TO: Board of Supervisors
FROM: Steven Lederer, Director of Public Works
REPORT BY: Mark Witsoe, Airport Manager
SUBJECT: Lease Agreement No. 230234B with SkyserviceUS California, LLC. - Approve Second Amendment
RECOMMENDATION
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Approve and authorize Amendment No. 2 to Lease Agreement No. 230234B with SkyserviceUS California LLC. (Skyservice) to adjust square footage and total compensation to lease areas, change adjustments to base rent, to add Fuel Farm Infrastructure Improvement reimbursement to County, to extend development timelines, and to replace Exhibits. (Fiscal impact: $146,890 Revenue; Airport Fund; Not Budgeted; Discretionary)
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BACKGROUND
Lease Agreement No. 230234B with Skyservice for Fixed Base Operator (FBO) services and development was approved by the Board on December 6, 2022. In summary, the lease agreement provides a term of thirty (30) years with an option to extend for up to two (2) consecutive five (5) year periods; includes approximately ten (10) acres of ground lease and a 20,000 square foot commercial hangar; requires payment of fuel flowage fees and a tax minimum annual guarantee; requires minimum capital investment of $13.6 million for infrastructure development including a terminal, commercial hangar, and fuel farm; and requires construction of commercial restaurant space within its terminal. Amendment No. 1 to the Agreement was executed on March 21, 2023 to adjust the square footage of the commercial hangar from 20,000 square feet to 18,500 square feet, based upon actual measurements.
Since December 2022, Skyservice has been involved in planning for development of their ground lease space. They have justified their interest in expanding the width of their ground lease premises by 30 feet to accommodate their planned corporate aircraft storage hangars, FBO lobby, and restaurant. The additional 30 feet would be added to the north side of their existing lease. In addition, as part of their required work to develop a fuel farm, and because of similar requirements for the County and Atlantic Aviation (the other FBO at the Airport) to redevelop and develop their fuel farms, respectively, an opportunity to split the cost of shared fuel farm infrastructure has been identified. Shared work would include electrical service improvements, paving, and installation of an oil-water separator for stormwater protection. Cost sharing of the work benefits all parties and results in lower total costs for all parties. With approval of the proposed amendment, Skyservice would agree to provide 25% reimbursement of the cost of the fuel farm improvements, up to $200,000.
Approval of Amendment No. 2 to Lease Agreement No. 230234B with Skyservice increases the square footage of the ground lease by approximately 26,640 square feet and amends compensation amounts to support the increased area; amends timelines for adjustments to base rent to be the first of the month rather than mid-month for accounting ease; adds Fuel Farm Infrastructure Improvement reimbursement to County for the benefit of all parties, extends development timelines to be consistent with development conditions, and replaces Exhibits A-2, B-1, and F related to leased space, total compensation, and development timelines.
Requested Actions:
Approve and authorize Amendment No. 2 to Lease Agreement No. 230234B with SkyserviceUS California LLC. (Skyservice) to:
1. Adjust square footage and total compensation for Non-Exclusive License Area No.1, Supplemental Premises No. 1, No. 2, and No. 3 (lease areas);
2. Change adjustments to base rent to occur on the first month following anniversary of the effective date of the agreement;
3. Add Fuel Farm Infrastructure Improvement reimbursement to County;
4. Extend development timelines; and
5. Replace Exhibits A-2, B-1, and F to reflect changes reflected in this Amendment No. 2.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
No |
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Where is it budgeted? |
Revenue will be deposited into Airport- Operations Fund (Fund 5010; Subdivision 5010000). |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Approval of Amendment No. 2 will further facilitate efficient operations of the fixed based operations offered by Skyservice. 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 be forced to revise their development design and the County will earn less revenue from the lease agreement. The three (3) fuel farm developments may be forced to individually develop electrical service and stormwater protection, thus increasing the cost of infrastructure improvements for all parties. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The Board previously considered and adopted a Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program for this Project, pursuant to Resolution No. 2020-120. There have been no substantial changes to the Project or new information of substantial importance within the meaning of CEQA Guidelines section 15162 that would warrant additional environmental review in connection with this action.