Monday, July 31, 2017

Records: City paid double what company did for same land on same day; Marion Airport (C17) purchase still bumpy ride





MARION — On the same day in 2015, the city paid an aviation company more than twice as much per acre for a slice of Marion Airport land than the company paid the original owners for it hours earlier.

As plans continue to evolve for the future of the small airport, and Marion receives funding from the Iowa Department of Transportation to help, some are questioning not only that transaction two years ago but also the city’s direction in airport planning since, according to documents and City Council records.

The city did not obtained appraisals on the land in question before buying it; didn’t seek proposals from other companies interested in operating the airport before making a deal with a newly formed limited liability corporation; and later distributed an inaccurate memo from City Manager Lon Pluckhahn recapping the purchase when questions arose.


In its quest to purchase key parts of the Marion Airport in 2015, the city of Marion paid a private company more than twice per acre than what the company had paid the original owners for it just hours before, and records show. This map shows the layout of who owns what at the airport.



In an interview, Pluckhahn said he stands by the property’s purchase.

“All of this was done in full view of the public,” he said. “I know there are people who think I’m getting kickbacks. I’ve told them, if you feel that, then you hire an accounting firm and I’ll give them full access to all of my financial transactions. It’s not my responsibility to pay for that to prove to you that I didn’t do anything wrong.”

A principal with operator LuxAir Aviation said the arrangement, at least initially, is a money loser and that the company has heavily invested in improving an airport vital to the city.

“Somebody had to take on the burden,” said real estate developer and pilot Jeff Witter, who helped form the aviation company. “No businessman, unless he loves flying and is an idiot, is going to say, ‘Wow this is a great opportunity to make some money.’ We made just under a million in improvements we needed to spend to get it close to where it needs to be.”




CITY GETS INVOLVED

For years, Perry and Jan Walton owned and operated the Marion Airport. In 2014, Perry Walton’s health began to deteriorate.

Some residents and longtime airport users came together to try to keep the airport running and financially viable, said Witter, who was part of that group.

Witter — who also owns Genesis Equities, a real estate development company, and Abode Construction — said he approached the city in 2014, wondering if officials would be interested in full or partial ownership of the airport land.

If a partial ownership deal was made, Witter said, Genesis Equities would help maintain and run the airport.

If the city were to own the entire airport — similar to airports run by the cities of Monticello and Independence — more federal funding streams could be available for construction and upkeep.




A factor appealing to the city was that the Marion Enterprise Center, a 184-acre business park, is west of the airport land. If improvements were made to the airport and traffic increased as a result, more people could access the center, Pluckhahn said.

“There was a strong sense with the City Council that if we didn’t step in and do something, the airport was going to die,” he said. The airport “was something we always looked at as a potential asset. When you’re marketing business parks or industrial parks, you’re always looking for something to set them apart.”

But the City Council at the time was not interested in owning the full airport, he said. The least the city could own to qualify for Iowa DOT grants for improvements, he said, was the runway and a fixed base operator building.

But instead of Genesis Equities operating the airport, Witter and daughter Hannah Kustes created LuxAir Aviation LLC in March 2015. The duties of operating an airport were beyond the scope of what Genesis Equities could offer, Kustes said.

By May 2015, the City Council voted 5-0 to have Pluckhahn close on the deal to purchase land including the runway and FBO building. The council also directed Pluckhahn to secure a lease with LuxAir, specifying it would manage and maintain all airport facilities for 10 years at no cost to the city. LuxAir also agreed to match $150,000 in grants.

In 2016, an 11-member Airport Advisory Board was appointed to make recommendations about an airport layout plan to the City Council.




QUESTIONS ASKED

As recently as March 9, during a City Council meeting where members were to vote whether to adopt the comprehensive airport layout plan, lawyer Bill McCartan spoke.

McCartan, with the Cedar Rapids firm of Bradley and Riley, told the council he was representing the Atlas Limited Partnership, owned by Terry Bjornsen. Bjornsen, who declined an interview with The Gazette, owns land south of the airport.

McCartan said his client wanted to “strongly encourage” the council to deny approval of the plan, according to a recording of the meeting.

He argued the city still would need to acquire more land to expand the runway so it could bring in more traffic, yet an expanded airport would decrease the developable value of nearby land.

And in a memorandum to the council, also provided to The Gazette, McCartan asserted the city’s purchasing of airport land gave LuxAir a “windfall” profit.

“The city has entered into a transaction with the airport developer that is unbelievably one-sided and favorable to the developer,” he said at the council meeting.

He wasn’t the only one to ask questions about the airport land deal.



PURCHASE OF LAND

Pluckhahn noted in a September 2016 memo to the council that he was approached by a member of the Airport Advisory Board, and that some council member were approached, too, about the same issue: the city’s purchase of airport land.

“I thought I would provide this memo showing how the process unfolded,” Pluckhahn wrote.

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