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Dixie Jet may lose contract

COVINGTON -- Representatives with Covington Municipal Airport fixed base operator Dixie Jet Services Inc. came to Monday night's City Council meeting to ask for more time to present changes to its operating agreement with the city.

They'll get their chance, but Mayor Kim Carter warned it may be wasted effort, as the council is considering early termination of the contract.

The exchange occurred during Monday night's work session prior to the regular meeting. Dixie Jet attorney Craig S. Oakes asked if the early termination discussion was on the council's agenda. Carter said it was, but during the regular meeting, the agenda was amended to include that discussion, "to be clear," Carter said.

"Quite candidly, this is the first we've heard of it. We feel quite ambushed here this evening," Oakes responded.

City Manager Steve Horton suggested the council table the matter until he can meet with Oakes, Dixie Jet President Bob Riddell and City Attorney Ed Crudup. Oakes indicated he had additional information to present besides what was already outlined in a proposal sent to the city by Riddell in early March.

"I haven't heard what Bob and Craig have to say. Curiosity always gets the best of me," Horton said, adding, "They may have something to say y'all need to hear."

The council agreed.

Riddell would not comment Tuesday, saying he would wait on the results of the meeting before making a statement.

On Tuesday, Carter said she and City Manager Steve Horton are recommending the council review early termination with the FBO for "strategic reasons."

The city, state and federal governments have invested heavily in building the necessary infrastructure to have a first-class general aviation airport, the mayor said. The city is in the process of forming an airport authority to get additional financing for future development. The city has also budgeted to build a new airport entrance to the south side of the airport connecting to the Nisshinbo road off Ga. Highway 142, and a One Georgia fund grant is being sought to finance a new terminal building.

"With all of this development and future plans, we feel as though it is in the city's best interest to terminate its agreement with the FBO as provided for in our contract," Carter said. "Our goal is to maximize property taxes, sales taxes and job creation in support of our existing and future industry base. We wish to accomplish this while providing a satisfactory customer experience for our pilots and passengers at the Covington Municipal Airport."

Carter said the city has also received numerous complaints about day-to-day operations at the airport.

"Provided the council agrees, the city will take over the operations and will use Mr. Horton's facility maintenance staff to run the airport," she said. "We feel we will have greater financial capacity to keep an abundant fuel supply and other necessary navigational aids."

The contract with Dixie Jet expires in 2019. The contract requires 90 days notice to terminate early.

"There is a standard amortization table that is specified as the termination amount. If we had given notice today, the termination would have been July 5 and the buyout would have been $353,109.77. There would also be a 10 percent early termination fee. This fee is 10 percent of the payoff amount, or $35,310.98. Each month that passes makes the buyout amount increase," the mayor said.

In a letter sent March 5 to the city, Riddell proposed making several changes to the Airport Operating Agreement between the FBO and the city.

The changes include charging a monthly "fuel flowage" fee to replace the current rent for land leased by the FBO. The fuel fee would be 10 cents a gallon for each gallon of Jet A and AvGas sold, with a base charge of $1,175 per month. The FBO would be required to sell 11,750 gallons to meet the monthly base charge.

As fuel volume increased, the flowage fee would increase as well. The city would agree to abandon efforts to buy out the FBO by removing the early termination provision and allowing Dixie Jet to keep its equity in its hangar and office building.

Riddell proposed a 30-year lease agreement to allow Dixie Jet to "rearrange existing and future financing for FBO growth" and help mitigate what he estimates to be $1.5 million in revenue losses due to ongoing work at the airport over the last 18 months.

Riddell also proposes allowing Aviation Investment Resources Inc., the management company for Dixie Jet Service Inc., to manage the airport and its growth at no additional cost to the city and report to the city manager.

In recent months, the council has received numerous complaints about the FBO.

In September, the council considered terminating its contract with the FBO after its insurance lapsed for the second time in a year. In December, aviators raised objections to new ground lease rates, terms of lease and rules and regulations implemented as part of lease agreements. In March, aviators complained that the FBO was not providing adequate fuel for their planes and has not been maintaining required hours of operation. In addition, the FBO owes the city more than $9,000 in stormwater fees.