SUBJECT
Title
ALL COUNTY OF SAN DIEGO AIRPORTS - OPTION TO AMEND ALL AVIATION LEASES LOCATED AT ALL COUNTY OF SAN DIEGO AIRPORTS TO ADD UP TO FIVE YEARS TO EACH CURRENT TERM TO ADDRESS COVID RELATED IMPACTS, WAIVE ASSOCIATED FEES, AND RELATED CEQA EXEMPTION (DISTRICTS: 2, 3 AND 5)
Body
OVERVIEW
There are eight airports owned by the County of San Diego (County) and operated by the County Department of Public Works (DPW). They are Gillespie Field, McClellan-Palomar Airport, Fallbrook Airpark, Ramona Airport, Borrego Valley Airport, Jacumba Airport, Ocotillo Airport, and Agua Caliente Airport. The County Airports system is operated, maintained, and improved using lease revenues and federal and State grant funding. County Airports’ infrastructure and facilities include runways, taxiways, air traffic control towers, communications, and related equipment. Services available to corporate and general aviation users include hangar and tie-down rentals, aviation fuel sales, aircraft repair, maintenance, parts, pilot supplies, flight training, and out-of-state flights. County airports serve the public by housing aviation facilities and equipment used by local law enforcement agencies, aerial firefighting, and other emergency service providers, and provides flights to the general public. County airports include industrial-zoned land that allows for other airport-compatible uses of the property such as manufacturing, storage, and other commercial uses such as those in our Gillespie Field and McClellan-Palomar Airport industrial parks. Leasing airport land generates revenue for the Airport Enterprise Fund (AEF), which DPW uses to ensure that all County airports are properly maintained and safe for users and surrounding communities.
County of San Diego Airport Lessees were greatly impacted by the COVID-19 pandemic. On February 14, 2020, the San Diego County Public Health Officer issued a Declaration of Local Health Emergency, pursuant to California Health and Safety Code Section 101080. Additionally, on that day, pursuant to California Government Code 8630, the Chief Administrative Officer, serving as the County of San Diego (County) Director of Emergency Services and as the Coordinator of the Unified San Diego County Emergency Services Organization, issued a Proclamation of Local Emergency.
On April 7, 2020, (4) the Board approved renters of County-owned residential and commercial property located in incorporated and unincorporated areas impacted by the COVID-19 emergency to be entitled to rent deferral and a moratorium on eviction, in accordance with the resolution adopted on March 24, 2020 (19). Gillespie Field lessees accepted the County’s rent deferral method and applied it to their leases to alleviate some of the economic hardship the lessees encountered since the onset of the COVID-19 pandemic. The Gillespie Field Development Council, an advisory committee, requested that aviation leases located at all eight County Airports be given an optional five-year term extension of their current term to help restore revenue lost from the effects of COVID-19. County Airports agrees this is an equitable opportunity to provide an option to extend to all aviation leases at all eight County Airports. This is a request to authorize the Director of Airports to execute amendments to all aviation leases at all County Airports, extending their termination dates up to five years, provided that specified conditions, discussed further in Background, are met.
This request comes forth on behalf of the aviation lessees based on economic need following the COVID-19 pandemic and its continued effects on individuals, families, and small businesses located at the eight County airports and in the surrounding community. With the proposed action, the lessees’ current monthly rent will not be increased along with this proposed action; however, affected lessees will continue to pay their current monthly rent and will continue to be subject to all other terms of the lease language, including language that may increase their rent during this five-year extension such as, scheduled rent adjustments, and annual CPI increases. If a lease that will be extended in accordance with this action is scheduled for a rent adjustment or any action that increases the monthly rent is due at the time of the lease extension, the increase of rent will be applied as scheduled pursuant to the language of the lease.
Lessees interested in amending their leases in accordance with this Board action shall request amendments from County Airports staff in writing within six months, and execute the amendment within one year of April 10, 2024. The amendment will add language requiring the leases to be in compliance with the Working Families Ordinance that became effective on April 1, 2022. This amendment will also add language requiring tenants to be in compliance with the Working Families Ordinance, which is effective on new and amended leases from April 1, 2022 onward. However, historical and customary equity payment to the County, and the capital improvement requirement that accompanies the extension of lease term, will not be applied to these leases. The equity payment is reversionary interest paid to County and is applied to all extension of term requests. The capital improvement item is also usually applied to all requests for extension of term and is an amount tenants will be applying to the leasehold in the form of improvements to the current dwellings or land, or in new additional dwellings on the leasehold. These payments are not required as part of providing tenants the COVID-19 lease extension.
If approved, this action would authorize the Director of Airports to execute amendments to all aviation leases at all County Airports, extending their termination dates up to five years, provided that specified conditions, discussed further in Background, are met. Thereafter, lease term extension requests will be completed as normal, following all County of San Diego requirements for County Airports, and applying the customary practices for such leases. As such, the per acre per month value that is applied to aviation-related leases will be reviewed and newly calculated during, or at the end of the same five-year timeframe. The new per acre per month will be applied to all aviation leases at all eight County airports during the next rent adjustment period, lease term extension, or any change or update to the lease language.
