Can a Mississippi airport authority pay a site location consultant a percentage-based fee tied to lease payments from tenants the consultant brings in?
Plain-English summary
The Gulfport-Biloxi Regional Airport Authority wanted to hire a site location/development firm to find aviation-related industries or commercial tenants for airport land. The Authority planned to pay the firm a fee equal to a fixed percentage of the lease payments it received from any tenant the firm placed, over a defined period. The Authority's attorney asked whether that percentage-based fee structure was lawful, and if not, whether a tiered fixed fee tied to lease value would work instead.
The AG said the percentage structure was fine. Section 61-3-15 gives airport authorities broad power to enter contracts that are necessary or convenient for their purposes. Personal and professional services contracts (which a site location consulting agreement is) are not subject to public purchasing statutes, so the Authority can use any procurement method it chooses. Prior AG opinions had upheld percentage-based fees in other public-entity contexts: a municipality paying a contingency fee on insurance-claim savings (Brown 2016), a state department paying a contingency fee for golf course management (Polles 1994), and a school district paying a placement agency a percentage of the hired employee's salary (Hemphill 2014).
The fee must be reasonable and appropriate for the services provided, and the Authority should determine that the arrangement is in the Authority's best interest. With those guardrails, the percentage-of-lease-payments fee was permissible. The second question (about a tiered fixed fee) was moot once the first question was answered yes.
What this means for you
For airport authority boards and economic development authorities
You have flexibility on how to structure consultant fees. A straight percentage of revenue (lease payments, sales, savings) is allowed if you decide it is reasonable and in the Authority's best interest. Document the analysis in the minutes:
- Why the percentage structure aligns the consultant's incentives with the Authority's goals
- What the percentage is and over what period
- That the rate is reasonable for the services
- That the contract was procured in a manner that captures best value (RFQ, RFP, or competitive solicitation, even though it is not strictly required)
The opinion encourages soliciting bids or proposals even though personal/professional services are exempt from competitive bidding. The reason is straightforward: it protects the Authority against allegations of favoritism and helps establish that the rate is market-reasonable.
For airport authority attorneys
When advising on consultant contracts, you can offer the Authority several models:
- Hourly or flat fee (traditional)
- Tiered fixed fee based on milestone or lease value (also fine, per the opinion)
- Percentage of revenue or savings (fine, per this opinion and prior precedent)
For percentage structures, build in reasonableness tests: a cap if the percentage produces an outsize fee on a very large lease, a floor if it produces a tiny fee on a small lease, and a duration limit so the consultant is not collecting a percentage forever.
For site location and economic development consulting firms
If you do business with Mississippi airport authorities, port authorities, or other public bodies, your fee structure can be performance-based. Be ready to:
- Disclose your fee methodology clearly in the contract
- Justify the rate as market-reasonable (comparable deals, industry surveys)
- Accept reasonable conditions (audit rights, caps, sunset)
For private tenants placed by a consultant
If you sign a lease with a public airport authority and a placement consultant introduced you, your lease payments may indirectly fund the consultant's fee. That is a matter between the Authority and the consultant; it does not impose any direct obligation on you, but expect the Authority's lease to be standard, market-rate, and not inflated to cover the consultant fee.
For attorneys advising other Mississippi public bodies
This opinion sits in a line of opinions allowing percentage and contingency fees in the public-services context: claim negotiation savings (Brown 2016), management of state assets (Polles 1994), school placement (Hemphill 2014). The threshold inquiry is always:
- Is the service exempt from competitive bidding (most personal and professional services are)?
- Is the fee reasonable and appropriate for the benefit received?
- Did the public body determine the arrangement is in its best interest?
If yes to all three, percentage and contingency fees are typically allowed.
Common questions
Q: Does the Authority have to put the contract out to bid?
A: No. Personal and professional services are exempt from public purchasing statutes. The Authority can negotiate directly. The AG strongly recommends soliciting bids or proposals anyway, to ensure best value and avoid favoritism allegations, but it is not legally required.
