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OCR for page 88
88 Guidebook for Developing and Leasing Airport Property Baton Rouge Metropolitan Airport (BTR) Airport Type: Small-Hub Tenant: Coca-Cola Type of Business: Nonaeronautical Facility Location: Landside SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009. Project Overview Baton Rouge Metropolitan Airport (BTR) purchased a 498-acre parcel of undeveloped land east of the airport in order to realign a four-lane road to meet FAA Runway Safety Area (RSA) require- ments. Once the road was realigned, the remaining 450-acre parcel was cut off from airside access by the new roadway. The portion of property not needed for RSA purposes had good development potential since it was in a desirable location with excellent highway access, but because the new road separated that portion of the parcel from the airfield, it had no potential for future aero- nautical purposes. Baton Rouge experienced a population boom after Hurricane Katrina in 2005, causing Coca-Cola to outgrow its former bottling and distribution facility. Shortly after the Airport purchased the land, the City of Baton Rouge and the State of Louisiana learned that Coca- Cola was interested in consolidating three of its Gulf Coast facilities to serve the entire Gulf Coast Region. Baton Rouge was in competition with Hattiesburg, Mississippi, for the location of the plant and both cities had deep roots with the company. The City of Baton Rouge and its mayor approached Coca-Cola, and made their desire to keep Coca-Cola in Baton Rouge very clear. The City offered a 112-acre tract that no longer had airside access to Coca-Cola for consider- ation. The lease was signed in March 2007, and construction commenced shortly thereafter, in April. The 781,000 square foot facility was built at a total cost of $176,000,000. It was the first Leadership in Energy and Environmental Design (LEED)-certified manufacturing facility in Louisiana. The reader should note two important points within this case study. First, construction of non- aeronautical improvements on property purchased for RSA enhancement is quite unusual. Had

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Case Studies 89 the roadway not been realigned for purposes of expanding the RSA, thereby bisecting the parcel and rendering a large portion of the parcel nonaeronautical because it did not have airside access, the opportunity to lease land for the Coca-Cola development would not have presented itself. Sec- ond, the lease term exceeds the 50-year threshold generally considered to be a disposal of property. Even though the state may have a different definition for disposal of public property, coordination with the FAA's Airports District Office is crucial in avoiding conflict with federal grant assurances. In fact, both of these scenarios warrant close collaboration with the FAA, should the airport spon- sor wish to explore such a strategy. Further discussion of term lengths can be found in Section 3.2.4: Land Releases. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease agreement: Baton Rouge Metropolitan Airport Authority: Worked with the office of the mayor to develop a package that would attract Coca-Cola to the Airport. State of Louisiana: Arranged for $27 million in Gulf Opportunity Zone Bonds. Office of the Mayor: Originally approached BTR to discuss the availability of the land adja- cent to the airport. Louisiana Economic Development: Provided a $1.4 million performance grant through the Economic Development Award Program in order to pay for new water wells. Key Lease Elements The land lease between the City of Baton Rouge/Parish of East Baton Rouge and Coca-Cola con- sists of a 99-year lease term, with eight 10-year options to renew, and one 9-year option to renew. Note that this lease term is deemed acceptable by the FAA only because the land being leased has no practical aeronautical use due to its location and separation by a four-lane highway. Had this land been potentially usable for aeronautical purposes, a 99-year lease term would have been con- sidered a violation of grant assurances. Considerations for the Tenant Louisiana Economic Development provided a $1.4 million Economic Development Award Pro- gram grant. Coca-Cola will receive industrial property tax exemptions on buildings, machinery, and equipment; and rebates were granted on state income and sales taxes through the Enterprise Zone tax credit program for areas that meet low- to moderate-income requirements. Another rebate was granted on local sales taxes through the Enterprise Zone program. The new, larger facility allowed Coca-Cola to expand its operations as well. Bottling capacity increased from 25 million cases to 43 million cases per year. Benefits to the Airport The acquisition of the 498-acre parcel of land, and its subsequent lease to Coca-Cola, have allowed the Airport to meet FAA Runway Safety requirements while making use of, and generat- ing revenue from, Airport-owned land with no airside access. The Airport receives revenue from monthly rental payments of $18,667. Additionally, the high profile LEED-certified facility generated a good amount of positive pub- licity for the Airport. The plant also employs over 540 employees, and is expected to create another 113 jobs by 2012.