2013 fall conference association of california airports (aca) south lake tahoe, california

AviationManagementConsulting GroupAC

A


A

2013 Fall Conference

Association of California Airports (ACA)

South Lake Tahoe, CaliforniaSeptember 12, 2013


A

Establishing and AdjustingGeneral Aviation Rents and Fees

Presented by:

Paul MeyersPrincipal

Aviation Management Consulting Group


A


Paul Meyers 35 years of experience…

Aviation–leadership–management–customer service– GA (FBO operations/management), integrated freight, air carrier,

and employee training and development – GA management consulting (airport and FBO)

Bachelor’s degree (business/aviation administration)– California State University at Los Angeles

Member of the GA Airports Committee (AAAE) and Airport Business Committee (NATA)

Airport Cooperative Research Program (ACRP)– Panelist, principal investigator, and subcontractor

Aircraft owner and instrument rated private pilot


A

Aviation Management Consulting Group…

Services Provide a full range of GA management

consulting services Specialize exclusively in the GA industry

– Services (all GA related) are provided to:» Airports» Fixed Based Operators (FBOs)» Specialized Aviation Service Operators (SASOs)» Others having an interest in the GA industry


A


Airports Rent Studies and Fee Analysis/Studies Primary Management and Compliance Documents Strategic/Business Planning/Plans Appraisals and Valuations Lease, Use, and Operating Agreements Through-the-Fence (Access) Agreements Market Assessments and Feasibility Studies RFI/RFQ/RFP Development, Evaluation, and Selection Operational, Managerial, and Financial Assessments Acquisition, Divestiture, and Due Diligence Land Use, Site Planning, and Facility Programming Litigation Support and Expert Testimony


A


Team Experienced and proven professionals

Excellent working knowledge of the aviation industry– GA airports and aviation businesses (in particular)

Approach every project from a unique (multi-dimensional) GA perspective Airport, business, and customer

Completed over 1,000 GA assignments at more than 500 airport and aviation business locations


A


Resources Extensive research capabilities

Proprietary GA industry database and GA resource library

Excellent working knowledge of FAA policies and guidelines pertaining to: The planning, development, operation,

management, and funding of airports (in general) The development, implementation, and

enforcement of PMCDs (in particular)


A


Paul Meyers9085 East Mineral Circle, Suite 315Centennial, CO 80112-3499(303) 792-5202 (direct)(303) 792-2700 (office)(303) 792-2751 (facsimile)[email protected]


A

Session Outline

Discussion Framework Airport Sponsor Assurances

Key assurances Primary Management and Compliance

Documents (PMCDs) Definition, purpose, role, and importance (value)

Leasing/Rents and Fees Policy


A

Airport Sponsor Assurances


A

Background on Assurances

To secure Airport Improvement Program (AIP) funds (a grant), an airport sponsor is required to give certain assurances to

the FAA known as the Airport Sponsor Assurances.

In essence, sponsors must agree to comply with the Assurances (currently 39) as a condition of receiving AIP funds.


A

Background on Assurances…

As the recipient of an AIP funds, in addition to complying with the assurances, sponsors must comply with:

Federal requirements (cited in the grant) including, but not limited to: Legislation Executive orders Regulations Office of Management and Budget (OMB) Circulars Advisory Circulars (ACs)


A

Background on Assurances…

The Airport Sponsor Assurances provide a means for the federal government to ensure that public use airports are developed, operated, and maintained in a safe, secure, efficient, compatible, and

compliant manner.


A

The 39 Assurances

1. General Federal Requirements2. Responsibility/Authority of the Sponsor3. Sponsor Fund Availability4. Good Title5. Preserving Rights and Powers6. Consistency with Local Plans7. Consideration of Local Interest8. Consultation with Users9. Public Hearings

10. Air and Water Quality Standards


A

The 39 Assurances…

11. Pavement Preventative Maintenance12. Terminal Development Prerequisites13. Accounting System, Audit, and Record

Keeping Requirements14. Minimum Wage Rates15. Veteran’s Preference16. Conformity to Plans and Specifications17. Construction Inspection and Approval18. Planning Projects19. Operation and Maintenance


A


20. Hazard Removal and Mitigation21. Compatible Land Use22. Economic Nondiscrimination23. Exclusive Rights24. Fee and Rental Structure25. Airport Revenues26. Reports and Inspections27. Use by Government Aircraft28. Land for Federal Facilities29. Airport Layout Plan


A


30. Civil Rights31. Disposal of Land32. Engineering and Design Services33. Foreign Market Restrictions34. Policies, Standards, and Specifications35. Relocation and Real Property Acquisition36. Access By Intercity Buses37. Disadvantaged Business Enterprises38. Hangar Construction39. Competitive Access


A

22 (a). Economic Nondiscrimination

Sponsor will make its airport available as an airport for public use on reasonable

terms and without unjust discrimination to all types, kinds, and classes ofaeronautical use.


