HomeMy WebLinkAbout130-10 RESOLUTIONRESOLUTION NO. 130-10
A RESOLUTION TO AMEND SECTION 2 OF RESOLUTION NO. 109-06 TO
LOWER THE ANNUAL PERCENTAGE RATE AND THE MONTHLY
REPAYMENT AMOUNT
WHEREAS, two corporate hangars were constructed with two $250,000.00 SAAG
grants and a loan of $700,000.00 from the General Fund to be repaid over fifteen years at a 5%
annual interest rate pursuant to Resolution No. 109-06 passed on June 6, 2006; and
WHEREAS, interest rates have fallen substantially due to the poor economy which
justifies reducing the 5% annual rate to 3%.
NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby amends
Section 2 of Resolution No. 109-06 by repealing Section 2 in its entirety and enacting a new
Section 2 as follows:
"Section 2: That the City Council of the City of Fayetteville, Arkansas
hereby approves the attached revised Financing Plan to cover the
remaining portion of the City's initial match of $700,000.00 with
repayment to be made over 15 years from the date of this amendment at a
3% annual interest rate on the declining balance."
PASSED and APPROVED this 20th day of July, 2010.
APPROVED:
By:
LI
EL
i�
7c, , • .. , ... //,__....... _____
By:
JORD Mayor
ATTEST:
SO I . S ITH, City Clerkl`i'reasurer
`' V D
0 /11)
Ray M. Boudreaux
Submitted By
City of Fayetteville Staff Review Form
City Council Agenda Items
and
Contracts, Leases or Agreements
7/20/2010
City Council Meeting Date
Agenda Items Only
Aviation
Division
Action Required:
Action Required: Approve Proposal to re -finance Airport Hangar Loan.
Transportation
Department
$
(9,949.00)
Cost of this request
5550.0955.4450.00
Account Number
Project Number
Budgeted Item
139,200.00
Category / Project Budget
81,230.45
Chgs-Sery
Program Category / Project Name
Airport Revenue
Funds Used to Date Program / Project Category Name
57,969.55 Airport
Remaining Balance Fund Name
Budget. Adjustment Attached
epartment Director
City Attorney
Lp,i. _
Fina and Internal Services Director
7-7 /6 Previous Ordinance or Resolution #
Date
Original Contract Date:
14 Original Contract Number:
Date
7-7.2016
Date
1-i /a
Date
Received0ry —1 0 P61-41- f6#103
103
Clerk's Office
07 -07 -10P03:25 RC
Received in
Mayor's Office
7f2-0
Comments:
Revised January 15, 2009
THE CITY OF FAYETTEVILLE, ARKANSAS
AVIATION DIVISION
4500 S School Ave, Ste F
Fayetteville, AR 72701
P (479) 718-7642
ARKANSAS
www.accessfayetteviite.org
CITY COUNCIL MEMO
To: Mayor Jordan and City Council
Thru: Chief of Staff, Don Marr
Thru: Transportation Director, Terry Gulley
From: Ray M. Boudreaux, Aviation Director
Date: June 22, 2010
Subject: Approve refinancing of the Airport Fund Loan from the General Fund to finance two
Corporate Hangars at Fayetteville Executive Airport, Drake Field.
PROPOSAL: SkyVenture Aviation, Inc. leases office space in the Airport Terminal Building. The lease
began July 1, 2006. The prime term was for two years. They renewed in 2008 for the first renewal period of
two years. During lease negotiations for the second renewal option, SkyVenture owners Mark Frankum and
Kathy Moore submitted a letter stating they do not wish to renew the lease under the current terms and
conditions. We have had several meetings with the company owners and they have asked for a reduction in
total monthly rent outlay as the economy has caused the company some stress.
The lease calls for a rent increase based on the increase in the CPI, however the CPI has actually gone down
since the last renewal two years ago. The company currently pays $2,000.00 per month for their office space.
In July 2007, SkyVenture leased one of the newly constructed corporate hangars in which to store their aircraft
fleet and in which to conduct maintenance for their aircraft and aircraft of their clients. The rent for the Hangar
is $3,829.06 per month and represents a payback to the General Fund Loan and an additional amount for the
Airport Operating Fund. They have been an excellent tenant and have continued to pay the rent on time every
time for four years.
