HomeMy WebLinkAbout11/17/2004 - STAFF REPORTS (20) MEMORANDUM
PALM SPRINGS INTERNATIONAL AIRPORT
From the desk of: Richard S. Walsh, A.A.E., Director of Aviation
DATE: November 15, 2004
TO: David H. Ready, City Manager e�`,
FROM: Richard S. Walsh, A.A.E., Director of Aviation'
SUBJECT: City Council Request— Million Air Lease
The City leases a portion of its Airport facilities to Palm Springs FBO dba Million Air
("Million Air") for provision of fixed base operator("FBO") services under a 1981
Indenture of Lease and Aeronautical Concession Agreement ("Lease"). Recently,
Million Air has breached the Lease by allowing its sub-tenants to use the Airport's t-
hangars in violation of the Lease. These prohibited activities continued even after 2
letters from Million Air to the Airport assuring no such violations existed. Million Air
also breached the Lease by failing to pay percentage rent to the City for revenues
generated by other Million Air sub-tenants.
On August 25, 2004, Million Air requested that the City approve transfer of the Lease to
North American Capital Holding Company. Toward that end, Million Air is seeking an
estoppel certificate from the City confirming that there are no outstanding violations of
the Lease. Million Air has had a long history of ownership transfers from its beginnings
in the 1970's. It is estimated that at least five (5) transfers of ownership have occurred
prior to the November 18, 1981 Agreement No. 1764. In addition to these transfers,
Agreement No. 1964 (12-18-81)has also transferred five (5) times from this date.
The Lease limits uses of the leased area to aeronautical-related uses or other uses serving
the Airport. Article III, Section 4 of the Lease lists all of the allowable uses, including
for the repair and maintenance of aircraft (sec. 4(a)), storing aircraft(sec. 4(f)), operation
of a charter or air taxi flight service(sec. 4(g)), and"[s]uch other.activities as are incident
to the operation of a general commercial aviation business" (sec. 4(n)). The uses are also
subject to the prior approval of the Airport Commission. During the Airport's review
relative to issuance of an estoppel certificate, many of the subleases at the t-hangars may
have been approved without Airport Commission, including before Million Air took over
the lease.
To confirm whether such violations existed, the City conducted an inspection in
accordance with its rights under the Lease. This initial inspection revealed several uses at
the t-hangars in violation of the Lease. In response, Million Air admitted to the
violations by letter of October 4, 2004 to its sub-tenants demanding correction of the
violations. The City subsequently conducted follow-up inspections on t-hangar facilities
to assess compliance.
The chronology of compliance issues were provided in a packet to City Council under
closed session dated October 20, 2004. Contained within that packet is information
specific to each of the violations, correspondence and subsequent actions taken by
Airport staff. Portions of that packet clearly address the concerns voiced by Million Air
tenants Mr. Roy Hauffhines, Mr. Harold Williamson, Mr. Dominic Tallerita, Mr.
Dominic M. Tallerita, Mr. Marvin Rosenburgh, Mr. Steven Stewart, Mr. Avens, Mr. Dan
Esponson, and Mr. Simon Houseman revealed to the City Council at the
November 10,2004 meeting. Given the similar nature of each of the comments, the
following excerpts from that packet best serve to address comments received:
1. It was believed and has now been confirmed, that Million Air—Palm Springs
has allowed improper use of its leasehold areas. More specifically, the Million Air t-
hangars, since the beginning of the last assignment of the lease, have had issues with
improper facility use or non-compliance, including general infonnation notices for
fire code violations from the Fire Marshal with the Palm Springs Fire
Department. Only after forced investigation were the real problems identified.
Through correspondence, meetings and follow up conversations that were held with
the General Manager—Eric Affeldt from Million Air, the Airport began the process
to force Million Air to resolve all of these outstanding compliance issues. All of the
problems were identified and documented.
2. Specifically,Million Air was notified in late June to assure that all inappropriate t-
hangar activities were to be discontinued by September 1, 2004. We were advised by
Karen Davidson of Million Air on September 2, 2004 that non-aviation related
businesses in the hangars were no longer being conducted and that all miscellaneous
items would be removed from the hangars by September 30, 2004. After September
30, 2004, during normal operational inspections of the perimeter of the airport, airport
staff discovered that the t-hangar activities,which were previously found to be out of
compliance in the Million Air t-hangars, had not ceased. Airport staff notified the
General Manager from Million Air with the first written request to inspect the t-
hangars on September 27, 2004. Even though requested in the letter, the General
Manager was not able to provide access to many t-hangars, more specifically the t-
hangars with the known compliance issues were not available to be inspected. This
resulted in a second letter of request to inspect all the t-hangars on the Million Air
leasehold. Our inspection of the Million Air t-hangars on October 1, 2004 revealed
that a full automotive shop, complete with hoist and high-grade equipment, was still
set up in t-hangars 14, 15 and 16. It is believed from the records provided by
Million Air, that these hangars are subleased to Mr. Dominic Tallarita. As a side
issue, during the time when Airport staff discovered these activities had not ceased
after September 30, 2004, it is believed that Mr. Tallarita was notified by the Million
Air General Manager who stated to Mr. Tallarita that since these non aviation
activities had not ceased, that the Airport was going to cut Mr. Tallarita's lock off his
t-hangars and enter the hangars. Mr. Tallarita became very angry and called the
Director of Aviation and the Assistant Director of Aviation and left two (2) very
disturbing voice mails which further prompted a police incident report to be taken.
At no time did Airport staff enter the t-hangars without first providing
correspondence requesting the inspections even though the lease allows the
r
Airport the right to inspect the Million Air leasehold facilities at any time
without notification.
3. Million Air representatives continued to proclaim that the t-hangar issues had been
resolved, but it was obvious that no attempt had been made to remove the
unauthorized equipment from the hangars. The General Manager, during the 2°a
inspection, even proclaimed that a follow-up inspection conducted by his staff had
occurred after he was notified by the Airport. He stated that all of the automotive
equipment in the t-hangars had been cleaned out. He went on to say, that he even had
photographs of the t-hangars which proved that this equipment had been removed.
This is further confirmed in a memo dated October 1, 2004 from the Airport
Operations Supervisor lI to the Assistant Director of Aviation, who were both present
during the second inspection, and heard the General Manager make these statements.
These statements were made as we were entering the Tallarita hangars where the
illegal automotive shops were discovered. This blatant non-compliance and
subsequent falsification of the facts by the General Manager is evidence that no
attempt was made to resolve the t-hangar issues and none of the unauthorized
equipment had been removed as indicated. Due to the numerous welding tanks, fuel
tanks, car engines and other combustible items found in various hangars during the
inspection, the Fire Department has issued a general notice of advisory regarding
these potential fire code violations. Follow up correspondence with the attached
information from the Fire Department was sent to the General Manager in an effort to
ensure that these t-hangars are no longer housing any prohibitive items which could
cause safety issues.
cc: City Council
City Clerk