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HomeMy WebLinkAboutAgenda Bill 05/21/2001 (20) Petaluma city Council Briefing Municipal.Airport Hanger Project 5/21/01 Time: 10 minutes Three main presentation topics: I. Airport hanger project background 2. Project scope 3. Project finances and next steps Open time for questions from Council members Topic l: Hanger project background. 20 years ago when our airport was:being planned a number of other airports were visited to identify the key processes that could ensure long term success of our enterprise. Three were identified and they are:. • Airport owner retains ownership of all fuel concessions • Airport owner retains ownership.and:control over hangers and ground leases • Hanger projects are phasedin over time so development can be self supporting Our Airport Master Plan and the development strategy for Petaluma Municipal were created with this approach in mind. The last hanger project was completed over three years ago. Since that time thehanger waiting list has grown,to over 60. Each individual on this list has paid a deposit of$400 to hold their space. The Master PlanestablishesTa target numberof based:air'craft of around 300. We currently have 210 based aircraft at.Petaluma Municipal. It was.recognized that during the early years the enterprise would poteiiti'ally run deficits until the hanger projects had been completed and attracted enough aircraft to turn the,situation into one with consistent positive cash flow. Iri fact, we have run generally neutral in our cash flows year over year We have deviated from this norm when depreciation and temporary loans from the General Fund ate taken into account. The temporary loans from the General Fund are used to cover development projects until final payments from funding organizations are received such as the FAA and State Aeronautics Depaftment upon project close-out. The final payment requests for the last project have recently been sent to the FAA. This will complete our payback to the General Fund for the temporary`cash flow loan used to complete our last development project. Additional cash generated by our proposed hanger project and the pay off of some of our outstanding loans will cover the accrued depreciation. We distfibuted a package to you all at your February oil--site workshop that contained detailed-projections and financial impact of Our proposed hanger project. We'd now like to move on to briefly discuss our project scope. Topic 2: Project scope. <3 • Given the available space,on Airport property, the most advantageous location to build hangers;is'between'the Mangon Aircraft and 29er Association.buildings along Sky Ranch Drive. This area is zoned "Aviation Commercial" with one of the allowable uses being "Aircraft-Storage." Consequently, there is no need to change any element of the current PCD or Airport Master Plan for hangers in this location. Our original intent for this area was for aviation related business ground leases. However, the market for hangers has increased significantly and the aviation related business demand has not developed as anticipated. Given the available space we can accommodate between 40 to 50 hangers. With a waiting list of over 60 we-should have no difficulty renting these units and keeping them fully occupied. Our past history has been that with the completion of each phase of the hanger project, another waiting list is started and begins to fill up. We've found that the list ends up with nearly as'many-new"entriesas it did before the project had been built. There are several reasons-for such-a high demand. The primary one is that the overall rental cost of a hanger,is,largely offset by the savings in maintenance, greater security, cleanliness and lower insurance costs. Another is that the typical single engine aircraft has appreciated.in valise. Consequently, owners are motivated to protect their investments and therefore they want to, store their'aircraft indoors. There are also additional benefits:to the Airportkope'ration-besides the revenue generated from hanger rent. Historically we've found that about half the new hangers in any project are filled by..aircraft-curtently'.tied,down()tithe field with-the remainder being aircraft new to Petaluma. Additional fuel is sold and personaPproperty tax revenue collected from these newly based.aircraft. For our current Airport commercial tenants these newly based aircraft can become new customers for our two repair facilities and pilot supply shop. Given the location ofour project it will be in our collective interest to have commercial tenants occupy one or more of our proposed hangers. However, it is equally important that in doing so we do not impose unfair burdens on either new or existing commercial tenants. Careful consideration will be given to the interests and concerns of all our airport users as our project progresses. Topic 3: Project finances and next steps. At this time we have only scoping estimates of the costs and revenues associated with our proposed hanger project. However; these estimates arc based on experience with our previous projects as follows: • Funding sources: FAA grants and State of California.Dept of,Aeronautics loans. The 'grant and loan programs are funded largely through fuel taxes paid by pilots. Estimated project costs: $1,400;000 to $1;600,000. :FAA Grant eligible: $300,000 to $500,000 Calif. Aeronautics loam $1,100,000 to $1,400,000 \.'7r-' Revenues:and,expenses associated with this project are estimated to be: Revenue Expenses Hanger rent (98N occup) : $200,000 Loan principal and interest: $110;000 Fuel: $50,000 Misc expenses: $10,000 Personal property tax: $6,000 Total: $120,000 Misc revenue: '$15,000 "Total: $271.000 As you can see, the additional revenue generated by hangers significantly offsets the expenses. This is why successful airports retain the ownership and control over hangers as mentioned earlier. Our next steps will be: • Meet with SPARC in June for a preliminary review followed by final endorsement afleiincorporating their input as appropriate into our project designs. • Fully develop the project plan including costs, schedule, contracting plan etc. • Apply for fundingloans and,grants as appropriate • Seek Council approval and input as required or necessary Thank you for your attention. We would be happy to answer any questions you may have at this time. Mike Glose Airport Manager Tom McCaw Airport Commission Hanger Project Subcommittee