Q: Is there a cap on the percentage?
A: The statute does not set a cap. The fee must be "reasonable and appropriate for the benefit received," per the Hemphill opinion the AG quoted. Industry comparables for site location consulting fees can support reasonableness. Build in a contractual cap if you are concerned about runaway fees on a very large lease.
Q: Can the Authority pay the fee out of lease proceeds?
A: Yes, that is the structure described. The fee is a percentage of lease payments the Authority receives from the placed tenant. The Authority's general operating funds are the legal source; the percentage is just the calculation.
Q: How long can the percentage run?
A: The opinion mentions a "defined period of time." Set that period in the contract: the first three years of the lease, the first lease term, etc. An open-ended percentage indefinitely is harder to defend as reasonable.
Q: Could the Authority instead pay a flat fee per placed tenant?
A: Yes. The AG noted the second question (about a tiered fixed fee based on lease value) was moot but did not say it was prohibited. A flat per-placement fee, a tiered fee, and a percentage fee are all permissible structures for personal and professional services.
Q: Does this apply to other types of authorities (port, redevelopment, hospital)?
A: The opinion was specifically about an airport authority, but the underlying rule (personal and professional services are exempt from competitive bidding) applies broadly to Mississippi public bodies. Each authority should check its own enabling statute for any specific procurement rules, but the general framework is the same.
Q: What if the consultant introduces a tenant the Authority would have found anyway?
A: Build that issue into the contract. Define what counts as a "placement" (registered tenant lead, signed LOI, executed lease) and require the consultant to have caused the placement. Standard placement-agreement language handles this.
Q: Is this opinion just about the airport authority's broad powers, or about all percentage fees?
A: The opinion uses the airport authority's broad powers under Section 61-3-15 as the source of authority for entering the contract, and then applies the general rule on personal and professional services and reasonable percentage fees. The reasoning travels.
Background and statutory framework
The Gulfport-Biloxi Regional Airport Authority is created under Mississippi's airport authority statute, Section 61-3-1 et seq. Section 61-3-15 lists the authority's powers, including the catch-all "to execute such contracts and other instruments and take such other action as may be necessary or convenient to carry out the purposes of this chapter." That broad grant supports a wide range of consultant and service contracts.
Mississippi law treats public purchasing in two layers:
1. Goods and certain types of contracts must go through statutory competitive bidding processes (Sections 31-7-1 et seq. for state and local public bidding).
2. Personal and professional services are exempt from those bidding requirements. The contracting public body can use any procurement method.
The personal-and-professional-services exemption is well-settled in AG opinions. Site location consulting (which involves expertise in real estate, marketing, and economic development) falls in that category. The AG's prior opinions cited in this opinion (Stokes 2017, Broom 2019) recite the same rule.
On performance-based fees, the AG has consistently allowed them where:
- The service is a personal or professional service exempt from competitive bidding
- The rate is reasonable and appropriate for the benefit received
- The contracting body has determined the arrangement is in its best interest
The Hemphill (2014) opinion's standard, "Such a fee must be for a specific amount, or an amount that can be readily determined by the contracting parties, and must be reasonable and appropriate for the benefit received," is the working test. A percentage of lease payments meets the readily-determined test. Reasonableness depends on the market and the services.
Citations and references
Statutes:
- Miss. Code Ann. § 61-3-1 et seq., airport authority enabling statute
- Miss. Code Ann. § 61-3-15, airport authority powers (including subsection (d), the contract authority)
Prior AG opinions:
- MS AG Op., Stokes (Oct. 20, 2017), personal and professional services are exempt from competitive bidding
- MS AG Op., Broom (Jan. 18, 2019), same
- MS AG Op., Brown (Aug. 5, 2016), municipality may pay contractor a percentage of insurance-claim savings
- MS AG Op., Polles (Dec. 8, 1994), Department of Wildlife, Fisheries, and Parks may use contingency fees for golf course management
- MS AG Op., Hemphill (Sept. 18, 2014), school district may pay placement agency a percentage of the hired employee's salary; fee must be specific or readily determinable, reasonable, and appropriate
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/07/B.-Long-June-23-2021-Determination-of-Fee-for-Site-Location_Development-Firm.pdf
Original opinion text
June 23, 2021
Bobby R. Long, Esq.
