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Home My WebLink AboutStaff Report 2602-5923CITY OF PALO ALTO Finance Committee Regular Meeting Tuesday, April 21, 2026 Agenda Item 3.Recommendation to the City Council to: Adopt a Resolution Approving the Fiscal Year 2027 Schedule of Airport Rates and Charges; Accept the Palo Alto Airport Rates and Charges Study; and Authorize Annual Adjustments to Airport Fees and Charges Based on the Airport Benchmark Index (ABI), as Described in the Study; CEQA Status – Exempt Under Section 15061(b)(3) Staff Presentation Finance Committee Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: Public Works Meeting Date: April 21, 2026 Report #:2602-5923 TITLE Recommendation to the City Council to: Adopt a Resolution Approving the Fiscal Year 2027 Schedule of Airport Rates and Charges; Accept the Palo Alto Airport Rates and Charges Study; and Authorize Annual Adjustments to Airport Fees and Charges Based on the Airport Benchmark Index (ABI), as Described in the Study; CEQA Status – Exempt Under Section 15061(b)(3) RECOMMENDATION Staff recommends that the Finance Committee recommend that the City Council: 1. Adopt a resolution approving the Fiscal Year 2027 Schedule of Airport Rates and Charges; 2. Accept the Palo Alto Airport Rates and Charges Study; and 3. Authorize annual adjustments to airport fees and charges based on the Airport Benchmark Index (ABI), as described in the Study, as part of the annual Municipal Fee Schedule adoption. EXECUTIVE SUMMARY Airport operating revenues have not progressed with rising operating and capital costs, resulting in structural pressure on the Airport Enterprise Fund. In response, the City commissioned a comprehensive Rates and Charges Study to ensure the Airport remains financially self-sustaining in accordance with Federal Aviation Administration (FAA) requirements. The Study recommends targeted adjustments to landing fees, fuel flowage fees, lease rates, and select administrative charges. These changes are designed to restore structural balance, improve cost recovery, and generate sufficient reserve capacity to support required Capital Improvement Program (CIP) sponsor contributions. Collectively, the recommended rates strengthen the long-term financial stability of the Airport Enterprise Fund and position the Airport to meet its operational and capital obligations going forward independently from support from other City funding sources. BACKGROUND 1 approving the Schedule of Fees and Charges for PAO. Since then, the fees have increased by the Consumer Price Index of the San Francisco-Oakland-San Jose area. The Airport is currently planning approximately $12.5 million in capital projects through 2030, including both federally assisted and locally funded projects. While most federally eligible projects are expected to receive significant grant funding, the City remains responsible for sponsor match contributions and for fully funding projects that are not grant-eligible. FAA Grant Assurance 24 requires the City to maintain a fee and rental structure that makes the Airport as self-sustaining as possible, while Grant Assurance 25 restricts airport revenue to airport-related purposes. Considering the increasing operating costs, planned capital investments, and limited reserves, staff determined that a comprehensive review of airport rates and charges was necessary. 2 for the City has risen by 46% during the same time frame. 1 Resolution 9453, August 2014; https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=53806&dbid=0&repo=PaloAlto&searchid=a871830a -2a7c-4021-8f05-798c291e28fb 2 This is an annual increase in fees calculated primarily based on the average increase in salaries and benefits to maintain cost recovery levels year over year. This targeted adjustment realigns lease revenues with operating costs, supports required capital improvement sponsor contributions, and maintains compliance with FAA requirements that non-aeronautical uses be charged at fair market value. The proposed increase remains within the range of comparable airports and reflects a measured approach to restoring long- term financial stability. The study notes that if revenues do not meet expectations, PAO will need to defer CIP projects in the future. ANALYSIS Rates and Charges Study Overview The Rates and Charges Study evaluates the Airport’s financial position using a hybrid compensatory-residual methodology consistent with FAA guidance. Under this approach, market-based rates are applied where appropriate, and landing fees are calibrated to ensure that total airport revenues are sufficient to cover operating costs, capital needs, and reasonable reserves without generating excessive surplus as an enterprise. The Study includes: A peer airport analysis comparing PAO to similar general aviation airports in California; A review of existing aeronautical and non-aeronautical fees; A landing fee analysis based on aircraft weight and actual airport use; and A multi-year financial forecast assessing reserve balances under various fee scenarios. Key Findings The Study found that: Airport operating and capital costs have increased faster than existing fees; Transient aircraft account for a substantial share of runway use but contribute a relatively small portion of total revenue; and Without fee adjustments, the Airport Enterprise Fund risks continued structural deficits that could limit the City’s ability to maintain infrastructure and meet FAA obligations. Study Recommendations The proposed options are suggested by the consultant to meet the capital improvement needs of the airport: 5. Modify the tie-down parking rate structure to differentiate landing fee and daily parking rates with the landing fee established at $3.00 / 1,000 lbs. Maximum takeoff weight (MTOW) for non-commercial flights, and $9.00 / 1,000 lbs MTOW for commercial flights, and, 6. Benchmark future fee schedule increases to an Airport Benchmark Index (ABI) blending the City’s General Rate Increase (GRI) and the San Francisco-Oakland-Hayward CPI-U index at a 2:1 ratio. Fuel Flowage Fuel Flowage are fees charged by PAO on every gallon of aviation fuel dispensed into an aircraft on the field, and this fee represent a stable revenue source that supports airfield maintenance and capital improvements. While PAO’s existing fuel flowage fee is the highest within the regional range, the study notes that it is not uncommon for general aviation airports to have a fuel flowage rate between $0.20-0.25 per gallon. Therefore, the study recommends increasing the current fuel flowage of $0.21 to $0.25 per gallon to increase fuel flowage revenue. Per the lease agreement with the fuel provider at PAO, the fuel flowage fee will not be assessed on unleaded aviation fuel or sustainable aviation fuel until the sale of those fuels exceeds 50% of total fuel sales at the airport. Increase Monthly Vehicular Parking Rate and establish daily rates to one-fifth of the monthly rate The Study recommends increasing the monthly vehicular parking rate from $90 to $100 and establishing a daily rate at one-fifth of the monthly rate. The Study recommends the Mobile Truck Operations Permit be increased to $30 per day and $150 per month. These adjustments modernize PAO’s parking fee structure, improving consistency between daily and monthly rates. The revised structure aligns parking fees more closely with comparable airports while maintaining affordability for tenants based at the airport. The airport fee would be in the mid-range of peer airports with the typical range between $4.00 and $30.00. Apply a Commercial Non-Aeronautical Permit Fee Equal to 10% of Gross Receipts The Fee Study recommends applying a Commercial Non-Aeronautical Permit Fee equal to 10% of gross receipts for applicable operators conducting business at PAO. This fee applies to revenue generated from the sale of goods or services to the public or to PAO users, including but not limited to ride share companies, mobile vending, special events, vehicle rental, or other ground-based commercial services not supporting flight operations. This fee does not apply to business leases at PAO, as these are negotiated through individual leases. This fee ensures that commercial activities benefiting from PAO facilities contribute appropriately to the cost of maintaining the infrastructure and services. Under FAA policy, non- aeronautical uses of airport property must be charged at fair market value, and revenue derived from these activities must remain within the Airport Enterprise Fund. The proposed structure aligns with peer airport practices and promotes equitable cost recovery by capturing revenue from operators who generate income through airport-based activity without holding traditional aeronautical leases. This approach strengthens PAO’s financial sustainability while maintaining fairness across user groups. Revised Transient Landing Fee Structure The Study finds that transient aircraft account for a significant portion of runway use but contribute a disproportionately small share of total airport revenue. A transient aircraft is an aircraft that uses PAO on a temporary basis but is not based at PAO and does not occupy a long- term hangar or tiedown under a license agreement. Landing fees provide a direct, FAA- supported mechanism to recover costs associated with airfield use and the maintenance of runway and taxiway infrastructure. Benchmark future fee increases on ABI The Airport Benchmark Index (ABI) is a newly recommended method for making predictable annual adjustments to airport fees and charges, with a goal of better aligning annual adjustments with actual cost increases. The ABI incorporates: FISCAL/RESOURCE IMPACT 3. Support planned capital improvements without reliance on debt financing in the near term. While several recommendations are not readily quantifiable, the fuel flowage fee and transient landing fee are expected to generate approximately $52,000 and $154,000, respectively, in additional annual revenue during the first year of implementation. Collectively, these revenue increases will strengthen the Airport Enterprise Fund and generate additional reserve capacity within the fund balance to support future capital improvement program project sponsor contributions. As shown in Table 1 below, these additional fees will generate a surplus of $35,037. This surplus includes continuing with the CIP projects for the next fiscal year. Without the additional fees the Airport Enterprise Fund would have a deficit of $171,512. Table 1: Analysis of Changes in Fee Structure Fee Current Status Revised Expected Revenue Increase Fuel Flowage $0.21/gallon $0.25/gallon $52,026 Vehicle Parking $11/day or $92/month $20/day or $100/mo Mobile Truck Operating Permit $30/day or $77.50/month $30/day or $150/month $7,000 Commercial Non- Aeronautical Permit fee 10% gross receipts only charged to Rental Car services 10% gross receipts to all non- commercial operators Non-commercial Transient Landing Fees No charge $3/1000lbs Transient Commercial Landing Fees $25 - $95 $9/1000lbs Transient Tie-Down Parking Based on weight and hours of parking Simplified to Daily Rate with first 4 hours paid for by landing fee $154,523 Annual Increase Based on CPI Airport Benchmark Index which is 2/3 GRI & 1/3 CPI All revenue generated under the proposed fee adjustments will remain within the Airport Enterprise Fund and will be used solely for airport operating and capital purposes in compliance with FAA Grant Assurances 24 and 25. The revised fee structure supports PAO’s obligation to be as financially self-sustaining as possible under existing circumstances. PAO remains at the most expensive airport in the Bay Area and is at the top range of fees as shown below in Table 2. A commercial aircraft with a MTOW of 12,500 would be billed $117 per landing at the airport, placing PAO at the top range for Commercial Landing Fees in the Bay Area. Table 2: Bay Area Airport Comparison Fee PAO Range Bay Area Airport Range Tie-down $206.00 - 470.00 $48.00 - $411.50 Hangars $0.92 - $1.00 $0.36 - $0.87 Transient $5.50 - $30.00 $0.00 - $27.00 Non-commercial Landing Fee $3.00 / 1000 lbs $0.00 Commercial Landing Fee $9.00 / 1000lbs $2.00 - $106.00 Vehicle Parking $11.50 $0.00 - $20.00 Fuel Flowage $0.25 $0.05 - $0.15 STAKEHOLDER ENGAGEMENT Staff coordinated internally with the Administrative Services Department throughout the development of the Airport Rates and Charges Study. In addition to internal coordination, staff engaged with the Palo Alto Airport Association during the study. The Association was kept informed of the study scope methodology, and preliminary findings. This outreach was intended to promote transparency, ensure stakeholder awareness, and provide an opportunity for feedback prior to bringing the item forward for Council consideration. ENVIRONMENTAL REVIEW The proposed action is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3), as it can be seen with certainty that adoption of the fee schedule will not result in a direct or indirect physical change in the environment. ATTACHMENTS Attachment A: PAO Rates and Charges Study Attachment B: Resolution PAO Rates and Charges Adjustment APPROVED BY: Brad Eggleston, Director Public Works/City Engineer FINAL REPORT September 17, 2025 2 Palo Alto Airport (PAO or Airport) is a towered, single runway airport owned and operated by the City of Palo Alto (City or Sponsor) for public use. The Airport is categorized as a General Aviation Regional role in the Federal Aviation Administration’s (FAA) National Plan of Integrated Airport System (NPIAS) with 331 based aircraft on 102 acres located within the city of Palo Alto, CA. The airfield consists of Runway 13/31, a 2,441’ x 70’ asphalt runway with an LNAV MDA non-precision instrument approach. In August 2014, the County of Santa Clara transferred the PAO back to the City. Since that time, staff has been bringing the Airport up to current Federal Aviation Administration (FAA) standards through several capital projects. In August 2019, the City consolidated a General Fund loan totaling $3.4M to support operating and capital expenses spanning FY 2011 to 2018. Additional revenue from airport operations is required to finance necessary capital projects and ensure the long-term financial health of the Airport. The Palo Alto Airport Master Plan is currently under development by C&S Engineers. The Master Plan depicts proposed facilities on the Airport Layout Plan (ALP). The Airport Capital Improvement Plan (ACIP) projects capital expenses and project phasing of facilities on the ALP. C&S updated the ACIP in 2024 prescribing $4.7M in capital projects between 2025 and 2030. Federal grants provide funding equal to approximately 90% of the eligible project costs in exchange for obligations to uphold FAA Grant Assurances. The Sponsor’s 10% match is typically offset by grants from the California Department of Transportation (Caltrans). However, state funding through Caltrans is limited and not all capital projects are eligible for federal and/or state funding. The PAO budget calls for an additional $5.8M in federally funded projects not on the current ACIP and $384k in capital projects not eligible for federal funding. In all, the Airport plans to fund $12.5M in capital projects requiring $1.4M of Sponsor contributions through 2030. City has engaged Ascension Group Partners (AGP) to conduct this Rates and Charges Study with the purpose of determining appropriate aeronautical fees sufficient to cover the Airport’s operating expenses and funding requirements for planned capital projects. A survey of market-based rates and charges was conducted for a peer set of airports along with a landing fee analysis, which uses a residual cost-recovery methodology to determine landing fees adequate to cover the Sponsor’s obligations without accumulating an excessive reserve. This report supplements the Rent Study Analysis conducted by AGP in August 2023 that evaluated market rates for aeronautical and non-aeronautical facilities for a similar peer set of airports. The following options are suggested to meet capital development funding needs at PAO: 1.Defer capital projects when capital reserve is insufficient to fund Sponsor contribution, 2.Adopt Minimum Standards and complete the Master Plan prior to conducting any Request for Proposal (RFP) for commercial aeronautical facility development, 3.Adjust Fee Schedule by 2.4% in line with the San Francisco-Oakland-Hayward CPI-U index for CY 2024. 4.Increase office and non-aeronautical ground rents by an additional 5.6% over CPI adjustment for FY26. 5.Increase the fuel flowage fee from $0.21 to $0.25, 6.Increase monthly vehicular parking rate from $90 to $100 and establish daily vehicular parking at 1/5th of the monthly rate and the Mobile Truck Operating Permit at five times the daily rate, 7.Establish a Hangar Ground Lease Origination / Transfer fee at 2% of sale or assessed value, 8.Apply a Commercial Non-Aeronautical Permit fee equal to 10% of gross receipts, 9.Modify the tie-down parking rate structure to differentiate landing fee and daily parking rates with the landing fee established at $3.00 / 1,000 lbs. maximum take off weight (MTOW), and 10.Benchmark future fee schedule increases to an Airport Benchmark Index (ABI) blending the City’s General Rate Increase (GRI) and the San Francisco-Oakland-Hayward CPI-U index at a 2:1 ratio. Palo Alto Airport is entering a sustained, capital intensive period of facility redevelopment without a substantial reserve to finance construction projects. The proposed Aeronautical Fee Schedule in Exhibit A would fund planned capital projects and end FY2026 with a positive reserve fund by making minimal changes to consolidate and standardize current aeronautical fees beyond the 2.4% annual CPI adjustment. 3 1.0 Airport Rates and Charges Grant Assurance 24, Airport Fees and Rents, requires the airport 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. Airport proprietors must employ a reasonable, consistent, and transparent (i.e., clear and fully justified) method of establishing rates and charges, and adjustments on a timely and predictable schedule. FAA will not ordinarily investigate the reasonableness of a general aviation airport’s fees absent evidence of a progressive accumulation of surplus aeronautical revenues. In establishing new fees, and generating revenues from all sources, airport owners and operators should not seek to create revenue surpluses that exceed the amounts to be used for airport purposes, including reasonable reserves and other funds to facilitate financing and to cover contingencies. FAA Grant Assurance 25 ensures all airport-generated revenue be used solely for the capital or operating costs of that airport (or other FAA‑approved airport-related purposes) and prohibits diverting those funds to non‑airport entities or uses, including through the use of inappropriate direct or indirect operating expenses. A hybrid compensatory-residual methodology is applied to determine the Airport’s rates and fees. Under this methodology, PAO charges market-based rates comparable to a peer set of airports (Peer Set) for the lease of airport property and airport-related services to aeronautical users while establishing any approved non-aeronautical use of the Airport at fair market value. The Airport’s landing fee is calibrated to balance operating and capital budgets after cross-crediting other airport revenues and any reserves. 2.0 Market-Based Rate Survey A market-based survey of rates and charges was conducted on a Peer Set of ten comparable airports. Seven criteria were used in the evaluation: NPIAS role, number of based aircraft, TFMSC C-II operations, Air Traffic Control Tower (ATCT), and Instrument Landing System (ILS) facilities, acres of land, and distance from PAO. Data was acquired from the FAA Form 5010-1 Airport Master Record database. The Traffic Flow Management System Count (TFMSC) operations for Airport Reference Code C-II aircraft or above was acquired from the FAA Aviation System Performance Metrics Web Data System. Figure 1. PAO Airport Peer Set. All airports in the Peer Set were scored on the seven criteria by indexing the value for each airport minus the value for PAO on a scale of 0 to 1 with the highest score given to airports identical to PAO and the lowest score given to airports most dissimilar to PAO. PAO received a score of 1 in each of the seven criteria for a total index score of 7.0. San Carlos (SQL) was the most similar airport with an index score of 6.96: NPIAS Role (1.00), based aircraft (0.98), TFMSC C-II Operations (1.00), ATCT (1.00), and ILS (1.00), acres (0.99), and distance (0.98). The ten most similar airports were included in this Peer Set (Figure 1). Code Name City State RNWY Length Acres NPIAS Role ILS ATCT Based Aircraft CII TFMSC Distance Index PAO PALO ALTO PALO ALTO CA 2443 102 Regional N Y 331 0 0 7.0000 SQL SAN CARLOS SAN CARLOS CA 2621 110 Regional N Y 323 0 8 6.9621 RHV REID-HILLVIEW SAN JOSE CA 3100 179 Regional N Y 330 0 18 6.9484 CCR BUCHANAN FLD CONCORD CA 5001 495 National N Y 340 1980 37 6.7201 HWD HAYWARD EXEC HAYWARD CA 5694 543 National N Y 446 1846 14 6.4857 FUL FULLERTON MUNI FULLERTON CA 3121 86 Regional N Y 312 0 340 6.2698 WHP WHITEMAN LOS ANGELES CA 4120 184 Regional N Y 223 1 303 6.1037 CMA CAMARILLO CAMARILLO CA 6013 650 National N Y 383 2920 281 6.0938 HHR HAWTHORNE MUNI HAWTHORNE CA 4884 80 National N Y 184 1849 324 5.8557 MER CASTLE ATWATER CA 11802 1360 Local N Y 71 118 85 5.8372 WVI WATSONVILLE MUNI WATSONVILLE CA 4502 330 Regional N N 282 13 40 