Title
Resolution to Approve a Lease Agreement between the City and the Regents of the University of Michigan for a Corporate Hangar Located at the Ann Arbor Municipal Airport (8 Votes Required)
Memorandum
In 1994 Bijan Air Inc. leased land from the City of Ann Arbor and constructed a corporate hangar located at the Ann Arbor Municipal Airport, specifically 747 Airport Drive. Since the building was constructed, the University of Michigan Survival Flight has operated from this hangar. With the retirement of its owner, Bijan Air Inc. recently assigned, with City consent, the current lease to the Regents of the University of Michigan (University) so they could continue Survival Flight operations from this location. The University’s recently assumed lease expired on October 31, 2024, and negotiations progressed on a new lease.
Under the proposed lease between the City and the University, Survival Flight will continue to operate from the corporate hangar. The City owns the land and the University continues to own the building. Besides the operating and maintenance expenses of the building and land, the University has agreed to make certain capital improvements to the building which are included in the proposed lease. At the end of the nine-year term of the lease, the ownership of the building reverts to the City.
Under our FAA grant assurances, land lease rates per square foot should be equal for like properties at the airport, which these are. Land lease rates are increased annually per the Consumer Price Index. Additionally, the lease contains a building depreciation fee over the life of the term to reflect the City’s deferral of ownership of the building.
Budget/Fiscal Impact: While the land lease revenue is consistent with other “like” properties at the airport, the building depreciation fee has increased based on the proposed capital improvements, making the overall lease revenue positive for the airport. Unlike other airport owned buildings, the airport has no ongoing financial responsibilities for the building, aircraft ramp or grounds. There is no potential loss of property tax revenue for the City as the hangar is located in Pittsfield Township. The continued lease of this corporate hangar has a positive impact on the Airport’s Operating and Maintenance budget.
Staff
Prepared by: Matthew J. Kulhanek, Fleet & Facilities Manager
Reviewed by: Marti Praschan, Interim Deputy City Administrator
Approved by: Milton Dohoney Jr., City Administrator
Body
Whereas, The Regents of the University of Michigan has operated their Survival Flight helicopter operations from the corporate aircraft hangar located at 747 Airport Drive at the Ann Arbor Municipal Airport since 1994 as a sub-tenant to Bijan Air Inc. under Bijan’s lease with the City of Ann Arbor;
Whereas, The Regents of the University of Michigan recently assumed the ten year lease agreement between Bijan Air Inc. and the City for this corporate hangar;
Whereas, The Regents of the University of Michigan has expressed a desire to continue leasing this property for an additional nine-year term to continue operations of their Survival Flight helicopter air ambulance service;
Whereas, The City Administrator recommends that the City not expend money on an appraisal prior to approval of this lease per Code Section 1:321(2)(d) as the Federal Aviation Administration regulates the amount of rent the City may charge and because the tenant, The Regents of the University of Michigan, is a public entity established under the Michigan Constitution; and
RESOLVED, that City Council approve the proposed Lease Agreement with The Regents of the University of Michigan for the corporate hangar located at 747 Airport Drive;
RESOLVED, That the Mayor and City Clerk be authorized and directed to sign said lease agreement upon approval as to form by the City Attorney, and upon approval as to substance by the City Administrator; and
RESOLVED, That the City Administrator be directed to take the necessary administrative actions to implement this resolution.