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Attracting Investment at General Aviation Airports Through Public–Private Partnerships (2019)

Chapter: Chapter 4 - General Aviation Airport State of the Practice: Case Examples

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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
×
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
×
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
×
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
×
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Suggested Citation:"Chapter 4 - General Aviation Airport State of the Practice: Case Examples." National Academies of Sciences, Engineering, and Medicine. 2019. Attracting Investment at General Aviation Airports Through Public–Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/25560.
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32 To provide more detail on project structure, function, benefits, and risks, a summary of several case examples is presented in the sections that follow. These case study examples were selected on the basis of feedback from the screening and survey results discussed in Chapter 3 and in consultation with the study panel. The following airports were case examples: • Fort Worth Meacham International Airport, • Crater Lake–Klamath Regional Airport, • McKinney National Airport, • Morristown Municipal Airport, and • Cecil Airport. The information about them has been provided in the survey responses with some supple- mental information provided from other sources including interviews and other published materials. A summary of each airport includes (1) the key stakeholders involved; (2) contracting, lease, and financial considerations; (3) the benefits to the airport; and (4) key lessons learned. A consolidated summary of the results is presented in the conclusions (Chapter 5) of this report. Fort Worth Meacham International Airport Overview Located 5 miles north of downtown Fort Worth, Meacham International Airport serves as the city’s oldest operating airport, dating to 1925 (39). Since that time, the airport’s facilities have been remodeled in subsequent decades. Today, Meacham’s facilities include three full-service FBOs, aircraft maintenance facilities, flight schools, and rental car facilities. As shown in Table 8 and Figure 5, Meacham is classified as a national airport and consists of two runways on a total of 745 acres. On the basis of interviews with key officials, Meacham International Airport has entered into several public-private partnership arrangements over the past 5 to 10 years. Specifically, airport officials have noted that they have entered into agreements whereby the private sector receives a long-term lease on airport property in exchange for paying for the construction of building new hangars for general airport use. Key Stakeholders Key stakeholders for Meacham International Airport include • City of Fort Worth, Texas; • Texas Department of Transportation—Aviation Division; and • American Aero FBO. C H A P T E R 4 General Aviation Airport State of the Practice: Case Examples

General Aviation Airport State of the Practice: Case Examples 33 Type Information IATA airport code FTW Airport sponsor City of Fort Worth, Texas Asset category National Based aircraft 410 Operations 160,000 Runway information 16/34 7,502 x 150 (concrete) 17/35 4,005 x 75 (asphalt) Acreage 850 Source: USDOT, FAA, Airport Master Record—Forth Worth Meacham International Airport; e-mail correspondence with Fort Worth Meacham International Airport officials, 2018. Table 8. Fort Worth Meacham Airport key facts. Figure 5. Fort Worth Meacham International Airport aerial map. (Source: Google Maps.)

