(a) The arrangements between the airport owner and those private agencies seeking to offer commodities and services at the airport are to be expressed in a contract. Since most of these contracts involve the right to occupy and use designated premises, they will generally be in the form of a lease. As in any such agreement the rental payments, terms of occupancy, privileges granted, obligations assumed, and other considerations are a matter of bargaining and negotiation between the parties. There are, however, some general principles peculiar to the airport environment which should be given careful consideration.
(b) If the prospective tenant contemplates a substantial capital investment in hangars, fuel storage equipment, machinery, and store fixtures, etc, he or she will seek a relatively long term lease in order to be able to amortize his or her investment. It is to the advantage of the airport owner to encourage such private development and to offer sufficient tenure to induce it. On the other hand, aviation is dynamic and airports evolve and expand faster than anticipated. In leasing airport property to commercial tenants, it would be well to avoid leasing more than is reasonably required. Similarly the granting of options (to lease land not yet needed) may well turn out to the be the most regretted concession made during initial negotiations.
(c) A commercial tenant when contemplating a substantial investment at an airport will naturally seek some form of protection from competition. The airport owner if fact may be under considerable pressure during the negotiations to lease airport premises under terms which guarantee an exclusive monopoly. However, the City should realize that any exclusive right to conduct an “aeronautical activity” could make the City ineligible for various forms of Federal assistance. Federal law prohibits the granting of an exclusive right to conduct an aeronautical activity at any airport on which Federal funds have been expended. However, there are alternate legal means of giving adequate protection to a commercial aeronautical enterprise at a public airport. Advisory Circular 150/5190-A, Minimum Standards for Commercial Aeronautical Activities on Public Airports, describes in detail how an airport owner may, and should, enforce standards of quality and levels of service, including capital equipment. Such standards are very effective in excluding marginal or irresponsible competitive operations so there should be no compelling reason to lease airport facilities on an exclusive basis. The legal prohibition against airport monopolies does not apply to non-aeronautical activities such as restaurants, taxicabs, limousines, etc.
(d) In negotiating a lease on airport premises, it is desirable to keep in mind the nature of the rights and privileges to be conferred for the rentals or other considerations to be paid. The following describe conditions that aeronautical tenants usually seek when developing and negotiating a lease:
(1) The lease of specified premises for as long a term as it can.
(2) The right to conduct at those premises a wide range of activities with as little restriction as possible.
(3) The rights, for itself and its customers, to use in common with others the runways, taxiways, and other public facilities of the airport.
(e) A good lease will reflect thoughtful consideration of each of these objectives.
(1) The lease of land or specific premises should be for a term long enough to amortize the investment to which the tenant will be committed. It should be for a firm rental rate. It should clearly spell out the respective housekeeping and insurance responsibilities of each party. If renewal options are contemplated there may be provision for the airport owner to terminate the lease upon reimbursing the tenant for the unamortized value of installed improvements. Above all, the lease should be consistent with the master plan for phased airport development and land use.
(2) The agreement or lease should clearly identify what the tenant is permitted to do. This represents a franchise right to conduct a business of offering commodities and services to those attracted to the airport. It should cite the applicable standards, codes, or ordinances covering the exercise of the patronage at the airport.
(f) A model Land Lease Agreement is Attached.
(g) The price charged for land under the Agreement should reflect the costs incurred
by the City with regard to acquisition and development and the costs to be incurred by the Lessee with regard to improvements. Particular note should be made of private improvements which may benefit the airport in general or if excessive costs are associated with making the land accessible.
(h) Based upon other airport land use rates, costs incurred by the city and other development considerations the recommended cost per square foot for land lease at the Bellefontaine Regional Airport is between twenty to forty cents (.20-.40).
(i) The Airport Minimum Standards should be adhered to with regard to land leases and private development. However, each lease may present unique circumstances supporting a deviation from the Minimum Standards.
(Ord. 07-01. Passed 2-15-07.)