By Jenny Neyman
Photo by Jenny Neyman, Redoubt Reporter. Lease lot values at the Soldotna Municipal Airport increased by about 60 percent in a March appraisal, bumping lease fees up with it. Airport users are working with the city to change the city’s lease agreement to keep rates from skyrocketing unexpectedly in the future.
Redoubt Reporter
Aircraft aren’t the only things taking off at the Soldotna Municipal Airport lately. A recent property value assessment conducted on behalf of the city resulted in lease lot rental rates heading skyward, as well, and lessees’ discontent rising along with them.
An appraisal of lease lots at the airport, conducted in March by Derry and Associates, of Kenai, resulted in about a 60 percent increase in value over the previous appraisal in 2005. For the smallest lot, that translates to a rent increase of $132 a year, from $228 to $360. For larger lots, the rental fee increased as much as $2,000 a year, from about $3,000 up to about $5,000. The increase is particularly significant to businesses or individuals who rent multiple large lots, and some renters are saying that, rather than generating more financial support, the new rates could hurt the airport by driving leaseholders away.
“Unless I’m living on a different planet than everybody else, I cannot see a 50 to 60 percent jump, in this economy, justified. And I can’t see anywhere else the city has done this with leases,” said Peter Thompson. “It’s a total disincentive to do anything on this airport. I had my name down for another lot and that’s certainly not going to happen now. If I could sell the lots I’ve got over there, I would get rid of the hangars.”
The methodology for determining lease rates is spelled out in the airport lease agreement. The city is required to have the property value of the lease lots reassessed every five years. Lease rates are figured at 6 percent the assessed value.
Shawn Holley said he examined a five-year trend of borough appraisals of the property and found the borough’s appraisal increased 2.2 percent in that time, compared to Derry’s assessed increase of about 55 percent on his lot. He said it’s concerning to him that the city had recently discussed, and decided against, raising the lease rate from 6 percent to 8 percent. Then renters find out their lease rates are jumping even higher anyway.
Had the lease rate increased to 8 percent and appraisals stayed the same, the annual bill for Holley’s 43,331-square-foot lot would have gone from about $3,360 to about $4,480 a year. With the rate staying at 6 percent and the 55 percent increase in assessed value on his lot, his bill instead jumped to $5,190 per year.
“It just doesn’t sit well. And maybe part of this is poor timing and coincidence. I think a lot of the frustration that goes along with this is the push here a month or two ago to increase the lease rates to 8 percent of assessed value. That would have increased our annual lease rates by pretty close to what this appraisal’s going to increase it, and it just really raises an eyebrow,” Holley said.
At a Soldotna Airport Commission meeting April 15, City Manager Larry Semmens said the appraisal was done on schedule and according to the lease agreement.
“We did what the lease calls for. If we didn’t do that, I would have expected some negative feedback on that,” he said.
The city received only one bid for the appraisal, from Derry and Associates. The firm is qualified to assess raw land and also conducted the 2005 appraisal of airport lease lots. The appraisal methodology is explained in the summary appraisal report, available on the city’s website. To summarize, Semmens said Derry and Associates used a comparative approach, looking at the values of similar properties that have sold in the recent past and analyzing the differences between those lots and the Soldotna airport lease lots.
The appraisal values may not be sitting well with renters, but there was nothing untoward about how they originated, Semmens said.
“That’s important to me that you folks know that the city has no ability to determine the outcome of the results of the appraisal,” he said. “We hired what we considered to be a professional appraiser, they were acceptable in the past so I didn’t have any particular worries about Derry. The contract required us to get an appraisal, we got an appraisal. The numbers apparently are not universally smiled upon, and here we are.”
Some leaseholders questioned the approach used in the appraisal, especially comparing Soldotna airport lots, which can only be leased, to other airports’ lots, which can be bought and sold.
“I’m not an appraiser, but the methodology doesn’t make a lot of sense to me,” said Soldotna Airport Commissioner Jay Rohloff. “Doing comparables to land that you can own does have a higher intrinsic value. It sits wrong with me to get that big of increase when other raw land hasn’t gone up that much. And I would like to see some sort of solution to right that.”
Len Wickstrom, with Missionary Aviation Repair Center, said his organization has been continually leasing airport land for about 45 years now.
“I haven’t calculated it out precisely, but I think we probably have paid for this lot four or five times over, and I think we’ve committed a lot of effort in the community through the years, so I’d like to see that we address this a little bit further,” he said.
Semmens said that, in his conversations with airport lot lessees, it seems it isn’t the new prices that are causing the most heartburn so much as it is the system that generated them.
“My thought after those discussions is the concern is not necessarily with the dollar amount getting paid, but it is the uncertainly of future lease cost increases that is a concern,” Semmens said. “Certainly nobody wants to spend any more money than they have to. I know that I have that reputation and I’m not ashamed of it. So I can understand that these increases are considered to be unacceptable. But it seems to me the real concern is what’s going to happen in the life of a 30-year lease. If every five years I see the thing jump 60 percent, well, by the end I’ll be paying a lot of money. I’ve been told it’s a disincentive to investment and I understand that.”
With the current system, where lease rates can change every five years, uncertainly over future rates could be a stumbling block to retaining current leaseholders, much less attracting new ones.
“If we don’t have comfort in the future, then nobody’s going to throw any money at the airport in developing it,” said Jim Stenga, an airport commission member and a leaseholder at the airport, “There’s a fair amount of us here that have thrown a fair amount of money into that airport, and unless you have a comfort of what you’re going to be paying the city in the future, you’re going to take your money somewhere else or do something else.”
At the commission meeting, there was call for changing how the lease agreement works, to create a system whereby lease rates are foreseeable into the future, or at least where increases are phased in over five years.
“I think the idea of coming up with another way to set the lease rate that you know what you’re paying in 10 years or 15 years is a great idea to pursue, instead of every five years having a target that you throw a dart at and hope a third party is close to what you agreed upon,” Stenga said.
Semmens proposed an extension, to June 30, on the deadline for current airport leaseholders to indicate to the city that they wish to renew their leases. In the meantime, Semmens offered to meet with a group of leaseholders to discuss the contract.
“I’m happy to sit down with a group of airport users and talk about ways that we can mutually reach our goals and, if necessary, make amendments to this lease,” he said.
Soldotna Mayor Peter Micciche urged attendees of the commission meeting to take Semmens up on his offer.
“From what I know about him, and I happen to be a big fan of Larry’s, is that he is someone who listens to logic and reason. It sounds like you have some legitimate issues and I know he has some legitimate support for what he’s doing, so I would expect that a positive result would come out of that. So I wouldn’t get angry, but I would get some folks together and work with Larry and I think you’d be happy with the result,” Micciche said.
The commission passed a resolution in support of extending the lease renewal deadline and convening a group to discuss the lease agreement, with Mike Larson serving as a representative of the airport commission and Brenda Hartman serving as a city council representative.
“I know that I’ve been on the airport commission since the mid-’80s and the contract’s really old. Things have changed, and the way we do things should change,” said commission Chairwoman Colleen Denbrock. “… We do have to generate some revenue and so we’ve tried to do that. Maybe not every step is correct, and we have to go back and redo some things. It’s our airport and it’s an asset of our whole community.”
