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Agenda 02/25/2014 Item #11B2/25/2014 11. B. EXECUTIVE SUMMARY Recommendation that the Board of County Commissioners, in its capacity as the Collier County Airport Authority, accept staffs Airport Lease Report and direct the County Attorney and County Manager to work with the tenants of the Airport Authority to achieve compliance as outlined in the report's tentative compliance schedule. OBJECTIVE: That the Board of County Commissioners (Board) provide direction and support for staff s efforts to address all lease compliance issues at the airports. CONSIDERATIONS: On October 8, 2013 under item 14A1 the Board directed all leases to be thoroughly reviewed. On October 23, 2013, the Growth Management Division (GMD) assumed responsibility for the operational oversight of Immokalee Regional Airport, Marco Island Executive Airport, and the Everglades Airpark. In order to fulfill that responsibility, GMD staff, with the help of multiple county agency partners, conducted a review of each lease and license agreement at each of these facilities. The findings of this review are summarized in the attached Airport Lease Report. Included in the report is a preliminary summary of actions to be taken in order to address the various issues noted and the anticipated timeline necessary to do so. Key recurring areas of concern noted in the report are as follows: • Insurance certificates not on file or not current • Delinquent rent • Interest and /or late fees not properly charged to delinquent tenants • Agreements contain unclear terms and lack a consistent structure Staff intends to work cooperatively with the tenants to educate them and assist them in attaining compliance. Non - compliant leases that fail to actively pursue compliance will be acted upon with the assistance of the County Attorney and brought to the Board for final disposition as necessary. FISCAL IMPACT: There is no fiscal impact associated with this Executive Summary. GROWTH MANAGEMENT IMPACT: There is no growth management impact associated with this Executive Summary. LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, presents a number of legal issues that will be dealt with while working with staff pursuant to Board direction, which direction requires simple majority vote. -JAK. RECOMMENDATION: That the Board of County Commissioners, in its capacity as the Collier County Airport Authority, accepts staff s Airport Lease Report and direct the County Attorney and County Manager, or his designee to continue taking the actions required to address the non - compliance issues noted. Prepared by: Gene Shue, Operations Director, Growth Management Division - C &M Attachments: 1) GMD Airport Lease Review: 2) Airport Authority Lease Issues Exhibits A & B: and 3) Exhibit C — Lease /License Status Summary Packet Page -190- COLLIER COUNTY Board of County Commissioners Item Number: 11.11.6. 2/25/2014 11. B. Item Summary: Reccomendation that the Board of County Commissioners, in its capacity as the Collier County Airport Authority, accept staff's Airport Lease Report and direct the County Attorney and County Manager to work with the tenants of the Airport Authority to achieve compliance as outlined in the report's tentative compliance schedule. Meeting Date: 2/25/2014 Prepared By Approved By Name: LynchDiane Title: Supervisor - Operations, Road Maintenance Date: 2/14/2014 4:09:53 PM Name: ShueGene Title: Director - Operations Support, Transportation Administration Date: 2/14/2014 5:03:36 PM Name: MarcellaJeanne Title: Executive Secretary, Transportation Planning Date: 2/18/2014 8:21:01 AM Name: GreenwaldRandy Title: Management/Budget Analyst, Office of Management & Budget Date: 2/18/2014 9:00:47 AM Name: KlatzkowJeff Title: County Attorney, Date: 2/18/2014 9:33:30 AM Name: OchsLeo Title: County Manager, County Managers Office Date: 2/18/2014 12:21:26 PM Packet Page -191- 2/25/2014 11.B. Co per County Growth Management Division Collier County Airports - Lease /License Review Date: February 14, 2014 Introduction: As directed by the Board of County Commissioners on October 8, 2013 under item 14A1, Staff has completed a preliminary review of the lease and license agreements at each of the County's Airports. This review was completed with the help of many individuals within GMD, as well as several more from other Divisions. Particular thanks go to Tim Durham, Executive