01/20/2010

Meeting Minutes for:
Strategy Committee Meeting
Yuma International Airport, Conference Room
Wednesday, January 20, 2010 at 01:00 PM

Call to Order:
CALL TO ORDER
The Yuma County Airport Authority, Inc. (YCAA) Strategy Committee Meeting was called to order at 1:00 PM on Jan 20, 2010 in the Yuma International Airport Conference Room, 2191 E. 32nd Street, Suite 218, Yuma, Arizona 85365. The Presiding officer was Rob Ingold, Chairman.

YCAA MEMBERS PRESENT WERE:
Rob Ingold, Chairman
William Gresser, President
Albert Gardner, 2nd Vice President
Harry Hengl, Director
Jesse Haines, Director
Mikel Smith, Director

ALSO PRESENT WERE:
Mr. Williams, Airport Director
Gerald Hinkle, Jr., Chief Financial Officer
Gladys Wiggins, Airport Operations Director
Gen Grosse, Corporate Account Manager
Andrea Lopez, Executive Assistant
Lt. Col. Workman, Military Liaison
Wayne Benesch, Airport Counsel
Joe Gamez, CareFlight
Beth Colwell, CareFlight
Steve Hostettler, DEERNS
Bart Edwards, Garden of Energy
Chris Thompson, Patterson Thompson Architects
Kevin Kiernan, Kiernan Companies
Deborah Oseran, Mendelsohn & Oseran, P.L.C.

Regular Agenda

Mr. Williams informed the Committee that the Solar Parking project had been dropped so it had been pulled from the agenda. Likewise, the agenda item for a potential Aircraft Sales FBO lease for Mr. Ewing had been pulled as Mr. Ewing had changed his mind about the concept and would get back with us.

1) Discussion and consideration to recommend to the YCAA Board of Directors approving, in concept, a long term lease with AmEuro, a renewable energy development company, for the lease of the western 40 acres of the 80 acre tract west of the 4th Avenue Extension in the amount of $209,088 per year with an option for the remaining 40 acres for a total annual rental fee of approximately $418,176 per year with the final lease agreement contingent upon successful project development by all parties, final approval by the Board of Directors and final review by airport staff and legal counsel.

Mr. Williams explained that as previously briefed to the Board of Directors; airport staff has been actively recruiting outside investors to install a solar power farm. Our goals are two-fold: First, generating rental income on this otherwise non-producing land will enable us to invest in other airport projects that otherwise may have to wait for years. Second is to offset the known lack of power from APS for future tenants in the DCC. In essence this is a way to both accelerate and insure future growth on the airport.

Mr. Williams introduced Mr. Steve Hostettler. Mr. Hostettler explained that Deerns USA is applying for a DOE grant to help fund the construction of the solar farm. DOE's interest stems from the advanced technology that the project will include. The project is currently scheduled for a two phase installation, each involving 40 acres of land from the West DCC area. He provided an informative briefing on Deerns, on AmEuro and the Sol Focus Concentrated Photo Voltaic (CPV) technology. There is a high level of interest in this project as it will be the largest to date installation of the CPV systems. Mr. Hostettler introduced his team member, Mr. Vega who provided a briefing on the financial aspects of the proposed project.

Mr. Hostettler explained that the Phase One installation will occupy the western 40 acres of the 80 acre tract. The renewable energy investment will come from the team that they are putting together. He acknowledged the airport's position that for the YCAA this is first a ground lease project with a goal of increasing our rental income, and second, an opportunity to address energy concerns. He confirmed that the airport's rental rate is about 60% ($0.12 PSFPY) of the FMV for our land. As with all airport leases we would include yearly rental increases with an annual increase of 3 with ten or twenty year appraisal reviews. For the initial 40 acres the annual rental revenue would start at $209,088 per year. The Phase Two installation would double that rental income, up to approximately $418,176 per year. Mr. Vega stated these were important details as they had a direct impact of the business case they would make to their investors. The timing for Phase Two is unknown at this time but will be identified within the next two months as one of the milestones.

There were many questions by the Committee members and a high level of interest concerning the potential of this project to alleviate some of the known supply problems that the airport is facing due to APS limitations in this area of the city. This is in line with Deerns interest to establish power supply agreements with MCAS Yuma, with our Airport tenants and, if agreeable to the Board, to present opportunities for the Airport to use this power throughout the DCC. Many details have yet to be worked out.

After much discussion it was the consensus of the Committee to recommend to the YCAA Board of Directors to approve, in concept, a long term lease with AmEuro, a renewable energy development company, for the lease of the western 40 acres of the 80 acre tract west of the 4th Avenue Extension in the amount of $209,088 per year with an option for the remaining 40 acres for a total annual income of approximately $418,176 per year. A final lease agreement is contingent upon successful project development by all parties, final approval by the Board of Directors and final review by airport staff and legal counsel.

