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Mutual Help List, Hangar Construction

Brad's comments are more in line with my experience.  The facility belongs to the developer until it reverts.  The insurance comments are dead on.  The key is to protect the public entity from any risks resulting from the facility and its use.  There are a number of way to value the facility at the end of the lease but an appraisal, properly done, will probably give you the best estimate of value for purposes of future lease terms, insurance, etc.

Bill Ingraham, AAE
(909) 844-3335
-------- Original Message --------
Subject: RE: CAA: Mutual Help List, Mutual Help List, Hangar
From: "Christopher, Brad" <BChristopher@xxxxxxxxxxx>
Date: Wed, March 11, 2015 7:42 pm
To: "help@xxxxxxxxxxxxxxxxxxxxxx" <help@xxxxxxxxxxxxxxxxxxxxxx>
Cc: "stepheni@xxxxxxxxx" <stepheni@xxxxxxxxx>

I thought I would raise some points for you to consider. Sorry, probably more questions than answers.

When you say "on the airport's books" what do you mean by that? Unless you're a private agency I assume you have no tax liability for personal property or real estate. Typically, public agencies don't maintain a balance sheet. It doesn't sound like there is any revenue bond financing involved. Perhaps this is an inventory of airport property and assets for insurance purposes. Maybe state statute or county code requires that you maintain a capital or long-term asset inventory and market value.

Regardless of the answers to the questions above, it sounds clear that your airport will retain ownership of the land. However, you indicate that the improvements upon the property will revert to airport ownership after 25 years. Therefore, it sounds like the airport will own nothing except the land until the hangar facility reverts to the airport's ownership. Until then, if I'm reading your description correctly, you don't own the improvements, your tenant does.

I would suggest that you and/or your tenant seek the advice of a CPA firm about the tax exposure. There is likely no tax exposure on your part (assuming you’re a government agency), but if the hangar is the personal property of your tenant then he will likely have a tax liability; assuming your state has a property tax.

Our leasing policies require that the tenant secure and maintain all liability, property and casualty insurance on leasehold premises. Even though you may not own the hangar at the beginning of the lease, if it is destroyed then it would also be your loss at the end of the lease term. You should require the tenant to insure the property and improvements for the full replacement value and name your airport as additional insured.

Good luck with your project.


-----Original Message-----
From: help-owner@xxxxxxxxxxxxxxxxxxxxxx [help-owner@xxxxxxxxxxxxxxxxxxxxxx] On Behalf Of ereischman@xxxxxxxx
Sent: Wednesday, March 11, 2015 9:08 AM
To: help@xxxxxxxxxxxxxxxxxxxxxx
Cc: stepheni@xxxxxxxxx
Subject: CAA: Mutual Help List, Hangar Construction

We have leased acreage to a tenant who is building a hangar. The lease term is 25 years. At the end of the lease, the hangar will be property of the airport. How/when is the hangar recorded on the airport's books. They will be paying a monthly fee for the property.
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