A lease agreement between former state Rep. Mark Kelley and Myrtle Beach International Airport would violate federal guidelines and could endanger future funding, according to the Federal Aviation Administration.
The Feb. 16 FAA review said the hangar agreement, which County Council approved amid controversy in January, would charge Kelley an unfairly low rent that could give him an advantage over other businesses and is unusual because it requires the county to buy back the private hangars if Kelley's lease is not renewed.
Airport Attorney Sheryl Schelin responded to the FAA last week saying the airport disagrees with the findings and plans to make some changes. The county airport is required to follow FAA rules or face losing federal grant funding, including the agency's help with its estimated $228 million airport terminal project.
"If Myrtle Beach International Airport approves and executes the proposed agreement with the private enterprise, the sponsor, Horry County, may be in conflict with its federal obligations," FAA program manager Anthony Cochran wrote in a Feb. 16 letter to airport Director Bob Kemp. "We recommend Horry County renegotiate the agreement to provide more equitable terms for the airport."
The hangar deal was approved by a County Council majority despite a letter of opposition from the council chairwoman and recommendations to reject the agreement by the county administrator, attorney, airport manager and Horry County League of Women Voters.
The agreement has not yet been signed by Kelley and the airport, according to Horry County spokeswoman Lisa Bourcier.
Under the agreement, Kelley could build 30 hangars for private planes on leased county land.
The airport would be required to buy back the structures if Kelley's lease is not renewed after its 2030 expiration date.
The FAA said the lease creates an unfair advantage for Kelley because it does not increase his rent as property values go up. It also criticized the county's agreement to buy back the hangars as an unusual move that is "not consistent with similar lease agreements at similar airports in South Carolina."
The FAA review began with the Horry County League of Women Voters, which made a formal complaint to the agency in January.
"I don't consider this to be a reasonable contract by any standard," said Pam Creech, treasurer of the group. "As a taxpayer, I can't believe that anyone would accept this if you read it, understand it and bring it to its reasonable conclusion."
The county would receive about $225,000 in reduced rent for the hangars over the 25-year lease, Creech said.
But if Horry County is required to buy back hangars for $30,000 apiece - a reasonable price, according to the league - it will spend $900,000 on the project, she said.
"The way I see it, we are paying that man $675,000 to take our land," Creech said.
Schelin responded to the FAA on Thursday, saying the agreement was "unique" but appropriate for building hangars at the airport.
It will be amended to cap buyback of hangars at 10 percent of their original cost or their assessed value, and the lease rates will be increased through airplane tie-down fees if property values go up significantly, Schelin wrote.
The FAA said it had not yet received Schelin's letter Monday.
The agency provides funding to public airports but requires the facilities follow business practices that are "self-sustaining" to be eligible.
Horry County is hoping to receive FAA grants to help pay for its estimated $228 million airport terminal project, one of the county's most expensive undertakings.
"We would hope that any final T-hangar agreement would not jeopardize any FAA funding for the terminal or any other projects," Bourcier said.
It could be months before the county knows how much the FAA might contribute to the terminal project, Bourcier said.
Money is needed for the massive project. So far, $125 million in funding has been found, but it is unclear where the rest will come from.
Former state Rep. Mark Kelley dropped plans Wednesday to lease land and build hangars at the Myrtle Beach International Airport.
The plan to rekindle the airport expansion by creating a joint city-county board was unveiled by a group of six County Council members this week.
An FAA letter to the county Monday warned it may need to recoup "some or all of the federal funds expended on this project" if the county deems the terminal a dead issue.
Within a year, possible locations could be identified for a regional airport in northeastern South Carolina that supporters say would boost the area's economy.