LEGISLATIVE ACTION ITEM
SPONSOR: Ashton J. Hayward, III, Mayor
SUBJECT:
title
INTERLOCAL AGREEMENT BETWEEN ESCAMBIA COUNTY AND THE CITY OF PENSACOLA - FUNDING OF AEROSPACE MAINTENANCE, REPAIR AND OVERHAUL (MRO) CAMPUS EXPANSION AT PENSACOLA INTERNATIONAL AIRPORT
end
RECOMMENDATION:
recommendation
That City Council approve the Interlocal Agreement between the Escambia County Board of County Commissioners and the City of Pensacola related to the funding of the aerospace maintenance, repair and overhaul (MRO) campus expansion at the Pensacola International Airport. Further, that City Council authorize the Mayor to take all actions necessary to execute an Interlocal Agreement.
end
body
HEARING REQUIRED: No Hearing Required
SUMMARY:
In December 2013, Mayor Hayward executed a nonbinding Memorandum of Understanding with ST Aerospace which allowed the City of Pensacola to begin contract negotiations with VT Mobile Aerospace Engineering, Inc. (VT MAE) for the construction and operation of a maintenance, repair and overhaul (MRO) facility at the Pensacola International Airport. City Council approved the negotiated lease agreement in September 2014. In June 2018, the $46 million facility (Hangar 1) officially opened resulting in the subsequent creation of 400 new high-wage jobs.
To assist in the funding of Hangar 1, the City and Escambia County entered into an Interlocal Agreement dated March 6, 2014 whereby Escambia County contributed local funds in the amount of $8 million to pay a portion of the project costs with the City agreeing to repay $3.2 million to the County no later than December 31, 2019.
The Real Property Lease between the City and VT MAE for Hangar 1 grants a right of first refusal to VT MAE to lease additional land at the Pensacola International Airport (Airport) to expand its MRO operations. In November 2017, the City and VT MAE signed a Memorandum of Understanding to expand VT MAE’s MRO business operations at the Airport. VT MAE has proposed the construction of three (3) additional hangers; an administrative office building; a warehouse, shops and support facilities building; and associated aircraft aprons, taxiways, and automobile parking that would create and maintain an additional 1,325 full-time equivalent jobs at the Airport (Expansion Project). All of the assets constructed for the Expansion Project will be City owned property and infrastructure and will be leased to VT MAE under a triple net land lease, thereby generating additional airport revenue of approximately $1 million per year.
The estimated cost of the Aviation MRO Campus Expansion Project is $210,128,000. In September 2018, both the City Council and the Escambia County Board of County Commissioners approved funding for the Expansion Project in the amount of $10 million. Additional funding for the estimated cost of the Expansion Project is as follows:
a. $56 million from Triumph Gulf Coast, Inc.;
b. $35 million from VT MAE;
c. $50 million from the Florida Department of Transportation;
d. $17 million from the State of Florida;
e. $17 million from the U.S. Economic Development Administration; and
f. $15.128 million from other sources.
As part of Escambia County’s $10 million contribution, the Board of County Commissioners voted on September 6, 2018 to forgive the $3.2 million loan to the City from the first phase of the MRO project (Hangar 1) which was budgeted to be repaid on or before December 31, 2019. Therefore, the proposed Interlocal Agreement provides the City shall contribute funding for the Expansion Project in the amount of $3.2 million on behalf of the County in lieu of repayment to the County under the March 6, 2014 Interlocal Agreement on or before December 31, 2019. This will leave a balance of $6.8 million due from Escambia County to fund the Expansion Project. Escambia County shall provide funding in the amount of $2 million on or before September 30, 2022, with the balance of $4.8 being paid on or before September 23, 2023. The County’s total funding obligation will be contingent upon the City securing commitments sufficient to construct the Expansion Project.
