Final Report Report to Collect an Alternative Customer Facility Charge at Los Angeles International Airport

Transcription

1 Final Report Report to Collect an Alternative Customer Facility Charge at Los Angeles International Airport August 21, 2017 Prepared for Department of Airports of the City of Los Angeles Los Angeles, California Prepared by WJ Advisors LLC Denver, Colorado

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3 TABLE OF CONTENTS SECTIONS 1. INTRODUCTION Consolidated Rental Car Facility and APM/CTS Background Consolidated Rental Car Facility Automated People Mover System Business Arrangements in MOU Proposed Change to an Alternative CFC Rate California Civil Code Section 1939, Assembly Bill 2051, and Assembly Bill 2280 Overview Department s Compliance with CFC Legislation to Collect an Alternative CFC Public Hearing Revenue Amounts have been Established Existing CFC Revenue is Insufficient Additional Revenue Required Steps taken to Limit Costs Other Alternatives for Meeting Airport Operator s Revenue Needs Fees other than the fee collected from rental car customers that are paid by rental car companies and other businesses to use the ConRAC and APM/CTS INDEPENDENT ACCOUNTANT S REPORT SCHEDULE OF FORECASTED REVENUES AND COSTS OF THE LOS ANGELES INTERNATIONAL AIRPORT CONSOLIDATED RENTAL CAR FACILITY AND COMMON TRANSPORTATION SYSTEM NOTES TO SCHEDULE OF FORECASTED REVENUES AND COSTS OF THE LOS ANGELES INTERNATIONAL AIRPORT CONSOLIDATED RENTAL CAR FACILITY AND COMMON TRANSPORTATION SYSTEM General Basis of Accounting Summary of Forecasted Revenues and Costs Summary of Forecasted Revenues Summary of Forecasted ConRAC Costs Summary of Forecasted CTS Costs WJ Advisors LLC August 21, 2017

4 4.4 Summary of Significant Assumptions Consolidated Rental Car Facility Purpose, Need, and Alternatives Forecasted ConRAC Project Costs Forecasted APM/CTS Project Costs APM System Project Costs Allocation of APM System Project Costs to CTS ConRAC and APM System/CTS Project and Financing Costs Funding ConRAC Project and Financing Costs Funding APM/CTS Project and Financing Costs Estimated Annual Capital and Operating Costs for the ConRAC and CTS ConRAC Project CTS ATTACHMENTS Attachment A Memorandum of Understanding Attachment B Key Assumptions Attachment C Forecast Common Shuttle Bus Costs EXHIBITS Exhibit 1 Schedule of Forecasted Revenues and Costs of the Los Angeles International Airport Consolidated Rental Car Facility and Common Transportation System Exhibit 2 Application of CFC Revenues from FY 2023 through FY 2053 Exhibit 3 CFC Revenues through FY 2053 Exhibit 4 Project Costs Exhibit 5 Costs and Funding Sources Exhibit 6 ConRAC DBFOM Construction Loan and Interest Exhibit 7 Department ConRAC Special Facility Bonds Sources and Uses Exhibit 8 Availability Payments for ConRAC Exhibit 9 APM Department Airport Revenue Bonds Sources and Uses Exhibit 10 Availability Payments for Common Transportation System Exhibit 11 Estimated APM/CTS Operating Expenses Worksheet 2.1 Calculation of Maximum Annual CFS Contributions 2 WJ Advisors LLC August 21, 2017

5 1. INTRODUCTION CUSTOMER FACILITY CHARGE RATE MODIFICATION REPORT Consolidated Rental Car Facility and Common Transportation System Los Angeles International Airport WJ Advisors LLC prepared this Customer Facility Charge Rate Modification Report (Report) to fulfill the requirements of California Civil Code 1939, as amended by Assembly Bill (AB) 2051 and AB 2280 (collectively, the CFC Legislation), to require the rental car companies currently operating at Los Angeles International Airport (the Airport) to collect an alternative customer facility charge (CFC) to support the development of two significant projects at the Airport: a new consolidated rental car facility (ConRAC) and new Automated People Mover (APM) system, a portion of which is referred to and serves as the common-use transportation system (APM/CTS 1 ). The APM/CTS would serve the Central Terminal Area (CTA) and new ConRAC at the Airport. The Airport is owned and operated by the Department of Airports of the City of Los Angeles (the Department). The business arrangements for the development of the ConRAC and APM/CTS, including the collection and use of alternative CFC revenues at the Airport to pay for the costs of both projects, was agreed upon and documented in a non-binding Memorandum of Understanding (MOU) between the Department and the 13 on-airport rental car companies that currently serve the Airport. The MOU was signed by each of the existing on-airport rental car companies and fully executed by the Department in early A copy of the MOU is provided in Attachment A to this Report. As part of the MOU discussions, the Department prepared certain forecasts of existing and proposed alternative CFC rate revenues and uses of those revenues for both projects. For consistency with the MOU, the information contained in this Report is largely based on the MOU forecasts with respect to, among other things, estimated capital (project and financing) costs for the ConRAC project and APM/CTS project, APM/CTS operating costs, rates of growth in existing and alternative CFC revenues, and the dates when the new ConRAC and new APM/CTS would be ready and available for their intended use. The estimates and forecasts used in this Report will be replaced with actual results when known. Revenues from the alternative CFC rate, along with CFC interest income, and rental car CTS Contributions pursuant to the MOU, will be used to pay (a) the cost of designing, constructing, and financing the new ConRAC, (b) the cost of operating a common shuttle bus system, if needed, for approximately one-year from the date the ConRAC is operational and until the APM/CTS is operational, and (c) a portion of the cost of designing, constructing, financing, and 1 In this Report, the following terms are used: APM system is for the entire system; APM/CTS is that portion of the system that is estimated to be used by rental car customers, and CTS includes both the common shuttle bus system (if needed) plus the APM/CTS. 3 WJ Advisors LLC August 21, 2017

6 operating the APM/CTS. In this Report, the use of CTS refers to the common shuttle bus system and the APM/CTS combined. The ConRAC would: Address the future facility needs of rental car companies operating at the Airport. Improve operating efficiencies and modernizing vehicle processing for these operators. Enhance the Airport passenger experience. Reduce vehicle miles traveled by both rental automobiles and shuttle buses traveling between the CTA and individual company locations. Mitigate vehicle congestion and traffic in the CTA and areas surrounding the Airport. The ConRAC is estimated to be ready and available for its intended use by July 1, 2022, which for purposes of this Report, is referred to as the ConRAC date of beneficial occupancy (ConRAC DBO). The APM/CTS is estimated to be ready and available for its intended use by July 1, 2023, which for purposes of this Report, is referred to as the APM/CTS date of beneficial occupancy (APM/CTS DBO). From 2014 through 2016, the Department met with the rental car companies that serve the Airport to discuss: The planning, facility requirements, and preliminary design of the ConRAC. The operation of the CTS. The use of a design, build, finance, operate, and maintain (DBFOM) entity for the delivery of the ConRAC project and a separate DBFOM entity to deliver the APM system project. The plan to fund ConRAC project costs and CTS costs. The insufficiency of existing CFC revenues at the currently collected $10 CFC rate per transaction. The need to change the existing $10 CFC per rental car transaction to an alternative CFC rate per rental car transaction day. The use of CFC revenues to pay the forecasted ConRAC and CTS costs. The proposed contribution by rental car companies in defined annual amounts to pay a portion of the forecasted annual CTS costs. Proposed business arrangements between the Department and rental car companies to occupy, use, and to pay certain costs associated with the ConRAC. 4 WJ Advisors LLC August 21, 2017

7 The results of these discussions were documented in the MOU that was signed by the existing on-airport rental car companies. The business arrangements in the MOU will be used by the Department to prepare a new concession and lease agreement (CL&A) between rental car companies and the Department for, among other things, the use and occupancy of the ConRAC, and the use of the CTS, all of which are more fully described in Section 1.3 of this Report. The financial forecasts presented in this Report are based on information and assumptions provided by, or reviewed with and agreed to by, Department management. The forecasts reflect management s expected course of action and, in management s judgment, present fairly the expected use of CFC revenues. This Report should be read in its entirety for an understanding of the forecasts and the underlying assumptions. However, any forecast is subject to uncertainties. Inevitably, some assumptions will not be realized, and unanticipated events and circumstances may occur. Therefore, there will be differences between the forecast and actual results, and those differences could be material. 1.2 Consolidated Rental Car Facility and APM/CTS Background The Department proposes to implement certain landside improvements to continue to transform the Airport into a world class airport by relieving traffic congestion in the CTA and on the surrounding streets, improving access options and the travel experience for Airport passengers, and providing a connection to the regional metro rail system. The ConRAC project and APM system project are important elements of these landside improvements Consolidated Rental Car Facility. The ConRAC is expected to provide a centralized location for rental car companies serving the Airport. The project will improve the rental car customer experience and the day-to-day operations of the rental car companies, as well as improve traffic flow in the CTA by replacing all rental car company specific shuttle buses using the CTA with a new common transportation system, which will substantially reduce traffic congestion in the CTA and surrounding roads. Rental car company specific facilities can be found in over 20 locations northeast of the Airport. The Department seeks to reduce traffic congestion in the surrounding area of the Airport by relocating rental car companies into a centralized location adjacent to Interstate 405 with connections to the APM system and nearby freeways. In collaboration with the rental car companies, the Department has identified the following benefits of the ConRAC at the Airport: Improved Passenger Experience The ConRAC will provide enhanced customer experience and safety with an easy-to-find consolidated location conveniently linked to the CTA by the CTS. Average travel time between the terminal buildings/cta and the ConRAC will be reduced to 14 minutes or less, depending on the customer s arrival or departure terminal. Improved Traffic Flow The ConRAC is expected to eliminate more than 3,200 daily rental car shuttle trips on city streets and CTA roadways. In addition, because the ConRAC will consolidate the main operations of each company including idle storage 5 WJ Advisors LLC August 21, 2017

