At least 11 of the nearly 50 businesses operating at the Vero Beach Regional Airport were in violation of the terms of their lease agreements last week – because they did not have the required windstorm insurance coverage.
But city officials, who say they understand the harsh financial realities and growing angst amid the worsening statewide insurance crisis, don’t want to simply kick them off airport property.
Will they need to? Or can the city and its airport tenants come up with a way to keep these businesses on site and paying rent without putting Vero Beach taxpayers at risk?
The City Council hopes to get answers to those questions at a special-call meeting at 1:30 p.m. Tuesday at City Hall.
“In an attempt to be business-friendly, which is part of our mission, we’re trying to find an agreement that works for all parties,” Vero Beach Airport Director Todd Scher said last week. “I don’t think the city’s response is going to be: Revoke the leases.”
According to Scher, most of the tenants who are not in compliance with the insurance clauses in their leases no longer can afford the skyrocketing costs of windstorm coverage.
Others, because of the age and condition of their buildings, can’t find an insurance company willing to provide the required coverage – or they’re told a policy can be written only at a prohibitive cost and with deductibles that don’t satisfy their leases.
“It’s impossible for some of us,” said Ray Hooker, who co-owns with his wife, Mandy, the Indian River Distillery on Aviation Boulevard, where they have leased airport property since 2022 and opened for business in March 2023.
“Either the insurance company won’t offer coverage because of the age of the building, or the cost is ridiculously high, or the deductible more than the city will allow,” he added. “In our case, we were told we could get coverage if we put a new roof on the building, but even then the deductible wouldn’t satisfy the terms of our lease.”
Hooker said windstorm coverage has been an issue for airport tenants since he opened the distillery, but some could no longer endure the soaring premiums insurance companies began demanding last year.
He dropped the city-mandated coverage last year, when the cost doubled to $70,000 annually – and that insurance was available only if he replaced the roof.
“We were paying for it when it was $35,000,” Hooker said, “but $70,000 was too much.”
Walking Tree Brewery, Dragonfly Boatworks, and the Mobil gasoline station and convenience store on Aviation Boulevard were among the other tenants the city identified as being non-compliant with their leases, but Hooker believes that number will increase as businesses struggle to pay the premiums.
Hooker provided Vero Beach 32963 with a chart that shows the 11 tenants initially cited by the city for non-compliance make lease payments that total nearly $334,000 annually.
Scher, who is working with the city’s risk-management staff, said he has researched the insurance issue at other airports in Florida and found that “very few, if any of them, seem to be having the problem we’re having with tenants getting windstorm coverage.”
One possible reason, he surmised, is that the Vero Beach airport has more commercial tenants – both aeronautical and non-aeronautical – than other airports around the state.
It also has more old buildings.
“We’re looking at these buildings, particularly those that are the driving force behind this discussion, and they’re older buildings,” Scher said. “And (insurance) people don’t want to insure older buildings, except for a very, very large premiums.”
City Manager Monte Falls said the city’s concern is that severe, storm-related wind damage to uninsured buildings could result in the tenants deciding to not invest in repairs and, instead, go out of business.
“We want the property back in a leasable condition, whether that be the building being completely repaired or the site cleared so it can be leased again,” Falls said. “We don’t want to have to spend airport funds to get the property ready to be leased to the next tenant.
“The city is the one that’s at risk here.”
Scher said his staff’s discussions with tenants have produced several options – acquiring demolition insurance, creating escrow accounts, posting bonds and providing personal guarantees – but there are issues with all of them.
Falls said the city will introduce another potential remedy at the council’s special-call meeting – offering to replace existing leases, which include buildings, with land-only leases.
“That’s something we’re going to talk about,” Falls said. “We can’t force anybody to execute a new lease, but if you want this option, that’s what you’ll need to do. We think that might work.
“Our goal is to have viable options for people who can’t or don’t want to insure their buildings,” he added. “They’re not going to be the greatest options, but we have to make sure the city isn’t put at risk.”
