Dubois County Jasper Flight Services, Airport Authority meet, continue contentious negotiations on hangar lease increases
Dubois County Flight Services and the Dubois County Airport Authority met last week to discuss a contentious hangar lease renewal, with CEO Doug Bawel presenting three compromise proposals after months of disagreement over rental rates.
Here is information about the process from a story we did in October.
The facility was originally built by the Dubois County Flight Services in 1992 under the terms of the lease agreement with Dubois County Airport Authority. Those same terms stipulate that after 30 years, the airport authority may increase the rates to up to 1/20 of the building’s replacement cost.
The Airport Authority has been negotiating to increase the rate under the original agreement. They supported the increase with an appraisal conducted by Aviation Business Support (ABS).
However, the steep increase was unacceptable to Dubois County Flight Services, which commissioned its own market rate studies and appraisals of the facility through Aviation Management Consulting Group and French Lick-based Brooks Galloway Real Estate
“We are owned by our associate owners, so this has become very personal for me because it is our associate owners’ money,” Bawel, CEO of Jasper Engines and Transmissions, said. “Thus far we have spent $88,000 in legal opinions and appraisals not including any of our own time.”
Bawel presented three options to resolve the dispute. The first would average all three appraisals — their’s and the Airport Authorities, resulting in $53,676 annually with a 2.5% annual increase for 20 years plus two five-year options.
The second option would use the AMCG appraisal plus 13.5%, totaling $61,000 annually with the same terms as the first option, while allowing the airport authority to advertise for higher offers with Jasper maintaining first right of refusal.
The third proposal involves Jasper purchasing the building for $756,175 based on the AMCG appraisal, then leasing the land for an initial 30-year term plus three 10-year options.
Bawel criticized the Airport Authorities methodology for their rate study pointing out that ABS looked at airports across the country with the closest being in Chicago to create a cost comparison. These airports were based in larger metro areas.
The Airport Authority’s Legal Counsel, Phil Schneider, stated that the company acknowledged the difference in those markets and had taken that into consideration as part of its assessment.
Airport Authority Board Member Ken Schnaus acknowledged the challenge of finding comparable properties for appraisal purposes. The Huntingburg Airport is a designated a regional airport based on the number of flights and jets based there.
“One of the problems is there’s not a lot of us, so to try and find comparables it’s difficult to do, so it has to go out further to find this,” Schnaus said.
In response to Bawel’s three options, Schneider suggested averaging the two highest appraisals while excluding the Brooks Galloway assessment, noting that the company specializes in residential and farmland appraisals rather than airport properties.
“The comparable hangar rents that they cite in the report are all higher than what they came up recommending,” Schneider said.
As they discussed the options, Bawel emphasized that Jasper currently pays $1.76 per square foot and is offering to increase to $4.16 per square foot, which represented a significant jump from their current rate.
Bawel seemed reluctant to step away from the lease and said as negotiations move forward they would like to see the methodology that ABS used to determine their rates for the facility.
By the end of the meeting, both sides expressed willingness to continue negotiations, with the airport authority agreeing to request detailed methodology from their appraiser before making a final decision.
“We’re on the same team. We’re just trying to understand what our costs are going forward and we’re trying to cover those. We understand where you’re all coming from,” Schnaus said.
The parties agreed to table the discussion pending receipt of additional background information from the Airport Business Solutions appraiser, with plans to schedule another meeting once that documentation is available.
Correction: The Airport Authority was credited with building the facility in our story originally. The Dubois County Flight Services actually built the building. The story has been corrected.