8 onto one site, the number of vehicle miles required to process return vehicles to be fueled and washed or sent to storage will be greatly reduced. Free-up CTA Curb Space The ConRAC is expected to reduce curb side congestion on the lower level of the CTA. Operational Efficiencies Rental car companies within the same brand family will be able to reduce costs by sharing space, resources, and transportation, and accommodate all operations and forecast growth within the same secure area. Operational efficiency will improve as all areas will now be in one location. Better Land Use The preferred concept for the ConRAC will require approximately 68 acres. This footprint is at least 46% less land compared to the estimated site inventory of 145 acres currently utilized by the rental car companies in the areas surrounding the Airport. The ConRAC would include ready/return parking spaces for rental cars, a quick turnaround area (QTA) building that would include areas for vehicle queuing, fueling, wash bays, and light maintenance, and a customer service building (CSB) that would include customer service counters, office space, restrooms, and retail areas. Additionally, the ConRAC would include overflow rental car vehicle space to meet peak demands, rental car employee parking spaces, and QTA areas Automated People Mover System. The APM system is expected to provide fast, convenient, and reliable access to the CTA for passengers, employees, rental car customers, and other users of the Airport, 24 hours a day. The APM system would be built completely above grade and would connect to the passenger terminal buildings in the CTA. The APM system would transport passengers between the CTA and other Airport facilities, including the ConRAC, new public parking facilities, and multiple locations for passenger pick up and drop off. In addition, the APM system would include a station at the multi-modal/transit facility at 96 th Street/Aviation Boulevard planned by Metro, which would be a separate and independent project to provide the opportunity for passengers to access the Metro regional rail system. The APM system guideway would be approximately 2 ¼ miles in length and would be up to 70 feet in height above existing grade. There would be three stations within the CTA: (1) a West Station located between Terminals 3 and 4, east of the Tom Bradley International Terminal, (2) a North Center Station located between Terminals 2 and 6, north of the existing Airport Traffic Control Tower and Center Way, and (3) an East Station located between Terminals 1 and 7. Three additional stations outside of the CTA are proposed to serve: (1) a West Intermodal Transportation Facility Station, which may include, but not be limited to Airport public and employee parking facilities, and commercial vehicle pickup and drop-off areas, (2) the East Intermodal Transportation Facility station described above (located at 96 th Street/Aviation Boulevard) that would connect riders to the Los Angeles County Metropolitan Transportation Authority s light rail line (Crenshaw/LAX Transit Project) and additional future public parking and commercial vehicle pickup and drop-off areas, and (3) a ConRAC station. 6 WJ Advisors LLC August 21, 2017

9 1.3 Business Arrangements in MOU As stated earlier, the Department concluded commercial negotiations with the 13 existing on- Airport rental car companies and documented the understanding of the Department and the existing on-airport rental car companies in a non-binding MOU. The MOU was signed by the existing on-airport rental car companies, which includes the following brands: Advantage, Alamo, Avis, Budget, Dollar, DR Car Rental (doing business as Payless), Enterprise, EZ, Firefly, Fox, Hertz, Midway, National, Sixt, Thrifty, Zipcar. Figure 1 shows the on-airport rental car brands company market share of gross revenues for the first seven months of FY 2017 (July 2016 through February 2017). Each of the 13 on-airport rental car companies that signed the MOU also have existing rental car concession agreements with the Department. Figure 1 ON-AIRPORT RENTAL CAR BRANDS COMPANY MARKET SHARE OF GROSS REVENUE JULY 2016 THROUGH FEBRUARY 2017 Los Angeles International Airport Hertz, 20.3% Other (a), 5.0% Fox, 4.4% Sixt, 4.4% Thrifty, 4.7% Alamo, 16.5% Dollar, 6.1% Budget, 8.0% Avis, 13.6% Enterprise, 9.1% National, 8.0% Notes: The sector shares may not total 100% because of rounding. (a) Other includes Advantage, EZ, Firefly, Midway, Payless, and Zipcar. Source: Department records. 7 WJ Advisors LLC August 21, 2017

10 The MOU states, among other things, that: Subject to certain Board and other approvals, the Department will deliver a ConRAC that meets certain facility requirements of the rental car companies, which is referred to in this Report as the Preferred Alternative. The Department would seek to increase the existing CFC of $10 per rental car transaction to the alternative CFC rates stated in the MOU, as described in Section 1.4. The Department will draft a new concession and lease agreement (CL&A) for the use and occupancy of the ConRAC when it opens, which would replace the existing on- Airport concession agreements when those existing agreements expire. Rental car companies signing the MOU will have an opportunity to review the draft CL&A. The estimated term of the CL&A of 20 years with one option to extend the CL&A for 5 years by the Department through written notice to the concession, or automatically if certain transaction day targets are achieved pursuant to the MOU. The CL&A will include, but not be limited to, the following business arrangements that will be in effect on ConRAC DBO: o The reallocation of certain ConRAC facilities each year to the rental car companies to reflect changes in rental car company gross revenue market share. o The payment by the rental car companies to the Department of the greater of a minimum annual guarantee or a 10% privilege fee of rental car gross revenues. o The payment of ground rent by rental car companies to the Department. o An annual payment (the rental car CTS Contributions) by the rental car companies to the Department to pay a portion of the annual cost of the CTS, which includes the common shuttle buses and then the APM/CTS. Annual CTS costs not paid by rental car CTS Contributions would be paid from alternative CFC revenues. For companies choosing not to sign the CL&A, the Department would (a) require the customers of those off-airport companies to pick up and drop off their customers at the ConRAC to use the CTS and (b) pay a transportation fee to the Department, that would be established to cover their customers prorated use of the CTS. Transportation fee revenue from off-airport companies would be used to pay annual CTS costs. The forecasted revenues presented in this Report do not include forecasted transportation fee revenues from off-airport rental car companies because the level of the CFC that would be charged to these companies and the amount of rental car customers of these companies using the CTS is not known as of the date of this Report. 8 WJ Advisors LLC August 21, 2017

11 1.4 Proposed Change to an Alternative CFC Rate The Department proposes to change the existing $10 CFC rate per rental car transaction, which the Department has been collecting since July 1, 2007, to an alternative CFC rate, as follows: $7.50 per rental car transaction day for not more than 5 transaction days from rental car companies that are expected to use and operate from the ConRAC. The $7.50 CFC rate would start on January 1, $9.00 per rental car transaction day for not more than 5 transaction days from rental car companies that are expected to use and operate from the ConRAC. The $9.00 CFC rate would start no later than on the estimated ConRAC DBO California Civil Code Section 1939, Assembly Bill 2051, and Assembly Bill 2280 Overview California Civil Code 1939, as amended by Assembly Bill (AB) 2051 and AB 2280 (CFC Legislation), permits an airport sponsor to require rental car companies to collect from a renter a CFC to: Finance, design and construct a consolidated airport rental car facility. Finance, design, construct, and operate common-use transportation systems that move passengers between airport terminals and those consolidated car rental facilities, and to acquire vehicles for use in that system. Finance, design, and construct terminal modifications solely to accommodate and provide customer access to common-use transportation systems. An airport sponsor may require rental car companies to collect an alternative CFC under the following conditions: 1. A public hearing is held to review the costs of financing the design and construction of a consolidated rental car facility, and to design, construct, and operate a common use transportation system, and acquire vehicles to use that system. The following additional items are also required to be demonstrated at the same public hearing: 2. The amount of revenue has been established to finance the costs described in #1 above. 3. The amount of revenue generated from the existing $10 CFC per rental car transaction is not sufficient to pay the costs described in #1 above. 4. Additional revenue is required, which would be generated from the proposed daily CFC rate. 2 The Department may decide to shorten the period of time the $7.50 CFC rate would be in effect or eliminate the increase to the $7.50 CFC rate altogether by immediately increasing the CFC to the $9.00 rate, but only if the earlier increase to the $9.00 CFC rate is determined by the Department to be economically beneficial to the ConRAC project and/or APM/CTS project by lowering total financing costs. 9 WJ Advisors LLC August 21, 2017

12 5. The steps the airport operator has taken to limit costs. 6. Other potential alternatives for meeting the airport operator s revenue needs other than the collection of the fee. 7. The extent to which rental car companies or other businesses or individuals using the facility or CTS will pay for the costs associated with these facilities and systems apart from the fee collected from customers. AB 2280, which specifically applies to the Airport, states that the authorization under AB 2280 will become inoperative when bonds, capital contributions, availability payment contracts, lease agreements, or other forms of financing are paid or reimbursed. In addition, the maximum term for financing costs under AB 2280 shall not exceed 35 years. The Department intends to use an availability payment contract to finance, design and construct the ConRAC and a different availability payment contract to finance, design, construct, and operate the APM system, which APM system contract would include the acquisition of vehicles for use on the APM system. The availability payment contracts would be between the Department and the design, build, finance, operate and maintain entity that is competitively selected by the Department for the ConRAC project (the ConRAC DBFOM) and a separate DBFOM entity for the APM system project (the APM DBFOM). 1.6 Department s Compliance with CFC Legislation to Collect an Alternative CFC The Department s compliance with each of the items listed directly above pursuant to the CFC Legislation is as follows: Public Hearing. The Department expects to hold a public hearing at the Department s administrative office building (1 World Way, Los Angeles) in August 2017 to review the costs of financing the design and construction of the new ConRAC, the cost of operating a common shuttle bus system from ConRAC DBO until APM/CTS DBO, and the costs of financing the design, construction, and operation of the APM, including the acquisition of vehicles for the APM Revenue Amounts have been Established. The Department has established the estimated amount of total revenue to pay the cost of financing the design and construction of the new ConRAC, to operate a common shuttle bus system prior to APM/CTS DBO, and to design, construct, and operate the APM/CTS. The sources of revenues to pay ConRAC and CTS costs include (a) CFC revenues, (b) CFC interest income, and (c) rental car CTS Contributions pursuant to the MOU. The forecast of revenue is equal to approximately $5.6 billion, and is shown on Exhibit 1 and Exhibit 2. The forecast of revenues is based on the following: The existing CFC rate of $10 per rental car transaction staying in place until December 31, An alternative CFC rate of $7.50 per rental car transaction day for not more than 5 transaction days from January 1, 2018 through ConRAC DBO. 10 WJ Advisors LLC August 21, 2017