A

22 (c). Economic Nondiscrimination…

Each commercial aeronautical activity (operator) shall be subject to the same rates, fees, rentals, and other charges as are uniformly applicable to all other such operators making the same or similar uses of the airport and utilizing the same or similar facilities.


A

24. Fee and Rental Structure

Sponsor will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport.


A

Primary Management and Compliance Documents


A

PMCDs...

Definition A compendium of documents that

govern the operation, management, and development of an airport General Provisions Leasing/Rents and Fees Policy

– Lease, Use, or Operating Agreements Minimum Standards Rules and Regulations Development Standards


A

PMCDs...

Purpose – in combination, these documents:

Contribute to the financial health of an airport Facilitate (foster) orderly development Promote the provision of quality products,

services, and facilities Protect the health, safety, interest, and

general welfare of the public Reduce the potential for (and help facilitate the

successful resolution of):– Conflicts/Disputes with lessees, consumers, and users– Complaints (Part 13/informal – 16/formal)– Lawsuits (state and federal)


A

PMCDs...

Role Set the stage (parameters) for the way

an airport does business Play an important (essential) role in the

operation, management, and development of an airport (large or small)

While these documents are interrelated, they function independently of each other


A

PMCDs...

Ideally, an airport manager would have all of these documents (or specialized tools) in the toolbox


A

If not, may need to use other tools (that may or may not get the job done right)

In some cases, there are no tools in the toolbox

PMCDs…


A

PMCDs...

DEVELOP

LEASING/RENTS AND FEES POLICY

LEASE, USE, OR OPERATING AGREEMENT

MINIMUM STANDARDS

OCCUPY

ENGAGE

GENERAL (UMBRELLA) PROVISIONS

USE

DEVELOPMENT GUIDELINES

RULES AND REGULATIONS


A

PMCDs...

The importance of having the full array of PMCDs (these specialized tools)

available can not be stressed enough If consistent with (not a duplicate of) the assurances and other federal (including FAA), state, and local

requirements… PGDs will provide protection in the event of a:

Conflicts/Dispute Complaints Lawsuit


A

Alternatives

Playing Calvinball Using a “make up the rules as you go

approach” to developing, operating, and managing an airport

Managing by Lease Developing, operating, and managing an

airport based on the most recent (latest) lease terms and conditions

Both approaches are highly problematic! Increase the potential for conflict, disputes,

complaints, and lawsuits


A

Calvinball


A

Terminology

Fixed Base Operator (FBO) Specialized Aviation Service

Operator (SASO) Aeronautical Activity (Use) Commercial (for hire) Non-Commercial (not for hire) Employee Independent Operator Through-the-Fence Operation Self-Service, Self-Fueling, and

Self-Serve Fueling


A

Leasing/Rents and Fees Policy


A

Leasing/Rents and Fees Policy…

Definition Sets forth the parameters for leasing airport

land and improvements for general aviation purposes and outlines the process for establishing and adjusting general aviation rents and fees

Purpose Conveys the airport’s general aviation leasing

and rents and fees policies and practices


A

Leasing/Rents and Fees Policy…

Major Sections Introduction Leasing Land or Improvements Agreements Setting and Adjusting Rents and Fees Appendix

Key Elements


A

Rents

FAA requirements Methodology for general aviation must be:

Reasonable Justified, and Consistently applied

Goal of being as financially self-sustaining as possible given the circumstances that exist at the airport


A

Rents...

Establishing rents Methodologies

Negotiation Rent Study Appraisal

– “Only” if required (to calculate a rental rate)


A

Rents...

Negotiate To confer with another so as to arrive at the

settlement of some matter To arrange for or bring about through

conference, discussion, and compromise

Negotiation The action or process of negotiating or being

negotiated


A

Rents...