34 Attracting Investment at General Aviation Airports Through Public–Private Partnerships Contracting, Lease, and Financial Considerations The financial considerations for this airport can involve more typical responses. Regarding the project delivery method, officials noted that they decided to move forward with the build– operate–maintain option. Regarding the procurement method, the best value method was the method chosen to move forward with. Regarding methods and incentives used to attract potential investors, Meacham officials noted that a request for proposal (RFP) process was used, with long-term lease and existing aircraft apron as incentives. In addition, this airport did enter into a PPP lease agreement: specifically, airport officials noted that a performance bond was required until completion for most of its PPP projects. Regarding the airport’s process for approval of the proposed lease terms, airport officials noted that they reached approval of these lease terms through a negotiation process. Developing PPP contracts inherently involved managing, and in some cases mitigating, risk. Regarding the financing risks that were encountered, airport officials noted complexities asso- ciated with city purchasing procedures and the need to deal with those risks. Regarding con- struction risks, airport officials noted the need to mitigate challenges related to coordination and communication between design and construction processes, utility and right-of-way infra- structure relocation, and permitting challenges. Finally, regarding operation, maintenance, and revenue risks, airport officials noted challenges associated with facility maintenance. Benefits to the Airport According to Meacham airport officials, PPPs were pursued for, and resulted in, many posi- tive benefits to the airport. Regarding reasons for pursuing an agreement, airport officials noted that this agreement (1) stimulated airport activity, including air service and airline competi- tion; (2) introduced more innovation and creativity; (3) increased airport revenue and fund- ing; (4) reduced reliance on general tax levies and other traditional services of airport funding; (5) improved operational efficiencies; and (6) made better use of limited airport resources, including personnel. As found in the literature review, Meacham officials reiterated the importance of reaching balanced negotiations between both parties as a way to ensure a successful PPP agreement. Regarding how officials sought to structure PPP agreements advantageous for both parties, air- port officials noted that reaching negotiation terms “in the middle” was needed. Regarding what key elements should be in a good lease, Meacham officials noted the importance for airport officials to develop a good lease template and have a thorough lease policy. These officials also noted that a lease should cover all the terms, insurance, mandatory improvement requirements, rates, and other issues. Lessons Learned Regarding the more technical lessons learned of entering into a PPP agreement, Meacham officials considered local design and building requirements and airport rules, regulations, and minimum standards to be most important to the success of the PPP. State design and building requirements, federal design and building requirements, subordination and/or estoppel agree- ments, remuneration and remediation cost agreements for abandoned projects, and cleanup needs were considered less important toward contributing to the success of the PPP agreement. Other aspects were critical to helping ensure PPP success. For example, Meacham officials noted that funding, communication, and clear goals contributed to project success. In addition to success factors, there were several “lessons learned” that could help other officials negotiate with private partners to attract investment in general aviation airports. For

General Aviation Airport State of the Practice: Case Examples 35 example, a few lessons learned include issues revolving around “working in silos” and challenges attributed to changes as the project is underway. Overall, Meacham airport officials noted that the transfer of project-related risk and increased project quality were two major benefits of part- nering with a private-sector partner. Crater Lake–Klamath Regional Airport Overview As shown in Table 9 and Figure 6, Crater Lake–Klamath Regional Airport, a regional air- port located near Klamath Falls in Southern Oregon, has entered into a PPP agreement with multiple private partners. This project provided for the construction of a maintenance hangar. The project was delivered using a build-to-suit method. The reviews, approvals, inspections, and acceptance were provided by the City of Klamath Falls. The airport department hired a design engineer to design the hangar. Type Information IATA airport code LMT Airport sponsor City of Klamath Falls, Oregon Asset category Regional Based aircraft 104 Operations 55,071 Runway information 07/25 5,258 x 100 (asphalt) 14/32 10,301 x 150 (concrete) Acreage 1,166 Source: USDOT, FAA, Airport Master Record: Crater Lake–Klamath Regional Airport; e-mail correspondence with Crater Lake–Klamath Regional Airport officials, 2018. Table 9. Crater Lake–Klamath Regional Airport key facts. Figure 6. Crater Lake–Klamath Regional Airport aerial map. (Source: Google Maps.)

36 Attracting Investment at General Aviation Airports Through Public–Private Partnerships FAA was not involved in the lease agreement, but FAA grant assurances were incorporated into the agreements. The construction of the hangar had to meet the grant criteria of the State of Oregon, Department of Transportation, ConnectOregon VI grant program. The airport will manage the project. To secure a long-term lease, permanent improvements were required. To determine the market feasibility of this project, the airport relied on historical trends and needs based off the airport’s master plan. This project is not yet completed. Key Stakeholders The key stakeholders in this project were • City of Klamath Falls; • Crater Lake–Klamath Regional Airport; • EAL Leasing, Inc.; • Klamath and Lake Counties; • State of Oregon, Department of Aviation; and • State of Oregon, Department of Transportation. Contracting, Lease, and Financial Considerations The airport utilized a request for qualifications for an engineering/design firm to design the hangar. Regarding the construction contracting process, the airport requested bids for con- struction of the hangar. Construction was based on low bid. The lease to the tenant was based on a request for interest. The airport offered incentives totaling $2.8 million utilizing a State of Oregon, Department of Transportation ConnectOregon grant. The lease agreement did not address any costs associated with project abandonment; however, the agreement did stipulate that the private tenant provide $200,000 in improvements within the first 5 years of the lease. There was a high expectation that the hangar could be leased because of the interest in the proj- ect. The airport drafted a lease agreement before negotiations with the tenant. The lease has a 30-year term with options for two 5-year renewals. The lease agreement was approved by the City Council in early November 2017. Regarding risks, the airport noted that financing risks associated with this project included changes in construction costs. The airport did not transfer any design or construction risk on this project. The facility was proving costlier to construct than originally planned because of different standards/aircraft being identified than originally thought, requiring a more robust fire suppression system to be designed. Benefits to the Airport The reasons the airport pursued this project agreement are as follows: • Access to capital; • Stimulated airport activity; • Enhanced airport customer service; • Shift of risk of debt, capital development, and/or operations to private sector; • Increased airport revenue and funding; • Reduced reliance on general tax levies and other traditional sources of funding; and • Better use of limited airport resources. This arrangement was a mutually beneficial partnership between the private tenant and the airport. The airport received a state grant to offset the full cost of construction, with the tenant to pay only the airport’s grant match portion. The airport won with increased revenue, and

General Aviation Airport State of the Practice: Case Examples 37 the tenant won with lower rent. The airport also stated that the construction of the hangar was intended to encourage development along the eastside of the airport, and the tenant was expected to assist in increasing economic activity at the airport. The airport noted that key elements of a good lease began with the standard provisions and included disposition of improvements and term extensions. The airport considered the transfer of project-related risk as a benefit of partnering with a private-sector partner. Lessons Learned The airport recognized limitations of such an arrangement as including greater possibility of unforeseen challenges, limited government flexibility, loss of facility control, and potentially not enough competitive, high-quality bids. In this project, the airport found local design and building requirements important in contributing to the success of the project. Airport rules, regulations, and minimum standards along with the FAA grant assurances were seen as important. McKinney National Airport Overview This project provided for the development of a 40,000 square-foot hangar, increased auto- mobile parking, and a new terminal building (shown in Figure 7). It was a build-to-suit project. There was no FAA or state involvement in the project. The private partner provided the initial financing as well as the engineering, design, and construction. The partner also provided inspec- tions. The public partner, the city, provided some (a percentage to be determined) of the funding to reduce the overall costs of the project. The city also agreed to lease–purchase the facility from Figure 7. McKinney National Airport aerial map. (Source: Google Maps.)

38 Attracting Investment at General Aviation Airports Through Public–Private Partnerships the private partner until it is paid in full. The city approved the development site, facility design, and cost, and inspects and accepts the project. FAA grant assurances were incorporated into the agreements. Table 10 summarizes facts about the airport. Regarding the ongoing management arrangement, the private partner will hold title until the public partner pays off the lease–purchase amount. The private partner (developer) will own the facility until it is completed and turned over to the city (McKinney Air Center). McKinney Air Center, the city-owned FBO, would pay a set fee to the developer to operate it including controlling the lease space, maintenance, and operation including aircraft movements. The McKinney National Airport is overseen at the city level by the deputy city manager, who works to gain support of the local funding entities for airport projects. The local funding options available to the airport go beyond typical city funding. They include economic devel- opment funds from the McKinney Economic Development Corporation and the McKinney Community Development Corporation, both utilizing sales tax revenues dedicated for specific economic development uses. Funding also came in the form of a loan from the city’s solid waste fund, which required approval from both the city manager and city council. Key Stakeholders The key stakeholders in this project are • McKinney National Airport; • McKinney Community Development Corporation; • McKinney Economic Development Corporation; • City of McKinney; • Western, LLC; and • KAS Engineers. Contracting, Lease, and Financial Considerations The airport used a two-step contracting process for this project. A short list of potential bidders was established on the basis of qualifications. The short-listed firms then submitted a bid for the project. The city used a request for quotation (RFQ) and its own procurement pro- cedures. No incentives were provided as part of this project. The lease agreement did address costs associated with lease abandonment, but this issue was handled at the city level. The entire arrangement was handled through both a lease agreement and an operating agreement for the facility. The airport has not encountered or noted any financing, design and construction, or operat- ing and maintenance risks. The project is underway and not generating revenue. Type Information IATA airport code TKI Airport sponsor City of McKinney, Texas Asset category National Based aircraft 287 Operations 134,000 Runway information 18/36 7,002 x 150 (concrete) Acreage 778 Source: USDOT, FAA, FAA Master Record, McKinney National Airport; e-mail correspondence with McKinney National Airport officials, 2018. Table 10. McKinney National Airport key facts.

