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HomeMy WebLinkAboutMinutes Airport Board - 07/12/2006 o, r.0 tu^ dd Minutes ' -a. Fro r COR811SC[IRISTI Airport Board Meeting cli/ r °a;, INTERNATIONAL July 12, 2006 AIRPORT Board Members City/Airport Staff ❑Jerry Kane, Chairman ®Dave Hamrick, Director ®Frank"Rocco"Montesano,Vice-chair ®Debra Keller,Assistant Director ® Glenn E. Lyons,Member ®Adelle Ives,Management Assistant ®J.C.Ayala,Member ®Don Feferman,Member ® Sylvia Whitmore,Member ❑ William Dodge,III,Member ® Jesse Olivares,Member ® Sam J. Susser,Member Jay Wise, Member ❑ Ed Hicks, Sr., Advisory 1. Cap to Order The meeting was called to order at 3:30 p.m.by Vice Chairman Rocco Montesano in Chairman Jerry Kane's absence. II. Approval of Minutes for the Airport Board meeting held June 14,2006. Vice Chair Montesano called for approval of the minutes of the June 14'h Airport Board meeting. Board member Susser moved to approve the minutes and Board member Lyons seconded. The motion passed. III. Tour of the Airport's Customs Area by Juan Cardenas,Port Director,with the U.S. Customs &Border Protection. Director Hamrick introduced Mr. Cardenas to the Board who then proceeded to direct the Board members to the Customs Area for a tour. IV. Action Items Motion recommending the Board vote on the names"Business Park Blvd."or "Business Centre Blvd."for the street Iocated in the new International Business Centre. Vice Chair Montesano opened the floor for discussion. Board member Susser moved to approve the name of the International Business Centre street to be Business Centre Blvd. Airport Board Minuw stay 12,2806 Page 2 of 10 Board member Wise seconded. After some brief discussion, Vice Chair Montesano called for a vote and the motion passed. V. Reports a. Parking Revenue Report Director Hamrick reported that revenue for June,2006 was higher than June, 2005. He added that having covered parking played a part in the increase in revenue. Board member Susser questioned whether covered parking was available June of 2005. Asst.Director Debra Keller reported that the covered parking area was under construction at that time. Board member Wise mentioned he had experienced several instances when he was been unable to use the covered parking area due to the ticket machine not working. Director Hamrick was aware of this problem and explained this problem occurred due to harsh weather conditions and added that it was being addressed. Board member Susser questioned the cost of the covered parking construction and the rate of return on investment. Director Hamrick responded that the covered parking construction, frame and awning, cost was $1.2 million and added that a 100%return on the investment was expected within 10 years. Board member Susser questioned the difference of$1,000 in revenue from June '05 to June `06. Mrs. Keller stated that covered parking was available last June, but it was under construction for the repairs on the canopy. Director Hamrick felt that another reason the revenue was not higher this June was due to the Bowling Conference. He stated that the influx of bowlers kept the planes full, but the parking lot empty as the bowlers rent cars upon arrival. Mrs. Keller interjected that even when the covered parking was not available, passengers would just use the less expensive long term parking. Vice Chair Montesano commented that initially,covered parking was not created to generate revenue,but more as a convenience to the traveling public. Mrs.Keller commented that it has done so well that expanding the covered parking is under consideration. Vice Chair Montesano questioned whether staff has monitored load factors in comparison to use of each type of parking. Mrs. Keller stated that the long term parking fills up first and the covered parking second. She felt that there is more than ample short term parking and some of that area could be used to expand the covered parking area. She added that with the increase in passengers and flights,it would be beneficial to have additional covered parking area. Director Hamrick stated that the covered parking lot is the first Iot to fill up. Airport YoardMinutes July 12,2006 Page 3 of 10 Vice Chair Montesano questioned the length of the covered parking warranty. Director Hamrick responded that the covered parking was warranted for 10 years. b. General Activity Report(GAR) Director Hamrick reported the year-to-date figures on the General Activity Report were up 45% for enplanements for June '06. He questioned the reason why there was only a slight increase of only 2%from June`05. He added that the airlines are flying at capacity with the exception of Southwest which is experiencing low numbers. Vice Chair Montesano stated that at those capacities,passengers were probably getting bumped. Director Hamrick added that his concern was lessened upon meeting with Southwest staff who brought to his attention that the last flight at 7:30 p.m. usually flies out empty while the inbound flight is at capacity. C. Financial Report Asst. Director Debra Keller reported to the Board on the financials from June '05 compared to June '06. She began by stating that the first column in the handout is the adopted