ORDINANCE appropriating $4,000,000.00 from Airport System Consolidated 2011 AMT Construction Fund and approving and authorizing a Binding Memorandum of Agreement between AXIOM SPACE, INC and City of Houston for an Aerospace Operations and Technology and Facility Development Project at Houston Spaceport at Ellington Field - DISTRICT E - MARTIN

RECOMMENDATION:
Enact an ordinance appropriating $4,000,000.00 from the Airport System Consolidated 2011 AMT Construction Fund (8205) and approving and authorizing a binding Memorandum of Agreement (MOA) between Axiom Space, Inc. and the City of Houston through the Houston Airport System for an Aerospace Operations and Technology Facility Development Project at Houston Spaceport at Ellington Airport (EFD).

SPECIFIC EXPLANATION:

On April 20, 2020, the City entered into a non-binding Memorandum of Understanding (MOU) with Axiom Space, Inc. (Axiom) related to exploring the possibility of a development at Houston Spaceport in order to facilitate the assembly of space station components. The City procured and completed construction of infrastructure improvements on 153 acres of Houston Spaceport to facilitate development and occupancy by aerospace companies to stimulate and grow aerospace development in the region. Axiom subsequently decided to move forward with its project by entering into a binding MOA with the City wherein Axiom will begin planning and design of a development on approximately 22.52 acres of land related to the assembly of space station components to be utilized at the Axiom Station, a permanently growing complex located 250 miles above Earth. Such components include habitation, research and observation modules finished out in high bay buildings to be constructed by Axiom on leased premises at EFD pursuant to a subsequent lease agreement that will be brought to City Council for approval. As an anchor tenant of Houston Spaceport, up to $40 Million of capital improvements (including the $4 Million appropriated hereunder) will be reimbursed by the Houston Airport System (HAS) and charged back to Axiom under a cost-recovery methodology. Axiom currently estimates a total project cost of approximately $120 Million.

The pertinent terms of this MOA are as follows:

1. Leased Premises and Project Scope: Axiom will lease approximately 22.52 acres at Houston Spaceport, along Enterprise Shuttle Street, and begin its due diligence and planning efforts. After entering into a future lease agreement, Axiom will construct approximately ten acres of facilities including high bay buildings, aircraft apron, space module assembly, manufacturing, flight hardware development and testing, offices, astronaut training and quarantine facilities, mission operations, and parking facilities and support space for approximately 1000 employees. For commercial space customers of Axiom who fly their own aircraft to EFD, Axiom shall construct a hangar and be permitted to conduct FAR Part 145 aircraft repair and maintenance operations on such customers’ aircraft.

2. Option Tract: Axiom shall have a right of first refusal, within three years from countersignature of the future lease agreement, to lease an option tract of approximately 9.76 acres, currently estimated to be Parcel 23, for further capital improvement. Ground rent shall be established by independent appraisal on such option tract, if exercised, which rate shall escalate 15% every five years thereafter throughout the term of the lease.

3. Rentals and Reimbursement: In exchange for tenant improvements vesting in the City on a brick-by-brick basis, eligible capital costs, supported by proper documentation, shall be reimbursed to Axiom on a monthly basis, subject to appropriation of funds, and a rental rate methodology has been established to achieve cost recovery. Initially, under the MOA, Axiom shall be entitled to conduct due diligence, planning and design at a rate of $100.00 per month. Axiom shall not commence construction of any improvements until a formal lease agreement has been executed and presented to City Council for approval. Thereafter, upon an initial certificate of occupancy, Axiom shall pay rent in lease year one equivalent to 5% of the total reimbursed project costs to date, not to exceed $40 Million. Future lease year rentals based on the then-current total reimbursed project costs would escalate 2.5% annually throughout the initial term. Beginning in lease year 11, Axiom shall pay 10% of the amount reimbursed by the City. For any option periods exercised by Axiom, Axiom shall pay rates for land plus improvements in accordance with current HAS independent appraisal methodologies and escalated 15% every five years thereafter throughout the remainder of the lease term.

4. Term: Axiom shall be obligated to an initial 10-year term for up to $22 Million in reimbursable project costs. If Axiom desires additional funding beyond $22 Million, but not to exceed $40 Million, then it shall be obligated to an initial term of 20 years. Axiom shall have the right to exercise additional ten-year option periods, so long as the total of initial term and option periods does not exceed 40 years.

5. Other: An MWBE goal will be established for design and construction of the project in coordination with the Office of Business Opportunity. As mentioned above, a lease agreement shall be negotiated and submitted to City Council for approval.

Fiscal Note:
No significant Fiscal Operating impact is anticipated as a result of this project.


Director’s Signature:



_____________________________                    ___________________________
Mario C. Diaz                                                             Andy Icken
Houston Airport System                                           Chief Development Officer