Presentation on theme: "Proposed Amendments for Palomar Airport Center dba Premier Jet Abbreviated Presentation Palomar Airport Advisory Committee June 15, 2006."— Presentation transcript:
Proposed Amendments for Palomar Airport Center dba Premier Jet Abbreviated Presentation Palomar Airport Advisory Committee June 15, 2006
Background This item originally discussed at meeting on May 18, 2006 Some PAAC members said they did not have enough information to vote to recommend approval PAAC voted 4 to 3, with 1 abstention, against recommending Board approval
Options Drop the proposed amendments Move forward with the statement that PAAC did not vote to recommend Board approval in the letter to the Board Bring the item back to PAAC for additional information and discussion
Why a Special Meeting? Staff calls special meetings Advisory Councils for various reasons, for example time sensitive matters or those needing detailed discussion For issues involving complex financial analysis it can be preferable to have daytime meeting on one topic. Some members were interested in discussing this item in more detail, so it was determined a special meeting would be best option.
Covered at Special Meeting Background Special Workshop/Meeting Proposed Amendments Premier Jet – Commercial vs. Non-commercial Tenants – Aviation Uses County’s Analysis – Types of Rent – Spreadsheets Question and Answer Period Motion and Vote – No quorum
Overview of Proposed Amendments Staff and Premier Jet have agreed to amend, subject to Board approval, two of the 5 Premier Jet leases, Lease 2 County Contract Number 75628R and Lease 3, Contract Number 75629R
Overview of Proposed Amendments - continued Clarify the amount of additional rent the County will receive from long term prepaid subleases. – Upfront- Prepaid Rents – Ongoing – Operating Expenses – If additional term ever granted in future Set County Processing fees for these types of agreements
Issue There was a disagreement between the County and Premier Jet on how to handle additional rent to County for long term prepaid subleases according to the existing leases Staff and Premier discussed differences and settled on the terms in the proposed Lease amendment, subject to Board approval
Staff Interpretation Considers agreements Subleases – Premier Jet pays 5% of all prepaid rent for commercial subleases and ground rent subleases The estimate of this amount varies depending on the percentage of commercial subleases: At 33% $ 523,156 At 50% $ 785,085 At 60% $ 942,102 At 75% $ 1,177,628 At 100% $ 1,570,171
Difficult to Administer for County There is a grey area between private use and commercial, County would have to investigate each sublease’s business prior to consent Use could change over time and additional rent is paid upfront. It would be difficult to go back and collect once escrow is closed.
Other Aviation Leases Other County leases for prepaid long term subleases or “sale hangars” typically provide alternate formula resulting in monthly payments based on square footage Premier had agreed to share a percentage of long term prepaid subleases in exchange for other favorable terms.
Premier Jet Interpretation Considered agreement transfers Premier anticipated paying 5% on net profit only Construction costs (approximately 78%) were to be deducted Additional rent to County currently estimated at $352,077
Construction Costs Construction costs estimated at $ or 78% of total price ($ cost psf vs. sale price of $ psf) Costs have risen over earlier estimates due to increased cost of materials These numbers are estimates, not final
Cost to Construct (#1) Engineering & Inspections 694,368 Soils Testing 141,693 Architectural 871,336 Consultants 236,204 Site Improvements 2,787,564 Permits and Fees 597,735 Direct Construction 19,069,652 Indirect Construction 5,025,852 Marketing Costs 1,224,362 Other 4,946,477 Total 35,595,243 Estimate not final
Clear Misunderstanding Clearly there was a misunderstanding, because Premiers loan docs and business performas show a maximum of 5% on 1/3 of total sale price Premier Jet had previously estimated to County that it’s additional rent for the prepaid sublease would be approximately $400,000
Problem’s with this Option Leases as currently drafted are subleases not transfers Due to cost of improvements this amount is lower than anticipated by County
Proposed Solution Staff and Premier Jet have agreed to amend the lease, subject to Board approval, to clarify that long-term prepaid sublease additional rent to County will 5% of 1/3 of the total prepaid rent Staff believes this is a fair and reasonable compromise between the 2 interpretations
Benefits of Proposed Amendment More revenue to County than previously anticipated County receives revenue now when needed for capital projects at CRQ The amendment will relieve the County of the need to determine commercial/ non- commercial uses and validate construction costs
Additional Rent to County In addition to ground rent The estimated additional rent to County would be: 5% of 1/3 of all prepaid rent = $539,981 (up front one time) 5% of total short term commercial subleases = $11,168 (annually) 5% of operating expenses = $10,000 (annually) First year total $561,149