General Aviation Airport State of the Practice: Case Examples 39 The airport noted several reasons for pursuing this agreement with a private partner. These include • Access to private capital for development; • Stimulated airport activity; • More innovation and creativity; • Long-term efficiencies in operation and maintenance; • Enhanced airport customer service; • Shift of risk of debt, capital development, and operations to the private sector; • Accelerated project delivery and reduced construction costs; • Increased airport revenue and funding; • Reduced reliance on general tax levies and other traditional sources of airport funding; • Improved operational efficiencies; and • Better use of limited airport resources. Benefits to the Airport The airport also structured this partnership, by paying down the total cost of the project, in a way that essentially shared the financial risk of the project and made it advantageous to both parties. Regarding the lease agreement, the airport noted that its attorney was familiar with airport grant assurances, minimum standards, and airport operating and lease agreements and that all the appropriate requirements were built into the lease agreement. The airport reported the following as benefits associated with partnering with the private sector: • Innovative infrastructure solutions, • Shorter construction schedule, • Risks better understood from the beginning of the project, • Transfer of project-related risk, • Increased quality, • Increased flexibility of financing options, • Increased efficiencies, and • Response to elected officials’ desire to optimize the use of private investment in the airport. Lessons Learned The airport also reported some limitations in partnering with the private sector. These included • Increased financing costs, • Greater possibility of unforeseen challenges, and • Additional costs for private-sector services. The airport also noted that the airport’s rules, regulations, and minimum standards along with their local design and building requirements were very important in the success of the partnership. Subordination and/or estoppel agreements along with the remuneration and remediation cost agreement for abandoned projects were somewhat important. The three biggest factors that contributed to the success of the project were 1. Financing, 2. Full-service development, and 3. Product quality.

40 Attracting Investment at General Aviation Airports Through Public–Private Partnerships The airport stated that to avoid threats to the success of the project or otherwise impeding the timeline or success of the project, it was necessary to gain trust. This was the airport’s first PPP. The airport recommended the structure used for this project especially for airports with cash flow restrictions. Morristown Municipal Airport Overview Morristown Municipal Airport (MMU) is a national, reliever airport located in Morris County, New Jersey. The airport is located approximately 30 miles from New York City and provides an alternative to Teterboro Airport for those traveling to the New York–New Jersey area. MMU provides services for businesses located in the New York City metropolitan area, where approximately 50 Fortune 500 companies have their headquarters or major facilities (2). Because of the proximity of such clientele, MMU has a strong incentive to provide good customer service and aviation enhancements. Additional information about Morristown is summarized in Table 11 and Figure 8. During the late 1970s and early 1980s, MMU spent several years operating at a loss, which led to the accumulation of a large debt for the town. This debt meant that capital improvements were not completed and the overall state of repair of the airport was in decline. Users were threatening to end business with the airport, and FAA had demanded that improvements be made and that current FAA standards be met and had removed grant eligibility until such time as the condition improved. Morristown recognized that it did not have the necessary expertise to run the airport at a profit and complete the upgrades. The town began to search for an alternative way to manage, operate, and maintain the airport, with key objectives being the retirement of the long-term debt, completing the necessary upgrades to the airport infrastructure with the aid of both state and federal grants, and boosting the profile of the airport to be an economic catalyst for the region (1). DM Airports, Ltd. (DM), an affiliate of the DeMatteis organizations, won the con- tract in 1982 and signed a long-term lease with the town. The deal was structured with a great flexibility: the agreement was closer to full privatization on the public–private spectrum. However, the lease did not change the ownership of the airport or diminish the town’s rights and powers. The lease agreement provided that DM pay off all existing debt over the term of the lease, as well as manage and operate the airport, complete renovations to the infrastructure, and boost the overall revenue and investment in the airport. The agreement was structured to provide the greatest flexibility for management, operations, and capital projects or renovation decisions to the private entity; therefore, transferring all finan- cial risk of the airport away from the town. Morristown receives annual rental payments (equal to services provided as required by the FAA) from DM but does not receive any of the revenue Type Information IATA airport code MMU Airport sponsor Town of Morristown, NJ Asset category National Based aircraft 183 Operations 75,331 Runway information 05/23 5,998 x 150 (asphalt) Acreage 625 Source: e-mail correspondence with Morristown Municipal Airport officials, 2018. Table 11. Morristown Municipal Airport key facts.

