2011-07-19 Council Airport Committee MinutesCity Council Airport Committee
Tuesday, July 19, 2011
Meeting Minutes
After determining that a quoilim was present, the City Council Airport Coimnittee of the City of
Denton, Texas, convened in a regular meeting, on Tuesday, July 19, 2011, at 12:08 p.111. in the
City Hall Collference Room at City Hall, 215 E. McKiiuley Street, Dentoil, Texas.
PRESENT: Colulcil Member Jim EngelUrecht, Mayor Pro Tem Pete Kamp, and
Cotuzcil Meinber Cluis Watts.
STAFF PRESENT: Jon Fortune, Assistant City Manager; Blyan Langley, Chief Financial
Officer; John I�light, Deputy City Attor7iey; Mark Nelson, Director
of Transportation; Quentin Hix, Airport Manager; and Theresa
Jaworski, Recording Secretary.
OTHERS PRESENT: Don Smith, Airport Advisory Board; Bill Dyer, Vice President of
SAMI Management, Inc.
The meeting was called to order at 12:08 p.m. Uy Council Member Engelbrecht.
Item 1: Consider approval of minutes from the meeting held on M�y 17, 2011.
Mayor Pro Tem Pete Kamp motioned to approve the minutes followed Uy a second by Council
Meiuber Cluis Watts. The inotion cairied lulanimously.
Item 2: Receive reports by citizens and other interested persons.
With no reports by citizens or other interested persons, Council Member Engelbrecht
directed the Committee's attention to the next item.
Item 3: Receive a report, hold � discussion aud provide direction to st�ff reg�rding the
closure of the Denton Airport runway for m�intenance.
Airport Manager, Quentin Hix, reported on the rtuiway maintenance project. The Committee
discussed services that were affected and precautions taken during the closure time. Hix reassured
the Coimiiittee that all tenants were made aware of the schedule so that as�angements for business
could be made duriug the work project. The work oll the ruiiway is going so well that they may be
able to re-open earlier than expected.
Item 4: Receive a report, hold a discussion and provide direction to st�ff regarding an
Airpoi•t business expansioii by US Aviation Group to purchase All American Helicopter for
the purpose of exp�nding rotor aircraft training and charter service at Denton Airport.
Hix explained that this item is included on the agenda because of the significant Uusiness activity.
US Aviation Group purchased All American Helicopter with plans to continue flight training that
is cunently offered and to expand their helicopter charter service. There have Ueen discussions
with Longhoi-n Helicopter, the second vertical fight training and helicopter service company at
Denton Airport, regarding developinent of a helicopter landing and service area and private
development of a helicopter fixed based operator (FBO). The iinpact of this business growth at
Dentoil Airport inay accelerate plans for providing a helicopter operations area at the south end of
the Airport. Details of proposals to create improvements would be vetted tluough the Economic
Development Partnership Board and the Council Airport Committee.
A discussion followed on the preliminary plans, the Business Air Management opportLUlities, and
the possiUle accommodations that may require a public request for proposal to provide equal
opportunity to any interested helicopter seivice operator.
Item 5. Receive � report, hold a discussion �nd pi�ovide a recommendatiou to the City
Council regarding �►n ordinance authorizing the City Man�ger to execute on behalf of the
City of Denton an Airport Project Participation Agreement with the Tex�s Department of
Transportation Aviation Division relating to cert�in ramp improvements at the Denton
Municip�l Airport and authorizing the expenditure of funds �s provided for in said
Agreement.
Hix gave a review of the request to accept grant filndiilg for additional ramp area adj acent to the
Denton Airport Tei7ninal that was approved by City Cotuicil on April 19, 201 l. The City is now
requested to consider an Airport Project Participation Agreement (APPA) with Texas Departinent
of Transportation Aviation (TxDOT Aviation) for the engineering phase of this project at a cost of
$70,000. The City is requested to pay ten percent (10%) of the cost or $7,000. The engineering
phase would begin within thii`ty (30) days of the project agreement. A separate agj-eement will be
presented for the City's portion of the constr-uction phase of the project in early 2012.
Discussion followed on the amount being requested, haildling the fiuld as a capitalized project,
and how the gas well revenues and operating revenues are used to pay for this project.
