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Guidebook for Developing and Leasing Airport Property (2011)

Chapter: Appendix A - Case Studies

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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Appendix A - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Questionnaire To Airport Sponsors The survey below was distributed to airport sponsors of nominated case study airports. Dear Airport Sponsor, On behalf of the Transportation Research Board of the National Academies, RW Armstrong is compiling a Guidebook on the Best Management Practices for Leasing and Developing Airport Property. Our objective is to develop a Guidebook for airport management and other relevant stakeholders to implement leasing guidelines, property management and development bench- marks, and sample development agreements in the context of airport improvement and expan- sion. This Guidebook will be applicable to airports of all sizes. One or more projects at your airport have been nominated based on the following criteria: project(s) completed within the past 5 years, diversity and innovative alliance(s) of stakeholders, financing model(s), and those that optimized public and private investments. In order to further evaluate the nominated project(s), we ask that you describe the project(s) in the following manner: 1. What was the name of the project? 2. When was the project completed? 3. Please describe the stakeholders involved (cities, counties, states, the FAA, and economic development entities are examples of stakeholders you might consider). 4. How did this project stimulate economic activity in terms of job creation and/or other impact to the local economy? 5. To what extent does this project produce revenue for the Airport Sponsor? 6. What, if any, innovative financial tools, grants, abatements, and/or incentives were employed in this project? 7. How, if applicable, was public and private investment leveraged in this project to entice new economic activity worthy of benchmarking by other public airports? Name of Airport: Contact Information: Case Study Summaries The following sections contain summaries of the 10 case studies used in the compilation of this Guidebook. The summaries provide a project overview, identification of the key stakehold- ers in the development and execution of the project, a listing of the key lease elements, consid- erations for the tenant, and identification of the benefits for the airport and community. 77 A P P E N D I X A Case Studies

Collin County Regional Airport (TKI) Airport Type: General Aviation Tenant: EDS/Hewlett Packard Tenant Type: Corporate Hangar Complex Project Type: New Facility Facility Location: Airside 78 Guidebook for Developing and Leasing Airport Property SOURCE: Collin County Regional Airport. SOURCE: RW Armstrong, 2009. Project Overview Collin County Regional Airport is owned by the City of McKinney and is located in the north- east corner of the Dallas-Fort Worth Metroplex. It is the only airport capable of handling business class aircraft in the county and was looking to attract EDS/Hewlett Packard’s (EDS/HP) corporate flight department. EDS’s corporate headquarters are located in Plano, TX, approximately 15 miles from the Airport. Collin County Regional Airport encouraged the McKinney Economic Develop- ment Corporation (MEDC) to assist in attracting the flight department by providing financial incentives. Through public records, the Airport and MEDC were able to estimate a minimum tax impact that EDS/HP could bring to the Airport (based aircraft are taxed on approximately 50% of their value). They used this estimate to determine the financial incentives that could be offered to EDS/HP to assist in the pursuit. An agreement was achieved through a complex arrangement between the Collin County Regional Airport, the City of McKinney, EDS/HP, MEDC, and Collin County Regional Investments (CCRI). The Airport leases the land to CCRI, who developed the hangar complex. The facility is in turn subleased to EDS/HP. MEDC provides a rent subsidy directly to EDS/HP, and the City of McKinney pays EDS/HP for the land leased to accommodate a required storm water detention facility. Tax abatements and other incentives (detailed in the fol- lowing sections) were also involved in reaching a successful agreement. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease arrangement: Airport Sponsor: The City of McKinney was interested in attracting EDS/HP’s corporate flight department and was able to offer some incentives to appeal to the company. The City also pays to accommodate a required storm water detention facility.

Collin County Regional Investments: CCRI, a private developer, agreed to construct the facil- ity and sublease it to EDS/HP. They also purchased two 15,000 gallon, above ground fuel storage tanks for EDS/HP’s exclusive use. The FBO manages EDS/HP’s fuel system for $0.08/gallon. McKinney Economic Development Corporation: MEDC was instrumental in bringing EDS/ Hewlett Packard to TKI. MEDC pays EDS/HP’s facility rent payments and purchased a fuel truck for EDS/HP’s exclusive use. Texas Department of Transportation (TxDOT): TxDOT matched an amount provided by the City to pay for the taxi lane constructed adjacent to the EDS/HP hangar complex. Key Lease Elements The end product of this corporate hangar project is a comprehensive agreement between the City of McKinney, MEDC, CCRI, and EDS/HP. It is a complex deal, but it brought these entities together to benefit the Airport, the City, Collin County, McKinney Independent School District, and Collin County Community College District (the four taxing entities). Agreements: The lease consists of agreements between the City and CCRI and between CCRI and EDS/HP. • City leases the land to CCRI. • Lease term is 40 years with a fixed rate for 10 years. Rate is adjusted on the 10th anniversary, and adjusted every 5 years, thereafter. • A portion of applicable ad valorem taxes are abated for 10 years: – $31 million appraised value (2005) = 25% abatement, – Amounts exceeding $31 million = 40% abatement, and – Required amount decreases by $1 million to $22 million in 2015 (10th anniversary). • CCRI subleases the land and the facility to EDS/HP for 10 years. • Lease default would result in loss of future tax abatements and force repayment of abated taxes for preceding years. Financial Considerations for the Tenant The City of McKinney and MEDC were able to offer EDS/HP incentives based on a minimum tax impact. EDS/HP receives a rent subsidy of $34,650 per month directly from MEDC. The City pays $7,040 per year for the land leased to accommodate CCRI’s storm water detention center, and constructed a taxi lane to allow EDS/HP aircraft to access the hangar facility from the Air- port’s Air Operations Area. Finally, MEDC provided EDS/HP up to $100,000 to purchase a fuel truck for the exclusive use of fueling EDS/HP aircraft. Airport Benefits and Revenue Because of the creative incentive package the City of McKinney and MEDC were able to offer EDS/HP, the Airport succeeded in bringing the EDS/HP corporate flight department to TKI. The Airport collects $0.22 per square foot for the ground lease from EDS/HP. Additionally, the Air- port collects a fuel-flowage fee of $0.09 per gallon on approximately 350,000 gallons per year. The Airport’s FBO receives $0.08 per gallon of fuel delivered to EDS/HP as a fuel system use fee for storage of EDS/HP fuel in their fuel farm. The City also receives the benefit of a tax base increase from basing business aircraft on airport property. EDS/HP is expected to generate approximately $681,500 per year in Business Personal Property and Real Estate tax. The local community reaps a large share of the benefits resulting from this proj- ect. There is little public expense or risk involved in the project, and part of the taxes received from EDS/HP help fund educational entities. The McKinney Independent School District receives $1.517/$100 and the Collin County Community College District receives $.086/$100. Case Studies 79