5.7555 4 Airports from the previous Rent Study Analysis conducted by AGP were also included in the peer set. These airports were selected by flagging regional general aviation service airports with a tower, non-Part 139 certificated, non- precision approaches, airports with +/- 300 based aircraft, +/- 2,000 feet difference from PAO’s longest runway, and within the state of California. The PAO Airport 2023 Peer Set (Figure 2) contained four airports included in the current peer set. Figure 2. PAO Airport 2023 Peer Set. 2.1 Ground Lease and Hangar Rent Rates Ground lease and hangar rent rates are difficult to compare because property leases are uniquely determined based on existing improvements, access to the airfield, negotiation between parties, appraisals, and/or comparative properties. Surveying ground lease and hangar rent rates is informative, but such rates are not universally comparable from airport to airport. Ground lease rates are typically influenced by terms specified in the lease, such as required scheduled improvements over the lease term or conditions such as improvement reversion requirements at the end of the term. The 2023 Rent Study Analysis (Exhibit C) provides a detailed review of market rental and ground lease rates at comparable airports. Ground lease rates are often bifurcated for unimproved sites with no utilities or taxiway access and improved sites that have utilities and taxiway access. However, the most common structure in the survey was a single aeronautical ground lease rate. Palo Alto’s Aeronautical Ground Lease rates are above the market average of $0.59 / sq. ft annually but still within the Peer Set range. Palo Alto’s airport owned T-hangar rental rates are priced below market average. Non-aeronautical rents are above average but the FAA requires these rates be assessed at fair market value. Compliance Guidance Letter 2018‑3 (CGL‑2018‑3) Appraisal Standards for the Sale and Disposal of Federally Obligated Airport Property augments FAA Order 5190.6B – Airport Compliance Manual, Chapter 17 and Appendix Z, by defining the appraisal process and documentation standards required to determine fair-market value for leases and sales of non‑aeronautical land and facilities. The study found that airport fees have not kept pace with operating and capital expenses. As a result, the Airport Enterprise Fund has begun to operate at a deficit and increased fees are necessary to achieve the Airport’s financial self-sufficiency. Without corrective action, the funding deficit will begin to limit the Airport’s ability to meet operational demands and fund critical infrastructure projects. The table below illustrates the City’s General Rate Increase (GRI) since FY 2019 and corresponding lease rate increases. The GRI methodology is used by the City of Palo Alto to keep fees in line with the cost of service, new or changes to service delivery, and changes in cost recovery levels. From FY 2019 to FY 2025, lease rates increased by approximately 24% while the GRI increased by 36% over the same period. Code Name State Runway Length Acres NPIAS Role ILS ATCT Based Aircraft CII TFMSC Distance Index PAO PALO ALTO CA 2443 102 Regional N Y 331 0 0 7 SQL SAN CARLOS CA 2621 110 Regional N Y 323 0 8 6.9621 FUL FULLERTON MUNI CA 3121 86 Regional N Y 312 0 340 6.2698 CMA CAMARILLO CA 6013 650 National N Y 383 2920 281 6.0938 WVI WATSONVILLE MUNI CA 4502 330 Regional N N 282 13 40 5.7555 TRK TRUCKEE-TAHOE CA 7001 2280 Regional N Y 114 1017 167 5.7369 LVK LIVERMORE MUNI CA 5253 644 Regional Y Y 400 1233 23 5.6816 SMO SANTA MONICA MUNI CA 3500 215 Local N Y 74 121 314 5.582 SAC SACRAMENTO EXEC CA 5503 540 Regional Y Y 172 319 80 5.3565 SBP SAN LUIS RGNL CA 6101 340 Non-Hub Y Y 327 11330 174 5.3502 5 Table A. GRI vs Lease Rate Increases. GRI 100.00 Lease 100.00 FY19 2.6% 102.60 3% 103.00 FY20 7.5% 110.30 3% 106.09 FY21 2.6% 113.16 3% 109.27 FY22 2.0% 115.43 3% 112.55 FY23 4.6% 120.74 4% 117.05 FY24 7.5% 129.79 3% 120.56 FY25 5.2% 136.54 3% 124.18 FY26 6.8% 145.82 8% 134.12 AGP recommends a revised airport fee schedule based on an analysis of the Airport’s operating budget and CIP funding requirements. As part of this review, AGP also recommends an 8% increase in lease rates for new commercial aeronautical leases after July 1, 2025 to better align revenues with the increasing operating costs. With this proposed increase, lease rates between FY 2019 and FY 2026 will have increased 34%, or 3.75% per year. During the same period, the GRI increased 46%, or 4.85% per year. The updated lease rates for FY26 are critical to restore fiscal stability and ensuring that the Airport remains self- sustaining under FAA policy and grant assurance requirements. The decision to implement a moderate but necessary increase is consistent with the City’s obligation under FAA Grant Assurance 24 to maintain a fee and rental structure that will make the airport as self‑sustaining as possible under the circumstances existing at that particular airport. The use of the GRI is also consistent with FAA Order 5190.6B – Airport Compliance Manual guidance on escalation provisions in Section 9.5, Terms and Conditions Applied to Tenants Offering Aeronautical Services, subpart (e) that periodic adjustments be based on a recognized index to reflect inflation and other changing economic conditions. An Airport Blended Index (ABI) combining GRI/CPI rate increases would account for year-over-year salary and benefit increases calculated by the City in the GRI while the CPI covers all other cost increases. The ABI formula of 2/3 GRI + 1/3 CPI is justified based on 2/3 of the Airport fund expenses from salaries and benefits. 2.2 Fuel Flowage Fee Fuel flowage fees are a charge on fuel sales by Fixed Base Operators (FBOs) remitted to the Airport. Similar to ground lease rates, airports occasionally bifurcate fuel flowage fees for jet fuel and avgas. Several airports in the Peer Set exercise their exclusive right to provide sole fueling services at the airport, and therefore, do not have a published fuel flowage fee. Only three airports in the Peer Set include a retail fuel flowage fee in their fee schedule: Concord ($0.08 retail, or 4.5% of wholesale, $0.95 self-fuel), Fullerton ($0.15), Livermore ($0.11 - $0.15 depending on volume), San Carlos ($0.10), Camarillo ($0.06), Hayward (greater of $0.05 or 3%). Despite PAO having the highest published fuel flowage fee in the Peer Set, it is not uncommon for general aviation airports in the region to have retail fuel flowage fees between $0.20 - $0.25 per gallon. 2.3 Other Airport Fees and Charges Airports in the Peer Set were selected on characteristics similar to those found at PAO. However, many other circumstances influence the revenue-generating ability of the airport to cover capital and operating expenses toward the FAA’s stated goal of self-sufficiency described in Grant Assurance 24. These circumstances influence the opportunities available to PAO for additional revenue-generation. Thus, comparable market rates are informative in determining appropriate rates at PAO, but market rates may reflect other budget-balancing revenue sources that are not available to the Airport. 6 Fees found at Peer Set airports not charged by PAO include non-aeronautical permit fees and hangar ground lease origination / transfer fees. Non-aeronautical permit fees charged to rental car agencies or transportation network companies (TNCs) such as Uber, Lyft, and Turo are typically 10% - 12% of gross revenue or a fixed price per parking space. PAO has established a fee for car rentals equal to 10% of gross receipts, but not for TNC’s. Additionally, the existing Commercial Aeronautical Permit Fee of $134.50 annually be changed to a tiered structure that collects a fixed fee at lower thresholds while establishing a percentage of gross receipts fee for operators generating significant revenue. Ground lease origination / transfer fees are typically a fixed amount, ranging from $150 - $1,000, but can be 1% - 3% of the assessed or sale value like those collected at Camarillo. Similarly, some airports collect a percentage of revenue for subleasing of commercial aeronautical storage based on hangar square footage. PAO could add or change the following fees while remaining within the range of Peer Set market rates: Figure 3. Other Airport Fees. 2.4 Transient Landing Fees These fees allow the City to capture value created by their continued investment in airport infrastructure from based tenants. However, transient aircraft account for 27% of general aviation landed weight at PAO, yet transient landing fees only represent 0.08% of aeronautical revenue. Landing fees represent a mechanism immediately available to PAO for an increased source of sustainable, relatively inelastic revenue. Unlike hangar rent or fuel flowage fees, landing fees assess actual airport use that correlates with the operating and capital needs of the airfield. Commercial landing fees are assessed on aircraft weight. General aviation has traditionally been subsidized by commercial operators on the justification that heavier aircraft contribute more to the deterioration of runway pavement than lighter aircraft. However, load is less of a factor on runway deterioration when used primarily by aircraft within the pavement’s designed weight bearing capacity or in environments with heavy moisture, extreme temperatures, and frequent freeze-thaw cycles. While aircraft load can be a significant factor in runway deterioration, it isn’t the only factor or even the primary factor in many cases. Therefore, a flat rate may be applied for aircraft under a minimum weight threshold that represent a high share of operations but don’t significantly contribute to pavement deterioration. Based aircraft are typically exempt from landing fees as they pay into the airport system through ground, hangar, or tie-down rents and other fees. This has the secondary benefit of encouraging based aircraft registration, which may increase available state funding. •Current Fee:$10.50 / day •Typically $4-$30/day or $50-$150/monthVehicular Parking Fee: •Potential Fee:$1,500 annually / 1.75x monthly storage fee •Recent standard at GOO and WVI as well as SNS and O52 Derelict / Non-Operational Aircraft Storage Fee •Current Fee:$134.50 annually •Fixed fee of $150 -$1,400 min. annually; SQL: $500 monthly Commercial Aeronautical Permit Fee •Current Fee:10% of Gross Receipts for Rental Cars only •Ranges 10-12% , $100 per vehicle/month or fixed annual fee Commercial Non- Aeronautical Permit Fee •New Fee: 2% of greater sale or assessed value •Typically fixed fee of $150-$1,000; CMA: 2% of sale/assessed valueHangar Transfer Fee 7 3.0 Landing Fee Methodology A transient landing fee model provides a scalable, legally supported, and increasingly practical option