BOARD OF COUNTY COMMISSIONERS

AGENDA REQUEST

DATE: March 3, 2015

TO: Honorable Chairman and Members of the Board

FROM: Sunil Harman

SUBJECT: Proposed Settlement Agreement with mitigation terms for Destin Jet to 

operate both FBO locations

DEPARTMENT: Airport

BCC DISTRICT: All

STATEMENT OF ISSUE: The Board is requested to approve proposed amendments to the 

current lease agreements with the two FBOs, Destin Jet and Regal Air Destin, to allow Destin Jet 

to assume the Regal Air Destin lease as amended and operate both FBO locations under the 

Destin Jet brand at DTS. The Department of Airports staff and the County Attorney negotiated 

the lease amendments as a settlement with the FBO operators to resolve ongoing lease 

compliance issues and declining airport revenues. The amendments were negotiated with terms 

in exchange for assurance that the current Regal Air Destin purpose built FBO terminal and 

leasehold will continue to be operated for that use only, an increase in fuel flowage fees paid to 

the County and accelerated repayment of Regal Air Destin's debt.

BACKGROUND: Over the last year, concerns have been raised regarding the viability of

sustaining two FBOs at the Destin Airport due to declining fuel sales due to downturn in general 

aviation activity; resultant losses of airport revenues and compliance with existing lease 

agreements.

The following is a summary of the negotiated settlement proposal:

County agrees to authorize Destin Jet and Regal Air to operate under common ownership and 

brand with the following conditions:

a. Destin Jet and Regal Air agree to increase its fuel flowage to $.075 cents per 

gallon from $0.05 and $0.06 per gallon respectively.

b. Regal Air agrees to pay $50,000 towards the balance owed to the County for the 

assumption of Miracle Strip Aviation’s past due lease payments and the 

remaining balance over a 24 month period, rather than a sixty (60) month period 

as originally agreed to by Regal Capital, LLC.

c. Regal Air agrees to remove all “Regal Air” signage and operate the two FBO

locations as a single brand, Destin Jet.

d. County agrees to extend the Destin Jet lease from February 24, 2044 to April 14, 

2049. The language in the lease allowed for a 20 year lease and a 20 year 

extension which was to begin from the Date of Beneficial Occupancy which was 

April 15, 2009 and ending April 14, 2049. The lease effective date is February

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EXHIBIT

D

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26, 2004 and expires on February 26, 2044. This will correct an error in the 

original agreement.

To enable and adopt the negotiated settlement terms the Board is being presented with the 

following lease amendments for approval:

1) EXHIBIT A - Amendment Number 4 to Lease Agreement L04-0233-AP20-93

with Destin Jet, LLC, for Fixed Base Operator Destin/Ft. Walton Beach (DTS) 

2) EXHIBIT B - First Amendment to amended and restated lease agreement L97-

101-AP with Regal Air Destin for Fixed Base Operator Destin/Ft. Walton Beach 

(DTS).

OPTIONS: Approve, reject or table.

RECOMMENDATIONS: Staff recommends that the Board approve the negotiated settlement 

agreement by approving and authorizing the Chairman to execute the lease amendments as 

provided.

RECOMMENDED BY:

APPROVED BY: 

John Hofstad, County Administrator

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From: Lori Fox

To: Roland Sims

Subject: FW: 2-17 BCC Item Coordination - RE: Letter RE Lease Addendums from Jay Odom

Date: Tuesday, February 10, 2015 4:36:12 PM

Lori A. Fox

Okaloosa County Airports

1701 State Road 85 N

Eglin AFB, FL 32542

(850) 651-7160 ext. 4

Northwest Florida Regional Airport (VPS) . Destin/Ft. Walton Beach Airport (DTS) . Bob Sikes Airport (CEW)

Please consider the environment before printing this email.

Please note: Due to Florida's very broad public records laws, most written communications to or from County

 employees regarding County business are public records available to the public and media upon request. Therefore,

 this written email communication including your email address, may be subject to public disclosure.

-----Original Message-----

From: Greg Stewart

Sent: Tuesday, February 10, 2015 12:33 PM

To: Tracy Stage; Lynn Hoshihara

Cc: Sunil Harman; Lori Fox; Wendy Cain

Subject: RE: 2-17 BCC Item Coordination - RE: Letter RE Lease Addendums from Jay Odom

The agenda item summary is acceptable.

Gregory T. Stewart

County Attorney

Okaloosa County, Florida

Please note: Due to Florida's very broad public records laws, most written communications to or from County

 employees regarding County business are public records, available to the public and media upon request.

 Therefore, this written e-mail communication, including your e-mail address, may be subject to public disclosure.

