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Item 1.D.
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| City Council Regular | |
| Date: | 10/11/2021 |
| Title: | Commercial Aviation FBO Ground Lease with BAG Billings, LLC |
| Presented by: | Kevin Ploehn, Director of Aviation and Transit |
| Department: | Airport |
| Presentation: | No |
RECOMMENDATION
Staff recommends that City Council approve the Commercial Aviation Ground Lease with BAG Billings, LLC for a 25-year term commencing October 1, 2021, and ending September 30, 2046.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
Beacon Air Group (BAG) principals, Joel Simmons and Kevin Button, propose to construct and operate a second Fixed Base Operator (FBO) business at the Airport. Presently the Airport has one FBO operator, Edwards Jet Center, providing various services for both commercial and general aviation operators. BAG proposes to offer aviation fuel sales, hangar storage, aircraft tie down/parking, aircraft maintenance/repair/servicing, flight/pilot training, charter brokerage, and services for general aviation pilots. The BAG Billings FBO operation will include two phases. Phase 1 will involve the construction of the FBO hangar and an FBO office building. Phase 2 will involve the construction of the second companion FBO hangar.
Staff has worked with BAG Billings on a new 25-year Commercial Aviation Ground Lease that commences October 1, 2021, and terminates September 30, 2046. The location desired by BAG Billings includes an area that is just west of the Operations Building and is presently utilized by the contractor constructing the Terminal Concourse Expansion Project as a staging area. The Airport has worked with BAG Billings on a potential schedule to release each of four parcels constituting the FBO Premises. Areas of the proposed leased premises will be released, as staging area space is no longer needed for the ongoing Terminal Concourse Expansion Project. Rents will be charged and become payable as parcels are released. The new Lease also includes the last available lot in the East End Fuel Farm complex.
Staff has worked with BAG Billings on a new 25-year Commercial Aviation Ground Lease that commences October 1, 2021, and terminates September 30, 2046. The location desired by BAG Billings includes an area that is just west of the Operations Building and is presently utilized by the contractor constructing the Terminal Concourse Expansion Project as a staging area. The Airport has worked with BAG Billings on a potential schedule to release each of four parcels constituting the FBO Premises. Areas of the proposed leased premises will be released, as staging area space is no longer needed for the ongoing Terminal Concourse Expansion Project. Rents will be charged and become payable as parcels are released. The new Lease also includes the last available lot in the East End Fuel Farm complex.
ALTERNATIVES
City Council may:
- Approve the Commercial Aviation Ground Lease with BAG Billings, LLC for a 25-year term; or
- Not Approve the Commercial Aviation Ground Lease with BAG Billings, LLC for a 25-year term.
FISCAL EFFECTS
The initial rental will be for only Parcel A of the FBO Premises and the East End Fuel Farm lot. The first year annual rental for Parcel A and the Fuel Farm lot will be $13,145.64. Rentals on the remaining FBO Premise Parcels B, C, and D, will be charged immediately upon release by the Airport and at the then current per square foot rate. If all parcels and lots of the premises were immediately available, the first year lease rental for FBO Parcels A-D and the Fuel Farm lot would be $49,987.56. Lease rentals in subsequent years will be adjusted on an annual basis using the average of the monthly percentage increases for the previous calendar year, as determined by the Department of Labor Consumer Price Index for All Urban Consumers (CPI-U), published by the Bureau of Labor Statistics. The initial rate for this property is $.285 per square foot per annum. This rate for Commercial Lots exceeds the rates charged at other airports in Montana by anywhere from 10.5 cents to 16.5 cents per square foot per annum. When calculated on a per acre basis, this would generate $12,415 per year or $310,365 over a 25-year term not including adjustments for inflation. Recent appraisals for raw land in the area have ranged from $5,500 to $11,000. For the FBO, the improvements for infrastructure are all sunk costs, since the utilities were all added many years ago to supply services to the hangar complexes to the west. Subsequently, this is a very positive deal for the City and Airport.