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CITY COMMISSION AGENDA ITEM |
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Department: |
Public Works |
Commission Meeting Date: January 16, 2018 |
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Staff Contact: |
Jason Stowe |
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Recommendations/Options/Action Requested: |
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Approve T-Hangar lease rates of $225.00 for Hangars A and $250.00 for Hangars B and C per month for 2018 and for future years increase the rental rates by three percent (3%) annually.
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Executive Summary: |
The Lawrence Airport has three sets of T-Hangars that have 10 spaces in each building. These hangars are rented to interested parties who have airplanes or have aviation specific use. The terms for which these spaces are rented are spelled out in a 24-month lease agreement that requires the tenant/occupant to agree to rental rates, insurance requirements, term limits and extensions and responsibilities. These lease agreements have recently been reviewed by Public Works, Finance, and Legal staff to ensure that the requirements that are outlined in these documents are accurate and lease rates are being applied and comparable to other neighboring airports of like size and use. Attached is a spreadsheet that shows comparable size hangars and the rates applied for those spaces. Additionally, Aul Appraisals was consulted to assess fair market value for these spaces.
Each of these spaces’ current lease is set to expire on March 31, 2018. A 30-day notice of any changes or termination is required by either party. The intent will be to fill all hangars either with current renters or begin the process of contacting individuals who are on the current waiting list.
Upon review of the current lease documents, it was determined that the current lease format is not adequate to support the City’s needs. A new draft has been created and currently under review by the Legal Department. Similar to the current lease agreements, term limits, responsibilities of each party, insurance requirements, and lease rates are outlined in that document. The new lease will include terms that are one (1) year in length and will automatically renew each year unless 30-days’ written noticed is received from the tenant or 30-days’ notice is given to the tenant by the City.
Current lease rates are listed in the table below
Based on the results from the appraiser a recommended lease rate of $225.00 and $250.00 is being requested.
Proposed new lease rate:
One other item in need of attention is the rental rate increase. The rental rate increases to these spaces historically has not been applied consistently. To apply consistent measures for increasing rental rates, a flat three percent (3%) increase annually should be applied. This practice should help eliminate confusion for either party about how or when increases are to occur. This three percent (3%) annual increase will begin with the second year of the new agreements
The remaining leases for various other business tenants of the airport are also being reviewed. These leases have varying terms and renewal dates. As these leases come up for renewal, the staff will prepare a recommended lease for the City Manager’s approval.
At this time, one of the business leases has a variance of $948.57 that was discovered during the Accounts Receivable audit. The lessee has been notified and disagrees the amount is owed. This account went delinquent on 12/28/2017. This account will be turned over for collection.
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Strategic Plan Critical Success Factor |
Effective Governance/Professional Administration Sound Fiscal Stewardship Economic Growth and Security |
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Fiscal Impact (Amount/Source): |
The recommended action is expected to result in a $4,800.00 increase to revenue in the first year with the new rates for T-Hangars and three percent (3%) upward adjustment annually.
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Attachments: |
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Reviewed By: (for CMO use only) |
☐TM ☐DS ☐CT ☒BM |