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1FORN`P CITY COUNCIL STAFF REPORT
DATE: December 14, 2011 Consent Agenda
SUBJECT: SKYWEST AIRLINES AND ATLANTIC AVIATION LEASE
AMENDMENTS
FROM: David H. Ready, City Manager
BY: Palm Springs International Airport
SUMMARY
Request the City Council to approve a lease modification and an economic incentive for
Palm Springs International Airport's tenant, SkyWest Airlines, to accommodate the
expansion of its aircraft maintenance operation.
RECOMMENDATION:
1) Approve Amendment No. 3 to the Operation and Lease Agreement No.
A2388 with SkyWest Airlines, Inc., adding an amount of undeveloped
leasehold land to accommodate an expansion of SkyWest's maintenance
operations and providing SkyWest with development assistance of up to
15 months of rent abatement, not to exceed $51,000; and
2) Approve Amendment No. 2 to the Operation and Lease Agreement No.
A1764 with Atlantic Aviation FBO, Inc., reducing the amount of its
undeveloped leasehold land; and
3) Authorize City Manager to execute all necessary documents.
STAFF ANALYSIS:
SkyWest Airlines and Atlantic Aviation are both longstanding tenants at Palm Springs
International Airport. These properties are adjacent to each other on the east side of
ITEM NO.-21
Airport Commission Staff Report
December 14, 2011— Page 2
SkyWest&Atlantic Lease Amendments
the airport off of Gene Autry Road. The SkyWest Airlines facility is used for aircraft fleet
maintenance and the Atlantic Aviation facility is a full service Fixed Base Operator.
The PSP SkyWest Maintenance Station is now servicing more aircrafts than originally
planned, including those that provide commercial air service in the PSP market, and the
airline needs to expand their aircraft parking apron to accommodate the increasing
numbers of aircrafts. In order to facilitate this expansion, SkyWest has requested to
add an additional 2.5 acres to the current lease, which extends through 2027. The
neighboring tenant, Atlantic Aviation, has agreed to reduce its lease acreage by 2.5
acres and provide it to SkyWest's leasehold.
Airline maintenance facilities are considered prime developments for airports because
they help sustain air service to a market, generate well paying skilled jobs, and create
added airport revenue in rents and fuel sales. Because there are only a small number
of these types of airline facilities nationwide, airports typically find themselves
competing for these tenants by offering financial development incentives.
SkyWest has requested a development incentive in the amount of $51,000 or the
equivalent of up to 15 months of rent abatement. The Airport Commission voted at its
November meeting in favor of providing this incentive — as SkyWest is an important
airline partner serving our market, while employing over 100 skilled workers.
The Airport Director has confirmed that the rent abatement is consistent with the FAA
guidelines for airline incentives.
FISCAL:
The current Atlantic Aviation lease generates $41,382 annually for this 2.5 acre parcel.
Once the property is transferred to the SkyWest lease, it will generate $37,026 annually.
The reason for the differential is because the previous Atlantic lease established the
value for this property back in 2005 when values were significantly higher. The revised
cost to SkyWest is consistent with today's lower market values and FAA regulations
regarding land rental rates at airports. Over the course of the remaining SkyWest lease,
which expires in 2027, there will be three CPI increases. The total gross rent projected
for this parcel under SkyWest is expected to generate approximately $600,000 over the
remaining life of the lease.
Other positive financial factors related to this support of the SkyWest expansion include
retaining over 100 jobs at the facility and added revenue from landing fees and fuel
sales.
The only direct expense to be incurred by the airport for this expansion will be the
relocation of a small section of security fence line to delineate the new leasehold
boundary. The details of that modification will be refined once the project gets
02
Airport Commission Staff Report
December 14, 2011-- Page 3
SkyWest&Atlantic Lease Amendments
underway and, if possible, the new FAA security fencing project, that is currently
underway, may be able to handle that expense.
Thomas Nolan, A.A.E.
