PowerPoint Presentation

AviationManagementConsulting GroupACA12013 Fall Conference

Association of California Airports (ACA)

South Lake Tahoe, CaliforniaSeptember 12, 2013

AviationManagementConsulting GroupACAPaul2Establishing and AdjustingGeneral Aviation Rents and Fees

Presented by:

Paul MeyersPrincipal Aviation Management Consulting Group

AviationManagementConsulting GroupACA3Aviation Management Consulting GroupPaul Meyers35 years of experienceAviationleadershipmanagementcustomer serviceGA (FBO operations/management), integrated freight, air carrier, and employee training and development GA management consulting (airport and FBO)Bachelors degree (business/aviation administration)California State University at Los AngelesMember of the GA Airports Committee (AAAE) and Airport Business Committee (NATA)Airport Cooperative Research Program (ACRP)Panelist, principal investigator, and subcontractorAircraft owner and instrument rated private pilot

AviationManagementConsulting GroupACA4Aviation Management Consulting GroupServicesProvide a full range of GA management consulting servicesSpecialize exclusively in the GA industryServices (all GA related) are provided to:AirportsFixed Based Operators (FBOs)Specialized Aviation Service Operators (SASOs)Others having an interest in the GA industry

AviationManagementConsulting GroupACA5Aviation Management Consulting GroupAirportsRent Studies and Fee Analysis/StudiesPrimary Management and Compliance DocumentsStrategic/Business Planning/PlansAppraisals and ValuationsLease, Use, and Operating AgreementsThrough-the-Fence (Access) Agreements Market Assessments and Feasibility StudiesRFI/RFQ/RFP Development, Evaluation, and SelectionOperational, Managerial, and Financial AssessmentsAcquisition, Divestiture, and Due DiligenceLand Use, Site Planning, and Facility ProgrammingLitigation Support and Expert Testimony

AviationManagementConsulting GroupACA6Aviation Management Consulting GroupTeamExperienced and proven professionalsExcellent working knowledge of the aviation industryGA airports and aviation businesses (in particular)Approach every project from a unique (multi-dimensional) GA perspectiveAirport, business, and customerCompleted over 1,000 GA assignments at more than 500 airport and aviation business locations

AviationManagementConsulting GroupACA7Aviation Management Consulting GroupResourcesExtensive research capabilitiesProprietary GA industry database and GA resource libraryExcellent working knowledge of FAA policies and guidelines pertaining to:The planning, development, operation, management, and funding of airports (in general)The development, implementation, and enforcement of PMCDs (in particular)

AviationManagementConsulting GroupACA8Aviation Management Consulting GroupPaul Meyers9085 East Mineral Circle, Suite 315Centennial, CO 80112-3499(303) 792-5202 (direct)(303) 792-2700 (office)(303) 792-2751 (facsimile)pmeyers@aviationmanagement.comwww.aviationmanagement.com

AviationManagementConsulting GroupACA9Session OutlineDiscussion FrameworkAirport Sponsor AssurancesKey assurancesPrimary Management and Compliance Documents (PMCDs) Definition, purpose, role, and importance (value)Leasing/Rents and Fees Policy

AviationManagementConsulting GroupACA10Airport Sponsor Assurances

AviationManagementConsulting GroupACA11Background on AssurancesTo secure Airport Improvement Program (AIP) funds (a grant), an airport sponsor is required to give certain assurances to the FAA known as the Airport Sponsor Assurances.In essence, sponsors must agree to comply with the Assurances (currently 39) as a condition of receiving AIP funds.

AviationManagementConsulting GroupACA12Background on AssurancesAs the recipient of an AIP funds, in addition to complying with the assurances, sponsors must comply with:Federal requirements (cited in the grant) including, but not limited to:LegislationExecutive ordersRegulationsOffice of Management and Budget (OMB) CircularsAdvisory Circulars (ACs)

AviationManagementConsulting GroupACA13Background on AssurancesThe Airport Sponsor Assurances provide a means for the federal government to ensure that public use airports are developed, operated, and maintained in a safe, secure, efficient, compatible, and compliant manner.

AviationManagementConsulting GroupACA14The 39 Assurances1. General Federal Requirements2. Responsibility/Authority of the Sponsor3. Sponsor Fund Availability4. Good Title5. Preserving Rights and Powers6. Consistency with Local Plans7. Consideration of Local Interest8. Consultation with Users9. Public Hearings10. Air and Water Quality Standards

AviationManagementConsulting GroupACA158The 39 AssurancesPavement Preventative MaintenanceTerminal Development PrerequisitesAccounting System, Audit, and Record Keeping RequirementsMinimum Wage RatesVeterans PreferenceConformity to Plans and SpecificationsConstruction Inspection and ApprovalPlanning ProjectsOperation and Maintenance

