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HomeMy WebLinkAboutResolution No. 2020-35JC? Sponsored by : Administ ration Kl;NAI CITY OF KEN AI RESOLUTION NO . 2020 • 35 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, APPROVING THE FOURTH AMENDMENT TO THE AIRLINE OPERATING AGREEMENT AND TERMINAL AREA LEASE AND AUTHORIZING THE CITY TO ENTER INTO SUCH AGREEMENT WITH GRANT AVIATION, INC . WHEREAS, t he City of Kenai is the owner and operator of the Kenai Municipal Airport; and, WHEREAS, a recommendation of the 2007 Supplemental Plann ing Assessment was to update the City's airline operating agreement and terminal lease ; and, WHEREAS , Council approved Resolution No . 2008-27 establishing a new airline operating agreement and terminal lease to modernize the airport airline terminal leasing procedures and policies and increase airport operating revenue effective June 1, 2008 for a s ixty-month period ; and , WHEREAS, Council approved Resolution No . 2013-31 approving the First Amendment to the airline operating agreement and terminal area lease effective July 1, 2013 for a sixty-month period ; and, WHEREAS , Council approved Resolution No. 2018-43 approving the Second Amendment to the airline operating agreement and term inal area lease effective July 1 , 2018 for a pe riod of twelve months in consideration of the term inal rehabilitation project ; and , WHEREAS , Council approved Resolution No. 2019-24 approving the Third Amendment to the airline operating agreement and terminal area lease effective July 1, 2019 fo r an additional twelve months due to delays in the terminal rehabi litation project; and , WHEREAS, City administration, work ing with an airport consultant, developed the Fourth Amendment to the airline operating agreement and terminal area lease wh ich extends the agreement for five years beginning July 1, 2020 through June 30 , 2025; and , WHEREAS , City administration consulted with Grant Avi ation , In c., a scheduled passenger airline currently operating at the Kenai Mun icipal Airport regarding the agreement; and , WHEREAS , it is in the best interest of the City of Kenai t o authorize the City Manager to enter into such ag reement with Grant Aviation , In c., on beh alf of the C it y. NOW , THEREFORE , BE IT RESOL VED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA: Section 1. That the Kenai City Council approves the Fourth Amendme nt to the Airline Operating Agreement and Terminal Area Lease form as shown in Ex hibit 1; and , Resolution No. 2020-35 Page 2 of 2 Section 2. That the Kenai City Manager is authorized to enter into such an agreement with Grant Aviation , Inc. Section 3. That this resolution takes effect immed iately upon adoption. ADOPTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 3rc1 day of June, 2020 . BRIAN GABRIEL SR., MAYOR ATTEST: FOUR.TI! AMENDMENT TO THE KENAI MUNICIPAL AIRPORT AIRLINE OPERATING AGREEMENT AND TERMINAL AREA LEASE TIIlS FOURTH AMENDMENT to the Kenai Municipal Airport Airline Operating Agreement and Tenninal Area Lease (the "Fourth Amendment'') is made and entered into this 1st day of July, 2020, by and between the City of Kenai, Alaska (the "City"), a political subdivision of the State of Alaska, and Grant Aviation, Inc . ("Airline"), a corporation organized and existing under the laws of the State of Alaska and authorized to do business in the State of Alaska. RECITALS The circumstances surrounding the making of this Fourth Amendment are as follows: A. City and Airline are parties to the Airline Operating Agreement and Terminal Area Lease (the "Agreement") dated J\Ule 1, 2008 as amended by the First Amendment dated June 1, 2013, Second Amendment dated July 1, 2016, and Third Amendment dated July 1, 2019 (herein referred to as the "Agreement"), under which