13 An alternative CFC rate of $9.00 per rental car transaction day for not more than 5 transaction days from ConRAC DBO through August 31, Interest income on CFC revenues through August 31, Rental car CTS Contributions (gross rental car CTS Contributions less Scheduled Abatements and Additional Abatements, if any) pursuant to the MOU. Exhibit 3 presents the forecast of CFC revenues, which is based on the CFC rates that are assumed to be collected by the Department multiplied by forecasted rental car transactions for the existing $10 CFC and the forecasted rental car transaction days for not more than 5 transaction days for the alternative CFC rates. As shown on Exhibit 1 and Exhibit 2 of this Report, total forecasted revenues would be used to pay ConRAC and CTS costs of approximately $5.6 billion 3, which include: The payment of ConRAC project costs, which reduces the total amount of ConRAC project costs to be funded from other unrestricted Airport revenues. The payment of rental car facility planning expenses. The payment of all estimated ConRAC capital (project and financing) costs through the assumed maturity date (June 30, 2052) of capital used to pay ConRAC project costs. The payment of common shuttle bus costs. The payment of all APM/CTS capital (project and financing) and operating expenses through the assumed maturity date (June 30, 2053) of capital used to pay APM/CTS project costs. The forecast of CFC revenues, CFC interest income, rental car CTS contributions, ConRAC costs and CTS costs is based on the assumptions provided in Section 4 and Attachment B Existing CFC Revenue is Insufficient. Through June 30, 2016, the Department has collected approximately $248.5 million of revenue from the existing CFC of $10 per transaction (including CFC interest income), and has used approximately $3.0 million of that revenue for rental car related costs 4. As of July 1, 2016, approximately $245.5 million in CFC revenue is available to pay ConRAC capital (project and financing) costs and CTS project, financing and operating costs. The forecast of revenues from the existing $10 CFC per rental car transaction is equal to the existing $10 CFC per rental car transaction held constant through FY 2053 multiplied by forecasted on-airport rental car company transactions. We did not forecast any CFC interest income under this $10 CFC per transaction scenario because it was assumed that all $10 CFC revenue would be used to pay annual ConRAC and CTS costs. 3 Throughout this Report, cumulative dollars are shown, not discounted cash flows. 4 Source: Annual Financial Report, Los Angeles International Airport, for Fiscal Years Ended June 30, 2016 and WJ Advisors LLC August 21, 2017

14 Section 4 of this Report provides additional information regarding the assumptions used to forecast on-airport rental car transactions. Revenues from the existing $10 CFC per rental car transaction are forecasted to be $2.30 billion through FY In preparing the forecast of CFC revenues from the existing $10 CFC per rental car transaction, we did not assume any rental car CTS Contributions (gross rental car CTS Contributions less Scheduled Abatements and Additional Abatements), since those Contributions are part of a package of business arrangements between the rental car companies and the Department under the MOU that provided for the implementation and use of alternative CFC rates, not the continuation of the existing $10 CFC per rental car transaction. As shown on Figure 2, the shortfall in revenue from the existing $10 CFC per rental car transaction is approximately $3.3 billion, which is equal to (a) total ConRAC and CTS costs less (b) forecasted revenues from the existing $10 CFC revenue per rental car transaction. Figure 2 FORECAST OF EXISTING $10 CFC REVENUE, SHORTFALL IN REVENUE REQUIRED AND TOTAL CONRAC AND CTS COSTS Los Angeles International Airport $6.0 $5.0 (in billions) $4.0 $3.0 $3.3 billion shortfall in CFC revenues to pay CFC-eligible costs $5.6 $2.0 $1.0 $2.3 $- CFC Revenues and Interest Income from Existing $10 CFC Rate Total ConRAC and CTS Costs 12 WJ Advisors LLC August 21, 2017

15 1.6.4 Additional Revenue Required. The forecast of additional revenues required to pay ConRAC and CTS costs would come from the sources of revenue described immediately below (approximate amounts are shown). The additional revenue required is in addition to $3.3 billion in forecast existing $10 CFC revenue described above in Section $2.6 billion in alternative CFC revenue, based on the alternative CFC rates proposed by the Department multiplied by the forecast of rental car transaction days for not more than 5 transaction days. $660.9 million in rental car CTS Contributions (CTS Contribution Scheduled Abatement and net rental car CTS Contributions) pursuant to the MOU. $45.3 million of additional interest income on CFC revenues when the alternative CFC rates are collected on the dates that are described in this Report through August 31, See Section 4 for additional information regarding the assumptions used to forecast on-airport rental car transaction days, rental car CTS Contributions, and CFC interest income Steps taken to Limit Costs. The Department undertook an extensive process to identify and select a Preferred Alternative for the ConRAC, which included the development and analysis of numerous concept alternatives. An important criteria used to determine the Preferred Alternative was the cost effectiveness of the Preferred Alternative, both in terms of the design plan and any future expansion. The active input of the rental car companies, and consideration of their needs throughout the design process, will reduce any future change orders, and as such, any cost increases from such change orders. The Department intends to create project cost certainty for the ConRAC project and the APM system project by using competitively selected and separate DBFOM availability payment contracts with competitively selected DBFOM entities for each project. According to the Department, use of a DBFOM approach will have the following benefits for the ConRAC and APM system projects: Eliminating changes in project costs with a fixed price contract. A fixed price contract will result in lower financing costs compared to a traditional delivery method by eliminating change orders. This approach also means fixed annual DBFOM capital repayment costs (referred to as DBFOM availability payments ) and a greater certainty in the annual amount of CFC revenues that are needed to pay ConRAC capital costs and the annual capital and operating costs of the APM/CTS. Scheduling certainty with a certain delivery date for when the ConRAC and then the APM/CTS would be completed. This approach has multiple benefits, as follows: o Scheduling certainty by using a DBFOM approach will result in an overall reduction in financing costs that, under a traditional delivery approach, would have to be capitalized and paid from bond proceeds and would increase overall financing costs associated with the ConRAC and APM/CTS project. 13 WJ Advisors LLC August 21, 2017

16 o Rental car companies occupying and using the ConRAC will be able to transition from their existing rental car facilities to the ConRAC with date certainty, which will substantially minimize any operational disruptions and result in cost savings to those companies. This is particularly important given that many of the rental car companies that operate at the Airport have ground leases or own land for their existing operations, so these companies will be able to plan a greater level of certainty when for example ground leases have to be terminated Other Alternatives for Meeting Airport Operator s Revenue Needs. The Department has made effective use of all potential funding sources for the ConRAC project and the APM system project. Consolidated Rental Car Facility. As described in Section for the ConRAC project, the rental car companies that occupy and use the ConRAC will pay the Department (a) annual ground rent for use of the ConRAC, (b) an amount to cover all ConRAC operating expenses pursuant to the MOU, and (c) the greater of a minimum annual guarantee or a privilege fee for the right to operate a rental car concession on-airport. The Department does not believe that it is reasonable to require the rental car companies to pay higher rent to pay for the ConRAC. The Department has been very diligent in lowering the cost of the ConRAC while meeting the facility requirements and operational needs of the rental car companies. Automated People Mover System. The Department expects to use the sources of funds listed below to pay for the total cost of the APM system project 5 : o New Passenger Facility Charge (PFC). A new PFC authorization from the Federal Aviation Administration (FAA) to pay PFC-eligible APM system costs, which is expected to be submitted by the Department to the FAA in 2017/2018. o New airline rates and charges. Another source of revenue to pay for the APM system project will come from increases in airline rates and charges. o Other sources of Airport revenue. The Department expects that revenues from non-airline sources, including public parking and concession revenues would also help pay for APM system costs. o Rental Car CTS Contributions. The rental car companies that occupy and use the ConRAC will make annual rental car CTS Contributions towards the payment of annual APM/CTS capital and operating costs. The forecasted amount of annual Rental Car CTS Contributions is shown on Exhibit 1. 5 The DBFOM entity selected for the APM system project may also construct other Airport improvements. These other improvements, if any, and the cost of building and financing those other improvements are not contemplated in this Report. Forecast project costs for the APM system project and the APM/CTS are for those elements only, and not these other improvements. 14 WJ Advisors LLC August 21, 2017

17 1.6.7 Fees other than the fee collected from rental car customers that are paid by rental car companies and other businesses to use the ConRAC and APM/CTS. The fees other than the fee collected from rental car customers that are paid by rental car companies and other businesses to use the ConRAC and the APM/CTS include the following pursuant to the MOU: The payment of the greater of a minimum annual guarantee or a 10% privilege fee by the rental car companies to the Department. The payment of ground rent by rental car companies to the Department. An annual rental car CTS Contribution to pay annual CTS costs (common shuttle bus and APM/CTS). The payment of a transportation fee to the Department for companies choosing not to sign the CL&A. These off-airport rental car companies would be required to pick up and drop off their customers at the ConRAC to use the CTS and pay a transportation fee that would be established to cover their customers prorated use of the CTS. Transportation fee revenue from off-airport companies would be used to pay annual CTS costs. 15 WJ Advisors LLC August 21, 2017