2) Discussion and consideration to recommend to the YCAA Board of Directors a final selection of the FBO options now available, incorporating a 2-tier fuel flowage into the minimum standards, and implementing a common area fee for the Yuma Pilot Center in the airport's table of Rates and Charges.

Mr. Williams briefed that we recently hosted the owners of Freeman Holdings LLC, the largest of the MillionAir FBO franchisees. They presented a wonderful opportunity to open a MillionAir FBO on our Airport with the prospect of greatly increasing our military fuel sales. They presented a solid business plan that would include their investment of $3M in the airport. Their plan centers around locating the new FBO building in the DCC and includes two important commitments from the Authority: 1) dropping our military fuel flow rate to ten cents and 2) a guarantee that they will be the only jet fuel provider on the Airport.

Meeting these requirements is feasible; we could create a 2-tier FBO approach that is in accordance with recently published airport compliance guidelines. But it would require the Airport to either a) convince CareFlight to sell their fueling rights to MillionAir, or b) take those fueling rights away from CareFlight through a bureaucratic process.

After several discussions with Mr. Joe Gamez, CareFlight's local General Manager, and CareFlight's Owner, Dr. Stamper, staff can report without reservation that they are not interested in either stepping aside or selling out. CareFlight is excited about the opportunity they have encountered and committed to making it succeed. Further, they are willing to make any investment required to provide the military with a level of service the meets or exceeds the "Million Air Standard."

This creates a policy decision for the Board of Directors: shall we "Stay with CareFlight" or shall we "take away" their Jet-A fuel sales capability and "Go with MillionAir?"

Mr. Williams briefed on the Pros and Cons of staying with CareFlight vs. going with MillionAir. He also explained the two tiered Fuel Flowage Rate for the providers of Military Fuel. Mr. Williams discussed the concept of the GA Restaurant.

After much discussion the Committee decided to recommend to the YCAA Board of Directors to forego the pursuit of Million Air FBO, to incorporate a 2-tier fuel flowage into the minimum standards, and to implement a GA Terminal common area fee of $3,500 in the airport's table of Rates and Charges, to be shared equally by any FBO who had a fuel desk in the Yuma Pilot Center.

3) Discussion and consideration to recommend to the YCAA Board of Directors signing a fifty year lease with the US Government for the antenna farm that is reduced in size by 150' on the north and west boundaries to allow for a wider taxiway to the Yuma Pilot Center.

Mr. Williams briefed that this topic examines two separate problems on the airport and tries to reach a single solution to solve both problems.

We should work with MCAS on a new footprint for the existing lease. If we reduce the lease in size by 150' along the northern and western boundaries we could widen our taxiways, include the necessary taxiway safety areas, and dramatically improve the use of our GA apron space. Essentially, we would not get any bigger; we would just grow according to our current plan, but in a much safer fashion.

The consensus of the Committee was to recommend to the YCAA Board of Directors signing a fifty year lease with the US Government for the antenna farm that allows for taxiway and or ramp expansion up to 150' on the north and west boundaries of the antenna farm.

4) Discussion and consideration to recommend to the YCAA Board of Directors signing a long term lease with The Kiernan Group to develop two or more portions of the Defense Contractor Complex contingent upon final review and approval by airport staff and airport counsel.

Mr. Williams briefed that Airport staff has continued to recruit qualified investors for hangar development in the DCC. We recently met with Mr. Kevin Kiernan, owner of The Kiernan Companies. He has a distinguished record as a property developer across several industry groups, including Build to Suit, Hotel, Commercial and residential construction. He was impressed with the Authority's concept and vision of the future. His comment was that they never considered speculative development, until now. Because of the nature of our business he was willing to consider a speculative hangar project in the DCC and is ready to move very quickly.

Mr. Williams introduced Mr. Kiernan. He answered several questions for the Committee.

The discussion centered on our recently developed concept of operations, that is, the Airport would act as a property manager on airport development projects. Essentially, we would assist with marketing Kiernan properties and when clients moved in; we would manage billing, maintenance and any other required services. We would then deduct ground rent fees and other charges from the receivables and forward the remainder to the developer. Mr. Benesch's suggestion was that our lease document should in this case be split into two documents, a standard ground lease document plus a "property management" document that was yet to be crafted.

After much discussion the Committee unanimously decided to recommend to the YCAA Board of Directors to sign a long term lease with The Kiernan Group to develop two to three portions of the Defense Contractor Complex contingent upon airport and developer attorneys reaching a solution on the questions presented.

ADJOURNMENT

There being no further business before the Committee the meeting adjourned at 3:15PM.



// Approved //
Craig Williams
Airport Director
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