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HomeMy WebLinkAbout2005-09-29 Airport Commission Packet_~ ~~~y4 . _ ~~ ~~, , ~ the ci~ o f KENAI, ALASKA v ir ~ ~ f , ir i~ e u~c ~ a~ ~ u~c ~ r~ u~'c~ ~ 210 Fidalgo Avenue, Kenai, Alaska 99611-7794 Telephone: 907-283-7535/ FAX: 907-283-3014 www.ci.kenai.ak.us MEIVI~RANDUM T0: Mayor and Council Members FROM: Carol L. Freas, City Clerk DATE: September l, 2005 RE: AIRPORT COMNaSSION WORK SESSION -- SEPTEMBER 29, 2005 The attached is the Airport Leasing Program Changes information which was distributed at the Airport Commission work session held on August 25, 2005. and will be reviewed thoroughly at the next work session scheduled for September 29, 2005. Mr. Pavish will be attending the next work session scheduled for September 29, 2005 from 6-9:00 p.m. to review it and discuss it with you. Mr. Pavish would like you to take time to familiarize yourself with the information prior to the work session. REMINDER: AIRPORT COMMISSION WORK SESSION -- SEPTEMBER 29, 2005, FROM 6-9:00 P.M. IN THE COUNCIL CHAMBERS. clf N ~_ ~ . ~"+~R THERN KORIZQN ~ aMP~ ~( Y ~ ~~~ P H E N L. PAVI S H P.O. Box 1075~ Wil low, Alaska 99688 __ AVlat1011 Affalt'S C01?SU~tan~' Telephone: 907-733-5737 Cell: 907-354-0737 E-mail: spavish@ptialaska.net KENAI MUNICIPAL AIRPORT Supplemental Piannin Assessment g Phase 2: Airport Land Use Plan AIRPORT LEASING PROGRAM CHANGES Detailed Recommendations August 23, 2005 The leasing program change recommendations presented in this paper are based on the airport program comparison research I conducted during the early stages of this project, the consensus directions I received at the Kenai Airport Commission work session on July 26, 2005, and my experience as an airport professional. { Stephen L. Pavish Northern Horizon Co. --- Associate Member - Alaska Air Carriers Association --- . . . ~V ~RTNER~ HORIZON ~QMPA1~'Y ,. '~~''~PHEN L. PAVISH P.o. Box 107 ~ , , . 5, UViliow, Alaska 99688 Av~at~on Affairs Consultant Telephone: 907•733-5737 Cell: 907-354-0737 E-mail: s avis ' p h@ptialaska.net KENAI MUNICIPAL AIRPORT Supplemental Planning Assessment Phase 2: Airport Land Use Plan AIRPORT LEASING PROGRAM CHANGES Detailed Recommendations TABLE 4F C4NTENTS _ SUeJECTI RECOMMENDATION PAG E N 0. INTRODUCTI4N ................................................................................................... 1 ~ RECOMMENDATI~NS 1. Establish an Airport Reserve ........................................................................ 1 2. 4btain an Exemption for #he Airport Reserve from the Plattin . , , g Requirements of the Kenai Peninsula Borough ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 2 3, Stop Sending Airport Land Valuation Appraisals to the FAA for Approval ................................................................................................. 3 4. Adopt a New Method of Setting & Adjusting Land Rental Rates ......................................................................................................... 3 5. Adopt New Guidelines for Setting the Length of Land Lease Terms ............................................................................................... 5 6, Adopt Incentives to Encourage the Development of Airport Land ...........................................................................................,............. 5 7. Adopt an "Airport Zone" for All Land Within the Airport Reserve ............................................................................................. 7 --- Associate Mernber-Alaska Air Carriers Association --- . , . ~iORThI~RN HC~R~~'ON C~1~PA~I Y ~ ~~'~PHEN L. PAVISH Aviation Affairs Consultant P.O. Box 1015, Willow, Alaska 99688 Telephone: 907-733-5737 Cell: 907-354-0137 E-maii; spavish@ptialaska.net 8. Delegation of Authority & Responsibility for the Airport ........................... 8 9. Establish a New Chapter of the Kenai Municipal Code to Include all Codes Applicable to the Air ort& p Airport Reserve ...................................................................................................11 ATTACHMENTS - Proposed Ordinance to Establish New Lease Term Guidelines. - Proposed Transition Plan for Transferring Certain Authority & Responsibility to a Reconstituted Airport Commission. --- Associate Member-Alaska Air Carriers Association --- KENAf MUNICIPAL AIRPORT Supplementa! Planning Assessment Phase 2: Airport Land Use Plan AIRPaRT LEASING PROGRAM CHANGES Detailed Recommendations INTRODUCTION. An airport is, at once, an operational entity, an economic entit , and . Y a reai estate entity. Although each of these elements is susceptible to separate analysis, it must be recognized that the three are inseparably interrelated. This a er , , ,: , pp presents recommendations for the improvement of the Citys land leas~ng program for the Kenai Munic~pal Airport, and therefore, has the real estate entity as its prima . . . , , ry sub~ect. However, the recommendat~ons and supporting discussions presented here will occasionally overlap with economic and operational issues, some of which are bein . .. . g addressed by other members of our pro~ect team. Th~s is not intended to confuse the reader or unnecessarily complicate the issues. It is simpiy the unavoidable consequence of addressing the characteristic complexity of an airport. REC4MMENDATIONS 1. Establish an Airport Reserve. When the federal government conve ed the Kenai .. . . . . y. Municipal Airport (ENA} to the City in 1963, the transfer included a substantial tract of land consisting of approximately 1904 acres and extending as much as 6600 feet from the runway centerline. The deed of conveyance included a restriction prohibitin the . , . 9 City from leasing or selling land for "other than airport purposes" without the written consent of the FAA. However, on several occasions since the original transfer, the FAA released the City from that restriction, allowing the City to sell land for non-air ort . . . , p purposes. Airport land sold by the City formed the basis for economic development in the community. In fact, Kenai's existing central commercial area occu ies air ort land p p that was sold by the City. However, in recent years, this land sale activit has included . .. . .. . Y land nearer to the runway, significantly limiting future airport development and expansion options, especially in the southeast quadrant of the airport. To help assure that the City retains a site of sufficient size to meet the future h sical pY and economic needs of the airport, we recommend the City Council establish, b . . .. . Y ordinance, a Kenai Municipal Airport Reserve. The essential requirement of a Reserve ordinance would be for the City to retain title to all land within the Reserve boundaries, in perpetuity. Reserve lands could be leased, but never sold. Subject to release b the • ~ . .y ~ FAA, airport land outside the Reserve could be sold or leased at the City's discretion 1 with the proceeds being deposited into the airport fund. Recommendations for locatin . . g the Reserve boundaries are being developed as part of the land use lannin se ment p g g _ of the Supplemental Planning Assessment, Phase II project, Adop#ing an airport reserve ordinance is a key support for several of the recommendations that follow below. IU4TE: The final recommended boundary of the Airport Reserve may encom ass a few . p strategically located parcels of private land in the vicinity of the terminal building. These would be included with the proviso that the parcels would become a part of the Reserve only if they come into City ownership by gift, tax foreclosure, purchase, or other means. Until ownership passes to the City, all such parcels would be treated in eve wa as if . ~Y Y they were located outside the Reserve. 2. Obtain an Exemption for the Airport Reserve from Kenai Peninsula Borou h . . , ,. , g Platting Requirements. Currently, the City must subd~vide ENA land via the Kenai Peninsula Borough platting process before it can be leased. This can result in ma'or . , ~ ,, J delays if an applicant wants to lease airport land that isn t already platted. In addition, the platting requirement significantly limits the City's flexibility to chan e lease lot . . 9 dimensions to accomrnodate a lease applicant's development proposal or the expansion needs of an existing tenant. Having an outside entity with no airport operating responsibilities (or knowled e! control . , g) the platting of lease lots on an a~rport serves no useful public purpose and hinders the ~ .. . ~ ability of the airport operator to respond to changes in airport user needs. At best, when the airport operator and the platting authority have a cordial workin relationshi it is a . . . , , 9 p~ t~me-consuming nuisance. At worst, it can be an airport management ni htmare, if the . , . 9 plat#ing authorityfunctions as an adversary. Forthis reason, airporto erators t icall p Yp Y fry to obtain sole control of lease lot platting for their airports. In my com arison stud . . . , , p Y of five a~rports in Oregon and Washington last spring, the operators .of four air orts . . P controlled their own lease lot platting and fifth was negotiating to obtain a lattin . p g exemption from the local county. After enacting a Kenai Municipal Airport Reserve ordinance, under which land sales within the Reserve are prohibited, we recommend the City obtain a lattin exem tion p g p from the borough for all the land within the Reserve. Since the land will never be sold and all land uses will remain under the City's direct su ervision as air ort o erator p p p , there is no need forAirport Reserve lands to be platted by the borou h. Eliminatin the . . . , , g g platting step w~ll reduce the time required to issue a lease and si nificantl increase the . , ... . . . , . , g Y Citys flexibility in establishing and changing lease lot dimensions to meet the chan in . . , 9 9 needs of existing lessees and new applicants. NOTE: The state does not go through the borough platting process for the Homer and Seward Airports, yet the borough has no trouble assessing propert taxes a ainst Y g iessees at the airports. 1 ~ 2 3. Stop Sending Airport Land Valuation Appraisals to the FAA for A roval. For ~ . . . . , pp over 20 years, the City of Kenai has been submitt~ng airport land valuation a raisals to . , , . pp _! the FAA Alaska Region for review and approval. This included all the a raisals done pp for land sales, new land leases, and lease rent re-evaluations at ENA. Over the ears . , y , this process has involved a significant investment of time and mone b both the Cit . . .. . , y y Y and the FAA, not to mention significant delays for applicants seekin to develo air ort g p p land. Yet, the procedure is of little or no recognizable benefit to an one. Y Qualified, private sector real estate appraisers have performed all of the Cit 's air ort . . , Y p land appraisals. Typically, the Airports Division personnel who have reviewed ENA land appraisals have not been trained real estate appraisers, so it seems hi hl unlikel that gY Y an FAA review would ever result in any substantive change in valuation. This is not a procedure that the FAA universally imposes on all public air ort o erators. , , , , p p The ENA appraisal review process ~s an extraord~nary process, one that the FAA does not require of most other airport operators. It is unclear why the FAA initiated the appraisal review requirement for Kenai. The FAA Air orts Division ersonnel I . . , , p p interviewed in December 2004 did not know why the FAA started the program and were unable to find any information in theirfiles relating to its origin. Regardless of the reason for its beginning, we think it is a counterproductive exercise that serves no useful purpose, today. We recommend the City stop sending ENA land appraisals to the FAA and have '~ furnished City staff with a letter drafted for that purpose. ~ , 4. Adopt a New Method of Setting & Adjusting Land Rental Rates. The Cit 's . . . , Y existing method of establish~ng the rent for ENA land leases is to conduct individual appraisals for each new lease and for each existing lease that comes u for rent re- ~ . . , . . , p evaluation. (~ccasionally, when timing coincides, appra~sals for two or three leases are combined into a single appraisal.). The City retains local area private sector rea! estate appraisers to conduct the appraisals. There are three problems with the Cit 's current . , . Y appra~sal practice. First, compared to the alternative recommended below, the one- appraisal-at-a-time approach is not cost effective, Since the City's leases re uire rent . , . , q re-evaluation every five years, the City must appraise every leased ro ert on the p p Y airport every five years. Doing this by separately appraising each lease or small cluster of leases is an expensive way to accomplish the objective. Second, under the existing Kenai Municipal Code (KMC}, unless the lot has been appraised within six months prior to issuing a lease, an applicant for a new lease must put his or her development plans on hold while the City goes throu h the rocess of .. . 