Attorney for Gulfport-Biloxi Regional Airport Authority
Post Office Drawer W
Gulfport, Mississippi 39502
Re: Determination of Fee for Site Location/Development Firm
Dear Mr. Long:
The Office of the Attorney General has received your request for an official opinion.
Background
You state that the Gulfport-Biloxi Regional Airport Authority (the "Authority") would like to issue a request for qualifications for a site location/development firm to assist in locating an aviation related industry or commercial operation that would be willing to lease all or a portion of this property.
Questions Presented
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Can the Authority base the fee to be paid a site location/development firm on a fixed percentage of the amount of the lease payments the Authority receives from the lessee over a defined period of time upon the placement of an applicable business, industry, or tenant?
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If the answer to the first question is no, can the Authority pay a negotiated fixed fee upon the placement of an applicable business, industry, or tenant that depends on the total value of the lease, i.e., $10,000.00 on a lease valued at $50,000.00 to $100,000.00, $15,000.00 on a lease valued at $100,000.00 to $150,000.00, etc. for a defined period of time?
Brief Response
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Yes. We are not aware of any provision of state law that would prohibit the Authority from paying a fixed fee to a site location/development firm, where such fee is based on a percentage of the lease payments paid to the Authority by commercial tenants.
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The answer to your first question renders your second question moot.
Applicable Law
The Authority was created pursuant to Section 61-3-1 et seq. Section 61-3-15 provides, in part:
An authority shall have all the powers necessary or convenient to carry out the purposes of this chapter (excluding the power to levy and collect taxes or special assessments) including, but not limited to, the power:
...
(d) To execute such contracts and other instruments and take such other action as may be necessary or convenient to carry out the purposes of this chapter.
Our office has consistently opined that personal and professional services procured by a governing authority are exempt from public purchasing statutes and the governing authority can use any method of procurement it chooses. See e.g., MS AG Op., Stokes at 1 (Oct. 20, 2017); MS AG Op., Broom at 2 (Jan. 18, 2019). We have further stated that while a governing authority is not required to seek competitive bids in the procurement of service contracts, soliciting bids/proposals ensures that they are receiving the best value and eliminating favoritism of specific contractors. MS AG Op., Stokes at *1 (Oct. 20, 2017).
This office previously opined that a municipality had authority to pay a contractor a fee based on a percentage of any savings achieved through the claim negotiation services provided by the contractor, assuming the municipality determined that the compensation was reasonable for the services performed. MS AG Op., Brown (Aug. 5, 2016). On another occasion, citing the Mississippi Department of Wildlife, Fisheries, and Parks' broad authority over state parks and its ability to manage and lease out such property, we opined that if that department found that it was in the state's best interest, it could enter into a contingency fee agreement for the management of two golf courses. MS AG Op., Polles at 1 (Dec. 8, 1994). This office has also opined that a school district could pay a placement agency a search fee based on a percentage of the salary of the hired employee. MS AG Op., Hemphill at 2–3 (Sept. 18, 2014). In Hemphill, we stated: "Such a fee must be for a specific amount, or an amount that can be readily determined by the contracting parties, and must be reasonable and appropriate for the benefit received by the school district." Id. at *3. Similarly, we find no prohibition against an airport authority basing the fee paid to a site location/development firm on a fixed percentage of the amount of lease payments paid by the lessee, if the airport authority determines that such an arrangement is in that authority's best interest.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Phil Carter
Phil Carter
Special Assistant Attorney General