18 Independent Accountant s Report To the Members of the Board of Airport Commissioners Los Angeles International Airport Los Angeles, California We have examined the accompanying Schedule of Forecasted Revenues and Costs of the Los Angeles International Airport (Airport) Consolidated Rental Car Facility (CONRAC) and Common Transportation System (CTS) for the period from July 1, 2017 through August 31, 2047 (Forecasted Schedule), based on the guidelines for the presentation of a forecast established by the American Institute of Certified Public Accountants. The Airport s management is responsible for preparing and presenting the Forecasted Schedule in accordance with the guidelines for the presentation of a forecast established by the American Institute of Certified Public Accountants. The Forecasted Schedule was prepared for compliance with California Civil Code Section 1939, as amended by Assembly Bill No. 2051, and further amended by Assembly Bill No specifically for the Airport, related to Customer Facility Charges and the CONRAC and CTS. Our responsibility is to express an opinion on the Forecasted Schedule based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the forecast is presented in accordance with the guidelines for the presentation of a forecast established by the American Institute of Certified Public Accountants, in all material respects. An examination involves performing procedures to obtain evidence about the forecast. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of the forecast, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. In our opinion, the accompanying Forecasted Schedule is presented, in all material respects, in accordance with the guidelines for presentation of a forecast established by the American Institute of Certified Public Accountants, and the underlying assumptions are suitably supported and provide a reasonable basis for management s forecast. There will usually be differences between the forecasted and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Our examination was conducted for the purpose of forming an opinion on the Forecasted Schedule. The Message from the CFO, Section 1, Introduction, Attachments, and Exhibits are presented for purposes of additional analysis and are not a required part of the Forecasted Schedule. Macias Gini & O Connell LLP 777 S. Figueroa Street, Suite 2500 Los Angeles, CA

19 The Exhibits are the responsibility of management and were derived from and relate directly to the records used to prepare the Forecasted Schedule. Such information has been subjected to the procedures applied in the examination of the Forecasted Schedule to obtain evidence about the forecast. In our opinion, the Exhibits are presented fairly, in all material respects, in relation to the Forecasted Schedule. The Message from the CFO, Section 1, Introduction, and the Attachments have not been subjected to the procedures applied in the examination of the Forecasted Schedule, and accordingly, we do not express an opinion or provide any assurance on it. The accompanying Forecasted Schedule and our report are intended solely for the information and use of the Members of the Board of Airport Commissioners, the Airport s management, California s Assembly and Senate Committees on Judiciary, the Assembly Committee on Transportation, and the Senate Committee on Transportation and Housing, and are not intended to be and should not be used by anyone other than these specified parties. Los Angeles, California August 21,

20 3. SCHEDULE OF FORECASTED REVENUES AND COSTS OF THE LOS ANGELES INTERNATIONAL AIRPORT CONSOLIDATED RENTAL CAR FACILITY AND COMMON TRANSPORTATION SYSTEM For the period from July 1, 2017 through August 31, 2047 Amount TOTAL REVENUES (in millions) Existing per transaction CFC through December 31, 2017 (a) $279.9 New alternative CFC per transaction (a) 4,632.6 CFC interest income (a) 45.3 Total CFC revenues [A] $4,957.8 CTS Contribution Scheduled Abatements (b) [B] Net rental car company CTS Contributions (b) [C] Total revenues to pay ConRAC and CTS costs [D=A+B+C] $5,618.7 TOTAL CONRAC AND CTS COSTS ConRAC Project costs paid prior to FY 2022 (c) ($543.3) Planning expenses (d) (3.0) Department special facility bond debt service reserve fund (e) (47.1) Capital costs (project, financing, and interest) (f) (1,884.8) Total ConRAC costs [E] ($2,478.2) Common Transportation System CTS Contribution Scheduled Abatement ($115.0) Common shuttle bus expenses (g) (70.6) APM/CTS capital costs (h) (2,294.2) APM/CTS operating expenses (h) (664.4) Less: Remaining annual CFC revenues 3.7 Total CTS costs [F] ($3,140.5) Total ConRAC and CTS costs [G=E+F] ($5,618.7) Demonstration: total CFC revenues equal total ConRAC and CTS [G+D] $0 (a) See Exhibit 2. See Exhibit 3 for the detailed forecast of CFC revenues. (b) See Exhibit 2. Source for Scheduled Abatements: MOU. Forecast is net of Additional Abatements, also pursuant to the MOU. (c) Source: See Exhibit 2. Reflects the use of revenues to pay a portion of ConRAC project costs. (d) Source: Los Angeles International Airport Annual Financial Report for Years Ended June 30, 2016 and (e) See Exhibit 2. (f) See Exhibit 2. (g) Source: Department estimates. See Attachment C. (h) See Exhibit 2. See accompanying Notes to the Schedule of Forecasted Revenues and Costs of the Los Angeles International Airport Consolidated Rental Car Facility and Common Transportation System 18 WJ Advisors LLC August 21, 2017

21 4. NOTES TO SCHEDULE OF FORECASTED REVENUES AND COSTS OF THE LOS ANGELES INTERNATIONAL AIRPORT CONSOLIDATED RENTAL CAR FACILITY AND COMMON TRANSPORTATION SYSTEM 4.1 General California Civil Code 1939, as amended by Assembly Bill (AB) 2051 and AB 2280 (collectively, the CFC Legislation), permits an airport sponsor to require rental car companies to collect from a renter a Customer Facility Charge (CFC) to finance, design and construct a consolidated airport rental car facility; finance, design, construct, and operate common-use transportation systems that move passengers between airport terminals and those consolidated car rental facilities, and to acquire vehicles for use in that system; and to finance, design, and construct terminal modifications solely to accommodate and provide customer access to common-use transportation systems. The Los Angeles International Airport (Airport) is owned and operated by the Department of Airports of the City of Los Angeles (the Department). The Department prepared the Customer Facility Charge Rate Modification Report to fulfill the requirements of the CFC Legislation, to require the rental car companies currently operating at the Airport to collect an alternative customer facility charge (CFC) to support the development of two significant projects at the Airport: a new consolidated rental car facility (ConRAC) and new Automated People Mover (APM) system, a portion of which is referred to and serves as the common-use transportation system (APM/CTS), that would serve the Central Terminal Area (CTA) and the new ConRAC at the Airport. The Department proposes to change the existing $10 CFC rate per rental car transaction, which the Department has been collecting since July 1, 2007 and is expected to collect until December 31, 2017, to an alternative CFC rate of $7.50 per rental car transaction day for not more than 5 transaction days from January 1, 2018 through the ConRAC date of beneficial occupancy (DBO) and $9.00 per rental car transaction day for not more than 5 transaction days from the ConRAC DBO through August 31, The business arrangements for the development of the ConRAC and APM/CTS, including the collection and use of alternative CFC revenues at the Airport to pay for the costs of both projects, were agreed upon and documented in a non-binding Memorandum of Understanding (MOU) between the Department and the 13 on-airport rental car companies that currently serve the Airport. The MOU was signed by each of the existing on-airport rental car companies and fully executed by the Department in early Basis of Accounting The accompanying Schedule is presented using the cash basis of accounting, whereby revenues and expenditures are recognized during the period in which they are received or disbursed. 19 WJ Advisors LLC August 21, 2017

22 4.3 Summary of Forecasted Revenues and Costs Provided on Exhibit 1 and Exhibit 2 are the existing CFC revenues, forecasted alternative CFC revenues, forecasted CFC interest income, and forecasted net rental car CTS Contributions Summary of Forecasted Revenues. The forecast of revenues is equal to the sum of the following: The continued collection of the existing $10 CFC multiplied by the forecasted rental car transactions through December 31, The collection of an alternative CFC rate of $7.50 from January 1, 2018 through June 30, 2022, multiplied by the forecasted transaction days for not more than 5 transaction days during the same years. An increase in the alternative CFC rate to $9.00 from the estimated ConRAC DBO (July 1, 2022) through August 31, 2047, multiplied by the forecasted transaction days for not more than 5 transaction days during the same years. Forecasted CFC revenue interest income through August 31, Rental car CTS Contributions (CTS Contribution Scheduled Abatement and net rental car CTS Contributions) starting at ConRAC DBO and continuing through FY 2047 (the same date the Concession and Lease Agreement is assumed to expire). Section 4 and Attachment B provides additional information regarding the assumptions used to prepare the forecasts described above. Total forecasted revenues are equal to $5.62 billion, including $279.9 million from existing CFC revenues, $4.63 billion from alternative CFC revenues, $45.3 million CFC interest income, and $660.9 million from rental car CTS Contributions (CTS Contribution Scheduled Abatement and net rental car CTS Contributions) Summary of Forecasted ConRAC Costs. The forecast of total ConRAC costs presented on Exhibit 1 and Exhibit 2 is equal to the sum of the following: Forecasted ConRAC project costs to be paid from CFC revenues at the estimated ConRAC DBO. Actual rental car planning expenses as presented in the Los Angeles International Airport Annual Financial Report for Years Ended June 30, 2016 and A forecasted deposit to a debt service reserve fund for special facility bonds that would be issued by the Department to pay ConRAC capital (project and financing) costs. Starting at ConRAC DBO, forecasted capital (project, financing, and interest) costs equal to the following: o Forecasted annual debt service on special facility bonds that would be issued by the Department to fund forecast ConRAC costs. These bonds are estimated to be fully paid by FY 2052 (see Exhibit 7). 20 WJ Advisors LLC August 21, 2017

