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HomeMy WebLinkAboutMinutes Airport Board - 12/12/2007 j REGULAR MEETING CORPUS CIIRISTI INTERNATIONAL AIRPOkf B 7FECBI Id 1000 INTERNATIONAL DRIVE E IVE D AVIATION BOARD ROOM CORPUS CHRISTI,TEXAS 0 2010 INTERNATIONAL L DECEMBER 12,2007,3:30 P.M. INTERNATIbNAL AIRPORT GITYSEC BOARD MEMBERS Jerry Kane, Chairman Don Feferman,Member Frank"Rocco"Montesano,Vice-Chair William Dodge,Member J.C. Ayala,Member Jesse Olivares,Member Glenn E. Lyons,Member Jay Wise,Member Sylvia Whitmore,Member Sam Susser,Member Ed Hicks, Sr.,Advisory Member AIRPORT STAFF Fred Segundo,Director of Aviation Adelle Ives,Management Assistant Roy Rodriguez,Facilities Manager Mario Tapia,Finance&Admin Manager Carl Gross, Operations Manager John Hyland,Chief of Public Safety I. Call to Order Vice-chair Montesano called the meeting to order at 3:32 p.m. and a quorum was present. II. Approval of the minutes for the November 14,2407,regular meeting of the Airport Board Vice-chair Montesano called for the approval of the minutes for the November 14"'meeting. Board member Susser moved to approve the minutes as read. Board member Lyons seconded and the motion carried. III. Approval of Board member absences for November and December 2007 Board meetings Vice-chair Montesano called for approval of the absences of Chair Kane,Board members Feferman, Dodge and Wise from this meeting. Vice-chair Montesano questioned whether these members had contacted staff regarding their absences. Staff reported that all Board members had contact staff prior to the meeting regarding their absences. Board member Lyons moved to excuse Chair Kane, Board members Feferman, Dodge and Wise for the December meeting and Board members Olivares and Susser for the November meeting. Board member Susser seconded and the motion carried. IV. Public Comment Vice-chair Montesano called for public comment. Ms. Dita Cackova and Ms. Lindsay Owens from Enterprise Car Rentals were present and requested information on the car rental lease renewals. Ms. Cackova expressed her company's interest in bidding to have their agency on Airport property. Director Segundo responded that the leases negotiations would begin between late January and early February. He added that the delay has been in part to the development of a Quick Turn-Around (QTA) facility. He anticipated that a meeting with all car rental agencies would be held to discuss the development of this facility. Depending on the outcome of this meeting, the lease negotiations would proceed shortly thereafter. He intends to expedite the development of the QTA project and lease negotiations. Corpus Lnrisd International Airport Board Agenda December 12,1007 Page 2 of 6 Mr.Albert Garcia and Ms.Deborah Langan with Customs Border Protection introduced themselves to Board. V Item: a. Motion recommending approval of Ordinance authorizing the City manager, or designee, to execute separate agricultural farm lease agreements with Kelly-Farms for 533.287 acres; Bernsen Brothers Farms for 336.78 acres and; Pat McDonough Fauns for 359.45 acres at $50 per acre; James Charles Bernsen for 244.12 acres at S80 per acre at the Corpus Christi International Airport and make amendments to the Exhibits outlining the leased areas from time to time as may be required due to Federal Aviation Administration requirements or changing conditions. Vice-chair Montesano reviewed what had transpired at the last meeting regarding the differing amounts as one lease was done as a bid process and the remaining leases were renewals increased to fair-market value. He questioned whether this was budgeted as part of revenue. Finance Manager, Mario Tapia, responded that this revenue was budgeted but at the base amount. He added that the increase had not been forecasted. Board member Susser questioned what the process was to determine the rate change. Mr. Tapia stated that initially Mr. Bemsen had bid high in order to ensure his bid would have preference. But added Mr.Bemsen recently met with him and the Director to renegotiate his$80 bid to$50. Staff expressed the Board's preference to keep the bid at$80. Mr. Bernsen agreed. Mr. Tapia continued by explaining that the $50 bid was based on the bid received last year as well as an affirmation of rates received from similar leases surrounding the new landfill. They are currently receiving$50 and staff felt that would be the fair market rate. Board member Susser questioned whether these leases had gone out for bid. Mr. Tapia responded that staff did not go out for bids as it is not a requirement. Staff felt that it was not necessary to go out for bid based upon two factors. First staff felt that the fair market value had been established with the similar leases near the landfill and also,these leases had been farmed by these farmers for several years. Board member Susser questioned whether all bids, with the exception of the bid with Mr. Bernsen, could go out for bid. Staff informed the Board that Letters of Intent had already been sent to the farmers based upon their bids. Director Segundo felt that the Airport is legally bound as Letters of Intent had already been sent to these farmers. He also added that the agreements also include requirements mandated by the FAA which are generally not found in most leases. These requirements include scheduling of plowing under the land at the time of bird migration and changes that could occur should the FAA require the Airport to conduct a wildlife study program. Additional restrictions also include the type of crop that can be grown. He felt that if these leases went out for bid,there would be a possibility the market-value for these leases would decrease due to the restrictions and requirements. Board member Olivares questioned when these leases would go up for renewal again. Mr. Tapia responded that it would be in five years. Vice-chair Montesano felt that the negotiations with these farmers was done in good faith, but he felt that in the future, staff should take careful consideration in getting the most revenue Corpus LiAsti