________________________________________

From: Tracy Stage

Sent: Monday, February 09, 2015 11:43 AM

To: Greg Stewart; Lynn Hoshihara

Cc: Sunil Harman; Lori Fox; Wendy Cain

Subject: 2-17 BCC Item Coordination - RE: Letter RE Lease Addendums from Jay Odom

Hello Greg, Lynn,

As you know, we have uploaded the Destin Jet Lease agenda item (attached) in Minute Traq. Could you please reply

 with an approval as “Attorney Reviewed” for coordination purposes. We will upload your coordination reply to the

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Case 3:20-cv-03678-MCR-ZCB Document 57-4 Filed 09/28/22 Page 3 of 23
 Minute Traq item for the Feb 17th BCC mtg.

Thank you,

Tracy Stage, A.A.E.

Deputy Director

Okaloosa County Airports

(850) 651-7160 Ext. 4

http://www.flyvps.com<http://www.flyvps.com/>

From: Sunil Harman

Sent: Thursday, January 15, 2015 12:33 PM

To: Greg Stewart; Lynn Hoshihara

Cc: John Hofstad; Tracy Stage; Mike Stenson

Subject: FW: Letter RE Lease Addendums from Jay Odom

Good morning Greg and Lynn,

Attached herewith please find the referenced letter and signed lease addendums from Mr. Odom with notice of

 severance of any linkage with Vertol. As the window of opportunity initially agreed to in leveraging concessions

 from Vertol has long since passed, I am inclined to accept that we treat Destin Jet’s operation of Regal Air as a

 single FBO and Vertol’s Operating Agreement separately as there is still a net benefit to the County by moving

 forward with the FBO lease addendums.

I will await your opinion on how we should proceed as litigation appears to the only other option.

Thanks,

Sunil Harman A.A.E., IAP

Director of Airports, Okaloosa County

1701 State Road 85 North

Eglin AFB, FL 32542-1498

850-651-7160 ext. 4

[cid:image001.jpg@01D0445D.A68648D0]

Northwest Florida Regional Airport (VPS) Destin Airport (DTS) Crestview / Bob Sikes Airport (CEW)

"Please note: Due to Florida's very broad public records laws, most written communication to or from County

 employees regarding County business are public records, available to the public upon request. Therefore, this

 written e-mail communication, including your e-mail address, may be subject to public disclosure."

From: Sarah Burgess [mailto:sburgess@crystalbeachdevelopment.com]

Sent: Thursday, January 15, 2015 11:49 AM

To: Sunil Harman

Cc: Tracy Stage; manchors@kaglawfirm.com<mailto:manchors@kaglawfirm.com>; Larry Keefe

Subject: Letter RE Lease Addendums from Jay odom

Good Morning, Mr. Harman:

Attached, please find correspondence from Mr. Odom which includes the exhibits as described. The originally

 signed addendums (3 originals of each) will be delivered to your office today.

Sincerely,

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Sarah Burgess

Assistant to Jay Odom

850-654-4126, Ext. 113

[cid:image002.jpg@01D0445D.A68648D0]

Mailing: PO Box 1735, Destin, FL 32540

Physical: 4652 Gulfstarr Drive, Destin, FL 32541

CONFIDENTIALITY NOTICE: The information contained in this e-mail message is privileged and confidential

 information intended only for the use of the individual(s) named above. If the reader of this message is not the

 intended recipient, you are hereby notified that any dissemination, distribution or copy of this communication is

 strictly prohibited. If you have received this communication in error, please contact the sender by reply e-mail and

 destroy all copies of the original message. Thank you

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Background Summary - Destin Executive Airport (DTS) FBO Issues

Over the last year after discovering that Regal Air FBO (the successor of the Miracle Strip FBO through a 

negotiated and Board approved lease assignment in July 2013, in exchange for assumption of and 

structured repayment of delinquent debt) at Destin Executive Airport had been sold to and was being 

operated by Destin Jet FBO (the competing FBO on Airport), the Department of Airports and the County 

Attorney have been negotiating amendments to the current lease agreements with Destin Jet and Regal 

Air Destin to enable them to operate as a single FBO under common ownership and branding based on 

the following negotiated terms: 

Concerns regarding compliance with the grant assurances specifically as it relates to: (1) potential for 

abdication of “rights and powers” of the County authority to be involved before the sale / acquisition; (2) 

economic non-discrimination by allowing the after the fact acquisition preventing other qualified FBO 

operators into the market through a RFP; and (3) creating a perceived exclusivity limiting competition 

were all raised to the FAA, however in each instance the FAA determined that this is a lease 

administration issue and that the acquisition of a competing FBO, even if it results in a single FBO 

provider – a prevalent practice, does not in itself constitute as violation of grant assurances. A review of 

FBO performance statewide over the economic recession is a story of declining revenues from traditional 

FBO services including aircraft sales, maintenance, flight-training and ground handling of itinerant and 

local general aviation airplanes verified our concerns regarding the viability of sustaining two FBOs at the 

Destin Executive Airport which have become largely dependent on declining fuel sales. 

