City council approves loan for Ascent project

Ascent Aviation Services provided this rendering of its “phase one” widebody hangar. (Graphic submitted)

Copyright © 2021 Roswell Daily Record

The City of Roswell will provide an $11.1 million interfund loan to be used for the Ascent Aviation Services wide-body hangar project after approval by the Roswell City Council at a meeting Thursday evening.

The city council votes took place despite public comments and some councilors questioning the timing of actions days before a municipal election, the wisdom of using funds for such a purpose, and a demand for preferential treatment for Ascent. Aviation compared to other aviation centers. tenants.

Called for a special council meeting Thursday at the Roswell Convention Center, nine city councilors voted 7-2 to approve loans from the water, sewage, sewer and general funds to a Roswell Air Center fund. The group also passed a related resolution authorizing budget adjustments for cash transfers, also by a 7-2 vote.

The general fund contributes $4.1 million. The water fund lends $4 million. The solid waste fund provides $2 million, while the sewer fund lends $1 million.

Councilors Juan Oropesa and Angela Moore voted against both measures. Moore said that while she supports Ascent Aviation, she wasn’t sure she fully understood the financial arrangements. She also sought and received assurances that the timing of the vote just days before the end of Tuesday’s mayoral and city council elections was not politically motivated.

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Oropesa has repeatedly stated that it opposes rushing decisions. He also repeatedly asked City Manager Joe Neeb to explain or expand on why a special meeting was called rather than hearing resolutions at the regular March 10 meeting of the governing body.

Neeb said Ascent Aviation indicated that March was too late for his needs and he had worked to meet the needs of the business. In response to Oropesa’s question, he said Ascent had never threatened to end its relationship with the city if the votes took place after February. Oropesa proposed to submit the vote on the interfund loan until after March 1st. This motion was defeated 8 to 1.

Neeb also told advisers that the loan does not go directly to a private company.

“Simply put, it’s the city repairing its property,” Neeb said. “We own the entire property, so we invest the money in fixing the property.”

He and Mike Espiritu, president of the Roswell-Chaves County Economic Development Corp., called interfund lending another type of economic development tool. They compared the construction loan paid by the city on an Air Center building used by Red Mountain Arsenal, the industrial revenue bonds the city issued on behalf of companies, or the ROAR revolving loan fund for businesses that the city has funded and EDC manages.

Espiritu told a Roswell City Council legal committee meeting that preceded the special city council meeting that he considered the risk to the city to be low.

“What could happen? Well, I guess we could be stuck with this beautiful building that we need and that everyone would love to have around the world,” he said. “I so think we’re very lucky to have a company that will invest in Roswell and our people to make it a better place.”

Espiritu reiterated the economic benefits Ascent Aviation is expected to have in the region once it begins commercial aircraft maintenance, repair and overhaul (MRO) operations here. The 40-year-old company already has MRO facilities at Pinal Air Park in Marana, Arizona, and near Tucson International Airport. It plans to hire at least 100 technical and support staff when it opens in late December 2022 or early 2023 and up to 360 by year five. The company’s president said he would invest approximately $18 million in local operations over 10 years, and the New Mexico Department of Economic Development projected that the company’s economic impact nationwide of the state would be $545 million over a 10-year period. Ascent also spoke of plans for a Phase II after the fifth year of operation which would include another 300ft by 300ft hangar and the expansion of its operations to include the conversion of commercial passenger aircraft to cargo aircraft or freight.

Neeb, city staff and councilors raised several other points about interfund loans. They said the 3% annual interest rate for the affected loan is higher than what the funds are currently earning, which was reported to be less than 1%. They also said that the four municipal funds can save money and still have sufficient funds to meet expected future needs.

The Roswell Air Center fund receiving the $11.1 million will repay other city funds over 10 years in annual payments of $1.3 million beginning in June 2023. The annual payments will cover the principal and $1.91 million in interest. The Air Center intends Ascent Aviation Services LLC to repay it through lease payments as well as other agreements in its leases.

Because of this, in a related action, city councilors also voted 8-1 to approve a 45-year ground lease with Store Master Funding LLC, a financing group for Ascent Aviation. Oropesa voted against.

The lease is for a 10.65 acre shed, approximately 9.9 acres of which is for the shed and the remainder for parking. The initial rental rate for the site is 10 cents per square foot per year, with an annual increase of 3% beginning in the fourth year. The lease will be terminated if the West Earl Cummings Loop site is not used for aviation-related purposes, and Store Master Funding cannot sell, assign or transfer the lease without City Council approval.

According to information shared by Neeb, Ascent Aviation or its financing group would pay approximately $10.64 million for the first 15 years of the lease, including $4 million in the first four years from a grant from the local economic development in the state of New Mexico.

Neeb told city councilors that future leases that are expected to go to city council for approval are the sub-lease between Store Master Fund and Ascent Aviation for use of the hangar site and between the city and Ascent Aviation regarding its responsibilities in as a tenant of the Air Center. In addition, Ascent Aviation also plans to lease three more Air Center buildings for use before the hangar site is completed.

Randy Phelps, vice president and general manager of AerSale, an MRO that employs about 300 people and has operated in Roswell for about 10 years, read a statement expressing his opposition to the interfund lease and loan.

He said the “11th hour” decisions did not allow for proper discussion and review.

He also said that public funds are used to “support and promote the business opportunities and efforts of a private company to the detriment and discrimination of other companies in the same situation and operating at the Air Center”.

The statement also said that other Air Center tenants have seen their rents increased and the implementation of requirements on their operations and sites that are “onerous and severely restrict and potentially eliminate the ability of other tenants, including AerSale, to operate their businesses”.

Three candidates for the election of municipal officers also expressed concerns about the use of funds. They were mayoral candidate Tim Jennings and city council candidates Robert Corn and Ed Heldenbrand.

Among Jennings’ comments, he believed the city should use its general water, wastewater and sewer funds for current and future road, water, landfill and sewer projects and to mitigate the need to increase customer rates.

Corn said he supported Ascent Aviation but asked, “My question is, why didn’t we have this discussion in November and December?”

He also said he wasn’t sure how all the dollar figures on costs and funding sources added up from the presentation. “But that’s what happens when you rush,” he said.

Heldenbrand said he believes city councilors have a duty to ensure the city gets a fair return for its money.

“A three percent interest rate on a 15-year contract is not a fair return on our money,” he said. He added that the city should study a floating rate that would increase if interest rates and inflation rise significantly in future years.

While Heldenbrand and several others present at the meeting referred to 15 years for repayment, the city indicated that the four city loans giving the money must be repaid in 10 years.

Some of the city officials’ responses to the comments included that the city strives to treat all Air Center tenants fairly and equitably and that all have been given the opportunity to investigate possible city funding for help their projects.

Lisa Dunlap can be reached at 575-622-7710, ext. 351, or to [email protected]

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