General Aviation Airport State of the Practice: Case Examples 41 generated. The rental payments are used to provide the services that the town still covers, such as police, fire and emergency response, site planning, code enforcement, and grant accounting. As the sponsor, the town maintains control over approval and processing of grants and site plans, but the agreement requires the cooperation of the town with DM on such matters. Since the beginning of the lease term, DM has reverted from contracting out management to managing in-house to realize cost savings; the firm has implemented capital improvements to meet FAA requirements and market demand; this work in turn has improved customer experi- ence through these upgraded facilities and improved rates. DM has turned to creative user fee agreements to provide U.S. Customs and Border Protection for international flights as well as fostering strong community relations by partnering with local groups and promoting the airport throughout the local community. MMU is now a financially self-sustaining facility that com- petes for private aviation business with similar general aviation airports in the area; the deal with DM has turned the airport into an economic catalyst for the region. Key Stakeholders They key stakeholders in this project are • The Town of Morristown; • Hanover Township; • DM Airports, Ltd; and • FAA. Figure 8. Morristown Municipal Airport aerial map. (Source: Google Maps.)

42 Attracting Investment at General Aviation Airports Through Public–Private Partnerships The two main stakeholders are Morristown and DM Airports, Ltd. Morristown retains own- ership of the property and land, while receiving rental payments from DM, and DM Airports is responsible for all maintenance and operations except the provision of police, fire, emergency medical response, and the certain site plan approvals and grant administration through the state and FAA (2). Certain approvals by FAA were also required; however, this agreement was reached before the current formal policy on privatization was enacted by FAA. Contracting, Lease, and Financial Considerations The town utilized a one-step bid process whereby all competitors submitted a complete bid package before a final company was chosen. The town evaluated the candidates on the basis of best value and chose DM Airports, Ltd., to fulfill the management contract. The long-term nature of the lease term was deemed necessary by all parties in order to retire the debt accu- mulated by the airport and to allow for the recovery of costs associated with the new capital investments that were required to bring the airport back into compliance and to meet the intended objectives. This factor also provides for the time to develop and renovate the airport while working with FAA for grant funding for improvements. Initially, DM entered the agreement in the hopes of deriving revenue from real estate because of the developable land on the property; however, wetland limitations and the expansion of Route 24, requiring 11 acres of airport property, elimi- nated the possibility for large-scale commercial development (2). DM retained management of the airport because the firm was already realizing revenue gains from its enhancements, and the unique positioning of MMU provided a competitive market for aviation. These revenue gains were in part generated by switching from a fuel-centrist business model to a real estate business model, through the development of the remaining land and facilities. Benefits to the Airport The town of Morristown pursued the PPP because of the conditions of the airport and the extensive amount of debt that had accumulated; DM provided access to private capital for devel- opment and rehabilitation efforts, as well providing the town with ongoing payments for its asset. So far, the agreement has managed to stimulate activity at the airport, improve facilities, and improve the customer experience. Morristown benefits from the expertise of the private entity as well as the risk transfer to the private sector. The rental payments allow Morristown to recover all costs of the services it provides to the airport, and currently the facilities are being kept in an excellent state of repair. Hanover Township also benefits from land tax revenue that the municipality did not previously pay. The airport noted several reasons for pursuing this agreement with a private partner. These include • Access to private capital for development; • Recovery of town costs; • Stimulated airport activity; • More innovation and creativity; • Long-term efficiencies in operation and maintenance; • Enhanced airport customer experience; • Shifted risk of debt, capital development, and operations to the private sector; • Accelerated project delivery and reduced construction costs; • Increased airport revenue and funding; • Reduced reliance on general tax levies and other traditional sources of airport funding;

