GA Airports Are Economic Engines

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GA Airports Are Economic GA Airports Are Economic EnginesEngines

Association of California AirportsAssociation of California Airports

2010 Conference2010 ConferencePresented By:Presented By:

Derek Kantar, Aviation PlannerDerek Kantar, Aviation Planner

CalTrans HQ, Division of AeronauticsCalTrans HQ, Division of Aeronautics

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GA Airports Are Economic EnginesGA Airports Are Economic Engines

Why This Topic Now?

• Last year’s conference we spoke of it, this year we’ll explore it over three sessions

• The State wants airports to be successful and to make money

• Airports generate revenue locally and nationally

• Airports are job centers

Hayward Executive Airport

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Think Like Entrepreneurs

• You have what the community needs, show it!

• You are your airports best champion

• Diversify your partnerships

• Prepare your airport to receive customers and investors

• Have a plan for success!

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Ready Your Advocates

• Provide your advocates with tools

• Prepare your civic leaders

• Prepare your staff

• Have your ‘elevator commercials’ prepared

• Your Economic Development Director should know you well!

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Planes Fly to Markets, Not Airports• Airports have assets enticing to business and investment interests

• Airports are well suited to more than aviation businesses - Diversify

• Airports can be event venues

• Marketing and branding are necessary business tools

Paso Robles Airport

Santa Monica Airport

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Don’t Fly Solo While Marketing and Branding

• NBAA’s No Plane-No-Gain campaign

• AOPA’s Government Advocacy web-tools

• Alliance for Aviation web-tools

• ACRP Report 28: Marketing Guidebook for Small Airports

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Quick Links

• ACRP: www.trb.org/ACRP/Public/ACRP.aspx• Alliance for Aviation Across America

www.aviationacrossamerica.org/Myths_Realities.aspx• AOPA: www.aopa.org/advocacy/• Barker Hangar: www.barkerhangar.com• Buchanan Field

www.ca-contracostacounty.civicplus.com/static/depart/airport/index.htm• Caltrans Aeronautics: www.dot.ca.gov/hq/planning/aeronaut/• NBAA: www.nbaa.org/advocacy/npng/• Paso Robles Airport:

www.prcity.com/government/departments/publicworks/airport/events.asp

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Caltrans Aeronautics Contacts

• Gary Cathey, Division Chief

• Terry Barrie, Chief, Office of Aviation Planning

• Derek Kantar, Aviation Planner

• Main Phone: 916-654-4959

• www.dot.ca.gov/hq/planning/aeronaut/

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Part IHow To Be An Entrepreneurial Airport Manager

Presentations by:

• Seth Merewitz, Partner Best Best and Krieger, LLP

• Seth Wurzel, Consultant Capitol Public Finance Group, LLC

• Mary Hansen, Airport Manager

Yuba County Airport

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How to Be AnHow to Be AnEntrepreneurial Airport Entrepreneurial Airport

ManagerManager

Association of California Airports ConferenceSeptember 16, 2010

Lake Tahoe, CA

Presented By:

Seth Merewitz, PartnerBest Best & Krieger LLP

[email protected]

(916) 496-0588

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1. Preparation

a. Create a Mindset for Economic Success

• Airport Managers as Entrepreneurs.

• Facilitators, Not Regulators.

Pre-Flight

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Pre-Flight

1. Preparation

b. Prepare for Development and Investment

• Jurisdiction has stated clear Goals and Policies for Airport Economic Development.

• There is alignment between the Airport, Planning Department, Economic Development Department, etc.

• The airport is part of the community planning process and not an afterthought.

• Shared desire to Monetize your Assets!

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2. Inspection

a. What Are Your Assets?

• What are the value of those assets?

• Existing assets (developed and undeveloped) have a monetary value.

• Infrastructure (utilities, roads, etc.).

Pre-Flight

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3. Review Conditions

a. Political Challenges

• Political hurdles; It’s somebody else’s responsibility.

• NIMBY.

• Airport BANANA’s (build almost nothing anywhere near anything (aviation).

Pre-Flight

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Pre-Flight


b. Physical Challenges

• Infrastructure.

• Toxics.

• Wildlife Issues.

• Noise, Safety and Crime.

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Pre-Flight


c. Regulatory Challenges/Due Diligence

• FAA easements.

• Encroachments.

• Title Issues.

• Grant Obligations and Covenants.

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1. Airport Staff is Prepared

a. Don’t Fly Solo

• Have a team assembled and ready to evaluate opportunities.

• Airport staff knows the local decision making process.

Pre-Takeoff

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Pre-Takeoff

2. Airport Staff has Built Coalitions and Prepared Others

a. Build a Vision

• Have an Economic Development Action Plan.

• Development of Marketing and Branding.

• Know your Internal and External Champions.

• Understand your local and regional markets and market conditions.

• Understand marketing “outside the fence”.

• Coalition Building.

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Keys to SuccessAttracting Economic Development and

Capital to your Airport

Seth WurzelCapitol Public Finance Group, LLC

September 16, 2010

In-Flight

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Where does the money come from?

Airport’s Goals: Facilitate vertical development by maximizing value and reinvest back into the Airport

Development takes Upfront Money

Key Concept #1: Value is in the land• Ground Lease and/or Land Sale Revenue• Cash comes from selling interests in land to investors

who do vertical development

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How do you Maximize Value?The Airport’s Role

Key Concept #2: Reducing Risk = Creating Value• Reducing Risk means:

– Upfront Planning IE design standards, clear development

approval process, overlay zoning, Environmental Review, etc.

