Consideration and Approval of Amendment to Lease Agreement : First Amendment to Airport Lease Agreement with Peabody Western Coal

Consideration and Approval of Assignment and Consent to Assignment: of lease to Wiseman Aviation.

1. Approve the First Amendment to Airport Lease Agreement
2. Approve the Assignment and Consent to Assignment of the Lease to Wiseman Aviation.

Peabody Western Coal Company ("Peabody") will be leaving Flagstaff as a result of the pending closure of the Navajo Generating Station ("NGS"), scheduled for December 2019.  The NGS produced coal-fired electricity.  Peabody is currently leasing land at the Flagstaff Pulliam Airport, pursuant to an Airport Lease Agreement dated November 14, 2000. Pursuant to the Lease, Peabody has constructed a hangar, office spaces and its own fuel farm.  Peabody is requesting that it be allowed to assign the Lease to Wiseman Aviation, the current Fuel Based Operator at the Airport.  Wiseman Aviation is willing to assume the Lease, but the Lease must first be amended to allow for the assignment of the fuel farm.

Pursuant to the Lease, the City receives about $25,000 per year in rent, plus the Lessee pays fuel flowage fees to the Airport.  The City will continue to receive this rent and revenues, if the proposed documents are approved.

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No

1. Approve the First Amendment to the Lease and the Assignment and Consent to Assignment of the Lease.
2. Do not approve and redirect staff.

Peabody is a coal mining company.  For over 50 years, Peabody provided coal to the Navajo Generating Station ("NGS") power plant,  located on the Navajo Indian Reservation near Page, Arizona. NGS is closing in December 2019. As a result, Peabody recently discontinued coal shipments to NGS.  NGS was Peabody's only customer in Northern Arizona, and therefore Peabody is leaving Flagstaff. 

Peabody currently leases 1.97 acres of land from the City at the Flagstaff Pulliam Airport, pursuant to an Airport Lease Agreement dated November 14, 2000 ("the Lease").  Peabody constructed an office for its coal shipment business operations, a hangar and a fuel farm on the site.  The Lease expires November 14, 2025, with the Lessee's option to extend, subject to negotiations between the Lessee and the City regarding all terms and conditions of the Lease. The Lease provides for transfer of all improvements constructed by Lessee to City at the end of the term.

The proposed First Amendment to the Lease will allow the assignment of the fuel farm and update the terms of the Lease.  The Lease as amended will then be assigned to Wiseman Aviation.

The proposed amendment to the Lease, and assignment, will enable the Airport's existing Fuel Based Operator, Wiseman Aviation, to obtain additional fuel resources and facilities.  The City benefits from allowing assignment, as the fuel farm serving the Airport will continue in operations. If a fuel farm is not in operation it can grow bacteria within the tank making the fuel unusable.

Inform