AviationManagementConsulting GroupACA168The 39 Assurances20. Hazard Removal and Mitigation21. Compatible Land Use22. Economic Nondiscrimination23. Exclusive Rights24. Fee and Rental Structure25. Airport Revenues26. Reports and Inspections27. Use by Government Aircraft28. Land for Federal Facilities29. Airport Layout Plan

AviationManagementConsulting GroupACA178The 39 Assurances30. Civil Rights31. Disposal of Land32. Engineering and Design Services33. Foreign Market Restrictions34. Policies, Standards, and Specifications35. Relocation and Real Property Acquisition36. Access By Intercity Buses37. Disadvantaged Business Enterprises38. Hangar Construction39. Competitive Access

AviationManagementConsulting GroupACA18822 (a). Economic NondiscriminationSponsor will make its airport available as an airport for public use on reasonable terms and without unjust discriminationto all types, kinds, and classes ofaeronautical use.

AviationManagementConsulting GroupACA1922 (c). Economic NondiscriminationEach commercial aeronautical activity (operator) shall be subject to the same rates, fees, rentals, and other charges as are uniformly applicable to all other such operators making the same or similar uses of the airport and utilizing the same or similar facilities.

AviationManagementConsulting GroupACA2024. Fee and Rental StructureSponsor will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport.

AviationManagementConsulting GroupACA21Primary Management and Compliance Documents

AviationManagementConsulting GroupACA22PMCDs...DefinitionA compendium of documents that govern the operation, management, and development of an airportGeneral ProvisionsLeasing/Rents and Fees PolicyLease, Use, or Operating AgreementsMinimum StandardsRules and RegulationsDevelopment Standards

AviationManagementConsulting GroupACA23PMCDs...Purpose in combination, these documents:Contribute to the financial health of an airportFacilitate (foster) orderly developmentPromote the provision of quality products, services, and facilitiesProtect the health, safety, interest, and general welfare of the publicReduce the potential for (and help facilitate the successful resolution of):Conflicts/Disputes with lessees, consumers, and usersComplaints (Part 13/informal 16/formal)Lawsuits (state and federal)

AviationManagementConsulting GroupACA24 PMCDs...RoleSet the stage (parameters) for the way an airport does businessPlay an important (essential) role in theoperation, management, and development of an airport (large or small)While these documents are interrelated, they function independently of each other

AviationManagementConsulting GroupACA25 PMCDs...Ideally, an airport manager would have all of these documents (or specialized tools) in the toolbox

AviationManagementConsulting GroupACA26 If not, may need to use other tools (that may or may not get the job done right)

In some cases, there are no tools in the toolbox

PMCDs

AviationManagementConsulting GroupACA27 PMCDs...DEVELOPLEASING/RENTS AND FEES POLICYLEASE, USE, OR OPERATING AGREEMENTMINIMUM STANDARDSOCCUPYENGAGEGENERAL (UMBRELLA) PROVISIONSUSEDEVELOPMENT GUIDELINESRULES AND REGULATIONS

AviationManagementConsulting GroupACA28PMCDs...The importance of having the full array of PMCDs (these specialized tools) available can not be stressed enough If consistent with (not a duplicate of) the assurances and other federal (including FAA), state, and local requirementsPGDs will provide protection in the event of a:Conflicts/DisputeComplaintsLawsuit

AviationManagementConsulting GroupACA29 AlternativesPlaying CalvinballUsing a make up the rules as you go approach to developing, operating, and managing an airportManaging by LeaseDeveloping, operating, and managing an airport based on the most recent (latest) lease terms and conditionsBoth approaches are highly problematic!Increase the potential for conflict, disputes, complaints, and lawsuits

AviationManagementConsulting GroupACA30Calvinball

AviationManagementConsulting GroupACA31TerminologyFixed Base Operator (FBO)Specialized Aviation ServiceOperator (SASO)Aeronautical Activity (Use)Commercial (for hire)Non-Commercial (not for hire)EmployeeIndependent OperatorThrough-the-Fence OperationSelf-Service, Self-Fueling, andSelf-Serve Fueling

AviationManagementConsulting GroupACA32

Leasing/Rents and Fees Policy

AviationManagementConsulting GroupACA33Leasing/Rents and Fees PolicyDefinitionSets forth the parameters for leasing airport land and improvements for general aviation purposes and outlines the process for establishing and adjusting general aviation rents and feesPurposeConveys the airports general aviation leasing and rents and fees policies and practices

AviationManagementConsulting GroupACA34Will see this definition and purpose several times.Leasing/Rents and Fees PolicyMajor Sections Introduction Leasing Land or Improvements Agreements Setting and Adjusting Rents and Fees AppendixKey Elements

AviationManagementConsulting GroupACA35RentsFAA requirementsMethodology for general aviation must be:ReasonableJustified, andConsistently appliedGoal of being as financially self-sustaining as possible given the circumstances that exist at the airport

AviationManagementConsulting GroupACA36Rents...Establishing rentsMethodologies Negotiation Rent Study AppraisalOnly if required (to calculate a rental rate)