International Airport Board Agenda December 12,2007 Page 3 of 6 possible for all other bids. Director Segundo stated that escalator clauses could be added into the lease agreements based upon the Board recommendation. He felt that the leases could be reviewed mid-term in order to obtain a fair market-value increase on the leases. Board member Susser felt that not reviewing these leases periodically,in over five years S 100,000 to $150,000 in revenue was not being captured. He also felt that these leases could be done on a year-to- year basis in order to review the fair-market value. Board member Susser moved to renew the lease with Mr. Bemsen for five years and the additional leases would be extended for one-year subject to review, market analysis and bid. Board member Olivares seconded. Discussion followed. Board member Lyons feIt that rather than approve the one year leases, it would be better to approve a five year lease and after two years, increase it to $53; then $56 in year 3; $59 in year 4; and $60-$65 in year 5. Board member Susser questioned whether this would be a valid item to include into the leases if staff has already negotiated the leases on a fixed five-year lease amount. Mr. Tapia responded that staff has negotiated with the farmers on a fixed five-year lease. Vice-chair Montesano questioned whether staff gave the impression the negotiations were concluded on a fixed five- year lease. Board member Olivares felt that since the leases are not yet finalized, a provision should be included that would have incremental increases toward fair-market value. Director Segundo felt the farmers were given the impression the leases were finalized after their recent meeting. Board member Susser Questioned if the bids of$50 could be renegotiated as directed by the Board and go out for bid. Board member Lyons felt that Board member Susser's suggestion was better. Mr. Tapia stated that based upon the outcome of the recent meeting with the farmers, the fanners have moved forward with planting the land. With this stated, Board member Susser withdrew his motion to renew the lease with Mr. Bernsen for five years and the additional leases extended for one-year subject to review,market analysis and bid. Board member Susser moved to approve the leases as negotiated. Board member Olivares seconded and discussion followed. Board member Lyons felt that the lease negotiations should include escalation clauses as directed by the Board. Vice-chair Montesano disagreed because the farmers have an understanding based upon their recent meeting with staff. Board member Olivares questioned whether the leases have been finalized Director Segundo confirmed that the agreements have not been signed. He also added that discussion at the meeting with the farmers included the possible inclusion of language that would allow for the wildlife assessment which could take up to a year. He felt the farmers were not opposed to the inclusion of language regarding wildlife management; but added there had been no discussion on price escalations with the exception of Mr. Bernsen's request to change his bid. Vice-chair called for the question. The motion passed. Vl. Director's Report a. General Updates Director Segundo, in responding to requests for information at the last meeting, stated that Scmtech's financial reports were included in their meeting packets. Mr. Tapia added he checked right before the meeting on the status of Semtech's wire transfer and it has been received by the City. Director Segundo also added that a meeting will be held with Semtech as stated in their agreement to discuss the demolition. He added that the agreement stipulates that the demolition 1 r Carpus Lr,rtsti International Airport Board Agenda December 12,2007 Page 4 of 6 should be completed within 30 days. He also added that discussion would be held at the Semtech meeting regarding the ramifications of not meeting the demolition deadline. Director Segundo also addressed questions regarding the FBO rental rate increases. Board member Susser questioned whether this was the maximum amount of rent entitled under their lease agreements. He added that many years of entitled rent increases had not been captured and he was interested in knowing if a calculation had been done to capture the lost revenue. h4r. Tapia responded that the rate adjustments did include a CPI adjustment and had been applied to the lease. Director Segundo stated that a memo in resp6nse to the question regarding the amortization of additional covered parking was also included in their packets. Director Segundo responded to a question regarding the cost associated between a 9,000 ft. runway and 10,000 ft. runway. He explained that he used figures from the Olympus Project which was conducted in 2003 and estimated that the present day cost would be$14 million not including land acquisition. He felt that the 9,000 ft. extension was possible on the current property, but land would have to be acquired to do the 10,000 ft. extension. The additional land acquisition could possibly cost$20 million. Board member Susser questioned what type of aircraft could land on a 10,000 ft runway that could not land on a 9,000 ft. runway. Director Segundo responded that it was not whcther an aircraft could land on either runway; but more the length of the runway crucial to take off especially during the hot summer months. Board member Lyons commented that the problem of going from 9,000 ft. runway to 10,000 ft. runway would be that at some point in the future, the 10,000 ft runway may be necessary and waiting may not be cost effective. Director Segundo reported that one of the drawbacks of getting a 10,000 ft. runway is that the BCA (Benefit Cost Analysis) does not support a 10,000 ft. runway at this point in time. The BCA will support a 9,000 ft. runway and federal funding will be provided for this length of runway. Board member Susser questioned Director Segundo on the General Activity Report (GAR). Director Segundo clarified the GAR for the Board. Director Segundo began discussion on the withdrawal of