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"Florida's Venice airport lease rates are letting revenue fly away"



Saturday, March 25, 2006

Venice airport's low leases are letting revenue fly away
By PAUL QUINLAN
The Sarasota (FL) Herald-Tribune


VENICE -- When the City Council agreed in December to lease Agape Flights a
hangar and office space at the Venice airport for $2,114 per month, the
humanitarian relief organization heaped on the praise.

"Venice is really the right place for us," said Charlie Gardner, Agape's
executive director. "The community is very supportive."

Supportive may be an understatement. Under the approved deal, the city
allowed Agape to sublease some of its office space to two other companies,
who pay a total of $5,000 per month. Before the doors are unlocked on the
first of each month, Agape has already netted a profit of $2,886.

Though practically unheard of at other general aviation airports in the
state, deals such as these aren't unusual at Venice Municipal Airport.

Though airport officials fret about the ability to pay for a backlog of
overdue repairs at the airport, the airport for decades has undercharged for
its leases, a giveaway of hundreds of thousands of dollars annually,
according to a recent appraisal by Slack Johnston & Magenheimer, a Miami
firm hired by the city.

Officials admit the money could have been used for such things as
rehabilitation of runways -- major maintenance now a decade overdue -- or to
combat noise pollution that's drawn complaints from homeowners in Golden
Beach and other neighboring subdivisions for years.

"It tells me we've got to change our business practices," City Manager Marty
Black said of the appraisal.

Built in the 1940s as a training field for World War II pilots, the airport
was given by the Army to the city in June 1947 with the stipulation that it
be kept running.

Two 5,000-foot runways straddle its 835 acres on the Gulf of Mexico and see
more than 170,000 takeoffs and landings each year. With no control tower and
limited runway space, the airport serves only smaller planes, from
hobbyists' ultralights to private jets.

Per federal regulations, the airport supports itself through the hangar
rentals and land leases for fair market rates, as the Federal Aviation
Administration requires. Like most general aviation airports, Venice
Municipal also relies heavily on FAA and Florida Department of
Transportation grants, which can cover as much as 90 percent of the cost of
major projects.

In 1993, the Office of the Inspector General found that the Venice airport
wasn't charging fair market rates on 90 percent of its leases. From July
1993, the FAA withheld money until the airport adjusted its leases to the
satisfaction of inspectors in 1999.

In June 2000, the FAA cut off funding again, as it began investigating the
airport's land lease to the Venice Golf Association. Eventually, the city
hiked the VGA's rent, and in 2005, FAA cash again began to flow.

Some of that money went toward chipping away at the backlog of work that had
accumulated. Some also paid for the recent appraisal of airport leases.

In some areas, such as the golf lease, the report found that the airport now
was charging a fair rate, and in some cases, slightly more. But for space in
its mobile home park, hangar rentals and in many of its commerce park
leases, the appraisal concluded that the airport was letting revenue go down
the drain.

The report found:

At the Venice Municipal Mobile Home Park, where the airport rents out 189
pads, the monthly charge is 32 percent less than the market rate, or $187 on
average versus $275. Annually, the current rate amounts to $199,600 in lost
rent.

For each of the 144 T-hangars built by the airport, the airport charges 11
percent less than it should, $245 as opposed to $275. At $245, Venice's
hangars rent for only 78 percent of the statewide average, $312. That
amounts to $51,800 in lost rent.

The losses represent a significant portion of the budget, which amounted to
$1.9 million in 2006. Moreover, the airport has let more revenue go in its
commercial leases, renting land with buildings for the price of just the
land.

Typically, when a tenant builds on leased property, airports take ownership
of the buildings and other improvements at the end of the lease. Whether
it's a renewal or a fresh agreement with a different tenant, the new lease
would charge for both the land and the building space, based on square
footage. In Venice, the airport typically ignored building improvements when
renewing leases or leasing to new tenants, charging only for the land.

Almost none of the companies leasing airport land with building improvements
pay for the office or hangar space. At rates ranging from $0.18 to $0.35 per
acre, these companies make use of buildings that should add $5 and $10 per
square foot to the cost of the lease.

In the case of Agape, the organization received the benefits of an existing
lease that charged only for land.

It remains unclear how much money the airport loses on these leases
annually, since no accurate count exists of the building square footage for
which the airport could be charging rent.

"Clearly, it's in the tens of thousands of dollars," Black said.

Airport Manager Fred Watts, only a year on the job after replacing a manager
who lasted less than two years, chuckled at the suggestion that someone had
erred.

"I'm not going to comment on that," Watts said. "Being critical and pointing
fingers at the past serves no purpose."

Watts said there's little that can be done at this point, as most of the
leases have already been renewed for an additional 10 to 20 years. Only if
improvements or changes are made can officials renegotiate, Watts said.

"A legal lease is a binding legal contract, and we simply can't change the
rent," Watts said.

Sue Lang, president of the Venice Neighborhoods Coalition, said the
substandard leases and lack of grant money placed a financial strain on the
airport that caused its neighbors to suffer. She said the shortage of cash
has forced the airport to build more hangars and play host to more air
traffic, just to pay bills. It's also prohibited officials from taking steps
to limit noise pollution.

"There have been these sweetheart deals that have been going on for years
... they're bringing in more hangars and bringing in more planes, which is
increasing noise for residents," Lang said. "What they should do is keep the
airport small and charge what they should be charging for space."

Though the airport projected a 2006 reserve balance of $2.3 million, the
need to rehabilitate both runways and improve lighting and security systems
are anticipated to cost millions in coming years. Though the FAA will pay
the bulk of the cost, updating the first of the two runways will cost $3.8
million.

Airport officials also worry about the White House's proposal to slash FAA
funding by $800 million in 2007. If approved, the cut is expected to hit
smaller airports, such as Venice's, the hardest. To bolster revenues in the
short term, city and airport officials are again considering a plan to build
a 200- to 400-slip marina along the Intracoastal Waterway on the property's
undeveloped south side.

The marina could include a promenade with waterfront restaurants and other
tourist attractions, said Black, though concrete plans were still a ways
off. But Black conceded that until the airport shores up its finances, the
city could do little to address complaints about noise and the appearance of
some of the more dilapidated buildings.

"If we're going to be responsive to the community's needs of noise and
quality of buildings, we're going to need more money than we have in the
bank," Black said.

Attached Photo:

Hangered aircraft.

bilde.jpg


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