thanks to third- party fee collection services. This model enables airports to align fees more closely with facility use and fund capital reserves without overburdening based tenants. PAO currently charges a fixed tier landing fee for commercial operators based on the aircraft Maximum Take Off Weight (MTOW) ranging from $24.50 to $93.00 per landing. General aviation aircraft are charged a tie-down parking fee for 0-8 hours tiered on aircraft weight. This charge acts as a landing fee equivalent to an average of $2.05 / 1,000 lbs. MTOW. Landing fees vary widely in the Peer Set with some based on a fixed tier like PAO but more commonly assessing a rate per 1,000 lbs. MTOW, or a hybrid of both. Truckee Tahoe (TRK) is one such airport that has established the maximum of the Peer Set range at $8 / 1,000 lbs. for all aircraft > 5,500 lbs. up to 22,000 lbs., $10 / 1,000 lbs. for aircraft 20,000 lbs. to 36,000 lbs., and $14 / 1,000 lbs. for aircraft 26,000 lbs. to 80,000 lbs, and $16 / 1,000 lbs. for aircraft over 80,000 lbs. MTOW. Others in the Peer Set charge landing fees ranging from $1.44 / 1,000 lbs. for aircraft over 12,500 lbs at Camarillo to $3.00 / 1,000 lbs for general aviation aircraft over 6,000 lbs. The transient aircraft landed weight at PAO for September 1, 2024 through April 14, 2025 of 22,956,000 pounds was calculated using data from 1200.aero to extrapolate the FY 2025 baseline of 37,075,000 pounds. Applying the tie- down parking fee (0-8 hours) to all transient landings, PAO would have collected approximately $74,892 in landing fees, representing 12% of tie-down revenue budgeted for FY 2025. As a cost recovery mechanism, landing fees can be determined by dividing expenditures, less all other airport revenues and any reserve funds, by the anticipated landed weight for the rate setting period. The ACIP provides estimated costs and timing for implementation over the 5-year planning period. Capital project expenditures assume FAA Airport Improvement Program (AIP) federal grants fund approximately 90%1 (Figure 4). The Sponsor participation of capital projects is approximately 10% of federally eligible projects and 100% of locally funded projects (Figure 5). Figure 4. Federal ACIP-eligible Projects. Figure 5. Locally Funded Projects. Operating expenses were forecasted by calculating the future value of the FY2025 projected expenses for the Airport operating fund at a 3% annual growth rate. FAA policy requires sponsors charge direct operating expenses only when costs can be specifically identified with airport functions and must allocate all other overhead through an FAA‑approved cost allocation plan prepared in accordance with OMB Uniform Guidance (2 CFR Part 200 Subpart E), ensuring indirect costs are GAAP‑consistent, reasonable, similarly billed to comparable sponsor units, limited to employee salaries and wages, and not billed directly as pass‑through expenses. The City should evaluate any internal policies for direct and indirect expenses allocated to the Airport for conformance with FAA Order 5190.6B – Airport Compliance Manual and FAA Order 5100.38D – AIP Handbook. 1 The FAA Reauthorization Act of 2024 provides a 95% match in federal funds through FY 2026. Year Airport Capital Improvement Projects (ACIP) - Federal FY 2025 - 2030 (Oct 1 - Sep 30) 2024 Est. Cost Future Value 2025 AWOS III (Construction)2,532,000$ 2,532,000$ 2026 Master Plan (Environmental)750,000$ 780,000$ 2027 Airfield Solar Array (Design)500,000$ 541,000$ 2028 Runway and Taxiway Reconstruction and Drainage Improvements (Environmental) 900,000$ 1,012,000$ 2026 Access Road Reconstruction (Design)300,000$ 312,000$ 2029 Airfield Electrical Improvement (Design)482,000$ 564,000$ 2031 Year Locally Funded Projects 2024 Est. Cost Future Value 2026 Airport Customer Parking Charging Stations (Design & Phase I)25,000$ 26,000$ 2026 Airport Temporary Office Buildings 359,000$ 373,000$ 8 The General Aviation Landing Fee is calculated in Exhibit B using the methodology as set forth in Table A. EXPENSE CATEGORY LINE ITEM Line Item A. Operation and Maintenance Expenditures. This line item is the Airport’s costs for the operation, maintenance, and repair of the Airport including salaries and employee benefits, utility costs, ordinary maintenance, direct and indirect administrative and general expenses listed in the annual operating budget of the Airport Revenue Fund for the rate setting period. Line Item B. Operation and Maintenance Reserve. This line item is an amount equal to one fifth (1/5) of the annual budget for Operation and Maintenance Expenses for the rate setting period. Line Item C. Capital Improvement Plan Expenditures. This line item includes the sponsor’s participation of federal, state, and locally funded capital projects and other capital expenditures attributable to the airport cost center. Line Item D. Capital Improvement Plan Reserve Charge. This line item includes financing and contingencies that ensure airport self-sufficiency and a positive cashflow in future rate setting periods. The Capital Improvement Plan Reserve Charge is the Sponsor’s CIP Participation of Uncompleted Projects divided by the number of current and future rate setting periods in the CIP. The Sponsor’s CIP Participation of Uncompleted Projects means the total capital expense of uncompleted CIP projects less projected capital revenues from federal and state grant sources for future rate setting periods in the CIP. Line Item E. Airport Total Requirement. This line item is the sum of the following line items: Operation and Maintenance Expenditures, Operation and Maintenance Reserve Charge, Capital Improvement Plan Expenditures, and Capital Improvement Plan Reserve Charge. Line Item F. Credits to Airport Total Requirement. This line item identifies the credits to the Airport Total Requirement which include other airport revenues and the prior period ending balance of the Airport Revenue Fund, if any. The Airport Revenue Fund is a reserve fund to facilitate financing and cover contingencies. Any surplus revenue from the airport cost center will be transferred to the Airport Revenue Fund at the end of the fiscal year. Line Item G. Airport Net Requirement. This line item is the Airport Total Requirement less Credits to the Airport Total Requirement. Line Item H. Total Landed Weight is the sum of the Maximum Take Off Weight (MTOW) rounded up to the next highest 1,000 pound interval of each transient aircraft landing at the Airport with a MTOW of 8,000 pounds or more. For aircraft with a MTOW of less than 8,000 pounds, the landed weight is calculated as 1,000 pounds. Line Item I. General Aviation Landing Fee. Airport Net Requirement divided by Total Landed Weight. 9 4.0 Conclusion Palo Alto Airport is entering a sustained, capital intensive period of facility redevelopment without a substantial reserve to finance construction projects. Through 2030, the Airport is planning to fund $12.5M in capital projects requiring $1.4M in Sponsor contributions. The proposed Aeronautical Fee Schedule in Exhibit A would maintain a 10% average of Uncompleted Projects Funding in Reserve over the planning period. The reserve balance is forecast to remain above 0% during the planning period and end with 29% of the funding needed for Airport Electrical Improvement upgrades in 2031. This analysis assumes the City will defer non-critical capital projects if the reserve balance is insufficient to cover projected capital costs instead of pursuing debt financing. Once the Master Plan is complete, the Airport may choose to conduct a Request for Proposal (RFP) for private development of aeronautical facilities on airport-leased ground to realized additional revenues without funding capital development. The proposed T-hangar reconstruction, box hangar replacement, expanded commercial office development, and vertiport facilities could generate substantial revenue offsetting the need for higher aeronautical fees in the future. Airport-funded development requires up-front investment but provides a higher return over the lifespan of the project from facility rental revenues. Private development requires less upfront investment, dependent on existing site conditions, and the airport receives ground rent revenue. Reversionary ground leases for private developments are a common method for the airport to realize hangar rent revenues after the initial ground lease term has expired and the private developer has recovered their initial investment. Implementing a Hangar Ground Lease Origination / Transfer fee provides the Airport an opportunity to capture additional revenue on the initial sale and subsequent transfer of private hangars on airport leased ground. Similarly, collecting a Commercial Non-Aeronautical Recovery fee for off-airport operators enables the Airport to capture a percentage of gross receipts generated from activity at the airport. The waiver of landing fees for non-commercial transient aircraft operations is common among Peer Set airports. However, removing this waiver at PAO presents the opportunity to generate substantial and immediate revenue necessary to fulfill the City’s obligations for capital projects maintaining the airport in a safe and serviceable condition required by federal grant assurances. The following options are suggested to meet capital development funding needs at PAO: 1.Defer capital projects when capital reserve is insufficient to fund Sponsor contribution, 2.Adopt Minimum Standards and complete the Master Plan prior to conducting any Request for Proposal (RFP) for commercial aeronautical facility development, 3.Adjust Fee Schedule by 2.4% in line with the San Francisco-Oakland-Hayward CPI-U index for CY 2024. 4.Increase office and non-aeronautical ground rents by an additional 5.6% over CPI adjustment for FY26. 