Airline operates an Air Transportation business and leases property at the Kenai Municipal Airport. B. Pursuant to Section 12.20 of the Agreement, the Agreement may be amended in whole or in part without further consideration upon mutual written c.onsent of City and Airline who both herein wish to amend the Agreement. C . Pursuant to Section 2.1 of the Agreement, the term originally began on June I, 2008 and pursuant to Amendments is set to expire to J1llle 30, 2020 unless further amended. D. Pursuant to Section 5.2 of the Agreement, the Landing Fee charges shall be based on the rate and amollllt then currently approved by the City as provided in Exhibit C. E . Pursuant to Section 5.3 of the Agreement, rentals for the Airline's Exclusive Use Space and Joint Use Space shall be based on the rate and amount then currently approved by the City as provided in Exhibit C. F. Pursuant to Section 5.4 of the Agreement, the Terminal Apron Aircraft Parking and GSE Space rentals shall be based on the rate and amount then currently approved by the City as provided in Exhibit C. Fourth Amendment· Airline Operating Agreement and Tenninal Area Lease Page I of4 LESSOR LESS~ AMENDMENTS 1. Section 2.1 of the Agreement is amended to read in its entirety as follows : The term of this Agreement (the "Tenn") shall begin on July 1, 2020 ("Commencement Date,,) and shall terminate on June 30, 2025 (except as it may be terminated or extended in accordance with this Agreement), and the rentals, fees, and charges shall be effective on the Commencement Date, but only in the event that the Premises are then tendered to Airline ready for use and occupancy in accordance with the terms and provisions of this Agreement. 2. Section 5.3 of the Agreement is a.mended to include two new subsections 5.3.3 and 5.3.4 as follow: 5.3.3 If at any time during the current Fiscal Year, the Airline's total passenger enplanements for the current calendar year are reasonably projected by the City to vary by twenty percent (20%) or more than the Airline's total passenger e:nplanements for the prior calendar year as provided in Exhibit C, then the Airline's allocated joint rental amount may be adjusted, at the City's optic~ for the remainder of the current Fiscal Year to reflect the Airline's percent of total enplanements which results from the City's revised enplancment projection. . However, if only one commercial passenger airline provides service to the Airport for the remainder of the current Fiscal Year, such adjusted percentage shall not exceed 50% of total projected enplanements for the current calendar year. 5.3.4 City sh.all notify the Signatory Airlines ofits intent to make such revision and adjustments and the effective date thereof which shall be no earlier than fifteen ( 1 S) days from the date of notice. Such notice shall provide a revised projection of the joint rent aJiocati.on for the remainder of such Fiscal Year in sufficient detail to allow the Signatory Airlines to make informed comments thereon. The Signatory Airlines may submit 'Mitten comments on such notice to the City within ten (10) days of the notice date. City shall give due consideration to all comments submitted in a timely manner by the Signatory Airlines. If requested, the City shall convene a meeting with the Signatory Airlines to discuss such revisions and adjustments. 3. Exhibit C. From July 1, 2020 through June 30, 2021 Exhibit C will reflect no rate increase. For subsequent years of the Agreement (July 1 through June 30) the Exclusive Space Annual Rental Rate, the Joint Use Space Annual Rental Rate, the Apron/OSE Annual Rental RBte, and Signatory Landing Fee in Exhibit C wi1l reflect a 5% annual rate increase and the Joint Rent Subsidy will be reduced by 2 percentage points each year. 4. All other terms and conditions of the Agreement shall continue in full force and effect Fourth Amendment • Airline Operating LESSOR Agreement and Terminal Area Lease LESSEir.