23 o Forecasted annual ConRAC DBFOM availability payments that would repay DBFOM private capital and long-term bonds that would be used to fund the forecasted ConRAC project costs. The availability payment is estimated to be fully paid by FY 2053 (see Exhibit 8) Summary of Forecasted CTS Costs. The forecast of total CTS costs presented on Exhibit 1 and Exhibit 2 is equal to the sum of the following: Forecasted annual common shuttle bus expenses from ConRAC DBO until APM/CTS DBO. Starting at APM/CTS DBO, forecasted capital (project, financing, and interest) costs equal to the following: o Forecasted annual debt service on Airport revenue bonds that would be issued by the Department to fund forecast APM/CTS costs. These bonds are estimated to be fully paid by FY 2053 (see Exhibit 9). o Estimated annual APM/CTS DBFOM availability payments that would repay DBFOM private capital and long-term bonds that would be used to fund the forecasted APM/CTS project costs. The availability payment is estimated to be fully paid by FY 2053 (see Exhibit 10). Starting at APM/CTS DBO, estimated annual operating expenses through FY Total ConRAC capital (project, financing, and interest) costs plus CTS operating and capital costs are equal to $5.62 billion. 4.4 Summary of Significant Assumptions The assumptions used to prepare the forecasts described in this Report are summarized in Attachment B and are also included on the exhibits attached to this Report. This financial forecast presents, to the best of Airport management s knowledge and belief, the Airport s expected revenues and the expected total ConRAC and CTS costs for the forecast period. Accordingly, the forecast reflects Airport management s judgement as of the date of this forecast, of the expected conditions and its expected course of action. The assumptions disclosed herein are those that Airport management believes are significant to the forecast. There will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. The following is important to understand regarding the assumptions and information contained in this Report, and used to prepare the forecasts: 1. All forecasted project costs were provided by the Department, and are subject to change to reflect actual project costs based on, but not limited to, the selection of a DBFOM entity for the ConRAC project and DBFOM entity for the APM system project. 2. The sources of funds to pay ConRAC project costs and APM system projects costs are estimates that were provided by the Department, and are subject to change to reflect 21 WJ Advisors LLC August 21, 2017

24 actual funding sources, including the amount and timing for making milestone payments to each DBFOM entity. 3. Following completion of the ConRAC, the Department will be obligated to make annual availability payments to the ConRAC DBFOM entity, which were estimated based on the following key assumptions: Private capital Long-term debt 1a. Bond Issuance and Financing Dates: June 2022 June b. First and Final Principal Payments Due First principal due Final principal due c. Debt service structure Level Level debt service debt service 1d. Bond/Financing Interest Rates 7.88% 1e. Bond Principal / Financing Amount $ 50,750 $ 164,876 Please refer to Attachment B for more details. The Bond/Financing Interest Rate above is a blended rate. Financing costs are subject to change to reflect actual results. 4. Following completion of the APM system, the Department will be obligated to make annual availability payments (capital operating expenses) to the APM DBFOM entity, a portion of which will constitute the APM/CTS. Annual availability payments to the APM DBFOM entity were estimated based on the key assumptions on the following page. 22 WJ Advisors LLC August 21, 2017

25 Private capital Long-term debt 2a. Bond Issuance and Financing Dates: June 2023 June b. First and Final Principal Payments Due First principal due Final principal due c. Debt service structure Level Level debt service debt service 2d. Bond/Financing Interest Rates 6.10% 2e. Bond Principal / Financing Amount $ 33,632 $ 356,768 Please refer to Attachment B for more details. The Bond/Financing Interest Rate above is a blended rate. Financing costs are subject to change to reflect actual results. 5. Following completion of the ConRAC project but prior to the opening of the APM system, a common shuttle bus system may be required. The cost of operating and maintaining the common shuttle bus system was provided by the Department, and was based on certain assumptions regarding the ridership and the costs of such shuttle buses, which estimate is provided in Attachment C. The actual cost of the common shuttle bus system will be known when and if the common shuttle bus system is used. 6. The forecast of annual CFC revenues, which include revenues at the existing $10 CFC rate and the proposed alternative CFC rates of $7.50 and then $9.00, is based on certain assumptions regarding dates when the alternative CFC rates will start to be collected by the Department, growth in future rental car transactions and rental car transaction days as well as the average number of transaction days that are not more than 5 transaction days. The actual amount of annual CFC revenue that is collected by the Department and the uses of that revenue, will be affected by, among other things, the actual dates when the alternative CFC rates become effective, the actual number of transactions, transaction days, and transaction days that are not more than 5 transaction days. If annual alternative CFC revenues are not sufficient to pay annual APM/CTS capital and operating costs, the Department would use unrestricted Airport revenues to meet that obligation. 23 WJ Advisors LLC August 21, 2017

26 4.5 Consolidated Rental Car Facility Purpose, Need, and Alternatives The Department has met with and consulted with the rental car companies serving the Airport in planning workshops from 2014 through 2016 to evaluate different consolidated rental car facility alternatives. The following parameters were agreed to by both the Department and rental car companies as the criteria to evaluate alternatives: Customer service quick and easy to use. Operational efficiency minimize labor and process time. Efficient use of costs optimize the utilization of all facilities. Flexibility accommodate growth and industry changes. Level competitive playing field all users have an equal opportunity for efficient and profitable operations. Safety and security proactively design buildings for safety and security. In addition, the rental car companies suggested the following major values also be incorporated as part of the evaluation of alternatives: Maximize available site area Ensure that the ConRAC can be operated efficiently and meet future growth requirements. Minimize level changes no four-level schemes requiring a level change between the ready/return area and the QTA. Provide direct connections between the ConRAC garage to the QTA to idle storage. Brand family allocation the relationship of all components should accommodate the synergy in shared fleet and cross-utilization of facilities. Minimize initial costs the proposed design should be able to be constructed within the limits of the available funds. 24 WJ Advisors LLC August 21, 2017

27 The Department developed and evaluated three alternatives. Alternative 1 Alternative 2 Alternative 3 Site Utilization RAC building footprint Percentage of site occupied by rental car 51% 31% 44% Passenger Conveyance APM Station Single APM station for rental car facility and Metro users Separate APM station for rental car facility Separate APM station for rental car facility Percentage of rental car area within 350 ft. walking distance from CSB 48% 92% 87% Construction Phasing Rough order-of-magnitude costs Difficult to construct in phases Most practical for phased construction Difficult to construct in phases Project costs (millions) $931.0 $981.0 $1,000.0 Source: TranSystems. After a review of the three alternatives in January 2015, the rental car industry expressed a preference for alternative 3 and requested that the Department develop a version of that alternative that incorporates several modifications, which is referred to as the Preferred Alternative ). The features of the Preferred Alternative that are supported by the rental car industry and the Department are as follows: Equalized Ready/Return, QTA and idle storage area available on all three levels, which provides maximum flexibility in future space reallocation. Idle storage located in the center of the site between the Ready/Return and the QTA buildings. No level change between QTA and Idle Storage and the Ready/Return areas. A centralized QTA support area. Two multi-level QTAs for the large brand families, as well as two ground level QTAs for independent operators. CSB and APM station at level 4; no level change from the CSB to APM. An APM station for the ConRAC. 25 WJ Advisors LLC August 21, 2017

28 Bus plaza at ground level with access to the CSB for common shuttle bus operations prior to the start of operation of the APM system. The relationship between the three major components would contribute to the efficient movement of vehicles among these facilities, without crossing the boundaries into the facilities leased to other companies. The space requirements for the ConRAC are as follows: Component Ready/Return Area (area where customers pick-up and return vehicles) QTA (facilities for multi-level fueling, wash, and vehicle maintenance) QTA Support and Additional Site Functions (fuel storage and distribution; supervisor and vendor parking; car carrier delivery; vehicle staging corrals; loading docks/service yard) CSB (lobby with customer service counters, restrooms, retail amenities and other functions; connected to the APM and Ready/Return Area) Bus Plaza (for shuttle bus operations and for off-airport rental car companies pick up and drop off) APM Station (provides customers with convenient connection to the CTA) Idle Storage (overflow vehicle needs to meet peak demands) Rental Car Employee and Visitor Parking Design Basis 7,600 rental equivalent stalls 720 staging positions; 186 fueling nozzles; 37 wash bays; 63 maintenance bays 19 car carrier stalls and adjacent staging lanes; 348 stalls in dedicated secured car corrals 100,000 sf lobby and RAC offices; 4 vertical circulation cores Square footage Floor Space (Acres) 2,312, , , , bus bays 54, Separate load and unload platforms 24, ,000 storage stalls 1,905, ,100 employee stalls; 75 visitor stalls 366, Total ConRAC 5,934, Source: TranSystems, December Heavy maintenance, which includes major repair, body and collision work, brake, exhaust, engine, air conditioning, suspension, and transmission work is not accommodated at the ConRAC. It is expected by the Department that the individual companies would use certain offsite facilities to handle these needs. The Preferred Alternative also includes approximately 1,800 Airport employee parking spaces. No CFCs will be used to pay project costs or debt service on bonds used to fund project costs associated with employee parking. The Department has also focused efforts on making sure that sustainability measures would be incorporated into the ConRAC. One of the highlights of this initiative is the provision of a solar photo voltaic system, to be installed on the fourth level of the ConRAC. If built, energy generated from this system will be used to supply power to the ConRAC. 26 WJ Advisors LLC August 21, 2017