9 p obtaining an appraisal. Finally, it is highly unlikely that local real estate appraisers have air ort land valuation .. . . , p training and experience. Without specialized knowledge of the unique market characteristics of airports, an appraisal of airport property, especiall ro ert used for YP p Y aviation functions, may not be accurate. ~ ~ 3 As an aiternative to the City's existing program, we recommend a chan e to an air ort- g p _> wide rental rate adjustment system, as follows: A. Conduct an airport-wide appraisal every five years. The appraisal would provide a listing of the fair market value ~FMV) of every lot under lease at the time and for every vacant lot. The appraisal would also provide some generic valuations of the unsubdivided portions of the airport that have leasing potential. Finally, the appraisal would determine the contemporary capitalization rate applicable to leases on the airport. ~Note: The existing KMC fixes the capitalization rate at 6%. In the open real estate market, capitalization rates va . . , , ry from t~me to time, so applying an arbitrary fixed rate to FMV can result in revenue losses for the City or excessive rent for airport tenants. It would be in the best interests of both the City and the tenants to have the contemporary capitalization rate determined as part of the appraisal process.~ By appraising all ENA lease land at one time, the City would enjoy the benefits of scale, resulting in a lower appraisal cost per Iot, and have a large enough project to ~nterest an airport specialty appraisal firm, Since these firms are based in the Lower 48, only a larger, whole-airport appraisa! project would be likely to attract their attention to Alaska. Typically, airport appraisal firms subcontract with local appraisers to gather data on comparable properties. Then, their experienced airport appraisers review the comparable data and perform the valuation analysis. Typically, this blend of local market knowledge and airport appraisal expertise results in the most accurate, defensible airport appraisals. During the first 12 months following the City's acceptance of the airport-wide appraisal, the rentforany existing leases that come due for re-evaluation, and for any new leases issued during that time, would be taken directly from the appraisal. B. During the second, third, fourth, and fifth years, rents would be determined by applying a generally accepted inflation index to the valuations in the appraisal. The Anchorage Consurner Price lndex (ACPI) is probably the best available inflation index for use in Kenai. At the end of the first ear followin the Cit 's Y 9 Y acceptance of the airport-wide appraisal, the City would increase or decrease the rental amounts in the appraisal by applying the ACPI from the previous year. The resulting adjusted rents would then be applied to new leases issued durin . „ 9 the succeeding 12 months and to all existing leases that came up for rent re- evaluation during that same period. The inflation indexing process would be repeated at the beginnings of the third, fourth, and fifth years, with a new airport- wide appraisal being done for the sixth year. Inflation indexing of the appraisal data will keep it reasonably up-to-date forfive years. A five-year interval between appraisals, combined with annual inflation ~ indexing, is a common reaf estate leasing practice, ~~ ~ 4 \ C. While the rentai rates for the entire air ort wouid be ad'usted an p ~ nuaily under _ 1 this proposed appraisal 1 inflation indexing system, the rent for existin leases . . 9 wou l d remain su b~ec t to c hange on ly once every five years. At first, this rna ., Y seem contradictory, but it s actually not. Let's say the City accepts an airport-wide appraisal, effective Janua 1, 2007. . . « ~, . . ry Existing lease x is sub~ect to rent re-evaluation every five years, with the next re-evaluation coming due on June 1, 2007. The City would change the rent for that lease to the amount determined by the appraisal. The new rentwould remain in effect for lease "x" until June 1, 2012. Effective January 1, 2008, the City would adopt new rental rates b a I in the Y ppY g ACPI and increasing or decreasing the amounts in the appraisal accordin I~/, . . u ~~. . ~1 Existing lease y ~s sub~ect to rent re-evaluation every five years, with the next re-evaluation coming due on September 1, 2008. The City would chan e the rent 9 for fhat lease to the new amount adopted by the City on Janua 1, 2008. The . , ~Y new rent would remain in effect for lease "y" until September 1, 2013. 5. Adopt New Guidelines for Setting the Length of Land Lease Terms. To set the terrn of each new lease, the City has been using the lease term uidelines in the State's . , g rural airport regulat~ons ~17 AAC 45.225). Although that regulation has onl been in ~ , .. . Y place since 2402, the State s adrninistrat~ve use of the same term uidelines dates back , . , g ~ to the mid-1990 s. After roughly ten years of construction cost inflat~on, the investment ' amounts required in the guidelines for given lengths of term are too fow. Offthe record , State DOT&PF airport leasing officials have acknowledged this fact and lan to increase . . , ., p the investment requirements in a future revision of their regulations. In addition, the State's term guidelines extend all the way out to 55 ears which is Y , substantially longerthan the airport industry norm of 25 to 35 ears. The rural air ort Y p regulations were adopted to provide for terms up to 55 years in res onse to a statute . P passed in 1996 [AS 02.15.090(c~]. That law provides airport lessees with an almost perpetual right of renewal and allows lessees to retain ownership of buildin s and other . g improvements for as long as they hold a lease and continue to renew. Neither the Cit . . .. . . . , Y of Kenai nor the Kenai Mun~cipal Airport is sub~ect to this statute, so there is no requirernent for the City to grant leases for such lon terms. 9 During an Airport Commission work session on July 26, 2005, I recommended the Cit . . , , , Y adopt, by ordinance, a set of term guidelines similar to the state's, but with the investment requirernents increased by at least 50% and the maximum term set at 35 years. The 35-year upper limit is more than adequate to support amortization and financing of lessee-constructed improvements. Attached to the end of this a er is m pp Y August 4, 2005 draft of the proposed guidelines and supportin ordinance details. 9 6. Adopt Incentives to Encourage the Development of Airport Land. Previousl we . , . , Y, explored alternatives for the City to provide airport land development incentives to ~ ; , 5 tenants without violating FAA requirements. We were able to recomrnend onl two Y incentive plans. The first, was a waiver of the Cit 's ro ert tax on leasehold ~ , ... Y p p Y improvernents during the initial years of a lease that involved a significant lessee investrnent in improvement construction, Such an incentive r p ogram would have ta be adopted as part of the KMC. We recommend the KMC amendment include the following features: A. The lessee must commit to complete permanent im rovements costin at . p 9 least $250,004 on the prem~ses; B. The lessee rnust commit to complete the improvements within 24 months of the lease beginning date; C. The lessee must submit to the City written evidence that the im rovements . . , p have been timely completed, together with ev~dence of the lessee's total cost of building the improvements; D. Upon receiving satisfactory evidence of timely completion from the lessee the , City will grant the lessee a waiver of the City property taxes a licable to the ~ . . . , pp improvements for a period of time immediately following the date on which the lessee completed the improvements. The property tax waiver eriod would ,. . p depend on the lessee s improvement construction cost, as follows: COST TAX WAIVER PERIOD } , At least $250,000, but less than $500,000 ....................... 2 ears Y A t leas t $ 5 0 0, 0 0 0, bu t less t han $750,000 ....................... 3 ears Y At least $750,000 ............................................................. 4 ears Y (This graduated approach to tax waivers would encoura e lar er develo ments g 9 p while providing some incentives for smaller ones.) E. The waiver will notapply to any improvements constructed on the remises . p after the date in B, above. F, lf the lessee commits a breach of the lease, an unex ired waiver will end an . , p the date the City terminates the lease. The second incentive we recommend is to use funds from the Cit 's air ort land s stem Y p y trust fund to construct basic infrastructure for lease lots, such as structural ravel fill , , . 9 , access roads, sewer / water extensions, etc. Such infrastructure im rovements would . . , p make airport land more attractive to potential lessee. The Cit 's investment would be Y recovered from the lessee through a rent surcharge aver a reasonable eriod of the p lease term, not to exceed ten years. 6 7. Adopt an "Airport Zone" for All Land within the Airport Reserve. Man of the . .. . . , y land uses common to airports do not fitwell within typical munici al zonin .. , . , p g __ classifications. Airports the size of ENA can be a somewhat fluid mixture of commercial and private aviation facilities; aircraft re air sho s~ car rental facilities ift sho p p, , g ps, hotels, and other service businesses; air cargo warehouses; parts sales and other retail outlets~ , bulk fuel storage; aircraft and aircraft parts manufacturing; non-aviation commercial and industrial uses; and open space for air navigation safety. I found all of these land uses existing among the 11 airports included in my comparison study. All of these and more are potential uses flor land at ENA. Trying to cover all these dissimilar uses with conventional zoning classifications while remaining in compliance with FAA requirements and maintaining the flexibility necessary forthe airport to respond to the continually changing aviation business environment adds an unnecessary level of complexity to municipal airport operations. Either the conventional zoning classifications must be filled with special exceptions to accornrnodate air ort uses or . p rnany airport-related uses must be authorized through conditional use permits. Conflicts between zoning and FAA-approved land uses are frequent on air orts where . . . , , . , ~ , convent~onal zoning classifications are applied. According to the zoning map furnished to me by City staff, a number of these conflicts exist at ENA. For example, the Conservation Zone covers the majority of the airport, includin the float ond tie-down g p area and the gravel strip area. No doubt, guide services operate aircraft from the float pond tie-down area, yet a guide service is not a permitted land use under the Consenration Zone. The FAA-approved Airport Layout Plan shows lease lots for future development along the East Side of the gravel stri arkin a ron. The commercial 7 „ , pp 9 p ' aviation uses that typ~cally occupy such lease areas are not permitted under the Conservation Zone. Approximately 80 acres located northwest of the mid oint of the . , , p main runway includes a portion of the water runway and is zoned Rural Residential. The FAA Airport Layout Plan shows most of that land committed to present and future aviation uses. The FAA, which rarely approves of airport land anywhere bein used for . . , . , , , 9 residential purposes, wou;ld certainly find residential housing to be an unacce table use . . , , . . ... p of land that is in such close proximity aviation facilities. These are not catastro hic . . , , p conflicts beyond resolution, but they ~Ilustrate the kind of problems that fre uentl arise . . .. . q Y when conventional zoning classifications are applied to an airport. A more progressive approach to zoning for a rnunicipal airport operator is to ado t a . p broad "Airport Zone" that includes al! potential airport uses under its umbrella. Generically speaking, zoning is a lega! devise used by a city to control land use on privately owned land. When the city is both the airport operator and the zonin . . . 9 authority, it has far more powerto directly control land use on the airport as the air ort . . , , , p operator than as the zoning authority. Since the City of Kenai owns ENA, the Cit has . . Y direct, daily control over afl activities and land uses on the airport throu h leases and ~ ~ , . , g airport regulations. There s no real need to apply an additional layer of control in the form of site-specific zoning. Even with no zoning whatsoever, the Cit would still have . Y total control of all airport land use. Establishing an "Airport Zone" with application solel .. , Y to ENA would eliminate the need for zoning changes and conditional use permits to ~ r ~ 7 accommodate changing developments on the airport. An Airport Zone would also prepare the way for a transfer of land use responsibility within the Air ort Reserve as . , , p , described in the next section. NOTE: The zoning for any privately owned land that falls within the Air ort Reserve , p boundary would be excluded from the "Airport Zone" until such time as ownershi of the ~ p . land passes to the City. Also, see the note at the end of To ic No.1 on Pa e 2 of th~s p g paper. 8. Delegation of Authority & Responsibility for the Airport. 