budget with amendments for the year and the second column is the projected budget. She added that at the third quarter staff begins to look at changes in the budget to make projections for revenues and expenses for the coming year in order to remain in balance. The actvals are noted in the third column and the fourth column reflects any differences. She asked the Board to note that revenues are at 92% of the budget estimate which is on target for the year. She continued by stating that each expense division was a cumulative 91%. She continued by explaining the figures reflecting transfers to the capital reserve and operating reserve are mandated by the bond covenant as well as the debt service payments and include the maintenance services which are allocations from City Hall. She projected that these figures would be at 100%at the end of the year. She reported that$150,000 would be transferred into the budget from the Aviation Reserve Fund. Mrs. Keller explained that at the end of each year if there is a net income,it is split with the airlines at 60140. She added that these funds are put into an Aviation Reserve Fund to be used for emergency operating expenses. This year there was an emergency operating expense of$150,000 for the chillers. This transfer will insure there is no deficit at the end of the year. She continued with the following page which is a detail revenue report by line itern. Vice Chair Montesano questioned revenue generated by the sale of scrap. Director Hamrick explained that duct work that was the wrong size purchased by the contractor in doing work at the Airport for design modifications after 9111, the f Airport Board!!Minutes July 12,2006 Page 4 of!D FIS build-out, as well as discarded items which were being stored in the Airport Maintenance facility were sold for scrap. Mrs.Keller stated the operating revenues for this year through June are $7,452,000 while they were$7,411,000 last year which is a$50,000 increase from last year. Mrs.Keller explained that the$508,000 reflected the increase in expenses from last year. Board member Whitmore questioned what the majority of expenses were of the $508,000. Mrs. Keller stated that the majority of that amount was for the repair of the chillers which is included in Building Maintenance. Mrs.Keller added that operations were$173,000 more. Mario Tapia,Finance Manager, also added that in addition to the repairs to the chillers, the expense of the chiller rentals was included in this amount. He added that other related expenses included the increase in fuel costs and electricity. Mrs.Keller stated that the landing fees decreased due to Delta's flight cuts. Delta is down to two flights a day from six flights a day. Director Hamrick added that during this fiscal period, work on Runway 13/31 limited the operations to runway 17135 and the airlines cut back to smaller Us. d. FY 106 107 Airport Budget Mrs. Keller referred to the first page of the Budget Report which gave an overall view of actual expenditures in '05, this year's budget and the estimates for the end of'06,as well as the proposed budget for next year. Mrs. Keller commented that it was a balanced budget. Staff worked hard to insure that the same level of service was maintained while working with$300,000 less in the budget in revenues and a minimal increase of rates for the airlines. She added it has been a challenge to not significantly increase rates for the airlines for the past eight years, but she was proud of this achievement. She continued to the next page which is a breakdown of revenue detail. She asked the Board note the decrease in landing fees which reflects a full year of Delta's flight cut. Staff is very conservative in revenue and expense estimates in order to cover any unexpected emergencies within the budget year. Mrs. Keller asked the Board to note that in '05,$1.2 million was budgeted. She felt it was appropriate to be conservative for FY '06 by budgeting$600,000. She added that the oil and gas RFP is being processed but felt that revenue at the Airport should not be dependent upon oil and gas due to its unreliability. She added that each year, it is her goal to decrease the airport's dependency on oil and gas by developing other sources of revenue. 7 Airport Board Minutes July 12,2006 Page S of 10 Board member Feferman commented the report reflects that the restaurant is doing well. Mrs.Keller replied that the drastic increase in revenue at the restaurant is directly related to the new manager and her implementation of new programs. She felt more people were using the restaurant facilities including airport employees. Mrs.Keller added the Airport would be taking rates and charges to City Council for approval on rental of the Airport conference rooms to include catering by the restaurant. Director Hamrick reported additional news to the Board that would positively impact the restaurant. He stated that he met with Scarmell Properties yesterday and they have met with a client that desires to put up a 50,000 square foot facility in the International Business Centre. This facility would have approximately 100 employees. During negotiations at this meeting,the client discussed having the