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10 Demolition and Redevelopment Nothing Done Airports may decide to demolish a facility as the best Some vacancies occur and because the tenant continues to approach to ready a property for redevelopment. A decision pay rent, nothing is done. In these instances, airport spon- to demolish is made because-- sors typically work with the tenant and the FAA to plan for reuse in the future. The city of Dayton and Dayton Interna- The cost to maintain a facility is high, tional Airport (DAY) faced this situation when United Par- The parcel is needed for another use, cel Service (UPS) closed its Menlo Facility and cargo hub. Existing systems are highly specialized and/or UPS owns the building and has a ground lease on 166 acres outdated, that will expire in 2020. DAY considered purchasing the Access to the airfield needs to be limited and secured, building but opted to receive rent for the ground lease and Environmental mitigation to remodel is extensive, market the property to one or several tenants. Ultimately, A low likelihood of reuse points to partial or full prospective tenants would negotiate with UPS and seek FAA demolition, approval for any nonaviation use because the property has The airport does not have the immediate capital to ren- access to the airfield. ovate and demolition is the least costly option. In anticipation of opening its new terminal in 2005, Lee COMPLEXITIES OF REUSE OF AERONAUTICAL County Port Authority undertook an extensive terminal PROPERTY disposition evaluation at Southwest Florida International Airport (RSW) that included its main existing terminal, Reuse of aeronautical buildings comes with special chal- Concourses A and B, Concourse B extension, and the Inter- lenges to airport operators. The principal issues that national Arrival Building (IAB). The evaluation involved influence reuse are-- inspection of all accessible building areas; mechanical, plumbing, and electrical systems; underground utilities; Security; hydrant pumping systems; safety and fire issues; and envi- FAA grant and obligation issues; ronmental hazards. Four options were considered: Airport/airline operating agreements; Environmental regulations; Reuse of the entire facility; Technology changes; Removal of the main terminal and Concourses A and B, Cost to maintain a building, cost to demolish, and cost reuse of the newer Concourse B Extension and the IAB; to renovate (and who pays); Retention of the IAB, removal of everything else; Market prospects for replacement tenants and alterna- Demolition of all structures. tive uses; Stakeholder support; and For each option, the costs for demolition, construction, Competition with off-airport sites. and renovation; modifications to mechanical, electrical, and plumbing systems; ongoing maintenance; and roof repairs These issues are discussed briefly in the next sections. were estimated. Because the cost of system modifications was so high for reuse of the existing facilities, Lee County Port Security Authority decided to demolish all structures and prepare a ready and flexible site for a secure airside reuse (see Figure 7). Most aeronautical facilities are located next to the airfield. In this context, potential reuse options must consider and address security issues, in particular, general access to all airside areas of the airport. Reuse that requires access to the airfield is the easiest from a security standpoint as a facility that is totally directed at the landside would require closing off access to the airfield and potentially a commitment of security resources to ensure that the property is an indepen- dent landside component of the airport. FAA Grant and Obligation Issues If an airport sponsor has accepted federal Airport Improve- ment Program (AIP) grants, it agrees that its prime obliga- FIGURE 7 Debris from the old Southwest Florida International tion is to operate the airport for the use and benefit of the Airport terminal. (Source: Michel Fortier, Naples Daily News.) public. Furthermore, the FAA also views the airport's prime

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11 mission as aeronautics; therefore, an airport's first obliga- (RSW), signatory airlines did not want to share in the main- tion is to manage its assets in the civil aviation interests of tenance costs of both a new and vacant old terminal. How- the public. It is important that all nonaeronautical uses of ever, at PIT, modified airline/airport operating agreements land contribute to, or financially support, the aeronautical allowed for the airport's demolition of the former terminal, mission of the airport. With regard to this overall mission, and at RSW, an MII of the signatory airlines voted to approve Grant Assurances 19 and 29 direct an airport sponsor to a terminal project that included both construction of the new retain and operate aeronautical properties for aeronautical terminal and demolition of the