Sioux City Council to Vote on Agreements for Aviation Center and Pilot Academy

Jul. 25—SIOUX CITY — City staff has asked the Sioux City Council to move forward with the proposed Oracle Aviation Center project and reject an alternative proposal from Sioux Gateway Airport's current fixed base operator to use an existing building and hangar for a pilot training academy.

The council is scheduled to vote on the recommendation at its weekly meeting Monday.

In June, the council voted unanimously as part of its consent agenda to invite proposals for the lease of land and the construction of a new hangar facility for the fully accredited aviation program, which Oracle Aviation, LLC, plans to establish in partnership with Morningside University at the city-owned airport. The Omaha aviation company operates a similar training center at Millard Airport in Omaha with a partnership to offer a bachelor of science degree through the University of Nebraska Omaha.

Proposed agreements with Oracle include a commitment by the city to invest $7 million for the construction of a new hangar facility. The city was awarded a $1 million grant from the U.S. Department of Commerce Economic Development Administration to assist with the construction of the hangar facility, offices and other site improvements. The project would also be funded through approximately $6 million in general obligation bonds.

According to documents filed with the city, after the council announced its intent to accept Oracle's offer and initiated a 30-day notice period on June 14, the city received a flight training proposal from Hawthorne Global Aviation Services, the current fixed based operator at the airport.

"We support the city's desire to bring an aviation school to the airport, and our proposal would save taxpayers almost $5 million," Chuck Kegley, president of Hawthorne Global Aviation Services, said in a statement Friday. "We are asking the City Council to defer on their agenda item (Monday) to fund new construction, and instead lease our south hangar and building, which could be remodeled as Morningside University deems necessary. It's a win-win-win — a win for the school, a win for the airport and a win for the taxpayers."

According to the documents, Hawthorne proposes the city "lease back" a hangar it currently leases to Hawthorne for a zero-net rent, invest approximately $2.1 million to refurbish the existing hangar and, in turn, sub-lease the hangar to Morningside for use as a flight school. Hawthorne would provide fuel to Morningside at its cost and support ground handling operations as needed. Additionally, Hawthorne would establish a grant program for at-risk youth in the community who desire a career in aviation in the form of five $2,500 grants per year.

In the statement, Hawthorne said using an existing building and hangar would accelerate the startup time. It proposes converting 3,875 square feet of existing office space into classroom space. An additional 6,400 square feet of hangar space would support up to 20 aircraft. Hawthorne has a second adjacent hangar that would allow the aviation program to grow into the additional space rather than build everything at once.

"Starting a flight school isn't an easy process. We believe this would help eliminate some of the risk and help accelerate their timeline. Hawthorne will provide aviation fuel at cost to ease their startup expenses," Kegley said in the statement.

City staff recommends the council reject Hawthorne's proposal, saying it doesn't meet the requirements of the federal EDA grant.

"Hawthorne's proposal is non-responsive to the requirements of the notice in that it does not propose to lease the new hangar, nor does it propose a flight school," staff wrote in the documents. "It does not provide lease payments or other means to repay the proposed $2.1 million city investment. Hawthorne's proposal also does not meet the requirements of the federal EDA grant and those funds would not likely be available to support the development of a flight school."

Under the proposed development and lease agreements with Oracle, the aviation company would commit to leasing the new structure on a triple-net basis for an initial 20-year period, with two 10-year renewal options. Lease payments would be on a graduated scale, increasing from $15,000 to $33,000 per month over the initial 20-year term.

Oracle would lease approximately 100,000 square feet of land for the project for $20,000 per year, complete all interior finishes within the facility and invest $1 million in furniture, fixtures and equipment. It would also lease the existing "alert hangar" for an initial seven-year term for $1,500 per month and use its best efforts to create 42 new jobs, including instructors in the new flight school.

The city, in turn, would construct and own the new $7 million hangar facility, including a minimum of 29,400 square feet of hangar space and 10,000 square feet of office/training space, and provide property tax rebates on a graduated scale to Oracle over the first 15 years of the lease. The city would also complete a variety of improvements and repairs to the apron, roadway and other miscellaneous exterior concrete areas, utilities and other site improvements, which are currently estimated at $295,500.

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