Steamboat Springs The city could see the operating costs for the Steamboat Springs Airport come into the black in two years if they approve a five-year leasing agreement with Smartwool.
With the city spending $100,000 annually to subsidize its airport operations and continuing to pay off the $2.8 million debt incurred to build the terminal, the $67,000 the prospective tenant would bring in next year would offset the airport's mounting burden.
And under the city's proposed leasing agreement, that rent money will continue to grow so that by the end of the five-year lease, the sock manufacturing company would be providing a net revenue of $83,200.
If Smartwool would decided to extend its stay for ten years, that net revenue would be $160,500 a year.
The proposed lease would have Smartwool using 12,000 square feet, or 75 percent of the airport's terminal for its office headquarters. The airport would continue to support general aviation and house the city's offices that manage the airport, its fuel operations and air patrol.
Deputy City Manager Wendy DuBord said because the city cannot afford to make the needed renovations to bring in the commercial company, it is passing the cost onto Smartwool.
In exchange, the city will deduct the costs of the buildings improvements from the first seven years of the rent bill.
Although the city would actually charge a rent of $144,000 per year, Smartwool, after deducting improvement costs, would only be paying the city $67,000 in the first year.
Expenses for tenant improvements, which the city capped at about $250,000, will decrease over seven years.
"If Smartwool decides not to renew after five years, those improvements in the building go to the city. It's 12,000 square feet of improved commercial space," DuBord said.
The negotiations have Smartwool committed to a five-year lease, with the option of a two-year renewal and another three-year renewal after seven years.
Not only does the proposed lease have Smartwool renovating its 12,000 square feet of space to build 32 offices, it will also remodel the city's offices at the airport.
If Smartwool moves into the terminal, the airport offices need a separate entrance and restroom facilities.
City staff has projected that Smartwool could have airport operations, but not the debt, and break even by 2004 the year its debt decreases to $82,000.
City Council President Kathy Connell, who sat on the negotiating committee, said the city has to have the airport operating in the black.
"There's been a lot of shots at the previous council for its decision to build a terminal. They made the decision on the best information they had," Connell said.
"To continue to squabble about it is not the way to be fiscally responsible. The best way is getting a tenant."
A lease agreement with Smartwool would end a seven-year quest to fill the terminal after commercial service producers stopped flying into Steamboat in 1995, shortly after construction of the terminal was completed.
Connell and DuBord have cited Smartwool as a win-win situation, but city staff have noted some disadvantages would come along with having Smartwool move into the airport.
The most notable is that the net rate the city is charging for rent is below the market rate when compared with other vacant office space in Steamboat.
DuBord said the city took a rough survey of commercial space in Steamboat and found that it ranged from $6.78 to $25 per square foot.
If Smartwool pays for its own utilities, the city would charge $12 per square foot. If the city foots the bill for utilities, then the rent would increase to $12.75.
Right now the city spends $22,000 a year on utilities and maintenance for the airport.
Many of those costs, such as heating and snow removal, could be shouldered by Smartwool, DuBord said.
The staff also said conflicts could arise over community groups like local blood drives, Civil Air Patrol Cadets and private parties, that have occasionally used the terminal.
The city staff also predicts that aviators who use the airport might want to see the terminal used for aviation-only.
The city council is scheduled to vote on the leasing agreement at Tuesday's meeting.
The approval would also depend on the planning commission's action Thursday, when the y address the airport's request for a zoning change from an industrial to commercial use.