FAA Owes Ford Hefty Back Rent

December 3, 2004
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GRAND RAPIDS — The Federal Aviation Administration is in arrears to the Gerald R. Ford International Airport for $412,000 in office lease payments it has racked up over the past two years because it refuses to pay GFIA's exisiting market rates.

The agency has paid zero to date for the lease of 3,039 square feet of office space over the past 26 months, according to Bruce Schedlbauer, the airport's manager of marketing and communications.

Schedlbauer said the current terminal rental rate is $52.38 per square foot annually and that the FAA has proposed a rate in the $20-some range, which is "not acceptable."

Airport officials tried negotiating with the FAA during mediation in August. The FAA subsequently cancelled a scheduled follow-up meeting on the issue.

"They claimed the rate was not fair and equitable, and they apparently did their own study showing that the rate should be something less than the published rate is," Schedlbauer said. "Interestingly, the TSA (Transportation Security Administration), a sister federal agency, pays us the existing market lease rate. It's the same federal government, so why would one pay and one not?"

In September, the FAA asked whether it could split a portion of its currently leased space at GFIA, but the airport turned down the request due to its inability to re-lease a portion of the space due to an ingress-egress code issue involving the current configuration of space. Splitting up the space would leave the airport holding a "non-economic remnant," Schedlbauer said.

"We're very happy to work with them, but not if it's to leave us in a position worse off than we would otherwise be in," he noted.

The airport is 100 percent financially self-supporting, Schedlbauer pointed out. It does not use any local, county, state or federal tax dollars to support either operations or facilities development. Meanwhile, GFIA has been forced to absorb the $412,000 in back rent.

He sees the present situation as "very unfortunate" because up to now the FAA has been a great partner to GFIA in providing air traffic control services and navigation aid services.

"But on the other hand, this is business. We're not in the business of cutting deals on our lease spaced. We're charged with being economically self-sufficient, and one of the reasons we are is because we charge fair and equitable rates for leases. They have had more than enough time."

The FAA has been mum on the matter since September. GFIA and its legal counsel have discussed possible action and are going to arbitration to resolve the problem. In executive session on Nov. 24, the Kent County Board of Aeronautics instructed GFIA staff to craft a final settlement offer to the FAA.

Failing that, GFIA will resort to legal action to recoup the back rent, Schedlbauer said.

"We think we have a very solid case. First off, everybody else, including the TSA, is paying the published lease rates. We don't have anyone else that has refused to pay that."       

The FAA sees it differently.

Tony Molinaro, FAA spokesman for the Great Lakes region, said the FAA leases office space at most of the nation's commercial airports as part of what is called "grant assurances."

"Airports that get federal grants sign a document giving us certain assurances, one of them dealing with the leasing of space — not just office space but other kinds of space needs for equipment," he explained. "We get space leased to us at what we consider a fair market value."

Molinaro said prior to expiration of the FAA's 10-year contract with GFIA in September 2002, the agency was paying a rate of $13 to $14 per square foot at Ford International, but at contract renewal time the lease rates had nearly quadrupled, so the FAA let the lease expire.

He said the FAA did a study of comparable office space in the Grand Rapids area, including downtown, and the rate range was $20 to $25 per square foot.

The FAA leases not only office space, but space for an emergency generator for the tower and other equipment that has to be there in order to run the airport, he said. 

"We feel that $53, which is quadruple what we were paying and double what would be fair market in Grand Rapids itself — that's where we had an issue with the airport."

Molinaro said the agency has been trying to work with the airport since then to try to come to some kind of agreement.

"We feel, according to the grant assurances, that as part of taking federal money for airport improvements the airport has agreed that our space would be at what's considered a fair market value."    

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