FBCC defers decision on 2nd FBO lease to October 20

Submitted by Suanne Z. Thamm
Reporter – News Analyst
October 14, 2015 8:00 p.m.

The Fernandina Beach City Commission (FBCC) held a special meeting on October 13, 2015 to hear a request from McGill Aviation for reconsideration of a bid award (RFP 2015-101.2) to 8 Flags Aviation as a second Fixed Base Operator (FBO) at the Fernandina Beach Municipal Airport. After two hours of presentation and discussion, the FBCC postponed until next week at their October 20 Regular Meeting consideration of Resolution 2015-139, which includes the lease terms and agreement form which would allow 8 Flags Aviation to proceed with plans to build and operate their business at the airport.

While John McGill, President of McGill Aviation, in making his presentation clearly indicated that his concerns did not constitute a bid protest, he raised some items that created heartburn for some of the commissioners. Brian Echard, the Managing Member of 8 Flags Aviation, expressed concerns over many of McGill’s statements. Both McGill and Echard had provided commissioners with detailed memoranda before the meeting. In his email to commissioners dated September 25, 2015 McGill claimed, among other things, that new information that he received since September 18-24, raised questions of bidding irregularities and conflicts of interest. Echard responded to these concerns point by point in an equally long email dated October 12, 2015. In concluding his memorandum, Echard wrote, “Bullying threats should not be allowed to change the integrity of the process.”

John McGill argues his points.

In presenting his case orally to the FBCC, McGill claimed that his request was timely because he had only just received information that formed part of the basis of his concern. He expressed his belief that under RFP procedures, the FBCC had an opportunity to review the materials and process that resulted in the bid award, and they had not yet done so.

McGill’s arguments centered on three basic themes: the terms of the RFP, the city policy that supports a two-FBO airport and federal aviation law. At one point during his 45-minute presentation McGill stated that he has never been opposed to a second FBO at the airport.

McGill said that the RFP under review did not award a contract. Rather it decided which FBO gets the prime space in the airport welcome center, which will be built with grant money and money from the winning bidder. McGill said that since there were only two bidders, the location of the new building would be determined following the bid award. Had McGill Aviation been awarded the bid, it would have been built closer to their current leasehold; if 8 Flags was successful, it would be built closer to the east side.

According to McGill, he noted several “conflicts and inconsistencies” following the bid award. He stated that it wasn’t until two weeks ago at an Airport Advisory Commission (AAC) meeting that he saw the survey of the leasehold the city had negotiated with 8 Flags, which he claimed showed that the McGill building had become a part of the 8 Flags leasehold, along with their hangar and fuel farm. McGill said, “As a matter of pride, I paid for those with my money.”

The survey caused McGill to file what became an extensive public records request over the RFP and the city’s contract negotiations with 8 Flags Aviation. When he reviewed the proposed lease for the new FBO, McGill said he noted that there was no contingency for the financing of the new terminal. He also said that he saw for the first time that Michael Hodges, a consultant that the city used 9 years ago, would be the key employee of the new FBO. McGill also claimed that there was no deliberation among the three evaluation committee members before the award was made.

“This is not a bid protest. It is a request within the confines of the four corners of the RFP process itself,” McGill asserted. “It’s timely, and you have the power to do this. In my view, this is not a do-over, it is a do-it-right.”

With those comments, McGill delved into greater detail on his specific concerns, beginning with legal requirements levied by federal authorities on airport grant recipients to avoid discrimination and exclusive rights for any one FBO. He also objected to what he saw as a violation of a city policy that supported a 2-FBO airport.

Much of McGill’s argument surrounded his unhappiness with 8 Flags Aviation’s decision to employ Michael Hodges. McGill alleged a conflict of interest, citing Hodges’ previous relationship with the city as a consultant in connection with litigation that that took place nine years ago.

McGill characterized as a “land grab” the survey showing the leasehold for 8 Flags Aviation. He claimed that 8 Flags Aviation will get “about 80 percent of the pavement and the rest of it down the road,” leaving McGill to “have to clear cut a bunch of trees” to maintain his operation.

He claimed bias from one of the four bid evaluators and the failure of the evaluators to complete every form or deliberate following presentations.