4ne of the most universally accepted principles of organizational efficiency is the dele ation of authorit . .. g Y and responsibility to the lowest competent level, The CEO of a Fortune 500 cor oration . p may be a completely competent accountant and typist, but keeping the cor oration's . , , , p books or typing his own management pol~cy directives would not be the hi hest and .. , g best use of h~s time. Delegating the responsibility for these duties to others allows the CEO to devote his full time to the leadership functions that onl he can erform. . Y p Following the same example, the CEO knows nothing about the hi hl s ecialized field gYp of market analysis. UVere he to attempt to do his own market anal sis work the results Y , for the company would be poor. On the other h~nd, taking the trainin necessa to 9 ry become fully competent in the market analysis field would leave some of his essential CEO duties undone. Delegating this responsibility to a market anal st solves the Y problem. Operating airports has become an increasin I com lex and s'' ' ' ~ g y p p e c~ a l ~ z e d b u s ~ n e s s s i n c e t he fe dera l government transferred ENA to the City of Kenai in 1963, S ecialized . , , p knowledge and focus is necessary to remain current in the: - changing federal regulations for AIP grants, airport ,operations, and aviation secu rity; - rapid shifts within the commercial aviation industry; - advances in airport technology, - best airport business practices, and - successful techniques for marketing airports. Many municipal governments have found it impossible, within their normal administrative framework, to achieve the specialized attention air orts re uire. For that p q reason, the trend has been for municipal governments to establish an o eratin board , p g or port authority to assumefull responsibilityfortheir local airports. Six of the air orts ~ . . p included ~n the ENA comparison study (Juneau, Pendleton, Pullrnan, UValla UValla , Wenatchee, & Yakima) have gone through this kind of transition. The Kenai Municipal Airport may not yet have achieved a hi h enou h business volume . . , g g or traffic level to~ust~fy the transfer of the airport to a fully inde endent air ort board. ~ . .. . p p However, it appears that some significant improvements in efficienc and effectiveness . , . Y could be gained by delegating authority and responsibility to lower levels within the Cit .. . Y y where more specialized airport expertise and focus exists (or could be develo ed . This P ) , 8 is not to say that those involved in the existing system are incompetent or doing a oor . ,. . , , p ~ob. But, ~t is to suggest that some increased delegation of authority and changes in _ organization could produce long-term benefits for both the airport and the City. We recommend the following delegation / reorganization. Recommended Delegation I Reorganization of Autharity & Responsibility for the Airport. City Council. Regarding the airport, the Council would retain final decision authority for, - The airport operating budget; - The airport capital improvement project (CIP) budget; - Airport Master Plans and land use plans; - Airport-related changes to the KMC; - Land rental rate policy (Rent adjustment methodology); - Appeals of Airpart Commission decisions; and - The repeal of airport regulations. Reconstituted Airport Commission. The commission would change from an advisory group to a deliberative body with decision-making responsibilities. To avoid ,} . . . . conflict of interest problems, this change would necess~tate having a membership with wider community representation than is required by the current KMC. We recommend a commission evenly divided between direct airport users and non-direct users, as folfows: - One commercial aviation service provider at the airport; - One aviation lessee of land orterminal space atthe airport; - One non-aviation lessee of land or terminal space; - Three at-large members representing the business and professional community, but having no directfinancial interest in - an aircraft, otherthan one used exclusively for non-commercial purposes, - a business that operates on the airport; or - a land or terminal space lease or sublease at the airport. - One member of the City Council as a non-voting member. ~ Commission members would be appointed bythe Councii and serve at the Council's pleasure. I understand from speaking to the Juneau International Airport Business Managerthat the Juneau Airport Board members are not required to submit to complete financial disclosure. The City Attorney should check state law to confirm that this would be the case for the reconstituted ENA Airport Commission. Regardless, we recommend the City require the at-large members of a reconstituted Airport Commission to sign an affidavit affirming that they have none of the financial interests listed above. ~ ~ 9 Recommended delegations to a Reconstituted Airport Commission are as follows; - Recommending the airport operating budget to the Councii; - Recommending the airport CIP budget to the Council; - Approval of all expenditures within the scope of budgets approved by the Council; - Preparing and updating airport master plans and land use plans ~for a roval , pp by the Council~; - Making recommendations to the Gouncil for changes to airport-related sections of the KMC. - Adopting of airport regulations; - General oversight of all airport operations, terminal operations, and land use; - Promoting and marketing the airport; - Responsibility for all decisions related to leasing land within the Airport Resenre, including approval 1 rejection of lease applications, lease amendments, lease assignments, subleases, and {essee construction proposals; and decisions related to lease terminations; - Adopting land rental rates using methods established by the Council; - Adopting /changing airport userfees; - Final approval of the hiring orfiring of the Air ort Mana er~ p 9, - General supervision of theAirport Manager; - Hearing appeals of Airport Manager decisions; and - Make all land use decisions within the Airport Reserve. (Note: This would require a transfer of land use authority from the Planning Commission, but arrangements could be made for the Airport Commission to receive advice from the City's Planning & Zoning administrative personnel.) Airport Manaqer. Recommended new delegations to the Airport Mana er include: g Designated point of contact for all land lease applications, lease amendments, lease assignments, subleases, and lessee construction proposals;* Primary responsibility for negotiating the terms of land leases and lease amendments with applicants (with assistance from the City Attorney~;* Responsibility for lease premises inspections and lease enforcement;* *NOTE: This does not necessarily mean the airport manager or the mana er's , g staff would wr~te the actual lease documents or lease enforcement letters. Some or all of those duties could remain with the Assistant to the City Mana er. . g However, the airport managerwould, underthe general direction of the Air ort . . . . . , , p Commission, provide direction for the actions descr~bed. This delegation of authority and responsibility represents a major de arture from the . p waythe City and airport nowfunction. It certainly cannot be accomplished overni ht, so g l ~ 10 I've attached a suggested transition plan that provides for the dele ation to be 9 compieted by July 1, 2008. 9. Establish a New Chapter of the Kenai Municipal Code to include all Codes Applicable to the Airport & Airport Reserve. The program chan~ es recommended in • . . . .. g this paper will require extensive additions I changes to the Kenai Munici al Code. Other . p KMC changes will also be necessary to update the City's land lease form and lease application requirements. These code changes will be much more convenientforthe public to use, much easier to draft, and much less susceptible to code interrelationshi . ~ p errors, if all existing and amended codes relating to the Airport Reserve were segregated into an entirely separate chapter of the KMC. This segregation would also allow future KMC amendments relating to theAirport Reserve to be accom lished . . ., p without the possibility of creating inadvertent conflicts with codes a licable to Cit pp y interests outside the Reserve. For example, if the City wished to continue its current land rental rate practices for airport land outside the Reserve while ado tin the air ort- p 9 p wide appraisal program for land in the Reserve, it could be easily accom lished with • . . . p . segregated codes. The City would simply leave the existing codes alone, while amending the Airport Reserve chapter as needed to implement the air ort-wide . , p appraisal system. Without the recommended code segregation, weavin the necessa . . , , g ~`Y Airport Reserve code changes into the existing provisions would be an extremel . , , , , Y complex task in wh~ch c{ar~ty would be almost impossible to achieve. 11 oRaFT August 4, 2005 Kenai Municipal Airport Term Guidelines for Leases of Land within the Airport Reserve. (a) The len th of , . , , g term for a lease or lease extension granted by the City for land within the Airport Reserve wii! be based on the amount of investment the applicant proposes to make in the construction of new permanent improvements on the premises during the first 24 months following the beginning date of the lease or lease extension: ~b} If the applicant proposes to make no investment in new permanent improvements on the premises or proposes to invest less than $12,000, the maximum term of the lease or lease extension shall be five years. (c~ If the applicant proposes to invest $12,0~0 or more in new permanent improvements on the premises, the term of the lease or lease extension shall be determined accordin . g to the follow~ng table: Applicant's Investment (in U.S. Dollars) Maximum is at Least Term of Years 12, 000 6 24,000 7 36, 000 g 48,000 g 60, 000 10 72, 000 ~ ~ 84, 000 ~ 2 96,000 ~ 3 108,000 ~4 120, 000 15 132, 000 16 144, 000 ~ 7 156,~00 ~g 168,000 ~ g 180,000 20 192,000 2~ 204,000 22 216,000 23 228,000 24 240,000 25 ~ 2 52, 000 I 26 ~ 264,000 27 276,000 28 _ 288,000 29 300, 000 30 312,000 31 324, 000 32 336,000 33 348,000 34 360, 000 35 (d) in the lease or lease extension granted to the applicant, the City wili include a provision requiring the applicant to cornplete the proposed permanent improvements b .. y no later than 24 months after the beginning date of the lease or lease extension. ~e~ The City will require a performance bond, deposit, personal guarantee, or other security if the City determines security is necessary or prudent to ensure completion of the permanent improvements within the time period set under ~d} of this section. The City will determine the form and amount of the security according to the best interest of the City, considering the nature and scope of the proposed improvements and the financial responsibility of the applicant. (f} The applicant shall, within 30 days after completion of the permanent improvements, submit to the City written documentation that the irnprovements have been completed as required. (g) If the applicant shows good cause to the City and if it is not inconsistent with the City's best interest, the City will grant an extension that is sufficient to allow fior the completion of the permanent improvements or for submission of documentation that the permanent improvements have been completed under this section. No extension or cornbination of extensions granted under this subsection (g} will exceed 12 months. (h) If, within the time required under (d) of this section, including any extension ranted , . , , , 9 by the City under (g} of th~s section, the applicant fails to complete the re uired . ., a permanent improvements, the City wil! (1) execute the forfeiture of the performance bond, deposit, personal guarantee, or other security posted by the applicant under (e} of this section to the extent necessary to reimburse the City forall costs and damages, including administrative and legal costs, arising from the applicant's failure to complete the required im rovements p , and (2) take one of the following actions, as applicable, . (A} if one-third or less of the required im rovements have been p completed, initiate cancellation of the lease; , } , 2 (B) if at least two-thirds of the required improvements have been completed, reduce the term of the lease to a period under ~b) or (c} of this section that is consistent with the portion of the improvements timely completed; (C} if more than one-third but less than two-thirds of the required improvements have been completed, apply the best interests of the City to take the action described in either ~A) or (B~ of this subsection. Definition: ~a) "permanent improvement": a fixed addition or change to land that is not temporary or portable; ~1 ~ "permanent improvement" includes (A} a building, building addition, retaining wall, storage tank, earthwork, fill material, gravel, and pavement; and (B~ remediation of contamination forwhich the applicant is not responsible; (2~ "permanent improvement" excludes items of ordinary maintenance, such as glass replacement, painting, roof repairs, door repairs, plumbing repairs, floor coverin 9 replacement, or pavement patching. (b} "responsible", when used in regard to environmental contamination, means having materially contributed to, assumed under an assignment, or being otherwise liable for by law or contract. 3 ~~a ~ APPENDIX For comparison, the following is the term table used by the State of Alaska for leasing land in rural the airportsystem [17 AAC 45.225(i)~ and for leasin land . „ , , . 9 located in the General Aviation areas of the international air orts at Anchora e . p 9 and Fairbanks [11 AAC 42.225~h~], Fair MarketValue, Purchase Price, or Investment of at Least the Following Dollar Amount Term of Years l, 500 6 15,000 7 22, 500 g 30,000 g 37, 500 10 45,000 ~ ~ 52,500 12 60,000 13 6l, 500 14 75,000 15 82, 500 16 90, 000 17 97, 500 ~ g 105,000 ~g 112,500 20 120, 000 2 ~ 127,500 22 135,Q00 23 142,500 24 150,000 25 157, 504 26 165, 004 27 112,500 28 180,000 29 187,500 30 195,000 31 202, 500 32 210,000 33 217, 500 34 225,000 35 232,500 36 240,000 37 4 247,500 38 ~ ~255,000 39 _ 262, 500 40 274,00~ 41 277, 500 42 285,000 43 292,50Q [292,000]** 44 300,0~0 45 307,500 46 315, 000 47 322,50~ 48 330,000 49 331, 500 50 345, 000 51 . 