Airport panel endorses Dassault incentive deal
Posted: June 13, 2013 at 12:46 a.m.
An incentive package worth $41 million that the state’s largest airport put together to help persuade a private jet manufacturer to expand in Little Rock cleared its first hurdle Wednesday.
A Little Rock Municipal Airport Commission committee endorsed the incentive package, which consists of price breaks in the rental of the additional land that Dassault Falcon Jet will use for the expansion and on the buildings, which will eventually revert to the ownership of Bill and Hillary Clinton National Airport/Adams Field.
“These are all of the things we negotiated with [Gov. Mike Beebe] and Dassault Falcon and [the Arkansas Economic Development Commission] and so forth that led to the big announcement,” Ron Mathieu, the airport’s executive director, told the commission’s lease committee. “This is seeking the authority from the commission to go forward and make these changes to the lease.”
Most of the expansion is centered on a new 14-bay hangar that is three football fields long and one football field wide that will be used to complete a new jet the company said it will unveil in October. Work on the new facility is expected to begin this fall and be completed by 2016.
The Dassault completion center, which employs about 1,800 people, does interior work to customer specifications, including cabinetry, seating and other amenities. The center also paints and adds logos to the planes’ exteriors after the jets are flown to Little Rock from France, where they are manufactured.
Wednesday’s hurdle and the several that remain likely are not set all that high, as state and local officials said the Clinton National site, although already home to Dassault’s only completion center, was only one of several possible locations the company considered for the expansion. It also isn’t clear how many jobs will come with the expansion.
The proposal goes before the commission’s finance committee on Friday and before the commission at its regular meeting Tuesday. The Little Rock Board of Directors also must approve another aspect of the incentive package - providing Dassault $1.3 million from the airport enhancement fund to use in preparing the site for the expansion.
The airport enhancement fund was created about four years ago with money from an accelerated repayment of a loan the airport obtained from the city in 1991.
Clinton National was repaying the interest-free $2.3 million loan in $3,300 monthly installments through 2059, but agreed to repay the loan in three separate $800,000 installments over about three years. The airport has one payment to make.
The French company announced the $60 million expansion of its completion center at Clinton National on May 29. The additional 250,000 square feet of hangar will almost double what the manufacturer has under roof at its complex off East 10th Street on the north side of the airport.
The incentives will alter a 28-year lease Dassault signed with Clinton National and that became effective Jan, 1, 2012. Under that agreement, the company pays the airport $953,621.71 annually, or $79,4678.48 per month. Those figures are adjusted annually based on the movement of the Consumer Price Index.
That agreement covers a little more than 4 million square feet of land and 278,000 square feet of building space. It contained two 10-year renewal options, which provided a potential Dec. 31, 2060, expiration date.
Under an amendment to the agreement, the company will lease an additional 1.5 million square feet of land. Rental of the land will be waived during the first year “in consideration of Dassault’s capital investment.” After that, the agreement calls for the existing rate to be applied.
Under the new terms, the annual rent will rise to $1,148,000, a figure that will increase over the term of the lease as building ownership reverts to the airport. Typically, any facility constructed on the airport eventually reverts to the ownership of the airport.
The new facilities Dassault constructs won’t revert for 25 years. And once the new facilities revert to the Clinton National, the amendment calls for the “market rate” the airport typically charges on buildings it owns to be phased in over 15 years rather than take effect immediately upon reversion. The existing buildings, which are scheduled to revert to airport ownership in 2022, also will have a phased-in rental schedule.
Three buildings Dassault uses that already have reverted to airport ownership will be returned to Dassault, which plans to renovate them. They will not revert to the airport for another 12 years to allow the company to amortize its investment, according to the amendment.
The commission’s lease committee also approved another aspect of the deal that has airport and Dassault officials working together to acquire facilities near the Dassault complex, terminate the leases for them and raze the buildings. The cleared space will become part of the company’s complex.
The three-member committee spent about 20 minutes discussing the incentive package. One committee member, Tom Schueck, expressed concern that the deal the staff offered Dassault will now be expected by other prospective tenants or tenants who want to expand their facilities. Over the years, Schueck and others have pressed staff members to put uniform lease-agreement policies in place with all tenants.
But Mathieu said not all tenants are created equal.
“This was a negotiation with Dassault Falcon where there were others who wanted their business and they had pretty much thrown out incredible incentive packages,” he said. “This is a unique deal at the end of the day. To the extent that we have a tenant here willing to make that kind of investment and that kind of impact and those kind of jobs, we will certainly negotiate with them as well. When you get to this level in what you’re doing, there really is no standard, no policy. It really is … what is it that we can do to secure these jobs ?”
Business, Pages 25 on 06/13/2013