restaurant provide catering for this facility. Board member Feferman questioned the status of the Airport hotel. Director Hamrick explained that the original location for the hotel RFP is where the Semtech building is located. He added that in discussions with Semtech's CFO, David Krantz,the Airport offered a lease buy-out of the eight years remaining on the Iease at 5.50 on the dollar. This offer stipulated that Semtech would tear down the building, take it to sod with a Phase R environmental. The Airport would then write off the remaining portion of the lease. Director Hamrick added that he was contacted by Mr. Krantz who stated he would accept the offer if the Airport took the responsibility of tearing down the building. Board member Fefcrma .questioned whether the problem was in tearing down the building or whether it was related to the environmental assessments. Director Hamrick replied that Semtech has sent some partial environmental reports to staff but they only consisted of interior environmental assessments. He is more concemed with the exterior environmental assessments,phase 2. He added that some time ago Semtech had an estimated to tear the building down for$I48,000. He felt that this amount has increased substantially since the initial estimate. Mrs. Keller added that costs would be considerably more if asbestos or lead paint contamination is found These factors were not addressed in the environmental reports sent by Semtech. Director Hamrick will continue negotiations with Semtech while continuing to collect on their rental agreement unless they come back with a reasonable offer. He continued by stating there are a certain amount of environmental concerns due to an underground, heavy-gauge crude fuel contamination. He added that three test wells have been done and more will be done to determine the direction of the plume. Board member Feferman questioned why one side of the entrance to the Airport is better than the other. Discussion followed on the flow of traffic when picking up passengers. Airport Board Mimdes July 12,206 Page 6 of 10 Board member Susser questioned if Semtech was a stable company. Director Hamrick stated that in researching the company,he found them to be very stable. Board member Susser also questioned whether Semtech was obligated at the end of the lease for the building's demolition and the property's environmental remediation. Director Hamrick replied that Semtech was responsible for demolition and remediation of the site. Board member Susser also questioned whether the Airport had the right to have test borings done in order to determine whether the site is contaminated before the end of the lease. Director Hamrick felt sure that this was written into the lease. Board member Whitmore added that testing would be necessary in order to sell the property. Director Hamrick reported that monitoring wells are on site,but the results of the wells were not included in Semtech's latest environmental report. Mrs.Keller added that at one time, Semtech had a spill and TCEQ required the placement of monitor wells. Board member Susser felt that it would be beneficial to find out if there is any environmental contamination in order to deal with it beforehand. Vice Chair Montesano questioned when the budget would be going to City Council. Mrs. Keller reported that a Public Hearing was held yesterday on the budget and it will be going to its first reading at City Council next Tuesday and the second, final reading will be on the 25`". Vice Chair Monteano noted that three full-time positions would not be filled. Mrs. Keller acknowledged this fact. She continued with the budget presentation and reported that the Airport would be going up on interest rates. She reported the budget is still down$300,000 from last year's budget. She also included in her presentation a list of rates and charges for the last five years and asked the board to note that the proposed increase for this year is less than 1 %of their entire terminal rental rates(hold room, gates and operations area). Landing fees,which have not been increased for the last three years,will go up $.04. She felt that this would not be a significant problem with the majority of the airlines. A meeting with the airlines is scheduled for next week and she does not anticipate any problems. Overall, she felt that the increase in airport rates would not significantly impact the airlines since for the last five years rates have gone up less than 5%of their terminal rental rates and even less for the others. She felt the Airport's rates are comparable to other airports. The airport has strived to keep from significantly increasing the rates and charges. Mrs. Keller added that after 9111 and the economic impact that event had on the airlines, it was challenging to keep the rates and charges stable. She felt the benefit of the oil and gas revenues helped keep the rates the same. She feels that staff and services have not suffered because of the stabilization of the rates and charges. She felt that the Airport's Managers have worked diligently to maintain the same quality of services at the Airport. Board member Susser questioned whether airports of similar size as