was being paid. Sandler asked if he was to build a non-commercial hangar if Site B would be the better option and commission commented that if he was not an SFBO he could not have a mechanic working in the hangar on clients airplanes. Action: Sandler will pursue Site A and staff will continue negotiations with Sandler and Sky for FBO lease opitons. B. Commercial Lease Option Discussion Brown has had ongoing negotiations with Sky for the commercial lease. There are many gray areas that need to be considered. The FBO lease is for a revenue generating business based on the airport. Skinner’s lease has nothing to do with a land lease and his lease is a five year lease with three five year options so it is a twenty year lease. Skinner is an agent to the City and receives a percentage of the airport hangar lease income for collecting the rental fees and managing the fuel sales. If a business is operating at the airport and not as an agent of the City, then a percentage or a fee should be charged to support the infrastructure of the airport. Brown has discussed a 5% collection of gross income from Sky based on products created here at the airport and not figure in any income that is created off the airport. This would be very difficult to track for both Sky and the City and negotiations are still being worked out. Brown commented that at the end of a five year option, these terms could be reconsidered. It is a negotiation on the table and nothing is agreed to at this time. These kind of conditions are how we can make the airport self sufficient and that needs to be a priority. Sandler pointed out that Tregg Scott and Alan DeBoer both run businesses on the airport and have for some time. Commission pointed out that they operate as hangar keepers and under that heading they are not considered as SFBO status. This is clarified in the Minimum Standards. The percentage of gross revenue could be collected in lieu of the hangar rent or vice versa whichever was greater. This could be an option, or could apply to the landscape/parking lease rates. Staff is negotiating for a percentage of the gross revenue based on the airport as an SFBO. If the gross exceeds a certain set amount, we receive a portion of their profit, if the square footage rate is more than the business percentage we base the percentage on that amount, whichever is greater. Rostykus felt the landscape/parking piece should be part of the SFBO lease. Sandler has similar leases and this process works very well, he adds a 5% on top of the rent based on gross profit and makes the rent the minimum of the rates. DeBoer leaned towards the SFBO profit based one what is only produced in Ashland. Problem is how to identify and track that amount. There amount if using the landscaping/parking fee would be $3000 or 5% of profit whichever is greater on the items that are produced under the minimum standards category. Sandler felt these terms were fair. Jacobson feels this is an unfair practice. Developers invest $20,000-30,000 to build and to ask them to pay more is not right. To negotiate this plan would single out small business operators who find it hard enough to make it. Skinner understands where Brown is coming from; a hangar is one thing but a business will be making money on the airport and should help support the infrastructure of the airport. Jacobson pointed out that they will still have City fees to pay. Other Commissioners stated that they would have fees anywhere they built. Anne Sky spoke up that the negotiations were not final and that Sky was not supportive of the 5% because they do not feel comfortable with the City looking into their books. Sky would support the fixed rate fee but the unknown of the income makes Sky apprehensive. They would be willing to discuss a fixed rate for the first five years and consider the percentage at the renegotiations. This will give them a chance to establish the business and see what is really being looked at. Rostykus assured the commission that the lease will be worked out by City administration and brought back to the Commission for consideration. Rostykus asked commission if they support the concept that if a business is operating as a FBO on the airport they should have a higher rate? Most of the commission supported. Jacobson only supports this notion if it is a fixed rate and not a percentage. Rostykus felt a subcommittee may be the best option for hashing out this decision. Staff needs clear direction for this project. Brown will continue to work with Sky to resolve the lease issues. The lease needs to be fair to all SFBOs. Brown pointed out that the airport needs to generate revenue to stay a viable business. The Sorenson lease will need to be worked for a commercial building but not as an FBO. The availability of utilities are the immediate concern for Sorenson’s development. Action: Staff will continue negotiations and development of the lease for the commercial and FBO leases and report back to the Commission. C. Budget Preparation Brown presented a spreadsheet showing last years expenses and the next years’ anticipated amounts. Brown needs any changes the Commission would like to make to the Budget Committee. Brown detailed each expense and showed suggested changes. Under the maintenance column Brown could add an additional $12,000 for the replacement of the parking lot. Staff is trying to receive funding from the state or from ODA for this expenditure. DeBoer commented he would like to see the revenue side of the budget. Action: Insley motioned to approve the budget as presented by Staff. Ehlers seconded the motion. Unanimously passed. Budget will be presented to the Budget Commitee on April 11th. 5. AIRPORT MANAGER REPORT/FBO REPORT/AIRPORT ASSOCIATION: A. Status of Airport, Financial Report, Review of Safety Reports Activity has been spotty. Nothing to report. Zeve construction going well. ADJOURN Meeting adjourned at 1:10 PM