McGill raised many points during his 45-minute, uninterrupted presentation. He concluded by reminding commissioners that the RFP remedy rested with them. They could: disqualify 8 Flags Aviation based upon their key personnel; keep 8 Flags if they eliminate the conflicts; reject the 8 Flags lease, which he claimed is discriminatory; or go back and hear the presentations themselves and rank them. He also suggested that the FBCC could reject the RFP completely and negotiate with McGill Aviation over terms for investing in the new welcome center and extending their lease.

“If you do nothing,” he said, “it is very clear you are violating the RFP policy, the two FBO policy, and federal airport law.”

City Attorney Tammi Bach responds to the Mayor.

At the conclusion of McGill’s presentation, Mayor Ed Boner asked City Attorney Tammi Bach for input before opening commission discussion.

Bach said that she had not been involved in the RFP process, which had been covered by former city manager Joe Gerrity and Deputy City Manager Marshall McCrary. “As far as I’m concerned,” she said, “it was done fairly. There are things that Mr. McGill brings up that intrigue me, I’m curious about them, but I don’t know that they are enough for me to say that the whole process should be invalidated.”

Commissioner Pat Gass asks a series of questions.

Pat Gass was the first commissioner to speak. “I have several questions,” she said. She read a statement from McGill’s letter: Insider ethical conflicts taint the award. She asked Bach for her reaction to this statement.

Bach said that she was aware of Hodges’ previous relationship with the city as a consultant, but that had occurred 9 years ago, a year before she began working for the city. Gass was not satisfied, expressing her fear that since this matter could lead to another lawsuit for the city, she wanted more information. “That’s dangerous,” she said. “Red flags are flying.”

In response to another question from Gass, Bach talked about the welcome center construction and financing documents, which would be a separate document from the FBO lease. She said that at this point there are only conceptual drawings, so there is no firm indication of how much money the building would cost. “If they don’t have the money to contribute, they default on the lease,” Bach said.

Gass said it was her understanding that the new FBO would go into the new welcome center, so she did not understand why 8 Flags would be taking over McGill’s territory. Bach replied that the McGill’s current lease runs until 2018, but that their current lease cannot be renegotiated since it has already run through the initial 20-year period plus two 5-year extensions as permitted by law. Their current leasehold would be available for reassignment at that time.

Gass continued, “By 2018 we’ll have a new welcome center, so I don’t understand why the McGill leasehold is included in the 8 Flags lease.” Bach allowed that she did not know why it had been done that way, “and Mr. Gerrity is not here to tell us,” she said.

Gass also clarified that 8 Flags would not take over the McGill’s fuel farm. Bach said that all of the improvements under the McGill’s lease would become the city’s at the end of the lease. This is spelled out in the lease. “Yes, they paid for it,” Bach said, “but after 20-30 years they become the city’s property and we can do what we wish with them.” Bach also informed Gass that she had never been asked to attend a meeting with the McGills to discuss renewing or extending their lease.

Commissioner Tim Poynter expresses concerns about possible damage to McGills.

Mayor Boner recognized Commissioner Tim Poynter, who said he believed that the RFP proposals were based on what the bidders would do prospectively, not what they had done in the past. He said, “I have no issues with people who have served as consultants. … I do have a problem with hearing, if it’s accurate, that if we end up with [the 8 Flags] lease, then McGills are out of business. I have always been under the impression that we have a two FBO policy; I have never said that McGill shouldn’t be there.” Poynter addressed McGill, saying that during his last term on the FBCC McGills were contesting the city’s two FBO policy. It had been determined then that by federal law the city could not limit the number of FBOs, assuming there was space available at the airport.

“This is the first time I’ve heard that the lease we are talking about would encompass McGill’s entire leasehold,” Poynter said. “I was under the impression they would be side-by-side, sharing the apron. I have no problem with the RFP and how it was scored. I do have a big problem, however, if the lease puts [McGills] out of business or harms them. They are absolutely entitled to negotiate a new lease going forward after 2018 with whatever fair market values exist. I don’t know how we got to this point.”

Poynter said to the McGills and the audience, “We [the FBCC] have not been involved in any of this, because we are not allowed to be involved with the day-to-day operations of the city. I have no idea who negotiated all this stuff.”

Leasehold questions and the welcome center

Bach asked Andrew Holesko, project manager for Passero Associates (the city’s airport consultant), to try to explain the survey that was the subject of the question and resulting confusion. Holesko reminded commissioners that he could not speak to aviation law or political decisions, but could explain the process for siting the welcome center, which would not begin construction until probably 2017. Because McGill’s lease would expire in 2018, Holesko said, “It would make sense to talk about the most logical place for the new building.” Holesko said that the footprint for the building did not come at the end of the RFP process, but came before the RFP process and that the survey was included in the bid documents. In response to a question from Commissioner Robin Lentz, Holesko allowed that there might have been slight changes to the survey in the lease as opposed to the RFP, but they were not significant.

Boner recognized Poynter for additional comments. Poynter said to Holesko, “So you and ‘the gang’ anticipated not renewing the lease with McGill?” Holesko said he couldn’t speak to that. Bach interrupted to say, “I think that Joe [Gerrity] believed that the McGill facilities were at the end of their expected life and would revert to the city in 2018.”

Poynter continued, “Now we do know that we need to allow [McGill] to renew … do you see what I’m struggling with here?” Boner asked if the McGills would be able to ask to renew at the same spot. Bach said that it might not be the same as their current leasehold.

Poynter said that of all the points McGill had raised, he only had an issue with the alleged encroachment on his leasehold. He said he felt the city’s position was a bit disingenuous on that point.

Commissioner Robin Lentz said that she felt competition was good and had no problem with even three FBOs. She said that she had looked at the RFP as a document dealing with the 2018 situation in the surveys. Lentz recapped by asking Holesko if when the RFP had been put out for the third time it included the survey showing part of the McGill leasehold being included. Holesko said it did.

Gass admitted confusion, asking Holesko how, if the welcome center construction would begin in 2017, it could encroach McGill’s leasehold, which was still valid until 2018. Holesko clarified by saying that the new building itself would not encroach on McGill’s leasehold. Poynter said that the issue had more to do with use of the ramp, whether it would be divided 80-20 or some other shared arrangement. Holesko said that the new building would be built on currently unleased land between what could be two FBO leaseholds. He said use of the ramp is a commission decision.

Brian Echard speaks for 8 Flags Aviation

Poynter asked to hear from Brian Echard, the Managing Member of 8 Flags Aviation. Echard said that he had addressed many of McGill’s “false allegations” in his lengthy email to commissioners the previous day. He said that the opening of the welcome center and the new FBO would be spring or summer 2018, and that his lease did include the ramp. He added that the construction process would not touch or affect McGill’s leasehold. “He bid on the same thing I bid on,” Echard said. “You’ve got the score sheets in front of you. I think I gave the better proposal, and that’s why [the evaluation committee] selected me. We wouldn’t be hearing about this if Mr. McGill had won the RFP. And I don’t think I’d be up here whining and complaining about accusations that don’t exist. But I’m happy to answer any questions you might have.”

Poynter asked Echard about sharing the ramp. Echard said that was spelled out in the RFP, but that the city-owned ramp is still available, with space to build a building. “If it was good enough for me two years ago,” he said, “I’m not sure why it isn’t good enough for Mr. McGill. The reason I did not sign that lease two years ago is that a month or two following the approval of the lease, the city and the AAC decided to move forward with building a welcome center, and the RFP process was in discussion. At that time I made a business decision to hold off on building my own building and join with the city in building the welcome center. I have committed $1.2M to this project, far greater than what McGill has committed …” [Later in the discussion McGill said that he had spent $700K on his current leasehold improvements and had offered “$500K with no strings” as part of his bid.]

Echard also said that he does not want the current fuel farm, because he will build his own. He said he would tear down McGill’s hangar if it were part of his lease, because it is outdated.

Boner asked about McGill’s allegation that Echard’s lease would roll over and give him “perpetual renewal.” Echard said that it is a 20-year lease with two 5-year extensions, the same as the McGill lease. Bach said that the lease, which Echard has already signed, matches the proposal, other than slight differences in the survey as Holesko pointed out. She added that the lessee could come to the city with proposals to manage the city ramp for a fee.

Final comments and direction

Gass concluded her questioning by asking the city attorney if she felt confident that if the city ended up in court over this matter, McGill’s claim of “insider ethical conflict tainting the award” would not become a problem. Bach said that she did not have enough information to answer yes or no, adding that Hodges did not have access to all of McGills’ financial information in making his appraisal of the value of the McGill operation.

Echard added that in a lengthy telephone conversation following his receipt of McGill’s allegations, Hodges told him that he had only used information publicly available during the 3-month period that he worked for the city 9 years ago. Echard said that he wrote the RFP response himself and did not use Hodges, whose role will be to recruit and train 8 Flags staff. Echard said, “This is my business, and I am putting up my money.”