A recommendation to default Regal Air and RFP to award to an experienced FBO operator was deemed a 

costly and uncertain endeavor given the current climate with a twice failed FBO dispensing far less fuel 

than the 1.5 to 2 million gallons of fuel sales needed to attract national chains and practically unrealistic 

for a qualified bidder, even a national chain, has to start out a half million dollars in the red by assuming 

the indebtedness of the failed predecessors. The fact that less fuel sold translates to a loss of airport 

revenue to the County, because the FBOs pay a fuel flowage fee per gallon of fuel dispensed, as well a 

percentage of gross for other revenue sources which are not likely to grow in the near to intermediate term 

and because the persistent downturn and uncertainly of the general aviation sector which has forced so 

many airplanes owners out of the market, prompted the Department to pursue a negotiated settlement 

instead of risking protracted, costly and uncertain litigation, as Destin Jet is already engaged in operating 

Regal Air Destin and already committed roughly half a million dollars in assumed debt. 

Following protracted negotiations, the Department of Airports staff agreed to recommend to the Board 

that it authorize Destin Jet and Regal Air to operate under common ownership and brand with the 

following conditions: 

a. Destin Jet and Regal Air agree to increase their fuel flowage to $.075 cents per gallon, 

from the current $0.05 and $0.06 per gallon respectively. 

b. Regal Air agrees to pay $50,000 towards the balance owed to the County for the 

assumption of Miracle Strip Aviation’s past indebtedness with the remaining balance to 

be paid over a 24 month period, rather than a sixty (60) month period as originally agreed 

to by Regal Capital, LLC. And approved by the Board in the lease assumption 

negotiations and approval of July 2013. 

c. Regal Air agrees to remove all “Regal Air” signage and operate the two distinct FBO 

locations as a single Destin Jet FBO brand. 

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Additionally, Department staff agreed to recommend to the Board that it extend the Destin Jet lease from 

February 24, 2044 to April 14, 2049. This was deemed fair, as the language in the lease allowed for a 20 

year lease and a 20 year extension which was to begin from the “Date of Beneficial Occupancy” which 

actually occurred from April 15, 2009 and ending April 14, 2049 not from the lease effective date is 

February 26, 2004 with expiration on February 26, 2044. This action will correct an unintended error in 

the length of the original agreement. 

Furthermore, in an effort to resolve ongoing community compatibility noise issues related to Vertol's 

military transport helicopter maintenance and flight training operations, Vertol’s compliance with existing 

leases/sub-leases agreements; and compliance with the County’s Ordinance that requires an operating 

agreement with Vertol System Company, Inc., and Vertol Related Entities for operating a commercial 

business at Okaloosa County Airports (DTS and CEW), a requirement they have done without since 

2004, the Department of Airports negotiated to leverage concessions from Vertol Systems through Destin 

Jet because of their business relationship involving Vertol Systems’ role as the aircraft maintenance 

provider for the Destin Jet and Regal Air Fixed Base Operators (FBOs). Last October, Destin Jet 

negotiated the following concessions on behalf of Vertol as follows:

Vertol agrees to enter into an operating agreement with the County for its operations at the Destin 

Executive and Bob Sikes Airports, which shall include an annual operational fee not to exceed $2,000 per 

year. 

a. Vertol agrees that there will be no rotorcraft or rotary-wing (helicopter) operations 

(engine running) on the Destin Jet’s north leasehold ramp between the hours of 10:30 

p.m. and 8:00 a.m., 7 days per week. 

b. The County agrees to construct a helicopter engine run-up pad at the south end of the taxi 

way within two (2) years of such relocation. 

Subsequently, last December the Department of Airports learned from Destin Jet, that due to the 

additional operational restrictions being imposed and the inefficiencies to its business from having located 

in the Destin Jet apron and having to operate from the South Ramp, Vertol is not willing to execute the 

Operating Agreement negotiated on its behest and behalf by Destin Jet. The County is currently at a legal 

standoff with Vertol regarding the required operating agreement. 

Earlier this month, Destin Jet forwarded the revised leases and notified the Department of Airports that it 

is no longer allowed to negotiate for Vertol and wants to move forward with seeking Board approval for 

the leases as attached. 

 

It is recommends that the County move forward by treating these negotiations separately, as any leverage 

that may have existed to compel Destin Jet to get Vertol to cooperate has been severed, and further 

delaying or denying Destin Jet’s request to amend the Destin Jet and Regal Air leases will inevitable 

result at best, in maintaining the status quo with airport consumers being misled in believing there are 

competing FBO businesses at Destin Executive Airport and the County loosing fuel flowage and debt 

revenues and at worst in a long, protracted and uncertain court battle. 

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