Monroe County Airport (BMG) Airport Type: General Aviation Tenant: Multiple Type of Business: Aircraft Storage Facility Location: Airside 80 Guidebook for Developing and Leasing Airport Property SOURCE: Monroe County Airport. SOURCE: Monroe County Airport. Project Overview After an economic recession in the early 1980s, development at Monroe County Airport (BMG) was stagnant and public funds were not available for development of hangars and aircraft storage facilities at the Airport. The Airport decided to look into means of enticing private development. The Airport Board approached local business and aviation partners and was able to attract tenants for an eight-unit, 29,000 square foot hangar complex, which was completed in 1994. The lease term for this facility was 20 years with a 10-year option for renewal, after which it would revert back to the Airport. Seeking ways of providing the tenant with incentive to maintain the facil- ity, the Airport decided to allow the tenant to retain a portion of ownership in the facility. The Air- port would become vested in the facility at a rate of 2.5% per year. At the end of 30 years, the tenant would still own no less than 25% of the improvements they developed. The Airport intends to be able to purchase the remaining portion of ownership in circumstances where the tenant intends to vacate at the end of the lease with money from an account created with revenue from lease payments. This methodology has been extremely successful at BMG. In 1998 a flight-training center with seven offices was constructed, and in 2000 a corporate flight department relocated to the airport and constructed a 13,000 square foot complex. The corporate flight department cited BMG’s unique lease structure as a determining factor in their decision to relocate to the Airport. Key Stakeholders Following is a list of key stakeholders responsible for the development and ultimate execution of the lease arrangement: Airport Sponsor: Monroe County works closely with the Economic Development Associa- tion to identify development opportunities. The County also approves land acquisition efforts to prepare the Airport for future development.

Monroe County Board of Aviation Commissioners: The four-person County Board persisted in finding ways to bring revenue to the Airport, after the Airport suffered from a lack of develop- ment as the result of a down economy. When it was clear that public funds would not be avail- able for development, the board approached private aviation business partners. Private Developers: Private organizations develop and own their facilities until the end of the lease term, or until they sell their portion of ownership to the Airport or a new tenant. Economic Development Association: Works closely with the Airport Sponsor to seek devel- opment opportunities. Key Lease Elements Initial lease terms at the Airport are for 20 years with a 10-year extension option. If tenants wish to vacate the facility, they have the option of transferring the lease to a new tenant or sell- ing their portion of ownership in the facility to the Airport. Ownership Structure: The most important element of the leases at BMG is the ownership structure. Private entities develop and own their facilities, and the Airport becomes vested in the facility at a rate of 2.5% per year. At the end of the 20-year lease term, the tenant still owns 50% of their improvements; if they choose to exercise the 10-year option, they still own 25% at the end of 30 years. Fair Market Value Appraisal: Appraisals will be conducted by both the Airport and the ten- ant. If the values of the two appraisals are within 8%, the average of the two appraisals will be con- sidered fair market value. If the values are not within 8%, a third, independent appraisal will be conducted. The highest and lowest of the three appraisals will be rejected, and the mid value will be considered fair market value. Rent Adjustments: Ground rents and facility rents should be adjusted per an agreed-upon frequency and methodology identified in the lease agreement. Adjustments are typically made every 3-5 years, and might be tied to the Consumer Price Index (CPI), whereby rental adjust- ment will be equal to the percentage change in CPI for the period prior to the last changes in rental rate. Financial Considerations for the Tenant Aviation-related businesses at Monroe County Airport do not pay property taxes. Further, tenants receive the benefit of retaining a stake of ownership in their improvements. When the lease has expired, the tenant is left with a transferable asset. The Airport will purchase the remain- ing portion of ownership for fair market value, or the tenant may transfer the lease to a new ten- ant at any time throughout the lease term. Benefits to the Airport Allowing the tenants to retain ownership in their improvements relieves the Airport from the duties of property management, and retention of tenant equity provides the tenant with incen- tive to keep facilities in good condition. With the construction of the hangar complex and the implementation of the tenant ownership incentives, BMG had reason to raise their rental rates, which were previously lower than some similarly sized airports. The Airport now invests the extra revenue created by the rate increases in its Building Fund, set aside for the purchase of equity at the end of a tenant’s lease. Since the inception of this development project, based aircraft and air traffic at BMG have increased significantly. In 1994, there were 79 based aircraft; there are currently 101 based aircraft. The Airport estimates that over 100 jobs have been created by companies relocating to BMG. The Airport has since acquired additional land and secured AIP funding for future development. Case Studies 81

Coastal Carolina Regional Airport (EWN) Airport Type: Non-Hub Tenant: Tidewater Air Type of Business: Fixed-Base Operator Facility Location: Airside 82 Guidebook for Developing and Leasing Airport Property SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009. Project Overview Coastal Carolina Regional Airport (EWN) is a small commercial service airport located in New Bern, North Carolina. The physical appearance of the existing Fixed-Base Operator (FBO), Tidewater Air, created concern within the local business community, airport board members, and airport representatives. It was felt that the existing FBO did not adequately represent the image of New Bern to the general aviation public that uses an FBO as a portal to the community. The Airport Authority visited other airport FBOs and conducted surveys in order to identify pos- sibilities for a new FBO facility and to guarantee a first-class facility that would best represent their community. In 2005 construction began on the new FBO facility, while the existing facility was still in use. Construction costs were divided into Vertical elements (structure), privately funded by Tide- water Air, and Horizontal elements (land preparation, paving), paid for by the Airport Author- ity. The Airport and FBO approached local businesses to discuss the donation of fixtures, furnishings, and other required items. Each room in the new facility was furnished using dona- tions from local businesses. The existing FBO lease was amended to include a term extension for the new Tidewater Air FBO facility. Craven County waived property taxes on the facility, and the airport collects monthly rental payments at the new facility, as well as a fuel-flowage fee on each gallon of fuel sold. Key Stakeholders Following is a list of key stakeholders responsible for the development and ultimate execution of the lease arrangement:

Airport Sponsor: Coastal Carolina Regional Airport Authority provided the land, infrastruc- ture, access, and utilities for the project. The Authority was also responsible for the design and construction of all Horizontal elements for this project and for the demolition of the existing terminal. Airport Board: The Airport Board initiated the request for a new facility and researched facil- ities at similar airports. Committee of 100 Economic Development Corporation: Communicated with members of Congress to gain support for the project. State of North Carolina: Provided $250,000 for the Horizontal elements of the construction. Tidewater Air (Tenant): Funded the Vertical elements of construction. Local Businesses: The inside of the building was furnished using donations made by local businesses, and totaling $35,000. Key Lease Elements Lease Term: Tidewater Air privately funded a large portion of this project. In return, Tidewater Air’s lease agreement with the Airport was extended for 25 years. Land rent paid to the airport increases by 15% every 5 years. This project was divided into two portions: • Vertical elements (funded by Tidewater Air): – Foundation and Building pad and – All above ground improvements which comprise the structure. • Horizontal elements (funded by the Airport Authority): – Entrance roadway, – Parking lot, – Site preparation, – Drainage, – Sedimentation and erosion control, – Landscaping, – Potable water, – Sanitary sewer/septic system, – Electrical utilities, and – Phone lines and cable service. Considerations for the Tenant Tidewater Air was encouraged by the support from the community and the Airport Authority. The Airport Authority amended Tidewater Air’s current lease to include a 25-year extension, allow- ing Tidewater Air to recoup its investments in the new facility. The Authority also funded the Hor- izontal elements of the new facility and paid for parking lot improvements. The building was furnished with funds donated by local businesses. Finally, Tidewater Air benefits from having prop- erty taxes waived at the Airport. Benefits to the Airport The previous FBO facility at EWN was in disrepair and functionally limited. The building was unable to accommodate the number of pilots transporting business travelers to and from New Bern. The new facility is a significant upgrade that will meet the needs of the aviation commu- nity. The Airport receives land rent for the real estate on which the facility is located. Tidewater Air pays the Airport a fuel-flowage fee on their fuel sales each month. Case Studies 83

84 Guidebook for Developing and Leasing Airport Property SOURCE: http://www.flickr.com/photos/chchchacos/2968580859/ SOURCE: http://www.bridgew.edu/aviation/ Project Overview The City of New Bedford in southeastern Massachusetts is home to New Bedford Regional Airport (EWB) and Bridgewater State University. The college and the airport collaborated to convert a former Delta Air Lines pilot training facility (originally a plumber training facility) into a modern flight training facility. This collaboration was the result of mutually-vested interests by both parties. New Bedford’s mayor made a strong commitment to ensure a solid aviation management program at Bridgewater State University. The New Bedford Regional Airport was an attractive location for its flight-training center due to its close proximity to campus, and the operating air traffic control tower. The conver- sion of the building was a collaborative effort between the city and the airport. The airport funded the upgrades to the building, while the city and university staff provided most of the labor in-house. Bridgewater’s program caters to a broad base of students and has positively impacted the air- port and gained solid FAA support. At least 18 direct jobs have been created, and several busi- nesses have been positively affected through new fuel and maintenance contracts. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease arrangement: Airport Sponsor: The City of New Bedford paid approximately $50,000 to update the facility after Delta’s departure and provided labor at no cost. Tenant: Bridgewater State University’s operations are funded through the regular operating budget of the school. The University also provided labor in-kind to assist in preparing the facility for use as a training center. Division of Capital Asset Management: Negotiated the lease between the City and the University. New Bedford Regional Airport (EWB) Airport Type: Non-Hub Tenant: Bridgewater State University Type of Business: Flight Training Facility Location: Airside

New Bedford Redevelopment Authority (RDA): After Delta left EWB, the facility reverted back to the Airport when the RDA lease expired. Key Lease Elements The lease was negotiated by the Division of Capital Asset Management and Maintenance. In the agreement, the Commonwealth of Massachusetts is the tenant, and Bridgewater State Uni- versity is the “user agency.” The lease term is 5 years, the maximum allowed for state entities in Massachusetts, and rent is paid monthly in equal installment. Considerations for the Tenant New Bedford Regional Airport was a perfect fit for Bridgewater State University’s aviation pro- gram. The Airport is located near the school, and its air traffic control tower makes it a good loca- tion for a flight training program. Bridgewater State University has a strong education program and wanted a building that would identify with their educational reputation. After the Airport renovated the building at EWB, it was a facility the University could show to prospective stu- dents with pride. Benefits to the Airport Because the Airport acquired the flight training facility from the Plumber’s Union through a short-term financing arrangement with the Redevelopment Authority at no cost, all rent received from Bridgewater State University now goes to operational support. The Airport also receives rev- enue through fuel-flowage fees. The flight training center has created at least 18 jobs, including associate dean, flight instructors, dispatchers, and support staff. It has indirectly affected several businesses at the airport through fuel and maintenance contracts, building maintenance contracts, and building incidentals. The upgraded and modernized building will have a positive and significant impact on airport opera- tions, impacting overall FAA support. Albany International Airport (ALB) Airport Type: Small-Hub Tenant: HondaJet East Type of Business: Factory Service and Sales Center Facility Location: Airside Case Studies 85 SOURCE: Business Images, New York’s Tech Valley, November 5, 2008 SOURCE: www.Honda.com

Project Overview Note: The research and interviews for this case study were conducted in early 2009. Since then, the circumstances have changed and the project is being structured differently. However, the initial con- ditions of this case study and its main tenants still illustrate a solid foundation that other airports could apply to their own plan for development of airport property. In February 2007 Albany International Airport (ALB) sent a letter to Honda Aircraft Company informing them of the Airport’s desire to be the northeastern location for the new HondaJet loca- tion. In response to this letter, ALB spoke to representatives of HondaJet East and expressed inter- est in receiving the Request for Proposals (RFP) when it was released. During a site visit, the Authority was able to revise its initial RFP submittal to offer HondaJet East a parcel of land directly adjacent to the fixed-base operator. In April 2008 HondaJet announced that they had chosen Albany for the site of their new facility. During negotiations, the Authority attended several meetings with the senate majority leader of the State of New York, and with HondaJet East officials to request an economic development grant. The Albany Airport Authority applied for two grants on behalf of HondaJet East from the New York State Economic Development Assistance Program, and the New York State Transportation Bond Act (AIR ’99). Additionally, the Authority provided a match toward the cost of construction, reducing HondaJet East’s direct costs. The incentive to attract HondaJet East was a grant package close to 10% of the capital cost to build the new facility. The incentive package, along with a good fit of culture, future vision, and proximity to major northeastern markets, made Albany Interna- tional Airport the perfect fit. The new HondaJet facility will create strong economic activity in the greater Albany commu- nity, as well as the surrounding region. The new facility is estimated to generate at least 29 profes- sional and skilled jobs, in addition to attracting a broader base of customers to the airport. The facility is expected to open in the fourth quarter of 2010. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease agreement: Airport Sponsor: The Albany County Airport Authority initiated the conversation between the Authority and HondaJet East, with a letter stating their interest in bringing HondaJet’s facility to the Airport. The Authority also applied for grants on HondaJet’s behalf and paid a $45,000 match to reduce HondaJet’s construction costs, to entice the company to locate at the Airport. New York State Economic Development Assistance Program (EDAP): With support from the New York State senate majority leader, the EDAP provided a $500,000 grant to the Albany County Airport Authority to benefit the HondaJet East project. New York State Department of Transportation (NYSDOT): Processed the application that resulted in the award of an $180,000 Transportation Bond Act (AIR ’99) grant, provided on behalf of HondaJet East. Key Lease Elements The lease for this project consists of an agreement between Flight Jets East, Inc., dba HondaJet East and the Albany County Airport Authority. The Authority leases the Airport from Albany 86 Guidebook for Developing and Leasing Airport Property

