General Aviation Leasing Information
The Eugene Airport (EUG) recently hired consultants Landrum & Brown (L&B) to review all aspects of how the Airport is managed, including the review of general aviation ground leases. As result of this review L&B recommended the implementation of three key performance indicators in ground leases moving forward:
- A rent escalation mechanism with clearly established timelines.
- The full development footprint of each hangar improvement is designated as the leased premises and is determined by a third-party survey of the area.
- Reversion of improvements to the City at the conclusion of a total lease term of 40 or 50 years.
In addition, we consulted with the FAA Northwest Mountain Region compliance program officer, and adopted leasing policies in place at Portland International Airport (PDX) and Redmond Municipal Airport (RDM).
The Airport has the obligation to make sure it is adhering to Airport Sponsor Grant Assurances, specifically Assurances 5, 22, 24, and 38, which if violated would put in jeopardy all past and future Federal grants. This is the Federal Aviation Administration’s (FAA) way of ensuring the highest and best use of grant assurance-obligated property, protecting the federal investment in our nation’s airports.
In developing the Eugene Airport Leasing Policy, L&B recommended using the Internal Revenue Service amortization timeline of 39.5 years and set the Eugene Airport's maximum lease term on a ground lease improvement at 40 years. This update to our ground lease practices specifically supports Assurances 5, 22, and 38.
In a good faith effort to support our local general aviation community, there are several options available to ground lease holders whose hangar improvement is more than 40 years old, but less than 50 years old:
For ground lease holders who wishes to retain ownership of the improvement (hangar), EUG offers the following option:
- A new lease will be executed for up to a maximum age of the improvement (hangar) of 50 years and the City will assess a Reversion Deferral Fee (RDF) in compensation for lost improved (hangar) lease revenue during the lease extension period.
If the ground lease holder does not opt for the RDF, EUG offers the following options:
- At the end of the ground lease term [Date], Section 18 of the agreement will go into effect due to the age of the improvement (hangar).
- If the improvement is in acceptable condition, the lease holder may vacate the improvement on the leased land and allow ownership of the hangar to revert to the City
- Remove the improvement.
- An improved ground lease (land and hangar) under City ownership of the improvement.
For ground lease holders whose hangar improvement is more than 50 years old options include:
- Remove the hangar improvement and return the land to the original condition; or
- If the improvement is in acceptable condition, the lease holder may vacate the improvement on the leased land and the hangar will revert to the City; or
- An improved ground lease (land and hangar) under City ownership of the improvement
A link to Grant Assurances 5, 22, 24, and 38 is listed below: