REPORT TO THE CITY COUNCIL FROM: MARK THORPE, Director of Aviation Airports Department BY: JOSHUA CASTELLANO-GONZALEZ, Assistant Director of Finance and Administration, Airports Department BRITTNEY VERROS, Airports Property Supervisor Airports Department SUBJECT ..Title Actions related to the Second Amendment to the Ground Lease Agreement between the City of Fresno and SkyWest Airlines, Inc., for hangar facility and ramp space at Fresno Yosemite International Airport (FAT) (Council District 4) 1. Adopt a finding of Categorical Exemption pursuant to Section 15301 (Existing Facilities) of the California Environmental Quality Act (CEQA) Guidelines 2. Approve the Second Amendment to the Ground Lease Agreement with SkyWest Airlines, Inc. (SkyWest). The potential revenue generated by this Agreement is $8,369,791.60 plus annual CPI adjustments over the full term ..Body RECOMMENDATION Staff recommends that City Council 1) adopt a finding of Categorical Exemption pursuant to Section 15301 (Existing Facilities) of the California Environmental Quality Act (CEQA) Guidelines and 2) approve the Second Amendment to the Ground Lease Agreement (Amendment) with SkyWest Airlines, Inc. EXECUTIVE SUMMARY SkyWest has continuously rented and operated a regional maintenance hub at FAT since 1998, when they acquired previous tenant's operations. The current lease was executed September 1, 2016 with an initial term of three (3) years and seven (7) one-year extensions for an end date of August 31, 2026. SkyWest has exhausted all of the options in the original Agreement. The parties are moving forward with negotiating a new Agreement but have not completed it yet. Therefore, both parties wish to extend the original Agreement on a year-to-year basis for no more than ten (10) years, to allow for the negotiation of a new Agreement. Upon completion of the new Agreement and approval by City Council, this Agreement will terminate and the other Agreement will take precedence. This Lease will continue on a year-to-year basis until the new Agreement is completed, but not to extend past August 31, 2036. The current monthly rental rate is $69,748.26 and is subject to annual CPI adjustments not to exceed 2%. BACKGROUND SkyWest has ten regional maintenance facilities throughout the United States. SkyWest began operating its FAT maintenance facility in 1998, following its acquisition of the incumbent tenant, Westair Airlines. The leasehold totals 625,393 square feet of hangar, shop and ramp space. SkyWest employs 175 aircraft mechanics, engineers, technicians and support staff at the site. The Lease incorporates a combination of land and facilities. This means that in addition to the land, Airports owns the improvements made by SkyWest, which is reflected in the fair market rental rate structure. The facility accommodates the Embraer 175 aircraft and smaller aircraft operated on behalf of Alaska Airlines, American Airlines, Delta Air Lines and United Express. SkyWest is a valuable tenant at FAT. In addition to the lease revenue generated and employment levels, its presence also contributes to FATs airline service because SkyWest is a regional partner with all of our major carriers. The City Attorney has approved the Amendment as to form. ENVIRONMENTAL FINDINGS Staff has performed a preliminary environmental review of this project and has determined that these Amendments fall within the Class 1 Categorical Exemption for Existing Facilities set forth in CEQA Guidelines, Section 15301 for existing facilities, as it involves no alteration of existing facilities, with no expansion of use, and will not result in any significant negative effects relating to traffic, noise, air quality or water quality. Furthermore, none of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2 apply to this project. FISCAL IMPACT The potential total revenue collected for the full term of this Second Amendment to the Agreement is $8,369,791.60 plus annual CPI adjustments. There is no impact on the General Fund or ratepayers of the City of Fresno from this item. Attachments: CatEx - Notice of Exemption Second Amendment First Amendment Original Agreement