County, and the current lease extends through 2036. The land lease with HondaJet East, at the writing of this report, was scheduled to begin on the earlier of either January 1, 2011, or the date a certificate of occupancy is issued. The initial lease term is for 25 years, to end when the Author- ity’s lease with the County ends, but HondaJet East will have the option of two renewals at the end of the initial term, each for 7.5 years. Right of First Refusal: The land lease covers 87,294 square feet of land that will be occupied by HondaJet East. There is an additional parcel of land totaling 45,150 square feet adjacent to the primary parcel and available under option. This adjacent parcel could be used as an expan- sion site for HondaJet East, who will have the right of first refusal during the first 10 years of the lease. Construction Requirements: The lease agreement requires that HondaJet construct, at their own expense, a 12,000-square-foot hangar, a 1,567-square-foot service space, and a 5,406-square- foot non-FBO space. Approval of Plans: HondaJet East must provide detailed construction plans, specifications, and architectural renderings of any improvements, to the Authority, for approval before mov- ing forward with construction of improvements. Lease Extension: If HondaJet East wishes to exercise its option for a lease extension, they must begin negotiations for upgrades to their improvements 23.5 years after the commencement date of the lease agreement. Rent: HondaJet’s total rent is the sum of the base rent and a maintenance rent. Rent will be adjusted each year in accordance with the Consumer Price Index. Considerations for the Tenant Location was an important factor in selecting a site for HondaJet’s new facility; Albany Inter- national Airport proved to be an ideal location. Albany’s geographical proximity to large cities like New York and Boston was attractive to HondaJet, as visitors of larger cities might choose to arrive and depart from Albany since it is less congested than larger airports. Logistically, the loca- tion of the specific parcel of land was appealing because it was directly adjacent to the Fixed-Base Operator. Additional space for expansion was also a favorable attribute. Finally, the perfect fit of culture, vision, and quality of life in Albany appealed to HondaJet East. The HondaJet facility will cost approximately $6 million to construct and will be financed with bonds. As such, the funding from the State of New York and the Airport Authority was very enticing. Benefits to the Airport The HondaJet facility is a high profile development project that is expected to bring numerous benefits to Albany International Airport, and to the greater community. A local construction management company has been selected for the construction of this $6 million project. An annual tax impact of $906,000 is expected, along with the creation of 52 jobs. The facility will house maintenance and sales operations, attracting a variety of customers and increasing aviation activity. Finally, the project is expected to foster economic activity in terms of tourism through hotel stays and restaurant visits while customers’ aircraft are being serviced. Case Studies 87

Project Overview Baton Rouge Metropolitan Airport (BTR) purchased a 498-acre parcel of undeveloped land east of the airport in order to realign a four-lane road to meet FAA Runway Safety Area (RSA) require- ments. Once the road was realigned, the remaining 450-acre parcel was cut off from airside access by the new roadway. The portion of property not needed for RSA purposes had good development potential since it was in a desirable location with excellent highway access, but because the new road separated that portion of the parcel from the airfield, it had no potential for future aero- nautical purposes. Baton Rouge experienced a population boom after Hurricane Katrina in 2005, causing Coca-Cola to outgrow its former bottling and distribution facility. Shortly after the Airport purchased the land, the City of Baton Rouge and the State of Louisiana learned that Coca- Cola was interested in consolidating three of its Gulf Coast facilities to serve the entire Gulf Coast Region. Baton Rouge was in competition with Hattiesburg, Mississippi, for the location of the plant and both cities had deep roots with the company. The City of Baton Rouge and its mayor approached Coca-Cola, and made their desire to keep Coca-Cola in Baton Rouge very clear. The City offered a 112-acre tract that no longer had airside access to Coca-Cola for consider- ation. The lease was signed in March 2007, and construction commenced shortly thereafter, in April. The 781,000 square foot facility was built at a total cost of $176,000,000. It was the first Leadership in Energy and Environmental Design (LEED)-certified manufacturing facility in Louisiana. The reader should note two important points within this case study. First, construction of non- aeronautical improvements on property purchased for RSA enhancement is quite unusual. Had Baton Rouge Metropolitan Airport (BTR) Airport Type: Small-Hub Tenant: Coca-Cola® Type of Business: Nonaeronautical Facility Location: Landside 88 Guidebook for Developing and Leasing Airport Property SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009.

the roadway not been realigned for purposes of expanding the RSA, thereby bisecting the parcel and rendering a large portion of the parcel nonaeronautical because it did not have airside access, the opportunity to lease land for the Coca-Cola development would not have presented itself. Sec- ond, the lease term exceeds the 50-year threshold generally considered to be a disposal of property. Even though the state may have a different definition for disposal of public property, coordination with the FAA’s Airports District Office is crucial in avoiding conflict with federal grant assurances. In fact, both of these scenarios warrant close collaboration with the FAA, should the airport spon- sor wish to explore such a strategy. Further discussion of term lengths can be found in Section 3.2.4: Land Releases. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease agreement: Baton Rouge Metropolitan Airport Authority: Worked with the office of the mayor to develop a package that would attract Coca-Cola to the Airport. State of Louisiana: Arranged for $27 million in Gulf Opportunity Zone Bonds. Office of the Mayor: Originally approached BTR to discuss the availability of the land adja- cent to the airport. Louisiana Economic Development: Provided a $1.4 million performance grant through the Economic Development Award Program in order to pay for new water wells. Key Lease Elements The land lease between the City of Baton Rouge/Parish of East Baton Rouge and Coca-Cola con- sists of a 99-year lease term, with eight 10-year options to renew, and one 9-year option to renew. Note that this lease term is deemed acceptable by the FAA only because the land being leased has no practical aeronautical use due to its location and separation by a four-lane highway. Had this land been potentially usable for aeronautical purposes, a 99-year lease term would have been con- sidered a violation of grant assurances. Considerations for the Tenant Louisiana Economic Development provided a $1.4 million Economic Development Award Pro- gram grant. Coca-Cola will receive industrial property tax exemptions on buildings, machinery, and equipment; and rebates were granted on state income and sales taxes through the Enterprise Zone tax credit program for areas that meet low- to moderate-income requirements. Another rebate was granted on local sales taxes through the Enterprise Zone program. The new, larger facility allowed Coca-Cola to expand its operations as well. Bottling capacity increased from 25 million cases to 43 million cases per year. Benefits to the Airport The acquisition of the 498-acre parcel of land, and its subsequent lease to Coca-Cola, have allowed the Airport to meet FAA Runway Safety requirements while making use of, and generat- ing revenue from, Airport-owned land with no airside access. The Airport receives revenue from monthly rental payments of $18,667. Additionally, the high profile LEED-certified facility generated a good amount of positive pub- licity for the Airport. The plant also employs over 540 employees, and is expected to create another 113 jobs by 2012. Case Studies 89

