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Agenda 03/12/2013 Item #14A1 3/12/2013 14.A.1. EXECUTIVE SUMMARY Recommendation that the Board of County Commissioners acting as the Collier County Airport Authority review options, consider organizational and operational structures and prepare to provide direction regarding the management and operation of the Collier County Airports. Options to consider should include but not be limited to maintaining the existing Airport Authority/Executive Director structure, Contract Airport Management, Long-term Lease of Airports (Public-Private Partnership), Sale of the Airports (Full Privatization), and/or any combination thereof. OBJECTIVE: Review the management of the Collier County Airport Authority business unit, Collier County Airport operations, and future economics of the Everglades Airpark, Immokalee Regional Airport, and Marco Island Executive Airport with goals of providing acceptable public service, minimizing short term operational costs, and maximizing the economic development potential of the Collier County Airport assets. CONSIDERATIONS: At the Airport Workshop held on February 5, 2013, the Executive Director suggested that the BCC, as the current Collier County Airport Authority, had not provided clear direction to the Executive Director in the operation and/or direction of the Collier County Airports, and by some measure of self-reflection, the BCC may be lacking the skills and/or experience needed to successfully direct the management and infrastructure needs of the Public Airports under their authority. Given cumulative losses from the operation of the Airports, and past and potential fiscal impacts on the General Fund, it is advisable to review all available Airport management options and provide direction for both the Executive Director and/or the future management and operation of the Collier County Airports. FISCAL IMPACT: Fiscal impact to be determined. At some measure, the goal is to reduce the financial impact to the General Fund, minimize annual operational losses, and reduce the overall debt obligation attributable to the Collier County Airports. LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney and raises no legal issues at this time. Any Board direction would be by majority vote. -JAK GROWTH MANAGEMENT IMPACT: TBD RECOMMENDATION: Recommendation that the Board of County Commissioners review all options for Airport management and operational structures, and to provide direction regarding the operation of the Collier County Airports, including but not limited to maintaining the existing Airport Authority/Executive Director structure, Contract Airport Management, Long-term Lease of Airports (Public-Private Partnership), Sale of the Airports (Full Privatization), and/or any combination thereof. PREPARED BY: Jim Flanagan for County Commissioner Tim Nance AGENDA DATE: March 12, 2013 Packet Page-970- 3/12/2013 14.A.1. COLLIER COUNTY Board of County Commissioners Item Number: 14.14.A.14.A.1. Item Summary: Recommendation that the Board of County Commissioners acting as the Collier County Airport Authority review options, consider organizational and operational structures and prepare to provide direction regarding the management and operation of the Collier County Airports. Options to consider should include but not be limited to maintaining the existing Airport Authority/Executive Director structure, Contract Airport Management, Long-term Lease of Airports (Public-Private Partnership), Sale of the Airports (Full Privatization), and/or any combination thereof. (Commissioner Nance) Meeting Date: 3/12/2013 Prepared By Name: FlanaganJim Title: VALUE MISSING 3/5/2013 5:27:33 PM Submitted by Title: VALUE MISSING Name:FlanaganJim 3/5/2013 5:27:35 PM Approved By Name:KlatzkowJeff Title: County Attorney Date: 3/6/2013 8:13:16 AM Name: KlatzkowJeff Title: County Attorney Date: 3/6/2013 9:46:41 AM Name: GreenwaldRandy Title: Management/Budget Analyst,Office of Management&B Date: 3/6/2013 10:50:39 AM Packet Page-971- 3/12/2013 14.A.1. Now Name: IsacksonMark Title:Director-Corp Financial and Mgmt Svs,CMO Date: 3/6/2013 11:19:00 AM Avow ,41146k. Packet Page-972- 3/12/2013 14.A.1. AIRPORT MANAGEMENT OPTIONS / ECONOMIC OPPORTUNITIES Considerations and Discussion Topics A. AIRPORT AUTHORITY/EXECUTIVE DIRECTOR • Continue with Current Management Structure, with focus on improving economics and operations. B. CONTRACT AIRPORT MANAGEMENT • Contractor receives a management fee based in part on the contractor's performance. • Facility employees and managers work for the contractor not the government. • Operation budget proposed by the contractor and approved by the County Commission. • Funds needed for budgeted items are appropriated by the County Commission and passed through the contractor. • Fees and charges are paid by the airport users to the County and not to the contractor. Benefits: • Increased operating efficiencies. • Additional operating revenues. • Reduces