5.Increase the fuel flowage fee from $0.21 to $0.25, 6.Increase monthly vehicular parking rate from $90 to $100 and establish daily vehicular parking at 1/5th of the monthly rate and the Mobile Truck Operating Permit at five times the daily rate, 7.Establish a Hangar Ground Lease Origination / Transfer fee at 2% of sale or assessed value, 8.Apply a Commercial Non-Aeronautical Permit fee equal to 10% of gross receipts, 9.Modify the tie-down parking rate structure to differentiate landing fee and daily parking rates with the landing fee established at $3.00 / 1,000 lbs. maximum take off weight (MTOW), and 10.Benchmark future fee schedule increases to an Airport Benchmark Index (ABI) blending the City’s General Rate Increase (GRI) and the San Francisco-Oakland-Hayward CPI-U index at a 2:1 ratio. The proposed Aeronautical Fee Schedule in Exhibit A would fund planned capital projects and end FY2026 with a positive reserve fund by making minimal changes to consolidate and standardize current aeronautical fees beyond the 2.4% annual CPI adjustment. These include standardizing monthly rates at five times the daily rate and reclassifying the short-term tie down parking fee to a standardized landing fee per 1,000 lbs. based on the aircraft maximum take off weight. EXHIBIT A – AERONAUTICAL FEE SCHEDULE (effective July 1, 2025) *Aircraft not currently based in a hangar or tiedown at the Palo Alto Airport is considered a transient aircraft. Charges” for the ensuing twelve (12) months shall be adjusted according to the Airport Benchmark Index calculated at 2/3rd the City of Palo Alto’s General Rate Increase (GRI) and 1/3rd the Consumer Price Index (CPI) for the San Francisco‐Oakland‐San Jose area of the United States Department of Labor, Bureau of Labor Statistics. In the case of an ABI decrease the rates will remain the same. All fees are rounded up to the nearest fifty cents ($.50) AIRCRAFT: All aircraft weights referenced in this document are defined by the aircraft manufacture and/or the Federal Aviation Administration (FAA) as the certified maximum gross take‐off weight (MTOW) rounded up to the nearest 1,000 lbs. Palo Alto Airport Schedule of Fees and Charges Fiscal Year 2026 (July 1, 2025 ‐ June 30, 2026) SECTION A. City‐Based Aircraft Tail‐in Open Tie‐Down, improved pavement (monthly) 0 to 3,500 pounds $ 206.00 3,501 to 5,200 pounds $ 239.00 5,201 to 10,200 pounds $ 268.50 10,201 to 17,000 pounds $ 301.50 Taxi‐in Open Tie‐Down, improved pavement (monthly) 0 to 3,500 pounds $ 257.00 3,501 to 5,200 pounds $ 319.50 5,201 to 10,200 pounds $ 443.50 10,201 to 17,000 pounds $ 470.50 Large aircraft and helicopter designated tie‐downs (monthly) $ 470.50 SECTION B. City Non‐Based Aircraft* Transient Aircraft, landing fee (non‐commercial) $ / 1,000 lbs. MTOW $ 3.00 Transient Aircraft, landing fee (commercial) $ / 1,000 lbs. MTOW $ 9.00 Transient Aircraft, tie‐down fees (daily for every 24 hour period, aircraft leaving within 4 hours of landing are exempt) 0‐3,500 pounds $ 14.00 3,501 to 5,200 pounds $ 16.00 5,201 to 17,000 pounds, taxi‐through, and helicopter $ 30.00 Transient Aircraft Late Fee Added to each invoice not paid within 30 days. $ 25.00 Transient Gliders will be charged for the number of tie‐downs they occupy. SECTION C. Other Charges Glider & Aircraft Trailer Parking Per Month $ 190.00 Automobile Daily Parking Permit $ 20.00 Monthly Parking Permit ‐ Automobiles Only $ 100.00 Monthly Automobile Apron Parking (Parking spots only rented in association with a Tie‐down account) $ 55.00 Automobile Parking Citation Fee Per Transaction (same as Transient Aircraft Convenience Fee) $ 50.00 Annual or Replacement Gate Access Card Fee Per Card $ 31.00 Mobile Truck Operations Permit Per Day $ 30.00 Per Month $ 150.00 Fire Extinguisher Replacement Per Fire Extinguisher $ 218.00 Commercial Operators/FBO Waste Oil Fee Per Quart $ 1.50 SECTION D. Other Charges (not subject to annual ABI adjustment) Aircraft Storage Late Fee Per Month $ 45.00 Fixed Base Operator Late Fee Per Month 10% of amount due Hangar Sublease Fee Per Month per additional aircraft $ 25.00 Non‐Operational Aircraft Storage Fee Per Month 1.75x monthly storage fee Fuel Flowage Fee for Palo Alto Airport Per Gallon $ 0.25 Self‐Fueling Permit Flowage Fee: Individual aircraft owner/operator Annual Fee per aircraft $ 84.00 Aircraft owned or operated by a Flying Club Annual Fee per aircraft $ 731.00 Commercial Aeronautical Operations Fee Per Year $ 134.50 Commercial Non‐Aeronautical Fee (Rental Car and Transportation Network Company Operations) Payments made by credit card are subject to a 3% convenience fee. This fee does not apply to payments made by check, ACH or Cash. Per Month Expired Certificate of Insurance Fee $ 50.00 EXHIBIT B – PRO FORMA FINANCIAL ANALYSIS Actual Forecasted Fiscal Year (July 1 - June 30)2025 2026 2027 2028 2029 2030 2031 Operations Growth Rate 3.0% Operating Expense Escalation Rate 3.0% Capital Expense Escalation Rate 4.0% Activity Based Fees Fuel Flowage Fee $0.21 $0.21 $0.25 $0.25 $0.25 $0.25 $0.25 Transient Landing Fee ($/1k lbs)$3.00 $3.00 $3.00 $3.00 $3.00 Transient Landed Weight (000's) 58,402 60,154 61,959 63,817 65,732 67,704 69,735 Fuel Sales (gallons)503,771 518,884 534,451 550,484 566,999 584,009 601,529 Rental Income Incraese 0%0%0%0%0%0%0% Operations and Maintenance Expense 3,458,112$ 3,399,722$ 3,493,509$ 3,590,109$ 3,689,607$ 3,792,090$ 3,897,648$ Operations and Maintenance Reserve Charge 691,622$ 679,944$ 698,702$ 718,022$ 737,921$ 758,418$ 779,530$ Capital Project Expenditures -$ 80,600$ 27,050$ 101,200$ 56,400$ -$ 1,086,700$ Capital Improvement Plan Reserve Charge -$ 211,892$ 248,860$ 285,775$ 362,233$ 543,350$ -$ Airport Total Requirement 4,149,734$ 4,372,158$ 4,468,120$ 4,695,106$ 4,846,162$ 5,093,858$ 5,763,878$ Less Credits to Airport Total Requirement (232,358)$ 1,156,088$ 1,035,690$ 1,074,407$ 1,122,491$ 1,180,223$ 1,247,892$ AIRPORT NET REQUIREMENT BEFORE LANDING FEES 4,382,092$ 3,216,070$ 3,432,431$ 3,620,698$ 3,723,671$ 3,913,635$ 4,515,986$ AIRPORT OPERATING FUND Airport Aeronautical Revenues Rental Income 970,089$ 1,104,620$ 1,137,759$ 1,171,891$ 1,207,048$ 1,243,260$ 1,280,557$ Hangar Fees 1,303,269$ 1,289,010$ 1,327,680$ 1,367,511$ 1,408,536$ 1,450,792$ 1,494,316$ Fuel Commission 115,709$ 79,210$ 81,586$ 84,034$ 86,555$ 89,152$ 91,826$ Tie Down Fees 715,336$ 636,500$ 655,595$ 675,263$ 695,521$ 716,386$ 737,878$ Parking 17,946$ 19,220$ 19,797$ 20,390$ 21,002$ 21,632$ 22,281$ Other Utilities 103,405$ 66,240$ 68,227$ 70,274$ 72,382$ 74,554$ 76,790$ Misc. Revenues (Transient Fees / Charter Flights)27,431$ 30,440$ 31,353$ 32,294$ 33,263$ 34,260$ 35,288$ Incremental Landing Fees -$ -$ 154,523$ 159,159$ 163,933$ 168,851$ 173,917$ Incremental Rental Income -$ -$ -$ -$ -$ -$ -$ Incremental Fuel Commission -$ -$ 52,026$ 53,587$ 55,195$ 56,851$ 58,556$ TOTAL AIRPORT AERONAUTCAL REVENUES 3,253,185$ 3,225,240$ 3,528,546$ 3,634,403$ 3,743,435$ 3,855,738$ 3,971,410$ Airport Aeronautical Expenses Salaries and Benefits (Operating & CIP)1,647,448$ 1,731,152$ 1,783,087$ 1,836,579$ 1,891,677$ 1,948,427$ 2,006,880$ Contract Services (ex-ACIP)374,333$ 270,900$ 279,027$ 287,398$ 296,020$ 304,900$ 314,047$ Supplies and Materials 52,842$ 76,472$ 78,766$ 81,129$ 83,563$ 86,070$ 88,652$ General Expenses 46,001$ 39,480$ 40,664$ 41,884$ 43,141$ 44,435$ 45,768$ Rents and Leases 670$ 6,630$ 6,829$ 7,034$ 7,245$ 7,462$ 7,686$ Direct and Indirect Charges 1,063,318$ 1,001,588$ 1,031,636$ 1,062,585$ 1,094,462$ 1,127,296$ 1,161,115$ Liability Insurance -$ -$ -$ -$ -$ -$ -$ TOTAL SALARY AND OPERATING EXPENDITURES 3,184,612$ 3,126,222$ 3,220,009$ 3,316,609$ 3,416,107$ 3,518,590$ 3,624,148$ Transfers Out State DOT Loan Repayment -$ -$ -$ -$ -$ -$ -$ General Benefits Fund -$ -$ -$ -$ -$ -$ -$ Loan Repayment- General Fund 272,000$ 272,000$ 272,000$ 272,000$ 272,000$ 272,000$ 272,000$ Transfer to Technology Fund 1,500$ 1,500$ 1,500$ 1,500$ 1,500$ 1,500$ 1,500$ Transfer to Vehicle Fund -$ -$ -$ -$ -$ -$ -$ TOTAL TRANSFERS OUT 273,500$ 273,500$ 273,500$ 273,500$ 273,500$ 273,500$ 273,500$ TOTAL AIRPORT AERONAUTICAL EXPENSES 3,458,112$ 3,399,722$ 3,493,509$ 3,590,109$ 3,689,607$ 3,792,090$ 3,897,648$ TOTAL AIRPORT OPERATING PROFIT (204,927)$ (174,482)$ 35,038$ 44,294$ 53,828$ 63,648$ 73,762$ Airport Capital Improvement Fund - Ending Balance 1,361,010$ 1,186,528$ 1,221,566$ 1,265,860$ 1,319,687$ 1,383,335$ 1,457,097$ Reserve for Encumberances 241,595$ 581,046$ 581,046$ 581,046$ 581,046$ 581,046$ 581,046$ Unrestricted Fund Balance 1,119,415$ 605,482$ 640,520$ 684,814$ 738,641$ 802,289$ 876,051$ Airport Capital Improvement Fund 2025 2025 2026 2027 2028 2029 2030 Airport Capital Improvement Fund - Revenues Federal Grants (90% of Federal ACIP projects only)1,037,400$ 513,950$ 910,800$ 507,600$ -$ 5,694,300$ State Grants (0% of Federal ACIP and 0% of State Funded ACIP projects)-$ -$ -$ -$ -$ -$ TOTAL CAPITAL REVENUE 1,037,400$ 513,950$ 910,800$ 507,600$ -$ 5,694,300$ Airport Capital Improvement Fund - Expenses TOTAL CAPITAL EXPENSES (See ACIP Below)10,016,000$ 1,118,000$ 541,000$ 1,012,000$ 564,000$ -$ 6,781,000$ Sponsor Participation of Capital Projects 1,351,950$ 80,600$ 27,050$ 101,200$ 56,400$ -$ 1,086,700$ Sponsor Participation of Uncompleted Projects 1,351,950$ 1,271,350$ 1,244,300$ 1,143,100$ 1,086,700$ 1,086,700$ -$ Percentage of Uncompleted Projects Funding in Reserve 83%48%51%60%68%74% Airport Capital Improvement Projects (ACIP) - Federal FY 2025 - 2030 (Oct 1 - Sep 30)Future Value 2025 Est. Cost 2026 2027 2028 2029 2030 2031 2025 AWOS III (Construction)2,532,000$ 2,532,000$ 2026 Master Plan (Environmental)780,000$ 750,000$ 780,000$ 2027 Airfield Solar Array (Design)541,000$ 500,000$ 541,000$ 2028 Runway and Taxiway Reconstruction and Drainage Improvements (Environmental) 1,012,000$ 900,000$ 1,012,000$ 2026 Access Road Reconstruction (Design)312,000$ 300,000$ 312,000$ 2029 Airfield Electrical Improvement (Design)564,000$ 482,000$ 564,000$ 2031 Airfield Electrical Improvement (Construction) - Phase I 6,327,000$ 5,000,000$ 6,327,000$ Locally Funded Projects 2026 Airport Customer Parking Charging Stations (Design & Phase I)26,000$ 25,000$ 26,000$ 2031 Airport Temporary Office Buildings 454,000$ 359,000$ 454,000$ EXHIBIT C – 2023 RENT STUDY ANALYSIS www.aeroplex.net Development Consulting Management Airport Rent Study Analysis June 1st, 2023 Palo Alto Airport (PAO) Rent Study Analysis Long Beach, CA 90806 Phone: (562) 981-2659 | Fax: (562) 426-8236 Palo Alto Airport Palo Alto, California www.aeroplex.net Development Consulting Management Airport Rent Study Analysis Mr. Andrew Swanson, C.A.E. Airport Manager 250 Hamilton Ave Palo Alto, CA 94301 RE: Airport Rates and Fees Analysis – Palo Alto (PAO) Dear Mr. Swanson The Aeroplex Group Partners LLC (AGP) is pleased to submit this report, a Rent Study Analysis for Palo Alto Airport (PAO). Our report provides recommendations based on an analysis of those rates used at comparable like airports, consistent with FAA Airport Compliance and Policy relative to rates and fees, and as well accepted airport industry standards and best practices. Palo Alto’s unique and diverse operations fleet mix provides opportunity for the airport sponsor to maximize revenue with respect to aircraft hangar and land rates with the goal to make the Airport as financially self-sustaining as possible. Evaluating the rates and fees structure for airport land on a regular basis will best assure Palo Alto can meet its federal obligations and support fund generation that will provide surplus funds for matching grant applications. AGP completed a survey of comparable rental rates from a list of similar airports provided to us by PAO. The 10 comparable airports offer similar physical and operational characteristics to Palo Alto. AGP has provided a recommendation on adjusting