Project Overview Pittsburgh International Airport (PIT) is located in southwestern Pennsylvania and repre- sents 8,840 acres of land in area. Although 3,000 acres were identified for nonaeronautical development, only 1,200 acres were easily developable because of their rolling topography. The airport prioritized various sites on airport property as to desirability for development. One of the top sites became the Clinton Commerce Park due to its proximity to a major inter- state highway and desirability from a commercial real estate perspective and potential for warehousing and distribution. The project is in Phase I of five anticipated phases. At the writ- ing of this report, three buildings totaling more than 700,000 square feet are either completed or are under construction. Knepper Press, a printing company, is one of the tenants in the commerce park. The company was looking to expand and chose PIT because of the location, and because the site was shovel ready. Knepper Press built a 100,000-square-foot facility. They have utilized the initial facility and are leasing an additional 60,000 square feet in a neighboring building. Community support was essential to successfully funding this project. An assortment of fund- ing sources was utilized, including the State of Pennsylvania, Allegheny County, Findlay Town- ship, the school board, and a federal earmark. The equity value of the land itself was used as a match for the state grant. The project and the larger commercial park are expected to be a sig- nificant source of economic development for the state. Key Stakeholders The following is a list of key stakeholders responsible for the development of the Clinton Com- merce Park project: Pittsburgh International Airport (PIT) Airport Type: Medium-Hub Tenant: Knepper Press Type of Business: Industrial Facility Location: Landside 90 Guidebook for Developing and Leasing Airport Property SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009.

Airport Sponsor: The Allegheny Airport Authority prioritized sites on airport property, one of which became Clinton Commerce Park. The Authority was also able to secure a grant using the value of the airport land for $3 million as debt coverage. Allegheny County: Collaborated with Findlay Township and West Allegheny School District to create a Tax Incremental Financing (TIF) District. Consequently, the Airport was able to issue debt of $5.5 million for project funding. Knepper Press: An anchor tenant of the Commerce Park. State of Pennsylvania: The state awarded the Airport a $7 million grant to help fund project and provided Knepper Press with tax breaks for new employees as an incentive. Federal Government: The federal government earmarked $100,000 to fund the Clinton Com- merce Park Project. Key Lease Elements Leases at Clinton Commerce Park are strictly land leases. Each company owns its respective facility. So as not to compete with local developers, the Airport does not construct buildings. Because companies cover the cost of constructing their facilities, the land leases allow for com- panies to recoup the costs of their investments. The lease term is for 29 years with two 10-year options to renew. Throughout the term, the Airport is responsible for funding improvements to the commerce park, and the companies are responsible for maintenance and insurance. The lease agreements contain clauses ensuring that the companies’ operations will not interfere with aviation operations, and will preserve the environment. Considerations for the Tenant Because Knepper Press pays ground rent only, and owns its facility, it is able to lease part of the facility to third parties. Knepper Press has leased enough land to expand the facility up to 175,000 square feet, enabling it to increase operations. Knepper Press also receives a tax break from the state for new employees, and was not charged ground rent during the con- struction period. Knepper Press was looking to relocate from its previous facility, and Clinton Commerce Park was an attractive location. The Airport is not far from its previous location, offering a promi- nent and recognizable facility, convenient for out-of-town clients due to its proximity to the passenger terminal. Benefits to the Airport The Airport collects revenue on the land leases within Clinton Commerce Park. There is currently $48 million in private investment, and as the project matures, revenue is expected to grow significantly. Because the companies located in the commerce park have a large number of fixed assets, it is anticipated that the businesses will remain at the Airport long term and have a positive impact on Pennsylvania’s economy by bringing more business to the area. Fifteen new jobs have been created, and 110 jobs were retained at Knepper Press. Clinton Commerce Park is expected to afford additional employment opportunities at the Airport. Case Studies 91

Project Overview The Anchorage International Airport, the fifth busiest cargo airport in the world, recog- nized that the level of private-sector interest was high enough to offer property by competi- tive bid. The Airport offered a 20-acre parcel of land for development and required the winning bidder to provide a financial guarantee. Alaska CargoPort LLC, a subsidiary of the Lynxs™ Group, LLC was the winning firm, and a long-term lease was executed. Because of regulatory restrictions, the lease is structured as a 35-year lease with four 5-year options, effectively creating a 55-year lease. The Airport was able to use AIP funds for creating a runway and taxiway in preparation of the facility site. Alaska CargoPort secured approximately $30 million in financing, but required more for the development project. The Airport and Alaska CargoPort agreed on a unique situation in which the Airport would act as a conduit for Alaska CargoPort. The Air- port took ownership of the facility, which consisted of approximately 200,000 square feet of warehouse, maintenance buildings, offices, and crew quarters, as well as all-weather aircraft parking for 12,747 freighters and was able to obtain tax exempt financing. The Airport then leased the facility back to Alaska CargoPort. Later, there was an additional 10-acre expansion of the facility. In order to secure prime tenants, the Airport and Alaska CargoPort worked together to utilize creative marketing tactics. In addition to the Airport’s ongoing efforts to facilitate the airport-wide marketing of international air cargo activity, it sponsored the Top of the World Air Cargo Sum- mit, where Northwest Airlines CEO Richard Anderson (now Delta Air Lines CEO) was the keynote speaker. Alaska CargoPort and Northwest Airlines held meetings which ultimately resulted in Northwest Airlines relocating its Asia freighter hub to Alaska CargoPort’s facility, providing the desired prime tenant. Ted Stevens Anchorage International Airport (ANC) Airport Type: Medium-Hub Tenant: Alaska CargoPort™ LLC Type of Business: Cargo Handling Facility Location: Airside 92 Guidebook for Developing and Leasing Airport Property SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009.

Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease agreement: Airport Sponsor: The State of Alaska agreed to assist Alaska CargoPort in securing tax-exempt financing by taking ownership of the facility, and, in turn, leasing it back to Alaska CargoPort. The Airport prepared the facility site with a runway and taxiway using AIP funds. Tenant: Alaska CargoPort won the competitive bid process to build a cargo facility on the valuable 20-acre parcel of land at ANC. Alaska CargoPort requested that the Airport assist with financing in order to lower costs by approximately $1 million. Subtenant: Northwest Air (now part of Delta Air Lines) decided to relocate from Narita Airport in Tokyo to ANC. This gave Alaska CargoPort a prime tenant and greatly increased operations at the facility. Alaska Industrial Development Authority: Issued tax-exempt bonds to the Airport to finance the cost of building the cargo facility. Key Lease Elements Lease Rate and Term: The land lease between the Airport and Alaska CargoPort is a 35-year lease with four 5-year options to renew. The lease requires a bid deposit of 1 year’s rent submit- ted with the bidder’s registration. Annual rent is $0.06 per square foot. After June 1, 2000, the Airport may increase the rent. The Airport may also increase rent at its discretion every 5 years thereafter. Rent increases will not exceed fair market value, as determined by an appraiser. Improvements: Alaska CargoPort is required to substantially complete development and improvements within 3 years. The minimum value of improvements is $10 million, and the facil- ity must be no less than 100,000 square feet with five wide-body aircraft parking positions. The Airport will provide access, water, and sewer to Alaska CargoPort. Performance Bond: Prior to any demolition or construction, but by no later than July 1, 1998, Alaska CargoPort was required to submit proof of a $10 million performance bond to guaran- tee performance, completion, and payment of the required improvements. Considerations for the Tenant Ted Stevens Anchorage International Airport was an attractive site for Alaska CargoPort because of the high amount of cargo traffic between Asia and North America. There are 33,000 operations between the two continents annually, most of which make stops at ANC to either transfer, sort, clear customs, or refuel. The financial guarantee required by the Airport was an unusual require- ment, but the creative financial partnership between the Airport and Alaska CargoPort made the project feasible. The tax-exempt financing lowered costs by approximately $1 million. Benefits to the Airport The Airport had a valuable but undeveloped 20-acre parcel of land available. By requiring bid- ders to provide a guarantee, the Airport ensured that the land would be developed. Using creative marketing tactics, the ANC facilitated meetings between Alaska CargoPort and airline executives. These meetings resulted in Northwest Airlines relocating their Asia freighter hub to Anchorage, bringing weekly over 90,747 freighters. This was a high profile project and reinforced ANC’s strategy of encouraging market-driven activity. Alaska CargoPort brought approximately 500 jobs to the Airport and hundreds of millions of dollars in economic activity to the community from cargo activity, and has been operated suc- cessfully for over 10 years. Case Studies 93

Project Overview George Bush Intercontinental Airport/Houston (IAH) is one of three airports that comprise the Houston Airport System (HAS). The mid-1990s represented an era of undeveloped land and grow- ing concerns of smog, providing a fertile environment for consideration and development of a con- solidated rental car facility (CRCF). Dallas-Fort Worth International Airport (DFW) opened its CRCF in 2000, and IAH was able to apply lessons learned at DFW to ensure a high quality and suc- cessful facility at IAH. In 2003, the facility located on 250 acres of land opened at IAH. Financing for the CRCF was initiated in April 2001 with the Airport issuing bonds of $130,250,000. When the bonds were issued, a customer facility charge (CFC) of $3.00 was imposed at the airport as well to pay the debt service on the bonds. A Facility Improvement Fund for capi- tal improvements and a Stabilization Account for funding any shortfalls associated with the econ- omy were also created at that time out of excess CFC collections. There are currently eight rental car operators located within the CRCF with Master Leases with the City of Houston. This consortium of operators was required by HAS to form a Limited Liabil- ity Corporation (LLC). The LLC is responsible for governing maintenance and operations, includ- ing bus operations between the facility and the airport, utilities, and insurance. The entire facility covers 250 acres, with 33,960 square feet of exclusive use area, 30,500 square feet of common space, a lobby/shuttle bus area, and a two-level parking garage. Because of issues with rental company bankruptcy in both 2001 and 2009, the Airport learned that there should be separate trust account provisions and/or a financial guarantee provided to pro- tect from bankruptcy. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate execu- tion of the consolidated rental car facility lease. 94 Guidebook for Developing and Leasing Airport Property George Bush Intercontinental Airport/Houston (IAH) Airport Type: Large-Hub Tenant: Consolidated Rental Car Facility Type of Business: Rental Car Facility Location: Landside SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009.

Airport Sponsor: The City of Houston is the Airport owner and is the lessor in the lease agreements. Houston Airport System (HAS): The City of Houston’s Department of Aviation considered lessons learned from Dallas-Fort Worth’s facility to ensure the facility at IAH was efficient and successful. The HAS issued $130,250,000 in bonds to finance the CRCF project. The bond issuance provided funding for the physical development plus the initial purchase of 26 buses that are used by the rental car operators to transport customers between the airport’s terminals and the CRCF. Rental Car Operators: The following rental car operators formed a Limited Liability Corporation: • Alamo (rejected lease in 2001 bankruptcy, but dual marketing with National), • Avis, • Budget, • Hertz, • Thrifty, • Enterprise, • Dollar, • National (dual marketing with Alamo since 2001 bankruptcy), and • Advantage (left due to bankruptcy in 2009). Key Lease Elements Each rental car operator enters into two agreements with the City associated with the CRCF: a Master Lease Agreement and a Concession Agreement and into the LLC with the other operators. Elements of Master Lease: • The operator is required to be part of the LLC. • Operators pay the LLC for operational expenses. The LLC, in turn, is responsible for main- taining and operating the CRCF, including bus operation. • Ground rent is paid by operators pro rata (based on the number of parking spaces and the square footage of the area each operator occupies): – Rate of $0.23 per square foot per year initially; currently $0.2645 per square foot per year. – Escalation by 15% at every 5-year interval after the 5th year. • A Special Facilities Rent is paid by the rental car operators to pay debt service and administra- tive expenses of the bonds and for use of the facility: Customer Service Building, Parking Garage, Shuttle facilities, Shuttle Bus Maintenance, Storage facilities, and the initial buses. • Contains provisions for new entrants. • Stipulates CFC must be charged for each transaction and remitted to the Airport. • Allows for CFC adjustment annually (or more often under certain conditions). • Provides for a Rate Stabilization Account to deal with seasonal or economic adjustments throughout the year. Elements of Concession Agreements: • Provides a Scope of Services required by operators. • Stipulates the greater of a Minimum Annual Guarantee (MAG) versus a percentage fee to be paid to the City: – MAG is calculated as 85% of the total amount of concession fees for the preceding 12 months but cannot be less than $100,000. – Percentage Rent:  8.5% of first $3 million and 10% above $3 million for the first 5 years.  10% of all gross revenues for years 6 through 10. Case Studies 95