The impact to the Airport Enterprise Fund in the amount of $126,000 as a result of taking this action is expected to be recuperated over the life of the leases and at the next term extension request. The waiving of the fees will contribute to the recovery of financial hardship experienced as a result of the pandemic. Our stakeholders will be able to take advantage of the longer terms to seek more favorable rates from lenders and to help amortize current loans for previous and future capital improvements of their assets.
RECOMMENDATION(S)
CHIEF ADMINISTRATIVE OFFICER
1. Find in accordance with Section 15301 of the California Environmental Quality Act (CEQA) Guidelines that the proposed lease amendment is categorically exempt from CEQA review as it consists of the leasing of existing facilities involving negligible or no expansion of existing or former use.
2. Approve and authorize the Director of Airports to execute, upon receipt, three copies of each lease amendment meeting the requirements of this Board letter and take any other actions necessary to administer the lease amendments. (4 VOTES)
4. Waive the application of Board Policy B-29, full cost recovery, to the proposed lease extensions, which are proposed to address the negative impacts of the COVID-19 pandemic for aviation lessees at all County Airport Leases.
EQUITY IMPACT STATEMENT
The County of San Diego (County) has eight airports that are owned and operated by the County which provide vital air transportation hubs, emergency response facilities, and economic engines. The County pursues delivery of these services in a fair and equitable manner and actively works to remove barriers by providing airport guests with general airport information in the County’s threshold languages, encouraging participation, and providing competitive opportunities for small businesses and businesses that traditionally have less working capital, and business owners and managers who may be socially and economically underserved.
SUSTAINABILITY IMPACT STATEMENT
This request will authorize the Director of Airports to execute amendments extending the terms of all aviation leases up to five years, provided the specified conditions are met. The base monthly rent from these leases help support economic and social sustainability by providing services for the region. The revenue that aviation businesses at the eight County airports will be able to earn because of this lease extension will help operate, maintain, and improve the County airports system consistent with the County sustainability goal of providing just and equitable access to County services and resources in support of sustainable communities.
FISCAL IMPACT
Funds for this request are included in the Fiscal Year 2023-24 Operational Plan in the Airport Enterprise Fund. If approved, today’s recommendation will extend aviation lease agreements by five years. County Airports, authorized under Section 85.422 of the County Code of Regulatory Ordinances, charges a lease processing fee that will be waived. The fee waiver will result in a loss of revenue of approximately $126,000. The funding source is available Airport Enterprise Fund fund balance. There will be no change in net General Fund cost and no additional staff years.
BUSINESS IMPACT STATEMENT
Leases at airports benefit the local business community by creating jobs, increasing economic activity, providing business opportunities, and supporting infrastructure development. They attract visitors, generate revenue, and help small businesses grow, thus stimulating the local economy and improving the quality of life for residents. Airports connect individuals to jobs and local communities to the world. Revenue derived from airport leases allows DPW to operate and maintain the eight County airports, airstrips, and airpark safely, efficiently, and cost-effectively. Today’s action of implementing a five-year extension of term to all aviation leases promotes self-sufficiency by helping businesses to remain open and enhances the economic viability of the County airport system since impacted by COVID-19.
Details
ADVISORY BOARD STATEMENTS
On September 20, 2023, The Gillespie Field Development Council recommended, by a vote of 4 in favor, 0 against, 0 abstained, with 1 member absent and 0 vacant seats, that the Board approve the proposed amendment to all aviation leases located at all eight County Airports extending the term of the leases up to five years.
On February 5, 2024, The Fallbrook Airpark Advisory Committee recommended, by a vote of 5 ---in favor, 0 against, 0 abstained, with 0 absent and 0 vacant seats, that the Board approve the proposed amendment to all aviation leases located at all eight County Airports extending the term of the leases up to five years.
The subject has been briefed to the East County Economic Development Council (ECEDC) on February 13, 2024, as well as an Airport Director’s quarterly stakeholder outreach meeting with Gillespie Field stakeholders on February 9, 2024.
On March 21, 2024, the Palomar Airport Advisory Committee voted on the item as follows, by a vote of 4 ---in favor, 4 abstained, with 1 absent, that the Board approve the proposed amendment to all aviation leases located at all eight County Airports extending the term of the leases up to five years.
BACKGROUND
There are eight airports owned by the County of San Diego (County) and operated by the Department of Public Works (DPW). Within the airport operations area, DPW has leases with aviation operators, offering services to corporate and general aviation users, such as hangar rentals, aircraft tie-downs, aircraft maintenance, and flight training, as well as providing aerial support to the regional law enforcement, firefighting agencies, and other emergency service providers. Leasing of airport land generates revenue for the Airport Enterprise Fund, which is used by DPW to ensure that all County airports are properly maintained and safe for airport users and the surrounding communities.
On March 11, 2020, The World Health Organization (WHO) declared COVID-19 a pandemic.