Corpus Christi's have increased their rates and charges Airport Board Minutes July 12,2006 Page 7 of 10 with more frequency. Mrs. Keller responded that airports of similar size as CCIA have not been able to stabilize their rates and charges and she speculated that it was because they did not have the type of significant revenue like the oil and gas revenue. Mrs.Keller added the increase in rates and charges is slight when compared to fuel increases. Director Hamrick added that some airports operate differently so rates and charges can not be compared. He used the example of Laredo's airport which has lower rates and charges because they offset costs with the cargo/industrial storage facilities they have on-site. Mrs.Keller added that looking at the cost of enplaned passengers,which the airlines like to keep low, CCIA has gone from '02203 at$5.99 to a proposed rate of$5.43 which is a decrease of 1% and an overall five-year decrease of 2%. She felt that this was a significant achievement for CCIA considering ASA cut flights to DFW. She is hoping that this will encourage more flight development. In her presentation,Mrs. Keller reported on the breakdown of the airline fees. Airlines fees include landing fees,baggage fees,security fees,apron fees and space rental fees. She stated that the airline fees and the airline space rental are 31%of revenue which is the largest revenue source. At 22%,the parking lot revenue of$1.8 million is the second highest source of revenue. She continued with the third highest source of revenue of car rental fees which is a healthy amount,but will decrease due to the spike during the bowling conference. The remainder of the revenues include the terminal concessions, TSA rental and the oil and gas revenue. She reiterated the minimal increase is less than 3%and added that the Airport would be going out for the now RFP to increase our oil and gas revenue and decrease the dependency on the operating budget. Board member Feferman asked in what manner the Airport is compensated on car rentals. Mrs. Keller replied that the Airport receives a percentage of car rental agency fees with a minimum annual guaranteed rate versus a percentage of 10%. She added that she would look at the details of this issue and report back to the Board. Board member Feferman questioned whether this changed when Hertz changed ownership. Mrs.Keller stated that there was no change when Hertz changed ownership. Mrs.Keller continued her budget presentation with the report of expenditures by function. She felt this report was of value as the Airport is a service industry business. She added that personnel is usually 50%or more of the amount depending on how much service is provided. She felt that this budget reflects what most service industries experience as far as personnel and operations are concerned. This year's budget does not reflect the$100,000 expenditure to the CCREDC as it was one of the cuts made due to the reduction of oil and gas revenue. She added that three full-time positions would not be filled in order to cut personnel costs. Airport Board Minutes July 12,2006 Page 8aflD The positions are the Public Safety Training Coordinator, a custodial position and one parking lot attendant position. The positions will not be eliminated this budget year but some changes may be made to eliminate them the following year. Board member Susser questioned how the parking lot compensated with the loss of the position. Mrs. Keller responded that the schedule hours for the parking attendants have been changed in order to make up for the loss of this position. Board member Susser questioned whether an automated pay station could be used. Mrs.Keller stated that this option has been researched and one automated, credit card pay station is in use at the toll booth area;but,it has not been working well since it was struck by lightening. It had been down an entire month earlier in the year and then it was down again when it was struck by lightening. Board member Susser questioned what the total labor cost was at the parking lot. Mrs. Keller stated that the total budget for parking is$450,000 which out of this amount, the labor costs are approximately 50%. She added that outsourcing this area has been considered but it was determined that this option would give up control of the level of service and the cost savings would not be significant enough to warrant the possibility the level of service would diminish. Board member Whitmore questioned whether the Public Safety Training Coordinator position was necessary. Mrs.Keller stated that this position was necessary, so the Lieutenants and the Chief are taking over the functions of this position. The training program is still in the process of being put in place and once it is determined whether the Lieutenants and the Chief can continue to take on this function,the position will be eliminated. Should this endeavor not work and it is determined there is a need to keep this position, it will be filled next year. These three positions were vacant during the budget process and in order to cut costs, the managers were asked to determine whether these positions needed to be filled this budget year. Vice Chair