Delta Airlines from the Airport. He reported to the Board that the GAR reported Delta's Ioad factors at 63% and Delta's corporate rep, Amy Martin,reported their figures were at 65%which is a 2%discrepancy. He also reported that he had a lengthy discussion with Amy Martin with Delta corporate. He added that the initial report from Delta was that they were suspending the service. He advised the Board that when he was still at the McAllen Airport, Delta had given a 10-month advance notice of the service suspension. At that time, a team was put together to meet with Delta but what he encountered was that they were not going to put any money into the market. He added that his team had proposed different joint ventures for advertising and incentives, but Delta was not interested in any of their proposed ideas. Since Delta was not interested, the McAllen Airport chose not to continue their attempt in keeping the service. He also stated that he spoke with Ms. Martin regarding different routes and her response was that if the service could not make it going to Corpus Cnrisd International AirportBoard Agenda December 12, 2007 Page S of 6 Atlanta, it would not work in any other market. She also added that Delta's corporate offices had already decided to pull the service. On a positive note, he felt that Continental at CCIA was attempting to fill flights left by Delta. Director Segundo advised the Board that his priority is to concentrate in keeping the airlines that are already at the Airport and then move to develop a plan to get more flights with Continental or American. He will be setting up monthly meetings with the Airline station managers as they are the first to know if there is a problem. He felt this would give staff time to foresee and prevent any potential problems. He reported that in the Southwest Region Passenger Report, CC1A's yields are relatively good with an average increase of 1.9 over the same period from last period. This indicates that Delta's revenues were increasing, but the cost of fuel and the cost of maintenance on the older RJ's impacted their decision to pull service. He stated that Delta had too much overhead and exclusive use space for two flights a day. He also added that an O&D study needed to be conducted in order to see where people are going before additional air service could be solicited. Board member Susser questioned how this O&D study would be done. Director Segundo responded that usually a consultant is hired that has access to all the travel databases for this study. He added that this type of study can include information regarding how many people from Corpus Christi are traveling, which locations they are traveling to and, in some cases even capture the demographics for those traveling. Board member Susser questioned the cost of this type of study. Director Segundo responded that this study could possibly cost $12,000. Board member Susser questioned the reliability of this type of study. Director Segundo responded that these studies are very reliable and extensive. The study he referenced is a sample solicitation from a company that provides this type of service and is limited in value. Board member Ayala questioned whether this would provide information on getting west coast service. Director Segundo responded an 0&D study will provide information to determine whether it would be cost effective to have flight service to any specific location. Board member Ayala questioned whether CCIA has ever had an O&D study done. Mr. Tapia responded that an abbreviated study was done when the Monterey service was being researched. Director Segundo stated that this study could give insight to the high-market destinations and added that these studies are very helpful, but if the numbers are not there, it is better to concentrate on keeping current service rather than trying to develop additional service. Board member Susser questioned whether, instead of a full blown study, it would be possible to have a study done on specific destinations. Director Segundo responded that this would have to be negotiated with the consultant; and, he added, he did not think that this study was budgeted. He stated that in this coming budget process, he would be look into obtaining a study along with other sources of revenue such as the Adapt-a-Watt program. He added that staff is still assessing the impact of Delta's departure. He continued by stating that at this point, the loss in revenue of the two Delta flights is minimal at $3,000, but the perception by the community could make it difficult to get additional air service. Board member Olivares commented that past information reflected a large number of Corpus Christi residents flying through San Antonio. He questioned why this happens and how to capture this business and would the airlines reconsider cutting service if this could be remedied. Director Segundo asked the Board to also consider that the airlines need to look at the cost of doing business at the Airport. He felt that lowering PFCs, which at CCIA are average, could lower the cost of doing business for the airlines, but then alternative revenue sources would be needed. Vice-chair Montesano commented that at this point . r � Corpus[,nristi International Airport Board Agenda December 12,2007 Page 6 of 6 in time, if load factors are below 70%, like Southwest Airlines, the airline is operating in "the danger zone". He added that if gas prices continue to rise,they will begin to cut where they can. Vice-chair Montesano requested the Board for any additional updates. Board member Lyons questioned whether an access code could be provided to pilots flying in late at night to get through the gate instead of calling security to be let out. Chief Hyland responded that since the FBO's lease the property, including the gate,pilots would need to negotiate this with the FBO staff. VII. Adjournment As there was no further business to discuss, Vice-chair Montesano called for a motion to adjourn. Board member Susser moved and Board member Lyons seconded. The meeting was adjourned at 4.30 p.m.