On February 14, 2020, the San Diego County Public Health Officer issued a Declaration of Local Health Emergency, pursuant to California Health and Safety Code Section 101080. Additionally, on that day, pursuant to California Government Code 8630, the Chief Administrative Officer, serving as the County of San Diego (County) Director of Emergency Services and as the Coordinator of the Unified San Diego County Emergency Services Organization, issued a Proclamation of Local Emergency regarding COVID-19.
On April 7, 2020 (4), the Board approved renters of County-owned residential and commercial property located in incorporated and unincorporated areas impacted by the COVID-19 emergency to be entitled to rent deferral and a moratorium on eviction, in accordance with the resolution adopted on March 24, 2020 (19). Gillespie Field lessees accepted the County’s rent deferral method and applied it to their leases to alleviate some of the economic hardship the lessees encountered since the onset of the COVID-19 pandemic. The Gillespie Field Development Council, an advisory committee, has requested that all aviation leases located at all eight County Airports be given an optional five-year term extension of their current term to help restore revenue lost from the effects of COVID-19. County Airports agrees this is an equitable opportunity to provide an option to extend all aviation leases at all eight County Airports.
This is a request to authorize the Director of Airports to execute amendments to all aviation leases at all County Airports, extending their termination dates up to five years, provided that the following conditions are met:
• Lessees interested in amending their leases in accordance with this Board action (Interested Lessees) shall request amendments from County Airports staff in writing within six months of April 10, 2024. Amendments must be fully executed within one year of April 10, 2024.
• Interested Lessees must be fully compliant with the terms of their leases prior to requesting an extension. Full compliance includes, without limitation, (i) hangars are clear of all non-aviation items and all items used for non-aviation business; (ii) all past due rent has been paid; (iii) all past due capital improvements have been completed; and (iv) there are no outstanding issues of noncompliance, as identified by County Airports staff.
• Lease terms may be extended up to five years beyond the termination date stated in the respective leases, provided that total lease terms shall not in any event exceed 50 years.
• Leases shall be subject to the Working Families Ordinance adopted by the Board on April 1, 2022, unless one of the ordinance’s specified exceptions applies.
This request comes forth on behalf of the aviation lessees based on economic need following the COVID-19 pandemic and its continued effects on individuals, families, and small businesses located at all County of San Diego Airports and in the surrounding community. With the proposed action, the lessees’ current monthly rent will not be increased; however, affected lessees will continue to pay their current monthly rent and will continue to be subject to all other terms of the lease language, including language that may increase their rent during this five-year extension such as, scheduled rent adjustments, and annual CPI increases. This amendment will also add language requiring tenants to be in compliance with the Working Families Ordinance, which is effective on new and amended leases from April 1, 2022 onward. The historical and customary equity payment to the County, and the capital improvement requirement that accompanies the extension of lease term, will not be applied to these amendments. The equity payment is reversionary interest paid to County and is applied to all extension of term requests. The capital improvement item is also applied to all requests for extension of term and is an amount the tenant will be applying to the leasehold in the form of improvements to the current dwellings or land, or in new additional dwellings on the leasehold.
This action is being proposed to assist lessees suffering from the financial impacts of COVID-19, which should be known to the lessees at this point in time. Thus, County Airports recommends requiring lessees to request the amendment within six months and execute the amendment within one year of this Board hearing. If approved, the action would authorize the Director of Airports to execute amendments to all aviation leases at all County Airports, extending their termination dates up to five years, provided that specified conditions are met. Thereafter, lease term extension requests will be completed as normal, following all County of San Diego requirements for County Airports, and applying the customary practices for such leases. As such, the per acre per month value that is applied to aviation-related leases will be reviewed and newly calculated during, or at the end of the same five-year timeframe. The new per acre per month rate will be applied to all aviation leases at all eight County Airports during the next rent adjustment period, lease term extension, or any change or update to the lease language.
ENVIRONMENTAL STATEMENT
Section 15301 of the California Environmental Quality Act (CEQA) Guidelines exempts from CEQA review actions consisting of the “operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features involving negligible or no expansion of existing or former use.” The key consideration in applying this exemption is whether the proposed action involves expansion of an existing use. The proposed action involves amending all aviation leases at County Airports with an optional one to five-year extension to help restore revenue lost from the effects of COVID-19. No other changes in use are proposed from what currently exists, and is, accordingly, exempt from CEQA review pursuant to Section 15301 of the CEQA Guidelines.
LINKAGE TO THE COUNTY OF SAN DIEGO STRATEGIC PLAN
Today’s proposed action supports the Economic Sustainability Strategic Initiative in the County of San Diego’s 2024-2029 Strategic Plan. Revenue derived from airport leases is placed in the County’s Airport Enterprise Fund, which aligns services to available resources, maintaining fiscal stability, and ensuring long-term solvency by using lease revenue for ongoing maintenance and operation of County Airports. Airports in San Diego County are an important part of the County’s physical infrastructure and the federal transportation system and provide superior service delivery to the local aviation customers and the public which they serve.
Respectfully submitted,
Dahvia Lynch
Interim Deputy Chief Administrative Officer
ATTACHMENT(S)
Attachment A: Vicinity Map
Attachment B: List of all eligible County of San Diego Aviation Leases