Huntsville, TN (2009-12-21) The Scott County Commission has agreed to consolidate and refinance outstanding financial obligations of the Scott County Airport Authority, agreeing to assume the Authority’s debt provided the quasi-governmental entity pledges to remit all revenues from the lease of a hangar on the property, along with all other revenues, including one-time and recurring income for a residential air park adjacent to the Airport, to the County to help retire the note.
The Scott County Commission Monday night, by a 13-0 vote with Commissioner Odeva Byrd absent, agreed to assume $434,103.05 in debt from the Scott County Airport Authority, debt incurred during the construction of a commercial aviation maintenance hangar, along with a one-acre parking area, and an adjoining taxiway at the Scott County Airport; a project that was completed in 1999. Under terms of the tentative agreement, the two outstanding debts on the project, a bank loan at First National Bank of Oneida for $345,000, and a note from the contractor, Brewster Builders of Oneida, totaling $126,047, would consolidated into one capital outlay note issued by the County. As presented, the note would be retired from revenue from lease of the hangar and income associated with an agreement with a residential airpark adjacent to the airport. In addition, the Airport Authority would tender up to $34,000 to the County for the purpose of making a principal payment on the indebtedness prior to consolidation and refinancing.
In April 2009, ATS Group, Inc., the aircraft maintenance firm that currently occupies the hangar, signed a new, ten-year lease on the facility. Per terms of that long-term lease, ATS is currently paying the Airport Authority $31,800 per year. In addition to the initial term, ATS has the right to exercise four, five-year extensions, giving the company a potential for a 30 year lease. The company has operated in Scott County since 1999.
At an estimated interest rate of 5%, the County could retire the outstanding debt in twelve years with an annual payment of roughly $49,000 per year. With the ATS lease, plus an estimated $9,200 per year in revenue generated from its agreement with Big South Fork Airpark (BSFA), the County could capitalize most of the debt, roughly $41,000 per year. The balance of the obligation could likely be generated through fees from the future revenues generated from anticipated growth of the airpark development. In the absence of those funds, the shortfall would have to be assumed by the County.
After the current indebtedness has been satisfied, the Authority would continue to remit revenue from both the hangar lease agreement with ATS, and its agreement with BSFA, as well as all other revenues generated from the operation of the Airport, including hangar rental fees and aviation fuel sales, to the County. All revenues would be used for the sole purpose of funding the project, future projects, and the operations of the Airport.
While the County agreed to assume the debt, a number of provisions were included in the resolution, which the Airport Authority must agree to in its next meeting, in order for the resolution to be put in force. They are:
1) The Airport Authority must agree to pay the County not more than $34,000 and not less than $32.500 for the purpose of making a principal payment on the project debt;
2) The Authority must agree to tender all current and future revenue generated from the lease of the hangar and project to the County;
3) The Authority must agree to tender all current and future revenue generated from its agreement with BSFA and Pegasus to the County; and,
4) The Authority, although it has statutory authority to incur debt, shall summarily agree to present any future projects to the County prior to making any future financial obligations.