29 4.6 Forecasted ConRAC Project Costs Forecasted project costs for the ConRAC project were prepared by Faithful + Gould, consultants to the Department. The forecasted period costs were used by the Department to prepare forecasts of CFC revenue and uses of CFC revenue for the MOU and for this Report. According to Faithful + Gould, project costs for the ConRAC project include the following: Hard construction costs, based on an estimated schedule of values for each project. Allowances for escalation equal to 2.25% per year through the estimated midpoint of construction of Allowances for art program expenditures. Allowances for bonds 6 and insurances. Allowances for Department costs that are attributable to each project. Allowances for project and construction contingencies. According to Faithful + Gould, the estimated construction cost of the ConRAC was based on the following information for the new ConRAC: Architectural design development drawings. Project Definition Document. Workshop meetings. Discussions with architect and engineers. Exhibit 4 shows the forecasted cost of the ConRAC project of approximately $1.075 billion. The $1.075 billion of ConRAC project costs does not include cost savings, if any, from the cost and delivery of the project by a DBFOM entity. As stated earlier in this Report, the Department will be using a DBFOM delivery method for the ConRAC project to potentially achieve lower project costs and to have schedule certainty for the ConRAC DBO. In preparing the forecasts used for the MOU and the forecasts used in this Report, the Department assumed that the DBFOM entity would achieve efficiencies in constructing the ConRAC equal to a 5.0% reduction in ConRAC project costs, from $1.075 billion to $1.021 billion, which reduction, if any, may or may not be achieved. In addition, it was also assumed that new roadways and roadway improvements that would provide access to the ConRAC, but are not included in the forecasted $1.075 billion in costs prepared by Faithful+Gould, would equal approximately 5% of total ConRAC project costs. The actual cost of constructing the ConRAC and the cost of surrounding roadways will be based on the actual cost of the ConRAC project and roadway projects. 6 Bonds related to construction performance, not bonds to fund project costs. 27 WJ Advisors LLC August 21, 2017

30 Project Costs (in thousands) Forecasted ConRAC project costs (a) $1,075,114 Less: DBFOM efficiencies (b) (53,756) Estimated DBFOM ConRAC project costs $1,021,358 Plus: Attributable roadway costs (c) 51,068 Total ConRAC project costs $1,072,426 (a) Source: Faithful + Gould. (b) Source: Department. Equal to an allowance of 5.0% of ConRAC project costs of $1.075 billion. (c) Source: Department. Equal to an allowance of 5.0% of DBFOM ConRAC project costs of $1.021 billion. 4.7 Forecasted APM/CTS Project Costs This section of the Report presents the forecast of APM system project costs prepared for the Department as well as the method used by the Department to determine the amount of APM system project costs that are allocated to and constitute APM/CTS project costs APM System Project Costs. The forecast of APM system project costs are shown on Exhibit 4. That portion of APM system project costs that are allocated to the APM/CTS are also shown on Exhibit 4, and are the project costs used by the Department to prepare a forecast of CFC revenues and uses of CFC revenues for the MOU and for this Report. The estimate of APM system project costs were prepared by MapLAX, which was a jointventure that prepared the Landside Access Master Plan (LAMP) for the Department. LAMP includes, among other projects, the APM system, enabling roadways that would serve the ConRAC, and other Airport projects. Specialist firms working on LAMP included: Lea+Elliott, Faithful+Gould, WSP Parsons Brinkerhoff, and TranSystems. According to MapLAX, APM system project costs include the following: Hard construction costs, based on an estimated schedule of quantities (e.g., the volume of concrete required) Allowances for escalation and inflation equal to 2.50% per year to the midpoint of construction. Allowances for art program expenditures. Allowances for bonds 7 and insurances. Allowances for Department costs that are attributable to each project. Allowances for project and construction contingencies equal to 5% 7 Bonds related to construction performance, not bonds to fund project costs. 28 WJ Advisors LLC August 21, 2017

31 Forecasted APM system project costs are $2.30 billion, which includes all of the project cost elements discussed immediately above. As stated earlier in this Report, the Department will be using a DBFOM delivery method for the APM system project to achieve construction cost efficiencies and date certainty for when the APM/CTS will be operational. The actual cost of constructing the APM system and allocated costs to the APM/CTS will be based on the cost of delivering the APM system by the DBFOM entity selected by the Department Allocation of APM System Project Costs to CTS. The method used by the Department to allocate APM system project costs to the ConRAC and other areas of the Airport was based on the following, which was made available to the rental car companies that signed the MOU: Estimated types and amounts of ridership on the APM system, as determined by MapLAX. Types of ridership included rental car customers, passengers and employees of Airport tenants and the Department. The purpose and likely use of major project elements of the APM system by all users of such system. Approximately 41.1% of APM system project costs are estimated to be allocable to the CTS, which constitutes APM/CTS project costs for purposes of this Report. The cost of the APM system project that is estimated to be allocable to the CTS is approximately $943.7 million, as shown on Exhibit ConRAC and APM System/CTS Project and Financing Costs The estimated plan to fund ConRAC capital (project and financing) costs, as well as, the plan to fund the APM/CTS capital (project and financing) costs were developed by the Department and are discussed in this section. Exhibit 5 summarizes the estimated sources of funding for both projects. The funding plan for the ConRAC project and the APM/CTS project were developed by the Department prior to the selection of a DBFOM entity for each project. As such, actual construction and financing costs for each project may be different than the estimated plan discussed below Funding ConRAC Project and Financing Costs. The estimated funding plan assumes the following: At the start of ConRAC construction, the selected DBFOM entity would fund the forecasted $1.072 billion of ConRAC project costs. At ConRAC DBO, the funds used by the DBFOM would be replaced with the following sources: o DBFOM private capital and long-term debt financing 29 WJ Advisors LLC August 21, 2017

32 o Two milestone payments made by the Department to the DBFOM consisting of (1) CFC revenues and (2) the issuance by the Department of special facility bonds. As shown on Exhibit 5 for the ConRAC project, the estimated capital (project and financing) costs are approximately $1.43 billion. Capital and financing costs include the following: The cost of paying off the DBFOM construction loan, including interest expense on the loan. A major maintenance reserve account for the ConRAC, which assumes that the funding of such an account is a requirement of securing long-term debt financing by the DBFOM or by bond holders of the special facility bonds. A deposit to the CTS Payment Account. A debt service reserve fund for the DBFOM financing. A coverage account. Other costs of issuance. It was assumed that on ConRAC DBO, ConRAC capital (project and financing) costs would be funded by the following approximate amounts: $563.2 million in existing and forecasted CFC revenues. $648.6 million in Department special facility bond proceeds. $215.6 million in DBFOM capital and long-term debt Funding APM/CTS Project and Financing Costs. As stated in Section of this Report, the Department has estimated that approximately 41.1% of total forecasted APM system project costs or approximately $943.7 million in project costs are allocable to the CTS. This section discusses forecasted capital (project and financing) costs associated with the APM/CTS only, not the entire APM system project. The funding plan assumes the following for the APM/CTS: In or around the start of APM system construction, the DBFOM entity would fund total APM system project costs by a construction loan. In or around the APM/CTS DBO, the construction loan used by the DBFOM would be paid off from the following sources: o DBFOM private capital and long-term debt financing. o A milestone payment made by the Department to the DBFOM consisting of the issuance by the Department of Airport revenue bonds. 30 WJ Advisors LLC August 21, 2017

33 As shown on Exhibit 5 for the APM/CTS, the estimated capital (project and financing) costs are approximately $1.20 billion. Financing costs for the APM/CTS portion of the APM system project include the following: The cost of paying off the DBFOM construction loan, including interest. A debt service reserve fund for the Airport revenue bonds. Capitalized interest on the Airport revenue bonds. A debt service reserve fund for the DBFOM long-term financing. Other costs of issuance. It was assumed that the APM/CTS capital (project and financing) costs would be funded by the following approximate amounts: $806.1 million in Airport revenue bond proceeds and interest income. $390.4 million in DBFOM capital and long-term debt. 4.9 Estimated Annual Capital and Operating Costs for the ConRAC and CTS ConRAC Project. For the ConRAC project, estimated annual capital costs include the following: Annual debt service on the approximate $648.6 million in proceeds of the ConRAC special facility bonds. Annual availability payments on the approximate $215.6 million in ConRAC DBFOM private capital and long-term debt. The assumptions used to estimate both annual payments are presented on Exhibit 7 for the ConRAC special facility bonds and Exhibit 8 for the ConRAC DBFOM capital repayment. Annual ConRAC capital costs to be paid by alternative CFC revenues are estimated to start on ConRAC DBO through FY As shown on Exhibit 7 and near the last forecasted maturity date of the special facility bonds, the forecasted funds in the debt service reserve fund and coverage account would be used to reduce the annual capital costs that would otherwise be paid from alternative CFC revenues. As shown on Exhibit 8 and near the last forecasted payment date of the DBFOM availability payment, the forecasted funds in the debt service reserve fund would be used to reduce the annual DBFOM availability payments that would otherwise be paid from alternative CFC revenues. Pursuant to the terms of the MOU, the rental car companies signing the new CL&A would be responsible for paying all ConRAC facility operating expenses. ConRAC facility operating expenses cannot be paid from annual CFC revenues under the CFC Legislation. Exhibit 2 presents annual capital costs of the ConRAC. 31 WJ Advisors LLC August 21, 2017