The proposed Interlocal Agreement for the funding of the Expansion Project replaces the Interlocal Agreement for the first phase of the MRO project dated March 6, 2014 and incorporates the full-time job investment guarantees and clawback provisions in that agreement. The proposed Interlocal Agreement provides the following:
1. VT MAE will be required to create and maintain an employment level of 300 full-time equivalent jobs at Hangar 1 during the term of the Real Property Lease for Hangar 1. After thirty-six months from the date of beneficial occupancy as defined in the Real Property Lease for Hangar 1, and continuing for seven years thereafter, the City shall pay the sum of $2,286 per job (calculated by dividing the County contribution of $4.8 million by (300 jobs multiplied by 7 years), rounded) for the difference between the actual average number of employees and 300 full-time equivalent jobs maintained by VT MAE during each lease year. The City’s obligation to reimburse the County under this provision shall not exceed $4.8 million.
2. VT MAE will be required to create and maintain an employment level of 1,325 full-time equivalent jobs at the Expansion Project during the term of the Real Property Lease to be entered into for the Expansion Project. After thirty-six months from the date of beneficial occupancy to be defined in the lease for the Expansion Project and continuing for seven years thereafter, the City shall pay the County the sum of $1,078 per job (calculated by dividing $10 million by (1,325 jobs multiplied by 7 years), rounded) for the difference between the actual average number of employees and 1,325 full-time equivalent jobs maintained by VT MAE during each lease year. The City’s obligation to reimburse the County under this provision shall not exceed $10 million.
3. Jobs created at Hangar 1 in excess of the number of jobs required to be maintained may be counted toward the job requirement of the Expansion Project. Jobs created at the Expansion Project in excess of the number of jobs required to be maintained may be counted toward the job requirement of Hangar 1.
4. If the Expansion Project is terminated at any time prior to the date of beneficial occupancy, the City will reimburse the County $3.2 million paid on behalf of the County and the full amount of contributions by the County to date up to $6.8 million. The City’s obligation to reimburse the County under this provision shall not exceed $10 million.
5. Should VT MAE cease operations at the Airport within ten years from the date of beneficial occupancy of the Expansion Project and the City is unsuccessful in recruiting a similar replacement tenant within three years from the cessation, the City will reimburse the County $14.8 million over the succeeding seven year period less any reimbursements previously paid by the City due to the full-time job investment guarantee.
The City’s obligation to reimburse the County as described above is payable solely from and secured by a first and prior lien upon the City’s Communication Services Tax as was also provided for in the March 6, 2014 Interlocal Agreement. However, the City anticipates using Local Option Sales Tax funds if the full-time job investment guarantees and clawback provisions are initiated.
John Daniel of Beggs & Lane RLLP will be present to review the terms of the proposed Interlocal Agreement for funding of the Expansion Project.
The proposed Interlocal Agreement has been forwarded to the County and requested to be considered at the Board of County Commissioners Regular Meeting on Thursday, November 1, 2018.
PRIOR ACTION:
February 27, 2014 - City Council approved the Interlocal Agreement between Escambia County and the City of Pensacola for funding of economic development project - ST Aerospace of Mobile.
September 9, 2014 - City Council approved the Real Property Lease with VT Mobile Aerospace Engineering, Inc.
September 22, 2016 - City Council approved Amendment No. 1 to the Real Property Lease with VT Mobile Aerospace Engineering.
September 13, 2018 - City Council approved funding in the amount of $10 million from Local Option Sales Tax Series IV in the support of the aerospace maintenance and overhaul campus expansion.
FUNDING:
Budget: $ 10,000,000
Actual: $ 10,000,000
FINANCIAL IMPACT:
City Council has committed $10 million in Local Options Sales Tax Series IV in support of the MRO campus expansion. The City has programmed $6 million to be contributed on or before September 30, 2019, $2 million to be contributed on or before September 30, 2021 and $2 million to be contributed on or before September 30, 2022. Additionally, once completed, all of the assets constructed for the Expansion Project estimated to cost $210,128,000 will be City owned property and infrastructure and will be leased to VT MAE, thereby generating additional airport revenue of approximately $1 million per year.
CITY ATTORNEY REVIEW: Yes
10/26/2018
STAFF CONTACT:
Keith Wilkins, City Administrator
Richard Barker, Jr., Chief Financial Officer
Daniel E. Flynn, Airport Director
ATTACHMENTS:
1) Interlocal Agreement between Escambia County and the City Related to the Funding of VT Mobile Aerospace and Engineering, Inc.
PRESENTATION: No end