General Aviation Airport State of the Practice: Case Examples 43 • Improved operational efficiencies; and • Better use of limited airport resources. Lessons Learned MMU’s management contract is an early example of the usage of PPPs at general aviation airports; a unique set of circumstances drove the town to seek expertise from the private sector, but there are still lessons to be learned and best practices to be derived from this example. DM Airports identified transparency, financial imperative, and FAA cooperation as three of the most important factors in ensuring the success of this PPP. The clear need for private invest- ment drove the deal forward, as well as the cooperation on the part of FAA, which also wished to see improvements at MMU. In terms of threats to success, DM Airports cited the historical losses and therefore financial standing of the airport, as well as a lack of precedent for such arrangements with FAA, and old leases that had to be renegotiated because of the new arrangement. Financial considerations were a key factor in both creating the need for this type of arrangement and also threatening its success. DM Airports took all of MMU’s debt after the lease was signed and therefore needed to generate revenue to pay this down. Cecil Airport Overview Cecil Field is a former naval air station located in Jacksonville, Florida. In 1999, the base and all its airport related property were transferred to the Jacksonville Aviation Authority (JAA) under the 1993 Base Realignment and Closure Act. (Other property of the former naval air station was turned over to the City of Jacksonville for its use.) JAA then had the task of bringing the aviation assets of the former naval air station up to modern standards. Cecil Airport, as it is commonly known, is now the eighth licensed commercial spaceport and houses aviation training facilities operated by the Florida State College Jacksonville (FSCJ). At this time, FSCJ was engaged in operating an aviation center of excellence at the Cecil campus, which offered educational programs for students interested in the aviation field. In 2007, FSCJ approached Cecil Airport and JAA to suggest a partnership to create a state- of-the-art coating facility and maintenance hangar at Cecil Airport. [The services performed— maintenance, repair, or overhaul (MRO)—are known as MRO activities, which the documents described as aircraft painting, coating and other maintenance, modifications, conversion, repair, and overhaul activities.] This partnership would allow the college to provide training in aviation coating as well as practical experience to students. JAA understood the benefits of such a facility from previous industry needs assessments; however, the authority wanted to ensure that there was demand in the community for such a specialized coating bay. At the time, FSCJ was competing for a state grant from the Florida Departments of Education and Technology that would provide $10 million in funding. JAA agreed to match the grant if won, and so both signed a letter of intent to that effect. FSCJ won the grant, and the two parties moved forward on the construction of the hangar. This project involved JAA leasing the land to FSCJ for the hangar facility, as well as searching for a private tenant for the hangar. The ground lease was executed in 2009 to FSCJ, and operation and management agreements with both the private tenant, Flightstar, and FSCJ were executed shortly thereafter. All three parties had a stake in the design and development of the hangar. Further, because this was a somewhat complex transaction, setting forth the roles of parties was crucial in understanding which party would be responsible for the various activities.

44 Attracting Investment at General Aviation Airports Through Public–Private Partnerships This agreement led to the construction and outfitting of a 130,000 square foot hangar with three bays: one for the coating facility and two heavy maintenance bays. The agreement between the three parties included a workforce development arrangement that offered job training for the students completing the course through FSCJ. On completion of the course, the students were offered employment with Flightstar (or contractors working for Flightstar) if they wished to continue working at the facility. This arrangement stands today, and the pro- gram has been successful at placing students if they so desired. Table 12 and Figure 9 provide a list of key facts and an aerial map of Cecil Airport, respectively. Key Stakeholders The key stakeholders in this project are • JAA, • FSCJ, and • Flightstar. Contracting, Lease, and Financial Considerations The airport and JAA were approached by FSCJ, which was hoping to secure a state grant from two state departments that would total $10 million. FSCJ proposed building a coating facility that would allow students to train and a private company to perform maintenance. JAA agreed to match the grant if FSCJ were successful and signed a letter of intent to that effect. The aviation authority and FSCJ used design–build to complete the construction of the hangar and convert it to an educational coating facility as well as a maintenance facility. The agreement involved FSCJ entering into a ground lease with JAA and JAA sending out a RFQ and Interest (RFQ& I) to find an operator for the hangar facility. Numerous documents were required in the transaction, with the initial lease between JAA and FSCJ for a 40-year term, and operation and management agree- ments with both FSCJ and Flightstar. The operation and management agreements were for ten years, with two 10-year extensions. The lease was entered into in 2009, the FSCJ operation and management agreement was executed in July 2010, and Flightstar’s agreement was executed in December 2010. At the end of the lease term, JAA will own the facility in its entirety. One of the key risks with this project was the possibility that JAA would not receive interest in leasing the hangar from a private entity. The three-bay hangar is a large facility that could price out many companies; however, the connection to FSCJ allowed the private company access to coating staff and the coating lab as well as the heavy maintenance facilities. Beginning the project without a lessee was the main risk borne by JAA and FSCJ. However, significant funding and construction began after all documents were in place and thus a lowered risk. Type Information IATA airport code VQQ Airport sponsor Jacksonville Aviation Authority Asset category Regional Based aircraft 22 + 69 military Operations 104,361 Runway information 09L/27R 4,439 x 200 09R/27L 8,003 x 200 18L/36R 12,503 x 200 18R/36L 8,002 x 200 Acreage 6,082 Source: e-mail correspondence with officials familiar with Cecil Airport operations, 2018. Table 12. Cecil Airport key facts.

