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Date
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February 11, 2008
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Agenda
Item No. 50 Roll
Call No. 08- Communication No. 08-063 Submitted by: Craig
Smith, Aviation Director |
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AGENDA HEADING:
Approval of long
term lease agreement with Mesaba Airlines, Inc. for occupancy of an
SYNOPSIS:
Recommend
approval of a long term lease agreement with Mesaba Airlines Inc., John
Spanjers, President,
FISCAL IMPACT:
Amount: This lease with Mesaba will generate land
rent revenue of $114,794.90 annually plus building rent of $508,683 annually.
The land rent will be abated at 75%, 60%, 45%, 30% and 15% for the first five
years of the Agreement. The building rent is calculated over a twenty year
period with a ten year payback of the airport’s contribution to the
construction of the building shell. The Lease Agreement also contains a clause
to adjust portions of the land rent throughout the term of the lease based on
inflationary factors.
Funding
Source: Initially, all revenues will be applied
towards repayment of the Airport’s Commercial Paper (Series C) debt obligation which
is being used to fund construction of the building. After all construction debt has been repaid,
revenues will be credited towards the Airport’s general operating fund, FY08
Operating Budget, EN002, AIR040100, pg. 30 to offset ongoing expenses.
ADDITIONAL INFORMATION:
During December
2006, Airport staff was contacted by Mr. Eric Van Horne from the New Frontier
Management Group. Mr. Van Horne is a
consultant hired by Northwest Airlines (NWA) to review airport sites for
potential hangar locations that could support a maintenance base for NWA’s
newly acquired fleet of Embraer 175 regional jet aircraft. NWA preferred an airport that had existing
facilities that could support the base.
On April 6, 2007, Northwest Airlines
published an RFP for the hangar locations.
Airport staff conducted a series of internal meetings with the City’s
Economic Development Office and the Des Moines Partnership to gain information
and on May 18, 2007, Airport staff responded to the RFP for the maintenance
facility.
On August 7, 2007, Mesaba Airlines
announced its intentions to construct an $11.8 million maintenance facility at
the
Staff began negotiating with
representatives of NWA for the construction of a new maintenance hangar,
certain apron space, parking and other details related to the construction and
operation of the facility.
As a result of the negotiations, Airport
staff and Mesaba have reached an agreement on all terms of a Development and
Lease Agreement for a 79,975 square foot newly constructed building at the
The building is
a joint project valued at approximately $11.8 million and provides for the
first full service commercial aircraft maintenance facility at the
PREVIOUS COUNCIL ACTION(S):
Date: December 3, 2007
Roll Call Number: 07-2300
Action: Set date
of Hearing on approval of development agreement with Mesaba Airlines, Inc. for
property at the
Date: December 17, 2007
Roll Call Number: 07-2419
Action: Hearing on development agreement with Mesaba
Airlines, Inc. for property at the
Date: January 7, 2008
Roll Call Number: 08-072
Action: Hearing on development
agreement with Mesaba Airlines, Inc. for property at the
BOARD/COMMISSION ACTION(S):
Date: February 5, 2008
Resolution Number: A08-037
Action: Recommendation from the Airport Board to City
Council to Approve the Development and Lease Agreement with Mesaba Airlines
Inc.
ANTICIPATED ACTIONS AND FUTURE COMMITMENTS: NONE