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TO: Mayor Irvin and City Council
FROM: Alex Alexandrou
Chief Management Officer & Chief of Staff to the Mayor
Martin Lyons
Chief Financial Officer & City Treasurer
Rick Veenstra
Corporation Counsel
DATE: July 13, 2020
SUBJECT:
Consideration of a proposed amended and restated lease between the City of Aurora and Lumanair, Inc. for certain real property located at Aurora Municipal Airport.
PURPOSE:
To enter into a comprehensive lease agreement with an existing airport tenant that is consistent with terms offered to its competitors, embraces modern standards, and resolves ongoing litigation.
BACKGROUND:
Lumanair, Inc. has been a tenant at the City's airport since 1982 and operates as one of the airports two fixed-base operators (FBO), providing, among other things, fuel service to the airport's general aviation customers. The City and Lumanair have amended their original lease several times since 1982 to include additional facilities at the airport.
Lumanair utilizes underground fuel tanks which is not consistent with the minimum standards for FBOs operating at the airport as established by the City. Lumanair's continued use of those tanks in violation of the minimum standards led to several years of litigation between the City with each side accusing the other of violations of the lease agreement. The litigation is still ongoing.
Despite the litigation, Lumanair has repeatedly expressed a desire to remain at the airport. While there is some uncertainty as to whether Lumanair successfully renewed its existing lease in 2018 (which would further broaden the scope of the litigation) it has remained current in its rent payments to the City.
The proposed lease, which was drafted and negotiated by Klein, Thorpe & Jenkins, Ltd., would amend and restate the existing agreements between the City and Lumanair for as long as thirty (30) years. The lease requires Lumanair to promptly remove its underground storage tanks, construct a new, above ground fuel farm, and make significant improvements to its facilities. The lease includes an original five (5) year term and five (5) renewable five (5) year terms. Lumanair may not exercise its right to renew unless it has completed the improvements required to conform to the airport's minimum standards.
The City used its existing lease with the airport's other FBO as a template for its negotiations with Lumanair. Because FAA grant assurance regulations require the City to treat its FBOs equally, use of a common lease platform will help reduce the likelihood of successful complaints to the FAA.
DISCUSSION:
The benefits to the community include having two competitive FBO tenants at the airport, each able to provide aircraft maintenance and storage, charter aircraft services, operation of a flight school with aircraft rental, the sale of retail aviation fuel, and the sale of aircraft.
The enhancements required by the lease will benefit the overall look and appeal of the Airport and its facilities, which Lumanair will be required to maintain. Additionally, at the end of Lumanair’s lease all buildings and structures revert back to the City.
Financial considerations include payment of ground rent on a price per square foot basis and additional rent based on tenant’s gross receipts, with some exclusions including mail order business, aircraft sales, fuel sales.
Approval of the lease will also render moot the ongoing litigation between the City and Lumanair which has been pending since 2015.
IMPACT STATEMENT:
The proposed requires Lumanair to promptly construct an above ground fuel farm, remove the underground fuel tanks, and undertake some renovations/beautifications to Lumanair’s existing structures, interior, exterior, and parking facilities. Plans for those improvements and constructions projects must be submitted and approved by the City.
RECOMMENDATIONS:
That the Council approve the lease.
cc: Planning, Zoning, and Economic Development Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution approving a lease agreement with Lumanair, Inc. for certain real property located at the Aurora Municipal Airport.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, the City of Aurora is the owner and operator of the Aurora Municipal Airport (airport); and
WHEREAS, Lumanair, Inc. has leased certain property at the airport from the City since 1982 and serves a fixed-base operator at the airport; and
WHEREAS, City and Lumanair, Inc. have negotiated a restated lease for certain real property located at the airport, as more fully set forth in Exhibit A to this Resolution; and
WHEREAS, the City finds the execution of the lease as set forth in Exhibit A is in the best interest of the City, its residents, and the airport.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that the amended and restated lease between the City and Lumanair, Inc. as set forth in Exhibit A shall be and hereby is approved; and further
BE IT RESOLVED, that the Mayor shall be and hereby is directed to execute the lease in substantially the same form as set forth in Exhibit A on behalf of the City; and further
BE IT RESOLVED, that the Airport Manager shall be and hereby is directed to administer the lease on behalf of the City consistent with the purpose and intention of the lease and this Resolution.