Airport report suggests bond issuance to pay land lease

The man tasked with creating a General Aviation Airport Study for the Town of Pahrump had some sage advice for town officials.

“Get into the airport business.”

Ron Price, principal of QED Airport and Aviation Consultants presented his findings of an Aviation Airport Feasibility Report to the town board during a recent meeting.

Price’s report viewed the potential financial outcome as “positive” in terms of yielding a net operating income for the town.

General aviation aircraft range from gliders and powered parachutes to corporate jets.

The facility covers a large range of activities, including flying clubs, flight training, agricultural aviation as well as light aircraft manufacturing and maintenance.

Plans for establishing a general aviation airport in the Pahrump Valley have been in the works for more than 20 years.

Last summer, the town board approved hiring QED to conduct the airport study.

Town Manager Susan Holecheck said Price’s report addresses the scope of work while presenting recommendations about the construction, operation and management of the proposed facility.

She noted that a major part of the report focuses on the financial impact for the town.

“It’s all part of obtaining FAA grants and there are certain things you have to do when you obtain federal grants and one of those is to find out if the project is financially feasible. He came back with total cost estimates, which were about $22 million dollars.” she said.

Contained within the report, the proposed Pahrump Valley General Aviation Airport is to be constructed on 650 acres of land provided by the Bureau of Land Management (BLM).

Price told the board that at present, the BLM is unable to negotiate a sale of the land to the town because the proposed site is not yet designated as available for disposal in the agency’s Resource Management Plan (RMP).

A RMP addresses and updates management policy for the present and future needs of the site.

“Consequently, the land can only be leased at a rate equivalent to 50 percent of fair market value over a 20-year term. The term can be extended in 20-year increments at the option of the BLM and using updated land appraisal values. At such time as the BLM Resource Management Plan is completed and the land area encompassing the proposed airport is designated as available for disposal, the town may enter negotiations with the BLM to acquire the land,” he said.

Price also presented more than one option town officials need to consider regarding the forms of airport operation and management.

“The first contemplates that the town will assume these responsibilities and the second assigns these duties to a fixed base operator. Within these two basic options are the combinations that may result in a sharing of responsibilities, operating revenues, expenses and capital project implementation. Irrespective of the option adopted, the airport owner is ultimately responsible for maintaining the safe operation of the airport and fulfilling obligations that are tied to FAA Airport Improvement Program grant awards for the capital improvement program,” he said.

Grant eligibility does not appear to be a guaranteed funding mechanism for the town.

The FAA AIP, Price said, is the only outside source to the town to implement the required airport capital improvement program aside from community organization and resident contributions.

The consultant also suggested that it would be in the town’s best interests to assume the larger role in providing overall airport operations and management duties.

“There is merit in having the town assume the responsibility for the sale of aviation fuel and provide overall operations and management duties, including the maintenance of the facilities for at least the first 10 years. This policy allows potential tenants to lease the maintenance hangar or other services at attractive rates and focus on building their businesses. Fuel prices at the lowest end of the market will attract based and transient aircraft and help gain exposure for these tenant businesses. The revenue anticipated from that activity helps position the proposed airport for the future because the town can assume the bulk of the operating costs and debt service requirements,” he said.

The meat of the report also provided board members with information on whether the project is financially feasible for the town.

Price noted that the utilization of AIP grants would prevent the town from incurring the entire $22 million dollar price tag.

He also spoke of the prospect of leasing the land for the facility, which would require a General Obligation Bond (GOB).

A GOB is a common type of municipal bond in the United States that is secured by a state or local government’s pledge to use legally available resources, including tax revenues, to repay bond holders.

Most general obligation pledges at the local government level include a pledge to levy a property tax to meet debt service requirements.

Price said holders of general obligation bonds have a right to require the borrowing government to levy that tax to satisfy the local government’s obligation.

“AIP grant funding for eligible projects from the FAA reduces the airport capital improvement program funding requirement of the town to about $4.3 million. It is anticipated that general obligation bonds issued for 20 years at an interest rate of 4 percent and including a 125 percent coverage requirement will be the financing vehicle available to the Town of Pahrump. Additionally, the town will need to lease the land from the BLM to proceed with the construction of the proposed airport. The total annual lease rate for each of the first five years of the land lease is $48,750 based on fair market value of $3,000 per acre for unimproved land. The lease is FAA AIP grant eligible and results in an annual cost to the town of $3,047 for each of the first five years,” Price said.

The proposed site of the facility is located on the far south end of town.

Holecheck, meanwhile, said that once the land is acquired by the town, the actual construction of the facility is several years away.

“You are not even talking about construction taking place until probably 2017 and you’re not even talking about the airport even opening until 2020. We are still a long way off,” she said.