the current rates, which we believe aligns Palo Alto with the FAA’s obligation to maintain financial self- sustainability. The Aeroplex Group Partners LLC is pleased to submit this report to Palo Alto Airport. We appreciate the opportunity to conduct this work. We will remain available to answer any questions and provide additional assistance. Sincerely, Justin Castagna Justin Castagna, PMP, C.M. Partner www.aeroplex.net Development Consulting Management Airport Rent Study Analysis Palo Alto Airport (PAO) Airport Rent Study Analysis I. BACKGROUND a. Current Practices II. ASSUMPTIONS III. FEDERAL POLICY RELATED TO AIRPORT RATES AND FEES a. Overview b. Self-sustainability c. Reasonable terms, without unjust discrimination IV. STUDY FINDINGS V. SUMMARY VI. RECOMMENDATIONS VII. CLOSING VIII. RESOURCES IX. APPENDIX X. REFERENCES Disclaimer: The information contained in this report is intended as a guide for the reader in better understanding the complexities, policies, industry standards and airport leasing policies, rules, and procedures that apply to airports. It is not intended to replace any necessary research and review of applicable law that may be required in a specific review of a particular case, nor is intended to give legal advice or take the place of an attorney who can advise with respect to a particular situation. While every care is exercised in the preparation of this report, AGP does not accept responsibility for an individual or entity’s reliance on its contents. www.aeroplex.net Development Consulting Management Airport Rent Study Analysis BACKGROUND Aeroplex Group Partners LLC (AGP) is pleased to submit this Airport Rent Study to the Palo Alto Airport (PAO). This analysis includes a survey of the 10 comparable airports as noted above and the current market rents for aircraft hangars, tie-downs, office, restaurant and improved land rates at PAO. Consistent with FAA's Rates and Charges Policy for aeronautical rate setting, the most accurate and effective methodology for establishing market rents for aeronautical property is through the assessment of rental rates at similar and comparable airports, consistent with fair and reasonable rates and fees for aeronautical property at airports. These airports were selected by flagging regional general aviation service airports with a tower, non-Part 139 certificated, non-precision approaches, airports with +/- 300 based aircraft, +/- 2,000 feet difference from PAO’s longest runway, and within the state of California. The 10 airports selected had at least four of the six characteristics in common with PAO. Please note that market rents for off-airport, non-aeronautical properties were not utilized, as this approach is problematic due to the different types of land use. The adjustment between off-airport, non-aeronautical properties and on-airport, aeronautical properties would have to reflect the fact that these land uses do not exhibit the same rights or restrictions. It is very difficult to determine the adjustment applied to unencumbered off-airport, non-aeronautical rental rates to reflect the constraints imposed by the Federal Aviation Administration (FAA), the Airport, and/or others pertaining to the development and/or use of on-airport, aeronautical properties. TABLE 1 – COMPARABLE AIRPORTS Comparable Airports Airport Code Location San Carlos SQL San Carlos, CA Fullerton Municipal FUL Fullerton, CA Camarillo CMA Camarillo, CA Watsonville Municipal WVI Watsonville, CA Truckee Tahoe TRK Truckee, CA McClellan-Palomar CRQ Carlsbad, CA Santa Monica Municipal SMO Santa Monica, CA Livermore LVK Livermore, CA San Luis Obispo County SBP San Luis Obispo, CA Sacramento Executive SAC Sacramento, CA www.aeroplex.net Development Consulting Management Airport Rent Study Analysis CURRENT PRACTICES AT PAO Current PAO Rates Hangar Type Rate T-Hangar $0.85 - $0.88/sf Box Hangar $0.85/sf Executive/Corporate Hangar $0.78 - $1.11/sf Tail-in Tie Down $196.00/mo Taxi-in Tie Down $244.50/mo Tie Down Rotorcraft $448.00/mo Office $2.28 – $2.64 Restaurant $2.39/sf Improved Land $0.74psf/yr ASSUMPTIONS It is noteworthy that the market rent opinions conveyed in this Rent Study Summary are based on the lessee having full (unrestricted) and continued access /from the Subject Property) to PAO’s airside and landside infrastructure. Additionally, it is important to note that the analysis was based on an evaluation of triple net lease rates (wherein the lessee pays maintenance, utilities, insurance, and taxes associated with the Subject Property). Market rents are driven by the amount a willing buyer (lessee) pays to a willing seller (lessor). To the extent that local economic and social factors affect rental rates at the national, regional, comparable, and competitive airports, these economic factors will be rejected in the rental rate conclusions. To derive the market rent opinions for the Subject Property, AGP has identified and analyzed (on a comparative basis) the rents being charged and paid for similar properties (by component) at a cross- section of airports that are considered most comparable to PAO. AGP recognizes that there are differences between PAO and the comparable airports where there is no identical comparison. Some of the comparable airports exhibit superior characteristics and some exhibit inferior characteristics. In an effort to identify airports that were considered most comparable to PAO, and to draw conclusions that reflect the conditions at PAO, the comparable airports were compared using a number of aeronautical activity and infrastructure indicators. www.aeroplex.net Development Consulting Management Airport Rent Study Analysis FEDERAL POLICY RELATED TO GENERAL AVIATION AIRPORT RATES AND FEES FAA Airport Compliance Manual Order 5190.6B, chapter 18.2 requires all airports to adhere to policy regarding airport rates and charges. “The Rates and Charges Policy provides comprehensive guidance on the legal requirement that airport fees be fair, reasonable, and not unjustly discriminatory” (5190.6B, 18.2). Airport sponsors have the responsibility to establish a schedule of reasonable rental rates and charges for the use of facilities and services and to periodically revise those charges to be comparable with other airports having similar characteristics, facilities, and services. The FAA encourages airports to incorporate the following objectives into their fee structures: 1.Requirement to Be Financially Self-Sustaining – Sponsors must maintain a fee and rental structure, which based on the circumstances of that unique airport, makes the airport as financially self-sustaining as possible. 2.Fair and Reasonable Fees – Unless otherwise agreed by aeronautical users, the airport proprietor must allocate capital and operating costs among cost centers for those airfield facilities and services directly used by the aeronautical users. 3.Equitable Treatment of Tenants and Users at Airport – To ensure that the revenues generated by the tenants and users of the Airport will be consistent with the income potential of such tenants and users at the Airport. In addition, fee structures should be reviewed, and possibly revised, on a periodic basis with the goal of satisfying the reasonable expectation to maintain competitive fee structures for the tenants and users of the Airport on an ongoing basis. Ensuring that any airport tenants are subject to the same rates, fees, and charges as are uniformly applicable to other tenants offering similar services or utilizing similar facilities at the Airport will assist in alleviating the potential for claims of unjust discrimination. 4.Escalation Provision. FAA guidance provides that ground leases with terms of five (5) or more years should contain an escalation provision for periodic adjustments based on a recognized economic index. An annual escalation provision helps the sponsor comply with Grant Assurance 24, Fee and Rental Structure, which requires the sponsor to make the airport as self-sustaining as possible under existing circumstances for a specific airport. Thus, given the financial and competitive goal, it is reasonable that Airports apply such a standard for shorter lease terms less than five (5) years. The FAA policy provides that airport sponsors may use different mechanisms and methodologies to establish fees for different facilities, and for different aeronautical users, e.g., air carriers and fixed-base operators. The FAA will consider these differences if called upon to resolve a dispute over aeronautical fees or otherwise consider whether an airport sponsor complies with its obligation to provide access on fair and reasonable terms without unjust discrimination. The FAA typically will not investigate the reasonableness of an airport's fees absent evidence of a progressive accumulation of surplus aeronautical revenues. www.aeroplex.net Development Consulting Management Airport Rent Study Analysis STUDY FINDINGS The tables below contain the specified airports’ metrics including Hangars, Tie-Downs, Office space, Restaurant and Improved Land. The three types of hangars studied are T-Hangar, Box Hangar, and Executive/Corporate Hangar. Due to the nature of varying hangar dimensions, an average was taken by dividing all monthly rates by hangar square footages. Similarly to hangars, three different tie-downs were evaluated. The three different types of tie downs are tail-in, taxi-in and rotorcraft. Sufficient information was gathered to compare rates for tail-in and taxi-in however not enough rates were compiled for rotorcraft simply because the majority of airports do not offer specific tie downs for rotorcraft. Similarly to hangars, tie-down rates also vary widely based on aircraft weight so rates listed in the tables below were calculated based on aircraft weighing under 12,500lbs. Office and Restaurant rates were taken directly from fee schedules provided on a monthly per square foot basis. Improved Land is the only rate that is calculated on a per square foot per year basis. The results of the study indicate that the average rental rate for T-Hangar is $1.15 psf/month and average rental rate for Box Hangars is $0.94 psf/month, both being slightly higher than the current rates at PAO. However the rate for Executive/Corporate Hangar is $1.02 psf/month, which is in line with the current range at PAO. The average monthly rate for a tail-in tie down is $141.16 and $162.25 for a taxi in tie down, respectively. Both rates are slightly lower than the current rates for tie downs at PAO. The average rates for Office, Restaurant and Improved Land are as follows: Office $1.99 psf/month, Restaurant $1.76 psf/month & Improved Land $0.59 psf/yr. These rates are significantly lower than current rates at PAO. Based on AGP’s research, there is sufficient data to derive