34 CTS. A common shuttle bus system would be used by the Department if the APM system was not ready and available for its intended use at the same time that ConRAC DBO is reached. In the forecasted results provided to the rental car companies that signed the MOU, it was assumed that a common shuttle bus system would be used by the Department from July 1, 2022 to June 30, This is an assumption only. The CFC Legislation allows annual CFC revenue to be used to pay, among other things, operating expenses on a CTS. The estimated operating cost of the common shuttle bus system in FY 2023 is shown on Exhibit 2 and based on the assumptions provided in Attachment C. The estimated one-year operating cost of the common shuttle bus system would be paid from a combination of future annual alternative CFC revenues and rental car CTS Contributions, as provided under the MOU. When the APM/CTS DBO is reached, the estimated annual capital costs would include the following: Annual debt service on approximately $767.1 million in proceeds of Airport revenue bonds issued to fund APM/CTS capital (project and financing) costs. Annual DBFOM availability payments on approximately $390.4 million in APM system DBFOM private capital and long-term debt. The assumptions used to estimate both annual payments are presented on Exhibit 9 and Exhibit 10. Annual CTS capital costs to be paid by alternative CFC revenues are estimated to start when the APM/CTS DBO is reached. As shown on Exhibit 9 and near the last forecasted maturity date of the Airport revenue bonds, the forecasted funds in the debt service reserve fund would be used to reduce the annual capital costs that would otherwise be paid from alternative CFC revenues. As shown on Exhibit 10 and near the last forecasted payment date of the DBFOM availability payment, the forecasted funds in the debt service reserve fund would be used to reduce the annual DBFOM availability payments that would otherwise be paid from alternative CFC revenues. In addition to annual CTS capital costs, there will also be annual CTS operating costs paid from forecasted alterative CFC revenues, which amounts are shown on Exhibit 2 and Exhibit 11. MapLAX prepared annual estimates of operating expenses for the APM system. The Department used the methodology presented on Exhibit 11 to determine the amount of annual APM system operating costs that are allocated to the CTS. 32 WJ Advisors LLC August 21, 2017

35 ATTACHMENT A MEMORANDUM OF UNDERSTANDING 33 WJ Advisors LLC August 21, 2017

36 Memorandum of Understanding Los Angeles International Airport Rental Car Center Development The purpose of this non-binding memorandum of understanding ( MOU ) is to memorialize the mutual understanding of Los Angeles World Airports ( LAWA ) and (the Signatory RAC ) regarding the proposed terms for a concession and lease agreement ( C&LA ) with entities interested in and qualified to occupy and operate from the proposed Los Angeles International Airport ( LAX ) Rental Car Center ( RCC ). For over a decade, LAWA has proposed development of a consolidated rental car facility (a ConRAC ) at LAX with the goal of securing the benefits associated with such a facility, including but not limited to: addressing the future facility needs of rental car operators currently serving LAX, improving operating efficiencies and modernizing vehicle processing for these operators, enhancing the LAX passenger experience, reducing vehicle miles traveled by both rental automobiles and shuttle buses traveling between the Central Terminal Area ( CTA ) and individual company locations, and mitigating vehicle congestion and traffic in the CTA and near LAX neighbors. As part of the Specific Plan Amendment Study undertaken from , LAWA evaluated the feasibility of a ConRAC north of Century Boulevard between Aviation Boulevard and I-405. In February 2015, LAWA issued a Notice of Preparation initiating review of a ConRAC under the California Environmental Quality Act ( CEQA ) as part of the proposed LAX Landside Access Modernization Program ( LAMP ). In September 2016, LAWA issued a draft environmental impact report ( DEIR ) for LAMP. The DEIR review process is ongoing. LAWA expects to complete review of LAMP under CEQA in LAWA expects the Federal Aviation Administration to complete its review of the planned facility pursuant to the National Environmental Protection Act and other federal laws in In parallel with the multi-year processes summarized above, LAWA and interested rental car service providers ( RACs ) operating in and around LAX have been regularly meeting to confirm the specific requirements and features of the RCC as these affect design, development, cost, financing, operation and maintenance. LAWA and the RACs seek to solidify the understandings arising from this consultation process through this MOU to make RCC implementation efficient and timely. Notwithstanding concurrence between LAWA and the RACs on various development matters, compliance with CEQA and federal review processes may result in changes to the envisioned facility (although LAWA is not aware of any such changes being necessary at this time) and construction activities may not commence until final approvals are secured. LAWA understands the current rental car concessionaires have determined the RCC will be of interest to them only if RCC program reasonably meets each participating company s forecast operational and space requirements. LAWA has also determined (1) the project s 1

37 benefits are best achieved by maximizing RAC participation in the RCC including participation by RACs of all sizes and (2) the current Customer Facility Charge ( CFC ) level would need to be increased to the maximum per contract day level that is legally permissible by the State of California. LAWA and the Signatory RAC also recognize that the currently state-authorized maximum CFC rate levels do not yield forecast CFC revenues sufficient to fully fund the entire RCC program and common transportation system. Therefore, the proposed C&LA terms are structured to (1) distribute the risk of CFC shortfall between LAWA and the RACs that would occupy the RCC and (2) benefit both LAWA and the RACs that would occupy the LAX RCC should the CFC rate level be authorized to increase during the life of the C&LA. LAWA and the Signatory RAC agree that benefits will accrue to all participants/stakeholders through a well-defined, mutually understood path for establishing the means for financing and delivering the RCC. The approach to be taken for development and financing the RCC is summarized in two attachments to this MOU, specifically: Attachment 1 LAX RCC Implementation Plan Attachment 2 Concession & Lease Agreement Term Sheet ( Term Sheet ) Through this MOU and by 60-days from the date LAWA issues this MOU to RACs, LAWA seeks pre-design concurrence on the project features, financing assumptions, commercial terms, and process to be used for undertaking the RCC, as such concurrence will help maximize the probability of a successful project. This MOU, with its attachments, is presented for the purpose of securing the Signatory RAC s acknowledgment that the attachments reasonably reflect the non-binding agreement of LAWA and the RACs regarding the basis for future document development, including, but not limited to, the C&LA, financing, design/construction and related documents. After execution of this MOU, the Signatory RAC will: 1. Be asked to participate in the review of the draft C&LA once developed by LAWA with the Los Angeles City Attorney, which document will include the terms described in the Term Sheet; 2. Receive a final C&LA for execution during Phase 1 of the C&LA competitive process as more particularly described in Attachment 1, which, if executed in Phase 1 by, will result in a location designation in the RCC; 3. Be invited to continue participating in the design process for finalizing the RCC facility program, which will include working with the RCC design-build contractor once selected by LAWA pursuant to a competitive process, which entity is also expected to be responsible for construction financing, a share of permanent financing, and for the operation and maintenance of certain aspects of the RCC. 2

38 Los Angeles World Airports [Name of company] By: Deborah Flint By: Title: Chief Executive Officer Title: Date: 3

39 ATTACHMENT 1 LAX RCC Implementation Plan (Defined Terms are included in Attachment 2) Purpose To document LAWA s plans for the LAX RCC s (1) program and requirements, (2) design and delivery approach, (3) project financing, and (4) process for offering CL&As to interested in and qualified to operate as an LAX rental car concessionaire. Defined terms are provided at the end of Attachment 2. Program and Requirements 1) Subject to and while complying with both CEQA and NEPA, LAWA plans to develop the LAX RCC whose program includes: a) The following LAX RCC capacities: Component Ready/Return Area (RAC) (area where customers pick-up and return vehicles) Quick-Turnaround Area (QTA) (facilities for multi-level fueling, wash and vehicle maintenance) QTA Support and Additional Site Functions (fuel storage and distribution; supervisor and vendor parking; car carrier delivery; vehicle staging corrals; loading docks/service yard) Customer Service Building (CSB) ( mini-mall lobby with customer service counters, restrooms, retail amenities and other functions connected to the APM station via an open courtyard and to the ready/return area via vertical circulation cores with escalators and elevators) Bus Plaza (for shuttle bus operations for a potential interim shuttle bus operation and for off-airport rental car companies) Idle Storage (for overflow vehicles to meet peak demand) Employee and Visitor s Parking Design Basis 7,600 rental equivalent stalls 720 staging positions 186 fuel nozzles 37 wash bays 64 maintenance bays 19 car carrier stalls and adjacent staging lanes 348 stalls in dedicated secured car corrals 100,000 square feet lobby and RAC offices with 4 vertical circulation cores 10 bus bays vertical circulation core connected to the CSB 10,000 storage stalls 1,100 employee stalls 75 visitor stalls b) Base building systems, finishes, and equipment inclusions (and exclusions) as shown in Exhibit 1 to this Attachment 1 c) A sustainability goal to meet or exceed Cal Green Tier 2 and LEED Silver 1

40 d) A facility functional/operational configuration and access roadways consistent with those shown in Exhibit 2 to this Attachment 1 2) In addition to Concessionaire employee parking spaces identified above, but not considered to be part of the LAX RCC program, LAWA plans to develop, in conjunction with the LAX RCC program, up to 1,800 airport employee parking spaces on Level 4 of the VSA element of the LAX RCC. 3) However, LAWA may reduce or eliminate the following: a) the airport employee parking element to the extent (i) it impairs the CEQA and NEPA approvals related to the underlying LAX RCC program or (ii) LAWA determines it is not in LAWA s operational or financial interest to implement the airport employee parking element in conjunction with the LAX RCC and b) the LAX RCC program s solar enhancements to the extent LAWA determines it is not in LAWA s operational or financial interest to implement the solar enhancements as part of the LAX RCC. 4) The current cost estimate for LAX RCC program is $993 million in 2016 dollars, including all soft cost and contingencies established using standard LAWA percentages, but excluding site acquisition, structure demolition for existing facilities to be acquired by or to be acquired by LAWA, land rent, tenant improvement costs, solar enhancement costs benefiting the LAX RCC, and the airport employee parking element s direct and allocated costs. Design & Construction 1) LAWA plans to deliver the LAX RCC and operationally necessary related improvements using a DBFOM entity who would be compensated by LAWA through a combination of milestone payments during construction, milestone payments at/after DBO, and annual availability payments after DBO through the DBFOM contract term. 2) LAWA may use a traditional contracting method distinct from the DBFOM contract to implement enabling projects, such as utilities relocation and installation, building demolition, earthworks, roadways, and site preparation, etc. 3) LAWA may elect to terminate the plan to use the DBFOM delivery method for the LAX RCC if LAWA determines that entering into a DBFOM contract is not advantageous to LAWA on a cost, schedule, financing, or operational basis, in which case LAWA may finance and deliver the LAX RCC using one or more traditional LAWA- managed methods to implement the LAX RCC program. 4) Throughout the DBFOM procurement, design and construction process (or a traditional LAWA-managed delivery method) for the LAX RCC, LAWA will periodically, no less frequently than every six months after the MOU execution date, and prior to any major decision milestones consult with and provide updates to RACs that have executed the MOU to which this document is attached. 2