AviationManagementConsulting GroupACA37Rents...NegotiateTo confer with another so as to arrive at the settlement of some matterTo arrange for or bring about through conference, discussion, and compromiseNegotiationThe action or process of negotiating or being negotiated

AviationManagementConsulting GroupACA38Rents...NegotiationThis can result in a market transaction as long asIts an open marketThe buyer and seller each act prudently and knowledgeably The price not affected by undue stimulus

AviationManagementConsulting GroupACA39Rents...Rent studyStreamlined approachRental rates for similar aeronautical land and/or improvements at similar (or comparable) airports are analyzed to derive an appropriate rental rateAlso, considers national, regional, and competitive airports

AviationManagementConsulting GroupACA40Rents...Rent study (process) Identification of comparable airportsProfile of the subject airport Identification of comparable leaseholdsSimilar land and/or improvementsSimilar useCommercialFBOs or SASOsNon-CommercialUse of on-airport comparables Compilation and analysis of dataSegregate rent (by component)

AviationManagementConsulting GroupACA41Rents...Identification of comparable airportsKey elementsInfrastructure (number, configuration, and capacity of runways, taxiways, ramps/aprons)Approaches (precision verses non-precision)Control towerNumber and type of aviation businesses located at the airport (including fuel providers)Amount of land available for development (and related land use considerations)Type of market and number of airports in marketActivity levels (based aircraft, aircraft operations, and fuel volumes)

AviationManagementConsulting GroupACA42Rents...Identification of comparable leaseholdsKey elementsUse (commercial verses non-commercial)Size (usable verses unusable area)Location and access (landside and airside access to/from the leasehold, airport infrastructure, and utilities)Lease terms and conditionsType, quality, condition, and functional utility or limitations of the landAre there any restrictions on the development of land, the availability of utilities, and the ability of the land to support aircraft?

AviationManagementConsulting GroupACA43Rents...Segregate rent (by component)Real estateUnimproved land (raw land)Improved land (with access and infrastructure to the lease line)Site improvements (ramp/apron, vehicle parking)Facilities (terminal building, hangars, office, and shop space)Non-real estate (business)Percentage rents (gross receipts)

AviationManagementConsulting GroupACA44Rents...Consultant qualificationsKnowledge and experienceGeneral aviation industryCommercial FBOs and SASOsNon-commercialAppropriate for the work being performedConsultant instructionsDispute resolution procedures

AviationManagementConsulting GroupACA45Rents...Adjusting rentsMethodologyMechanisms (basis)NegotiationFixedIndexConsumer Price Index (CPI)Producer Price Index (PPI)Airport Economic Index (AEI)Rent StudyCombinationAlternating

AviationManagementConsulting GroupACA46Rents...Adjusting rentsFrequency (how often)Regular (periodic) adjustments throughout the lease termWhenever an option is exercisedIf options are granted in the lease agreementWhenever the lease term is extendedCapital investment translates into term

AviationManagementConsulting GroupACA47FeesEstablishing feesCost recoveryBest practices approach (or methodology)Allocate (non-funded) costs to general aviation (cost center approach)Planning, development (including debt service), operation (including maintenance and repair), and management of the airport (not being covered by federal or state funding)Plus reasonable reserves (or contingencies)Ascertain the cost gapCost - rent = cost gap

AviationManagementConsulting GroupACA48Fees...Establishing feesBest practices approach (or methodology)Select and calculate fees required to close the gap (recover costs)Cross check calculated fees against the marketComparable airports (based on airport profile)Competitive airports (in the area)Set fees based upon reasonable cost recovery target while striving for financial self-sufficiencyGraduating (over time) percentage of the gap

AviationManagementConsulting GroupACA49Fees...Types of fees and basisFuel flowageCents per gallon sold/dispensed (with exemption if landing fee is paid)LandingCents per 1,000 lbs. aircraft weight (or fixed fee by aircraft type or within specified aircraft groupings) with a minimumRelationship to fuel flowage fees

AviationManagementConsulting GroupACA50Fees...Types of fees and basisRampFixed fee (by type or within a specified grouping) with a minimumDay, overnight, or monthly (tiedown)FacilityFixed fee (by type or within specified grouping) with a minimumActivity (Permit)Dependent upon the type of operator (FBO or SASO) and/or activity (temporary and/or special use)

AviationManagementConsulting GroupACA51Fees...Adjusting feesHow often (frequency)AnnuallyWhenCoincide with budget yearAdjustmentUp and downFloors and ceilingsMinimum Annual Guarantee (MAG)ConsiderMarket rentsCost recovery fees

AviationManagementConsulting GroupACA52Questions and AnswersAirport Sponsor AssurancesPrimary Guiding DocumentsLeasing/Rents and Fees Policy

AviationManagementConsulting GroupACA53Thank You! Enjoy the rest of your stay. Have a safe trip home!

Aviation Management Consulting Group

AviationManagementConsulting GroupACA54