352, 500 52 360,000 53 367, 540 54 375,000 55 **An error being corrected in the pending amendment of 17 AAC 45.225 i. ~~ 5 KENAI MUNICIPAL AIRPORT Supplemental Planning Assessment Phase 2: Airport Land Use Plan AIRP~RT LEASING PROGRAM CHANGES Proposed Transition Pian for Transferring Certain Authorit & . .. , Y Responsibflity to a Reconstituted Airport Commission. This plan presents a series of steps allowing for a graduai, orderl transfer of authorit and . .. . . . y Y responsibility forthe Kenai Municipal Airport to a reconstituted Airport Commission b Jul 1 .. ... . Y Y~ 2008, For purposes of training and familiarization to prepare members for the assum tion of • . ,. p wider dut~es, the Commission may have to meet twice per month durin arts of the ,. . , 9p transition. The dates given are intended only to be representative of the time eriods . p involved. Arnendments to the KMC wifl be necessary throughout the transition as items of authority are transferred to the Commission. The word "review" includes makin . , g recommendatians, but does not include final approval, ~ DATE S ACTION S ____ February 1, 2006 Adopt b ordinance the Air ort Reserve bo ' Y p undaries. March 1, 2006 Amend Chapter 21,25 KMC to reconstitute the Air ort .. , p Commission membership and change all references to "aeronautical lands" to "Airport Reserve". (For the time being, the Commission would serve in an advisory capacit . . Y only, so the duties in ,010 would not change.) April 15, 2006 Appoint / reappoint members to the Commission. May 15, 2006 Commission briefed on recent and endin KMC p g amendments related to the airport. June 15, 2006 Commission briefed on the FY 2007 air ort o eratin and p P 9 capital budgets. July 1, 2Q06 Commission begins reviewin all ex enditure a roval 9 p pp requests related to the airport before they are sent to the Council; Commission also begins reviewing all applications to lease land in the Airport Reserve prior to their submission to the Council. ~ July1- October 1, 2006 Commission briefed on airport operations, terminal operations, FAA grant assurances, airport security, leasing procedures, and the status of all on-going projects. October 1, 2006 Planning Commission adopts "Airport Zone" for Airport Reserve lands; In addition the reviewing new lease applications, the Airport Commission begins reviewing all proposals for lease changes, assignments, and lessee construction, as well as staff recomrnendations for lease enforcement action or lease termination. October 1, 2006 July 1, 2007 For training purposes, Commission is included in: Each stage of the preparation and adoption of the FY 2008 airport operating and capital budgets; Eve Council ry decision related to the airport; Every airport regulation change by the City Manager. January 1, 2007 Commission begins reviewing appeals to the Council of ~ Airport Manager/ City Manager decisions regarding the airport. Commission assumes responsibility for marketing the airport. July 1, 2007 Responsibility & authority for the following are moved to the Commission: Adopting airport regulations, including airport userfees; Approval I rejection of all airport expenditures consistent with Council-approved budgets; Approval / rejection of all applications I proposals for leases, lease changes, assignments, subleases, and lessee construction related to land within the Airport Reserve; Deciding appeals from Airport Manager/ City Mana er decisions 9 related to the airport. During FY 2008 Commission responsible for: Preparing and presenting to Council the FY 2009 capital and operating budgets for the airport; Proposing to Council changes to the KMC, especially those necessary to complete the transition by July 1, 2008. January 1, 2008 Commission given final decision authority for the supervision, hiring, and firing of the Airport Manager. Land use authority for the Airport Reserve transferred from Planning Commission to Airport Commission. March 1- Ju1y 1, 2048 Commission coordinates the final details of the transition, July 1, 2408 Transition completed; Commission assumes responsibilit Y for all dut'res listed in the delegation of authority recommendations. ,~ ~ Kenai Municipal Airport Supplemental Planning Assessment Air ort Commission Work Session - August 25, 2005 p Proposed Agenda 1. Meeting Agendallntroductions - Tom Middendorf 2. Rates and Fees Analysis - Steve Horton 3. PreliminaryAviation Land Use Plan - Tom Middendorf 4. Recap and Next Steps - Tom Middendorf ~ • ' P I i M eeti n October Meeting and ub c g • Phase 2 Report KENAI MUNICIPAL AIRPORT Supplemental Planning Assessment - Phase 2 CouncillCommission Work Session August 25, 2005 Task 11.3.4: Rates & Charges Analysis Review Review Agenda •• Approach for determining Airline Rates & Charges ••~• Several methods of calculation are used commonly in the industry which comply with the FAA Policy Regarding Airport Rates & Charges •••• Selecting a method, or combination of inethods, for calculating rates depends on the particular circumstances at any individual airport •••~ In the Rates & Charges Analysis, we tested several methods and determined those we considered most appropriate for Kenai •••• The result is determination of formula based landing fees and rental rates rather than fixed rates that do not change from year to year ••• • Development of the rate structure and formulas are initially complicated, but once the structure and formulas are defined, the annual calculation is straightforward ~~ Process for Calculating 2006 Rates •~•~ Combine all airport funds into one "Airport Enterprise Fund" •••• Define appropriate cost centers within the "Airport Enterprise Fund" that will support the determination of rate bases and calculation of rates ••~• Using the 2006 budget for the "Airport Enterprise Fund", calculate the cost of operations for each cost center ••~• Project aircraft landed weight for 2006 to use for determining the landing fee for signatory air carriers ~••• Determine exclusive space leased by individual airlines and define the joint use space used by all airlines in common •~•• Apply the formulas determined for the defined rate structure ,~ ~ - ~ KENAI MUNICIPAL AIRPORT Financial Management Structure and Policy R~view - May 12, 2005 ~ Rates & Charqes Analvsis - Process for Calculatina 2006 Rates •• Combine all airport funds into one "Airport Enterprise Fund" Airport Land System Special Revenue Fund Airport Terminal Enterprise Fund Airport Land Sales Permanent Fund Airport Enterprise Fund -1- KENAI MUNICIPAL AIRPORT Financial Management Structure and Policy Review - May 12, 2005 Rates & Charqes Analvsis - Process for Calculatinq 2006 Rates •• Define appropriate cost centers within the "Airport Enterprise Fund" that will support the determination of rate bases and calculation of rates DI RECT COST CENTERS Airfield Terminal Area Aeronautical Other Bldgs and Areas Non-Aeronautical Other Bldgs and Areas Airport Enterprise Fund INDIRECT COST CENTERS Administration ARFF Security -2- ~. - KENAI MUNICIPAL AIRPORT Financial Management Structure and Policy Review - May 12, 2005 Rates & Charpes Analvsis - Process for Calculatinq 2006 Rates ~~ Using the 2006 budget for the "Airport Enterprise Fund" •••• Allocate budget line items into the Direct and Indirect Cost Centers ••~• Once the costs for operating all cost centers are determined, indirect costs are then allocated to the Direct Cost Centers to determine the cost to operate each cost center •••• Results of cost center analysis and cost allocation: Airfield Terminal Aero Non-Aero Admin ARFF Security Total $748,949 $507,043 $82,385 $178,037 $228,602 $321,200 $126,700 $2,192,917 377,151 181,351 61,316 56,686 (228,602) (321,200) ~126,700) - - - $1,126,100 $688,394 $143,701 $234,723 $0 $0 $0 $2,192,917 -3- KENAI MUNICIPAL AIRPORT Financial Management Structure and Policy Review - May 12, 2005 Rates & Charqes Analvsis - Process for Calculatinq 2006 Rates •• Project aircraft landed weight for 2006 to use for determining the landing fee for signatory air carriers ~• Determine exclusive space leased by individual airlines and define the joint use space used by all airlines in common ••~ • Exclusive use space - ticket counters, office space and operations space (baggage make-up areas~ •~•• Joint use space - baggage claim, baggage breakdown area and passenger holdrooms •••~ Airlines currently do not pay rent for all the space that they use and typically pay for at other airports so that the effective rental rate is significantly lower that the rental rate actually paid ~••• Review terminal floor plan -4- .~ - - KENAI MUNICIPAL AIRPORT Financial Management Structure and Policy Review - May 12, 2005 Rates & Charg,es Ana~sis - Process for Calculatinq 2006 Rates •• Apply the formulas determined for the defined rate structure: Airfield "residual" landinq fees {per 1,000 Ibs) Airfield 0&M expenses $1,126,100 Less aviation fuel tax 5,000 Ai~ield rate base $1,121,100 / Airline landed weight (1,000 Ib units} 170,000 Resulting landing fee 6.59 Terminal "compensatorv" space rent ~psfpv) Terminal 0&M expenses $ 688,394 1 Leaseable square feet 13,652 Resulting rental rate $ 50.42 x Airline leased square feet 6,528 Airline terminal rent 329170 ~ ~ -5- ~irport Land Use ~~an Definitions ~e following land use p~an is intended to guide ~uture lease, sa~e and use of airport tands at ~en~i Mun~c~pa1 Airpo~fi, As a long range Iand us~ plan it se~s a long ~ara~e vision for land us~s ar~d reftec~s future development in the current master plan or reco~nmendations from the Supplemen~ Planning Assessment. In some instances, such as the relacatian of general aviation activity ta ~he west side o~~he airport, i~ reflects a sign~ficant change in land use, that vv~~l take many yeaxs ta implement. ~n ather cases there may be interim uses that may be allowed ~n~il the long term land use is required. 1, Airport Boundary - This boundary reflects the ox~gina~ airpart bounci~ary and any lands ~hat have subsequent~y added #o ~i~ airport, Many parcels wi~hin this boandary, but autside the airpor~ use boundary, have been sold by the Ci~y and ~hese proper~ies are na longer technically part of the ai~ort property, Howev~r, for simplicity and because of ~ie Iarge axnount of roads, righ#s af ways and ease~nents between these soid lots, that are stili owned by the airport, this drawing continues to re~lect the origina~ airpo~ property boundary. 2. Airport Use ~oundary W Land within this bounda~y is reserved for shor~-term and lang term a~rpart-related uses and should not be so1d. A~l uses within ~us bounclaary shouid con~ply wi~h ~he airpor~ ~and use plan and the airport mas~er plan, ~ some cases interim uses not consistent with ~he ~a~d use plan may be allow~d as long as the uses are consistent with sa~e a~~port operatia~s and FAA standards and the lease terms and canditions allow the uses to cha~ge when the land is needed for aviation purposes. 3. Airfield - Areas directly related to the landing, takeoff, taxiing and parking of aircrafi~ and helicoptexs, including runways, taxiways, h~e~~pads, runway protection zones, approach surfaces, building and obstacle free zones, navigat~onal a~ds, and City-ov~med aircra~ paxking apro~ns. 4. Passenger Terminal Area - Areas cantaining the passenger ternninai and pub~ic, rental car, and employee parking associated with terminal ac~ivities. 5, Aviatio~a Commerc~al- Areas used for avia~ian activities requiring taxiway access such as air ca~go faci~iti~es, hangaxs, corporate jet support facilities, military facilities, fueling facili~ies, airline and air taxi hangar/office camplexes, and ~ox general aviaxion activit~es requiring p~imary use of the paved runway. b. General Avia~ion~ - Areas used by private p~lots and businesses primarily operating fram the floa~plane base and gravel strip and ot~er businesses that provide services ~o them, 7. A~v~ation Suppaxt/Govexnmental - Areas used by gov~rnment acfi~~ities required for the apexation and maintenance of ~ae airpor~ and air navigation such as the a~r ~'ll~ •:/:.':J•.k:~~i:'~1::~• ~Y~:1: r:':vi:~~7;CV:fi:~H~r.,i.~~~~,.l..~:,?,'ay.'"'y..vr~ •.~•iw:.~ ~«~i^.~?,;w:l;!nYfii,qr~y •u;rir;vM~ri:~Ni~A.•.tN~•yLr ' ..~~.. ~lY.... . ~ ...~: .. ~ .. . t... . . .. . d I. .... ~it...,l},r~r . ~!'..r. . ~ . ~ . r~ C~. . r . . . Se ~ :Y~~~ k'SW':~t:t~~'it'!f'w~i67r."itnlPYwrVrY•,•,.tNVfh4.Y.7•.,..r...r••;•rn.y•.~..N.~.1•..~~r..•....v.......~• • ...i..........«......~~.~..v........w.••...»...~.~~~.~......«..~....~............ traffic con~rol ~ower, flight service sta~io~, airpor~ ma~ntenance faciliries, airport rescue and fire fighring, and airpo~t storage a~eas, 8. ,AYiation-Related - Areas used for facilities and funcrions which support ~he airfie~d, termina~, aviat~on co~nmercial, and general a~iation t~nants and the trave~~ng public such as rental car oz other ground t~ansportation naa~ntenance areas, aviation~related offices and warehouses, aircra~ pa~fis suppiiers or hotels. 9. Av~ation R~serve - A~reas reserved for future Iong terrn aviation comn~ercial or avia~ion-related development, 10. Non-Aviation - Areas outside ~he ~`Airpor~ Use" boundary which may be d~veloped for pu~as~s unrelated to the a~~o~ providing ~iey do not conflict w~~h airpor~-~elated restrictions on heigh~, noise, or airpor~ safety zanes. lIMY V.VI 11 IJr~ •I •H nl~M ~\~ V. A•/~1CY~Y •'I~/f•/~~/YI~~.rn ~~r~•~y~~y• ••Il~~~ .~/ • r 7~ ~ 7 rY~ t I,tO J t~. s t •K• ••ti 1 ~rX n. +•r• : vi.•Y.,~.;•.v. ~ Y^ .l~J' '.Y i~'~ xa r~~•: •y•~ ••l' q•~ ~5': /•• J• ~ X: n~J! M•••I~MYh•• 1~•••~n v~....•..~ .w! ! .! t Ii! Yt71~~ •'~F. Y .+~ ..•'r' ::S%'.^'~: ,r .:S J:. ( i: J" ~i :N':'Y..Jt .,r:!':.Ir~'tiyirvrvn.m ,;~...~.: ~rc'i:':•'i.; r ~ .fr n';:•a ~.~~:. :.r..~. .•r..t~.. , :'~:t. .. •r .~.~47: ~:l.7.. • . . ":'~r~•.. . ~ .}.;1..5•t' .~.•i'~.r!~ . ~ :it: . . r~~.e,t...~.~lr:~t.ti'.. ~~nf~.... .~ .. .. . ..~ .~ .~h~~.'v~n.•'..~......~l.