Manager of Corporate Business Operations for his work in researching and locating many of the lease documents that were reviewed. In addition to the Summary of Findings and Corrective Actions outlined in the following pages, please note the following Exhibits at the end of the report: Exhibit A — Immokalee Regional Airport Site Location Map Exhibit B — Marco Executive Airport Site Location Map Exhibit C — Lease /License Agreement Status Summary Scope of the Review: The intent was to review and improve leases at the Immokalee Regional Airport, the Marco Executive Airport, and the Everglades Airpark. In addition, Staff reviewed all available relevant supporting documentation that could be located in order to provide context for the various agreements. It should be noted that the review is an ongoing, iterative process. Findings are current as of the date of this report but are subject to change as the review continues. Growth Management Division • 2885 South Horseshoe Drive • Naples, Florida 34104.239- 252 -8192 • FAX 239 - 252 -2726 Packet Page -192- Summary of Findings: General Findings Inter - Agency Support 2/25/2014 11. B. It was noted during the review that the Airports have been operating without the full benefit and support of all available County resources and expertise. Failure to fully utilize these resources, particularly in the area of lease management, has led to many of the specific lease issues outlined in a later section of this report. Corrective Actions: 1. GMD Operations staff is currently working with Airport staff to implement a document storage process that utilizes SIRE's document management capabilities. a. In addition, GMD — Operations staff has begun development of a GIS based "Airport Information System" that will facilitate access to relevant Airport information and associated documents. Staff is currently scanning and indexing the nearly 2,000 documents discovered during the review effort. 2. GMD has begun a dialogue with other Inter - Agency partners designed to make available the expertise necessary to improve the efficiency of Airport operations. The initial lease review activity was spearheaded by the CMO, while the Real Property Management and Risk Management groups are mobilizing to play a more active role in the lease management process. Status: Underway - actions will be ongoing. Follow -up on Past Due accounts • A number of customers had aged accounts receivable balances brought forward in FY14 as part of the invoicing/billing process migration from Quickbooks to SAP. Corrective Actions: 1. Determine the validity of the carry forward balances of accounts receivable for FY14. Packet Page -193- 2/25/2014 11. B. 2. Make any necessary journal entry recommendations to Finance to cleanse the A/R balance. 3. Determine staff responsibilities related to following up on past due /delinquent amounts from tenants. Status: Underway — resolution of all issues expected within 3 months. Invoicing • Errors and omissions were noted during the review of leases, especially related to the charging of interest and late fees. Further details within "Specific Lease /License Issues" segment of this report. Corrective Actions: 1. As part of the lease review, Standard Operating Procedures should be developed to document the SAP invoicing process with related deadlines and responsibilities for the charging of fees, interest, sales tax, notices to delinquent tenants, and collection of past due amounts. 2. A master listing /matrix of leases with important deadlines, amounts and any other pertinent information should be created and maintained to provide accountability and transparency regarding the leases by location. Status: Underway — resolution of all issues expected within 6 months. T- Hangar and Tie -Down Agreements • In matching the Tie -Down agreements to the proper rate, it was noted that the aircraft classification was missing, making it impossible to validate the rate charged. Corrective Actions: The aircraft classification was added to the agreement for proper matching to the approved rate sheet. 1. The Executive Director signature line was removed and the Airport Accounting Supervisor was added in its place. The agreements are also sent to GMD for uploading and tracking in SIRE as part of the document management project. 