Official Statement Airport Commission City and County of San ...

APPENDIX D
SUMMARIES OF CERTAIN PROVISIONS OF THE SETTLEMENT
AGREEMENT, THE LEASE AND USE AGREEMENTS
AND THE LEASE AND OPERATING AGREEMENTS
The following are summaries of certain provisions of the Settlement Agreement, the Original Lease and
Use Agreements, the amendments thereto (collectively, the “Lease and Use Agreements”) and the Lease and
Operating Agreements. The Settlement Agreement was entered into by the City on the one hand, acting in its own
behalf and on behalf of the Board of Supervisors of the City, the Airport Commission of the City and certain City
officials, and by certain signatory airlines on the other hand. The Lease and Use Agreements and the Lease and
Operating Agreements were entered into by the City, acting by and through the Commission, and by the respective
signatory airlines. Such summaries do not purport to be complete and reference is hereby made to the complete text
of each of the foregoing agreements, copies of which are on file and are available for examination at the offices of
the Commission.
Settlement Agreement
Disputes between the City and various airlines regarding the operation and finances of the Airport resulted
in litigation being brought against the City in 1979 by certain airlines. To accomplish the settlement of the litigation
and to dispose of other disputes between the parties, the parties agreed to enter into a Settlement Agreement, and,
simultaneously, the Lease and Use Agreements.
The Settlement Agreement provides for altering the airlines-Airport relationship in four major areas:
(a) Payments from the Commission to the City; (b) Bond financing; (c) West of Bayshore lands; and (d) the
calculation of landing fees and terminal area rentals using a “cost center” residual rate setting approach as described
below under “Lease and Use Agreements.”
Payments from Commission to City
The Settlement Agreement provides for payments from the Commission to the City consisting of the
Annual Service Payments and certain additional payments for direct services provided by the City to the
Commission.
Annual Service Payments are to be paid from the Airport Revenue Fund into the General Fund of the City
for each fiscal year beginning with Fiscal Year 1981-82 through Fiscal Year 2010-11 during the term of the Lease
and Use Agreements. These payments amount to the greater of (i) 15% of “Concession Revenues” as defined in the
Lease and Use Agreements and (ii) $5 million for each of the Fiscal Years 1985-86 through 2010-11. The
Settlement Agreement provides that the Annual Service Payment to the City constitutes full satisfaction of all
obligations of the Airport, the Commission, and the airlines party to the Settlement Agreement for any and all
indirect services provided by the City to the Airport and the Commission. The Settlement Agreement also declares
that the Annual Service Payment (together with certain identified payments that have now all been made) constitutes
the total transfer to the City’s General Fund contemplated by a provision of the Charter that calls for repayment to
the City of principal and interest paid by the City on various previously issued City airport general obligation bonds
plus other payments constituting investment return to the City. See “AIRPORT’S FINANCIAL AND RELATED
INFORMATION–Payments to the City.”
The Settlement Agreement further provides that the Commission, the Board of Supervisors and the City
will not take any action to cause payment to the City, directly or indirectly, of any additional money from Airport
revenues or from the airlines, except as permitted under the Lease and Use Agreements, other than for certain direct
services provided to the Commission by the City. These include services provided by the City Attorney, the Fire
Department, the Police Department, the City Controller, the Water Department, the Department of Public Works,
the Purchasing Department and the City-wide risk manager.
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