~. . .,..5.. ~.... ..l~.. ...l,...l....s.. ...!•...~..~..•.r.... ...•t+•....i..........~..~.i: ~.5.:~.~^....~s.+x:-:::.':: t•a.y:~.i....?tiY•:i.. } b KENAI MUNICIPALAIRPORT ~ Supplementai Planning Assessment - Phase 2 CouncillCommission Work Session August 25, 2005 Task 11.3.4: Rates & Charges Analysis Review Review Agenda ~ Approach for determining Airline Rates & Charges ~• Several methods of calculation are used commonly in the indust which , , ry comply with the FAA Policy Regarding Airport Rates & Charges •• Selecting a method, or combination of inethods, for calculating rates de ends . p on the particular circumstances at any individual airport •~ In the Rates & Charges Analysis, we tested several methods and determined those we considered most appropriate for Kenai •~ The result is determination of formula based landing fees and rental rates rather than fixed rates that do not change from year to year •~ Development of the rate structure and formulas are initially complicated, but once the structure and formulas are defined, the annual calculation is straightforward • Process for Calculating Future Rates •~ Combine all airportfunds into one "Airport Enterprise Fund" •~ Define appropriate cost centers within the "Airport Enterprise Fund" that will support the determination of rate bases and calculation of rates •• Using the 2006 budget for the "Airport Enterprise Fund", calculate the cost of operations for each cost center ~• Project aircraft landed weight for 2006 to use for determining the landin fee for . , g signatory air carriers - •• Determine exclusive space leased by individual airlines and define the 'oint use 1 space used by all airlines in common •• Apply the formulas determined for the defined rate structure • Overall Rates & Charges Recommendations t F~ KENAI MUNICIPALAIRPORT Rates & Char es Anal sis Review - Au ust 25, 2005 , Process for Calculatinq Future Rates • Combine all airport funds into one "Airport Enterprise Fund" Airport Land System Special Revenue Fund Airport Terminal Enterprise Fund Airport Land Sales Permanent Fund Airport Enterprise Fund -1- KENAI MUNICIPAL AIRPORT Rates & Char es Anal sis Review - Au ust 25, 2005 Process for Calculatinq Future Rates~cont'd~ • Define appropriate cost centers within the "Airport Enterprise Fund" that will support the determination of rate bases and calculation of rates DIRECT COST CENTERS Airfield Terminal Area Aeronautical Other Bldgs and Areas Non-Aeronautical Other Bldgs and Areas Airport Enterprise Fund INDIRECT COST CENTERS Administration ARFF Security -2- l KENAI MUNICIPALAIRPORT Rates & Char es Anai sis Review - Au ust 25, 2005 Process for Calculatinq Future Rates (cont'd~ ~ l, ~ ~ Using the 2006 budget for the "Airport Enterprise Fund" •• Allocate budget line items into the Direct and Indirect Cost Centers •~ Once the costs for operating all cost centers are determined, indirect costs are then allocated to the Direct Cost Centers to determine the cost to o erate each p cost center •~ Results of cost center analysis and cost allocation: <<---------- D i re ct C o st C e n te rs ----------> ><<-------- I n d i re ct c o st C e n te rs -------- >> Airfield Terminal Aero Non-Aero Admin ARFF $748,949 $507,043 $82,385 $178,037 $228,602 $321,200 ~l 371,151 181,351 61,316 56,686 (228,602) (321,200) 1 ~ $1,126,100 $688, 394 $143, 701 $234, 723 $0 $0 Security Total $126,700 $2,192,917 (126, 7007 - - - $0 $2,192,917 -3- r ~ ~ ~ O _ ~ ~ ~ ~ .Q Q K N W ~ N ~ N ~ d ~ ~ U ~ y 0' V ~ v ~ ` ~ d ~ LL LL ~ Q '~ C C _ '- ~ '~ Q ~ L ~ .L .N ~ ~ ~ ~ .Q ~ ~i. 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N N ~ C N N ~ N O Q ~ cn ~ W W ~ N~ ~ ~ ~ V c c~ N ~ ~ ~ ~ V N C O ~ ~ ~ ~ ~ c~n U CX ~~ .QN~ ~S C a~ W ~ ~ 2~- N ~ C ~ °~ ~ ~ +r W C X c~ 'm ~ ~, ~ ~ ~ :~ o W ~~ a~ o ~ ~. c c o ~ 0 X ~ ~ N ~ °~ Q' ~ ~ ~ ~ W ~ fl. C,~~v~i~N ~~ U~U ~ ~ a~ a~~~ ~~ Qa~ ~~ L ~. ac_ ar ~, ~m a~° ~ = ~ o ic~U~~OU ~ ~ ~- O O .~. o° N ~ N M ~ .-. O ~ ~ N N ..~ O p ~ (0 O ~ N p f~ O O p r N N N N r ~ r ~ O N O ~ p M M ~ M ~ ~ ~ ~ O ~ ~ O N r- p ~ M O N O M tn ~ o ~ o o a o O ~ ~' O ~ r' O N O N ~ ~ ~j ~ ( p ~ o ~ ~ o ~ 0 0 ~ 0 O o ~,,~ O ~t o0 p ~ O ~ ~ ~ ~ N ~ ~- N I ~~~~ ~ N ~ ~ ~ ~ o~ ~ ~ ~ ~ I N I ~ ~ ~ N ~ I M ~ N d9 I ~ O ~' ~ ~ ~ M~, 00 (0 ~ °o ~ N ~ N N N Q. N O W N N U = ~ c ` o~ o '~- V ,.~ +r o 4- c ~ ~ o a ~«- +r N N N~'~ ~ ~ ~+~ cn .-r q~ N ~t Q ~x N p~t' W ~ ~ V N c ~ o~ ~ cn . N ~- N C rn o ~ V ~n W N~ v~ v~ ,~ ( p V~' L X N O~.D ~ U N~ ~ ~ C U N W ~~' a ~~ ~ L~ ~ a 4 , L~ a°~ ~ ~ °~ ~ W a~, o ~ v a. c W o ~ W ~~, o . c~ C~~ ~ C 0' ~ 0 ~ C~ O~ ~ C .~ 0 C ~~ C 0~+r 0 N ~. O N N ~' N~ N N ~~ N N ~ oQV o oQ U o oc~U o ~ Q Q Q Q Q Q I~ KENAI MUNICIPAL AIRPORT Rates & Char es Anal sis Review - Au ust 25, 2005 ~ Process for Calculatinq Future Rates (cont'd~ • Project aircraft landed weight for 2006 to use for determining the landing fee for signatory air carriers • Determine exclusive space leased by individual airlines and define the joint use space used by all airlines in common •• Exclusive use space - ticket counters, office space and operations space (baggage make-up areas) •• Joint use space - baggage claim, baggage breakdown area and passenger holdrooms •• Airlines currently do not pay rent for all the space that they use and typically pay for at other airports so that the effective rental rate is significantly lower that the rental rate actually paid ~• Reviewterminal floorplan -5- ~ KENAI MUNICIPAL AIRPORT Rates & Char es Anal sis Review - Au ust 25, 2005 __ ~ Process for Calculatinq Future Rates (cont'd~ • Apply the formulas determined for the defined rate structure: Airfield "residual" landinq fees (~er 1,000 ibs) Airfield 0&M expenses $1,126,100 Less aviation fuel tax 5, 000 Airfield rate base requirement $1,121,10~ I Airline landed weight (1,000 Ib units) 170,000 Full Co~t Recoverv landing fee _____~ 6.59 Terminal "compensatory'. ' space rent ~psf~y) Terminal 0&M expenses $ 688,394 / Leaseable square feet 13,652 Full Cost Recovery rental rate $ 50.42 Airline leased square feet x 6,528 Airline terminal rent requirement 329170 -6- KENAI MUNICIPAL AIRPORT ~ Rates & Char es Anal sis Review - Au ust 25 2 ~ , 005 Process for Calculatin Future Rates (cont'd~ •• Result of terminal rent calculations SUMMARY OF TERMINAL BUILDING RENTAL RATE CALCULATI~NS PR~JECTED FOR FISCAL YEAR 2006 ~ Wtd Avg Resulting Terminal ~ Rental Rate Building Airline Rate Methodology Per Sq Ft Rental Revenues Existing (Per Lease) Existing (Effective) Industry Average Compensatory«< Residual $19.80 $31,127 $4.77 $31,127 $18.72 $122,231 $50.42 $329,170 $65.06 $424,699 •~ Current airline terminal rent subsidy - Terminal rental requirement = - Current terminal rent = - City subsidy = $329,170 31,121 $298,043 -l- KENAI MUNICIPALAIRPORT Rates & Char es Anal sis Review - Au ust 25 2005 , Process for Calculatina Future Rates ~cont'd~ •• Result of landing fee caiculations SUMMARY OF LANDING FEE RATE CALCULATIONS PROJECTED FOR FISCAL YEAR 2006 Rate Per Resulting Total Rate Methodology 1,000 Lb. Unit Landing Fees Existing - Wtd Avg All Carriers $0.50 $85,000 Industry Average $1.03 $175,462 Compensatory $6.59 $1,121,100 Residual - Airfield Only«< $6.59 $1,121,100 Residual -AirfieldlAeronautica( $6.83 $1,160,401 Residuai - Total Airport with Existing Terrninal Revenues $9.20 $1,564,786 Residual - Total Airport with IndustryAverage Airline } Terminal Rent $8.67 $1,473,682 ~ Residual - Total Airport with Compensatory Airline Terminal Rent $7.45 $1,266,743 •• Current airline landing fee subsidy - Landing fee requirement = $1,121,100 - Current landing Fees = 85,000 - City subsidy = $1,036,100 ) -- 8 r KENAI MUNICIPALAIRPORT Rates & Char es Anal sis Review - Au ust 25, 2005 Process for Calculatinq Future Rates (cont'd~ ~• Statistics provided previously Kenai Industry - Airport operating expenses per enplaned pax = $ 23.98 $ 23.13 - Airport operating revenue per enplaned pax = $ 8.14 $17.57 - Airline cost per enplaned pax = ~ $ 0.97 $ 6.12 1 -g- , i KENAI MUNICIPAL AIRPORT , ~ Rates & Char es Anal sis Review - Au ust 25, 2005 Overall Rates & Charqes Recommendations • Prepare and negotiate a new airline agreement with up-to-date, common industry provisions when the current agreements expire » Note that: - Current agreements (and the KMC} provides that "The arnount of rents or fees specified herein shall be subject to increase based on the per square foot rate set by City Council each year." - Landing fees are set from time-to-time by Council resolution in the KMC • Establish formula based rates for airlines and recalculate the rates annually (within the current agreements) •• Show the airlines what the full cost recovery rates are (i.e., those rates which would comply with FAA regulations) ~• Signatory Landing Fees - Increase rates to at least $O.15 per thousand pounds ~subsidized) ~ •• Establish a non-signafiory landing fee of premium of 30% higherthan the signatory rates •• Airline Terminal Rent - Apply rates to actual space used by the airlines - Increase rates to at least $9 per sq ft per year (subsidized) ~ Increase public parking fee to $3 per day now; VUhen parking improvements are made, increase to $4 per day • Charge rental car companies for readylreturn parking spaces at $10-$20 per space per month -10- t KENAI MUNICIPALAIRPORT ? Rates & Char es Anal sis Review - Au us 2 ~ t 5, 2005 Overall Rates & Char es Recommendations cont'd • In other analyses the project team has indicated ~~ Land and building rent > establish FMV rental rates ~above 6% ??? ) •• Allow longer term investment options for airport cash •• Use "some" cash to make revenue generating investments that: - Cover costs and generate a reasonable investment return - Ensure that the risk is warranted by the return ~ ~ -11- ~~ ~ L ~ ~ ~ ~ 1 ~ ~ ' J ~ Q ~ t~ ~ C E ~ = ~+ /' ~ L i~ ~ ~ ~ ~ _ ~ _ L _ ~ L R '. ~ Q, o ~ Q~ ~ ~~ a y,~ ~ ~ ~ i~ ~ , i+ °' ~c _ * Q ~a a a i+ ~ ~o ~ ~ ~ a~ a~ Q , , ~~ n o - ~ 0 z L ~ .:d ,. ~ a ` ~ . ~a ~- c~a ~- a v ~ ~-- ~ > ~o C Z ~ = .~~ ~aN a I^ W ! ~ WN `~ U' `~ ~ ~ ~ W ~ ~ „ : ~ ~ oqo ma~ ~ = J ~ ; ~ ,,~ Z .~ ~ 3 a G ~ a C ~ ~ ~o ~ ° a ~~ N~ ~H dH ~ ~ Q ~i .7 a ~ ut O a~ ZZ _" W N R ~ j d (81)I~ IZ~9Z-0l SOOZ Bt 9f1V bMp'SO-LI-B ocn puo~ iouoH~ f do~ oc~ puo~oc~ p~p~~~oup~ S9LBSU\a3~aa 6u~uuoia ved,~R~~~~~M~ .~ __. ~_. N RTHER ~ C~ N H~RIZ~N COMPANY '~ T,~P H E N L. PAVI S H P.O. Box 1075 Willow Alaska 99688 , , .~ Aviafion Affairs Conscrltant Tele hone: 907-733-5737 Ceil: 907- • -'~ ' ~ p 354 0137 E maii, spavish@ptialaska.net KENAI MUNICIPAL AIRP~RT Supplemental Piannin Assessment g Phase 2: Airport Land Use Pian AIRP4RT LEASING PROGRAM CHANGES Detailed Recommendations August 23, 2005 The leasing program change recommendations presented in this a er are based pp on the airport program comparison research I conducted during the earl sta es Y g of this project, the consensus directions I received at the Kenai Air ort Commission p work session on July 26, 2005, and my experience as an airport rofessional. p Stephen L. Pavish Northern Horizon Co. --- Associate Member-Alaska Air Carriers Association --- NoR rN~Rn~ NoRfzanr c o~Pa ~~ ~"'~PHEN L. PAVISH ~'~ A viafion Affair s Consu/tant P.O. Box 1075, Willow, Alaska 99688 Telephone: 907-733-5137 Cell: 907-354-0737 E-mail; spavish@ptialaska.net KENAI MUNICIPAL AIRPORT Supplementai Planning Assessment Phase 2; Airport Land Use Plan AIRPORT LEASING PROGRAM CHANGES Detailed Recommendations TABLE 4F CONTENTS SUBJECTI RECOMMENDATI~N PAGE N0. INTRODUCTION ................................................................................................... 1 ` RECOMMENDATIONS 1. Establish an Airport Reserve ........................................................................ 1 2. Obtain an Exemption for the Airport Reserve from the Piattin . . , g Requirements of the Kenai Peninsula Borough ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 2 3. Stop Sending Airport Land Valuation Appraisals to the FAA for Approval ................................................................................................. 3 4. Adopt a New Method of Setting & Adjusting Land Rental Rates ......................................................................................................... 3 5. Adopt New Guidelines for Setting the Length of Land Lease Terms ............................................................................................... 5 6. Adopt Incentives to Encourage the Development of Airport Land ......................................................................................................... 5 7. Adopt an "AirportZone" for Ail Land Within the Airport Reserve ............................................................................................. 