Advisory board recommends revised lease to spur hangar expansion, airport progress

For the Sallisaw Municipal Airport, the sky is quite literally the limit.

And the Sallisaw Airport Advisory Board wants to be able to touch the sky.

That’s why the board is recommending city commissioners take immediate proactive steps to increase hangar leases — there’s currently a waiting list — so that the airport can realize its potential.

“We get several calls,” airport manager and fixed base operator Tom Hanning told the board at its Monday meeting, “and as soon as I tell them, ‘We’ve got about 16 on the [waiting] list,’ that’s the end of the conversation.

“I would say that if there was 20 empty hangars, we’d have 21 requests,” Hanning said, emphasizing the demand for aircraft storage space as well as the airport’s popularity and potential.

“It’s time we do this. We’ve been talking about this for years, and if we want airport development, we need to encourage the city commissioners to follow through with this,” said board member Frank Sullivan, who is a pilot and leases hangar space for his airplane.

“This could be done and done very well knowing that you’ve got tenants on the ground ready to go. I think we would have to do it expeditiously. Get it done, keep those guys interested, and get [more hangars] built and let’s get some more airplanes out there,” Sullivan recommended.

And that’s in line with Hanning’s view of the facility on South U.S. 59.

“The potential’s definitely there. When’s it going to happen? I don’t know. But it will eventually,” Hanning told the board.

Not only would securing hangar leases expand airport operations, but it would be done without a substantial cost to the city.

“The way you’ve got it set up, we don’t have to go out there and build them all and just cross our fingers and hope that people will lease them,” Sullivan told the board. “If you want to execute ground leases in accordance with this basic kind of plan, I think it’s a great idea. The city doesn’t have to inject any more capital in it until they have leases. You can get commitments in writing, leases contingent on development of the property within a certain period of time.

“My personal recommendation would be to submit it to our FAA regulatory consultants, just to get them to give us preliminary approval, and then is to have Tom give us an average idea of whether this layout would work the way you have it planned, to give a ground lease on 1 and 2 and we build to that,” Sullivan said. “To me, it looks good, but I would think it would need FAA regulatory consultants to say, ‘Yes, it looks OK’.”

What lease should include

The proposed lease would only pertain to the ground on which the hangar sits, because tenants would pay for building the hangar for their use and in compliance with city code.

“Our thought has always been, ‘it needs to match what’s out there’,” said George Bormann, economic development director for the city.

But before ground space for any hangars can be leased, an appropriate agreement must be drawn up, a responsibility that initially falls on the city.

The current ground lease for hangars is for a 20-year term, at which point it reverts back to the city.

While current hangar space is a major challenge for Hanning, the length of the lease is a close second.

“The question then becomes, ‘How long can I have this?’,” Hanning said of the inquiries he’s fielded. He believes a 30-year lease with the option for two 10-year extensions would “be much more palatable.”

But 50 years is the threshold beyond which the Federal Aviation Administration (FAA) might become uncomfortable.

Hanning told the board that in conversation with Warren Meeks, program manager for FAA in Fort Worth, Texas, he had previously said, “The FAA wants the municipality to benefit in the end.”

“So he says anything beyond 50 years, the FAA will then begin to look down upon someone,” Hanning recalled of his discussion with Meeks. “Anything up to 50 years, he seemed great with. So that’s what I knew I could approach [potential hangar tenants] with, with the FAA behind me supporting that. The verbiage that he used was they do not like to see after — I’ll put it in context here — 20 years, that at the end of 20 years you have the first right of refusal for the next 20. I was told by the FAA that they don’t like that.”

Bormann concurred. “The FAA doesn’t like the renewable clause, but they’re OK with the extension. When we looked at this a few years back, we were at the bottom end of comparable airports for our length of lease. My recommendation to Mr. [Keith] Skelton, and my discussion with Tom, was to increase that time. [Meeks] mentioned bringing it up to a 25- or 30-year with the two 10-year extensions, and I think that’s important for somebody who’s going to invest hundreds of thousands of dollars out there. They need to have a return on their investment.”

Bormann was unable to tell the board why the lease term was set at 20 years, but added that city manager Skelton “has always been an advocate for increasing those terms as well. I think that trying to give operators the best terms we can for a good return on their investment will spur development.”

Sullivan agreed.

“I think that needs to be done. Because you’re going to keep having people, ‘Unless you can promise me what it’s going to be, I’m not interested’.”

But, he pointed out, whether it’s a renewal or an extension, it’s not automatic for the tenant. The city must still approve the continuation of the lease.

“Thirty, 10 and 10 sounds a whole lot better than 20 and end,” Sullivan said. “There’s always ways to get it done. And the city wants to lease them, and they want to lease them to good operators. The city commission needs to come up with terms that will be acceptable across the board, with specified terms that are more lenient than the present terms. And it needs to be in final form of a lease where you could physically hand it to [interested tenants] and say, ‘All we have to do is basically put in the description of it and put in the name of the tenant and this is the lease.’ I think that’s really what they need to do. So I’d make a recommendation that the city get a lease prepared containing terms that we can show to prospective tenants on the spot.”

That’s an undertaking that may be easier said than done, however.

More lenient terms

If increasing the term of the lease is a stumbling block for city commissioners, SAAB chair Gary Schaefer suggested that the city “can come back with what they think is lenient.”

Sullivan, frustrated by those who might resist change, suggested, “They (city) need to lighten up.”

In addition, Hanning asked about tenants wanting to sell their hangar to a third party.

“You’re selling your leasehold interest, subject to the approval of the city,” Sullivan explained. “You’re assigning the remainder of the term of your ground lease. That needs to be in this lease that the city puts together so that you can point to that provision. It also needs to include provision for subletting. There needs to be some forethought.”

Sullivan then suggested that the city consult a firm specializing in aviation law.

“I promise you, they have a lease like this already ready. I think that would be money well spent to consult one of those firms that has a couple of aviation lawyers, and say, ‘we’d like to have some FAA-sanctioned ground leases for hangars,’ and I bet you they can come up with one, and it would be airtight for the city,” Sullivan said. “It would protect the rights of the tenants and make sure we’re FAA-compliant. There’s no need for somebody that’s not an aviation law specialist to try to do one of these, because we’re inevitably gonna miss something because we’re just not experts.”

Sullivan recommended Crowe Dunlevy, which he said is “probably the eminent firm in the state.”

In addition, Sullivan cautioned that the city should not view more hangars and the possibility of them reverting to the city at the end of a lease as a cash cow for the airport.

“The city never needs to think of this as ‘Oh, wow, we’ll end up with some hangars.’ That’s not the value. The value is having operators in here who are filling those hangars, buying fuel, increasing ops and making Sallisaw a viable airport. The real value is in keeping them leased to good operators. It’s not worried about ‘the city’s gonna increase its balance sheet with a half million dollars in assets with hangars.’ That should never even be the thought,” Sullivan lectured.

The board’s recommendation for the city to review — and modify — its current lease will be forwarded to the city commissioners to be added to their Aug. 14 agenda.

In other business, Hanning reported on airport operations. “As far as daily operations out there, things are going well. This time of year we have a little extra activity,” Hanning said. “Maintenance is definitely going well. The flight school is doing well. We’ve been training several multi-engine students that have come from all over the country. Some are flying in, some are driving in, so we’re excited about that. That’s going really good. Everything’s going well.”

Schaefer then offered his assessment of Hanning’s efforts. “You’ve expanded that operation. It’s unbelievable what it was when you got here, and what it is today.”

Bormann then gave a brief update on the progress of the pavement improvement for the taxiway and apron, as well as the runway light. The projects are expected to