 Thereafter, percentage fees shall be based upon the average comparable percentage fees at the 10 largest airports in the US, except the Port Authority of New York/New Jersey. Financial Considerations for the Tenant The introduction of the CRCF brought numerous benefits to the rental car operators. In addi- tion to the advantages of being located in a new, high-quality facility, the operators have the ben- efit of shared operational costs. The Airport purchased the buses used by the operators, and since the buses are shared, transportation to and from the airport is much more efficient. The number of buses used by rental car operators was reduced from 125 buses to 26. Tampa International Airport (TPA) Airport Type: Large-Hub Tenant: PEMCO World Air Services Type of Business: Maintenance and Repairs Facility Location: Airside Project Overview The 5-bay, 150,000-square-foot maintenance facility was built in 1993 for use by US Airways, but sat vacant for nearly 6 years after US Airways entered bankruptcy and closed the facility in November 2002. The closure of the facility resulted in the loss of 300 jobs, as well as a significant reduction in revenue for the Airport. Initial efforts to market the facility to new tenants were han- dled by US Airways; however, those responsibilities, along with maintenance and upkeep of the facility, were soon transferred to the Hillsborough County Aviation Authority (the Airport Spon- sor). The Authority invested $500,000 in the upkeep of the hangar, ensuring that the facility was in excellent, move-in condition for any prospective tenants. The Authority enlisted the support of the Hillsborough County Economic Development Cor- poration (formerly the Greater Tampa Chamber of Commerce Committee of 100) to assist in the marketing of the facility, and to identify a package of available financial incentives to help lure prospective tenants. In addition to the quality of the available facilities, the Tampa metropolitan area had a built-in, trained, and available labor force of skilled aircraft maintenance profession- 96 Guidebook for Developing and Leasing Airport Property SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009.

als resulting from the closure of the US Airways facility, the closure of the Delta maintenance facil- ity at TPA in 2005, and the airport’s proximity to MacDill Air Force Base. The first contact with PEMCO World Air Services occurred in March 2005, with PEMCO expressing interest in operating a third-party MRO facility servicing commercial aircraft. PEMCO, working with the Airport Authority and the Tampa Hillsborough EDC, began to eval- uate the facility, the labor force within the community, and the available incentives that would assist in making the venture financially viable. Through negotiations and coordination with key stakeholders in the community, a package of lease terms and incentives (detailed in the follow- ing sections) was put together that met the needs of the Airport Sponsor and PEMCO, and offered significant economic benefit to the surrounding community. A lease agreement was signed in early 2008, with operations at the facility starting shortly thereafter. Key Stakeholders Following is a list of key stakeholders responsible for the development and ultimate execution of the PEMCO lease arrangement: Airport Sponsor: Hillsborough County Aviation Authority maintained the facility in move- in condition, took the lead in marketing the facility after initial efforts by US Airways yielded little result, and enlisted the support of the Tampa Hillsborough Economic Development Corporation (EDC). Tampa Hillsborough EDC: The Tampa Hillsborough EDC assisted the Airport Sponsor in marketing the facility and identifying available incentives to entice and assist prospective tenants to the vacant facility. Tampa Hillsborough EDC is officially recognized by Enterprise Florida as Hillsborough County’s primary business recruitment/retention team, and part of an economic development alliance with Hillsborough County and the cities of Tampa, Plant City, and Tem- ple Terrace, as well as various private investors. Governor’s Office of Tourism, Trade and Economic Development (OTTED), Enterprise Florida (EFI), Hillsborough County, and City of Tampa: PEMCO qualified for and was awarded Enterprise Florida’s Qualified Target Industry Tax Refund Program (QTI) inducement. QTI is a performance-based program based on the creation of high-paying jobs in target industries, of which aviation is one. The tax refund will be paid out over several years by the state, Hills- borough County, and the City of Tampa, provided eligibility requirements are maintained. Workforce Florida: A Quick Response Training grant was awarded to PEMCO by this state agency, in partnership with the Hillsborough County School District. The grant funded a cus- tomized training program to assist the company with its ramping-up efforts. Florida Agency for Workforce Innovation (AWI) and Tampa Bay Workforce Alliance: Pro- vided labor market statistics specific to the skills and occupations the company required. PEMCO World Air Services: PEMCO was able to successfully negotiate with the Hillsborough County Aviation Authority and strike an agreement that proved beneficial to its own interests, those of the Airport, and those of the surrounding community. The lease is structured in a way, through revenue sharing, that ties the Airport’s financial success to PEMCO’s, while ensuring con- sistent revenue to the Airport Sponsor through base land and facility rents. Key Lease Elements TPA and PEMCO were able to construct a lease favorable to both parties. The Airport kept the initial parcel rent low, with incremental ground lease increases, and offered a facility rent structure based on the financial success of the tenant (percentage of gross revenue). Case Studies 97

Lease Term: The lease is for an initial 15-year term, with two 5-year extension options that can be executed under the same terms as the initial agreement, and without a formal amendment to the lease agreement. Rent and Escalation: Rent is accounted for in two parts: ground rent and facility rent. • Ground rent is set at $0.15 per square foot annually, based on the 717,492-square-foot parcel that encompasses the PEMCO facility. This equates to $107,624 annually. At the 5-year anniversary of the execution of the lease, and on every third year after (including lease exten- sions, if applicable), ground rent will increase by 10%. • Annual facility rent is based on 1.3% of PEMCO’s gross receipts (i.e., gross revenue from the operation of the facility), with a minimum annual facility rent clause that guarantees the Air- port Sponsor $300,000 annually ($25,000 paid on a monthly basis). Every 3 months, 1.3% of revenue is calculated for the preceding 3-month period. Should the 1.3% of revenue surpass the 3-month minimum of $75,000 (3 months times $25,000 per month), PEMCO will pay the Airport the difference. Should the 1.3% of revenue not exceed the $75,000 minimum, the Air- port Sponsor will credit the surplus paid to the next period’s minimum facility rent. If at the end of the 12-month period the 1.3% of gross revenue exceeds the $300,000 minimum, the Air- port Sponsor retains the funds. Noncompete and Right-of-First-Refusal Clause: PEMCO had expressed interest in the vacant US Airways maintenance hangar for potential expansion of its operations, but was con- cerned that further competition at the airport (another MRO entering the same market) would render its business plan obsolete and hinder PEMCO’s ability to operate profitably at TPA. In order to address this concern, a clause was inserted into the Lease Agreement that gives PEMCO the right to cancel its Lease Agreement within 30 days if another MRO enters the market. This was a creative approach to attract new business activity, re-use a significant facility on the air- port, and replace the aeronautical activity and aviation jobs that were lost. The noncompete clause is a bit tricky, however, in that the airport sponsor is precluded from granting exclusive rights to a single operator, a clear violation of Grant Assurance 23. The fact that the airport sponsor is simply granting the operator the option of terminating its lease if a competing MRO comes onto the airfield is important, because the airport sponsor can, and should, allow and encourage competition. In this case, the operator is occupying existing facil- ities so the airport sponsor has more flexibility to release PEMCO if a better business deal pres- ents itself than it would if the development project carried debt that was secured by a long-term tenant lease. As discussed previously, the airport sponsor should collaborate closely with the FAA’s ADO to ensure that grant assurance violations do not occur, and that the per- ception of noncompliance does not prevail. This topic is discussed further in Section 2.3.1, Noncompete Clause. Considerations for the Tenant The structure of rent payments directly ties PEMCO’s facility rent to the company’s success at the Airport. The base ground rent and minimum facility rent clause set the initial outlays for PEMCO low enough to make the facility attractive to start operations, while guaranteeing the airport sponsor a base revenue stream with significant upside potential. In addition to a favorable lease payment structure, PEMCO was awarded a performance-based tax inducement by Enterprise Florida, through the Qualified Target Industry Tax Refund Pro- gram. The program stipulates that at least 100 new jobs must be created, and provides a tax refund of between $3,000 and $5,000 per employee, based upon the annual average wages paid (the higher the wage, the greater the tax credit). PEMCO was also awarded a Quick Response Training grant by Workforce Florida. Additionally, the Florida Department of Revenue offers 98 Guidebook for Developing and Leasing Airport Property