Executive Director
David H. Ready, E
City Manager
Attachments
03
AMENDMENT NO. 3 TO INDENTURE OF LEASE NO. 2388
SKYWEST OPERATING AND LEASE AGREEMENT
AT PALM SPRINGS INTERNATIONAL AIRPORT
THIS AMENDMENT NO. 3 TO LEASE NO. 2388 ("Amendment") is made and
entered into this fifteenth day of December 2011, by and between the CITY OF PALM
SPRINGS, a charter city and California municipal corporation ("Lessor"), and SKYWEST
AIRLINES, INC., a corporation organized and existing under the laws of the State of Utah
("Lessee").
RECITALS
WHEREAS, Lessor and Lessee entered into Lease Agreement No. 2388
("Agreement'), effective January 15, 1987; and
WHEREAS, the parties wish to amend the Agreement pursuant to the terms of
Amendment No. 3 as follows;
WHEREAS, Lessor owns and operates an airport known as the Palm Springs
International Airport, located in the City of Palm Springs, County of Riverside, State of
California ("Airport"); and
WHEREAS, to further its business of aeronautics and aircraft modification, Lessee is
desirous of leasing certain real property consisting of extending Parcel 5 by 200 feet to the
south, which is 550.90 feet wide, (110,180 square feet) and which property is part of the
Airport. It is more specifically described and depicted as Parcel 4A on Exhibit "A", attached
hereto and incorporated herein ('Parcel 4A"); and
WHEREAS, Lessor is desirous of leasing the Parcel 4A to Lessee and granting
Lessee certain rights to access the Airport from Parcel 4A to allow Lessee to perform its
business of aeronautics and aircraft modification thereon.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
for other good and valuable considerations, Lessor does hereby lease to Lessee, and
Lessee does lease from Lessor, the parcel of land containing the northern 200 feet of
Parcel 4, which is 550.90 feet wide, which property is part of the Airport, as more
specifically described and depicted as Parcel 4A on Exhibit "A", attached hereto and
incorporated herein ("Parcel 4A"); for all purposes, together with those rights and privileges
stated elsewhere in this agreement upon the following terms and conditions, to become
effective December 15, 2011:
AGREEMENT
Section 1. The ending date of the term of this Amendment No. 3 shall be the same as that
described in Article I of Lease 2388, January 14, 2027.
04
Section 2 Parcel 4A, hereinafter more fully described on Exhibit "A", contains the northern
200 feet of Parcel 4, which is 550.90 feet wide.
Section 3 The rental value of Parcel 4A as determined by Lessor at the inception of this
Amendment will be the same rental rate as Lease No. 2388 and as adjusted on
January 14, 2012. In consideration for the improvements made by the lessee,
rental payments shall begin on February 1, 2013.
Section 4 Rental adjustments shall be as per Article II of Lease Agreement No. 2388, the
first rental adjustment to take effect as of January 14, 2017.
Section 5 All other conditions of Lease Agreement No. 2388 not in conflict with this
Supplemental Agreement shall remain in full force and effect and shall apply to
Parcel 4A.
(SIGNATURE PAGE FOLLOWS)
SkyWest Airlines, Inc.
Amendment 3 to Lease Agreement No. 2388
Page 2 of 4 05
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement as of the date first
written above.
ATTEST: CITY OF PALM SPRING
a municipal corporation
By: BY: 1
City Clerk City Manager v�VI
APPROVED AS TO FORM:
By:
City Attorney
CONTRACTOR: Check one: Individual _Partnership_Corporation
Corporations require two notarized signatures: One from each of the following: A. Chairman of Board,
President, or any Vice President: AND B. Secretary, Assistant Secretary, Treasurer, Assistant Treasurer, or
Chief Financial Officer.
