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Meeting Minutes for:
Strategy Committee on Apr 7, 2010
Yuma International Airport, Conference Room
Wednesday, April 07, 2010 at 02:00 PM
Call to Order:
CALL TO ORDER
The Yuma County Airport Authority, Inc. (YCAA) Board of Directors Strategy Committee was called to order at 2:00 PM on Apr 7, 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
Albert Gardner 2nd Vice President
Karl Moedl, 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
Joe Gamez, CareFlight
REGULAR AGENDA
1) Discussion and Possible Action to recommend a land purchase to the YCAA for 40 acres of land west of the Airport
Mr. Ingold briefed that we have received the appraisal of the 40 acres of land west of the airport. The appraisal values the land and facilities at $3,375,000. A review indicated that this particular parcel of land is not of our Master Plan and that a further study should be accomplished to determine if this purchase is required for our planned growth. If the land could be incorporated into the airport's Master Plan a way to pay for the plan should be developed. The concept thus far proposed was not clear and the details should be examined during the review process. One concept was that an option could be placed on the land giving the airport the right of first refusal. Other ideas should be developed during the planning process.
Financing that amount at 6% for 30 years would cost approximately $20,234.83 per month (does not include financing setup fees). At the current time, the property would not generate aviation related revenue because there are no aviation capital improvements on the land and our current ACIP does not have funds allocated for such infrastructure. However, the property could be used for non-aviation related activity such as warehousing, office, training, etc.
To cover the mortgage payment and depending on the acreage rented, the lease PSFPY price would be in the same region as our current lease rates. For example, a 20-acre lease at a rate of $0.28 PSFPY would result in a monthly rental income of $20,328 which would cover the mortgage; and a 30 acre lease rate of $0.19 PSFPY would yield $20,691 per month. This equates to a $500 to $1,000 per acre per month rate. Options should be developed to lease back part of the land to the Swap Meet and the remaining area put to an intermediate term use, such as solar power, which combined would cover the mortgage.
Importantly, any shortfall in lease income would require the airport to make the mortgage payments and at this time the airport does not have such excess funds.
After some discussion, the Committee directed staff to investigate the options to include having an update to the Master Plan completed to determine the need for the property in our growth plan and possible ways to pay for the land acquisition.
2) Discussion concerning our current Master Plan and DCC growth.
This item was discussed concurrently with the agenda item above.
Mr. William Gresser, YCAA President, joined the Strategy Committee
3) Discussion to provide guidance to the Airport Director concerning the Million Air Lease and purchase of fuel tanks.
Mr. Williams briefed that the final lease agreement with Million Air has been negotiated, however, since our earlier discussions the terms and conditions have changed slightly.
The original agreement was based on our understanding that we would either inherit the previous 40,000-gallon Lux Air fuel tanks or that we could lease fuel tanks for $1,000 per month. Both predictions were incorrect. In fact, the tanks were owned by Mr. Ewing and at auction were bought by CareFlight. Our current research is an estimated lease of $2,976 per month. The cost to purchase is approximately $200,000.
The original lease agreement with Million Air called for an initial minimum five-year lease but during the negotiations, this was dropped to a one-year lease with four (4) one-year options.
Million Air anticipates they will win the DESC contract. They are confident enough to invest the required half million dollars in their initial setup and they are ready to move forward if the airport will sign the lease.
The question was asked as to what would happen if Million Air does not get the DESC contract. The answer is that the currently negotiated lease would allow them to move out after one year and that the airport would be holding the tanks. However, they may stay and continue to operate as an FBO and compete with CareFlight. After some discussion, this was accepted by the committee and the conclusion was if that became the case, the tanks could be sold and it is likely that we would recover most if not all of our investment.
Mr. Gamez was asked by the Committee what would be the impact on CareFlight if Million Air won the DESC contract, Mr. Gamez replied that he felt the impact would be minimal with regard to his current operation. It was pointed out that CareFlight and Million Air were seemingly going after different markets and that it appeared they could co-exist and both be successful.
Mr. Williams explained that if Million Air does get the DESC contract, the payoff to the airport is very high in increased fuel flow revenue and it would enhance the airport's visibility and reputation. Importantly Million Air was anticipating a growth in fuel sales from one million gallons the first year to over two and one half million gallons in year five. These are expected to be new fuel sales. These do not appear to detract from any existing sales.
Ms. Grosse pointed out that her conversations with the testing crews from Boeing and other Defense Contractors indicate that the industry is well aware that Million Air is planning to move to Yuma. This move is being regarded with great anticipation by all of the aviation industry because of our superior facilities, our friendly community, the Airport's growing reputation as a Center for Customer Excellence and of course by the reputation of Million Air itself.
The consensus of the committee was that the tanks were a good investment even if Million Air does not get the DESC contract. If they were not successful in their bid, whoever did get the contract would likely need the tanks. Additionally, the 40,000 gallons of underground fuel storage that the Airport inherited from Bet-Ko was scheduled to be removed within 4 ½ years.
The Committee approved a recommendation to the Board to authorize staff to proceed with the purchase of the tanks at the best price and method as determined by airport.
4) Discussion on the Solar Parking project.
Mr. Ingold briefed the recent history of the contract negotiations with Blue Renewable Energy. On the plus side, the contract fixes our electrical payments at an annual rate increase of just under one-half of one percent (0.495%). On the minus side, paragraph 3 is a problem, as it requires the airport to make service payments regardless of system status. Mr. Williams reported that this requirement has been addressed in the default section in paragraph 13. Mr. Gresser pointed out that the airport had taken over the insurance requirement and that had put a large part of the problem under the Airport's control.
At this point, the specific sticking points have been addressed and the contract is ready for signing.
5) Discussion and Possible Action to reduce the risk to potential developers.
Mr. Williams briefed that in recent meetings, potential developers for the DCC have identified several concerns with regard to risk. Staff requests the Strategy Committee explore options on how to reduce the risk of developers for the DCC.
After a lengthy discussion, Mr. Ingold directed staff to investigate the suggestions that had been offered, to include the potential for a lease back and/or self-financing.
GENERAL UPDATE
Mr. Williams explained that the FAA's Los Angeles attorney had completed his review of our "Sponsor" status and forwarded his recommendation to FAA Headquarters in Washington DC. The committee felt this was an unnecessary bureaucratic and troubling delay and directed staff to put the question on the agenda for next Tuesday so the Board of Directors could determine how the airport should elevate our concern. The consensus was that this should take place either through the Office of the Inspector General of the Department of Transportation or through Congressional Channels.
ADJOURNMENT
There being no further business the committee adjourned at 3:30 PM.
// Approved //
Craig Williams
Airport Director | |
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