41 5) Concessionaires will be required to engage their own design and construction firms to implement tenant improvements but will be subject to LAWA requirements applicable to LAX tenants engaging in construction in LAX facilities. 6) As part of the DBFOM procurement process (or through a more traditional LAWAmanaged delivery method), LAWA will both require and incentivize proposers to develop a QTA facility element delivery schedule prior to DBO and in a window of time reasonably sufficient to allow for tenant improvements in the QTA to be completed prior to DBO by Concessionaire-secured contractors. Plan of Finance 1) LAWA will adopt a CFC charged on Transaction Day basis at a rate no less than $7.50 on or before the Construction Commencement Date and adopt a CFC charged on a Transaction Day basis at a rate no less than $9.00 on or before LAX RCC DBO. 2) Prior to DBO, LAWA will transfer $115 million of CFCs collected to the CTS Abatement Fund established in the C&LA. 3) Pre-construction and construction financing is to be provided as follows. a) For the scope of any DBFOM contract, LAWA expects to require the DBFOM entity to provide all construction financing. b) For scope not included in any DBFOM contract, such as enabling project implementation described above, LAWA expects to provide construction financing through the SFB issuance and/or by employing other LAWA non-cfc capital. (LAWAmanaged scope may arise from a termination or reduction of the DBFOM approach and use of a more traditional LAWA-managed delivery method.) c) Regardless of the construction financing source, to reduce construction financing costs and, to the extent feasible, make certain LAX RCC facilities available for use prior to DBO, LAWA will use CFCs collected prior to DBO to make milestone payments to the DBFOM (or as an equity funding source to a LAWA-managed construction method): i) in an amount equal to the actual QTA facility element construction cost upon its completion, but not greater than $320 million and ii) in an amount equal to the VSA facility element construction cost upon its completion (or other date LAWA determines is financially efficient), but not greater than $243 million. d) However, to the extent LAWA determines the total CFCs collected before DBO is forecast to be less than that required for the stated CFCs to be transferred to the CTS Abatement Fund, the QTA completion milestone payment, and the VSA completion milestone payment, the VSA milestone payment will be reduced such that 3

42 the QTA milestone payment and the CTS Abatement Fund funding amounts are protected. e) For any milestone payment made during construction, no CFC funds will be used for the incremental cost of the airport employee parking element if delivered in conjunction with the LAX RCC. 4) After satisfying the CFC amount to be transferred to the CTS Abatement Fund, the QTA completion milestone payment, and the VSA completion milestone payment, any remaining CFC balance available at DBO will be used to reduce the amount of SFBs whose proceeds are to be used to fund post-dbo milestone payments to the DBFOM (or pay for construction cost incurred in a LAWA-managed project). 5) After DBO, to reduce project financing costs when using the DBFOM delivery method, LAWA will issue SFBs and/or provide other LAWA funds backed by post-dbo CFC revenues having proceeds of no less than $600 million, unless increased by LAWA in its sole discretion, which proceeds would be used as a scheduled post-dbo milestone payment to the DBFOM and to extinguish accrued land rent and any accrued interest thereon in an amount not to exceed 4% per annum during construction. a) If a LAWA-managed delivery method is used in lieu of the DBFOM method, prior to DBO LAWA will issue SFBs or use other LAWA funding sources backed by post-dbo CFC revenues to, at a minimum, finance project costs in an amount to ensure LAX RCC project completion, unless LAWA terminates the C&LA pursuant to the C&LA terms. 6) Regardless of delivery method chosen by LAWA, the CFC amount to be used to pay financing costs for the first 10 years after DBO will be fixed pursuant to an exhibit in the C&LA, unless otherwise agreed to by LAWA and Concessionaires pursuant to the C&LA terms. a) No CFCs will be used to pay finance costs arising from or attributable to including the airport employee parking element in the LAX RCC program. Should LAWA not make a milestone payment for the airport employee parking element, any DBFOM availability payments that would recover delivery and financing cost of the airport employee element will be pro-rated, based on costs, such that CFCs are not used directly or indirectly to pay for the airport employee element. b) Unless otherwise agreed by Concessionaires pursuant to the C&LA terms, any additional financing requirement arising from increased project costs will be financed (i) to defer recovery of such costs until after the DBO 10 th anniversary and (ii) to distribute such costs efficiently over the remaining term of the financing. 7) When competing the DBFOM contract among qualified development teams, LAWA expects to establish and fix annual DBFOM availability payments for the first 10 years after DBO. The fixed DBFOM payments in the first 10 years after DBO will be based on the fixed financing costs listed in the C&LA exhibit described immediately above, net of planned LAWA SFB payments, thereby causing proposed DBFOM availability payments 4

43 starting in Year 11 after DBO to be the focus of the financial criteria used in LAWA s DBFOM competitive process. a) When competing DBFOM availability payments, LAWA expects to establish rules and publish an evaluation process discount rate that promotes a stable and efficient availability payment proposals 8) When using the DBFOM delivery method, LAWA expects to require the DBFOM to establish and manage a tenant improvement fund of no less than $30 million, which fund would be made available to Concessionaires pursuant to the C&LA. LAWA expects to require the DBFOM contractor to provide reasonable, competitive proposals to each Concessionaire for design and construction of tenant improvements with commercially reasonable access, insurance and indemnification requirements; however, Concessionaires will not be obligated to contract with the DBFOM entity for tenant improvements. a) If a LAWA-managed delivery method is used in lieu of the DBFOM method, LAWA expects that proceeds of SFBs will be used to establish a tenant improvement fund in an amount no less than $30 million, except to the extent LAWA determines that adding this sum to the SFB issue is financially disadvantageous. If LAWA establishes the tenant improvement fund with SFB proceeds, Concessionaires will be responsible for independently competing and negotiating their design/construction contracts for tenant improvements prior to accessing the tenant improvement fund. b) Regardless of delivery method employed, the following will apply. i) Funds provided by the DBFOM or LAWA will not exceed 75% of the Concessionaire s reasonably forecasted tenant improvement cost. ii) Any tenant improvement costs above the amounts made available through the tenant improvement fund will be the sole responsibility of the Concessionaire to provide. iii) Repayment of the tenant improvement funds used by each Concessionaire will be to LAWA pursuant to the C&LA. C&LA Competitive Process LAWA expects to initiate the C&LA competitive process in early The C&LA competitive process will be implemented in three phases, as follows. Phase 1 Each RAC executing the MOU by the MOU Availability Expiration Date will be: 1. Invited to designate its preferred floor level for LAX RCC operations, which designation opportunity will be done in sequence based on 2016 market share of brands and brand families and later subject to the terms of the C&LA terms. 5

44 2. Offered a final C&LA for execution, which document will be based on the Term Sheet, if such RAC also meets Minimum Qualifications and passes City of Los Angeles administrative requirements in effect at such time. (Minimum qualifications are expected to be substantially similar to those described in the 2015 Rental Car Concession Agreement RFP unless otherwise directed by the Board of Airport Commissioners, but will be finalized during the implementation of Phase 1.) Those RACs that execute the C&LA during Phase 1 will not be required to participate in Phase 2 or Phase 3 of the C&LA competitive process. Phase 2 LAWA will issue a request for proposals ( C&LA RFP ). RACs that are interested in operating in the LAX RCC, but did not execute a C&LA in Phase 1 may participate in the C&LA RFP process if they wish to be considered. If the number of qualified RACs submitting proposals in response to the C&LA RFP is less than the maximum number of RACs that can be accommodated as established by LAWA in the C&LA RFP ( Maximum Number ) all qualified RACs submitting proposals in response to the C&LA RFP will be offered a C&LA for execution. If the number of qualified RACs submitting proposals in response to the C&LA RFP is greater than the Maximum Number, all qualified RACs submitting proposals in Phase 2 will be subject to Phase 3. Phase 3 If no C&LAs are offered for execution by LAWA in Phase 2, all RACs submitting proposals in Phase 2 and deemed qualified proposers will be required to submit a onetime bid if they seek to receive a C&LA from LAWA. LAWA will rank the bids and, thereafter, offer C&LAs to proposers with the highest ranked bidders until the number of executed C&LAs equals the Maximum Number. All bidders must pay LAWA the bid amount offered by the lowest ranked bidder executing a C&LA regardless of their individual bid amount. 6

45 Exhibit 1 LAX RCC Base Building Systems, Finishes, and Equipment (inclusions and exclusions) 7

46 Exhibit 1 (page 2 of 3) LAX RCC Base Building Systems, Finishes, and Equipment (inclusions and exclusions) 8

47 Exhibit 1 (page 3 of 3) LAX RCC Base Building Systems, Finishes, and Equipment (inclusions and exclusions) 9

48 Exhibit 2 LAX RCC Layout and Roadway Configuration 10