2005/07/18 Municipal Investment in AirportK
City of Kalispell
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' Post Office Box 1997 - Kafispell, .Fontana 59903-1997 - Telephone (406)758-7700 Fax (406)758-7758
TO: Mayor and City Council
FROM: James H. Patrick, City Manager
SUBJECT: Municipal Investment on City of Kalispell Airport
MEETING DATE: 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
7505 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 hanker
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 there 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
remainine five nears 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.
The advantages are that we would have an anchor, long term tenant on the airfield; the
tenant is a governmental agency and guaranteed to be here for years to come; and this
will produce additional revenue for the airport (approximately $74,321.76 in lease
payments plus the sale of the hanger at current market rates at the end of five or ten
years).
RECOMMENDATION: Council favorably consider this proposal between the City and
DNRC Forest Service_
Respectfully,
O
James H. Patrick
City Manager