2. The square footage on the hangar diagrams was rounded, making the rate calculation utilizing the square footage appear inaccurate. Hangar diagrams have been updated to reflect actual square footage to ensure proper rates are charged and transparent for audit. Packet Page -194- 2/25/2014 11. B. 3. Agreements executed in the absence of the ED are being brought to the BCC for ratification in February 2014. Status: Completed. Missing or Expired Insurance Documentation • We reviewed Airport records for all required insurance documents as specified in the agreements. o There were 41 instances noted in which the documentation either could not be located or was not current. 0 7 of these instances are noted within the Specific Lease /License Issues" segment of this report. Corrective Actions: 1. Airport management will work with tenants to quickly obtain current insurance documentation. Status: All tenants have been notified - resolution of all issues expected within 2 months. Specific Lease /License Issues Gulf Coast Design Products "GCDP" (formerly Florida Architectural products "FAP ") • Related to the Incubator 11 Facility at the Immokalee Regional Airport. o This facility has a $750k CDBG grant associated with it that obligates the Airport to remit 51% of the lease proceeds to the grantor. • At lease inception there were concessions made which resulted in FAP only paying for half the space actually occupied for the first 6 months of the lease term. • Base lease agreement expired in April 2007. o Two year extension was available, though there was no documentation of it being exercised. • In February 2009, the tenant requested a rent reduction because of the worsening economy. • The Executive Director at the time (T. Cook) approved a rollback to the original rental term — which only charged the tenant for about half the space occupied. • Airport Authority meeting notes indicate that the board accepted this arrangement subject to the grantor — the Florida Department of Community Affairs (DCA) approval. ■ No documentation could be found to verify the grantor's approval. Packet Page -195- 2/25/2014 11. B. ■ Subsequent communications with the grantor agency indicate that they were aware and approved — but we are still awaiting documentation. o No lease amendment reflecting the rent reduction could be found. Effectively the tenant has occupied the facility without a valid executed lease for the past 5 to 7 years. • Over the past several years the tenant has been significantly behind in their rent payments. o In late 2012 Executive Director C. Curry worked out a payment plan in an attempt to get the tenant current. • Although no documentation (signed agreement and payment schedule) of this plan was found, it apparently called for the tenant to pay an extra $500 per month toward the approximate $10k arrearage. • The tenant has failed to abide by this plan, and is currently > $25k behind in their payments. • An invoicing error was noted within FY14 whereby the Accounting Supervisor began including the additional $500 on the billing to the customer. This has caused an overstatement of accounts receivable and revenue which is currently being corrected with the assistance of Clerk's M IS. • At the time of our review the Certificate of Liability Insurance had expired. • Also at issue are the payments to the grantor. Note that the DCA is now known as the Florida Department of Economic Opportunity (FDEO). ■ Original obligation called for 51% of rent payment to be remitted to DCA (FDEO). An analysis of remittances to the FDEO has been completed and work is underway to determine what, if any, liability exists for additional payments to the grantor. • There were also concerns about the degree to which the Airport and the Participating Partner (FPA /GCDP) in the original grant agreement met the terms of the grant. o A 12/09 "Close out" letter from the DCA indicates that compliance requirements were met. Corrective Actions: 1. Work with CAO to collect past due amounts and get tenant current. The past due amount is approximately $25k including late fees. 2. Working with the CAO and Real Property Lease Management group, draft a new lease agreement to fill the void of the expired lease. This lease must conform to the standards that we are instructing the Real Property group to develop for use at the Airports and meet all FAA requirements. 3. Re: the Certificate of Liability Insurance expiration issue - the tenant was contacted immediately and a current certificate has been acquired. Packet Page -196- 2/25/2014 11. B. 4. A thorough analysis of the payments received from the tenant and the remittances to the DCA /FDEO was completed. The CAO has initiated communication with the FDEO to determine how much, if any funds are due to them at this point. 5. With the assistance of the CAO, the Grants Management Office and the Housing, Human & Veteran Services Division we are continuing to review the grant related issues that were outside of the scope of our lease review. 6. The Airport Accounting Supervisor understands how to properly invoice this customer in the future to avoid further fiscal errors. Status: Underway — resolution of all issues expected within 6 months. KPK Management Inc. • Related to the Incubator I Facility at the Immokalee Regional Airport. • Original lease was with Global Manufacturing Technology. o Lease was subsequently assigned to KPK (a related entity). • KPK has been "administratively dissolved" but continues to pay its lease obligation. • KPK subleases to other entities. • Lease has specific stipulations about the type of businesses it may sublease to. • Tenant has not allowed the Airport to review these subleases. • Non - approved businesses may have been allowed to operate within premises. • Current insurance documents could not be located. • Contrary to lease provisions, the tenant is utilizing exterior parking and common areas for storage of materials and items. • At the time of our review the most recent rent escalation provision effective 9/1/13 had yet to be applied. Corrective Actions: 1. If KPK's corporate status impacts the validity of the lease agreement then it needs to be revised to reflect the proper entity as lessee (Global Manufacturing Technology ?). 2. Work with tenant to secure current insurance documentation. 3. Meet with tenant to stress that all lease provisions must be abided; especially the requirement to submit subleases to the Airport for review and approval. 4. Notice of rental increase in accordance with lease agreement went out in January 2014. Status: Underway — resolution of all issues expected within 3 months. Packet Page -197- 2/25/2014 11. B. Salazar Machine and Steel Inc. - USDA & EMS Facilities (two leases) • Tenant is consistently 60 to 90 days late in making their lease payments for the USDA facility. • Late fees and interest have not been correctly computed and charged. • Current past due amount including late fees and interest is >$70k. • Revenue from this lease goes back into the "Immokalee Development Fund" until the fund is paid back; then the revenue will go into the IMM Cost Center Revenue Budget (495- 192330). • Current insurance documents could not be located. • EMS lease is for the building only. • Tenant is using surrounding land for storage. • Tenant needs to be paying to use the land at the acceptable land lease rates. • EMS agreement is not a standardized and does not indicate who is responsible for utilities. Corrective Actions: 1. With help from CAO, work with tenant to address late payment issue. 2. Work with Real Property Lease Management group to address lease standardization issues. 3. Work with tenant to secure current insurance documentation. Status: Underway — resolutions to past due amount and insurance issues are expected within 2 months but lease standardization will take longer. Immokalee Regional Raceway /Drag Strip (IRR) • Drag Strip "Operating Area" does not match up to actual area used. • Current insurance documents could not be located. • There is an unauthorized Go -Cart Track operating on land adjacent to the area covered by this lease. • The current lease agreement does not encompass this area or activity. • There are also zoning issues associated with this use. • Insurance is inadequate for this activity. • Fuel tanks in use at Drag Strip need to be upgraded or replaced. • Associated FAA issues: • FAA approval is needed for amendments to the lease. • An Airspace Study is required for certain structures on the property. Packet Page -198- 2/25/2014 11. B. • Advertising Revenue - Should be paid monthly (50% of Revenue) with financial records to support the remittance to the Airport Authority. • Bathhouse ownership issues. o Tenant believes that he owns it. • Tenant has letter from previous Airport Management authorizes its relocation to IRR. • Tenant paid to relocate and currently maintains the facility. • The bathhouse is not