7 --- Associate Member-Alaska Air Carriers Association --- ~vvR rH~Rn~ ~r a~~zo~r c a~~~ ~ Y ~ ~'r'~PHEN L. PAVISH P,o. Box 1075 Willow Ala , . . , , ska 99688 Avrat~on Affairs Consultant Telephone: 907-733-5737 Celi: 907-354-0737 E-mail: s avish tialaska.n p @p et 8. Delegation of Authority & Responsibility for the Airport ........................... g 9. Establish a New Chapter of the Kenai Municipal Code to lnclude all Codes Applicable to the Airport & Airport Reserve ...................................................................................................11 ATTACHMENTS - Proposed Ordinance to Establish New Lease Term Guidelines. - Proposed Transition Plan for Transferring Certain Authority & Responsibility to a Reconstituted Airport Commission. --• Associate Member - Alaska Air Carriers Association --- KENAI MUNICIPAL AIRPORT Supplemental Planning Assessment Phase 2: Airport Land Use Plan AIRPORT LEASING PROGRAM CHANGES Detailed Recommendations INTRODUCTION. An airport is, at once, an operational entit , an economic entit and Y Y, a real estate entity. Although each of these elements is susce tible to se arate .. , p p analysis, it must be recognized that the three are inseparabl interrelated. This a er y pp presents recommendations for the improvement of the City's land leasin ro ram for . ,. gp g the Kenai Municipal Airport, and therefore, has the real estate entit as its rima ~ . Y p ry sub~ect. However, the recommendat~ons and supporting discussions resented here . . . , p will occasionally overlap with economic and operational issues, some of which are bein addressed g by other members of our project team. This is not intended to confuse the reader or unnecessarily complicate the issues. It is simply the unavoidable consequence of addressing the characteristic complexity of an airport, ~ RECOMMENDATIONS 1. Establish an Airport Reserve. When the federal overnment conve ed the Kenai ,. . . , ~ Y Municipal Airport (ENA) to the City in 1963, the transfer included a substantial tract o ,. , f land cansisting of approximately 1900 acres and extendin as much as 6600 feet fro . 9 m the runway centerline, The deed of conveyance included a restriction rohibitin the ~ . . p 9 C~ty from leasing or selling land for "other than airport ur oses" without the written pp consent of the FAA. However, on several occasions since the ori inal transfer the FAA . ., , , g , released the City from that restriction, allowing the City to sell land for non-air ort . . p purposes. Airport land sold by the City formed the basis for economic develo ment in th ' '~ ~ ~ p e community. In fact, Kenai s existing central commercial area occu ies air ort land . . , p p that was sold by the City. However, in recent years, this land sale activit has inclu y ded land nearer to the runway, significantly limiting future air ort develo ment and • . . , p p expansion options, especially in the southeast quadrant of the airport. To help assure that the City retains a site of sufficient size to meet the future h sica . . pY ~ and ec,onomic needs of the airport, we recommend the Cit Council establish b . . .. . y ~ Y ordinance, a Kenai Municipal Airport Reserve. The essential re uirement of a Reserve • . .. a ordinance would be for the City to reta~n title to all land within the Reserve boundaries in perpetuity. Reserve lands could be leased, but never sold. Sub'ect to release b~ . . J y the ~I FAA, airport land outside the Reserve could be sold or leased at the Cit 's discretion ` y with the proceeds being deposited into the airport fund. Recommendations for ! ' ocating the Reserve boundaries a~e being develo ed as art of the land use lanni p p p ng segment of the Supplemental Planning Assessment, Phase II ro'ect. p1 Adopting an airport reserve ordinance is a key support for severai of the recommendations that follow below. NOTE: The final recommended boundary of the Air ~ ort Reserve ma encom ass , p y p a few strategically located parcels of private land in the vicinity of the terminal buildin . These . . , g would be included with the proviso that the parcels would become a art of the Reserv . . , , , p e only if they come into City ownership by gift, tax foreclosure, urchase or other means . . p , . Unt~l ownership passes to the City, all such parcels would be treated in eve wa a' , ry y s if they were located outs~de the Reserve. 2. Obtain an Exemption for the Airport Reserve from Kenai Peninsula Borou h Platti n ' g g Requirements, Currently, the City must subdivide ENA land via the Kenai Peninsula Borough platting process before it can be leased. This can result in ma'or dela s i ' ~ y f an applicant wants to lease airport land that isn't alread latted. In addition . . , „ Yp , the platting requirement significantly limits the City's flexibilit to chan e lease lot , , Y g dimensions to accommodate a lease appiicant's develo ment ro osal or the p p~ expansion needs of an existing tenant. Having an outside entity with no airport operating res onsibilities or knowled e! c . , P ( g ) ontral ~ the platting of lease lots on an airport serves no useful ublic ur ose and hinder ~ .. , p p p s the abil~ty of the airport operator to respond to changes in air ort user needs. At best w , p , hen the airport operator and the platting authority have a cordial workin relationshi i' , , , g p, tisa time-consuming nuisance. At worst, it can be an airport mana ement ni htmare if h . . . g g , te p(atting authority functions as an adversary. For this reason air ort o erators t' , p p ypicaliy try to obtain sole control of lease lot platting for their air orts. In m com arison stud . . . p Y p y of f~ve airports in Oregon and Washington last sprin , the o erators of four air o . 9 p p rts controlled their own lease lot platting and fifth was negotiatin to obtain a lattin . g p g exemption from the local county. After enacting a Kenai Municipal Airport Reserve ordinance underwhich land s , ales within the Reserve are prohibited, we recommend the Cit obtain a lattin exem ' Y p g ption from the borough for all the land within the Reserve. Since the land will nev er be sold and atl land uses will remain underthe City's direct su ervision as air ort o era p p p tor, there is no need forAirport Reserve lands to be latted b the borou h. Elimi ' . , , , , p Y g nating the platting step w~ll reduce the time required to issue a lease and si nificantl inc g y rease the City's flexibility in establishing and changing lease lot dimensions to meet the changing needs of existing lessees and new applicants. NOTE; The state does not go through the borough lattin rocess for the Hom , p g p er and Seward Airports, yet the borough has no trouble assessin ro ert taxes a ai , 9 p p y g nst iessees at the airports. ~ i 2 3. Stop Sending Airport Land Valuation Appraisals to the FAA for A rova -, pp I. For ~ over 20 years, the City of Kenai has been submitting airport land valuation a raisals to _ th pp e FAA Alaska Region for review and approval. This included all the a raisals done pp for land sales, new land leases, and lease rent re-evaluations at ENA. Over the years, this process has involved a significant investment of time and mone b both the Ci y y ty and the FAA, not to mention significant delays for applicants seekin to develo air ort g p p land. Yet, the procedure is of little or no recognizable benefit to an one. Y Qualified, private sector real estate appraisers have performed all of the Cit 's air ort I ' Y p and appraisals. Typically, the Airports Division personnel who have reviewed ENA land appraisals have not been trained real estate appraisers, so it seems hi hl unlikel that 9Y Y an FAA review would ever result in any substantive change in valuation. This is not a procedure that the FAA universally imposes on all ublic air ort o erators. p p p The ENA appraisal review process is an extraordinary process, one that the FAA does not require of most other airport operators. It is unclear why the FAA initiated the appraisal review requirement for Kenai. The FAA Airports Division ersonnel I . . , p interviewed in December 2004 did not know why the FAA started the ro ram and were . . . . . . . .. p 9 unable to find any information in theirfiles relating to its origin. Re ardless of the ~ . . . .. g reason for its beginning, we think ~t is a counterproductive exercise that serves no useful purpose, today. Vl~e recommend the City stop sending ENA land appraisals to the FAA and have furnished City staff with a letter drafted for that ur ose. pp 4. Adopt a New Method of Setting & Adjusting Land Rental Rates. The Cit 's . . . . Y ex~sting method of establishing the rent for ENA land leases is to conduct individual appraisals for each new lease and for each existing lease that comes u for rent re- ~ . . . . , p evaluation. ~Occasionally, when timing coinc~des, appraisals for two or three leases are combined into a single appraisal.). The Cit retains local area rivate s Y p ector real estate appraisers to conduct the appraisals. There are three problems with the Cit 's current . . . Y appraisal practice. First, compared to the alternative recommended below the one- , appraisal-at-a-tirne approach is not cost effective. Since the Cit 's leases re uire rent . . , Y q re-evaluation every five years, the City must appraise eve leased ro ert on the . . , ry p p Y a~rport every five years. Doing this by separately appraising each lease or small cluster of leases is an expensive way to accomplish the objective. Second, under the existing Kenai Municipal Code KMC , unless the lot has been . . . . ~ ) appra~sed w~thin six months prior to issuing a lease, an applicant for a new lease must put his or her development plans on hold while the City oes throu h the rocess of g 9 p obtaining an appraisal. Finally, it is highly unlikely that local real estate appraisers have air ort land valuati . . . . , , p on training and experience. Without specialized knowledge of the uni ue market .. , . , q characteristics of airports, an appraisal of airport propert , es eciall ro ert used fo .. . Y p Yp p Y r aviation functions, may not be accurate. ~ ~ 3 ~~~` As an alternative to the Cit 's existin ro ram we rec ~ Y g p g , ommend a change to an airport- ,~ wide rental rate adjustment system, as follows: A. Conduct an airport-wide appraisal every five years. The a raisal would . . . . pp provide a listing of the fair market value ~FMV) of every lot under lease at the time and for every vacant lot. The appraisal would also rovide some en ' p g eric valuations of the unsubdivided portions of the airport that have leasin otential. . . , gp Finally, the appraisal would determine the contemporary capitalization rate applicable to leases on the airport. ~Note: The existing KMC fixes the capitalization rate at 6%. In the open real estate market, ca italization rates va . . . , , p ry from time to time, so applying an arbitrary fixed rate to FMV can result in revenue losses for the City or excessive rent for airport tenants. It would be in the best interests of both the City and the tenants to have the contempora ca italization ry p rate determined as part of the appraisal process.) By appraising all ENA lease land at one time, the City would en'o the benefits of . . . 1Y scale, resulting in a lower appraisal cost per lot, and have a large enou h ro'ect g p 1 to interest an airport specialty appraisal firm. Since these firms are based in the Lower 48, only a farger, whole-airport appraisal project would be likel to attract ~ ~ . . . . y their attention to Alaska. Typically, airport appraisal firms subcontract with local appraisers to gather data on comparable properties. Then, their ex erienced . . , p airport appraisers review the comparable data and perform the valuation 1 analysis. Typically, this blend of local market knowled e and air ort a raisal 1 . , g p pp ~ expertise results in the most accurate, defensible airport appraisals. During the first 12 months following the City's acceptance of the air ort-wide . ., P appraisal, the rent for any existing leases that come due for re-evaluation, and for any new leases issued during that time, would be taken directly from the appraisal. B. During the second, third, fourth, and fifth ears rents would be ' Y , determined by applying a generally accepted inflation index to the valuations in the a raisal. pp The Anchorage Consumer Price Index (ACPI) is probabl the best available . . . . , Y ~nflation index for use in Kenai. At the end of the first yearfollowin the Cit 's . . . , , 9 Y acceptance of the airport-wide appraisal, the City would increase or decrease the rental amounts in the appraisal by applying the ACPI from the revious ear. p Y The resulting adjusted rents would then be applied to new leases issued durin . „ g the succeeding 12 months and to all exist~ng leases that came u for rent re- ~ ~ . . . . p evaluation during that same period. The inflation indexin rocess would be . . , , gp repeated at the beglnnings of the third, fourth, and fifth years, with a new air ort- , . , , p wide appraisal being done for the sixth year. Inflation indexing of the appraisal data will keep it reasonabl u-to-date for five Yp years. A five-year interval between appraisals, combined with annual inflation indexing, is a common real estate leasing practice. ~ ; 4 ~~~ C. While the renta! rates for the entire air ort would be ad'usted annuail n p J y u der _ ~ thi • . . . . ~ s proposed appraisal / inflation indexing system, the rent for existing leases would remain subjectto change only once every five years. At first, this rna . ., Y seem contradictory, but it s actually not, Let's say the City accepts an airport-wide appraisal, effective January 1, 2Q07. Existing lease "x" is subject to rent re-evaluation every five years, with the next re-evaluation coming due on June 1, 2007. The City would change the rent for that lease to the amount determined by the appraisal. The new rent would remain in effect for lease "x" until June 1, 2012. Effective January 1, 2008, the City would adopt new rental rates by applyin the . , , , . , 9 ~ ACPI and increasing or decreasing the amounts in the appraisal accordingly. • • li 11 ' ' . . " Existing lease y is sub~ect to rent re-evaluation every five years, with the next re-evaluation coming due on September 1, 2048. The City would change the rent for that lease to the new amount adopted by the City on January 1, 2008. The new rent would remain in effect for lease "y" until September 1, 2013. 5. Adopt New Guidelines for Setting the Length of Land Lease Terms. To set the term of each new lease, the City has been usin the lease term uidelines in the State's g g rural airport regulations (17 AAC 45.225). Although that regulation has only been in place since 2002, the State's administrative use of the same term guidelines dates back ~~ to the mid-1990's. After roughly ten years of construction cost inflation, the investment ' amounts required in the guidelines for given lengths of term are too low. Off the record, State DOT&PF airport leasing officials have acknowledged this fact and plan to increase the investment requirernents in a future revision of their regulations. In addition, the State's term guidelines extend all the way out to 55 ears, which is . . . Y substantiafly longerthan the airport industry norm of 25 to 35 years. The rural air ort . , p regulations were adopted tv provide for terms up to 55 years in response to a statute passed in 1996 [AS 02.15.090~c}]. That law provides airport lessees with an almost perpetual right of renewal and allows lessees to retain ownership of buildings and other improvements for as long as they hold a lease and continue to renew. Neither the Cit . . .. . . . , , Y of Kenai nor the Kenai Municipa! Airport is sub~ect to this statute, so there is no requirement for the City to grant leases for such lon terms. 9 During an Airport Commission work session on July 26, 2005, I recommended the Cit ~ . . . , , Y adopt, by ordinance, a set of term guidelines similarto the state's, but with the investment requirernents increased by at least 50% and the maximum term set at 35 years. The 35-year upper limit is more than adequate to support amortization and financing of lessee-constructed improvements. Attached to the end of this a er is m pp Y August 4, 2005 draft of the proposed guidelines and supporting ordinance details. 6. Adopt Incentives to Encourage the Development of Airport Land. Previousl , we . . , . y ~ explored alternatives for the C~ty to provide airport land development incentives to 5 tenants without violating FAA requirements. UVe were able to recommend onl . . y two incentive plans. The first, was a waiver of the Cit 's ro ert tax on le . , ,,, Y p p y asehold improvements during the initiai years of a lease that involved a si nificant lessee . .. 9 investment in improvement construction. Such an incentive ro ram would have to b p9 e adopted as part of the KMC. VUe recommend the KMC amendment include the following features: A. The lessee must commit to complete permanent im rovements costin . p g at least $254,000 on the premises; B. The lessee must commit to complete the improvements within 24 rnonths of the lease beginning date; C. The lessee must submit to the City written evidence that the im rovements . , , p have been timely completed, together with evidence of the lessee's total cost of building the improvements; D, Upon receiving satisfactory evidence of timely com letion from the lessee the . , , p , City will grant the lessee a waiver of the City propert taxes a licable to the . Y pp improvements for a period of time immediately following the date on which the lessee completed the irnprovements. The property tax waiver eriod would ,. , p depend on the lessee s improvement construction cost, as follows: COST TAX WAIVER PERIOD t least $250,000, but less than $500,000 ....................... 2 ears Y At least $500,000, but less than $150,000 ....................... 3 ears Y At least $?50,000 ............................................................. 4 ears Y ~This graduated approach to tax waivers would encoura e lar er develo ments . ., g 9 p while providing some incentives for smaller ones.) E. The waiver will not apply to any improvements constructed on the remises . p after the date in 6, above. F. If the lessee commits a breach of the lease an unex ire ' ' , p d waiver will end on the date the City terminates the lease. The second incentive we recommend is to use funds from the Cit 's air ort land s , , y p ystem trust fund to construct basic infrastructure for lease lots, such as structural ravel fill . , , g , access roads, sewer / water extensions, etc. Such infrastructure im rovements would . , . p make airport land more attractive to potential lessee. The Cit 's investment would b Y e recovered from the lessee through a rent surcharge over a reasonable eriod of the p lease term, not to exceed ten years. ~ , 6 l. Adopt an "Airport Zone" for All Land within the Air ort Reserve. , p Many of the land uses common to airports do not fit well within t ical munici al zonin .. . . yp p g - class~ficat~ons. Airports the size of ENA can be a somewhat fiuid mixture of ' commercial and private aviation facilities; aircraft repair shops; car rental facilities ift sho . , , , g ps, hotels, and other service bus~nesses; air cargo warehouses; arts sales and other retail ~ , , p outlets, bulk fuel storage; aircraft and aircraft parts manufacturin ~ non-aviation comm ' . , g, ercial and industrial uses; and open space for air navigation safet . I found all of these land , . Y uses existing among the 11 airports included in my comparison stud . All of these and more . , Y are potent~al uses for land at ENA. Trying to cover all these dissimilar uses with conventional zoning classifications while remaining in compliance with FAA requirements and maintaining the flexibility necessary forthe air ort to res ond to th ~ . .. , p p e continually changing aviation business environment adds an unnecessa level of . . . . . , ~Y complexity to municipal airport operat~ons. Either the conventional zonin cl ' ' ' ' g assifications must be filled with special exceptions to accommodate air ort uses or . , p rnany airport-related uses must be author~zed through conditional use ermits. p Conflicts between zoning and FAA-approved land uses are fre uent on air orts w . . q p here conventional zoning classifications are applied. According to the zonin ma furnished . . , 9 p to me by City staff, a number of these conflicts exist at ENA. For exam le the . , , , p , Gonservation Zone covers the ma~ority of the airport, inciudin the float ond tie- , g p down area and the gravel str~p area. No doubt, guide services operate aircraft from the float pond tie-down area, yet a guide service is not a permitted land use under the Conservation Zone. The FAA-approved Airport La out P1an shows lease lots for ~, Y future `~ development aiong the East Side of the gravel strip arkin a ron. The commerci . . , p g p al aviation uses that typically occupy such lease areas are not ermitted under the . , p Conservation Zone. Approximately 80 acres located northwest of the mid oint o . , , p f the main runway includes a portion of the water runway and is zoned Rural Residential. The FAA Airport Layou# Plan shows most of that land committed to resent an . , , p d future aviat~on uses. The FAA, which rarely approves of airport land an here bein used for . . , . YW g residential purposes, would certainly find residential housin to be an unacce tabl g p e use of land that is in such close proximity aviation facilities. These are not catas r' t ophic conflicts beyond resolution, but they illustrate the kind of roblems that fre uentl ' . , p q y arise when conventional zoning classifications are applied to an air ort. p A more progressive approach to zoning for a munici al air ort o erator is to a „. „ . , p p p dopt a broad Airport Zone that includes all potential airport uses under its umbrella. Generically speaking, zoning is a legal devise used b a cit to control land u . Y Y se on privately owned land. When the city is both the airport o erator and the zonin . . , p g authority, it has far more power to directly control land use on the air ort as the i p a rport operator than as the zoning authority. Since the City of Kenai owns ENA the Cit ha , y s direct, daily control.over all activities and land uses on the air ort throu h le . , , p g ases and airport regulations. There s no real need to apply an additional la er of control in the . .. . . Y form of site-specific zoning. Even with no zonin whatsoever the Cit woul ' , 9 , y d still have total control of all airport land use. Establishing an "Air ort Zone" with a lication s . . , p pp olely ~~ to ENA would eliminate the need for zoning changes and conditional use ermits ~ p to 7 accommodate changing developments on the airport. An Air ort Zone wouid also p prepare the way for a transfer of land use responsibility within the Air ort Reserve as • . . p , described in the next sect~on. N4TE: The zoning for any privately owned land that fails within the Air ort Res bo « . p erve undary would be excluded from the Airport Zone" until such time as ownershi of th land a ' ~ p . e p sses to the City. Also, see the note at the end of Topic No. 1 on Pa e 2 of this g paper. 8. Delegation of Authority & Responsibility far the Air ort. Qne of the most . , , , , p universally accepted principles of organizational efficiency is the dele ation of authorit ... g y and responsibility to the lowest competent level. The CEO of a Fortune 500 cor ora ' p t~on may be a completely competent accountant and typist, but kee in the cor oration's . , , , , P 9 p books or typ~ng his own management polECy directives would not be the hi hest an .. . 9 d best use of his time. Delegating the responsibility for these duties to others allows . the CEQ to devote his full time to the leadership functions that onl he can erform. . Y p Following the same example, the CEO knows nothin about the hi hl s ecialized fi . g gyp eld o f m ar ke t ana lysis. Were he to attempt to do his own market anal sis work the resul y , ts for the company would be poor. On the other h~nd, takin the trainin necessa g g ry to become fully competent in the market analysis field would leave some of his esse ' . nt~al CEO duties undone. Delegating this responsibility to a market anal st solves the Y problem. Operating airports has become an increasin I com I '' ' ~ ~ g y p ex and s ecialized business sin p ce the federal government transferred ENA to the Cit of Kenai in 1963. S ecializ Y p ed knowledge and focus is necessary to remain current in the: - changing federal regulations forAlP grants, airport o erations and aviation p , security; - rapid shifts within the commercial aviation industry; - advances in airport technology, - best airport business practices, and - successful techniques for marketing airports. Many municipal governments have found it impossibfe, within their normal administrative framework, to achieve the specialized attention air orts re uire. F . , p q or that reason, the trend has been for municipal governments to establish an o eratin boar . p g d or port authonty to assume full responsibility fortheir local air orts. Six of the air orts • • . p p included in the ENA comparison study (Juneau, Pendleton, Pullman V1lalla Walla , , Wenatchee, & Yakima) have gone through this kind of transition. The Kenai Municipal Airport may not yet have achieved a hi h enou h busine , , , g g ss volume ortraffic level to ~ustify the transfer of the airport to a full inde endent air ort board. . Y p p However, it appears that some significant improvements in efficienc and effec i , , , y tveness could be gained by delegating authority and responsibilit to lower levels within the ' Y City ~ where more specialized airport expertise and focus exists or cauld be develo ed ' ~ ~ p ). This , 8 is not to say that those involved in the existing system are incom etent or doin . . , p g a poor ~ob. But, it is to suggest that some increased dele ation af authorit and chan ' . , g y ges ~n - organization could produce Iong-term benefits for both the airport and the Cit . We . . . , Y recommend the following delegation / reorganization. Recommended Delegation I Reorganization of Authorit & Res onsibilit fo , Y p y r the Airport. Citv Council. Regarding the airport, the Council would retain final decision auth ' ority for: - The airport operating budget; - The airport capital improvement project (CIP) budget; - Airport Master Plans and land use plans; - Airport-related changes to the KMC; - Land rental rate policy ~Rent adjustment methodolog )~ , . . , , Y, • Appeals of Airport Commiss~on decisions; and - The repeal of airport regulations. Reconstituted Airport Commission. The commission would chan e from an . . , . g } advisory group to a del~berative body with decision-makin res onsibilities. To avoi . . g p d ~ conflict of interest problems, this change would necessitate havin a membershi wit g p h wider community representation than is required by the current KMC. We recomm end a commission evenly divided between direct airport users and non-direct users as , follows: - One commercial aviation service provider at the air ort; .. p - One aviation lessee of land orterminal space at the air ort~ .. p , - One non-aviation lessee of land or terminal space; - Three at-large members representing the business and rofessional . . . , . , p community, but having no direct financial interest in - an aircraft, other than one used exclusively for non-cornmercial ur oses . , p p , - a business that operates on the airport; or - a land or terrninal space lease or sublease at the air ort. . , , p - One member of the City Council as a non-voting member. Commission members would be appointed by the Council and serve at the Cou '' ncil s pleasure. I understand from speaking to the Juneau International Air ort Busine , p ss Managerthat the Juneau Airport Bo.ard mernbers are not re uired to submit to c . , . , q omplete financial disclosure. The City Attorney should check state law to confirm that h' t ~s would be the case for the reconstituted ENA Airport Commission. Re ardless we rec g , ommend the City require the at-large members of a reconstituted Air ort Commission to si p gn an ~ affidavit affirming that they have none of the financial interests listed above. 