Officials discuss airport land lease

BENTONVILLE — Changes to the land lease process at the municipal airport could hinder private investment, developers say.

Chuck Chadwick, airport manager, contends the standardized 45-year lease essentially short-sells the real estate value for the city.

Most developments at the airport are hangars, but they could be a commercial building or self-fueling station. Developers build projects they own on airport land leased from the city.

The length of the lease should depend on the amount of infrastructure the developer is going to build for the airport, Chadwick told the Airport Advisory Board and city staff members Jan. 4. Any improvements, including buildings, made on city property become the airport’s after the lease ends.

Lease lengths should fluctuate, he said.

“The FAA doesn’t agree with anything over 50 years, because by that time, the value of the improvements on the land have probably already been worn out. And they also say that

30 to 35 years is needed for an investor to get a reasonable rate of return on his investment,” Chadwick said.

Officials discussed a new procedure where the developer and Chadwick would negotiate financial and lease-length terms. The airport board would vet it for fairness for both the developer and city. It would then be sent to City Council for final approval.

The meeting Jan. 4 was a work session. Nothing was formally approved.

Chris Townsley, a pilot with 12 years of experience, said the changes could hinder development because the standards for developers to meet is already high.

He started planning a 7,200-square-foot hangar about three years ago and spent about $60,000 for engineering documents, architectural drawings and other development documents prior to applying for a lease, he explained.

He obtained a standardized 45-year lease agreement in March 2017 for land on the west side of the runway. He hopes to break ground in mid-February.

“I had to put a lot of skin in the game to get to the place where I could ask to be qualified for that lease,” he said in a phone interview Friday morning.

The municipal airport is a general aviation airport on Southwest I Street. The number of aircraft based there has increased from 63 in 2014 to 77 in June 2017.

The airport predicts there will be 111 by 2035, according to the Airport Master Plan. The plan, adopted in July 2016, calls for developing 52,900 square feet of hangars over the next 20 years.

Chadwick is a lawyer with experience at other airports in the region regarding leases for businesses that provide aeronautical services, he said. City officials sought him out last summer to become airport manager, he said.

A few people have become upset when he denied them the 45-year standard lease, Chadwick said. They want the same deal others received, but Chadwick said he can’t guarantee that without knowing what kind of investments would be made in the airfield.

“The process wasn’t right, but it’s being corrected,” he said.

Brian Baldwin, board chairman, said its members need to calculate the return for the investor and the return for the city.

“All the city is looking for is a balance in equity there,” he said.

Townsley wouldn’t “begin to have confidence” to do what he’s done with the changes being discussed, he said. He would have to make the same investment, but then have to negotiate for a lease.

“It’s like working all your life to build a nest egg then going to Vegas and throwing it on the roulette table,” Townsley said. “The bar is already so high, if you really add anything else to it, you’re

essentially stepping on the throat of development.”

He saw the requirements under the current system as a technicality: If he provided the information the city requested he was confident he’d get a lease and building permit.

The airport’s east side has 13 of 14 hangars and little room left to develop. The 600 feet of taxiway on the northwest side of the 4,426-foot runway is being extended south on the west side, which opens up land.

The west side has one hangar and three more in various stages of construction.

People began inquiring on how to reserve land on the west side as the taxiway expansion plans became more concrete a few years ago. The thinking then, from board members and city staff, was how to expedite the land lease process, officials said.

The policy was approved by the Airport Advisory Board in August 2016, but not by the City Council and was never signed by Mayor Bob McCaslin, Chadwick said. Therefore, it’s not a binding obligation, he said.

“With that said, I know there was a lot of people who put a lot of hard work into this, and others started relying on this being the process,” he said. “But in fact, it never was a completed process.”

The leases issued under the policy that have been approved by the board, council and signed by the mayor are legally binding and will stand, Chadwick assured.

A few board members said the former airport manager had several roles with the city, which prompted the simplified, standard lease to save time.

“I think we did the right thing at that time because we didn’t know any different,” board member Joe Clark said.

Board member Chris Faulhaber said it makes more sense to have individual negotiations because Chadwick’s only role is to manage the airport. The board will still be able to vet the leases, he said.

Chadwick said he can create a lease where the majority of it is standard terms, but where the financials and term lengths can be filled in for each case.