SkyVenture Aviation Inc. pays a total of $5,829.06 per month for their office space and hangar. They would
like to reduce their rent over the next year in order to be able to weather the current economic downturn. Air
travel is down as is the training of new pilots. SkyVenture is doing everything they can to recruit new pilot
training candidates. Much of their current business centers around foreign pilots here for upgrade into
multiengine aircraft or to get an instrument rating. They have been able to recruit these students because they
have entered and become qualified to issue student visas for the training. Much of their past business was in
new aircraft sales. They have not sold a new aircraft in two years nor have they had any inquiries. They have
only had a few clients use their maintenance facility. For just these reasons, they requested and the Airport
Board approved a $500.00 per month reduction in hangar rent for the last six months of 2009.
The Airport Board and staff would like to help SkyVenture Aviation get through the slowdown. They
contribute significant aircraft operations to our tower count which keeps the activity high enough to keep the
Telecommunications Device for the Deaf TDD (479) 521-1316 113 West Mountain - Fayetteville, AR 72701
THE CITY OF FAYETTEVILLE, ARKANSAS
tower 100% funded by the FAA Contract Tower Program. If we lost their flight operations activity, it could
result in the City paying a portion of the cost of the tower.
They are a first class operation that presents a very attractive and professional appearance for our airport
customers that compliments our first class FBO Million Air. They provide comprehensive customer service and
have pilot supplies and equipment and aircraft for sale. They believe that a turnaround is in the very near future
but that the recovery will be slow. It will be a year or longer before we can expect to be back to the activity of
2007. Activity at Drake Field in 2009 was down more than 30 % over our peak year 2006. Fuel sales were
down more than 25%. While the monthly trend over the last five months has been positive from a bottom in
December 2009, year over year there is a 9% additional decrease in activity and in fuel sales. We are hoping
the growth will continue throughout 2010 but there is a long way to go to reach and surpass 2009.
Additionally, we need to keep our FBO and help them remain viable over the economic downturn. We recently
renegotiated their Terminal/FBO Hangar Lease and they agreed to the provisions which included a $200.00 a
month increase in the rent computed IAW the increase in the CPI. They also rent one of the new hangars and
pay the same rate as SkyVenture. They have also requested a reduction in the Hangar rent as they have lost
several customers over the last 18 months who leased space in the hangar thus making the second hangar
operation a loss. Million Air is doing all they can to get new customers and tenants. Recently, Million Air
Corporate was able to acquire a Government Fuel Contract which will make it possible for the military to utilize
Drake Field for training and fueling stops.. The military flies a lot in the area and attracting a percentage to
Drake could be a substantial increase in our operations and sales. The presence of Million Air at the airport
resulted in many of the new tenants and customers simply because they are the FBO. We need to keep them in
order to keep their customers who fly large aircraft that burn jet fuel which accounts for more than half of the
total fuel sales generated on the airport.
The results of the national economic downturn are reflected in the Airport revenue numbers. We budgeted
revenue very conservatively but are still below the line in revenue projections. We are holding down expenses
in order to stay above water. But, expense budgets have been cut over the last three years so there is very little
room to cut expenses. For the first time in ten years we have empty T Hangars for rent and there is no waiting
list. We have three empty office spaces in the Terminal Building. We are still working with a client who wants
to lease the former AATC Aviation Maintenance School building but they have been unable to secure financing
to make the move to Fayetteville. We literally cannot afford to have any other facilities empty and not paying
rent.
We need to keep the airport's share of the rent generated on the new hangar buildings in the airport operating
budget as the airport revenue budget could not afford to forfeit that budget revenue. SkyVenture and Million
Air lease the two buildings and both pay rent which covers the debt service to the City General Fund and an
additional amount which supports the airport operations budget. The purpose of this item is to request City
Council support to refinance the airport loan from the City General Fund. The loan was approved by the
Council for 15 years at 5% on the unpaid balance. We have made our payments on time and we will pay back
the loan in its entirety. However, if we could extend the loan period and/or reduce the percentage rate we could
reduce the monthly rent to our tenants and keep the airport revenue intact. In this waylboth the tenant,s the
airport and the citizens of Fayetteville benefit.
Attached to this memo are several items to back up this request. The loan analysis contains the current loan
information and several alternatives to achieve the goal of reducing the loan payment. SkyVenture has
Telecommunications Device for the Deaf TDD (479) 521-1316 113 West Mountain - Fayetteville, AR 72701
RESOLUTION NO.
