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Home My WebLink AboutOrdinance No. 2198-2006Suggested by: Administration CITY OF KENAI ORDINANCE NO. 219~-2006 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA INCREASING ESTIMATED REVENUES AND APPROPRIATIONS BY $15,000 IN THE AIRPORT FUND FOR PROI'ESSIONAL SERVICES. WHEREAS, it is in the best interest of the City of Kenai to obtain consulting services to develop on airline operating agreement; and, WHEREAS, these professional services are estimated to cost $15,000; and, WHEREAS, funds are available in the fund balance of the Airport Fund. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF TH~ CITY OF K~NAI, ALASKA that estimated revenues and appropriations be increased as follows: Airport Fund Increase Estimated Revenues: Appropriation of Fund Balance 15 000 Increase Appropriations: Terminal - Professional Services $7,500 Airfield - ProPessional Services 7,500 15 000 PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this sixth day of December, 2006. ~ ~ ~~~~ PAT PORTER, MAYOR ATT~ST: ~ ~~~ Carol L. Freas, City Clerk Approved by Finance:-1~~~ (10/25/2006) hl Introduced: November O1, 2006 Adopted: November 21, 2006 Postponed to: December 6, 2006 Effective: November 2L 2006 ~ erSPXVa.NU~~1.P~~ ~ ~P.VI~,f~l~Y~t~/' 305 N. WIIJ.OW ST. SUITE 260 i~NAI, ALASKA 39Ci11 TELEPHONE ~9-283-7959 FAX 9072833737 C • ~ J To: Rick R. Koch, City Manager From: Rebecca Cronkhite - Airport Manager~~, Date: October 25, 2006 Subject: Airline Operating Agreement HISTORY: The Supplemental Planning Assessment recommended the City negotiate an Airiine Operating Agreement and Terminal Building Lease with the Airlines. During work sessions, it was pointed out that the first operating agreement negotiation is crucial and requires expertise in the field. There seemed to be a concurrence on this point from Council, Administration and Commission. We have been able to use the FAA funded Supplemental Planning Assessment to conduct most of the background work for this negotiation, however the actual negotiation is not grant fundable. RECOMMENDATION: i have requested a proposai from Steve Horton to lead the negotiation team. City administrative staff would participate in the negotiations with the intent that the City might then choose to conduct future negotiations independent of a consuitant. Mr. Horton's proposal is attached. It is my recommendation that the City approve funds in the amount of $15,000 for this project and proceed with negotiations. Leases with both carriers operating at Kenai have expired and are currently on a month to month basis. The airlines have agreed to extend on a month to month basis pending compietion of an airline operating agreement. www.ci.kenai.ak.us. Municipai Airgxor! October 26, 2006 Ms. Rebecca Cronkhite Airport Manager Kenai Municipal Airpart 305 N. Willow, suite 200 Kenai, Alaska 99611 Dear Ms. Cronkhite: Thank you for the opportunity to propose our services to Che Kenai Municipal Airport to assist in negotiating an Airline OperaCing Agreement and Terminal Building L.ease with airlines that currently provide commercial passenger servic;e to Kenai. This letter presents the objectives, approach, tiine frame aud fee basis that we propose for conducYing this projecT. ~Z3,)BCiiVes The objeetive of this project is to negotiate a new airiine agreement to be drafted as part of flie project we have proposed to implement recoimnendations oP the Supplemeneal Planning Assessment Terminal Lease Analysis. Our generat philosophy for assisting in fhe negotiation of airline agreements is to focus on achieving an agreement that reflects current industry pracYices while sCrengthening the Airport's capability to recover its costs of operations and capital in the future. This philosophy includes ensuring that City ordinances, federal regulations and other legal requirements are met. It also includes an objective of establishing reasonable rates and charges that result n1 Airport fmances that are as self-sufP'icient as possible while recognizing the economic t3ifficulties that the airline industiy currently faces. Approach Our approach for conducting this project iucludes the following steps: •• Meee with Airport/City mana~ement Yo discuss the City's objectives for negotiating new airline agreements and to identify key agreF:ment issues and concerns. •• Establish and define participanY roles for an airline negotiations corrunittee includin~ management, financial and iegal representation. •• Review and discuss key background issues with the airline negotiations committee that include: •••• Updated airline rate ealculations based on the structure developed in the SupplemenCal Planning Assessment Rates and Charges Study o•°• Regulatory requiremenYS and constraines for airiine rates and charges •••• Key provisions of the draft airline agreement •°•~ Recent airline market conditions in Kenai •••• Local political, media and community support environment •••° Aitport's past and present relationship with the airlines, their presumed atYitude abouC rate adjustments and their probable negotiating posture based on previous eeperience with airline representatives. •• Develop negotiation sCrategy •••• Goals - short and long terin • • • • Term of the lease • • • • Operational issues ••^ Minimum acceptable outcomes and potential conCract concessions •••• PotenCial opposing issues and concerns of the airlines and the AirporC's response Yo these concerns •••• Communicarions with the local media • • • • Agreement versus ordinance/resolution. •• DisYxibute the proposed agreement draft with rate calculation schedules to the airlines and conPirsn the fireY negotiation meeting date in Kenai. •• ConducY the inirial negotiaCion meeting: •••• Review and discuss the proposed rate structure •••• Review and discuss provisions of ffie proposed agreeinent draft •••• Address airline comments and concerns. •• Prepare analyses in response Yo airline concerns, alternaYive raYe structure proposals and alternate eontract terms proposa]s. •• Conduct additional negotiation meetings as required. •• Finatize and issue the contract document and rate calculations. Time Frame The time frame for conducling the negotiation process is difPicult Yo estimaCe because of the airlines' availabiliYy and their own agenda for completing the negotiation. The negotiation meeti~igs could take several months to conclude. Inirially, we anticipate two to three trips to Kenai to review the draft agreemenC and preliminary rate calculations and discuse any concerns the airlines may raise. The actual time span and number of trips required will depend on any difficulties encountered and on the maimer in which the airlines conduct the negotiation. -2- Fee Basis ~ We cumot provide a fee quoYe for this project because of the uncertain time frazne required for conducting the negotiation process, considering alternaYive contract provisions and revising the agreement. Consequently, our fees for these services will be on a firne-and-materials basis charged at our standard hourly rate of $213/hour for principals on our staff. We have completed ofller airline negotiations in as little as 40 hours while others have taken much longer. Any out-of-pocket expenses far the negotiation project wil1 be charged as actually incurred. We appreciate Che opportunity to assist the you with this project. Should you have any questions or need additional clarification of any element of our approach, please contacC us to discuss them further. Very Cruly, Stephen B. Hortoil -3-