What’s New In Airport Compliance ?

What’s New In Airport Compliance ?

Charles C. ErhardCharles C. Erhard

Residential Development On Federally Obligated Airports ?Residential Development On

Federally Obligated Airports ?

Bring Housing on to the Airport???

Airport HomeComplete with Hot-Tub!

Bring Housing on to the Airport???

•Airport Homes = Future Access Restrictions

Bring Housing on to the Airport???

•Airport Homes = Future Access Restrictions

•Airport Homes = Vehicle and Pedestrian Deviations

Bring Housing on to the Airport???

•Airport Homes = Future Access Restrictions

•Airport Homes = Vehicle and Pedestrian Deviations

•Airport Homes = Lost Credibility to Control Off-Airport Land Use

Balanced Approach in Evaluating Access Restrictions

Balanced Approach in Evaluating Access Restrictions

Balancing the Federal and LocalInterest

Balancing the Federal and LocalInterest

Balanced Approach

• Define the Noise Problem

Balanced Approach

• Define the Noise Problem• Identify Non-Restrictive Measures Sponsor Has

or Could Implement

Balanced Approach

• Define the Noise Problem• Identify Non-Restrictive Measures Sponsor Has

or Could Implement•Assess a Full Range of Non-Restrictive and Restrictive Measures

Balanced Approach

• Define the Noise Problem• Identify Non-Restrictive Measures Sponsor Has

or Could Implement•Assess a Full Range of Non-Restrictive and Restrictive Measures•Restrictions Are Last Resort Measures

Pre-selected Restriction by Aircraft Class or Type

(Stage 2 Ban)Unjustly Discriminatory

Pre-selected Restriction by Aircraft Class or Type

(Stage 2 Ban)Unjustly Discriminatory

Rule of Unintended Consequences Stage 2 Ban

Rule of Unintended Consequences Stage 2 Ban

Sabreliner “Out”

Rule of Unintended ConsequencesStage 2 Ban

Mig 17 “In”

Rule of Unintended Consequences Stage 2 Ban

A-3 “In”

Airport Real Estate ValuationsAirport Real Estate Valuations

Third Party Developed Facilities

Fair Market Rent For The DeveloperFair Market Rent For The Developer

Financial OfferAirport Paid Greater of!

Financial OfferAirport Paid Greater of!

Minimum Guaranteed Ground Rental OR

Percentage Bid of Gross Rentals

Calculation of MinimumGuaranteed Ground Rental

Calculation of MinimumGuaranteed Ground Rental

Appraisal of Site $5.00 per sq. ft.

CAP Rate 7%

Ground Rental Rate $5.00 x 7% = $0.35 per

sq. ft.

Site Size 400,000 sq. ft.

Minimum Guarantee $140,000 per year

Rent for the Airport’s FacilitiesRent for the Airport’s Facilities

Rent for the Airport’s FacilitiesRent for the Airport’s Facilities

• Market or Cost Approach Rental

Third Party Developed Facilities

Developer Facilities Revert to the Airport

“Beware of the Vice-President of Extensions”

The Airport’s Residual Interest Has Value

The Airport’s Residual Interest Has Value

Ground Lease Terms 30 years

Ground Lease Rent to Airport $140,000 per yr.

Remaining Useful Life After 30 years 20 years

Extend Ground Lease or Take Building?

The Airport’s Residual Interest Has Value

The Airport’s Residual Interest Has Value

Rentable Square Feet 250,000 sq. ft.

Rented Square Feet (occupancy) 200,000 sq. ft.

Full Service Rental Rate $15 per sq. ft./yr.

Gross Rental Income $3.0 million/yr.

The Airport’s Residual Interest Has Value

The Airport’s Residual Interest Has Value

Gross Rental Income $3.0 million per yr.

Operating Expense and Reserves $1.5 million per yr.

($6 per sq. ft./yr.)

Operating Income $1.5 million per yr.

Extend Ground Lease or Take Building?

The Airport’s Residual Interest Has Value

The Airport’s Residual Interest Has Value

Extend Ground Lease or Take Building?

Ground Lease ($140,000/yr.) Take Building ($1.5 million/yr.)

After 20 years ($2.8 million) After 20 years ($30 million)

A $27.2 million Decision

Preserving Airport Rights and Powers

What is wrong with this picture?

Airline Service Incentives Everyone Wants Low-cost Service

Airline Service Incentives Everyone Wants Low-cost Service

Sarasota Petition to Subsidize Airline Service

Sarasota Petition to Subsidize Airline Service

FAA Revenue Use Policy Prohibits a Subsidy with Airport Revenue

FAA Revenue Use Policy Prohibits a Subsidy with Airport Revenue

Threshold Question — Is It An Operating Cost of the Airport

or Community Economic Development

Threshold Question — Is It An Operating Cost of the Airport

or Community Economic Development