airport subsidies from general-fund revenues. Drawbacks: • Management fee must be significantly lower that current county subsidies. • Costs of reestablishing airport operations Current Airports using contract management: Air-Carrier Airports Burbank 'Bob Hope" Airport, Burbank, CA (TBI Airport Management) Macon County Airport, Macon, GA (TBI Airport Management) White Plains/Westchester County Airport, White Plains, NY (AFCO AvPorts, Inc.) General Aviation Airports Alliance Airport, Fort Worth, TX (Alliance Aviation) Brackett Field, La Verne, CA (American Airports Corp) Compton Airport, Compton, CA (American Airports Corp) El Monte Airport, El Monte, CA (American Airports Corp) Peru Municipal Airport, Peru, IN (Miami County Air Services) Fox Airfield, Lancaster, CA (American Airports Corp) Republic Airport, East Farmingdale, NY (URS Corp) Whiteman Airport, Pacoima, CA (American Airports Corp) Packet Page-973- 3/12/2013 14.A.1. Implementation • Request for Information/Strategies—publish a request for private firms to submit interest in private management, operations, and or development of the airports. • Request for Qualifications —weeds out firms that are that are unlikely to succeed in meeting the requirements for operating, managing or developing the airports. • Request for Proposals— Consultants knowledgeable about both airports and privatization should be retained to review financial and operational data and assist with designing the competitive process and the required documents (RFQ/RFP). • Proposal Evaluations • Negotiations C. LONG TERM LEASE OF AIRPORTS (PUBLIC/PRIVATE PARTNERSHIP) • Generally a lease is used in preference to a contract where significant airport development is anticipated. • Shifts development risks form the taxpayer to the private sector lessee. • Airport users pay charges and fees directly to the lessee. Lessee must cover its operating costs from those revenues. • Lease payment to the county is based on a percentage of gross revenue. FAA Privatization Process. • A preliminary application to the FAA is the initial step in starting the process of studying the possibility of a public-private partnership to operate country airport. • The preliminary application identified the project objectives, described the proposed process and timetables, and provided current financial and operations statements. • FAA accepts the preliminary application. FAA acceptance of the pre-application does not commit the County to proceed with a final application. • RFP is issued • Requests for proposals are evaluated - Commissioners selects preferred proposal • Contract Negotiation - County negotiates with private sector partner - Conduct Potential Impact Studies - Proposed operational changes - Board of Commissioners approves contract Packet Page-974- 3/12/2013 14.A.1. • Final Application Process to FAA - FAA review and certification of private operator - Closing —sign contract with private sector partner • FAA approval requires private operator to: - Ensure continued access to the airport on reasonable terms - Ensure continued safe operations, security, maintenance, and improvements - Mitigate noise and environmental impacts in accordance with state and federal law - Provide for the continued operation of the airport in case of the private manager and operator's bankruptcy or other defaults • There is no timeline for the FAA to complete its review of the final application. D. SALE OF THE AIRPORTS (FULL PRIVATIZATION) Packet Page-975- Fact Shee$—What is the Airport Privatization Pilot Program? http://www.faa.gov/news/fact_sheets/new. 3/12/2013 14.A.1. ..` Federal Aviation Administration Fact Sheet - What is the Airport Privatization Pilot Program? For Immediate Release September 26, 2012 Contact: Marcia Alexander-Adams Phone: (202) 267-3488 The airport privatization pilot program is designed to allow airports to generate access to sources of private capital for airport improvement and development. The 1996 Reauthorization Act, Title 49 United States Code §47134, authorized the Federal Aviation Administration(FAA)to establish the pilot program. The 2012 Reauthorization Act increased the number of airports that could participate in the program from five to 10. The same restrictions on participation apply. Only one large hub airport can participate in the program; one of the airports must be a general aviation airport. Commercial service airports can only be leased and general aviation airports can be sold or leased. The program now permits up to 10 public airport sponsors to sell or lease an airport with certain restrictions, and to exempt the sponsor from certain federal requirements that could otherwise make privatization impractical. Most commercial service airports in the United States are owned and operated by local or state governments. Public-use general aviation airports are both publicly and privately owned. AIRPORTS IN THE PRIVATIZATION PROGRAM Chicago Midway Airport(MDW) Chicago Midway Airport (MDW), a large air carrier hub airport, owned and operated by the city of Chicago, handles more than 17 million passengers and 253,000 aircraft operations (calendar year 2008). The City also owns and operates Chicago O'Hare International Airport. Status:The FAA expects to receive a revised preliminary application including a revised timetable and a distribution ready copy of a request for qualifications or interest from the city of Chicago by December 31, 2012. Hendry County Airglades Airport(2lS) Airglades Airport, a general aviation reliever airport in Clewiston, Florida, is located 80 miles from Miami International Airport. The airport is owned and operated by Hendry County. The airport has a 5,603-foot runway, a general aviation terminal and hangars. Hendry County's preliminary application was approved by the FAA on October 18, 2010. Status:The airport sponsor is negotiating an agreement with a private operator. Luis Munoz Marin International Airport(SJU) Luis Munoz Marin International Airport, a medium-hub airport is owned and operated by the Puerto Rico Ports Authority. In 2008, the airport had 4.6 million passenger boardings. The FAA approved the Authority's preliminary application for the Luis Munoz Marin International Airport on December 22, 2009. Status: The airport sponsor published a Request for Qualifications in July 2011 and prequalified six potential bidders to submit proposals. On July 19, 2012, the Puerto Rico Ports Authority selected Aerostar Airport Holdings as the winner of a public bidding process to become the private operator of the Packet Page-976- 1 of 3 2/5/2013 11:23 PM Fact Sheet—What is the Airport Privatization Pilot Program? http://www.faa.govinews/fact_sheets/nev 3/12/2013 14.A.1. Luis Munoz Marin International Airport. The FAA held a public meeting on September 28, 2012 to discuss the final preliminary application to privatize the airport. AIRPORT INFORMATION IN THE DOCKET To review information on the airports submitted to the docket go to: www.regulations.gov (http://www.regulations.gov/) . Chicago Midway, Docket Number FAA-2006-25867 Airglades, Docket Number FAA-2008-1168 Luis Munoz Marin International, Docket Number FAA-2009-1144 AIRPORT PRIVATIZATION FACTS What does FAA's acceptance of the preliminary application mean?An airport sponsor who wants to participate in the airport privatization pilot program must receive preliminary FAA approval, through an application process, to reserve one of the five slots available under the program. Once the FAA approves the preliminary application, the sponsor can select a private operator to manage the airport, negotiate an agreement with the private operator, and prepare a final application for submittal to the FAA. Application process.A public airport sponsor and the private operator selected to purchase or lease an airport may request participation in the pilot program by filing an application for exemption under Title 49 United States Code §47134(a). * A public sponsor may submit a preliminary application for FAA review and approval. It must contain summary narratives identifying the objectives of the privatization initiative, a description of the process and a realistic timetable for completing the program, current airport financial statements, and a distribution ready copy of the request for proposal. The FAA has 30 days to review the preliminary application. * When the FAA approves the preliminary application, the applicant is guaranteed one of the 10 slots in the program. * The airport sponsor may select a private operator, negotiate an agreement, and submit a final application to the FAA. There is no timeline for the FAA to complete its review of the final application. * After the FAA reviews and approves the final application and lease agreement, it publishes a notice in the Federal Register for a 60-day public review and comment period. * The FAA completes its review, prepares its Findings and Record of Decision (ROD), addresses the public comments in the ROD, and publishes the agency decision. * If the FAA approves the ROD, it monitors the legal settlement and transfer of the airport from public owner and sponsor to the new private operator and sponsor. Number and category of airports. The legislation authorizes 10 airports to participate in the program. At least one must be a general aviation airport and no more than one large hub air carrier airport may participate. Under the pilot program, general aviation airports may be leased or sold, but an air carrier airport may only be leased. Exemption from federal requirement. The 1996 Reauthorization Act permits the FAA to exempt an airport sponsor from certain requirements that could otherwise make privatization unattractive. First, the public airport sponsor may receive an exemption to use the lease or sale proceeds for non-airport purposes. Generally, all proceeds from the lease or sale of airport land must be used for the capital or operating costs of the airport. This exemption