old. uses. A sponsor may consider using aeronautical property for nonaeronautical uses, after review and approval of the Environmental Regulations FAA, including a period for public comment. Grant Assur- ance 24 requires an airport sponsor to maintain a fee and Reuse of aeronautical property requires compliance with rental structure that will make the airport as self-sustaining current environmental regulations that may include removal as possible. Grant Assurances 24, 25, and federal law require of asbestos, lead paint, and hydrocarbon contamination. It that airport sponsors that lease airport property for nonaero- is not uncommon for terminal areas to have fuel lines and nautical use receive no less than fair market value rents. other utility corridors buried adjacent to an aeronautical property. Fire suppression systems for maintenance facili- With regard to specific FAA grant-funded improvements ties, although appropriate for aircraft, would be dangerous if or equipment, a sponsor must operate and maintain the project they remained in place for an adaptive reuse to, for example, or equipment for its full useful life. Grant-funded construc- office space. tion or renovation projects are deemed to have a useful life not to exceed 20 years. Grant-funded equipment is deemed Technology Changes to have a useful life not to exceed 10 years. Land purchased with FAA grants is to be operated for airport purposes in Increased use of information technology systems, advanced perpetuity or until the sponsor receives specific release of fueling systems, alternative fuels, passenger tracking, self- its obligations from the FAA. In the case of a grant-funded tagging and check-in, wireless communications, common- building, the airport sponsor would need FAA approval for use baggage systems, and passenger transit are examples an alternative nonaviation use or for demolition. The FAA of technologies that can be expensive to retrofit into older may impose conditions for the reuse or demolition of the buildings. building, including repayment to the FAA of its share of the undepreciated value of the building or the reinvestment of Who Bears the Cost that value as the federal share of a new AIP-eligible airport improvement. Such repayment or reinvestment would not be When airport building leases are rejected by tenants dur- necessary if the specific project had exceeded its useful life ing bankruptcy, ownership usually reverts to the airport or if the reuse was for another AIP-eligible purpose. sponsor, which becomes responsible for maintenance and repairs. The costs to maintain a building without tenants can Because of FAA grant assurances and obligations, airport be considerable. Direct costs include maintenance and secu- sponsors should consult with the FAA throughout the reuse rity personnel, materials and supplies, contracted services, process so that the FAA Airport District Office can follow utilities, and other repair and maintenance. There may also an airport's best efforts to secure a new aeronautical tenant be indirect costs for taxes and insurance. before considering a mixed use or nonaeronautical use. In addition to upkeep costs, airport sponsors may incur Many airports consider interim uses (less than 5 years) the costs to remove environmental hazards and meet other for a vacated facility to continue a revenue stream and/or building code requirements for an adaptive reuse. This might solidify a long-term plan. include modifications to plumbing, electrical, mechanical, and fire safety systems, as well as ADA access requirements. Airport/Airline Operating Agreements The costs associated with these modifications can make the economics of adaptive reuse unattractive from a costbenefit Numerous airports have signed agreements with "signa- standpoint. tory" airlines that include MII clauses. These clauses typi- cally result in the airport losing the right to make fully Competition from Off-Airport Sites for Nonaeronautical autonomous decisions about capital expenditure programs Tenants by giving the signatory airlines a say on projects exceeding a certain dollar amount. Thus, where an MII clause exists, Nonaeronautical reuse on an airport does not always stack the disposition of older terminal buildings or other facilities up well against comparable property off an airport. Ware- may be influenced by the signatory airlines. In the cases of houses, multimodal logistics centers, and other transport- both Pittsburgh (PIT) and Southwest Florida International related activities that do not necessarily need airside access

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12 have a much wider selection of properties off-airport that Despite the many challenges of reuse, the case studies can be purchased outright (fee simple) or leased at a lower presented in the next chapter demonstrate some excellent rental rate than aeronautical property. examples of facilities that have been modified and placed back in service.