Los Angeles ookt**40 World Airports 60'

Transcription

1 Los Angeles ookt**40 World Airports 60' TM July 24, 2014 The Honorable City Council of the City of Los Angeles City Hall, Room 395 Los Angeles, CA LAX LA/Ontario Van Nuys City of Los Angeles Eric Garcetti Mayor Subject: APPROVAL OF TEN YEAR LEASE WITH VIRGIN ATLANTIC AIRWAYS, LTD. AT LOS ANGELES INTERNATIONAL AIRPORT In accordance with Section 606 of the City Charter, the Board of Airport Commissioners transmits for your approval a ten year Premier Passenger Lounge Space Lease in Terminal 2 at Los Angeles International Airport with Virgin Atlantic Airways, Ltd. that will provide approximately $500,000 in the first year and $6,924,000 in revenue over the entire term. RECOMMENDATION FOR CITY COUNCIL Board of Airport Commissioners 1. APPROVE the ten year Lease with Virgin Atlantic Airways, Ltd. at Los Angeles Sean 0. Burton International Airport. President Valeria C. Velasco Vice President Gabriel L. Eshaghian 2. CONCUR in the Board's action authorizing the Executive Director to execute the ten year Lease with Virgin Atlantic Airways, Ltd. Jackie Goldberg 3. FIND that this action is exempt from the California Environmental Quality Act (CEQA) Beatrice C. Hsu pursuant to Article III Class 1(18)(c) of the Los Angeles City CEQA Guidelines. Matthew M. Johnson Dr. Cynthia A. Telles Gina Marie Lindsey Executive Director The Board of Airport Commissioners, at their meeting held on June 16, 2014, by Resolution No approved the ten year Lease with Virgin Atlantic Airways, Ltd., subject to the approval of your Honorable Body, is attached. There is no fiscal impact to the City's General Fund as a result of this action. CONCLUSION Please return the attached ten year Lease with Virgin Atlantic Airways, Ltd. to the Department of Airports' Board Office after City Council approval and Certification of that approval. Very truly yours Sandra J. Miller Commission Executive Assistant II BOARD OF AIRPORT COMMISSIONERS cc:trade, Commerce and Tourism Committee Councilmember LaBonge, E-file Councilmember Buscaino, E-file Councilmember Bonin, E-file. CAO (Airport Analyst), E-file CLA (Airport Analyst), E-file City Clerk's Office, Enc. (one original) 1. World Way Los Angeles California Mail PO. Box Los Angeles California Telephone Internet

2 IS _do Los, Angeles World Airports TM - RESOLUTION NO LAX LA/Ontario Van Nuys City of Los Angeles Eric Garcetti Mayor Board of Airport Commissioners Sean 0. Burton President Valeria C. Velasco Vice President Gabriel L. Eshaghian Jackie Goldberg Beatrice C. Hsu Matthew M. Johnson Dr. Cynthia A. Telles Gina Marie Lindsey Executive Director BE IT RESOLVED that the Board of Airport Commissioners approved a ten (10) year Premier Passenger Lounge Space Lease in Terminal 2 at Los Angeles International Airport with Virgin Atlantic Airways, Ltd. that will provide approximately $500,000 in the first year and $6,924,000 in revenue over the entire term, as referenced on the board report attached herein and made part hereof; and BE IT FURTHER RESOLVED that the Board of Airport Commissioners authorized the Executive Director to execute the Premier Lounge Space Lease with Virgin Atlantic Airways, Ltd. upon approval as to form by the City Attorney and upon approval by the Los Angeles City Council; and BE IT FURTHER RESOLVED that the issuance of permits, leases, agreements, gate and space assignments, and renewals, amendments or extensions thereof, or other entitlements granting use of existing airport facilities or its operations is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Article III Class 1(18)(c) of the Los Angeles City CEQA Guidelines; and BE IT FURTHER RESOLVED that actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section I hereby certify that this Resolution No is true and correct, as adopted by the Board of Airport Commissioners at its Regular Meeting held on Monday, June 16, Sandra J. Mil er Secretary BOARD OF AIRPORT COMMISSIONERS 1 World Way Los Angeles California Mall P.O. Box Los Angeles California Telephone Internet a.aero