-.>., Page2 of4 except as modified by this Fourth Amendment. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, the day and year stated in the individual acknowledgments below. CITY OF KENAI Paul Ostrander Its: City Manager (If Lessee is a Corporation) 2 LA'L Name Title Fourth Amendment ·Airli ne Operating Agreement and Terminal Area Lease By : Page3 of4 Grant AVIATION, INC. 1 F~e ~~be~~~1i~ Its: President LESSOR LESS~ _ _;,.,, STATE OF ALASKA ) ) SS THIRD JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before me this _ day of ______ , 2020, by Paul Ostrander, City Manager of the City of Kenai, an Alaska municipal corporation, on behalf of the City. Notary Public in and for Alaska My Commission expires: __ _ STATE OF ALASKA ) ) SS THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY the foregoing instrument was acknowledged before me this ~-.,,_ day of (Y1 A y , 2020, by Robert M Kelley, President of Grant Aviation, Inc., an Alaska corporation, on behalf of the corporation. _. .. _...,._. ....... aal&l!J~'\ f) ·oFFICIAL SEAL~ ·~ JOYCE ANDREWS ~ ~a An.du1US-- N ~blic in and for Al~ l HOTARYl'll8UC,STAfEOfAL4bK,i ~ MYCOMlllSSIONEJ(PIAESMAY !T,. ;:., .. ,; : My Commission expires : S": ~ '4 ~raea.&2'!r.es!ll22eMe.i?:ea~~~ Approved by Kenai City Council ---------------- Approved as to lease form by City Attorney ------------ Approved by Finance Director ________________ _ Approved by City Manager _________________ _ Return to: City Clerk 210 Fidalgo Ave. Kenai, AK 99611 Fourth Amendment~ Airline Operating Agreement and Terminal Area Lease Page 4 of4 LESSOR LESSEE I • .>..., t I t 1 ' 4 ' I I i . \ § i AREA @ 1.452 S .F. @ 1,1555.F. © 6705.F. r ""' VlllNCE-CORTHELL-BRYSON -"° 1--·--" ~ THIS DRAVlllNG JS NOT TO SCALE LESSOR~~~~~~~~~~~~~ LESSEE~~~~~~~~~~~~~ KENAI MUNICIPAL AIRPORT EXHIBIT A EXCLUSIVE SPACE KENAI, ALASKA f ':i :a ~ i ·1 l i:; ~ I ~ ! e ~ I .. .. ~ i §j u ~ ~ ~~ ~~ ~~ ~~ ~-• 1.ms., 2.7IOS.F \,Ol6S.f . BAGGAGE MAKE-UP AREA = BAGGAGE BREAKD O'M'I AREA :: BAGGAG E CLAIM AREA = ARRIVAUDEPARTURENVAITING AREA :: TO TAL JOINT USE SPACE = , WINCE-CORT HELL-BRYSON ""'""· I AIMWI: --"- ""' "'~ 2 ,856 S.F 1.333 S .F 1,095 S .F . 2 .73 0 S .F. 8.014 S.F. 2 .MIS.F THIS DRAWING IS NOT TO SCALE LESSOR----------~ LESSEE ------------ KENAI M UNICIPAL AIRPORT EXHIBIT B JOINT USE SPACE KENAI, .ALASKA Kenai Munlclp11I AJrport Excl115ive Since Ann~I ~te/Sq Ft. Joint Use Space lt2 Annual Rate/Sq Ft Joint UH! Space 111 Annutl Rate/Sq Ft. Apron/GSE Space Rent Signatory Landing Fee/(1,000#5) Joint Rent subsidy K Atta DffCl'lptlon Tennlnal Rent ExclllSlve use space: Room A Joint use splice: Arr.a #1 Bagg;ge dalm area Passenger hold room, arrival & de~nure area Total Joint Use 5~ce Area #1 Arull2 Bagage malclHlp an:a B1gpge breakdown area Total Joint Use Space Area 12 Total Tennlnal Rent Terminal Apron/GSE Space Rent Total Terminal & Apron GSE Spece Rent landll'll Fees RAVH Maski -Tobi Rents ind Fees RAVN Y111rl $ 33 .BS s 20 .51 s l3.8S $ 0.52 $ 1.70 20" teased I Used Space (sqft) 1,452 1,09S 2,730 2,856 1,333 31,75S Prr>jeet2d unded $ $ $ $ $ $ Base llental Rate (plfpy) 33.85 33.85 33.85 20.51 20 .51 0.52 Wit Unclln& (1,00<Ws) Fee Rm 115,624 $ 1.70 £npl1nements: 2019 calendar Vear Tenant 1 7 2,575 Ten11nt 2 22,429 Tenant3 Tl!nant 4 95,004 Allocated Prior Vear JGlnt Enpbnement Rental " Amount N/A N/A 76.39" s 28,315 $ 76.39" $ 70,592 $ 76.39" s 44,747 s 76.39" $ 20,885 $ N/A N/A 76.39" 23.61% D.OOK ~ 100.00" Joint Rtnt Substdy Reduc:tf on N/A $ (S,663) $ {14,118) s $ (8,949) s (4,177} $ $ $ N/A $ $ Rent.I Amount 49,150 22,652 56,474 79,126 35,798 16,708 SJ,506 180,782 16,513 197,295 uncUn&Fee.1 $ 196,561 $ 393,!56 Exhibit C • RAVN Year 1 Kena i Munlclpal Airport fxcluslve Space Annual Rate/Sq Ft Joint Use Space #2 Ann11al Rate/Sq Ft, Joint Use Spacl! i'1 Annual Rate/Sq Ft. Apron/GSl Space Rent Signatory landing Fee/{1,000#s) Joint Rent Subsidy" Grant AViatlon Are. Desutptlon Terminal Rent Exclusive use space: Room B Joint use space: Arls#l Baagage dalm area Passenger hold room, arrival & departure area Totcil Joint Use Space Area #1 Area 112 Bauase malcHIP area Bagpge bre1lcdown area Toto! Joint U$e Space Area #2 Total Termlna( Rent Terminal A.pron/GSE' Space Rent Total Termlrnil & Apron GSE Sl)llce Rent Landing Fees Grant Aviation ·Total ltents and Fees $ 33.BS s 20.51 s ~3.85 $ 0.52 s 1.70 20% leaffd/ UHd$pllU (sqft) 1,155 1,095 2,730 2,1156 1,333 10,730 Pro]ected Landed s $ $ s $ s Ban Rumr Rate (psfpy) 33.85 33.85 ~3.85 20.51 20.51 0.52 Wst lllnding (1,00CJjfs) Fee Rate 26,525 $ l .70 fnpl1nements: 2019 Cllendar YPr Ten.nt 1 72,575 76.39% Tenant 2 22 142 9 23.61% Tenant 3 0.00% Ten1nt4 OJX1!i 95,004 100.007' Alloc.tted Prior Year Joint Joint Rent Enplanement Rent.I Subsidy Rental " Amount Reduction Amount N/A N/A N/A $ 39,097 23.61" s B,751 $ (1,750) $ 7,001 23.61" s 21,817 $ (4,3631 $ 17,4S4 s 24,455 2.9.61" $ 13,829 $ (2,766) $ U.,063 23.61% s 6,455 $ (1,291) s 5,164 $ 16i227 $ 79,779 N/A N/A N/A s S,580 s 85,359 1.Jndlni fftJ $ 45,093 $ 130,452 Exhibit C -Grant Year 1 City of Kena i I 210 ~idalgo Ave, Kenai, AK 99611-7794 I 907.283.753 5 I www.kenai.ci!y MEMORANDUM TO: THROUGH: FROM: DATE: SUBJECT: Mayor Brian Gabriel and Council Members Paul Ostrander, City Manager Mary Bondurant, Airport Manager May 22, 2020 Resolution 2020-35 Fourth Amendment to Airline Operating Agreement and Terminal Area Lease for Grant Aviation, Inc. Attached to this memo is the Fourth Amendment to the Kenai Municipal Airport Airline Operating Agreement and Terminal Area Lease executed by Grant Aviation for Council approval. With the completion of the Terminal Rehabilitation Project and the City having final airline allocations for exclusive and joint use space and operation costs, City Administration worked with an airline consultant to negotiate a five-year agreement that begins July 1, 2020 through June 30, 2025. The first year of the agreement has no rate increase . The increase in airline rates and charges is based on increased square footage in areas of offices, ticket counters, baggage claim/makeup areas, and holding areas requested by the Lessee during the term inal rehabilitation project. Exclusive and joint use space areas reflect small increases in square footage , again related to facility expansion during the terminal rehabilitation project. There is no square footage change to the terminal apron/GSE space area. The terminal joint use space area calculations are based on the 2019 enplanement numbers. RAVN 's market share of 76.39% and Grant's market share of 23.61 %, and no reduction in the 20% Joint Use Space Subsidy. Each of the subsequent four years starting July 1, 2021 include a 5% increase to the Exclusive Use Space Annual Rental Rate, the Joint Use Space Annual Rental Rate, the Apron/GSE Space Rent, and the Signatory Landing Fee coupled with a 2% reduction to the Joint Use Space Subsidy from 20% to 18% effective July 1, 2021 , from 18% to 16% July 1, 2022, and so on . Amendment Exhibit's A and B provide the delineation of exclusive and joint use space c urrently leased by airlines. Amendme nt Exhibit C provides the updated calculation rates effective July 1, 2020. The agreement was also emailed to RA VN at their request but has not been returned. I recommend approval of the Fourth Amendment to the Airline Operating Agreement with a term of five-yea rs from July 1. 2020 through June 30 , 2025. Tha nk you for your consideration .