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HomeMy WebLinkAbout2016-02-23 Council Minutes - Work SessionJOINT WORK SESSION KENAI CITY COUNCIL & AIRPORT COMMISSION FEBRUARY 23, 2016 KENAI CITY COUNCIL CHAMBERS MAYOR PAT PORTER, PRESIDING NOTES LEASE /SALE OF AIRPORT LANDS Council present: P. Porter, T. Navarre, R. Molloy, H. Knackstedt, B. Gabriel, R. Marquis, L. Porter, G. Feeken, J. Beilefeld, K. Dodge Others present: City Manager R. Koch, City Attorney S. Bloom, Finance Director T. Eubank and City Clerk S. Modigh Mayor Porter began the work session at approximately 6:00 p.m., provided introductions of all in attendance, and opened the floor for public comment. Fred Braun, a local realtor, recommended that consideration of the sale of airport land outside the airport reserve boundary should include precedent or prior history on the lease. Rick Baldwin, a tenant of the airport, spoke in favor of the City Manager opening the conversation on these matters for Council and the Commission to consider establishing policies. Mr. Baldwin addressed the uncertainty for the lessee related to the cost and length of lease. Dan Pitts, a Kenai resident, noted conflict he's faced with his lease over the past 8 months and the instability of the cost of the lease which is based on an appraisal system. Derrick Leichleiter, airport lessee, advised he was new to the airport and was seeking a solid lease from the City. City Manager Koch advised that the Kenai Municipal Airport was a business and in the past ran at a significant deficit. It was noted the Airport wasn't funded by sales tax or the general fund, but was funded by revenue. Koch reported the City had in recent years changed how the Airport Land Sale Permanent Fund was invested which has turned around the Airport operations. Koch reviewed the Sale of Airport Lands Administrative Policy noting that the sale of airport lands must be in the best interest of the City. The three following types of airport lands were reviewed: • Airport lands inside the airport reserve boundary and inside of the airport security fencing. • Airport lands inside the airport reserve boundary and outside the airport security fencing. • Airport lands outside the airport reserve boundary. Koch advised it was not his intent to sell airport land within the reserve or within the security fence unless a very rare situation was presented. The considerations and analysis applied for each type, which was detailed in the memorandum included in the packet were reviewed. Koch advised that an analysis of the following variables determine the financial return to the Airport of a sale versus a current or future lease of airport lands: Kenai City Council Work Session February 23, 2016 Page 2 • Term of the analysis in years • Raw land appraisal • Lease rate for airport lands • Assumed lease tern during the analysis period • Time value of lease revenue • Time value of sale revenue • Appraisal increase for each five -year period. Koch provided examples of his analysis which were provided in the meeting packet as exhibits A -G. Koch further reviewed the historical aspect of land sales and acknowledged that airport land sales were agreed upon; however, circumstances have changed and any sale now is based on whether the sale would be in the best interest of the Airport. Koch advised that the City's appraisals are completed based on how it's outlined in the lease and based on raw land. Council, Administration and the Commission discussed adding consideration of prior history of the lease and there was not consensus on the matter. Koch provided Administrations recommendations to modify /amend existing and future airport land leases for the following types of airport land leases: • Airport lands inside the airport reserve boundary and inside of the airport security fencing. • Airport lands inside the airport reserve boundary and outside the airport security fencing. • Airport lands outside the airport reserve boundary. Koch advised that some of the existing terms of airport leases, and some for the terms for airport leases adopted by Council as recommended in the 2006 Supplemental Planning Assessment have created uncertainty for existing lessees and in some instance, have been detrimental to potential airport leases. A recalculation of the lease rates in 2015 addressed a number of the issues to eliminate them in the future. The following recommendations were made by Administration for the Commission to review: • Establish a lease provision so that lessees can request a lease extension for up to 55 years without the necessity of constructing improvements to support the extension. All lease extensions must be mutually agreed upon by the lessee and the City. • Establish lease provision by which, at the termination of a lease, the lessee is able to sell their leasehold interests. • Establish a lease provision that provides a buffer for the severe increases in lease rates. Given that several reasons for severe increases have been eliminated, this should be a very uncommon occurrence. Following the five -year reappraisal, lease increases shall be limited to 20% per year, or one -fifth of the total increase, whichever is greater. Council concurred to have Administration refer its recommendations to the Airport Commission for review and consideration. Additional public comment was provided: Fred Braun advised that the Economic Strategic Development Board met this morning and discussed why all business is going to Soldotna, and spoke in opposition about the land not being available. Kenai City Council Work Session February 23, 2016 Page 3 Rick Baldwin recommended experts be brought into the conversation such as a banker when the discussion of this subject continues. He further recommended a subcommittee be established to review this matter. Dan Pitts thanked everyone for their time and efforts on addressing this subject. Mike Hassemer, Arctic Ministries, advised that trust and accountability is key and requested a good clear lease so they could maintain their fiscal responsibilities. Greg Mangione, SOAR, noted that he called around to other airports and agreed with Mr. Baldwin on bringing other experts into the conversation. Council and Commissioner comments ensued: J. Beilefeld noted most in attendance were lessees and that the Airport was a gem and up -to- date, but the airport needs more business. Suggested a whole new program for leasing using the City Managers recommendations as a template; spoke in favor of consistent growth. G. Feeken advised she thought things could move forward in a positive manner. H. Knackstedt commented on moving this forward and looking forward to working with Administration and the Commission. Gabriel thanked all that attended and noted that he agreed with Administrations recommendation. Navarre thanked everyone in attendance and spoke in favor of a better process. Molloy thanked Administration for the presentation and advice on the matter; thanked the commission and the community. K. Dodge thanked all for their input and looked forward to moving forward with the bowling alley. Mayor thanked all that attended and Administration for their work on this matter; was hopeful for a better balance between the City and its customers. The work session was adjourned at 8:15 p.m. Notes prepared by: �/I "i I IN [ E2—� Sand Modigh, C IC City erk