3 -II.00 'Los Angeles World Airports REPORT TO THE BOARD 0 AIRP COMMISSIONERS Item tuber h re r\. / 4:e. _5 Approved, by:: Dave Jones, ana iger, Terminals _ - -ss Management Meeting Date: 6/16/2014 ki, LI Completed 0/11.-1/73 Reviewed by: Debbie L. Bowers, De, uty Executive Director CAO Review: 1 Pending E N/A ----)\-- /,, / Reviewed for i Date Approval Status 13_y Cit Attorney! Capital Budget i 5/22/2014 / ItAld-- ez--- /k/lc-c- ----s' Gina Marie Lindsey - Executive Direc r Operating Budget l 5/29/2014 CEQA I 5/30/2014 l MY EN Procurement l 6/2/2014 ( / SUB ECT: Premier Lounge Space Lease with Virgin Atlantic Airways, Ltd. 1:7 1 0 N El NA 1:1YO N DNA ZY ON 0 Gond Approve the proposed 10-year Premier Passenger Lounge Space Lease in Terminal 2 at Los Angeles International Airport with Virgin Atlantic Airways, Ltd. that will provide approximately $500,000 in the first year and $6,924,000 in revenue over the term. RECOMMENDATIONS: Management RECOMMENDS that the Board of Airport Commissioners: 1. ADOPT the Staff Report. 2. DETERMINE that this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Article III, Class 1 (18)(c) of the Los Angeles City CEQA Guidelines. 3. APPROVE the proposed new Premier Passenger Lounge Space Lease in Terminal 2 at Los Angeles International Airport with Virgin Atlantic Airways, Ltd. 4. AUTHORIZE the Executive Director to execute the Premier Lounge Space Lease with Virgin Atlantic Airways, Ltd., after approval as to form by the City Attorney and upon approval by the LoS Angeles City Council. DS RW MV MT Page 1 VIRGIN ATLANTIC PREMIER LOUNGE SPACE IN T2.docx

4 DISCUSSION: 1. Purpose Establish a premier passenger lounge for Virgin Atlantic Airways Ltd. (Virgin Atlantic) passengers at Los Angeles International Airport (LAX). 2. Prior Related Actions September 17, Board Resolution No The Board of Airport Commissioners (Board) authorized a New Rate Methodology for calculation of rates and charges for use of terminal space at Los Angeles International Airport (LAX) which was developed in anticipation of future Terminal construction projects and is intended as a self-financing mechanism to recover the costs of constructing, acquiring, operating, and maintaining the terminals at the airport. 3. Current Action Virgin Atlantic has operated in Terminal 2 since March 25, 1992, with its premier passengers using lounges operated by other airlines because adequate space was not available for Virgin Atlantic to construct and operate its own premier passenger lounge. In April 2014, Air France relocated from Terminal 2 to Tom Bradley International Terminal, vacating lounge space in Terminal 2. Virgin Atlantic requested to lease this space and will make required minimum capital investment of no less than $500 per square foot at its sole cost and expense. The table below provides a summary of key elements of the proposed Lease: Description Proposed Terms Commencement: Upon execution Term: 10-years with a 90-day termination and buyout provision for Los Angeles World Airports (LAWA) Reduction in Term: If the improvements are not completed within eighteen months of Lease commencement, the Lease will be terminated Expiration 10-years from the Commencement Date unless terminated early Early Termination After the 5th year, Virgin Atlantic may terminate the lease if it relocates to another terminal, without a LAWA buyout Demised Premises: 4,062 square feet Required Investment: Minimum investment of $500 per square foot Estimated 1st Year Rent: $499,800 Page 2 VIRGIN ATLANTIC PREMIER LOUNGE SPACE IN T2.docx

5 Action Requested Staff requests the Board approve the proposed Premier Lounge Space Lease with Virgin Atlantic Airways, Ltd. after approval as to form by the City Attorney and upon approval by the Los Angeles City Council. Fiscal Impact The proposed Premier Lounge Space Lease will provide annual Terminal Building Rent of approximately $500,000 in the First Year not including any annual rate escalations required by the application of the new Rate Methodology. No appropriation is requested from the Capital Budget as approval of this action will have no fiscal impact on the Capital Budget. 4. Alternatives Considered Do Not Lease the Space Not leasing the space would be an option if LAWA wanted to use it for other purposes or hold for an unknown future tenant. STANDARD PROVISIONS: 1. The issuance of permits, leases, agreements, gate and space assignments, and renewals, amendments or extensions thereof, or other entitlements granting use of existing airport facilities or its operations is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Article III, Class 1 (18) (c) of the Los Angeles City CEQA Guidelines. 2. This agreement will be approved as to form by the City Attorney. 3. Actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section Virgin Atlantic Airways will comply with the provisions of the Living Wage Ordinance. 5. The Small Business Enterprise Program does not apply to leases. 6. Virgin Atlantic Airways will comply with the provisions of the Affirmative Action Program. 7. Virgin Atlantic Airways is not required to obtain a Business Tax Registration Certificate for this Lease Agreement. 8. Virgin Atlantic Airways will comply with the provisions of the Child Support Obligations Ordinance. 9. Virgin Atlantic Airways has approved insurance documents, in the terms and amounts required, on file with Los Angeles World Airports. 10. This action is not subject to the provisions of City Charter Section 1022 (Use of Independent Contractors). Page 3 VIRGIN ATLANTIC PREMIER LOUNGE SPACE IN T2.docx

