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Pitkin County is inclined to contract out the work of the fixed-base operator at the Aspen-Pitkin County Airport, and is closing in on a contract expected to bring in $879 million over 30 years.
The county has been in negotiations with Atlantic Aviation, the current FBO and winner of a monthslong procurement process last year, since April 2023. Nearing the end of the contract negotiations, the county considered the financial impact of a variety of FBO models at their Tuesday work session.
A one-year lease extension between the county and Atlantic expires Sept. 30. To allow time for contract finalization, the county intends to extend that extension by no more than 60 days at their Sept. 25 meeting. First reading on the lease is expected for that meeting.
General aviation, or private aircraft, accounts for approximately 87% of air traffic annually at the airport.
The county’s revenue sources in the new lease are robust. Over 30 years, the county is expected to collect about 39.4% of Atlantic’s total revenue over the lease term, producing the $879 million figure. That includes revenue from base rent and a fuel flow Minimum Annual Guarantee, though the MAG comes from more than just fuel sales.
Both the ground rent and the MAG have percentage increases written into the lease. The ground rent will start at $3 million annually, then adjusted annually by the higher of 4% or the Denver-Aurora-Lakewood Consumer Price Index.
The MAG will begin at $14 million in Year 1 and adjusted by 1.5% annually. In Year 5, the MAG will bump up to $16 million and follow the 1.5% increase for the rest of the lease term.
Atlantic will also be required to pay a supplemental operating fee, which starts at $4 million annually and will adjust annually by 4% or the Denver-Aurora-Lakewood CPI — whichever is greater.
One-time capital costs for westside development of the FBO, facility renovation and ramp pavement repair are $125 million. For westside development, Atlantic will pay $105 million. The other $20 million would be split between county airfield redevelopment and “investment in community priorities” — which Pitkin County Manager Jon Peacock said will likely be related to climate initiatives.
The county viewed the shift in the negotiations from Atlantic’s original bid with a higher MAG and lower rent to the inverse as a boon for issuing debt to finance the extremely expensive renovation goals for the airport.
“The idea of shifting the amount of MAG to a lower amount initially and adjusting and raising the combination of the ground rent and a supplemental fee has resulted in a more robust guaranteed payment to the county over time,” Peacock said. “Which is important given what the board potentially intends to do at the airport.”
The terms are significantly more lucrative for the county, which only saw $1.24 million from September 2022 to October 2023 from Atlantic under a lease originally negotiated decades ago.
“We’ve been getting hosed,” said Commissioner Kelly McNicholas Kury on the prior lease’s terms.
A number of “what if” type questions must still be finalized. Interim County Attorney Ry Neiley said details on who fulfills the financial obligation made by Atlantic in the event they cannot still needs to be determined and is a focus in the remaining contract negotiations.
Airport Director Dan Bartholomew said the new lease includes provisions for based aircraft at the recommendation of the local pilots group.
A 20% discount on fuel, tie-down space waitlist accommodation, a flight school building, future electric vertical take-off and landing, known as eVTOL, infrastructure and more are all part of the plan. Some of the accommodations are dependent upon runway shifting and reconstruction, particularly any westside development.
The county has lofty goals for the airport, much of which are outlined in the Common Ground Recommendations — community goals formed from a 121-person committee and codified by the county four years ago.
The runway requires total reconstruction due to subsurface water damage, estimated to cost over $100 million. There is community consensus over the need to renovate the terminal, which is constrained by size and an aging, climate-unfriendly infrastructure. Costs for those plans have been estimated around $400 million.
The county strategy to fund the projects includes a mix of federal and state grants, plus using Airport Enterprise Funds to finance bond issuance. Bond funds would help cover grant match requirements and facets of the project that fall outside of the scope of Federal Aviation Administration grants or other government funders.
Revenue earned at the airport can only be applied at the airport, as required by law. State law dictates that airport enterprise funds can only issue debt via a revenue bond, or take on debt based on revenue earned at the airport. The county’s “general income” cannot be used to pay off that debt.
Chief Financial and Administration Officer Ann Driggers stressed that the county is legally prohibited from using property tax-backed general obligation bonds to fund work on airport property, a strategy suggested by nonprofit Aspen Fly Right in their Essay No. 17. Aspen Fly Right promotes a county-run FBO approach to avoid reliance on federal funding for airport renovations and reconstruction work.
Driggers also presented a report from Piper Sandler, a multinational investment bank and financial services company, that concluded the airport would only be able to secure approximately $80-102 million in bonds with $18 million annual revenue, based on the 2024 lease extension revenue.
In Aspen Fly Right’s analysis, the conclusion is $19 million annual revenue could result in $403 million-$620 million in bonds.
The airports in Jackson Hole, Wyoming and Naples, Florida both run their own FBOs. The county used public budget numbers to compare their net revenue and concluded that with expenses like fuel farm and overhead, the MAG from Atlantic is a better financial deal.
Jackson Hole’s net revenue is expected to be less than $6 million, while the county estimates the first year of the proposed lease agreement to be closer to $20 million with the MAG, supplemental operating fee and tiedown/patio shelter rentals (not including landing fees).
The county also presented an analysis done by Denver-based aviation consulting firm Ricondo & Associates, which compared the revenue potential for differing FBO models like the lease agreement, a third-party manager, and a county owned and operated FBO.
The Ricondo analysis pointed to the capital expenditures, the $125 million guaranteed from Atlantic, as factors that would financially burden the county in the county-run and third-party management scenarios.
Over the course of the 30-year lease term, the county would not come close to the $879 million in revenue from the proposed lease agreement, according to the Ricondo analysis. Instead, the county would be subject to risk and costs like insurance and capital expenses.
Factors like economies of scale for overhead and fuel purchases and expertise or experience contribute to Atlantic’s ability to enter such a lease agreement, Peacock said, but perhaps the greatest advantage is the unique nature of the Aspen market.
“I think Atlantic, in these negotiations, has recognized Aspen's value isn't necessarily in the profit and loss just at this FBO, it's having Aspen as part of a larger portfolio that makes Atlantic more competitive at other airports,” he said. “Customers who may want to fly in here may have multiple choices of FBOs at other airports may choose Atlantic, because Atlantic is the only one that has this airport.”
The county Financial Advisory Board reviewed the comparison’s in a closed-door executive session Monday, and concluded via resolution that the county “accept FAA grants in order to provide the financial capacity and funding for a new runway and a new commercial air terminal” and that leasing out the FBO is in the county’s best interest.
The whole discussion is underscored by the debate over the future of the airport’s runway. The airport and the county say the runway/taxiway separation must be widened to avoid the revocation of FAA funding. Aspen Fly Right and other community groups say widening the separation and the arrival of wider-wingspan aircraft would damage the community.
The debate will appear on the November ballot in the form of two ballot questions — one which seeks to strip the county of its power to alter the runway without voter approval, and another which seeks to “reaffirm” the county’s authority to make such decisions.