City of Ormond Beach

Disposition Item

Airport Appraisal Services


Department:Economic DevelopmentSponsors:
Category:Consent Agenda




Staff is providing the City Commission with an update regarding the pending fair market value appraisal of parcels of leased airside property at the Ormond Beach Municipal Airport.




In 2006, eight (8) tenant leases were subject to their ten (10) year reappraisal.  In accordance with FAA regulations and lease requirements, staff conducted a fair market appraisal of the subject leased properties at the Airport. An additional six (6) tenants were also subject to the ten year reappraisal process in the following 2-3 years. Many of the tenants were concerned with the significant increase in their lease rates and requested the City Commission to conduct an additional appraisal. Following the completion of the second appraisal, the Commission held a workshop to address the appraisal(s) and to resolve the tenant concerns and the proposed ground lease rates. At the May 15, 2007 meeting, the City Commission resolved that it would be beneficial to amend the leases of all the14 tenants with a similar appraisal date rather than having separate appraisal periods. The City Commission thus offered the tenants to choose one of the following three options:

Option A: To continue the tenant's existing lease rate, subject to annual CPI increases, and agree to a reappraisal in 2012, which would take effect on January 1, 2013 with reappraisals in subsequent 10 year intervals. 


Option B: To select the lease rate of $.225/square foot as established by the September 2006 appraisal, subject to annual CPI increases, with reappraisals in subsequent 10 year intervals. 


Option C: This option applied only to tenants with fuel farms, which was to select the rate of $.175/square foot, subject to annual CPI increases and agree to a reappraisal beginning in 2013.


Ormond Beach Aviation opted for Option C, which was to increase their fuel farm lease rate to the rate of $.175/square foot.


The other 13 tenants chose Option A, which was to continue their current lease rates until January 1, 2013 when the reappraisal would take effect.




FAA Order 5190.6B states that ground leases with terms of five (5) or more years should contain an escalation provision for periodic adjustments based on a recognized economic index. This provision is meant to facilitate parity between new and established lessees, and also helps the sponsor comply with Grant Assurance 24, Fee and Rental Structure, which requires the airport sponsor to make the airport as self-sustaining as possible.


A majority of active lease agreements for airside property at the airport contain a provision such that beginning on January 1, 2013, in addition to the annual C.P.I. adjustment of the rental payment required under the lease, the annual rent shall be subject to review and a valuation adjustment every ten years such that the rental payment beginning on January 1, 2013 and every ten years thereafter shall be ten percent (10%) of the appraised value, plus applicable sales tax.  Such valuation adjustment shall be based upon a reappraisal.  The appraisal shall be based upon the fair market value of the land, excluding any improvements constructed by the Tenant but including the value of any improvements on the property that the City has constructed and taking into account any restriction on use of the property imposed under the terms of the lease, or by any governmental authority or agency having jurisdiction over the property and its use.


The provision further provides that in 2012 the City shall obtain an appraisal at its sole cost and expense for purposes of the initial valuation adjustment and thereafter shall obtain a reappraisal every ten (10) years.  The Tenant shall have thirty (30) days from the delivery of the City’s appraisal report to notify the City in writing whether it accepts the valuation or desires to obtain its own appraisal at its sole cost and expense.  If the Tenant does not advise the City within said thirty (30) day period that it does not accept the appraisal report, said report will be deemed to be accepted by the Tenant and rent will be charged accordingly.  If the Tenant obtains its own appraisal and if the two (2) appraisals are within ten percent (10%) of each other, the value will be deemed to be the average of the two (2) appraisals.  If the two (2) appraisals are more than ten percent (10%) apart, then the two (2) appraisers will negotiate an acceptable third appraiser, whose appraisal cost will be split equally by the City and the Tenant, who shall value the property at a value which will be no less than the lowest of the two (2) appraisals and no more than the highest appraisal, and which value shall be final and binding on the parties.  All appraisals shall be performed by MAI certified appraisers, experienced in the area of airport land appraisals and guided by recognized appraisal standards of the Society of Real Estate Appraisers and standards implemented by the FAA and FDOT relative to airport property.


Staff requested proposals from seven (7) MAI certified appraisal firms located in the state of Florida, from which six (6) affirmative responses have been received.  Quotes varied widely within a range of $4,000.00 to $27,500.00.


Staff believes it critical that the City engage the most qualified and experienced firm to conduct the currently required appraisal.  Slack, Johnston & Magenheimer, Inc. has been involved in real estate appraising and consulting in Florida for over fifty years and provides a wide range of valuation services concerning all forms of commercial, industrial and residential real estate, as well as aviation and related uses.  The firm has an on-going consulting contract with the Miami-Dade County Aviation Department related to estimating fair annual rental rates at their general aviation airports.  In addition, their aviation experience includes projects at Miami International, Fort Lauderdale-Hollywood International, Orlando International, Tampa International, Sarasota-Bradenton International, Palm Beach International, Jacksonville International, Pensacola International, Tallahassee Regional, Sebring Regional, Herlong, Craig Field, Fort Lauderdale Executive, Boca Raton, Charlotte County, St. Augustine-St. Johns County, Hernando County, Naples Municipal, Gainesville Regional, Orlando Executive, Arthur Dunn, Merritt Island, Space Coast Regional, Palm Beach North County, North Perry, Pahokee, Lantana, Peter O. Knight, Tampa Executive, Witham Field, Dade-Collier Training and Transition and Venice airports, as well as the Kendall-Tamiami Executive, Homestead General Aviation and Opa-Locka Executive airports in Miami-Dade County.


Staff strongly believes that the proposal from Slack, Johnston & Magenheimer, Inc. is the most responsive to the City’s particular needs in this matter, and that selection of this firm to conduct the required appraisal of airport property is the most prudent and responsible option available to the City.


Budget Impact


The total cost to the Airport Fund for this service is $8,900.00, which includes fees for time to attend meetings during preparation of the appraisal and three original copies and one PDF copy of the appraisal report; and is within the City Manager's approval authority.  Funds have been programmed in the airport budget for this purpose.




This is a disposition/informational item and requires no action by the City Commission.  The process for accepting the appraised value of airside property is a function of the leases for this property, and will also require no action by the City Commission.



Meeting History

Jul 31, 2012 7:00 PM  City Commission City Commission Meeting
MOVER:Rick Boehm, City Commissioner, Zone 3
SECONDER:James Stowers, City Commissioner, Zone 1
AYES:James Stowers, Troy Kent, Rick Boehm, Bill Partington, Ed Kelley