6 11. Virgin Atlantic Airways must submit the Contractor Responsibility Program Pledge of Compliance and comply with the provisions of the Contractor Responsibility Program prior to execution of the Lease Agreement. 12. Virgin Atlantic Airways must be determined by Public Works, Office of Contract Compliance, to be in compliance with the provisions of the Equal Benefits Ordinance prior to execution of the Lease Agreement. 13. Virgin Atlantic Airways will be required to comply with the provisions of the First Source Hiring Program for all non-trade LAX Airport jobs. 14. This action is not subject to the provisions of Bidder Contributions CEC Form 55. Page 4 VIRGIN ATLANTIC PREMIER LOUNGE SPACE IN T2.docx

7 TRANSMITTAL TO Gina Marie Lindsey, Executive Director Department of Airports FROM The Mayor DATE JUL COUNCIL FILE NO. COUNCIL DISTRICT 11 Proposed Premier Passenger Lounge Space Lease with Virgin Atlantic Airways, Ltd. at Los Angeles International Airport Transmitted for further pr, essing, including Council consideration. See the Ci is -tive Officer report, attached. MAYO (Ana Guerrero) MAS:AVM t: CAO 649-d

8 REPORT FROM OFFICE OF THE CITY ADMINISTRATIVE OFFICER Date: To: From: July 1 6, 2014 The Mayor Miguel A. Santana, City Administrative Officer CAO File No Council File No. Council District: 11 Reference: Subject: Communication from the Department of Airports dated June 16, 2014; referred by the Mayor for report on June 19, 2014 PROPOSED PREMIER PASSENGER LOUNGE SPACE LEASE WITH VIRGIN ATLANTIC AIRWAYS, LTD. AT LOS ANGELES INTERNATIONAL AIRPORT, IN TERMINAL 2 SUMMARY The Executive Director of the Department of Airports (Department) requests approval to execute a proposed lease (Lease) with Virgin Atlantic Airways, Ltd., (Virgin Atlantic) for premier passenger lounge space in Terminal 2 (T2) at Los Angeles International Airport (LAX). Approval of the proposed Lease, which has a term of 10 years, will permit Virgin Atlantic to construct and operate a premier passenger lounge in T2 utilizing 4,062 square feet of space, will require Virgin Atlantic to invest a minimum of $500 per square foot for the capital improvements and will provide approximately $500,000 in rent to the Department during the first year of the Lease, and $6,924,000 in revenue over the 10-year term. The Board of Airport Commissioners (BOAC) approved the proposed Lease during a meeting on June 16, The above-referenced aspects of the Lease, and this report, incorporate revised information received from the Department subsequent to the initial request submittal. Pursuant to Charter Section 606, Council approval of the proposed Lease is required because the cumulative term exceeds five years. Background Department staff reports that while Virgin Atlantic has operated in T2 since 1992, Virgin Atlantic premier passengers have had to use lounges operated by other airlines because there was not adequate space for Virgin Atlantic to construct and operate a premier lounge of its own. Recently Air France vacated its T2 lounge space when that airline relocated to the Tom Bradley International Terminal from T2. Consequently, Virgin Atlantic will be able to lease the former Air France area and estimates it will take up to 250 days of construction to rehabilitate the lounge space of 4,062 square feet for use by Virgin Atlantic premier passengers.