requires the approval of 65 percent of the air carriers at the Packet Page-977- 2 of 3 2/5/2013 11:23 PM Fact Sheet—What is the Airport Privatization Pilot Program? http://www.faa.govinews/fact_sheets/nev 3/12/2013 14.A.1. airport (by number of carriers and by landed weight). The FAA also can exempt a public sponsor from an obligation to repay federal grants and return property acquired with federal assistance upon the lease or APINk sale of the airport. Conditions for granting exemptions. The FAA approval is based upon a number of conditions listed in Title 49 United States Code §47134. These include the private operator's ability to assume the public operator's grant obligations, and ensure continued access to the airport on reasonable terms. The private operator must operate the airport safely, maintain and improve the airport, provide security, mitigate noise and environmental impacts, and abide by existing collective bargaining agreements. The public operator must provide a plan for continued operation of the airport in case of bankruptcy of the private operator. Federal assistance. The private operator of an air carrier airport may receive Airport Improvement Program (AIP)grants, collect Passenger Facility Charges, and charge reasonable fees. Airport rates and charges that exceed the Consumer Price Index require approval of 65 percent of air carriers. Private operators of general aviation airports can receive AIP discretionary grants. Federal oversight.Airports in the pilot program must comply with Title 14 Code of Federal Regulations Part 139 and with Transportation Security Administration requirements for airport security. #k:# This page can be viewed online at: http://wwwfaa.gov/news/fact_sheets /news_story.cfm?newsId=13333&omniRss=fact_sheetsAoc&cid=103 F_S wow Packet Page-978- of 3 2/5/2013 11:23 PM 3/12/2013 14.A.1. Airport Authority Loan History Aisk Fund 495 Fund 496 Fund 497 Total Loan Airport Op Capital/Grant Capital/Immok FY Total Annual Increase Total Loan Beginning Balance: 9,010,457.45 FY 2003 Loan 817,100.00 128,400.00 945,500.00 interest 41,279.05 80,388.11 121,667.16 1,067,167.16 10,077,624.61 FY 2004 Loan 687,600.00 25,171.00 712,771.00 interest 46,186.52 70,754.41 116,940.93 829,711.93 10,907,336.54 FY 2005 Loan 599,800.00 128,750.00 728,550.00 Interest 119,754.94 150,711.16 270,466.10 999,016.10 11,906,352.64 FY 2006 Loan 658,600.00 537,600.00 1,196,200.00 Interest 230,951.31 278,802.92 509,754.23 1,705,954.23 13,612,306.87 FY 2007 Loan 765,400.00 119,100.00 750,000.00 1,634,500.00 interest 304,267.78 336,503.92 25,532.08 666,303.78 2,300,803.78 15,913,110.65 FY 2008 Loan 651,400.00 171,933.00 750,000.00 1,573,333.00 Interest 216,556.51 220,787.86 37,045.26 474,389.63 2,047,722.63 17,960,833.28 FY 2009 Loan 456,132.00 140,500.00 750,000.00 1,346,632.00 Amok interest 60,235.72 57,553.81 16,113.75 133,903.28 1,480,535.28 19,441,368.56 FY 2010 Loan 447,600.00 243,750.00 (133,850.00) 557,500.00 Interest 19,350.79 17,921.59 5,855.85 43,128.23 600,628.23 20,041,996.79 FY 2011 Loan 527,000.00 (133,850.00) 133,850.00 527,000.00 Interest 19,615.79 17,276.20 5,785.52 42,677.51 569,677.51 20,611,674.30 FY 2012 Loan 538,000.00 (250,000.00) - 288,000.00 Interest 30,005.87 19,896.79 6,993.13 56,895.79 344,895.79 20,956,570.09 FY 2013 Loan 527,800.00 128,500.00 - 656,300.00 Interest - - - - 656,300.00 21,612,870.09 I1:\Mark Items\Airport transfers loans history.xisxSheetl 1/30/2013 D�rLct Dnac Packet Page-979- 3/12/2013 14.A.1. Collier County,Florida Airport Authority Profit and Loss For Fiscal Year 2011 Marco Island Executive Airport: Operating Revenues $ 2,157,589 Miscellaneous 8,692 Total Operating Revenues 2,166,281 Operating Expenses: Personal services(salaries and associated costs) 356,624 Operating 1,500,679 Allocation of Administrative Costs-based on FTEs* 269,678 Total Operating Expenses 2,126,981 Operating Gain-Marco Island 39,300 Immokalee Airport: Operating Revenues 641,036 Miscellaneous 11,053 Total Operating Revenues 652,089 Operating Expenses: Personal services(salaries and associated costs) 304,685 Operating 637,414 Allocation of Administrative Costs-based on FTEs* 269,678 Total Operating Expenses 1,211,777 Operating Loss-Immokalee (559,688) Everglades Airport: Operating Revenues 120,326 Miscellaneous 145 Total Operating Revenues 120,471 Operating Expenses Personal services(salaries and associated costs) 70,338 Operating 131,852 Allocation of Administrative Costs-based on FTEs* 53,343 Total Operating Expenses 255,533 Operating Loss-Everglades (135,062) Total Operating Revenues less Personal Svcs.and Operating-FY-2011 $ (655,450) * -Requestor indicated that the desired basis of allocation for administrative costs was FTEs. Allocation of overhead is not mandatory for GAAP reporting for the Airport Authority,or for purposes of meeting the Clerk's financial reporting responsibilities. As such this statement, with it's associated assumptions,are for discussion purposes only. Packet Page-980-