NOTICE OF PUBLIC MEETING PHOENIX AVIATION ADVISORY ...

NOTICE OF PUBLIC MEETINGPHOENIX AVIATION ADVISORY BOARDBUSINESS AND DEVELOPMENT SUBCOMMITTEEPursuant to A.R.S. Section 38-431.02, notice is hereby given to the members of thePHOENIX AVIATION ADVISORY BOARD, BUSINESS AND DEVELOPMENTSUBCOMMITTEE and to the general public, that the BUSINESS AND DEVELOPMENTSUBCOMMITTEE will hold a meeting open to the public on November 4, 2010, at 2:30PM located in the Aviation Conference Room, Terminal 3, Level 3, EastMezzanine, 3400 E. Sky Harbor Boulevard, Suite 3300, Phoenix, Arizona 85034.One or more board members may participate via teleconference. Agenda items may betaken out of order.The agenda for the meeting is as follows:1. Call to Order Chairman Almanza2. Approval of the October 7, 2010 Meeting Minutes Chairman Almanza3. Facility Lease at Phoenix Sky Harbor International Airport Ms. Tamie FisherThis item is for discussion and action.4. Request to Issue Terminal Advertising ConcessionRequest For ProposalsMs. Tamie FisherThis item is for discussion and action.5. Subcommittee Information and Follow-Up Requests (not Chairman Almanzafor discussion or recommendation6. Call to the Public: This is the time for the public to Chairman Almanzacomment. Members of the Board may not discuss itemsthat are not specifically identified on the agenda.Therefore, pursuant to A.R.S. Section 38-431.01(G), actiontaken as a result of public comment will be limited todirecting staff to study the matter, responding to anycriticism, or scheduling the matter for further considerationand decision at a later time.7. Adjournment Chairman AlmanzaFor further information or reasonable accommodations, please call Kate O’Malley,Management Assistant, Aviation Department at 602-273-2075 or TTY relay 1-800-781-1010 as early as possible to coordinate needed arrangements.The next Business and Development Subcommittee meeting is scheduled to take placeThursday, December 2, 2010.Page 1

• Subcommittee Members PresentBenito Almanza, ChairPete GorraizPatty JohnsonPHOENIX AVIATION ADVISORY BOARDBUSINESS & DEVELOPMENT SUBCOMMITTEEMEETING MINUTESOctober 7, 2010• Staff PresentDanny W. Murphy, Aviation DirectorCarl Newman, Assistant Aviation DirectorPaul Blue, Assistant Aviation DirectorCarolina Potts, Assistant City AttorneyBrent CagleChad MakovskyCindy LizarragaCynthia SegoviaKate O’MalleyLaVonne MorrisMara KellyPaula KucharzRandy PayneRobyn SullivanRoxann FavorsTamie FisherPage 2

• Item 1 - Call to OrderMeeting called to order at 2:40 PM by Chairman Almanza• Item 2 - Approval of the September 2, 2010 Meeting MinutesMr. Gorraiz motioned for approval of the minutes. Ms. Johnson seconded themotion.The motion was approved 3:0.• Item 3 – New US Airways Cargo Transfer Point Land Lease at Phoenix SkyHarbor International AirportMs. Tamie Fisher and Ms. Roxann Favors presented a request for recommendationto enter into a new land lease agreement with US Airways for use of approximately85,233 square feet of airport land as a cargo transfer point and express packagedelivery facility at Phoenix Sky Harbor International Airport.Ms. Johnson asked what the current lease rate is. Ms. Favors responded that thecurrent lease rate is $0.88 per square foot.Ms. Johnson asked how much cargo goes through this area. Ms. Favors respondedthat all transfer cargo between airlines is processed through this area, as well assome pet and package pick up, and almost all of the mail from the US PostalService.Chairman Almanza asked what the process is for extending this lease. Mr. Blueresponded that an extension would be at the discretion of the Aviation Director.Mr. Gorraiz motioned for approval of this item. Ms. Johnson seconded the motion.The motion was approved 3:0.• Item 4 – Corporate Hangar Lease at Phoenix Sky Harbor International AirportMs. Tamie Fisher and Ms. Roxann Favors presented a request for recommendationto lease approximately 12,000 square feet of hangar and office space located at2531 East Air Lane at Phoenix Sky Harbor International Airport (PHX) to PacificConnection, Inc. for aircraft storage.Ms. Johnson asked how staff compares lease rates. Ms. Fisher responded that staffcompares lease rates by conducting rental studies, comparing rates at otherairports, and utilizing Consumer Price Index adjustments on older leases.Page 3

Ms. Johnson asked how frequently a rental study is completed and noted that thenew rate for this facility is lower than the old rate. Ms. Fisher responded that studiesare usually conducted no more than five years apart. Ms. Favors added that it isimportant to maintain equity amongst tenants.Chairman Almanza asked how leases are tracked and managed. Ms. Fisherresponded that staff utilizes a property management system that shows contractterms, important dates, compliance lists, fees, etc. Mr. Almanza noted that theBoard would probably find this information useful. Mr. Blue offered to bring some ofthis information to the Board as information only presentations. Ms. Johnson addedthat she would like to see a chart of leases that will be coming to the Board over thenext year.Mr. Gorraiz motioned for approval of this item. Ms. Johnson seconded the motion.Motion approved 3:0.• Item 5 – Phoenix Sky Harbor International Airport Business UpdateMs. Fisher presented an update on business activity and associated revenues atPhoenix Sky Harbor International Airport.Ms. Johnson asked what kind of feedback was being received from retailers. Ms.Fisher responded that retail numbers seem to be improving, and while they don’ttrack exactly with airline activity, expressed that retailers seem positive.Chairman Almanza asked how passenger activity compares to peak airport trafficand asked what an average flight out of Phoenix Sky Harbor costs. Mr. Blueresponded that the airport is seeing activity that is about 10-15% lower than peaktraffic. Mr. Blue added that while he would follow up with exact statistics, he notedthat Phoenix Sky Harbor had fairly low prices when compared to the nation’s top 10busiest airports.This item was for information only. No action was required.• Item 6 – Subcommittee Information and Follow-up RequestsNone• Item 7 – Call for Public CommentNone.• Item 8 – AdjournmentMs. Johnson motioned for adjournment. Mr. Gorraiz seconded the motion. Themeeting was adjourned at 3:15 PM.Page 4