By: By:
Signature(notarized) Signature(notarized)
Name: Name:
Title: Title:
State of State of
County of County of
On before me, On before me,
personally appeared personally appeared
who proved to me on the basis of satisfactory who proved to me on basis of satisfactory
evidence to be the person(s)whose name(s) evidence to be the person(s)whose name(s)
is/are subscribed to the within instrument is/are subscribed to the within instrument
and acknowledged to me that he/she/they and acknowledged to me that he/she/they
executed the same in his/her/their authorized executed the same in his/her/their authorized
capacity(ies), and that by his/her/their capacity(ies), and that by his/her/their
signature(s)on the instrument the person(s), signatures(s)on the instrument the person(s)
or the entity upon behalf of which the or the entity upon behalf of which the
person(s)acted, executed the instrument. person(s)acted, executed the instrument.
I certify under PENALTY OF PERJURY I certify under PENALTY OF PERJURY
under the laws of the State of California that under the laws of the State of California that
the foregoing paragraph is true and correct. the foregoing paragraph is true and correct.
WITNESS my hand and official seal. WITNESS my hand and official seal.
Notary Signature: Notary Signature:
Notary Seal: Notary Seal:
SkyWest Airlines, Inc.
Amendment 3 to Lease Agreement No. 2388
Page 3 of 4 06
Exhibit"A" Revised
Q� PARCEL 5
`\\ APARCEL 48 2.26321
N 3632'OB' W
PARCEL 3 �tiF
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\ PARCEL 1
\ PARCEL 2
3.067.14
RECORD CURVE DATA
0= 3674'02'
R = 4,850' I
L = 3,067.14'
T = 1,SWRI
400 0 40D 800
SCALE IN FEET 62.90'
N 00'17'49-
ROAD-__- -_
--__-.
SkyWestAirlines, Inc.
Amendment 3 to Lease Agreement No. 2388
Page 4 of 4 07
AMENDMENT NO. 2 TO INDENTURE OF LEASE NO. 1764
ATLANTIC AVIATION FBO, INC.
AT PALM SPRINGS INTERNATIONAL AIRPORT
THIS AMENDMENT NO. 2 TO LEASE NO. 1764 ("Amendment") is made and entered
into this fifteenth day of December 2011, by and between the CITY OF PALM SPRINGS, a
charter city and California municipal corporation ("Lessor"), and ATLANTIC AVIATION FBO,
INC., a corporation organized and existing under the laws of the State of Delaware,
("Lessee").
RECITALS
WHEREAS, Lessor and Lessee entered into Lease Agreement No. 1764
("Agreement"), effective December 15, 1981; and
WHEREAS, the parties wish to amend the Agreement as provided in this Amendment
to reduce the total square footage of property to be leased as follows;
WHEREAS, Lessor owns and operates an airport known as the Palm Springs
International Airport, located in the City of Palm Springs, County of Riverside, State of
California ("Airport"); and
WHEREAS, Lessee currently leases Parcel 4, as more specifically described and
depicted on Exhibit"A", which is attached hereto and incorporated herein; and
WHEREAS, Lessee is agreeable to amending and reducing the portion of the real
property that it currently leases from the Lessor. Lessee specifically agrees to terminate its
lease and all associated rights for that portion of the real property described in the
Agreement consisting of the northern 200 feet of Parcel 4, a section of property which is
550.90 feet wide and covers 110,180 square feet. The section of the property for which
Lessor relinquishes all rights is labeled as Parcel 4A on the attached Exhibit "A" and is
hereafter referred to as "Parcel 4A;" and
WHEREAS, it is agreed that Lessee will continue to lease the remaining southern
most portion of Parcel 4, more specifically described and depicted as Parcel 4B on Exhibit
"A"; and
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for
other good and valuable considerations, Lessor and Lessee do hereby agree as follows:
Atlantic Aviation FBO, Inc.
Amendment No. 2 to At 764
Page 1 of 4
08
AGREEMENT
Section 1 The ending date of the term of this Amendment No. 2 shall be the same as that
described in Article I of Agreement No. 1764 for the remaining southern most
portion of Parcel 4, and referenced in Exhibit"A" as Parcel 4B.
Section 2 Lessee agrees to relinquish any and all rights under the Agreement to Parcel 4A.