Bryan Langley, Chief Financial Officer, offered clarification on how gas well revemies and
operating reveinies are halldled. Previously, the Airport was part of the geueral fiind and airport
revenues would go iiito the general fund. The Airport gas well fiind was a separate fiuid. When it
became an Airport enterprise fiuid, the general fiuid portion and the gas well portion were
combined into one fmid. When the fund is capitalized, the capital expendit�ires are shovv�l as a
hailsfer iilto capital projects. This is a line item in the budget, aild goes into a capital accotult that
can be multi-year in natltre. Some of these projects cail take eighteen months to two years to
complete. Whei1 this project is refei7ed to as capitalized, that mealis it is transferred out of the
Airpor-t fitnd into the capital projects fund for the Airport, to track them separately. The Airport
Fund is included in the Executive Dashboard of the Quarterly Financial Report and provides a
quick review of the fiuid's activity.
Mayor Pro Tem Kamp motioned to approve aild recoimllend to Council the Airport Proj ect
Participation Agreeiuent for the engineering phase of the Airport terminal rainp iulproveiuent.
Motion seconded by Council Member Watts. The motion ca��7ed mianimously.
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Item 6. Receive a report, hold a discussion and provide staff direction regarding a report
from SAMI Management, Iuc., �n �irport commercial real estate management company, ou
implementation of grouud lease reversion clause terms in Denton Airport property leases.
Hix introduced the item and briefed the Conmlittee oll staff's efforts to review the reversion
clause as it appears o11 all cont�acts and specifically as it applies to the Fi�st Fivancial Aii�ort
lease agreement that is up for renewal. City Staff engaged the services of Bill Dyer with SAMI
Management, I�lc., to review best inanagement practices for general aviation airports to
administer a property reversion clause typically contained in aviation ground leases.
Bill Dyer, Vice Presidelit of SAMI Managemeilt, gave a report to the Coi��ittee defining a
grotiuld lease aud one of the lcey eleineiits, tlie reversionary clause. Tlus provision sets foi-th the
landlord's right to retalce possession aud resume the full and sole nse and proprietorship of its real
property teinporarily alienated while the ground lease is in effect. The reversionary process is the
progression both the landlord and teilant undergo as they plail, facilitate, and administer the
eventual and certain retaking of the property and improvements entitled to the landlord.
By definition, the reversion of the tenant's property rights is inevitaUle; however it can be
deferred Uy way of a negotiated lease renewal. The use of a lease extension or renewal must be
carefiilly weighed by the Airport giving regard to the impact that such an extension inay have on
the landlord/tenant relationship, the long-term strategic objectives of the Airport, and coinpliance
tuider state laws and/or federal grant assLtrances, if any.
Council Menlber Watts asked why the City couldn't enter into a commercial lease with the tenant
providing mainteuance, iusurance, etc. The City would lease the shell and have the gioimd
instead of extending a reversionary clause unless the tenant puts in substailtial capital
iinprovemeilts.
Dyer respoiided that what you find is airports extend the lease tei7n or push out the reversion
event Uy amendment but tied to some type of added value tluough capital implovement, rental
inodification, or indirect econonlic advantage. The decision process should be vahie driven as the
City weighs their options, taking iilto consideratioll the value, Uenefits, indirect Uenefits, and the
economics in keeping a tenant versus bringing in a ilew tenant. There are inany ways to deal with
the reversion but it is recognizing that the reversion is there. There is value to the Airport that
should be recogiuzed, both in a legal staildpoiut and the self-siistaining capacity of the Airport.
Council Member Engelbrecht asked about the state law of 40 years and the FAA, 50 years and if
the FAA is looking to see if we are recapturing the investment. If the reversion is not acted on
and the lease renegotiated, what would be the FAA's position?
Dyer explained that the FAA doesn't loolc at specifics, Uut looks to see if the City is adding value
to the overall portfolio. If you are, it is a wiil-win situation and if the vahie is driven for the
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tenants, value for the community and providing added revenue as well, you would survive the
FAA scrutiny.
