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5. City Airport Fee Schedule ChangeCity of Kalispell Post Office Box 1�)97 -- Kalispefi, Montana 59903-199. -Telephone (406)758-7700 Fax(406)758-7755 REPORT: Honorable Mayor and City Council FROM: Chris Kukulski, City Manager SUBJECT: Kalispell City Airport Fee Schedule Change MEETING DATE: February 26, 2004 BACKGROUND: The objective of the Kalispell City Airport is to continue to provide safe and regulated aeronautical use for the benefit of all of the citizens of Kalispell. Since its inception, the users of the airport have funded the airport. Leased income derived from hangars, aviation gas tax, user fees and commercial fees generate the airport funds. Proceeds of this revenue has provided insurance, maintenance and upkeep of the lighting and radio system at the airport. Updated airport hangar contracts have been discussed for several years. Over the past year, it has become apparent that existing lease wording including contract length, liability, insurance, safety, subleasing and fee structures required modification to move the City into the fixture as we begin the planning for the expansion of the airport. Within the next two years, four of the five airport leases expire and we are aware that the leasees are interested in renegotiating new leases. In addition, we have had two new requests for immediate hangar leases and anticipate several more once building begins. For consistancy, special requests will be handled through the use of an addendum rather than making internal changes to each lease. Current lease rates (adopted in Resolution No. 4804) apply. Other significant changes include: • Paragraph 2. The term of the lease will now be 10 years rather than 20, with two additional successive terms of 5 years each. • Paragraph 3. Clarification regarding payment of the lease and provisions for fee increases. • Paragraph 4. Clarification of building standards and building expansion. • Paragraph 5. Clarification of hangar use and sublease requirements. It requests an administrative fee when an airport hangar space is subleased. The recommended rate is 2%. • Paragraph 8-11. Clarification and inclusion of liability and insurance requirements. • Paragraph 13. Clarification of building maintenance & repair. • Appropriate language for standardization. The Airport Advisory Board after consideration and review of the legal staff has requested the adoption of the proposed lease effective immediately. RECOMMENDATIONS: FISCAL EFFECTS: ALTERNATIVES Respectfully submitted, Chris Kukulski City Manager Council adopt the Kalispell City Airport lease. Revenue neutral. As recommended by Council. HANGAR SITE LEASE THIS Lease, made and entered into this day of , , by and between the City of Kalispell, a municipal corporation, hereafter referred to as CITY, and , hereafter referred to as TENANT: W I T N E S S E T H: WHEREAS, the CITY operates the Kalispell City Airport, and WHEREAS, the CITY desires, in order to provide a source of income for airport maintenance and to increase the utilization of said airport, to lease tracts of land to various tenants in order that the tenants may erect structures for the storage and protection of aircraft based at said airport. NOW, THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS: 1. The City does hereby agree to lease to TENANT, and TENANT hires from City, those certain premises located at the Kalispell City Airport, Kalispell, Montana, which are specifically described in Exhibit AA@ (Projected Building Area) which is attached to this Lease and by this reference incorporated herein. 2. The term of this Lease shall be for ten (10) years, commencing on the lst day of , and ending on the 1" day of unless sooner terminated by mutual agreement of the parties or by one of the parties under the specific provisions hereof. TENANT ,shall have the option to renew for up to two (2) additional successive terms of five (5) years each. CITY shall give TENANT sixty (60) days written notice prior to the end of each term and TENANT shall give CITY written notice of TENANT=S intention to exercise said option no later than thirty (30) days from the end of each term. Upon expiration of the forgoing terms, TENANT shall have the right of first refusal to an additional lease not to exceed five (5) years under such terms and conditions as may be agreed upon at such time. 3. TENANT agrees to pay to the CITY for the use and benefit of the CITY the sum o $ ( ) per square foot per year for the projected building area, which for purposes of this provision shall be one hundred 2003 Airport Lease 1 and fifty percent (150%) of the actual square footage occupied by the hangar, herein