9 \'~ Recommended delegations to a Reconstituted Air ort Commission ar ~ J p e as foliows, - Recommending the airport operating budget to the Council; - Recommending the airport CIP budget to the Council; - Approval of ali expenditures within the scope of budgets a roved b the pp Y Council; - Preparing and updating airport rnaster plans and land use lans fora roval p ~ pp by the Council}; - Making recommendations to the Council for changes to air ort-related . P sect~ons of the KMC. - Adopting of airport regulations; - General oversight of all airport operations, terminal operations, and land use~ , - Promoting and marketing the airport; - Responsibility for all decisions related to leasing land within the Air ort ~ . . , p Reserve, includrng approval / re~ection of lease applications, lease amendments, lease assignments, subleases, and lessee constructian proposals; and decisions related to lease terminations; - Adopting land rental rates using methods established by the Council~ - - Adopting 1 changing airport user fees; - Final approva( of the hiring or firing of the Airport Mana er; .. , g - General supervision of the Airport Manager; - Hearing appeals of Airport Managerdecisions; and - Make all land use decisions within the Airport Reserve. Note: This would ~ require a transfer of land use authority from the Plannin Commission but g ~ arrangements could be made for the Airport Commission to receive advice from the City's Planning & Zoning administrative personnel. ) Airport Manager. Recommended new delegations to the Air ort Mana er include: p g Designated point of contact for all land lease applications, lease amendments, lease assignments, subleases, and lessee construction proposals;* Primary responsibility for negotiating the terms of land leases and lease amendments with applicants (with assistance from the Cit Attorne ~* . . . . Y Y), Responsibil~ty for lease premises inspections and lease enforcement~* , *NOTE: This does not necessarily mean the airport mana er or the mana er's . g 9 staff would wr~te the actual lease documents or lease enforcement letters, Som e or all of those duties could remain with the Assistant to the Cit Mana er, . Y g However, the airport managerwould, underthe general direction of the Air ort . . , . . p Commission, provide direction for the actions described. This delegation of authority and responsibility represents a ma'or de arture from 1 p the waythe City and airport nowfunction. It certainly cannot be accom lished overni ht so p g, 10 I've attached a suggested transition plan that provides for the dele ation to be 9 completed by July 1, 2008. 9. Establish a New Chapterof the Kenai Municipal Code to Include all Codes Appficable to the Airport & Airport Reserve. The program chan es recommended in ~ ~ . . .. g this paper wili require extensive additions / changes to the Kenai Munici al Code. Other . p KMC changes will also be necessary to update the City's land lease form and lease appfication requirements. These code changes will be much more convenient for the public to use, much easier to draft, and much less susceptible to code interrelationshi . .. p errors, if all existing and amended codes relating to the Airport Reserve were segregated into an entirely separate chapter of the KMC. This segregation ~would also allow future KMC amendments relating to the Airport Resenre to be accom lished . . .. p without the possibil~ty of creating inadvertent conflicts with codes ap licable to Cit P Y interests outside the Reserve. For example, if the City wished to continue its current land rental rate practices for airport land outside the Reserve while ado tin the air ort- p 9 p wide appraisal program for land in the Reserve, it could be easily accom lished with • ~ . p . segregated codes. The City would simply leave the existing codes alone, while amending the Airport Reserve chapter as needed to implement the airport-wide appraisal system. UUithout the recommended code segregation, weavin the necessa ~ . . . . , g ~Y Airport Reserve code changes into the exist~ng provisions would be an extremel . . . , , , Y complex task in which clarity would be almost impossible to achieve. 11 DRAFT August 4, 2005 Kenai Municipal Airport Term Guidelines for Leases of Land within the Airport Reserve. ~a) The length of term for a lease or lease extension granted by the City for land within the Airport Reserve wiil be based on the amount of investment the appiicant proposes to make in the construction of new permanent improvements on the premises during the first 24 months following the beginning date of the lease or lease extension. ~b) If the applicant proposes to make no investment in new permanent improvements on the premises or proposes to invest less than $12,400, the maximum term of the lease or lease extension shal! be five years. ~c) If the applicant proposes to invest $12,0~0 or more in new permanent improvements on the premises, the term of the lease or lease extension shall be determined according to the following table: Applicant's Investment , (in U.S. Dollars) Maximum } is at Least Term of Years 12, 000 6 24, 000 7 36, Q00 8 48,000 9 . 60,000 ~ 0 72, 000 11 84,00~ 12 96, 000 13 108,~00 14 120,000 15 132,000 16 144,000 1? 156, 000 18 168,000 19 180,000 20 192, 000 21 204,000 22 216, 400 23 228,000 24 240,000 25 ~ 252,000 , 26 264, 000 27 ~~ 276,000 ~~ 28 ~ 288,000 29 300,000 30 312,000 31 324, 000 32 336,000 33 348, 000 34 360,000 35 (d} In the lease or lease extension granted to the applicant, the City wili include a provision requiring the applicant to complete the proposed permanent improvements by no laterthan 24 months afterthe beginning date of the lease or lease extension. (e~ The City will require a performance bond, deposit, personal guarantee, or other security if the City determines security is necessary or prudent to ensure completion of the permanent improvements within the time period set under (d) of this section. The City will determine the form and amount of the security according to the best interest of the City, considering the nature and scope of the proposed improvements and the financial responsibility of the applicant. ~f~ The applicant shall, within 30 days after completion of the permanent improvements, submit to the City written documentation that the improvements have been completed as required. (g} If the applicant shows good cause to the City and if it is not inconsistent with the City's best interest, the City will grant an extension that is sufficient to allow for the completion of the permanent improvements or for subrnission of documentation that the permanent improvements have been completed under this section. No extension or combination of extensions granted under this subsection (g) will exceed 12 months. (h} If, within the time required under (d) of this section, including any extension granted by the City under (g) of this section, the applicant fails to complete the required permanent improvements, the City will (1) execute the forfeiture of the performance bond, deposit, personal guarantee, or other security posted by the applicant under ~e) of this section to the extent necessary to reimburse the City for all costs and damages, including administrative and legal costs, arising from the applicant's failure to complete the re uired im rovements q p , and (2) take one of the following actions, as applicable, (A} if one-third or less of the required improvements have been completed, initiate cancellation of the lease; 2 (B) if at least two-thirds of the required improvements have been completed, reduce the term of the lease to a eriod under b or c of thi ' ~ . . , , p ( ) ( ) s sect~on 1 that is consistent with the portion of the improvements timel com leted~ Y p - (C} if more than one-third but less than two-thirds of the re uired . q ~mprovements have been completed, apply the best interests of the Cit to take . . . . , , Y the action described in either (A) or (B} of this subsect~on. Definition: (a7 "permanent improvement"; a fixed addition or chan e to land that is n g ot temporary or portable; ~1 } "permanent improvement" includes (A) a building, building addition, retaining wall, storage tank, earthwork fill material, gravel, and pavement; and ' (B~ remediation af contamination for which the applicant is not responsible; (2) "permanent improvement" excludes items of ordinary maintenance, such as glass replacement, painting, roof repairs, door repairs, plumbin re airs floor coverin . g p , g replacement, or pavement patching. (b) "responsible", when used in regard to environmental contamination means , having materially contributed to, assumed under an assi nment or bein otherw' . g , g ise liable for by law or contract. 3 APPENDIX For comparison, the foilowing is the term table used by the State of Alaska for leasing land in rural the airportsystem [17 AAC 45.225~ij] and for leasing land located in the General Aviation areas of the international airports at Anchorage and Fairbanks [17 AAC 42.225~h~]. Fair Market Value, Purchase Price, or Investment of at Least the Following DollarAmount Term of Years 7, 500 6 15,040 7 22,500 8 30, 0~0 9 37,500 10 45,~00 11 52, 504 12 60,000 13 67, 500 14 15,000 15 82,500 16 9Q,000 17 97, 500 1 g 105,000 1 g 112,500 20 120,000 21 127, 500 22 135,000 23 142, 540 24 150,OQ0 25 157, 500 26 165,000 27 172,500 28 180,000 29 187, 500 30 195, 000 31 202, 500 32 210,000 33 217, 5~0 34 225,000 35 232, 500 36 240,000 3? 4 247, 500 38 ~255,000 ~~ 39 _' 262, 50~ 40 270,000 41 217,500 42 285,000 43 292,500 [292,000~** 44 300,000 45 307, 500 46 315, 000 47 322,50~ 48 330, 00~ 49 337,500 50 345,000 51 352,500 52 360,000 53 367, 500 54 375,000 55 **An error being corrected in the pending amendment of 17 AAC 45.225(i). 5 KENAi MUNICIPAL AIRPQRT Supplemental Planning Assessment Phase 2: Airport Land Use Plan AIRPORT LEA~ING PR~GRAM CHANGES Proposed Transition Plan for Transferring Certain Authority & Responsibilityto a Reconstituted AirportCammission. This plan presents a series of steps aliowin for a radual orderl transfer of authorit and 9 g , y y responsibility for the Kenai Municipal Airport to a reconstituted Airport Commission by July 1, 2008. For purposes of training and familiarization to prepare members forthe assumption of wider duties, the Commission may have to meet twice per month during parts of the transition. The dates given are intended only to be representative of the time periods involved. Amendments to the KMC will be necessary throughout the transition as items of authority are transferred to the Commission. The word "review" includes making recommendations, but does not include final approval. ~ DATE(S) _~ ACTION S February 1, 2006 Adopt by ordinance the Airport Reserve boundaries. March 1, 2006 Amend Chapter 21,25 KMC to reconstitute the Air ort p Commission membership and change all references to "aeronautical lands" to "Airport Reserve". (For the time ~ being, the Commission would serve in an adviso c~ acit ry p Y only, so the duties in .010 would not change,} April 15, 2006 Appoint / reappoint members to the Commission. May 15, 2006 Commission briefed on recent and pendin KMC g amendments related to the airport. June 15, 2006 Commission briefed on the FY 2007 airport operatin and 9 capital budgets. July 1, 2006 Commission begins reviewing all expenditure approval requests related to the airport before they are sent to the Council; Cornmission also begins reviewing all applications to lease land in the Airport Reserve prior to their ' submission to the Council. ~ ~ July1- ~ctober 1, 2006 Commission briefed on airport operations, terminal operations, FAA grant assurances, airport security, leasing procedures, and the status of all on-going projects, October 1, 2006 Planning Commission adopts "Airport Zone" forAir ort p Reserve lands; In addition the reviewing new lease applications, the Airport Cornmission begins reviewing all proposals for lease changes, assignments, and lessee construction, as well as staff recommendations for lease enforcement action or lease termination. October 1, 2006 - July 1, 2007 For training purposes, Cornmission is included in: Each stage of the preparation and adoption of the FY 2008 airport operating and capital budgets; Every Council decision related to the airport; Every airport regulation change by the City Manager. January 1, 2007 Commission begins reviewing appeals to the Council of ~ Airport Manager I City Manager decisions regarding the airport. Commission assumes responsibility for marketing the airport. Juiy 1, 2007 Responsibility & authority for the following are rnoved to the Commission: Adopting airport regulations, including airport user fees; Approval 1 rejection of all airport expenditures consistent with Council-approved budgets; Approval / rejection of all applications / proposals for leases, lease changes, assignments, subleases, and lessee construction related to land within the Airport Reserve; Deciding appeals from Airport Manager / City Manager decisions related to the airport. During FY 2008 Commission responsible for: Preparing and resentin to p 9 Council the FY 2009 capital and operating budgets for the airport; Proposing to Council changes to the KMC, . especially those necessary to complete the transition by July 1, 2008. January 1, 2008 Commission given final decision authority for the supervision, hiring, and firing of the Airport Manager. Land ~ ~ use authority for the Airport Reserve transferred from Planning Commission to Airport Commission. March 1- July ~, 2008 Commission coordinates the final details of the transition. July 1, 2008 Transition completed; Commission assumes res onsibilit . , p y for all duties listed in the delegation of authority recommendations. .-~,, 1