9 CAO File No PAGE 2 Proposed Space Lease with Virgin Atlantic for a Premier Passenger Lounge in Terminal 2 The Department proposes to lease recently vacated space in Terminal 2, LAX, to Virgin Atlantic Airways, Ltd., for ten years to provide an area for the airlines to construct and operate a premier passenger lounge. Virgin Atlantic will undertake the expense of investing a minimum of $500 per square foot to improve and upgrade the leasehold of 4,062 square feet. Virgin Atlantic will also provide an estimated $500,000 in terminal building rent to the Department during the first year of the proposed Lease, and pay approximately $6,924,000 in rent over the Lease term. In addition to the above-mentioned key components, the proposed Lease contains several provisions outlining a reduction of term and early termination options. A common criterion in those provisions is the status of the construction for the lounge improvements. The proposed Lease shall terminate two years from the commencement date if Virgin Atlantic has not begun construction within six-months after the commencement date. While the Lease term will be terminated if the improvements are not completed within 18 months of the lease commencement, the Executive Director has sole discretion to extend the non-completion date up to 24 months from the lease commencement date. If Virgin Atlantic opts to relocate to another terminal, upon 90 days advance written notice, this T2 tenant may terminate the Lease and the improvements will revert to the Department, at no expense to the Department. Additionally, sections in the proposed document establish guidelines by which the Department may initiate action to terminate the Lease. The Department will derive revenue from Virgin Atlantic as outlined in Section 3 Rent, of the proposed Lease. A simplified calculation for rent is the product of the 4,062 square foot area multiplied by base rent. According to Department staff, the first year's lease will provide rent totaling approximately $500,000, excluding annual rate escalations. However, the details of the rent formula involve numerous considerations and factors. In September 2012, the BOAC authorized a New Rate Methodology to calculate the rates and charges for use of terminal space at LAX. The fees and charges that Virgin Atlantic will pay as rent are, according to Department staff, intended as a self-financing mechanism to recover the costs of constructing, acquiring, operating and maintaining the terminals at the airport. Alternative to Approving the Proposed Lease If the Department had either another purpose for the 4,062 square foot area or a different possible tenant, then there could be a reason to present an alternative to approving the proposed Lease. However, Department staff has not indicated as such and consideration of the proposed Lease is recommended as requested. City Contract Compliance The proposed Lease is subject to approval by the City Attorney as to form. Prior to the execution of the proposed Lease, Virgin Atlantic is required to submit the Contractor Responsibility Program Pledge of Compliance, as well as comply with the provisions of the Contractor Responsibility Program, and to have a determination rendered by the Department of Public Works, Office of

10 CAO File No PAGE 3 Contract Compliance that Virgin Atlantic is in compliance with the provisions of the Equal Benefits Ordinance. Virgin Atlantic already has its approved insurance documents on file with the Department in the terms and amounts required. Virgin Atlantic is required to comply with the provisions of the following City contract standard documents: Affirmative Action Program; Child Support Obligations Ordinance; First Source Hiring Program for all non-trade LAX Airport jobs; and, Living Wage Ordinance. Virgin Atlantic is not required to obtain a Business Tax Registration Certificate number for the proposed Lease. The Small Business Enterprise Program does not apply to leases. Additionally, the proposed Lease is not subject to the provisions of Charter Section 1022, Use of Independent Contractors, nor to the provisions of Bidder Contributions City Ethics Commission Form 55. Furthermore, the issuance of permits, Leases agreements, gate and space assignments, and renewals, amendments or extensions thereof, or other entitlements granting use of existing airport facilities or its operations is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Article 111, Class 1 (18) (c) of the Los Angeles City CEQA Guidelines. Pursuant to Charter Section 606, actions taken on this item by the BOAC will become final upon approval by the Council. RECOMMENDATIONS That the Mayor: 1. Approve, subject to approval by the City Attorney as to form, and to fulfilling the following two requirements prior to the execution of the proposed Premier Passenger Lounge Space Lease (Lease) with Virgin Atlantic Airways, Ltd. (Virgin Atlantic), first that Virgin Atlantic is to submit the Contractor Responsibility Program Pledge of Compliance and comply with the provisions of the Contractor Responsibility Program, and second that the Department of Public Works, Office of Contract Compliance, is to determine that Virgin Atlantic is in compliance with the City's Equal Benefits Ordinance, a proposed Lease with Virgin Atlantic at Los Angeles International Airport (LAX), to construct and operate a premier lounge of 4,062 square feet of space in Terminal 2, to invest a minimum of $500 per square foot for capital improvements and to pay approximately $500,000 in rent for the first year of the lease, and approximately $6,924,000 in revenue to the Department of Airports over the Lease ten years term, and 2. Return the request to the Board of Airport Commissioners for further processing, including Council consideration. FISCAL IMPACT STATEMENT Approval of the proposed Lease between Virgin Atlantic Airways, Ltd. (Virgin Atlantic) and the Department of Airports will have no impact on the General Fund. The Lease will provide

11 CAO File No PAGE 4 approximately $500,000 in rent during the first year. Also, Virgin Atlantic will invest $500 per square foot to improve the 4,062 square foot space for a premier passenger lounge in Terminal 2 at LAX. This project complies with the Department of Airports adopted Financial Policies TIME LIMIT FOR COUNCIL ACTION Pursuant to Charter Section 606, "Process for Granting Franchises, Permits, Licenses and Entering Into Leases," unless the Council takes action disapproving the lease within 30 days after submission of it to Council, the lease shall be deemed approved. MAS:AVM: