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Anatomy of a Lease 23 Environmental aspects to be considered in airport leases include the current environmental condition of land and/or airport facilities; responsibility for past, present, and future environ- mental remediation; environmental insurance requirements; and landlord assurance that the tenant will be financially capable of resolving potential liability exposures. At the very minimum, all parties of an airport lease agreement should agree on the environmen- tal condition of the property at the time the property is placed under control of the tenant, as well as the condition the property is expected to be in at the time it reverts to the airport sponsor. Specif- ically, soil conditions and historical data regarding fuels, solvents, and other contaminants should be discussed and a baseline for expectations established. If existing buildings are a part of the airport lease, asbestos and other building materials/equipment should undergo a similar baseline survey. Many airports have experienced decades of tenants and operations on a given piece of prop- erty. As acceptable activities have changed and environmental awareness has increased, past activities and practices may no longer be appropriate or allowed by the airport sponsor. Fuel releases from aircraft, for example, were dismissed more readily in the early days of aviation than they are today. Airport sponsors today are held to high standards as environmental stew- ards, especially in the areas of water quality and storm water management, both of which could be affected by tenant fuel releases. All parties should also agree on the level of environmental insurance, or liability insurance that covers environmental issues, as a term of the airport lease. Even if both parties agree that levels and standards may change over the course of the lease, an honest and constructive discussion can save all parties pain in the future. The airport sponsor deserves, and should expect, to be indem- nified by the airport tenant on matters environmental and otherwise. The tenant should have an understanding of the prevailing obligations and associated expenses that are imposed by the airport sponsor regarding environmental insurance. A third aspect of a minimum level of environmental discussion should be the airport sponsor's confidence in the ability of the tenant to environmentally remediate airport property in the event of contamination. Of course, environmental insurance speaks directly to this point, but environ- mental insurance can be very expensive. Just as the airport sponsor must gauge the tenant's ability to make payment for rents, fees, and charges, it must also gauge the tenant's ability to remediate contamination should environmental contamination occur. Other means of establishing security of obligations in this regard are bonds, letters of credit, and/or funds in escrow. As with many issues, the airport sponsor walks the fine line of protecting the airport's assets without imposing undue hardship on the tenant who wishes to utilize the airport. 2.2.17 Taxes and Fees The airport sponsor, typically a public entity that operates the airport for public benefit and use, is likely exempt from many taxes and fees, including property taxes. When private develop- ment in support of a commercial venture takes place on public property, interpretation as to how the tenant of the leased property is taxed varies widely and can easily change with the political winds and economic climate. Airport sponsors, therefore, should strive to protect themselves from incremental development costs and associated tax exposure by appropriately passing any tax liability through to the tenant that occupies the airport property. These provisions and pro- tection of the airport sponsor should be fully described within the language of the lease. Similarly, the airport sponsor should be prepared, through language within the lease, to pass through any fees that might be assessed to a given airport development project on leased airport property. For example, impact fees that some communities levy on new development to offset the public investment required to support that development should be passed through to the tenant, even though the airport sponsor is the owner of the land being developed.