TO: Board of Supervisors
FROM: Steven Lederer, Director of Public Works
REPORT BY: Mark Witsoe, Airport Manager
SUBJECT: Approve and Authorize Assignment and Amendment No.4 to Agreement No. 6121 (Private Hangar Lease) & Assignment and Amendment No.2 to Agreement No. 7735 (Self-Fueling Agreement) with DRG Challenge, LLC.
RECOMMENDATION
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Approve and authorize Assignment and Amendment No. 4 to Agreement No. 6121 (Private Hangar Lease) and Assignment and Amendment No. 2 to Agreement No. 7735 (Self-Fueling Agreement), currently with DRG Star Management, LLC, consenting to the assignment of both agreements to DRG Challenge, LLC, as well as amendments to both agreements reflecting the assignments. (No Fiscal Impact; Discretionary)
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BACKGROUND
On September 16, 2003 the Board approved Agreement No. 6121 between Napa County and SK Aviation, LLC for the construction and use thereafter of a private (non-commercial) aircraft storage hangar. The leased premises (land lease) includes approximately 1.01 acres of land located in the southeast portion of the Airport property. Paragraph 16 (Restricted Transfers) of Agreement No. 6121 states in part that the Lessee may transfer and assign all of its interest in the Agreement to another party upon receiving written consent from the County.
Amendment No. 1 to Agreement No. 6121 addressed provisions related to the installation and removal of a Jet-A fuel tank on the leasehold and incorporated by reference the County's Self-Fueling Policy. Amendment No. 2 to Agreement No. 6121 assigned the lease from SK Aviation, LLC to ACV Napa Flight, LLC.
On April 3, 2012, the County entered into Agreement No. 7735 (Self-Fueling Agreement) with ACV Napa Flight, LLC. The Self-Fueling Agreement authorized the Lessee to conduct non-commercial self-fueling operations of Lessee's owned or leased aircraft in accordance with the County's Self-Fueling Policy.
On March 10, 2020, the Board of Supervisors approved Amendment No. 3 to Napa County Agreement No. 6121 and Amendment No. 1 to Napa County Agreement No. 7735, which assigned the Private Hangar Lease and Self-Fueling Agreement from ACV Napa Flight, LLC, to DRG Star Management, LLC. The currently requested approval of Assignment and Amendment No. 4 of Napa County Agreement No. 6121 and Assignment and Amendment No.2 of Napa County Agreement No. 7735 would assign all interest in the Private Hangar Lease and Self-Fueling Agreement from DRG Star Management, LLC, to DRG Challenge, LLC, for the remaining term of the lease, which expires on August 31, 2028.
Paragraph 9 (Permitted Uses of Leased Premises) of the Napa County Agreement 6121 states in part that the hangar shall be used only for the storage of aircraft possessed by Lessee as owner or lessee. Similarly, paragraph 5 (Evidence of Ownership) of Self Fueling Agreement No. 7735 requires any self-fueling to be of aircraft owned or leased by the Lessee. DRG Star Management, LLC purchased a new aircraft, taking ownership in March of 2024. Ownership of the aircraft was established by their parent company DRG Challenge, LLC. A Lease Execution Deposit was established between DRG Challenge, LLC and Napa County Airport for the lease reassignment to the aircraft owner as of March 1, 2024.
According to Federal Aviation Administration (FAA) records, the registered owner of the aircraft that has been, and will continue to be, stored within the leased premises of and fueled under the terms of the agreements is DRG Challenge, LLC. Thus, the proposed assignments and amendments will result in the Lessee complying with the terms of the agreements because the Lessee and registered aircraft owner will be the same legal entity. Aside from the requested assignments and amendments, all other terms and conditions of the agreements will remain the same. The Airport will continue to receive lease revenue adjusted annually based on Consumer Price Index (CPI) as well as Fuel Flowage Fees as outlined in the Napa County Airport Fees Policy.
REQUESTED ACTION:
Approve and authorize Assignment and Amendment No. 4 to Agreement No. 6121 (Private Hangar Lease) and Assignment and Amendment No. 2 to Agreement No. 7735 (Self-Fueling Agreement), currently with DRG Star Management, LLC, consenting to the assignment of both agreements to DRG Challenge, LLC, as well as amendments to both agreements reflecting the assignments.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
No |
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Is it currently budgeted? |
Yes |
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Where is it budgeted? |
Current Lease revenue will not change and is budgeted in Airport- Operations Fund (Fund 5010; Subdivision 5010000) and is included in the recommended FY25 budget for Airport Operations. |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Approval of Assignment and Amendment No. 4 to Agreement No. 6121 & Assignment and Amendment No. 2 to Agreement No. 7735 will facilitate the assignment of the agreements to the party owning and operating the Aircraft and bring the Lessee into compliance with agreement terms. The Airport Enterprise Fund will continue to receive revenue. |
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Is the general fund affected? |
No |
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Future fiscal impact: |
Continued monthly operating and rent revenue. |
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Consequences if not approved: |
Lessee will not be following Airport Rules & Regulations or Paragraph 16 of the Lease Agreement and Paragraph 5 of the Self Fueling Agreement, causing the Airport to be in violation of FAA Grant Assurances. |
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ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.