ASW Safety and Standards Airport Compliance Prepared for: 2018 TXDOT AIRPORTS CONFERENCE Presented by: Gary J. Loftus, A.A.E. Regional Airports Compliance Program Manager ASW - 620 Date: March 29, 2018
INTRODUCTION 2017 Compliance Interest Items Compliance Inspections Issues With Leases Lease Case Studies Challenges Real Estate Management Moving toward self-sufficiency 2
2017 COMPLIANCE INSPECTIONS WILL MY FUNDING STOP?????? What to expect from a compliance inspection. Historical file review (FAA files): Land deeds (normally back to the 1940 s for surplus property deeds), ALP, Exhibit A, FAA correspondence (releases/acquisitions) and grants. Review of Leaseholds, Revenue Use, Agreements. Compare property map, ALP and land availability. Compatible land use, RSA,TSA,ROFA,TOFA, RPZ LAND-USE INSPECTION FINDINGS CORRECTIVE ACTION PLAN PROGRESS 4
2017 COMPLIANCE IN REVIEW LEASES How long? 1-year, 5-years, 10-years, 20-years, 30-years. Entering into agreements that do not safeguard the airport s rights. Not exercising reverter clauses. What is a reverter clause? Leases that do not prohibit or oversee sub-leasing. Leases that allow sub-leasing without airport approval. Leases that do not contain escalator clauses. 5
2017 COMPLIANCE IN REVIEW LEASES Who manages airport leases? Airport Management vs Sponsor Management Tenant Hangar Committee vs Airport Mgmt? What do you do when tenants refuse to honor the lease reversion clause? Who determines rates and charges, specifically increases? Are escalator clauses automatic or require an act by the council/county/? What about hangar homes? 6
LEASE CASE STUDY (1) America s Team Airport is located in Heartbreak, Texas. This GA airport has two runways, 120 hangars (20 T-hangars belong to the sponsor) and a total of 321 based aircraft. The sponsor has 120 leases The waiting list: For Lots = 35 For T-Hangar = 11 The airport struggles to get to selfsufficiency. 8
LEASE CASE STUDY (2) 20 T-hangars @ $170-380 each per month Avg = $225 x 20 x 12mths = $54,000 per year Hangar leases at $.15 per sf. 60x60 = 3600 x.15 x 1 year = $540 per year Commercial hangar lease at $.19 per sf. 60x60 = 3600 x.19 x 1 year = $685 per year Hangar tenants sublease approved by airport. ZERO. Based aircraft = 321-120 hangars = 201??? Possibly 201 grant assurance violations Ex Rights 9
LEASE CASE STUDY 20 T-hangars @ $170-380 each per month Private Hangar leases at $.15 per sf. X total sf = per year cost. 60x60 = $540 per year Commercial hangar leases at $.19 per sf x total sf = per year. 60x60 = $685 per year What about airport improvements? Private hangar 10
LEASE CASE STUDY Tom requests to build a hangar on the airport and tells you the amortization of his note is 27 years. You provide him a 27 year ground lease for his hangar with a reversion to the airport at lease term. At year 20 Tom, no longer flying due to health reasons, sells his hangar to Beth. Beth informs you the amortization of her note is 25 years. 11
LEASE CASE STUDY How long of a lease-term do you enter into with Beth? Why? - If 25 years to allow Beth to amortize her investment, how does that impact the airport? - If the sponsor approves Beth s request. Instead of 27 years and reversion, the airport, if approving Beth s 25 year request is now losing 18 years worth of revenue as the hangar would have reverted in year 27 instead of year 52. (Tom 27 + Beth 25 = 52) 12
LEASE CASE STUDY Tony is from Philadelphia (Philly) and thinks he s a tough guy. Although he signed a lease with a reversion clause, he tells you he will NOT give his hangar to the airport. Additionally, he informs you he will hit you with D batteries hidden in snowballs if you come near his property. What are your options???? 13
Questions 14