VPS lease with Air Force extended to 2063

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TONY JUDNICH @Tonyjnwfdn

CRESTVIEW — Okaloosa County’s lease of 130 acres of Eglin Air Force Base land that contains the Destin-Fort Walton Beach Airport will be extended by 25 years and expire on July 30, 2063, instead of in 2038.

The extension was part of a lease amendment that the County Commission unanimously approved on Tuesday. The revised agreement includes a new payment structure that eventually might lead to an estimated overall savings of more than $7 million for the county.

In an agenda request to the commission, county Airports Director Tracy Stage noted that the commission in November 2015 approved a proposal that outlined the restructuring of the rent provisions with a modified performance-based approach.

The proposal recommended a fixed-base rent of $400,000 per year for a term of 50 years and an additional payment of 50 cents per enplaned passenger for every passenger above 400,000 enplanements, Stage said.

The Air Force, however, rejected that proposal.

Stage said negotiations later produced a new payment structure with a one-time payment that is consistent with other Air Force agreements and a new escalation method that is based on the consumer price index versus a standard 3 percent. 

A one-time payment of $1.2 million, plus the annual rent payment of $433,775.89 to cover the period from April 1, 2018 through March 31, 2019, will be due upon full execution of the lease amendment.

While the one-time payment will not be fully recovered for a number of years, a county comparison using the 16-year average consumer price index estimate of 2.10 percent and the current rate structure of 3 percent annually depicts a breakeven point of 2042.

“The annual payments will be based on economic factors that may vary; however, over the term plus the additional 25-year extension to the term, we estimate an overall savings of $7,057,891 with this new payment structure,” Stage said.

The county-Air Force partnership at VPS goes back to 1957. The fast-growing airport set a new passenger count record for fiscal 2017 with a total of 1,134,209 passengers.

Stage told the commission on Tuesday that through the first quarter of fiscal 2018, the airport had $2.1 million in expenses, almost $3.3 million in revenue, $13.3 million in unrestricted cash and $11.8 million in restricted cash.

Commission Chairman Graham Fountain pointed out that the $1.2 million one-time payment will come from enterprise funds paid by airport users, and not from the county’s general fund.

“And any time we can save over $7 million, that’s the business we’re in, so I want to thank you,” he told Stage.

Before voting with his fellow commissioners to approve the lease amendment, Commissioner Nathan Boyles said he wished the commission had received a mid-negotiation update from staff.

“This thing is signed, sealed, delivered and all but awaiting the formality of the chairman’s signature, which I think is a foregone conclusion,” he said.

Boyles added that the $7 million in estimated savings “is certainly theoretically possible. If you look a little bit closer, it’s actually not very likely at all.

“The breakeven point (in 2042) on this deal is many years in the future. In fact, it’s beyond the existing term that we have out there. It’s based upon some kind of rosy assumptions of what the consumer price index will do in future years.”

Boyles also said that the airport is “just as vital to Eglin as it is to Okaloosa County. I would have preferred to have seen a partnership where Eglin was invested in the performance of that facility with us, rather than one simply where they sit in the position of landlord and collect a rent check from us.”

But Commissioner Trey Goodwin told Stage, “I don’t think you did that bad of a job negotiating this.”

And Fountain said “there is always a roll of the dice about what the CPI or anything will do 20 or 30 years from now.”

He added that he thinks the Air Force has a lot of investment in its partnership with the county for airport operations, “from the fire department to (Federal Aviation Administration) stuff to the runway, to just about everything that happens out there. Their investment is probably very much larger than ours.”

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