Negotiation… This can result in a “market” transaction as

long as… It’s an open market… The buyer and seller each act prudently and

knowledgeably… The price not affected by undue stimulus


A

Rents...

Rent study Streamlined approach

Rental rates for similar aeronautical land and/or improvements at similar (or comparable) airports are analyzed to derive an appropriate rental rate– Also, considers national, regional, and competitive

airports


A

Rents...

Rent study (process) Identification of comparable “airports”

Profile of the subject airport Identification of comparable “leaseholds”

Similar land and/or improvements Similar use

– Commercial» FBOs or SASOs

– Non-Commercial Use of on-airport comparables

Compilation and analysis of data Segregate rent (by component)


A

Rents...

Identification of comparable “airports” Key elements

Infrastructure (number, configuration, and capacity of runways, taxiways, ramps/aprons)

Approaches (precision verses non-precision) Control tower Number and type of aviation businesses

located at the airport (including fuel providers) Amount of land available for development

(and related land use considerations) Type of market and number of airports in market Activity levels (based aircraft, aircraft

operations, and fuel volumes)


A

Rents...

Identification of comparable “leaseholds” Key elements

Use (commercial verses non-commercial) Size (usable verses unusable area) Location and access (landside and airside

access to/from the leasehold, airport infrastructure, and utilities)

Lease terms and conditions Type, quality, condition, and functional utility

or limitations of the land– Are there any restrictions on the development of land,

the availability of utilities, and the ability of the land to support aircraft?


A

Rents...

Segregate rent (by component) “Real estate”

Unimproved land (raw land) Improved land (with access and infrastructure to

the “lease” line) Site improvements (ramp/apron, vehicle parking) Facilities (terminal building, hangars, office, and

shop space) “Non-real estate” (business)

Percentage rents (gross receipts)


A

Rents...

Consultant qualifications Knowledge and experience

General aviation industry Commercial

– FBOs and SASOs Non-commercial

Appropriate for the work being performed

Consultant instructionsDispute resolution procedures


A

Rents...

Adjusting rents Methodology

Mechanisms (basis)– Negotiation– Fixed– Index

» Consumer Price Index (CPI)» Producer Price Index (PPI)» Airport Economic Index (AEI)

– Rent Study– Combination– Alternating


A

Rents...

Adjusting rents… Frequency (how often)

Regular (periodic) adjustments throughout the lease term

Whenever an option is exercised If options are granted in the lease agreement

Whenever the lease term is extended Capital investment translates into term


A

Fees

Establishing fees Cost recovery

Best practices approach (or methodology)– Allocate (non-funded) costs to general aviation (cost

center approach)» Planning, development (including debt service), operation

(including maintenance and repair), and management of the airport (not being covered by federal or state funding)

» Plus reasonable reserves (or contingencies)

– Ascertain the cost gap» Cost - rent = cost gap


A

Fees...

Establishing fees… Best practices approach (or methodology)…

Select and calculate fees required to close the gap (recover costs)

Cross check calculated fees against the market– Comparable airports (based on airport profile)– Competitive airports (in the area)

Set fees based upon reasonable cost recovery target while striving for financial self-sufficiency– Graduating (over time) percentage of the gap


A

Fees...

Types of fees and basis Fuel flowage

“Cents per gallon” sold/dispensed (with exemption if landing fee is paid)

Landing “Cents per 1,000 lbs.” aircraft weight (or fixed fee

by aircraft type or within specified aircraft groupings) with a minimum– Relationship to fuel flowage fees


A

Fees...

Types of fees and basis… Ramp

Fixed fee (by type or within a specified grouping) with a minimum– Day, overnight, or monthly (tiedown)

Facility Fixed fee (by type or within specified grouping) with

a minimum Activity (Permit)

Dependent upon the type of operator (FBO or SASO) and/or activity (temporary and/or special use)


A

Fees...

Adjusting fees How often (frequency)

Annually When

Coincide with budget year Adjustment

Up and down– Floors and ceilings

Minimum Annual Guarantee (MAG) Consider…

– Market rents– Cost recovery fees


A

Questions and Answers

Airport Sponsor AssurancesPrimary Guiding DocumentsLeasing/Rents and Fees Policy


A

Thank You!

Enjoy the rest of your stay. Have a safe trip home!