Section 3 The rental value of Parcel 4A, as determined by Lessor at the inception of this
Amendment is $3,525.76 per month. As such, the lease payment due to Lessor
from Lessee shall be reduced by $3,525.76 per month for the remaining term of
the Agreement.
Section 4 Rental adjustments for lease payments for Parcel 4B shall be as per Article II of
Lease Agreement No. 1764, the first rental adjustment to take effect as of
December 15, 2011. For partial December credit of$1,762.88
Section 5 In consideration of Lessee's agreement to terminate its lease and all associated
rights for Parcel 4A, during the term of the Agreement Lessor grants Lessee a
right of first refusal to separately lease Parcel 4A, Parcel 5, Parcel 5A or 56,
commonly known as the Skywest Airlines Maintenance Facility, all as depicted
on Exhibit "A." Prior to leasing Parcel 4A, Parcel 5, Parcel 5A or 5B to any third
party, separately or in combination, during the term of the Agreement Lessor
shall first give Lessee notice and the opportunity to lease these properties on the
same terms and conditions offered to such third party and shall not lease these
properties to any third party unless and until Lessee declines to lease these
properties on the same terms and conditions.
Section 6 All other conditions of Lease Agreement No. 1764 not in conflict with this
Supplemental Agreement shall remain in full force and effect and shall apply to
Parcel 4A.
(SIGNATURE PAGE FOLLOWS)
Atlantic Aviation FBO, Inc.
Amendment No. 2 to Al764
Page 2 of 4
09
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement as of the date first written
above.
ATTEST: CITY OF PALM SPRING
a municipal corporation
By: BY n '
City Clerk CiryManageriSflr-V
-
APPROVED AS TO FORM:
By:
City Attorney
CONTRACTOR: Check one: _Individual _Partnership_Corporation
Corporations require two notarized signatures: One from each of the following: A. Chairman of Board,
President, or any Vice President: AND B. Secretary, Assistant Secretary, Treasurer, Assistant Treasurer, or
Chief Financial Officer.
By: BY:
Signature(notarized) Signature (notarized)
Name: Name:
Title: Title: -
State of State of
County of County of
On before me, On before me,
personally appeared personally appeared
who proved to me on the basis of satisfactory who proved to me on basis of satisfactory
evidence to be the person(s)whose name(s) evidence to be the person(s)whose name(s)
is/are subscribed to the within instrument is/are subscribed to the within instrument
and acknowledged to me that he/she/they and acknowledged to me that he/she/they
executed the same in his/her/their authorized executed the same in his/her/their authorized
capacity(ies), and that by his/her/their capacity(ies), and that by his/her/their
signature(s)on the instrument the person(s), signatures(s)on the instrument the person(s)
or the entity upon behalf of which the or the entity upon behalf of which the
person(s)acted, executed the instrument. person(s)acted, executed the instrument.
I certify under PENALTY OF PERJURY I certify under PENALTY OF PERJURY
under the laws of the State of California that under the laws of the State of California that
the foregoing paragraph is true and correct. the foregoing paragraph is true and correct.
WITNESS my hand and official seal. WITNESS my hand and official seal.
Notary Signature: Notary Signature:
Notary Seal: Notary Seal:
Atlantic Aviation FBO, Inc.
Amendment No. 2 to A1764
Page 3 of 4
10
Exhibit"A" Revised
eAc PARCEL 5
hypp�"`A
�yPARCEL 48 2,200.10'
,$t �\ N 3632b8' W
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PARCEL 3 �lF,
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3
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a n
N�m
`\ PARCEL 1 z
\ PARCEL 2
3,067.14
i
RECORD CURVE DATA
�= 3674'02"
R = 4.650'
L = 3,057.1,V
T - 1.686.81'
400 0 400 800
SCALE IN FEET 62.W
N 00'17'48' W
Atlantic Aviation FBO, Inc.
Amendment No. 2 to All 764
Page 4 of 4
11