HomeMy WebLinkAboutStaff Report 7440City of Palo Alto (ID # 7440)
City Council Staff Report
Report Type: Informational Report Meeting Date: 3/20/2017
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Summary Title: Airport Fixed Base Operator Expiring Leases and Info Update
Title: Palo Alto Airport Fixed Base Operator Expiring Leases and
Informational Update
From: City Manager
Lead Department: Public Works
Recommendation
This is an informational report and no Council action is necessary.
Background
In August 2014, City Council approved the transfer of the Palo Alto Airport
operations from the County of Santa Clara to the City of Palo Alto (CMR: 4723).As
part of the transfer, the City agreed to perform the executory portions of all
contracts assigned by the county, including the two Fixed Based Operator (FBO)
Lease Agreements with Roy-Aero Enterprises, LLC and Airport Management
Group,Inc., which expire in April 2017.
In June 2016,Council approved a contract with Aviation Management Consulting
Group (AMCG)to perform needed evaluation and planning tasks prior to the lease
expirations (CMR: 6671). Tasks encompassed in the contract included performing
a highest and best use analysis for the airport; developing the Primary
Management and Compliance Documents (Rules and Regulations, Minimum
Standards, Leasing/Rents and Fees Policy, and related documents); and an
optional scope of work for an Airport Business Plan.
To reduce proposed costs, Airport Division and Real Property Division staff
determined building condition and appraisals could be assessed in-house,aided
by consultant Valbridge Property Advisors. The resulting appraisal report was
used by AMCG to develop recommendations for interim property management.
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Timeline
Now
Over multiple site visits, AMCG was able to collect and review data on the
community, market, existing businesses and the airport. This data was the basis
for providing guidance and recommendations for an interim plan for the expiring
leases to allow time to conduct a comprehensive Airport business Plan that will
identify the long-term recommendations for the Airport for Council approval. The
City will enter into two-year term leases with the current FBO sub-lessees as an
interim solution until the Airport Business Plan is complete.
Fall 2017
The extensive data AMCG was able to collect and review will also help in
developing the Primary Management and Compliance Documents (Rules and
Regulations, Minimum Standards, Leasing/Rents and Fees Policy, and related
documents).Outreach with the pilots, businesses, and the community will be
conducted to ensure stakeholder input and program success. Establishing
effective property management practices and updated fees and rents will ensure
the airport is financially self-sufficient and well-run. Staff will return to Council in
fall 2017 to present the completed documents for approval.
January 2018
Shortly thereafter, staff expects to return to Council to amend the contract with
AMCG to add the optional scope for an Airport Business Plan. The Airport
Business Plan will utilize input from businesses, pilots, airport neighbors and the
community to plan for the future development and management of the airport.
As well, the Airport Business Plan will ensure the airport meets all FAA grant
assurances.
Next Steps
Following Council approval of the amendment, AMCG will begin developing the
Airport Business Plan and when complete,the airport anticipates issuing an RFP
for long-term lease agreements for business activities at the airport that meet the
goals identified in the plan.
This timeline will allow the airport to minimize operational and financial impacts
on airport users, while maximizing the airport’s revenue stream.
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Resource Impact
In Fiscal Year 2016, revenue from the two primary leaseholds equaled $80,054.72.
It is estimated Fiscal Year 2017 will end with short-term lease revenues equaling
$136,930.02. AMCG has projected Fiscal Year 2018 short-term lease revenue to
equal between $1.2M and $1.6M.
The General Fund has loaned about $2.9 million dollars to the Airport Enterprise
Fund to support operations and provide seed money for capital improvement
projects between Fiscal Years 2011 and 2017 (Table 1).
Table 1.
Fiscal Year Loan Amount
2011 $300,000
2013 $310,000
2014 $325,000
2015 $760,000
2016 $515,601
2017 $704,150
TOTAL $2,914,751
This recommended interim plan is establishing effective property management
practices and updated fees and rents to ensure the airport is well-run and
financially self-sufficient. The Airport is scheduled to initiate repayment of loans
in Fiscal Year 2019.
Policy Implication
There are no changes to existing City policies.