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Lease with Airport and Appointment to Electric System Board

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Reviewed Date: April 22, 2021


Original Author: 
Shechter, Leslie
Date of Material: 
Jun 9, 1993

Purchasing--Bids, proposals and specifications
Purchasing--Lease agreements

Lease with Airport and Appointment to Electric System Board

MTAS was asked whether a lease with a "fixed base operator" at the municipal airport that is due to expire must be publicly bid and how members to the Electric System board are appointed.

June 9, 1993

You have asked several questions: 1) whether a lease with a "fixed base operator" at the municipal airport that is due to expire in July must be publicly bid; and 2) how members to the Electric System board are appointed. I will answer them in that order.

1. The lease agreement between the City and an Aviation Company provides that the Aviation Company act as a "fixed base operator" at the municipal airport. In exchange for leasing a portion of the municipal airport to the Aviation Company, the Company pays a certain percentage of revenue it receives from the sale of gasoline and a percentage of income it receives from maintenance and repair and sale of airplanes and airplane parts, a percent of revenue received from charter flights, pilot training, etc, and from rental of the hanger.

The City is not purchasing a product or service or leasing or purchasing land it does not currently own. In other words it is not "purchasing" anything, but instead, leasing property it owns and receiving revenue from that lease. It is only when the city engages in purchasing activities that it must comply with purchasing requirements which, in most cases require public advertisement and bidding. With respect to this agreement, however, the City is leasing property it already owns to a "fixed base operator." The City could enter into multiple lease agreements with "fixed base operators" under FAA regulations and standards. In my opinion, this type of lease arrangement does not fall within the City's purchasing requirements.

In fact, if the City is operating under T.C.A. §42-5-101 et seq. (the "Municipal Airport Act"), there appears to be authority to enter into leases with contract terms of up to 50 years. There is no requirement in this statute that these long-term leases be publicly bid. See T.C.A. §42-5-110.

2. Appointments of members to the Electric Board are governed by T.C.A. §7-52-107 which provides in relevant part:

(b) The board shall be created in the following manner:...if the municipality employs a city-manager...then at any time the chief executive officer may, with the consent of the governing body of the municipality, appoint two (2) or four (4) men from among the property holders of such municipality who are residents of the municipality and have resided therein for not less than one (1) year next preceding the date of appointment to such board. The board of a municipal electric system may consist of two (2) or four (4) persons who have been for not less than one (1) year preceding the appointment both a customer of the municipal electric system and a resident of the county wherein such municipality is located....

T.C.A. §7-52-108 goes on to provide:

(c) In addition to the members so appointed, such chief executive officer shall also, with the consent of the governing body of the municipality, designate a member of such governing body, or, in the chief executive officer's discretion, the city manager, to serve as a third or fifth member of the board, as the case may be....

While I admit the language of these two sections is awkward, when you look at both §7-52-107(b) and §7-52-108(c) together (in pari materi) it seems clear that the board is to approve the individuals chosen, including the councilman designated under §7-52-108, and not the mayor's decision as to 1) the size of the board and 2) whether to have a representative from the council or the city manager be the third or fifth member.

It is a generally accepted grammatical rule that an adjective clause be placed near the word it is intended to modify. See Hodge and Whitten, Harbrace College Handbook, 6th Ed., p. 292. While I would have worded this section much differently, I think the clause is intended to modify the words "may...appoint" and not "two (2) or four (4)."

I hope this is helpful in your deliberation of these questions.

With kind regards,

Leslie Shechter
Legal Consultant

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