Alabama Ethics Commission Confirms No Probable Cau...

Alabama Ethics Commission Confirms No Probable Cause for Alleged Violation of Alabama Ethics Act. Complaint Dismissed.

 

To view the State of Alabama Ethics Commission decision, please click the following link: FAA_Oct17Update_Ethics Commission copy

 

The Fairhope Airport Authority was established in 2007 by the City of Fairhope and is incorporated under Article 2, Chapter 3, Title 4, Section 4-3-40 of the Code of Alabama 1975. The Authority’s primary purpose is to develop and operate the H. L. “Sonny” Callahan airport (i.e. the Fairhope Airport). The Fairhope Airport serves the Fairhope/Eastern Shore community as a hub of economic development and supports a growing community of aviation related businesses, providing services and facilities which sustain existing businesses and help attract new aviation related businesses

The Authority is governed by a seven-person Board of Directors who serve without compensation except for expenses. They are elected by the council of the City of Fairhope for staggered six year terms.

The Authority is profitable on an operating basis. Contributing to the Authority’s profitability has been its 7.0% annual increase in operating revenues stemming from an increase in revenues from rents from hangar ground leases and a $0.07 per gallon fuel flowage fee on all aviation fuel sold at the Airport. The only appropriations received from the City of Fairhope are used solely to service the debt incurred for the Fairhope Airport property owned by the Authority. Legal expenses are paid from Authority income and not from appropriations from the City of Fairhope.

In late 2014 the Authority was approached by two competing groups (Cedar Creek, LLC and Executive Aviation) to build two large corporate hangars on the two then available hangar sites at the Fairhope Airport. The owners of these entities were not members of the Board of Directors of the Authority. The construction cost for each of the private hangars would be paid by the developer. After the initial thirty-year lease period, hangar ownership would revert to the Authority. Also, each of the groups wanted to build their own dedicated fuel farm to service their aircraft.

Airport authorities in general are exempt from Alabama bid laws. Nevertheless, a Request for Proposal (RFP) and a sample lease were developed and the two parties were asked to submit bids for the pad 1 and pad 2 sites. In mid-January 2015, Cedar Creek, LLC submitted a conforming bid and in March 2015 the company signed a lease to develop pad 1. Executive Aviation did not submit a bid. In March 2016 Cedar Creek, LLC received a construction permit to build on pad 1 and its hangar is expected to be finished sometime in May 2017.

H. Ray Hix, Jr., was appointed to the Authority in April 2015. Mr. Hix is part owner in a real estate development and related construction company which requires substantial air travel and owns or leases airplanes for that purpose. He is also a part owner in Mid-Bay Air, LLC which provides air travel to the development and construction companies.

Before and after Hix was appointed, negotiations for the pad 2 hangar site continued with Executive Aviation through the summer of 2015 but the company never submitted required financial documentation by the deadline set by the chairman of the Authority of August 18, 2015.

In September 2015, without Mr. Hix participating or being present, the Authority voted to again send out a RFP for bids on leasing the remaining hangar site a/k/a pad 2. This time three groups expressed an interest in building a hangar and fuel farm on the site: Executive Aviation, Mid-Bay Air, LLC, and Terry Chapman. The bids were all within ½ cent of each other per square foot. To differentiate the bids, each group was asked to quantify not only their proposed ground lease rent (the minimum bid to be accepted was $0.22 per square foot) but also their estimated annual aviation fuel usage and their estimated hangar construction cost. Three conforming bids were received in October 2015. Again, with Ray Hix excused, an ad hoc committee of two members, Jack Burrell and Vince Booth, was selected to make a recommendation to the Authority. The committee determined the bid of Mid-Bay Air would result in 21% more annualized income to the Authority than the next highest bid. With Ray Hix excused, the Authority Board picked Mid-Bay Air, LLC as the winning bid at its November 2015 Board meeting because it was expected to generate the most annualized income for the Authority and because Mid Bay Air, LLC was constructing the most expensive hangar which the Authority would own at the expiration of the lease.

During November 2015 the Authority obtained an informal opinion from the Alabama Ethics Commission which stated that a member of the Authority could lease property from the Authority if the lease was competitively bid and the member recused themselves from participation in formulating the proposals or evaluating and awarding the bids.

As stated above, Ray Hix recused himself from all discussion and voting on the proposals. In December, he requested a formal opinion from the Alabama Ethics Commission. The Mid-Bay Air, LCC lease was expressly contingent upon approval from the ethics commission before it was enforceable by either party. On February 3, 2016, the Ethics Commission issued a formal opinion confirming the substance of the informal opinion. The signed lease was then filed with the Ethics Commission.

The construction permit for Mid Bay Air, LLC was received in November 2016 and the hangar on pad 2 will be completed in April 2017.

The documents referenced in the timeline can be downloaded here.