Montesano questioned the City fees. Mrs.Keller reported that the General Fund transfer was kept stable this year. She credited the Asst. City Manager, Oscar Martinez, in working with the Airport in keeping these fees down. She added the Airport's MIS allocation went down by$20,000. Mr. Tapia also added that the City's self-insurance costs also decreased. Mr. Tapia responded to Board member Susser's previous question by stating that out of a$3$2,000 budget,$269,000 or 70%is salaries. Mrs.Keller added that at the parking lot,which is a high customer service area, the cost of labor is slightly higher. Board member Susser questioned what customer services were provided at the parking lot. Mrs.Keller felt that a smile from employees was an extension of customer service and important factor in this area As an example,she added that the Toll Plaza building was named after a deceased, former parking lot attendant, Virginia Turner,who was renowned for her attentiveness to customers. Board member Susser felt that there would be a significant cost savings if ,ltrport Board Minutes July 1 Z,2006 Page 9 of 10 automated pay stations were implemented with an attendant on duty during peak hours. Mrs.Keller responded she was reluctant to automate due to her experience with the present credit card lane at the toll plaza. Even through training for customers has been provided,and use has been directly encouraged by the attendants to the customers,there is not a significant amount of traffic going through that lane. As an example of the quality of the level of service provided at the parking lot,Director Hamrick informed the Board that a letter of appreciation was recently received from a customer who had a flat tire at the parking Iot. The customer commended the parking attendant on duty for taking ownership of the situation by having an Airport maintenance employee come out and change the tire for the customer. Continuing in her presentation,Mrs.Keller reported on the Capital Reserve Fund which is obtained each year from the rates and charges from the airlines. This year it will be$123,000 from the Operating Fund.. The Airport will be purchasing $171,000 of operating capital items leaving a closing balance of$846,000. The Bond Covenant requires that a$250,000 balance be in this fund at all times and the remaining funds can be used for capital item purchases. About$500,000 is to be used in this budget to match the 17135 grant. She reported use of these funds will require an increase in the amount of monies to be reserved for this fund in the future in order to keep up with the grant match requirements. Mrs. Keller completed her report and there were no questions from the Board. VI. Director's Report Director Hamrick stated that he had no further information to report that had not already been covered in the meeting. Board member Sasser questioned Director Hamrick on whether he had received any feedback from Delta after the meeting he had with their staff. Director Hamrick responded that he had received an email from Delta on Monday thanking him for meeting with them in Austin. They wanted to reassure him that they would be periodically checking on the feasibility of direct flights from Corpus Christi to Salt Lake City. Vice Chair Montesano questioned the status of negotiations with the developer's lease agreement. Mrs.Keller responded that she was happy to report the developer has agreed to all issues the Board discussed at the last meeting. She recapped by stating the developer agreed to the 15%increase every ten years and agreed to renegotiate every five years at a rate of 7.5%. He also agreed to an increase of$.25 per square foot on the land along the frontage road as recommended by Mr. Adame. He is also agreeable to work with the Airport on site development which will be stated within the lease. She felt this fulfilled the requirements the Board expressed concern over at the last meeting. This lease will go to City Council on August 22, 2006. She added that the developer was in Airport Board Minutes July 12,2006 Page 10 of 10 town recently showing the site to potential clients and has also received three additional RFPs. She added that the EDC will be giving this developer all RFP's for this site since there is no other development of this type in town. City Council was very eager to see this project move forward. VII Board Business and Reports a. Board Member Absences Vice Chair Montesano called for a motion on Board member absences. Board member Feferman moved to excuse Chairman Kane and Board member Dodge. Board member Whitmore seconded and the motion passed. b. General Comments Board member Susser questioned whether an August Board meeting would be held. Discussion followed by the membership on whether to hold the August meeting. Director Hamrick stated he could send out both the GAR and Parking Revenue Report for August and contact the Chair and Vice Chair in order to determine whether the meeting would be held. VW Adjournment As there was no further business,Vice Chair Montesano called for a motion to adjourn. Board member Wise moved to adjourn. Board member Lyons seconded and the motion passed. The meeting was adjourned at 5:04 p.m.