Kenai airport agreements signed with Soldotna contractor, Hilcorp

Several public-private partnerships using Kenai airport land where discussed during the City of Kenai’s Wednesday meeting.

The measures included the terms of an airport land lease with Legacy Electric LLC, along with two others relating to airport parking and agreement between Hilcorp Energy, the city and a private airport lessee.

Legacy Electric, a Soldotna-based electrical and construction contractor, leased a section of airport property from the city in August 2014 with plans to create two hangar buildings on it. Council member Brian Gabriel explained the purpose of the lease from the city’s perspective.

“What happened is that the city is sort of sharing the developmental cost (of the hangars) …the cost of developing a piece of property, getting the infrastructure, the buildings, and the utility there,” Gabriel said.

After constructing the hangars, Legacy would earn returns on its estimated $500,000 investment by operating the hangars for profit during the rest of its 35 year lease (with an optional 20 year extension) before the land and the hangars are returned to city control. Gabriel described this development method as “a common practice for city governments that manage land.”

First, however, Legacy has to pay the cost of constructing the hangars — a project made more expensive by the fact that the leased land is a former dumping site and the ground is softened by a layer of silt and organic waste materials, according to a city memo added to the original lease documentation.

To encourage Legacy’s investment, the city gave it a non-standard lease which awarded them a credit, equal to the value of the work of excavating and refilling the land, on fees for the first five years their lease. Now, Legacy wants this portion of the agreement changed based on the discovery that the land has more contamination than previously thought.

The initial lease was based on a 2008 survey of the land by engineering consultants Wince-Corthell-Bryson which estimated that the ground would need to be excavated and filled to a depth of 8 feet to provide a foundation for the hangar buildings. After beginning excavation, Legacy discovered areas that would need to be dug to a depth of 15 feet, as well as a sewer line that needed to be graded differently, incurring further expense. Because the cost of Legacy’s excavation exceeded what it could recover as lease-fee credit over five years, the council resolved to extend Legacy’s lease credit period to 10 years.

“What we had already agreed to was to share the cost, but this (resolution) is to amend that lease to reflect the additional cost of excavation,” Gabriel said.

The council also considered a pair of action-approval items related to airport parking. Hilcorp Energy requested a special use permit for 37 airport parking spaces, to be used for the vehicles of Hilcorp employees flown to shifts on platforms and facilities on the west side of Cook Inlet. City Manager Rick Koch worked with the Hilcorp director of aviation to develop the terms of the special-use permit, which gives the spaces to Hilcorp for a monthly fee of $2158.33, and also includes permission for Hilcorp to use additional parking space on busy shift change days.

Before approving the permit, the council amended the monthly fee, which was originally $4000, according to a memo issued by Koch on Dec. 2nd that recommended a monthly fee of $2,158.33. According to the memo, the rate was altered for consistency with the city’s Schedule of Rates, Charges, and Fees, which prices an annual airport permit at $700.

The altered monthly fee of $2,158 is roughly equal to $700 for each of Hilcorp’s 37 spaces, divided by each month of the year. Koch said he was unaware of this fee schedule when offering Hilcorp the original monthly fee.

The council’s consent was also requested for a sublease given to Hilcorp by Dan Pitts, a private airport property lessee who said he was also asked by Hilcorp to provide airport parking on his leased lot, and negotiated separately with them to do so. According to an October 30 memo from Koch to the council, the rent that Pitts had proposed to Hilcorp for the parking sublease was less than the monthly fee the city requested from Hilcorp for the 37 parking spaces in the municipal lot. The memo also quotes the lease between Pitts and the city, saying “the rate charged for vehicle parking shall not be less than the rates charged by the City for airport parking.”

Discussion of Pitts’ sublease was originally scheduled for the Nov. 5 council meeting, but was delayed due to Pitts’ trip out of state for family business. On Wednesday, the council approved the sublease with the alteration that it allow “uses consistent with the lease between Dan O. Pitts and the City of Kenai,” requiring that Pitts charge Hilcorp a rate no less than the city’s.

Pitts addressed the council after the item was approved.

“These are competing proposals, and the one that the city has approved undercuts what I’m currently charging Hilcorp for parking,” Pitts said.