authorized, payable as follows: a. Upon the commencement date, TENANT shall pay the pro -rates portion of the annual rent for the time period from the commencement date to July 1 next succeeding. b. On each July 1, TENANT, without demand, shall pay the annual rental to the next succeeding fiscal year. C. On July 1, at the commencement date of the fiscal year during which this Lease terminates, TENANT, without demand, shall pay the pro-rata portion of the annual rent for the time period from July 1 to the termination date of the Lease. d. During the initial ten-year term of the lease, the annual lease payment shall increase 3% annually, from the previous year's payment. In the event TENANT elects to exercise his option to renew this lease for a subsequent five-year term, the annual lease payment shall be reviewed and reset by CITY. e. The Airport Manager or his designee will be responsible for the collection of lease payments or administrative fees for existing hangar and ground leases, and for adjustments to lease fees resulting from application of the criteria established in part (d), above. 4. TENANT agrees to construct one building for the purpose of housing light aircraft on said land, and TENANT further agrees to construct said building, together with access to runway, in accordance with the specifications contained in hangar construction and design standards. TENANT shall supply to CITY upon completion of the building appropriate invoices establishing the cost of construction of said building. a. TENANT shall have the right, upon the termination of this Lease, unless a lease for a further term be negotiated, to remove the hangar structure, but shall do so within 90 days and shall leave the premises in a restored condition, except that any paving shall be left. 2003 Airport Lease 2 b. If TENANT does not remove said building within such allotted time, it shall then become the property of CITY without further action on the part of the CITY. C. TENANT may expand the square footage of any building constructed on the Airport site, subject however to the prior written consent of CITY. In the event CITY approves any building expansion during the primary lease term or any extension thereof, TENANT'S lease payments shall be adjusted in accordance with the criteria set forth in 13. 5. TENANT shall use said property for the storage of light aircraft and other lawful purposes necessarily incidental thereto and for no other purpose. a. TENANT may sublet the premises for aviation purposes, subject however to the prior written consent of CITY. Any such sublease shall be in writing and shall be reviewed by CITY prior to approval. b. CITY'S approval of any sublease shall not relieve TENANT of any obligation imposed by this agreement. TENANT shall provide to CITY a signed copy of the final sublease agreement for its file. c. Upon approval by CITY of any sublease, an administrative fee equal to a of the rental fee imposed by TENANT on the sublessee, shall be paid by TENANT to CITY throughout the term of the sublease. This administrative fee shall terminate upon termination of the sublease. 6. TENANT shall have the right and privilege of sale, assignment or transfer of this Lease for the purpose defined in 15, hereof, upon written notice to the CITY stating the name and address of the proposed buyer, assignee, or transferee. a. If the CITY shall determine that said proposed buyer, assignee, or transferee is objectionable, any such reasonable objection shall be stated in writing to the TENANT within twenty (20) days after said notice. 2003 Airport Lease 3 b. The CITY shall not unreasonably withhold consent to sell, assign, or transfer this Lease, but reserves the right to adjust the annual rental payments following assignment. C. After sale or assignment by TENANT of its interest here, TENANT shall be relieved from liability for rental payments accruing thereon, and the buyer, assignee, or transferee shall thereafter be liable. d. Transferee under this paragraph shall only acquire the balance of the term of the lease and shall be subject to all terms and conditions of this lease, including the obligation to provide CITY with proof of insurance coverage as required by 18. 7, if, for any reason, the CITY discontinues aviation operations on Kalispell City Airport site, the CITY may terminate this lease and may elect to pay TENANT the unamortized portion of the cost of the hangar, herein authorized to be built. That amortization is to be computed on a straight-line basis over the period from the completion of the improvement up to 15 years. 8. TENANT shall hold harmless and indemnify the CITY from any and all liability claims of any kind or nature, whatsoever, arising out of the erection or expansion of the building upon the premises contemplated, herein, or the use of said premises by TENANT or TENANT=s invitees or licensees. a. As evidence of TENANT=s covenant herein, TENANT at TENANT expense shall keep in force, during the term of this Lease, insurance, issued by an insurance company, licensed to do business in Montana, protecting the CITY against all liabilities, judgments, costs, damages and expenses which may accrue against, be charged to, or recovered from the CITY, by reason of damage to property of, injury to or death of any person or persons on account of any matter or thing which may occur on the demised premises. b. Policy or policies in the amount of Seven Hundred and Fifty Thousand Dollars ($750,000.00) with respect to any one person, and One Million and Five Hundred Thousand Dollars ($1,500,000.00) with 2003 Airport Lease 4 respect to any one occurrence shall be held. Said insurance policy shall name the CITY, its officers, employees and agents as additional named insureds, and shall not be canceled or materially changed without at least thirty (30) days prior notice to the CITY, and shall be subject to approval as to coverage by the CITY. C. Proof of insurance coverage required by this Lease shall be provided by TENANT to CITY at the time of execution of this agreement. CITY reserves the right at any time during the primary lease term or any extension thereof, to require TENANT to provide to CITY proof of continued insurance coverage. d. Policy limits are subject to change in accordance with 12-9-108, MCA, ALimitations on Governmental Liability for Damages in Tort.@ TENANT shall file certificates of said insurance with the CITY, and said insurance shall be in full force and effect, throughout the term of this Lease. e. Failure or refusal by the TENANT to obtain or maintain said insurance as required hereunder shall constitute a material breach of this Lease and, in such event, CITY, in its sole discretion, may terminate this Lease without liability to TENANT hereunder, or elect to obtain like coverage and the cost for such coverage shall be paid by TENANT. 9. TENANT shall be responsible for acquiring whatever insurance TENANT deems necessary to safeguard TENANT=S interest in the TENANT=s building, herein authorized, and personal property stored in said building, and TENANT expressly covenants and agrees to assert no claim against CITY as a result of the loss or damage to the building or personal property belonging to TENANT or anyone else resulting from the action of any third party. a. TENANT herein covenants and agrees to take whatever steps TENANT sees fit to take in protecting TENANT=S property and persons from loss or damage as a result of vandalism, malicious mischief, theft or kindred losses, and agrees to assert no such claim against the CITY incident thereto. 2003 Airport Lease 5 b. All losses suffered criminal activity or the police. The CITY such losses. by TENANT resulting from others shall be reported to assumes no responsibility for 10. In the event that soils or other material are found on the leased site that are AHazardous or Deleterious Substances@ as defined by the Montana Comprehensive Environmental Cleanup and Responsibility Act, 175-10-701 et seq. MCA (ACECRA@), AHazardous Substances@ as defined by the Comprehensive Environmental Response, Compensation and Liability Act, 42 USC 19600, et seq. (ACERCLA@), AHazardous Waste@ as defined by the Montana Hazardous Waste and Underground Storage Tank Act, 175-10-401 et seq., MCA or the Solid Waste Disposal Act, as amended by the Resource Conservation Recovery Act, 42 USC '6901 et seq., or which require special remediation or disposal or disposal pursuant to any other applicable law, TENANT shall excavate, handle and dispose of such soils or other material only in compliance with such statutes and regulations. a. In the event TENANT leaves any of the above described materials on the property, the CITY may, at its option, have wastes properly disposed of and assess the costs of removal, storage, transport and disposal to TENANT. b. All Hazardous Materials must be appropriately labeled and stored. C. In the event Hazardous Materials are spilled upon the property, it is the responsibility of TENANT to have the spill cleaned up according to State and Federal laws and regulations. In the event that drains or floor sumps are contaminated, it will be the responsibility of TENANT to clean up those systems. d. TENANT is aware that there are significant penalties for improperly disposing of wastes or submitting false information, including the possibility of fine and imprisonment for knowing violations. TENANT must comply with all state, federal and local laws pertaining to the handling and storage of hazardous materials.. 