reasonable conclusions of market rent for Palo Alto Airport. The selection of comparable market-based rental rates is based upon the information analyzed by the AGP team, with consideration to the sizes (SF), utility, and age of structures. It is important to note that for the three different types of hangar rates, we analyzed and compared on a rate per square foot basis. Since each airport has their own unique hangar sizes, AGP wanted to show comparable rates for the same structure, which is achieved by analyzing the specific rate per square foot on the space. T-Hangar Rates per SF Box Hangar Rates per SF www.aeroplex.net Development Consulting Management Airport Rent Study Analysis Executive/Corporate Hangar Rates per SF PAO Rate $0.78 - $1.11 Minimum Rate $.37 Maximum Rate $2.56 Average Rate $1.02 Tail-in Tie down Rates per Month Taxi-in Tie down Rate per Month PAO Rate $244.50 Minimum Rate $125.00 Maximum Rate $221.00 Mean Rate $162.25 Tie down Rotorcraft Rate per Month Office Rate per SF www.aeroplex.net Development Consulting Management Airport Rent Study Analysis Restaurant Rate per SF Land Rates psf/yr SUMMARY Based on the results of all ten (10) surveyed airports, Palo Alto’s Airport’s range of various hangar rates are below the average rate of surveyed airports, with the exception of Executive/Corporate hangars. Tie down rates for both tail-in and taxi-in are higher than the average rate on the tables above. As stated previously, there is not enough data to derive an average rate for rotorcraft tie downs. Office, Restaurant and the annual Improved Land rates are higher than the average rate of surveyed airports. All these findings should be evaluated within PAO’s overall inventory of similar land and buildings, so to evaluate how these rates and fees, uniformly applied, can be used to support PAO’s budget and self- sustainability compliance goal, with revenues to provide for new investment. CLOSING Rates and fees for all general aviation users, regularly and consistently adjusted, will best support PAO in meeting its required grant assurance obligations to keep itself financially healthy and sustainable. As suggested by FAA policy, PAO should consult with aeronautical users and stakeholders well in advance, if practical, of introducing significant changes in charging systems and procedures or in the level of charges. PAO should also provide adequate information to explain to the aeronautical users the survey data justification for the change, the overall airport’s budget, and assess the need and reasonableness of any proposal to adjust PAO’s land rates. For consultations to be effective, PAO should give due regard to the views of aeronautical users and to the effect of any proposed changes in fees. Likewise, aeronautical users should also consider the financial needs of PAO itself so that it remains a viable enterprise. Understanding that consistent rate setting process will ensure that PAO remains self-sufficient, thereby best eliminating any risk in requiring support from the Airport Sponsor’s general fund. www.aeroplex.net Development Consulting Management Airport Rent Study Analysis RESOURCES The ideas and concepts presented in this report are intended to be consistent with FAA Airport Compliance Policy and industry standards and recommendations, combining all of this information in an effort to assist Palo Alto Airport with best airport management practices available. These ideas and concepts are consistent with information from the Airport Cooperative Research Program (ACRP), which is funded by the FAA, whose information provides excellent resources and ideas. The ACRP carries out applied research on problems that are shared by airport operating agencies on a variety of airport subject areas. The primary participants in the ACRP are an independent governing board appointed by the Secretary of the U.S. Department of Transportation, with representation from airport operating agencies, other stakeholder, and relevant industry organizations. APPENDIX A. Definitions  Improved Land – Airport land having access (airside and landside) and utilities to the property boundary  Market Rent – The rent a property (land or improvement) will most likely command in the open market  Minimum – Minimum value present in the data range  Maximum – Maximum value present in the data range  Average – Arithmetic average of all data in the data range B. Limiting Conditions This report is subject to the following conditions and to other specific and limiting conditions as described by Aeroplex Group Partners (AGP) in this report. 1. AGP assumes no responsibility for matters legal in nature affecting the Subject Property, nor does AGP render any opinion as to the title of the Subject Property, which are assumed to be good and marketable. The Subject Property have been analyzed as though free and clear and held under responsible ownership and competent management. 2. Information, estimates, and opinions furnished to AGP and contained in this report were obtained from sources considered to be reliable and are believed to be true and correct. However. AGP assumes no responsibility for their accuracy. 3. Although parcel dimensions were taken from a source considered reliable, this should not be construed as n land survey. A licensed engineer or land surveyor should verily the exact land size. 11 www.aeroplex.net Development Consulting Management Palo Alto Airport (PAO) Airport Rent Study Analysis 4.Unless noted in this report the rental rate conclusions do not include contributory value of any personal property, furniture, fixtures, equipment, or on-going business value. 5.It is assumed that the utilization of the land is within the boundaries or property lines of the Subject Property and there is no encroachment or trespass unless noted in this report. 6.This report is prepared for the sole, exclusive use of the client. No third parties are authorized to rely on this report without the prior written consent of AGP and the client. 7.It is assumed that all applicable zoning and use regulations have been complied with unless non- conformity was stated, defined, and considered in this report. 8.It is assumed that all required licenses, certificates of occupancy, consents or other legislative or administrative authority from any local, state, or federal government or private entity or organization have been or can be obtained or renewed for any use on which the rental rate conclusions are based. 9.Full compliance with all applicable federal, state, and local environmental regulators and laws is assumed unless noncompliance is stated, defined, and considered in this report. 10.In this assignment, the existence of potentially hazardous material, gases, toxic waste, and mold, which may or may not be present on the Subject Property, nor does AGP have any knowledge of the existence of such materials on the Subject Property. To AGP’s knowledge, the presence of potentially hazardous waste, materials, or gases has not been detected, or if detected, it has been determined that the amount or level is considered to be safe according to standards established by the Environmental Protection Agency (EPA}. However, AGP is not qualified to detect such substances and does not make any guarantees or warranties that the Subject Property have been tested for the presence of potentially hazardous waste, gases, toxic waste, or mold and, if tested, that the tests were conducted pursuant to EPA-approved procedures. The existence of any potentially hazardous waste, gases, toxic waste, or mold may have an effect on the rental rate conclusions. 11.The American with Disabilities Act (ADA) became effective January 26, 1992. AGP has not made a specific compliance survey and analysis of the Subject Property to determine whether or not the Subject Property are in conformity with the various detailed analysis of the requirements of the ADA. It is possible that a compliance survey of the Subject Property together with a detailed analysis of the requirements of the ADA could reveal that the Subject Property are not in compliance with one or more of the requirements of the ADA. If so, this this fact could have a negative impact on the market rent conclusion. Since AGP has no direct evidence relating to this issue, possible noncompliance with the requirements of the ADA was not considered in the rental rate conclusions. 12.AGP assumes there are no hidden or unapparent conditions of the Subject Property or subsoil that would render the Subject Property more or less valuable. AGP assumes no responsibility for such conditions or for engineering that might be required to discover such facts. www.aeroplex.net Development Consulting Management Airport Rent Study Analysis 13. No requirements shall be made of AGP to give testimony or appear in court by reason of this report unless arrangements have been made previously. If any courtroom or administrative testimony is required in connection with this report, additional fees and expenses shall be charged for those services. 14. Possession of this report, or copy hereof, does not carry with it the right of publication nor may it be used for any purpose whatsoever by any entity but the client without the prior written consent of AGP and the client. 