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Wed October 9, 2013
City approves new L-3 agreement
The Greenville City Council voted Tuesday to approve a lease agreement with L-3 Mission Integration concerning property the defense contractor operates at Majors Field Municipal Airport.
But the vote was not unanimous and came after Council member Dan Perkins raised multiple concerns about the agreement and what could happen to the City of Greenville should the airport ever lose its tax exempt status.
“I think it is catastrophic,” Perkins said of the potential for the city to be on the hook for millions of dollars per year in property taxes.
“Catastrophic is a good way to put it,” agreed City Attorney Daniel Ray.
The lease agreement, which was first presented to the full council two weeks ago, was reached after months of negotiations between the two sides, which followed years of often less than warm relations.
The issue again brought an overflow crowd to the council chambers, with those in attendance split on whether the agreement could be bad or good for Greenville.
Steve Ramsey told the council that the section of the contract regarding the tax exemption issue was too serious not to require additional scrutiny.
“I am begging you not to make a decision tonight,” Ramsey said.
But County Judge John Horn said the issue was one which affected more than just Greenville.
“It is critical to the survival of this city, this county and this region,” Horn said. “It needs to end tonight.”
Council member Velma Del Bosque-Hobdy asked that the vote be tabled to allow for additional study of the lease, and was seconded by Perkins, who said he had “fundamental differences” with the agreement.
The motion to table died on a 5-2 vote against, prior to the council voting 5-2 to approve the agreement, with Del Bosque-Hobdy and Perkins voting against.
L-3 Mission Integration would pay millions of dollars per year to lease property at Majors Field, under the 30 year lease agreement with the city. The funds from the lease would be directed back to keeping the airport as a self-sustaining facility.
In turn, the defense contractor would take over almost all of the operations at the airport, including the city’s terminal building.
L-3 may be planning a significant expansion at Majors Field, and would be allowed to establish an alternative permitting process for new structures at the facility, which could bring in more revenue which would be directed toward the city’s general fund.
Currently, L-3 is paying $72,500 per year for its lease of 610 acres at the airport, under an agreement reached in 1977, which expires in 2017.
Under the agreement, L-3 would be paying a total of a little more than $3 million per year to lease almost 708 acres at the airport, with the initial lease running to Sept. 30, 2016. The primary lease would take effect the next day and run for 15 years, followed by three five-year options.
The amount of the lease would gradually increase from $3 million to just over $5 million per year during the length of the agreement.
The company would take over most of the fixed base operations at the airport and in return would receive a credit on their rental agreement.
The city would still see a net of almost $26 million dollars over the length of the lease.
Under the agreement, L-3 would hire a full time employee who would be responsible for handling all of the permits associated with future building expansions at the airport, rather than seeking permits through the city directly.
In exchange, the company would pay the city $500,000 per year, money which would not be tied to the airport, resulting in approximately $15 .5 million in revenue over the length of the agreement.
Perkins’ biggest concern echoed one which Ramsey has been raising in recent weeks, the section of the agreement which deals with the possibility of the airport losing its tax exempt status.
Under the section, should the airport be found to be taxable by a change in state law, L-3 would be responsible for paying the property taxes.
If the city or the county acts in the future to tax the airport, then the city would be liable for the taxes, to the tune of close to $7 million per year.
Perkins said the city could be liable simply in the event a future Hunt County Chief Tax Appraiser decides the airport was no longer tax exempt.
“That would not be a change in state law,” Perkins said. “And that’s the way this contract reads.”
Ray said a subcommittee of council members who directed him in the negotiations said the first goal was to keep L-3 in Greenville.
“And the secondary goal was to get the best possible deal for the city,” Ray said.
Perkins disagreed the agreement was in the city’s best interest in the event of a change in the tax exemption.
“As it stands right now, the city would be bankrupt when this happens, in my opinion,” Perkins said.
Perkins also questioned the option in the lease whereby L-3 would expand its operations, noting that the area of the airport where the company wanted to build already has hangars leased to other tenants.
“That new set of buildings would be on top of those hangars that are already there now,” agreed Ray, adding that the city still owns the land itself and would offer to move the hangars to new locations at no cost to the tenants. “There is room for additional negotiation with them, to make it worth their time.”
“My frustration is, I’m hearing this for the first time,” Perkins replied.
Perkins also argued that the $500,000 from the alternative permitting process would be closer to $300,000 per year, once personnel and equipment costs are taken out.
Perkins also expressed frustration that all of the options in the contract were in L-3’s favor, that in the event the city wished to end the agreement after 15 years it would be unable to do so.
Perkins likewise noted that, should L-3 spend more than the lease amount each year on the maintenance and operations at the airport, then the city would receive nothing.