2003 Airport Lease 6 11. No construction or installation of any underground fuel storage tank dispensing system shall be allowed upon the premises. 12. Any utility services required by TENANT=s building or for its use shall be obtained by TENANT at TENANT=s expense. 13. a. TENANT agrees that upon completion the building will be maintained in good order, repair and safe condition and in compliance with the law. TENANT shall make any and all additions to, or alterations or repairs in and about the land and/or improvements which may be required and, in doing so, TENANT shall observe and comply with all existing or future public laws, ordinances and regulations applicable to the Land or public airport land upon which the leased premises are located. b. TENANT shall maintain an area of ten (10) feet from the exterior walls of the hangar or of the median point between hangars if there is less than twenty (20) feet between hangars, free from brush and weeds. If TENANT fails to keep and maintain the leased premises and improvements as required hereunder, CITY may in its discretion following written notice undertake to do or have done such and any expenses incurred by CITY shall be paid by TENANT. C. TENANT shall not store personal property, equipment of any kind, or vehicles, outside of the hangar. 14. TENANT shall be responsible for all taxes levied upon the structure erected hereunder and any equipment or property located therein. The land is owned by the CITY and is exempt from taxes, and the CITY agrees to maintain such tax exempt status. 15. TENANT shall comply with all State and Federal laws and regulations and with the Operating Regulations of the City of Kalispell. CITY shall have the right, through its agents or employees, for reasonable ingress and egress to inspect premises to ascertain that the terms of this Lease are being adhered to. 2003 Airport Lease 7 16. Notices to CITY shall be sent by certified mail, postage prepaid to City Manager, City of Kalispell, P.O. Box 1997, Kalispell, MT 59903-1997, and notices to TENANT shall be sent by certified mail, postage prepaid to: 17. TENANT shall have the right to cancel and terminate this Lease and any obligations arising hereunder by written notice to the CITY delivered within 60 days hereafter. 18. CITY reserves the right to further develop or improve, or not develop or improve, the landing area of the airport as it sees fit, regardless of the desires or view of the TENANT, and without interference or hindrance. 19. This Lease shall be subordinate to the provisions and requirements of any existing or future Lease between the CITY and the United States, relative to the development, operation or maintenance of the airport. 20. TENANT agrees to comply with the notification and review requirements covered by Part 77 of the Federal Aviation Regulations in the event any future structure or building is planned for the leased premises, or in the event of any planned modification or alteration of any present or future building or structure situated on the leased premises. 21. It is mutually agreed and understood that if TENANT should fail to make the annual lease payments as described above, or fail to perform any condition or covenant or condition of this Lease or fail to maintain the leased premises in a manner satisfactory to the CITY, and such condition or conditions exist for more than ninety (90) days after written notice is given to the TENANT, CITY may then terminate and end this Lease and re-enter and retake possession of the premises. All buildings and improvements placed on the premises shall thereupon revert to the CITY. This paragraph shall not apply to failure of TENANT to obtain or maintain insurance under &8, above. 22. It is mutually agreed that this Lease shall inure to the benefit of and be binding upon the respective parties, 2003 Airport Lease 8 their heirs, successors and assigns. It is further agreed that time is of the essence of this Lease. 23. Any change or modification of this Lease, in order to be effective, must be in writing and signed by the respective parties. 24. In the event either party to this Lease shall be required to bring an action against the other party to enforce this Lease, or any portion thereof, the prevailing party shah be entitled to reasonable attorney's fees and cost therefore in addition to any damages that might be awarded. IN WITNESS WHEREOF, said CITY has caused this Lease to be signed on its behalf by the Manager of said CITY and said TENANT has executed this Lease this day of , CITY OF KALISPELL Manager Attest: TENANT Attest: 2003 Airport Lease 9