City approves new appraisal of airport hangars

The city is currently in the process of getting a new appraisal on a group of 28 city-owned hangars at the municipal airport.

The appraisal — one of two that will need to be done — come as the tenants are seeking a longer-term lease instead of the month-to-month contracts that currently govern their relationship with the airport. The group of tenants are proposing a three-year lease with a two-year renewal option, which is the longest allowed by current law.

The hangar situation goes back to the early days of the pandemic era when the then-city council opted to exercise reversion rights, giving the city ownership of the 28 hangars at issue now.

All of the hangars at the airport were developed under the same scheme. which is common for smaller, city-owned airports. The city leased land to developers who developed the land, building hangars which they then sold to various private parties. The catch was that the people who “bought” the hangars were really kind of buying the idea of a hangar. The land the hangars were built on still belonged to the city. Plus, under the terms of the original developer leases, at the end of a 30-year term (an original 20-year lease plus a 10-year option), the city could exercise reversion rights which would transfer ownership of the actual hangars themselves to the city.

In 2020, the council opted to do just that. But then, in 2023, a new version of the council with zero members who were on the council in 2020 took a different path and extended the existing ground leases for an additional 10 years with a 10-year option which puts the total length of the leases at 50 years — the legal limit per Federal Aviation Administration rules.

This has resulted in a split situation in which the city owns 28 hangars which are rented out at a rate of $4.56 per square foot annually and then 111 hangars where the city opted against reversion and the ground leases were extended at rates between 40 cents and $1.36 per square foot annually.

The 28 city-owned hangars have been rented on a month-to-month basis since the lease terms and rates changed about five years ago. As noted earlier, the current tenants would like a longer-term arrangement.

The council approved an appraisal back in November of 2023, however per both state law and the Boulder City Charter, the city has to get two appraisals before they can lease any property. However, an appraisal is only good for one year, which means the 2023 valuation is no longer legally valid and the process has to start over.

And it gets more complicated. Nevada law and the city charter require hangar leases to be competitively bid. But NRS 268.064 allows leases of a building less than 25,000 square-feet in area to be leased directly to a person without a competitive bid. However, the city charter separately requires the lease be “at or above the current appraised value.” BC’s charter also provides that the duration of such a lease cannot be longer than three years with a two-year extension.

The now-expired appraisal came in at $5 per square foot per year for the type of rental currently offered where the city is responsible for building maintenance or $4.62 per square foot per year for a “triple net” lease where the tenant pays for upkeep.

The current rent charged is $4.84 per square foot per year, below the most recent appraised value.