part of the current leasing arrangement. • The bathhouse was permitted and constructed with grant funding; no grantor authorization to move the structure. • There is no valid permit for where the bathhouse is currently located. • The septic tank in use was likely not installed in compliance with county or environmental regulations. • Other issues to be addressed in revised lease: • Camping of trucks and trailers. • Trash Removal procedures. • Fuel sales to racers. • Storage of non -drag racing items (cattle trailers, old vehicles, dilapidated children's playground, etc...). • Concessions stand revenue sharing. Corrective Actions: 1. The unauthorized Go -Cart operation was halted in January pending the fulfillment of all necessary insurance coverage. 2. Work with tenant to secure current insurance documentation. 3. Per BCC direction on 2/11/14, a Code Enforcement case on the Immokalee Regional Raceway will open to bring the raceway into compliance with all applicable County codes. 4. Work with U.S. Department of Commerce to obtain permission for the movement and change of use of the grant funded bathhouse. 5. Upon compliance with all regulatory requirements, a new agreement will be drafted that addresses all the additional unresolved issues within the license agreement, including the rental rate, revenue concessions, and other issues as noted above. FAA approval of the agreement will also need to be secured. Status: Underway — resolution of all issues expected within 6 months. Packet Page -199- 2/25/2014 1 1 3. Fletcher Flying — Corporate Hangar & Staging Area (two leases) • Tenant required to produce and have in place a pollution control plan by October 1, 2013. • Grass areas around hangar are being used for storage of trailers, tanks, and vehicles. o Cannot locate this "right" in the lease. • Tenant pays to use the paved portion of staging area but is also using turf around area for storage of dumpster(s), chemical trailers, aircraft, equipment, and tanks. Corrective Actions: 1. Work with GMD —Natural Resources to refine and implement the pollution control plan. 2. Either strictly enforce current lease provisions or make revisions to accurately reflect the current operational framework. Status: Underway — resolution of all issues expected within 6 months. Shepard Land Leases (two leases) • Amendment #1 for each of the two agreements were never fully executed. • Current insurance documents could not be located. • Tenant leases minimal land (almost no buffer areas). • Buildings #7 & #8 are required per lease to be torn down after 3 years (on 9/13/14) o Building #8 has already been removed. • Tenant has a fuel farm containment area (no tanks) that is still on the property and needs to be removed along with the buildings at the 3 -year anniversary of lease. • No paved access to any of the tenant's buildings. Corrective Actions: 1. Working with the CAO to execute both amendments #1. 2. Work with tenant to secure current insurance documentation. 3. Work with tenant to make sure that the buildings and fuel farm containment areas are removed by 9/13/14 as per the lease agreements. 4. Work with tenant to address the building access and land buffer issues. Status: Underway — resolution of all issues expected within 7 months. Packet Page -200- 2/25/2014 11. B. Swasey /Exec Air Inc. of Naples /Aircraft Maintenance of Southwest Florida • Commercial T- Hangar Lease. • Lease allows tenant /company to perform "Full maintenance activities and major aircraft repairs under the terms of this agreement ". o Some maintenance activities however may not comply with the fire code due to building design. • Lease executed on 6/1/11. Term is 3 years with a 2 year renewal option. • Tenant has been granted a waiver from following Airport Minimum Standards until suitable space becomes available OR tenant builds a building that adheres /conforms to requirements of Minimum Standards. Corrective Actions: 1. Investigate fire code issue further to ensure that the Airport has no related liability issues. 2. Work with tenant in advance of lease expiration to make sure they are aware of the Airport's inability to continue leasing them T- Hangar space for their business operations. Status: Not yet started — resolution of all issues expected within 6 months. Mayhood Land Lease • Current insurance documents could not be located. • Leased area cannot be accessed without having to operate on Aircraft Movement areas o Tenant has the ability to add an access road off of Airway's Blvd. but requirement was not added into the lease during negotiations. Corrective Actions: 1. Work with tenant to secure current insurance documentation. 2. Initiate communication with tenant to explore the possibility of adding an access road off Airway blvd. Status: Underway — resolution of insurance issue expected within 1 month. National Guard T- Hangar C -10 & Vehicle Storage (two leases) • National Guard is using a t- hangar and land without compensating the Airport. Packet Page -201- 2/25/2014 11. B. o Agreement /Lease expires mid 2014. • Airport needs to show a revenue or credit for the usage of the hangar and land for the past 5 -years to adhere to FAA requirements. National Guard Land Lease • National Guard is using the land without compensating the Airport. • Lease provisions call for eventually billing the National Guard for imputed rent (approx. $115k /year). o Per lease agreement, this imputed rent is to be credited against the BCC loan to the Airports. Corrective Actions: 1. Work with Airport staff and OMB determine if the proper billing and accounting for this lease has occurred and, if not, make all necessary corrections. 2. Work with Real Property to create new (paid) T- hanger lease. Status: Not yet started — resolution of all issues expected within 6 months. Fogarty T- Hangar Sublease (Marco) • Tenant subleasing T- Hangar at Marco Airport for approximately 2 years (from J. Swain). • Sublease provisions call for termination of use after a maximum of 6 months. • Current insurance documents could not be located. Corrective Actions: 1. Enforce the the provisions of the Temporary Sublicense of Hangar Agreement by requiring the tenant to vacate the hangar, or revise the Leasing Policy to reflect the current subleasing activities. 2. Work with tenant to secure current insurance documentation. Status: Status: Underway — resolution of all issues expected within 2 months. Packet Page -202- Exhibit A - Immokalee Regional Airport 2/25/2014 11.B. A - Gulf Coast Design Products B - KPK Management C1 - Salazar Machine & Steel USDA Building C2 - Salazar Machine & Steel EMS Building D1 - Immokalee Regional Raceway Drag Strip D2 - Immokalee Regional Raceway Go -cart Track E1 - Fletcher Flying Service Hangar E2 - Fletcher Flying Service Staging Area F1 - Greg Shepard Hangar 7 F2 - Greg Shepard Building 8 F3 - Greg Shepard Hangar 13 F4 - Greg Shepard Hangar 14 G - John Swasey - Aircraft Maintenance of Southwest Florida H -Three Mayhoods 11 - National Guard T- Hangar 12 - National Guard Vehicle Storage 13 - National Guard Land Lease Packet Page -203- Exhibit B - Marco Island Executive Airport 2/25/2014 11.B. 2/25/2014 ' 1.B. s N N a CD 0 C O c c c O c O c N O .2 .9 C C C C C L L 5 C O fl) N L .0 N j p p p > > O O O 0 Z+ N O O O O O O 3 7 y N O. -Op m N 3 ❑ ❑ ❑ ❑ ❑ O O O 61 ,c ❑ O C p •y O " U U U U C C C C C X V C 0 y C c c c c c m w to m c � c m lie a '- t6 °" to 7 to 7 m t`o t` a) a) to y N N 7 N 7 W O N .- N n c f6 N N Y 7 N d N .- N C N O N •- S� JNO.2 r r r N r N N r r N r r r N N N M M M �M N 0)(.) co O LL ILL fn p O O fn N C 0 C iN # m '00 6% C14 LO M 4k = Vi ca ��'— °o l At cm w N •C m CL @ - LL fn - Q Ot Hj cc L� LL: ii ii ii ii ►� 0 8 d a) o c' 00 rn U) tD °° co c° co c° U O m O M X cl U c co co c0l00 CO U N O O O N 'a O `-' N N N to Q) N N U Q ik ik ik ik •U y C 'O •U 'i •U O- t6 t6 O t6 tc fc U tc � t6 •L) Q C t6 U t6 (OA t6 N Cl) N a) O) cn tT cm t0) L LL LL °� J w tT Q N LL LL J U- 0 t0 c C c c c C y y 0 'O .T. y ,- = C E .& N a) 'O N U `'G t6 t6 S t6 S tc S N S t6 S to tc to co t6 N .O-. t6 C N f6 U N Q :6 N U) to t6 to tc C N N O •• Vi Q F- f- ♦- ♦- F- F- 0) J 0) J N> t6 J N t6 J LL t6 (n m r N J tU J N J c) J O CO) y N I U rn LO C6 (D _ a 0 U 0) N N N N It 0 0000 ❑ O x x C N N tU N ' a E E E a M n n N t6 F- O F- t6 a a 0) x N N N N N 0) st NZ LO Z T Z N Z Lu r Z O O N N x tU x x a) x O F•" O) m O ' � N � O Z Z C '� a Co t6 F- a t6 t6 F- t6 ♦- a t6 t6 F- Q Q Q cQ O O O r-w O NO x x x N N N p N t6 t6 fc tb Z Z t6 ~ co m ~ N N N t6 N N N " r c — O U C N O c O C 4) ODU 4) L) a) O O N — — Q NU — WUU _ — N — U to f0 N Q N ♦- .y t6 fU tc t6 t6 N t6 - t6 t6 C t6 t6 tc N t6 t6 cc LL y N y to tT tT tT tT t71 LL LL O J LL J LL LL J LL 0N� U C N C C E 'O 'O N "O N N l6 t6 t6 t6 t6 t6 t6 (OA to N N ! 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