A RESOLUTION TO AMEND SECTION 2 OF RESOLUTION NO.
109-06 TO LOWER THE ANNUAL PERCENTAGE RATE AND THE
MONTHLY REPAYMENT AMOUNT
WHEREAS, two corporate hangars were constructed with two $250,000.00 SAAG
grants and a loan of $700,000.00 from the General Fund to be repaid over fifteen years at a 5%
annual interest rate pursuant to Resolution No. 109-06 passed on June 6, 2006; and
WHEREAS, interest rates have fallen substantially due to the poor economy which
justifies reducing the 5% annual rate to 3%.
NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby amends
Section 2 of Resolution No. 109-06 by repealing Section 2 in its entirety and enacting a new
Section 2 as follows:
"Section 2: That the City Council of the City of Fayetteville, Arkansas
hereby approves the attached revised Financing Plan to cover the
remaining portion of the City's initial match of $700,000.00 with
repayment to be made over 15 years from the date of this amendment at a
3% annual interest rate on the declining balance."
PASSED and APPROVED this 20th day of July, 2010.
APPROVED: ATTEST:
By: By:
LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk/Treasurer
sky entur'
AVIATION, INC.
May 11, 2010
Via Certified Mail, Return Receipt Requested
City of Fayetteville
Mr. Ray Boudreaux
Airport Administration Office
4500 S. School Avenue, Suite F
Fayetteville, AR 72701
Re: Terminal Lease Agreement.
Dear Mr. Boudreaux:
This letter is in reference to the Terminal Lease Agreement dated April 7,
2006 between the City of Fayetteville and SkyVenture Aviation, Inc.
Pursuant to paragraph 3 of the lease, this letter will serve as written notice
that SkyVenture does not desire to renew the term of the existing lease beyond the
current term.
If the City has an interest, SkyVenture is interested in negotiating a new
lease for the location. Please contact me if you would like to discuss the terms of a
new lease.
Sincerely,
Mark A. Frankum
President
SkyVenture Aviation, Inc.
870-219-9907
mark@skvventureinc.com
atingrAIWPAINVAINVIVAIMir
4500 South School Avenue, Suite C, Fayetteville, Arkansas 72701
Phone 479.521.9400 Fax 479.521.9405
Cessna
Pilot Center
June 22, 2010
Memo to City of Fayetteville from SkyVenture Aviation, Inc.
We want to be in the flight training business and we want to be in Fayetteville. We want to make
this work. We are coming to you because we need your help in making this happen. Here are
some of the obstacles we face as a company:
Current Analysis:
In 2009 we lost $18,000 in our Fayetteville Location.
Owners (Mark Frankum and Kathy Moore) are not taking any salary from the Fayetteville Flight
School.
Hindrances to Profitability in Flight Training:
1. General Aviation is Down
2. Ch'eckrides are 1/2 of what they were 2 years ago
3. 3 Years Ago, 60% of our customers were age 40+ with expendable income and were
learning to fly as a hobby. That clientele is now 15% - 20%. People are not spending
money in this economic environment on hobbies.
4. Aircraft Sales are down 80% nationwide. (we used to sell 5-6 new Cessna aircraft each
year)
5. No financing available for flight training students since May of last year. Sallie Mae and
Key Bank have removed themselves from financing any flight training. We no longer have
any viable financing options for our customers.
6. New VA Rules limiting available funds and who qualifies for those funds
Hindrances to Profitability in Fayetteville:
7. Cost of Initial Improvements of $130,000 (The city did contribute $24,000 toward these
improvements).
8. Not being allowed to provide our own fuel.
9. Price of Office Rent.
10. Hangar Rent (Amortizing over 15 years in an economy where aircraft maintenance and
aircraft sales are down)
What we are doing to overcome some of these hindrances:
1. We have spent thousands of dollars to become a SEVIS (foreign students) approved
school.
2. We have reduced our aircraft fleet
3. We are working hard to become a large player in the International Market. The
International Customers we have trained have good things to say about their experience.
They are recommending SkyVenture Aviation, Inc. to their friends — but it is a process that
takes time to get the fly -wheel turning.
What Can the City of Fayetteville do to help?
1. The City could lengthen the amortization period on the hangar to allow for a reduced
monthly payment. A total rent payment for office and hangar not to exceed $5000 per
month would allow us to stabilize the company and remain competitive while developing
our international customer base.
LOAN ANALYSIS
HANGAR FINANCING
Two Corporate Hangar Buildings
Fayetteville Executive Airport, Drake Field
In June of 2006 the City Council approved the Airport Request to finance the match to two State
Aeronautics Airport Grants in the amount of $250,000.00 each to construct two hangar buildings
at the airport. The loan was in the amount of $700,000.00 amortized over 15 years at 5% on the
unpaid balance annually (Principle paid in 15 equal installments with Interest decreasing each
year as it is paid on the unpaid balance). The airport reserves the amount of the payment in
account for a year and makes one payment annually in June. We have made three payments with
12 payments remaining. SkyVenture Aviation Inc and Million Air lease the buildings. Each
signed a lease prior to the grant request and the request for City financing. The State grants were
contingent on a business signing to lease the buildings.
Current Financing Plan: First Payment June 2008. Final Payment June 2022. 15 years/5%
Next Payment June 2011: $74,666.67 Principle: $46,666.67 Interest: $28,000.00
Final Payment June 2022: 48,999.95 Principle: $46,666.62 Interest: $2,333.33
Tenant monthly rent: $3,829.06 each (computed based on straight line amortization 15
years, 12 payments per year at 5% interest plus $1,000.00 to the airport fund)
Airport Operating Fund Revenue 2011=$717.95 each per month
Airport Operating Fund Revenue 2022=$1,787.39 each per month
General Fund Revenue on note 2011=$74,666.67
General Fund Revenue on note 2022=$48,999.97
Total General Fund Revenue on remaining balance=$741.999.97
Total General Fund Interest earned on remaining payments=$181,999.98
Option I Refinancing Plan: First Payment June 2011. Final Payment June 2022. 12 years/3%
First Payment June 2011: $63,466.67 Principle: $46,666.67 Interest: $16,800.00
Final Payment June 2022: $48.066.62 Principle: $46,666.67 Interest: $1,400.00
Tenant monthly rent: $3,317.81 each (computed based on straight line amortization 12
years, 12 payments per year at 3% interest plus $1,000.00 to the airport fund)
Airport Operating Fund Revenue 2011=$674.20 each per month
Airport Operating Fund Revenue 2022=$1,315.03 each per month
General Fund Revenue on note 2011= $63,466.67
General Fund Revenue on note 2022= $48,066.62
Total General Fund Revenue on remaining balance= $669,199.98
Total General Fund Interest earned on remaining payments= $109,199.99
Option II Refinancing Plan: First Payment June 2011. Final Payment June 2025. 15 years/3%
First Payment June 2011: $54,133.33 Principle: $37,333.33 Interest: $16,800.00
Final Payment June 2025: $38,453.33 Principle: $37,333.33 Interest: $1,120.00
Tenant Monthly Rent 2,933.63 each (computed based on straight line amortization 15
years, 12 payments per year at 3% interest plus $1,000.00 to the airport fund)
Airport Operating Fund Revenue 2011=$678.08 each per month
Airport Operating Fund Revenue 2022=$1,378.07 each per month
General Fund Revenue on note 2011= $54,133.33
General Fund Revenue on note 2025= $38,453.33
Total General Fund Revenue on remaining balance= $694,399.96
Total General Fund Interest earned on the remaining payments=$134,400.01
Option III Refinancing Plan: First Payment June 2011. Final Payment June 2025. 15 years/5%
First Payment June 2011: $65,333.33 Principle: $37,333.33 Interest: $28,000.00
Final Payment June 2025: $39,200.00 Principle: $37,333.33 Interest: $1,866.67
Tenant Monthly Rent: $3,214.22 each (computed based on straight line amortization 15
years, 12 payments per year at 5% interest plus $1,000.00 to the airport fund)
Airport Operating Fund Revenue 2010: $492.00 each per month
Airport Operating Fund Revenue 2022= $1,580.89
General Fund Revenue on note 2011= $65,333.33
General Fund Revenue on note 2022= $39,200.00
Total General Fund Revenue on remaining balance= $783,999.96
Total General Fund Interest earned on the remaining payments=224,000.01
. Recommendation: Staff recommends Option II to refinance the remaining balance for 15 years
at 3% interest. We would then reduce the rent to the tenants to $3,000.00 per month resulting in
a $9,948.72 annual reduction in rent. The payment to the General Fund due in June 2011 would
be $54,133.33 against rental revenue of $72,000.00 resulting in Airport Fund revenue of
$17,866.67 or $744.45 per month each, which is very close to the current amount to the Airport
Fund of $717.95 per month each. This alternative keeps the Airport Fund whole and allows for a
rent reduction to the tenants both of which are suffering revenue shortfalls due to the economy.
