07/18/05 Patrick/Municipal Investment on AirportTO: Mayor and City Council
FROM: James H. Patrick, City Manager
SUBJECT: Municipal Investment on City of Kalispell Airport
MEETING ATE: July 18, 2005
BACKGROUND: The City has been approached by the State Forest Service to try and
locate their helicopter and fixed wing aircraft on the City airport. They need to lease a
75x75 ft hanger with an option to purchase. The Airport Manager has contacted
numerous developers and investors in an attempt to find someone to construct a hanger
and lease to the State Forest Service without success.
A potential solution may be for the City to construct a hanger for the State Forest Service
and lease them the facility on a 10 year net/net lease with an option to buy the structure
after five years at the then appraised value. The appraisals would be done by both the
City and DNRC using government appraisers. The purchase price would be the average
between the two appraisals. If the DNRC did not purchase the building after the five year
period, the annual lease payments will continue to escalate at the 3% annual rate for the
remaining five years of the lease contract.
DNRC would be responsible for all insurance coverage, sewer connections, water
connections, natural gas and electrical connections, telephone and cable. All the utilites
are available within 30 feet of the proposed building.
A turnkey hanger would cost the City $172,000 to construct (plus an $8,000 allowance
for internal overhead lighting suitable to the client). It will be 75 x 75 feet with a special
door to accommodate their helicopter. The building will include a bathroom and a 400
square foot office area. All other improvements to the interior or exterior of the structure
will be the responsibility of the DNRC. All improvements to the structure will be
approved in advance by the City Airport Manager.
Upon DNRC acceptance of the building, they would pay a monthly lease payment of
$1,166.67 which will escalate at an annual fixed rate of 3% to cover inflation. The
second year would be $1,201.67 per month or $14,420.04 annually. The five year total
return would be $74,321.76.
DNRC has confirmed their interest in this project and is ready to proceed should Council
approve the concept.
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KALISPELL CITY AIRPORT — S27
CLIENT: MT — DNRC
Turnkey price on the structure is $ 172,000 (plus an $8,000 allowance for internal
overhead lighting suitable to the client.)
The client will lease the structure on a 10 year net/net lease with an option to buy the
structure after five years at the then appraised value. The appraisals will be done by both
the City and DNRC using government appraisers. The purchase price will be the average
between the two appraisals. Each entity will be responsible for the cost of their
appraisals.
If the client does not purchase the building after the five year period, the annual lease
payments will continue to escalate at the 3% annual rate for the remaining five years of
the lease.
The client will be responsible for all insurance coverage, sewer connections, water
connections, natural gas connections, electrical connections, telephone and cable. All the
utilities are available within 30' of the structure.
The structure will be a 75' X 75' hangar with a special door to accommodate the UH-1
helicopter used by the client. The building will include a bathroom and a 400 square foot
office area. All other improvements to the interior or exterior of the structure will be the
responsibility of the client. All improvements to the structure must be approved in
advance by the City Airport Manager as the agent for the City of Kalispell.
Upon acceptance of the building, the client will pay a monthly lease payment of
$1,166.67 which will escalate at an annual fixed rate of 3% to cover cost of living
adjustments associated with the lease of the ground on the airport.
2nd year payments - $1,201.67 per month
3rd year payments - $1,237.72 per month
4th year payments - $1,274.85 per month
5th year payments - $1,313.09 per month
If the client desires to have additional parking or ramp space allocated to the lease, the
cost will be $.16 per square foot. There could be additional outside parking (for aircraft
only) allocated to the lease.
Please contact Fred A. Leistiko, Airport Vanager, if you are interested in proceeding with
this project. (cell # 250-3065)
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