– Infrastructure Feasibility StudiesWhat are the hurdles? Find solutions!

– Obtaining FAA Review and Approvals– Developing a Financing Plan

Set up Land Secured Financing Policies to enable public financing of infrastructure

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Alignment of InterestsWorking Toward a Common Goal

Key Concept #3: Align the Interests between the Public Entity and Private Partner

– The Term Sheet: The financial structure between the Airport and the Developer.

Should incentivize both the developer and the Airport to work toward a common goal

Should recognize the timing and level of investment.

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Developer

ProvidesExpertiseCapital

Airport(or Parent Agency)

ProvidesLand & FacilitiesCapital and/or FinancingMechanism for Improvements

( Land Secured Financing)

Airport VentureGenerates revenue Land Sales or Ground Leases

1st Stage:I ncentive Returns

DeveloperReceives

% Discount off fee value for land

(Provides incentive and competitiveadvantage in market)

AirportReceives

% of fee simple value in cash

(Represents up front payment forraw land value to ensure minimumreturn)

Remainder

of Land payments go to: -Fund infrastructure -Return invested capital (to developer or agency (with preferred return) -Distribution of residual profits

2nd Stage:Return on I nfra structure

1st Priority to 2nd Capital Provider(Developer or Parent Agency)

Return of shortfall capital contributed pluspreferred %.

2nd Priority to 1st Capital Provider(Developer or Parent Agency)

Return of shortfall capital contributed pluspreferred % .

3rd Stage:Sharing of Re sidual Profits

Developer

% of Residual Profits

Airport

% of Residual Profits

Sharing of Residual Profits ensures Alignment of I nterests

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Example Deal Structure: - Recognizes the value provided by each party

- Initial Incentive Stage provides the needed certainty for each party to protect from downside.

- 2nd Stage provides return of upfront capital for Infrastructure Investment.

- 3rd Stage provides upside incentive and aligns goals between investor and public entity.

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Clearly Communicate Priorities

Key Concept #4: Identify and Share Priorities

• Clearly identify priorities of the Airport

Why is the Airport interested in new development?

– Fiscal Stability Operations (sustainable revenue for Airfield O&M )

– Job Creation– Property Tax Revenue Stream– Others??

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What is Each Party Working For?

• What are the benefits of Airport development?– For the Airport / Jurisdiction

New JobsProperty tax revenueEconomic DiversityOthers?

– For the Developer (Primarily Profit Driven)Land development opportunityVertical development opportunity

– Land development opportunity creates a platform for creating vertical assets

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Financing HurdlesKey Concept #5: Infrastructure and/or Services Financing

• How are public Infrastructure and Services Financed?• Land secured financing

Special Taxes and/or AssessmentsTax and/or assessment create revenue stream for

to fund a service or pay debt

• With sufficient development in place, Developer or Airport investment is repaid with issuance of municipal bonds backed by taxes.

• Develop a Financing Plan now to help navigate funding the Infrastructure and Services in the future.

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1. Airport and Jurisdiction are Ready to Receive a Proposal

• Resources are identified to assist with asset sales, lease, transfer agreements, etc.

• Airport and other public stakeholders have an understanding of goals, levels of service, risk management, etc.

• A marketing, branding, and related public relations program is ready.

Pre-Landing

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Pre-Landing

2. How Airports Help Themselves

• Understand competitive advantage of your property.

• They learn what investors want and need and adapt to minimize investor risk.

• They’ve tested the development waters by engaging investors and champions prior to opportunities (local brokers, chamber of commerce).

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Pre-Landing

2. How Airports Help Themselves

• Regulatory hurdles are understood; Plan for mitigating them already considered.

• Pre-entitle the property (planning reviews, CEQA/NEPA, utilities, ROW, easements, etc.).

• Funding sources and funding strategy (grants, local match, AIP grants, private capital).

• RFP/RFQ.

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1. Key Elements for Success

• Perceived as fair deal for public and private benefits.

• Transparency in process.

• Managing public and private risks.

• Political and stakeholder support.

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Post-Flight

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Post-Flight

2. Reminders for Public Officials

• It must be a real partnership, with shared burdens and shared rewards for both the public and private participants.

• There must be real incentives for the private sector or they will not participate.

• The public sector must use its resources effectively and judiciously, focusing on projects where there can be success.

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Post-Flight

2. More Reminders for Public officials

• Keep it simple for the private sector by minimizing the bureaucratic procedures.

• Remember that "Land is King"--it provides the public with the opportunity to control the projects.

• Public-private partnerships are a necessary and important part of the process.

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3. Keys to Successful Partnerships

a. Statutory and Political Environment.

b. Public Sector’s Organized Structure.

c. Detailed Business Plan (Contract).

d. Stakeholder Support.

e. Pick Your Partner Carefully.

Post-Flight

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Post-Flight

4. Ten Steps for ”Safer Soaring”

a. Maintain Personal Proficiency.

b. Use Checklists Effectively.

c. Properly Prepare for Each Flight.

d. Conduct Positive Control Checks Frequently.

e. Know the Economics; Shared Risks and Responsibilities.

f. Always Plan for Emergencies.

g. Maintain Situational Awareness.

h. Use Effective Collision Avoidance Techniques.

i. Eliminate Obstructions.

j. Make Safety the Primary Goal.

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QUESTIONS?

Seth Merewitz, Partner

Best Best & Krieger LLP

[email protected]

(916) 496-0588

Seth Wurzel

Capitol Public Finance Group

[email protected]

(916) 641-2734

Documents

GA Airports Are Economic Engines