BUSINESS AND DEVELOPMENT SUBCOMMITTEE REPORTTo: Business and Development SubcommitteeFrom: Danny W. MurphyAviation DirectorSubject: Facility Lease at Phoenix Sky Harbor International Airport (PHX)This report requests the Business and Development Subcommittee’s recommendationto lease approximately 4,100 square feet of office space located at 2625 East Air Laneat Phoenix Sky Harbor International Airport (PHX) to Embry Riddle AeronauticalUniversity.BACKGROUNDEmbry Riddle Aeronautical University has occupied the facility located at 2625 East AirLane since 1992. The current lease agreement expires January 31, 2011. EmbryRiddle Aeronautical University desires to enter into a new facility lease agreement foroffice and classroom space.DISCUSSIONEmbry Riddle Aeronautical University and the Aviation Department have agreed to thefollowing business terms and conditions subject to City Council approval:• The lease term is five (5) years with 2 one-year renewal options, exercised at thesole discretion of the Aviation Director.• Lessee will pay a base annual rental rate of $9.27 per square foot.• The security deposit will be maintained at $1,271.59. The City reserves the right toincrease the amount of the security deposit to three (3) months rent in the event ofan account delinquency of four (4) months within a twelve (12) month period.• Rent will be adjusted annually in accordance with Consumer Price Index (CPI).• Lessee will be responsible for the costs of utilities, any tenant improvement,maintenance of its improvements, normal wear and tear of the interior of thebuilding, and custodial and janitorial services.• The City will be responsible to maintain the roof, exterior walls, exterior doors,foundation and all mechanical, plumbing and electrical systems including firesuppression system and heating, ventilation and air conditioning (HVAC) unitsassociated with the facility.• The lease will contain other terms and conditions deemed necessary by the City.RECOMMENDATIONThe Aviation Department requests the Business and Development Subcommittee’srecommendation to lease approximately 4,100 square feet of office space located at2625 East Air Lane at Phoenix Sky Harbor International Airport (PHX) to Embry RiddleAeronautical University.Page 5

BUSINESS AND DEVELOPMENT SUBCOMMITTEE REPORTTo: Business and Development SubcommitteeFrom: Danny Murphy,Aviation DirectorSubject: Request to Issue Terminal Advertising Concession Request For ProposalsThis report requests the Business and Development Subcommittee’s recommendationto issue a revised Request for Proposals (RFP) for the Terminal AdvertisingConcession.BACKGROUNDThe Aviation Department (Aviation) currently contracts with Clear Channel Airports forthe terminal advertising concession at Phoenix Sky Harbor International Airport (PHX).The contract began in February 1999 with a five year term and a five year option andgenerated $2.8 million in revenue to the City in 2009. The current advertisingconcession contract expired in February 2010 and will continue on a month-to-monthbasis until the successful proposer to this RFP completes installation of its equipment.Aviation previously issued a RFP for advertising, which included three separatepackages: Fixed Display In-Terminal, Transit/Bus Shelter and Marketing Income. ThisRFP was cancelled in September, 2010 based on feedback from proposers that theRFP packages were too limiting and would have resulted in less investment in newtechnology and less income to the City than originally anticipated.DISCUSSIONThe Terminal Advertising Concession includes the interiors of all DVT, GYR, and PHXterminals, the Rental Car Center, and PHX Sky Train stations and includes but is notlimited to:• Floor and wall displays• Hotel/motel reservation telephone boards• Column and floor wraps• Interactive projection systems• BannersThis concession also includes a marketing income program to allow the concessionaireto sell, subject to Aviation approval:• Product rights sponsorships• Sound programs• Special event sponsorships and promotions• Supplier sponsorships• Naming rights or airport brand licensing rightsThis RFP will include the Airport Contracting Policy and Aviation’s OutreachRequirements for Airport Concessions Contracts. The transit/bus shelter package willbe included in a future solicitation which could incorporate additional outdoor advertisingopportunities.Page 6

Each RFP response must propose a minimum annual guaranteed rent (MAG) and aninitial minimum capital investment of at least $1.8 million with a midterm investment of atleast $500,000. The following business terms and conditions would be included:• The lease term shall be 7 years, with 1 three-year renewal option to be exercisedat the sole discretion of the Aviation Director.• For the first year of the contract, the successful proposer shall pay the greater ofthe proposed MAG or 65% of gross sales, with the exception of digitaladvertising, for which the percentage rent is 50% of gross sales.• In each subsequent year of the lease, the MAG shall be adjusted based upon85% of the prior year’s annual rent payment or 100% of the first year’s MAG,whichever is greater.Selection criteria for the Terminal Advertising Concession proposals will be:• Proposed MAG (0-40 points)• Advertising Display Program (0-25 points)• Business, Marketing and Operations Plans (0-20 points)• Qualifications and Experience of Proposer (0-15 points)RECOMMENDATIONThe Aviation Department requests the Business and Development Subcommittee’srecommendation to issue an RFP for the Terminal Advertising Concession.Page 7