Case Studies 99 sales and use tax exemptions on aircraft parts, modification, maintenance and repair, sale, or lease of qualified aircraft. Airport Benefits and Revenue In 2009 (the first full year of the lease arrangement), the Airport realized a minimum revenue of nearly $408,000 annually from this facility, a figure that could increase significantly as PEMCO’s operations and revenue grow. Maintenance and upkeep costs that were once the responsibility of the Airport are now the responsibility of the tenant, as stipulated in the lease agreement. Another benefit is the additional aircraft activity driven by the MRO, boosting fuel sales and fuel flowage at the airport, activity that benefits both fuel providers and the Authority. In addition to the direct financial benefits to the Airport Sponsor, this project has had a pos- itive impact to the surrounding community, through the restoration of 300 quality jobs, and the potential addition of another 110 jobs should PEMCO achieve its employment target of 410.

100 Guidebook for Developing and Leasing Airport Property Airport Size Category Developer of theProperty Incentives Involved Funding Elements Albany International Airport - HondaJet Development Small Hub HondaJet Land provided adjacent to FBO; Airport Authority worked to secure funding Grants awarded by EDA and state of New York; Funding match from Airport Authority Baton Rouge Metropolitan Airport - Coca-Cola Development Small Hub Coca-Cola Industrial tax exemptions and rebates on state income and sales tax State Economic Development grant Coastal Carolina Regional Airport - Tidewater Air Non-Hub Coastal Carolina Regional Airport and Tidewater Air Property taxes waived Grant from state of North Carolina; Private funding from Tidewater Air; Donations from local businesses Collin County Regional Airport - EDS Development General Aviation Collin County Regional Investments (CCRI) Rent subsidy; City paid for and constructed taxi lane for easy access to facility; Purchased fuel truck for exclusive use CCRI financed the project for 20 years; Minimum tax impact was estimated to determine amount EDS/Hewlett Packard would pay for facility Monroe County Airport - Aircraft Storage Hangars General Aviation Monroe County Airport (BMG) Tenants become vested in facilities and have a stake of ownership at the end of lease terms BMG uses percentage of rent payments for a "building fund," used for buyback of facilities George Bush Intercontinental Airport - CRCF Large Hub Houston Airport System Share buses for greater efficiency Bonds and Customer Facility Charge issued New Bedford Regional Airport - Bridgewater State University Training Facility Non-Hub New Bedford RegionalAirport Provided building at no cost; In-kind labor from City and the Airport Cooperative venture between BMG and Bridgewater State College Pittsburgh International Airport - Clinton Commerce Park Medium Hub Pittsburgh InternationalAirport No ground rent charge during construction period; Prominent location Grant from State of Pennsylvania; Federal earmark; Created TIF District and issued debt; Leveraged value of land Tampa International Airport - PEMCO Development Large Hub Tampa International Airport Low rent with incremental increases; Airport invested in upkeep of hangar; Available work force Qualified Target Industry Tax Refund grant Ted Stevens - Anchorage International Airport - Lynxs Alaska CargoPort Medium Hub Alaska CargoPort Applied AIP funds for site improvements; Helped secure prime tenants Alaska CargoPort secured $30 million; Conduit financing - ANC took ownership to obtain tax exempt financing, then leased facility to Alaska CargoPort Development Attributes Project Attributes Matrix

Case Studies 101 Type of Development Use of Airport Property Lease Term Visioning Documents Aeronautical Maintenance Facility and Sales Facility 25 years Yes Non-Aeronautical Coca-Cola Bottling Facility 99 years with eight 10- year options to renew Yes Aeronautical FBO Facility 25 years Yes Aeronautical Hangar Facility 40-year ground lease; 10-year facility lease Yes Aeronautical Hangar Complex 30 years Yes Aeronautical and Non- Aeronautical Consolidated Rental Car Facility 30 years Yes Aeronautical Flight Training Center 5 Years Yes Non-Aeronautical Industrial/Commercial Park 29-year land lease with two 10-year options to renew Yes Aeronautical Maintenance Facility 15 years with 10-year option to renew Yes Aeronautical Cargo Transfer Facility 35 years with four options to extend for 5 years Yes

102 Guidebook for Developing and Leasing Airport Property Airport Sponsor Airport Users Local City and/or County Government Albany International Airport - HondaJet Development Baton Rouge Metropolitan Airport - Coca-Cola Development Coastal Carolina Regional Airport - Tidewater Air Collin County Regional Airport - EDS Development Monroe County Airport - Aircraft Storage Hangars George Bush Intercontinental Airport - CRCF New Bedford Regional Airport - Bridgewater State University Training Facility Pittsburgh International Airport - Clinton Commerce Park Tampa International Airport - PEMCO Development x x x x x x x x x x x x x x x x x Stakeholders Involved Ted Stevens - Anchorage International Airport - Lynxs Alaska CargoPort x x Project Stakeholder Matrix

Case Studies 103 Department of Transportation or MPO/MTPO Economic Development Entity State Government Federal Aviation Administration (FAA) Federal Agency and/or Program Other than FAA x x x x x x x x x x x x x x x

Next: Appendix B - Acronyms »
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TRB’s Airport Cooperative Research Program (ACRP) Report 47: Guidebook for Developing and Leasing Airport Property explores issues associated with developing and leasing available airport land and summarizes best practices from the perspective of the airport sponsor.

The guidebook includes a diverse set of case studies that show several approaches airports have taken to develop and lease property for both aeronautical uses and non-aeronautical uses.

The project that developed the guidebook also produced two presentation templates designed to help airports in effective stakeholder communication regarding developing and leasing airport property. The templates, designed for a non-technical audience, provide content, examples, and definitions for a presentation to community stakeholders. The templates, one for aeronautical use development presentations, and the second for non-aeronautical use development presentations are available only online.

An ACRP Impacts on Practice related to ACRP Report 47 is available.

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