On Tuesday, March 3, 2020 airport staff held a meeting at the San Martin Airport (E16) with county and FBO tenants to cover three primary topics.
- Provide an update on the status of creating a new FBO lease at San Martin; and
- Obtain input from airport users as to what they would like to see in a new FBO lease; and
- Explain what will happen with the hangars situated on the FBO leasehold.
New FBO Lease Status
Staff has completed the bid process for a consultant to assist in developing a new FBO lease for the San Martin Airport. At the time of the meeting, staff is waiting for insurance verification to submit a contract to procurement for authorization. Once the contract has been signed, the consultant and staff will get to work on a new, modern FBO lease. The terms will be for seven-years with three one-year options. It was explained that going for a long-term lease was not in the best interest of the county or airport users until there is some certainty with the County direction as it relates to Reid-Hillview Airport (RHV). Should the county decide to close RHV, there would need to be a great deal of investment at E16 and it is expected that the value of the leasehold would be greatly increased. A long-term FBO lease would greatly hinder the ability of the County to make the necessary investments at E16 to accommodate the changes necessary should RHV close.
FBO Lease Timeline
- Fall 2019 - Staff was directed by the Board to execute a new FBO lease with one seven-year option and three one-year options.
- March/April - Develop new lease and Request for Proposal language;
- Mid-May - Release the RFP for questions and a pre-proposal conference;
- Late May - RFP responses due to the County;
- July - Evaluation of responses, potential interviews, and selection; and
- September - Lease goes to the Board of Supervisors for execution.
Please keep in mind this is an aggressive timeline and it is subject to shift as we work our way through this process.
FBO Desired Options
During the meeting, we discussed the typical services provided by and FBO and elicited input from the attendees on what was important to them.
FBO's typically provide most of the following services
- Aircraft Parking / Transient Parking
- Aircraft Maintenance, detailing & sales
- Aircraft Rental
- Flight Training
- Fuel - 100LL, Jet, Unlead
- Rental Car
Services that were mentioned as being desirable included
- Food and snacks
- Flight training and aircraft rental
- Aircraft repair
- Fuel. There was discussion and general agreement that if unleaded avgas was available, pilots there would use it in recognition of the concern around lead in regular avgas. It was also pointed out that there are 8 turbine aircraft based on the field. While that isn't a large number, they tend to purchase larger quantities of fuel making Jet fuel desirable on the field.
There are two distinct groups of hangars on the FBO property. Phase 1 (see image below) was constructed around 1986, while Phase 2 was constructed around 1996. The Phase 1 hangars were on the airport at the time the current FBO lease was executed. Phase 2 hangars were constructed by the previous FBO leaseholder, 2 Genes Aviation, after the execution of the current lease.
Phase 1 hangar occupants pay a ground-lease to Magnum aviation for the use of the space underlying the hangars. The agreement the hangar occupants have to occupy that space expires with the FBO lease on December 11, 2020. Phase 1 hangar occupants have the option to remove their hangars from the FBO property prior to the FBO lease expiration. Any hangars remaining on the property as of December 11, 2020 revert to the County and the occupants will need to negotiate with a new FBO leaseholder if they wish to continue utilizing those hangars.
Phase 2 hangars were "sold" by the previous FBO leaseholder (2 Genes Aviation) as an attempt to circumvent the leasehold requirement that the leaseholder pays a percentage of the monthly rent to the County. The County and 2-Genes took this issue to arbitration where the judge determined that the purported sale was actually prepaid rent. 2-Genes was then required to pay the County the percentage rent, plus interest, plus penalties.
The agreement Phase 2 hangar occupants have to occupy those hangars expires with the FBO lease on December 11, 2020. However, unlike Phase 1 hangar occupants, Phase 2 occupants do not have the option to remove the buildings from the property. If they wish to continue using the hangars they will need to enter into an agreement with the new FBO leaseholder.
There was a lot of discussion about the hangars, and questions about potential rent. FBO hangar occupants were very uneasy with the unknows surrounding the upcoming changes. One attendee explained how he believes everybody in the hangars will leave if the rent goes up anywhere near the rent for county-owned hangars at San Martin. Staff explained that historically the RHV hangar tenants, whos payments make up the lions share of the total airport income, have consistently subsidized the cost of operating the San Martin Airport. Since the new FBO lease would not be a ground lease with investment requirements, but instead would include the newer facilities constructed under the current FBO lease, the value of the leasehold would likely go up significantly. The additional income derived from a new FBO lease will assist in balancing the cost of operating San Martin Airport with the revenue derived from users of the airport.