Gass suggested the city err on the side of caution and reconsider the proposal to avoid a lawsuit. Bach replied that McGill’s claim of insider information “doesn’t move me at all.”

“This was a fair process,” Bach added, “but some of Mr. Poynter’s concerns about the sketch, we need to know. With this airport and the disputes we’ve already been through, I think either way we are going to be in a dispute quite frankly. I’m not saying who with, but putting this RFP out three separate times to resolve bidder questions, we did everything we could to make it fair. If you want to do the safest thing, you will sit here until 2018 and wait until …”

Boner recognized Poynter, who said, “I think the RFP was fair. I understand [Commissioner Gass’] concerns, but I don’t share them. I want to make sure moving forward that we’re not putting McGill out of business, because that has never been the intent. They will keep their fuel farm. It sounds like it’s coming down to a shared ramp. I say we move forward and make sure the ramp is shared.”

Bach said that what she was hearing from the commission was that they need a visual picture of what everyone is talking about in terms of leaseholds, ramps, and welcome center.

Lentz volunteered that in throwing out the scores of the RFP evaluator that McGill seemed to object to, 8 Flags would still outscore McGill Aviation by three points.

Vice Mayor Johnny Miller asked Echard about his communications with Hodges to make sure that Echard had received no insider information in preparing his response to the RFP.

John McGill returned to the podium to refute some of the statements made by Bach, Holesko and Echard. He expressed concerns that Echard could walk away from the lease before the welcome center is built but after construction contracts had been signed, thereby leaving the city on the hook to foot the entire bill. Bach replied that the FBCC had decided to build the welcome center before the RFP went out, so the city was prepared a few years ago to move forward on its own with the project.

Poynter said, “That might have been the case with a previous commission. But I don’t think that this commission has the same appetite to build a welcome center and bear the entire cost with citizens’ money. Whatever might have been, it ain’t that now. I am not endorsing an airport welcome center where the citizens are going to have to spend $1.2M to get it.”

Three members of the public commented. After that, Miller asked Acting City Manager Marshall McCrary if he could get involved in the conversation, since Gerrity was not present at the meeting. McCrary responded that his main responsibility related to the preparation of the RFP. Otherwise, he said he knew only bits and pieces. He said, “I can represent that the RFP was handled very fairly. The scoring methods were left totally up to the committee. The members could certainly talk among themselves. I stand behind that process.”

Miller said he had some concerns about moving forward and asked Bach what a delay would accomplish and what would it cost the city. She said that getting clarification on the surveys would be a good idea and would not take away from the RFP process. She cited her concerns over the FBCC’s confusion between the lease and the construction documents. “The city’s not going to be getting a welcome center without the participation of the FBO that receives this award. And there is going to be a hook,” she said. “The lease document leases land. I don’t have a problem with a 60-day out clause for the lease, because we get our land back.”

Miller persisted with his line of questioning. Bach said that while the city doesn’t suffer, 8 Flags suffers with a delay, because they don’t get to move forward. “But they are not ready to open a business, as I understand it, until we are ready to move forward with the welcome center. We are talking about moving forward on this quickly.”

In response to a question from Boner, Bach replied that the RFP process overrode any requirement in the McGill lease to negotiate the construction of a new building. She said that the goal of the FAA is to provide as open a competition as possible on a major public construction project.

Poynter said, “I’m still where I was. The winner won. I want to get some of these questions answered before we sign the lease, but I’m not willing to start the process over again. I think the city did their due diligence, they did their job. The best bid won. But I want to make sure those other questions are addressed. I definitely do not want to sign the lease tonight, but I want to give you a two-week time frame to getting it in front of us with these questions answered.”

Lentz agreed with Poynter, but asked that the item be on the October 20 city commission agenda. Holesko and Bach agreed with the caveat that the drawings might not be available until the week of the meeting.

With the decision that consideration of Resolution 2015-139 would be postponed until the October 20 FBCC Regular Meeting, Mayor Boner adjourned the special meeting.

Editor’s Note: Suanne Z. Thamm is a native of Chautauqua County, NY, who moved to Fernandina Beach from Alexandria,VA, in 1994. As a long time city resident and city watcher, she provides interesting insight into the many issues that impact our city. We are grateful for Suanne’s many contributions to the Fernandina Observer.