15. Neither all nor any part of the contents of this report shall be disseminated to the public through advertising media or public means of communication without the prior written consent of AGP and the client. REFERENCES FAA Airport Compliance webpage: www.faa.gov/airports/airport_compliance/ FAA Order 5190.6B: Airport Compliance Requirements Policy Regarding Airport Rates and Fees (Federal Register Volume 78- Sept 2013) https://www.federalregister.gov/documents/2013/09/10/2013-21905/policy-regarding-airport- rates-and-charges Notice of Amendment to Policy Regarding Airport Rates and Charges: July 2008 Final Policy Regarding Airport Rates and Charges: June 1996 https://www.gpo.gov/fdsys/pkg/FR-1996-06-21/pdf/96-15687.pdf AIRPORT COOPERATIVE RESEARCH PROGRAM (ACRP) Report 23 - Guidebook for compliance with grant agreement obligations to provide reasonable Access to An AIP funded public use general aviation airport REPORT 16 -Guidebook for Managing Small Airports REPORT 36 -Airport/Airline Agreements- Practices and Characteristics REPORT 47 -Guidebook for Developing and Leasing Airport Property 13 www.aeroplex.net Development Consulting Management Palo Alto Airport (PAO) Airport Rent Study Analysis Exhibit A Airport Rent Study Analysis —Attached— Airport / Location Airport Code T-Hangar Box Hangar Executive / Corporate Hangar Tail-in Tie - Down Taxi-in Tie - Down Tie - Down Rotorcraft Office Restaurant Improved Land Rate / SF per Year San Carlos Airport San Carlos, CA SQL $1.55 N/A $1.45 $153.00 $221.00 $221.00 $2.20 - $2.50 $4.14 $0.42 Fullerton Municipal Fullerton, CA FUL $1.93 $1.93 $2.23 $150.00 N/A N/A N/A $0.75 N/A Camarillo Airport Camarillo, CA CMA $0.54 $0.40 $0.40 $112.00 $153.00 N/A $0.50 $1.02 $0.98 Watsonville Muni Watsonville, Ca WVI $0.38 $0.44 $0.56 $100.00 $125.00 N/A N/A $1.15 N/A Truckee Tahoe Airport Truckee, CA TRK $0.45 $0.55 $0.55 $300.00 N/A N/A $1.10 $1.19 N/A McClellan-Palomar Ramona, CA CRQ N/A N/A N/A $185.00 N/A N/A N/A $0.76 $0.82 Santa Monica Airport Santa Monica, CA SMO $2.24 $2.56 $2.56 N/A N/A N/A $3.38 N/A N/A Livermore Airport Livermore, CA LVK $0.45 $0.40 $0.53 $126.00 N/A N/A $0.78 $1.16 $0.35 San Luis Obispo County San Luis Obispo, CA SBP $2.24 $0.29 $0.53 $73.33 $150.00 N/A $4.87 $4.87 $0.50 Sacramento Executive Sacramento, CA SAC $0.54 N/A $0.37 $71.14 N/A N/A $1.31 $0.84 $0.48 Min $0.38 $0.29 $0.37 $71.14 $125.00 $0.50 $0.75 $0.35 Max $2.24 $2.56 $2.56 $300.00 $221.00 $4.87 $4.87 $0.98 Average $1.15 $0.94 $1.02 $141.16 $162.25 $221.00 $1.99 $1.76 $0.59 Palo Alto Airport Palo Alto, CA PAO $0.85 - $0.88 $0.85 $0.78 - $1.11 $196.00 $244.50 $448.00 $2.28 - $2.64 $2.39 $0.74 Aeroplex Group Partners 3333 E. Spring Street │ Suite 204 │ Long Beach │ Ca │ 90806 Tel: (562) 981 - 2659 Fax: (562) 426 -8236 www.aeroplex.net Subject Summary of Airport Comparables Page 1 Resolution No. Resolution of the City Council of the City of Palo Alto Approving the Fiscal Year 2027 Schedule of Airport Rates and Charges, Accepting the Palo Alto Airport Rates and Charges Study, and Authorizing Annual Adjustments Based on the Airport Benchmark Index R E C I T A L S A. The City of Palo Alto (“the City”) owns and operates the Palo Alto Airport as an enterprise fund is strives to be as self sustaining as possible through the collection of rates and charges that are fair, reasonable, and not unjustly discriminatory. B. The City periodically reviews airport rates and charges to ensure alignment with the cost of providing airport facilities and services, industry best practices and applicable Federal Aviation Administration (FAA) guidance. C. The City retained a qualified consultant to prepare the Palo Alto Airport Rates and Charges Study (“Study”), which evaluates the Airport’s financial condition, cost recovery, peer airport comparisons, and rate-setting methodology D. The Study provides a comprehensive financial framework and recommends updates to the Airport’s rate structure to promote long-term financial sustainability, transparency, and equity among users. E. The Study includes the development of an Airport Benchmark Index (ABI) to allow for predictable, modest, and data-driven annual adjustments to airport fees and charges. F. This proposed Fiscal Year 2027 Schedule of Airport Rates and Charges is consistent with the methodology and recommendations contained in the Study. NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE, as follows: SECTION 1. The Fiscal Year 2027 Schedule of Airport Rates and Charges, attached hereto as Exhibit A and incorporated by reference, is hereby approved. SECTION 2. The Palo Alto Airport Rates and Charges Study is hereby accepted. SECTION 3. The Public Works Director or designee is hereby authorized to implement annual adjustments to Airport fees and charges based on the Airport Benchmark Index (ABI), as described in the Study. SECTION 4. The Council finds that the adoption of this resolution does not constitute a ‘project’ under Section 21065 of the California Public Resources Code and Sections 15378(b)(4) and 9b)(5) of the California Environmental Quality Act (CEQA) and the CEQA Guidelines, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: Page 2 AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ____________________________ Chief Assistant City Attorney City Manager ____________________________ Director of Public Works 214.50$ 248.50$ 279.50$ 313.50$ 267.50$ 332.50$ 461.50$ 489.50$ Large aircraft and helicopter designated tie-downs (monthly)489.50$ 0 to 3,500 pounds 14.50$ 3501 to 5,200 pounds 16.50$ 5201 to to 17,000 pounds 31.00$ Transient Aircraft Late Fee within 30 days 26.00$ Per Month 197.50$ 21.00$ 104.00$ 57.00$ Aircraft Late Fee)52.00$ Per Card 32.00$ Per Day 31.00$ Per Month 156.00$ Per Fire Extinguisher 227.00$ Per Quart 1.50$ Section C. Other Charges Monthly Automobile Parking (Parking spots only rented in association with a Tie-Down account Section B. City Non-Based Aircraft* Palo Alto Airport Schedule of Fees and Charges Fiscal year 2027 (July 1, 2026 - June 30, 2027 Section A. City-Based Aircraft On each July first of every year, all rates in Section A. "Based Aircraft", Section B. "Non-Based Aircraft" and Section C. "Other Charges" for the ensuring twelve (12) months shall be adjusted according to the Airport Benchmark Index calculated at 2/3rd the City of Palo Alto's General Rate Increase (GRI) and 1/3rd the Consumer Price Index (CPI) for the San Francisco-Oakland-San Jose area of the United States Department of Labor, Bureau of Labor Statistices. In the case of an ABI decrease the rates will remain the same. All fees are rounded to the nearest fifty cents ($.50) Aircraft Storage Late Fee Per Month 45.00$ Business Operator Late Fee Per Month 10% of amount due Hangar Sublease Fee Per Month per additional aircraft 25.00$ Non-Operational Aircraft Storage Fee Per Month 1.75x monthly storage fee Fuel Flowage Fee for Palo Alto Airport Per Gallong 0.25$ Self-Fueling Permit Flowage Fee: Individual aircraft owner/operator Annual Fee Per Aircraft 84.00$ Aircraft owned or operated by a Flying Club Annual Fee Per Aircraft 731.00$ Per Year 134.50$ Operators who sublease to, or offer a part of their services, car rental services, shall pay a monthly fee based on the gross receipts received from car rentals. 10 % gross reciepts Commercial Agreement Transmittal Fee Per Agreement 1,124.00$ Hangar Ground Lease Origination / Transfer Fee Per Agreement 2% of sale or assessed value Expired Certificate of Insurance Fee Per Month 50.00$ Transportation Network Company Operations) Section D. Other Charges (not subject to annual ABI adjustment) *Aircraft not currently based in a hangar or tie-down at the Palo Alto Airport is considered a transient aircraft. Non-revenue generating transient charter aviation activities conducted in direct support of a recognized missions are exempt from landing fees and the first 24 hours of transient parking; this exemption does not apply to flight training, instructional, or other ongoing aviation services. Airport Rates and Charges Study Palo Alto Airport April 21, 2026 www.cityofpaloalto.org 1 Staff Recommendations Staff recommends that the Finance Committee review and recommend that the City Council adopt a resolution to: 1.Adopt the Fiscal Year 2027 Schedule of Airport Rates and Charges 2.Accept the Palo Alto Airport Rates and Charges Study 3.Authorize annual fee adjustments based on the Airport Benchmark Index (ABI) (2/3 GRI + 1/3 CPI) effective July 1 2 Rates & Charges Study Overview 1.Fee Study Recommendation 2.Considerations Fee Methodology FAA Compliance - Grant Assurances PAO Financial Planning PAO Airport Fee Comparison 3.New and Modified Fees 4.Stakeholder Outreach 3 Fee Study Recommendations 1.Increase Fuel Flowage fee from $0.21 to $0.25 2.Increase Monthly Vehicular Parking Rate from $90 to $100 and increase Daily Vehicular Parking Rate at 1/5th of monthly rate 3.Increase Mobile Truck Operating Permit to five times the daily rate 4.Establish Commercial Non-Aeronautical Permit Fee equal to 10% of gross receipts 5.Modify Transient commercial Landing Fee to $9.00 per 1000 pounds for commercial and $3.00 per 1000 pounds for non-commercial 6.Modify the Transient Tie-Down Parking Rate structure to differentiate landing fee and daily parking rates 7.Modify Annual Fee increases to Airport Benchmark Index (ABI) 4 Updated Fee Summary Fee Current Fee Recommended Fee Revenue Impacts $0.21/gallon $0.25/gallon $52,026 (19% increase in est. revenue) Vehicle Parking $11/day or $92/month $20/day or $100/mo $7,000 (35% increase in est. revenue)Mobile Truck Operating Permit $30/day or $77.50/month $30/day or $150/month Commercial Non- Permit fee 10% gross receipts only charged to Rental Car services 10% gross receipts to all commercial operators TBD Non-No charge $3/1000lbs $154,523 (302% increase in est. revenue) Transient Commercial landing Fees $25 - $95 $9.50/1000lbs Transient Tie-Based on weight and hours of parking Simplified to Daily Rate with first 4 hours paid for by landing fee 5 Fee Methodology Hybrid Compensatory-Residual Approach •Market-Based Pricing •Aeronautical leases and services are aligned with peer airports •Fair Market Value •Non-Aeronautical uses priced at fair market value •Landing Fee Structure •Set to balance operating & capital budgets FAA Compliance – grant assurances • GA 24 – Self Sustainability & GA 25 – Revenue Use 6 PAO Financial Planning •Airport plans to fund $12.5M in capital projects through 2030 (requires $1.4M in local sponsor contributions) •Federally funded projects include runway, taxiway, and electrical •Self funded projects include solar or vehicle charging stations •Long Range Facilities and Sustainability Plan will likely identify more projects •Airport remains minimally staffed •Significant maintenance of current facilities •Current budget reflects essential operations only •No flexibility for further cost reductions 7 PAO Fee Comparison Fee PAO Range Bay Area Airport Range Tie-down $214.50 – 489.50 $48.00 - $411.50 Hangars $0.92 - $1.00 $0.36 - $0.87 Transient $14.50 - $31.00 $0.00 - $27.00 Non-commercial Landing Fee*$3.00 / 1000 lbs $0.00 Commercial Landing Fee $9.50 /1000 lbs $2.00 - $106.00 Vehicle Parking $20.00 $0.00 - $20.00 Fuel Flowage $0.25 $0.05 - $0.15 •Study compared PAO to a list of comparable airports •Many in the Bay Area such as Reid-Hillview, San Carlos, Buchanan Field, and Hayward •Also compared to six other general aviation (GA) airports across the state •PAO remains expensive when compared to similar Bay Area GA airports *There are airports in California charging landing fees to non-commercial aircraft such as Monterey and Truckee 8 Airport Benchmark Index •Current Index: CPI of San Francisco, Oakland Bay Area every FY. RECOMMENDED: Airport Benchmark Index (ABI) annually. ABI = 2/3(CoPA GRI) + 1/3(Bay Area CPI) •Staff Costs represent 2/3 of Airport expenses •Materials and Construction represent 1/3 of Airport Expenses •Avoid high increases every 5 years. 9 Staff Recommendations Staff recommends that the Finance Committee review and recommend that the City Council adopt a resolution to: 1.Adopt the Fiscal Year 2027 Schedule of Airport Rates and Charges 2.Accept the Palo Alto Airport Rates and Charges Study 3.Authorize annual fee adjustments based on the Airport Benchmark Index (ABI) (2/3 GRI + 1/3 CPI) effective July 1