Council MemUer Watts noted in the SAMI Repoi-t, mider the FAA's Perspective Towards Lease
Terms and Reversion Interests reads, "View the enforce111ent of the reversionary clattse is in
lceepii7g with the inandate of maintaining a fee and rental structure that ivalces the Airport as
financially self-sustaining as possible." That's ahilost an underliuing policy statemeilt aild is the
inajor goal of the enterprise fund creation.
Dyer agreed that the whole goal and objective with the eilterprise fiind is to operate like a
business and be busiuess piudent. The Airport portfolio is really llo differeilt thail a large
corporation's portfolio, managing and d�-iving the vahie. Tlus takes colisiderable planning with
decisions l�ade far in advance that must complement the operational strategic plaii.
Mayor Pro Tem Kamp, reininded the Carilmittee of the major puUlic iillprovements that have
beeil made at the Airport by substantial funding with the City's match of ten percent (10%). FAA
would have a say aUout the fi�nding, how we work with TxDOT and who gets the fiuiding with
the investinents illade for public improvement. How inuch funding woLild the City receive if we
weren't doing what we are supposed to be doiiig shategically at the Airport?
Mark Nelson, Tiansportation Director, advised that TxDOT pays attention to the way
ilifrast�ucture is ivaiiltained and requires certain criteria before fiuiding projects. This goes bacic
to how we manage the asset, not only the rate stilicture but also the portfolio and equitable
treatment.
The Conunittee discussed the tenant relationships and efforts towards equitable treatment to
pricing that the grailt assurances with FAA and transportation codes require in negotiating
agreements.
Dyer added that the City iniist be fair and equitable. If yon have souud and prudent business
jttstification for the decisions you malce that are driven toward the overall snategic plan aild
objectives for the Airport that is well docwnented, the FAA will see that yoii are doing yot�r best
to be self-sustaiuing with the goal of overall parity.
Hix brotight the Co�uittee's attention to the exhibits to this item that included two excerpts fiom
the Airport Advisory Board Meeting Minutes, the Position Paper conceriling the Airport grotuld
lease reversion claiise, leasehold iulprovements and assumptioii options, and a siuntnary of a
stuvey regardillg how reversion clauses are adi�ustered in soine of the airports, the way they
were enforced, and the experiences that resulted.
The Airport Committee of the Denton City Council will convene in � Closed Meeting to
consider specific items when these items are listed below under the Closed Meeting sectiou
of this agenda. When items for consider�tiou �►re not listed under the Closed Meetiug section
of the agenda, the Airport Committee of the Denton City Council will not conduct a Closed
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Meeting and will convene at the time listed above for its regular or special called meeting.
The Airport Committee of the Denton City Council reserves the right to adjourn into a
Closed Meeting on any item on its Open Meeting agenda consistent with Chapter 551 of the
TEXAS GOVERNMENT CODE, as amended, as set forth below.
1. Closed Meeting:
A. Deliberations regarding Real Property - Under Texas Government Code Section
551.072; Consultation with Attorneys - Under Texas Government Code Section
551.071.
1. Consult with, and provide direction to, the City's attorneys regarding legal rights,
restrictions and obligations under Texas law, associated with the lease of tracts of real
property located at Denton Municipal Airport where a public discussion of these legal
matters would conflict with the duty of the City's attorneys to the Airport Committee
of the Denton City Council under the Texas Rules of Disciplinary Conduct of the State
Bar of Texas, or would jeopardize the City's legal position in any administrative
proceedings or potential litigation.
2. Discuss, deliberate, and receive information from staff and provide staff with direction
pertaining to the lease of real property located at 910 Aeronca, a tract of land being
approximately 23,915 square feet or 0.508 acres, in the T. Toby Survey, Abstract No.
1285 in the City and County of Denton, Texas. Consultation with the City's attorneys
regarding legal issues associated with the lease of the tracts referenced above where a
public discussion of these legal matters would conflict with the duty of the City's
attorneys to the Airport Committee of the Denton City Council under the Texas Rules
of Disciplinary Conduct of the State Bar of Texas, or would jeopardize the City's legal
position in any administrative proceedings or potential litigation.
ANY FINAL ACTION, DECISION, OR VOTE ON A MATTER DELIBERATED IN A
CLOSED MEETING WILL ONLY BE TAKEN IN AN OPEN MEETING THAT IS HELD
IN COMPLIANCE WITH TEXAS GOVERNMENT CODE, CHAPTER 551, EXCEPT TO
THE EXTENT SUCH FINAL ACTION, DECISION, OR VOTE IS TAKEN IN THE
CLOSED MEETING IN ACCORDANCE WITH THE PROVISIONS OF §551.086 OF
THE TEXAS GOVERNMENT CODE (THE `PUBLIC POWER EXCEPTION'). THE
AIRPORT COMMITTEE OF THE DENTON CITY COUNCIL RESERVES THE RIGHT
TO ADJOURN INTO A CLOSED MEETING OR EXECUTIVE SESSION AS
AUTHORIZED BY TEX. GOV'T. CODE, §551.001, ET SEQ. (THE TEXAS OPEN
MEETINGS ACT) ON ANY ITEM ON ITS OPEN MEETING AGENDA OR TO
RECONVENE IN A CONTINUATION OF THE CLOSED MEETING ON THE CLOSED
MEETING ITEMS NOTED ABOVE, IN ACCORDANCE WITH THE TEXAS OPEN
MEETINGS ACT, INCLUDING, WITHOUT LIMITATION §551.071-551.086 OF THE
TEXAS OPEN MEETINGS ACT.
Committee re-convened in an Open Meeting at 2:13 p.m.
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7. Offici�l Action, if uecessary, on Closed Meeting item(s) under §§551.071-551.088 of the
Tex�s Govei-nment Code, as amended.
Council Member Watts motioned that the City of Dellton staff be directed to exercise the
reversionary clause as part of lease negotiations and consider it in tei711s of what will Ue charged
for rent in the future and potentially extend the reversionary date of the improvements oiit, based
on the rental rates that can be aclueved tluoiigh lzegotiatioils. A secoiid by Mayor Pro Tem I�amp
followed. Motion passed miazzimously.
Mayor Pro Tem Kamp requested that staff bring back a recommeildation to the Airport
Committee before talcing it to First Financial.
Council Member Watts added that he would lilce to see staff's reconullendations to Ltnderstand the
process and methodology of arriving at the recommendation and how it comports with the report
provided by SAMI, �i1c.
Mayor Pro Tein Kamp requested that staff work with the Coliul�ittee through the steps talcen in
drawing up the recomnlendation.
Colmuittee will meet again on August 2, 20ll, to review staff's recomnlendation on the reversion
clause.
Item 8. Under Section 551.042 of the Texas Open Meetings Act, respoud to inquiries from
the Airport Committee of the Denton City Couucil or the public with specific flctual
information or recitation of policy, or accept a proposal to place the matter on the agenda
for an upcoming meeting.
AND
Under Section 551.0415 of the Texas Open Meetings Act, provide reports about items of
community interest regarding which no action will be t�►ken, to iuclude: expressions of
thanlcs, congr�tulations, or condolence; information regarding holiday schedules; an
houor�iy or sllutary recognitiou of a public official, public employee, or other citizen; �
reminder �bout �tn upcoming event org�nized or sponsored by the goveruiug body;
inform�tion regarding � social, ceremonial, or community event organized or sponsored by
an entity other than the governing body th�t w�s attended or is scheduled to be �ttended by
� member of the governing body or �u official or employee of the municipality; or �n
announcement involving an imminent threat to the public health and s�►fety of people in the
muuicipality th�►t has arisen �fter the posting of the agend�t.
Mayor Pro Tem Kamp requested soule l�ind of foin�alized plamuiig for strategic consideratioils
for the entire Aiiport poi-tfolio. Also additional infoi7nation and education. The Airpol-t Board,
the public, aild Council need to be able to get this information in a siillple mamler so that we can
educate people about what we're doing with the reversionary clause.
Cotulcil Member Watts requested a repoi�t on the amount of the ad valorein taxes created at the
Airport broken down by tenailt, if possible, for the August 2 Committee ineeting. Also inchide a
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stunmary of how the property is valued. If there are exemptions, inchide the criteria for the
exemption of any interests at the Airport.
With no further busiiless to address, the Conunittee meetiilg adjourned at 2:27 p.m.
CITY OF DENTON, TX
''°. (--�
THERESA JAWORSI
RECORDING SECRETARY
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