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°q11FOR`'% CITY COUNCIL STAFF REPORT
DATE: September 26, 2017 CONSENT CALENDAR
SUBJECT: APPROVAL OF REVISED RENTAL RATE SCHEDULE FOR AIRPORT
CAR RENTAL CONCESSIONAIRES
FROM: David H. Ready, City Manager
BY: Department of Aviation
SUMMARY
This action provides for the City Council to approve a revised rental rate schedule to
replace the rate schedule that was embedded in the amendments which the City
Council approved on June 21, 2017, for the five existing Airport car rental
concessionaires.
RECOMMENDATION:
1. Approve the revised rental rate schedule and authorize replacement of the rental
rate schedule that was embedded in the amendments which the City Council
approved on June 21, 2017, for all five Airport car rental concessionaires.
2. Authorize the City Manager to execute all necessarydocuments.
STAFF ANALYSIS:
On June 21, 2017, City Council approved amendments for all five Airport car rental
concession agreements for the purpose of increasing revenues to offset the
expenditures associated with the addition of four new Police Officers as approved
during the budget cycle. The car rental agreement amendments increased the terminal
rent, service facility rent, ready parking space rate, and overflow parking space rate
effective July 1, 2017.
The City Council's previously approved staff report stated in its FISCAL IMPACT section
that the collective increase in revenue from all five car rental concessionaires was
$345,000 per year which was correct. Also in the report was a rental rate schedule
(Table A), but it was discovered after approval that two of the five rows in it required
correction. The following illustration shows the previous and revised table (Table B) that
Staff is requesting be approved. These changes do not affect the original revenue goal
ITEM NO.
City Council Staff Report
September 6, 2017— Page 2
Revised Rental Rate Schedule for Airport Car Rental Concessionaires
as stated in the body of the staff report on June 21, 2017. That report is attached to this
staff report as ATTACHMENT A for reference and context.
ORIGINAL Table A
Effective Dates Terminal Service Ready Spaces Overflow
Rates Facility Spaces
Effective $46.70 / SF $0.87 / SF $1,400 / space $1.50 /space
July 1, 2017
Effective $66.18 / SF $1.05 / SF $1,6841 space $1.80 /space
Au ust 1, 2017
Effective $83.921 SF $1.56 / SF $2,516 / space $2.70 /space
-January 1, 2018
Effective $65.55 / SF $1.22 / SF $1,965.24 /space $2.11 / space
July 1 2018
REVISED Table B
Table B — REVISED (Correct) Rental Rate Schedule
Effective Dates Terminal Service Ready Spaces Overflow
Rates Facility Spaces
Effective $46.70 / SF $0.87 / SF $1,400 /space $1.50 / space
July 1, 2017
Effective $55.88 / SF $1.04 / SF $1675.25 /space $1.79 /space
August 1, 2017
Effective $76.76 / SF $1.43 / SF $2,301.11 / space $2.47 /space
January 1, 2018
Effective $65.55 / SF $1.22 /SF $1,965.24 / space $2.11 /space
July 1 2018
FISCAL IMPACT:
Approval of the revised rental rate schedule (Table B) will have no impact to the
Airport's budget since City Council approved an increase of $345,000 for FY 2017-18
and which the revised rental rates achieves.
AMWAi
Thomas o an, A.A.E. David H. Ready, Esq., P .
Executive Director, Airport City Manager
ATTACHMENT:
A. June 21, 2017 Staff Report
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cq�JFORN�P MY COUNCIL STAFF REPORT
Date: June 21, 2017 NEW BUSINESS
Subject: APPROVAL OF AMENDMENTS TO EXISTING AIRPORT CAR RENTAL
CONCESSION AGREEMENTS INCREASING RENTAL RATES AND
EXTENDING THE TERM BY UP TO THREE YEARS
From: David H. Ready, City Manager
Initiated by: PSP International Airport
SUMMARY
This action provides for the City Council's approval of an amendment to the existing
lease agreements previously approved with five various car rental agencies currently
operating at the Palm Springs International Airport (PSP). The term of the existing lease
agreements ends June 30, 2017, and the proposed amendments will extend the term
one year to June 30, 2018, with two additional one-year optional extensions through
June 30, 2020. The proposed amendments also include an increase of 40.4% to the
current terminal rent, service facility rent, ready parking space rate, and overflow
parking space rate paid by the car rental agencies.
RECOMMENDATION:
1) Approve Amendment No. 3 to Agreement No. 6110 with Avis Budget Car Rental,
LLC, dba Avis Rent A Car System, LLC, and Budget Rent A Car System, Inc.,
increasing rental rates by 40.4% and extending the term by one year through June
30, 2018, subject to two additional one-year optional extensions at the City's
discretion; and
2) Approve Amendment No. 2 to Agreement No. 6111 with The Hertz Corporation,
increasing rental rates by 40.4% and extending the term by one year through June
30, 2018, subject to two additional one-year optional extensions at the City's
discretion; and
3) Approve Amendment No. 2 to Agreement No. 6112 with Enterprise Rent-A-Car
Company of Los Angeles, LLC, dba Alamo Rent A Car and National Car Rental,
increasing rental rates by 40.4% and extending the term by one year through June
30, 2018, subject to two additional one-year optional extensions at the City's
discretion; and
ITEM NO.
03
City Council Staff Report
June 21,2017—Page 2
Approval of Car Rental Lease Agreement Amendments
Palm Springs International Airport
4) Approve Amendment No. 2 to Agreement No. 6113 with Enterprise Rent-A-Car
Company of Los Angeles, LLC, dba Enterprise Rent-A-Car, increasing rental rates
by 40.4% and extending the term by one year through June 30, 2018, subject to two
additional one-year optional extensions at the City's discretion; and
5) Approve Amendment No. 2 to Agreement No. 6114 with DTG Operations, Inc., dba
Dollar Rent A Car and Thrifty Car Rental, increasing rental rates by 40.4% and
extending the term by one year through June 30, 2018, subject to two additional
one-year optional extensions at the City's discretion; and
6) Authorize the City Manager to execute all necessary documents.
STAFF ANALYSIS:
On June 15, 2011, the City Council approved lease agreements with five different car
rental agencies to operate non-exclusive car rental concessions at PSP. The original
term of these lease agreements was for three years, through June 30, 2014.
By the close of the initial three-year term of these lease agreements in 2014, PSP had
not yet completed its Master Plan Update to address relocation of car rental facilities
and adjustment of baggage claim counters and vehicle service facilities. At that time,
City Council approved amendments to the lease agreements with the five various car
rental agencies, providing for a three-year extension of term through June 30, 2017,
with increases of approximately 13% to fixed rents charged for terminal rent, service
facility rent, ready space rate, and overflow space rates.
On October 21, 2015, the City Council held a public hearing and adopted Resolution
No. 23908 approving the Master Plan Update for the Palm Springs International Airport
(the "Master Plan"). The Master Plan identified a Recommended Alternative that
included a major capital project that will reconfigure the existing ready/return car rental
lot to accommodate a Quick Turn Around (QTA) facility and structured parking and
ready/return. The QTA facility and structured parking for rental cars will be located on
the site of the existing rental car ready/return lot located on the north side of the
terminal, as identified in the adopted Master Plan shown below:
04
City Council Staff Report
June 21, 2017—Page 3
Approval of Car Rental Lease Agreement Amendments
Palm Springs International Airport
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As noted in the October 21, 2015, staff report, it was estimated that the QTA facility and
structured parking for car rentals was estimated to cost $24-$25 Million, and would be
funded through capital funds generated by Customer Facility Charges (CFCs)
authorized to be levied at PSP by the FAA.
With adoption of the PSP Master Plan Update, PSP is initiating the process to select
professional consultants to provide design development, and prepare preliminary and
final construction drawings for construction of the QTA facility and structured parking
garage for consolidation of car rental operations at PSP. It is anticipated that the
timeframe for completion of design, construction bidding, and construction will take a
minimum of three years.
It is staffs recommendation that in lieu of issuing a Request for Bids solicitation for new
car rental concession lease agreements at this time, that the City Council consider
amending the existing lease agreements to extend the term one year through June 30,
2018, with two optional one-year additional extensions through June 30, 2020. Given
the uncertainty with the timing on delivery of the new QTA and structured parking facility
� 5
City Council Staff Report
June 21,2017—Page 4
Approval of Car Rental Lease Agreement Amendments
Palm Springs International Airport
for car rental operations, issuing a formal bid process at this time might not yield the
best terms of new car rental concession agreements. It is expected that with the QTA
and structured parking facility in construction by 2020, PSP will then be in better
position to competitively bid car rental concession agreements, yielding improved
financial terms relative to PSP's delivery of a new and modern, consolidated car rental
operations facility.
Given the pending renovations specific to the car rental operations at PSP, extending
the term of these non-exclusive concession agreements is recommended to maintain
certainty of continued operations with the existing car rental agencies and increase
Airport revenues.
Staff has discussed the proposed term extensions with the local FAA Airport District
Office, and represents that FAA staff indicated nothing objectionable regarding the
amendments.
Finally, the Airport Commission, at its March 15, 2017 meeting, voted unanimously to
recommend approval of the lease amendments to the City Council.
ENVIRONMENTAL IMPACT:
Section 15061 (b)(3) of the California Environmental Quality Act (CEQA) Guidelines
exempts activities that are covered under the general rule that CEQA applies only to
projects that have the potential to cause significant effects on the environment. Where it
can be seen with certainty that there is no possibility the activity in question may have a
significant effect upon the environment, the activity is not subject to CEQA. The
requested action relates to approval of amendments to existing lease agreements for
car rental concessions at PSP, which itself will not result in any new direct physical
impacts to the environment. Therefore, the requested action is considered exempt from
CEQA.
FISCAL IMPACT:
The rental car concession fees at PSP are consistent with industry practice, and are
calculated using the greater of either a minimum annual guarantee or 10% of gross
revenue. In addition to this base fee, there are fixed rents charged to each of the car
rental agencies depending upon the amount of space occupied and facilities used. In
2016, the various car rental agencies operating at PSP collectively paid $5,823,324
based primarily from 10% of the gross revenue generated from rental transactions. In
addition, they collectively paid $846,500 in fixed rents charged for space leased.
06
City Council Staff Report
June 21,2017—Page 5
Approval of Car Rental Lease Agreement Amendments
k Palm Springs International Airport
The proposed amendments represent a significant increase of 40.4% to the fixed rents
charged for terminal leases, service facility rents, ready space rates, and overflow
space rates, to partially offset the cost of additional Airport security which was included
in the new fiscal year budget.
These fixed rent charges have increased over 50% since 2011, and the new
amendments will increase revenue by $345,000 annually effective July 1, 2017.
Because the proposed rental rate increases fall in the middle of the car rental
companies' fiscal year (January through December), they had requested the rate
increase for the period of July through December 2017 be $70,000, with the remaining
balance of$275,000 being collected from January through June 2018. Effective July 1,
2018, the rate will be adjusted so the monthly rates remain the same through June 30,
2020.
SUBMITTED
Marcus L. Fuller, MPA, P.E., P.L.S. Thoma's Nolan
Assistant City Manager Executive Director, Airport
David H. Ready, Esq., P
City Manager
Attachments:
1. Lease Agreement Amendments
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