In total, the council passed two ordinances and two resolutions, which in addition to the Legacy lease amendment included the acceptance of state granted travel reimbursement for Kenai’s librarians, acceptance of a donation by Hilcorp for the Kenai Senior Center’s annual Thanksgiving dinner, and adoption of an allocation plan for taxes paid by fishing businesses.

Other discussions held Wednesday night concerned two internal personnel decisions. First, council member Brian Gabriel was elected to succeed Ryan Marquis as Kenai’s vice mayor. Later, at the conclusion of the meeting, the council went into a closed executive session to discuss renewing the contract of city clerk Sandra Modigh. After the negotiation, Modigh’s contract was renewed and the council adjourned.


Reach Ben Boettger at

More in News

Sockeye salmon caught in a set gillnet are dragged up onto the beach at a test site for selective harvest setnet gear in Kenai, Alaska, on Tuesday, July 25, 2023. (Jake Dye/Peninsula Clarion)
Board of Fish proposals center on king salmon, east side setnet fishery

Many proposals describe changes to the Kenai River Late-Run King Salmon Management Plan

Jake Dye/Peninsula Clarion
Senior Prom King and Queen Dennis Borbon and Lorraine Ashcraft are crowned at the 2023 High Roller Senior Prom at Aspen Creek Senior Living in Kenai, Alaska, on Friday, Sept. 22, 2023.
Senior prom crowns king and queen

In brainstorming options, the concept of putting on a prom turned some heads

A photo distributed by the Federal Bureau of Investigation shows a man who allegedly robbed the Global Credit Union branch located in Anchorage, Sept. 19, 2023. Tyler Ching, 34, was arrested last week on charges related to robberies at the credit union and an Anchorage bank. (Photo courtesy Federal Bureau of Investigation)
Alleged bank robber arrested in Cooper Landing

An Anchorage resident was arrested by the Federal Bureau of Investigation in… Continue reading

A seal rescued earlier this summer by the Alaska SeaLife Center awaits release on the North Kenai Beach in Kenai, Alaska, on Saturday, Sept. 23, 2023. (Jake Dye/Peninsula Clarion)
2nd harbor seal release draws large crowds

The seals were Pierogi, Pringle and Belle de Fontenay

Attendees search the waters of the Kenai River for sightings of Cook Inlet belugas during Belugas Count! at the Kenai Bluff Overlook in Kenai, Alaska on Saturday, Sept. 23, 2023. (Jake Dye/Peninsula Clarion)
Belugas Count! celebrated in Kenai

At a viewing station on Kenai’s bluff overlook, dozens gathered and peered out over the Kenai River during a morning session

Kenai Peninsula Borough School District Finance Director Elizabeth Hayes, left, gives a presentation on the school district’s FY23 budget at Soldotna High School on Thursday, Oct. 8, 2021, in Soldotna, Alaska. Hayes during the KPBSD Board of Education’s Sept. 11, 2023, meetings, debuted first of an informational “Budget 101 Series.” (Ashlyn O’Hara/Peninsula Clarion)
School district warns of looming $13 million deficit in first ‘Budget 101’ presentation

The first installment explored Alaska’s foundation formula

Clockwise from bottom left: U.S. Army Corps of Engineers Alaska Division Commander Col. Jeff Palazzini, Gov. Mike Dunleavy, Kenai Mayor Brian Gabriel, Kenai City Manager Terry Eubank and Assistant Secretary of the Army for Civil Works Michael Connor participate in a signing ceremony for a project partnership agreement for the Kenai Bluff Stabilization Project at the Kenai Senior Center on Monday, Sept. 25, 2023, in Kenai, Alaska. (Jeff Helminiak/Peninsula Clarion)
Bluff stabilization agreement signed

The agreement allows the project to go out to bid and construction to begin

Lyndsey Bertoldo, Penny Vadla and Jason Tauriainen participate in a Kenai Peninsula Borough School District Board of Education candidate forum at the Soldotna Public Library in Soldotna, Alaska, on Monday, Sept. 25, 2023. (Jake Dye/Peninsula Clarion)
School board candidates tackle budget deficits, home-schooling, school maintenance

The discussion was the first of two forums featuring KPBSD school board candidates

Jake Dye/Peninsula Clarion
Brad Snowden and Julie Crites participate in a Seward City Council candidate forum at the Seward Community Library in Seward on Thursday.
Seward council candidates discuss issues at election forum

Participating in Thursday’s forum were Julie Crites and Brad Snowden

Most Read