General Aviation Airport State of the Practice: Case Examples 45 Benefits to the Airport The reasons the airport pursued this project agreement are as follows: • More innovation and creativity, • Accelerated project delivery and reduced construction costs, • Access to nontraditional funding through the grant, • Utilization of available land/real estate, and • Increased airport revenue and funding. The agreement allowed the airport to construct a state-of-the-art facility and enter a new market in terms of aircraft coating. JAA had the means to build the hangar and the facilities without the assistance from FSCJ; however, the financial risks and burden of constructing and then leasing the facility would have been much higher. Additionally, JAA would not have received design input from those who would be utilizing the facility; this lack of input could have reduced the marketability of the hangar. JAA noted that one of the core benefits was having all the parties to the agreement included in the design process. Figure 9. Cecil Airport aerial map.

46 Attracting Investment at General Aviation Airports Through Public–Private Partnerships JAA also mentioned the educational element as a benefit of the project; the ability to train and utilize students in the facility was a bonus for all parties, as students gained practical, on-site train- ing and the private operator had a pipeline of new talent upon their graduation. The operation and management agreements contain exhibits regarding the mandatory educational criteria. Lessons Learned In terms of lesson learned, the authority feels that it has benefited from having the partners involved in the design process and believes that was important to the success of the project. In terms of design requirements, since the facility is under the primary control of FSCJ and since FSCJ was in charge of the construction, the college had its own standards and inspectors. These standards, higher than the local requirements, added to the overall cost of the project, despite savings in other areas. Another lesson learned was to have the roles of the parties understood and to address clearly what happens in the event of default by any party, not only in the rent, but the failure to perform the various elements, such as meeting the educational criteria. PPPs are generally complex trans- actions, and all parties need to understand what-ifs for various scenarios. JAA stated that the contract did not include a contingency if a private operator was not found. This situation did not pose a significant problem since Flightstar was awarded the con- tract quickly after the design phase began, but does pose a risk if this model is replicated. Although the design phase was costly, all parties were in place and all documents signed before the biggest expense of actual construction began. Finally, one issue that arose after construction was the lack of adequate parking; JAA had to create additional parking facilities after the hangar opened to accommodate demand.

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Although general aviation airports have historically been funded by federal, state, and local entities, the private sector is increasingly playing a larger role. This involvement has ranged on a continuum from service and management contracts to singular projects at airports that involve leasing mechanisms to long-term leases and the whole-scale private development of general aviation airports.

In an era of declining resources and increasingly scrutinized public expenditures, private-sector involvement is and will likely need to continue to play a larger role to fill an ongoing and increasing gap between the existing infrastructure and the infrastructure that is needed.

Airport Cooperative Research Program (ACRP) Synthesis 94: Attracting Investment at General Aviation Airports Through Public–Private Partnerships explore public–private partnerships (PPPs) at general aviation airports in the United States over the past five years.

For the purpose of the synthesis, these PPPs are defined by the World Bank as long-term contracts between a private party and a government entity for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance

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