We cannot afford for either tenant to notice termination of their current leases as the airport
budget would then be obligated to pay the total amount of the note until we were able to find
another tenant. The market for hangars is very soft at the current time and finding another tenant
could take two years or longer. We have five T Hangars vacant and have rented three for storage
as there are no aircraft owners looking for hangars.
CITY OF FAYETTEVILLE
FAYETTEVILLE EXECUTIVE AIRPORT
SUMMARIZE AIRPORT OPERATING REVENUE & EXPENSE 2006 THRU 2009
OPERATING ACTIVITIES
REVENUE
Rents & Leases 439,690 430,259 469,292 468,030 468,078 449,030
Aviation Fuel 191,314 153,478 126,272 126,022 124,839 113,355
Contract FBO 45,500 72,966 107,682 107,449 107,749 114,349
Miscellaneous 19,089 5,121 16,669 5,328 5,000 5,850
INCOME RECEIVED FROM OPERATING ACTIVITIES 695,592 661,824 719,915 706,829 705,666 682,584
EXPENSES
Personnel 291,066 301,229 313,187 324,943 384,039 352,183
Materials & Supplies 16,537 20,276 23,213 12,469 15,470 9,062
Aviation Fuel Purchases 129,680 86,174 72,987 69,915 77,626 72,917
Services & Charges 194,671 178,146 167,429 155,394 188,568 130,282
Cost Allocation to General Fund 132,684 115,908 65,976 8,830 7,915 7,915
Maintenance 68,938 67,446 33,990 54,565 54,881 47,498
ATC Tower Costs 23,337 23,127 -
Interest General Fund Loan 35,000 32,667 30,334 30,334
INCOME USED FOR OPERATING ACTIVITIES 856,914 792,306 711,782 658,782 758,833 650,191
NET INCOME FROM OPERATING ACTIVITIES - GAIN / (LOSS) (161,321) (130,482) 8,133 48,048 (53,167) 32,393
Principal payment on General Fund Loan 0 0 46666.67 46666.67 46666.67 46666.67
NET INCOME minus Loan Principal Payments (161,321) (130,482) (38,534) 1,381 (99,834) (14,274)
44- is .ncr.
2006 2007 2008 2009 BUDGET 2010 EST 2010
NOTE: "Operating Activities" excludes non-operating income sources, Depreciation & Capital Expenses
RESOLUTIONNO. 109-06
A RESOLUTION AUTHORIZING AIRPORT STAFF TO APPLY
FOR AND ACCEPT TWO (2) SAAG GRANTS IN THE AMOUNT
OF $250,000.00 EACH FROM THE ARKANSAS DEPARTMENT
OF AERONAUTICS TO FUND A PORTION OF THE COST TO
CONSTRUCT TWO (2) CORPORATE HANGARS AT THE
FAYETTEVILLE MUNICIPAL AIRPORT; APPROVING THE
FINANCING PLAN TO COVER THE CITY'S MATCH OF
$700,000.00; AND AUTHORIZING THE MAYOR TO IMPLEMENT
THE NECESSARY BUDGET ADJUSTMENTS TO EFFECTUATE
THIS RESOLUTION.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, ARKANSAS:
Section 1. That the City Council of the City of Fayetteville, Arkansas
hereby authorizes Airport staff to apply for and accept Two (2) SAAG grants in
the amount of $250,000.00 each from the Arkansas Department of Aeronautics to
fund a portion of the cost to construct two (2) corporate hangars at the
Fayetteville Municipal Airport.
Section 2. That the City Council of the City of Fayetteville, Arkansas
hereby approves the Financing Plan to cover the City's match of $700,000.00,
with repayment over 15 years at a 5% annual interest rate on the declining
balance.
Section 3. That. the. City Council of the City of Fayetteville, Arkansas
hereby authorizes the Mayor to implement the necessary budget adjustments to
effectuate this Resolution.. 0.tORei,,,*
PASSED and APPROVED this 6th day of June, 2006.
APPROVED:
By: L _ 1.11
4
DAN COODY, Mayor
ATTEST: