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CITY COUNCIL STAFF REPORT
October 6, 2010
CONSENT AGENDA
AIR SERVICE INCENTIVE PROGRAM FUNDING IN THE AMOUNT OF
$100,000 TO WESTJET AIRLINES FOR NEW TORONTO SERVICE
David H. Ready, City Manager
Department of Aviation
This action would allocate $100,000 in Air Service Incentive funding to WestJet Airlines
to support the new Toronto nonstop flights beginning February 2, 2011.
RECOMMENDATION:
1. Approve Air Service Incentive Agreement with WestJet Airlines in Not -To -Exceed
amount of $100,000 effective February 2, 2011 through April 30, 2011.
2. Adopt Resolution No. , a resolution of the City Council of The City of Palm
Springs, California, amending the budget for Fiscal Year 2010-11,
3. Authorize City Manger to execute all necessary documents.
STAFF ANALYSIS
In an effort to promote the growth of commercial airline service at Palm Springs
International Airport an Air Service Incentive Program was developed to provide
promotional funding to new air carriers and current air carriers that elect to operate new
air service.
WestJet Airlines has been serving PSP airport since 2005 and recently announced that it
will begin new nonstop, twice weekly round trip service between PSP and Toronto,
Canada beginning February 2, 2011. Toronto Pearson International Airport is WestJet's
eastern Canadian hub airport serving a region of over six million people with connections
to such cities as Montreal, Quebec City, and Ottawa. This new service will provide the
valued Canadian travelers and local residents alike with new opportunities for air travel.
At a distance of just over 2,000 flying miles, this new route will be the longest nonstop
scheduled flight from PSP.
ITEM NO.
City Council Staff Report
October 6, 2010 -- Page 2
WestJet Air Service Incentive Agreement - Toronto
This peak season operation of February through April to the new long -haul hub city
destination meets PSP's Incentive Program criteria for a level of $100,000 in funding.
The airline has requested participation in this program and staff recommends that the
award be made to support the new service. The Airport Commission at its September 15,
2010 meeting also recommended the award of these funds to WestJet.
WestJet is a valued partner in this region's tourism industry and has continued to increase
overall seat capacity, most notably with the recently completed summer flights to their hub
in Calgary. That service was also a recipient of incentive funding in the amount of
$30,000.
The ultimate goal of this Air Service Incentive Program, in addition to serving as an
incentive for airlines to consider additional air service, is to help the airline make the new
service successful enough to justify keeping it at PSP.
FISCAL:
The expenditure for this promotional support is a maximum of $100,000. Funding for this
expenditure requires a Budget Resolution from the Airport Fund Balance to the Airline
Incentive Program Account 415-6002-45521.
Marketing and promotional funds offered through an air service incentive program are an
investment in the future growth of air service to PSP and the increased passenger traffic
will generate a direct and indirect economic benefit. The added passenger traffic from
this new service will create additional revenues through the Passenger Facility Charges
(PFC's), food and gift concessions, car rental concessions, vehicle parking fees, aircraft
landing fees, fuel flowage fees and other sources.
Thomas Nolan,
Executive Director,
David H. Ready, Cit
Attachments:
West Jet Air Service Incentive Agreement and Program Objectives
Budget Resolution
Janet Sheraton
From: Mark Kiehl
Sent: Monday, September 27, 2010 11:11 AM
To: Thomas Nolan; Janet Sheraton
Subject: RE: CC WestJet and HNTB are okay for final and on shared drive. Mark needs to provide attachment.
Janet,
Cindy Berardi has both original contract documents signed by WestJet and Doug Holland
and will keep them in their office to match up with paperwork from here. Finance Director
said the funds are to be moved from 415 Fund Balance to 415-6oO2-45521 Airline Incentive
Program.
NTI.oI"
Mark
From: Thomas Nolan
Sent: Monday, September 27, 2010 11:05 AM
To: Janet Sheraton
Cc: Mark Kiehl
Subject: CC WestJet and HNTB are okay for final and on shared drive. Mark needs to provide
attachment.
Thomas Nolan, A.A.E.
Executive Director
Palm Springs International Airport
3400 E. Tahquitz Canyon Way Suite OFC
Palm Springs, CA 92262
760-318-3901
www.paimspringsairport.com
9/27/2010
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF PALM SPRINGS, CALIFORNIA,
AMENDING THE BUDGET FOR FISCAL YEAR
2010-2011
WHEREAS, Resolution 22714 approving the budget for the fiscal year 2010-11
was adopted on June 2, 2010; and
WHEREAS the City Manager has recommended, and the City Council desires to
approve, certain amendment to said budget.
THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY
RESOLVE AS FOLLOWS:
SECTION 1. ADDITIONS
Fund Activity Account I Amount
415 Airport Airline Incentive 6002-45521 I $100,000.
Program
Purpose: To amend the FY 2010-11 budget to provide funds from prior fiscal
years to fund the WestJet Air Service Incentive Agreement.
SECTION 2. SOURCE
Fund Activity Account Amount
415 Airport Retained Earnings 29302 $100,000.
ADOPTED THIS 6th day of October 2010.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
Resolution No.
[00:1:4191aIWATO1[6]►.
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE) ss.
CITY OF PALM SPRINGS)
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a
regular meeting of the City Council of the City of Palm Springs on October 6,
2010, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
61
PALM SPRINGS INT'L AIRPORT AIR SERVICE INCENTIVE PROGRAM
PALM SPRINGS INTERNATIONAL AIRPORT
AIR SERVICE DEVELOPMENT INCENTIVE PROGRAM
EFFECTIVE JUNE 1, 2010
1. OBJECTIVE
Air service is a vital contributor to the City of Palm Springs and the entire Coachella
Valley, and it is widely recognized that that significant costs are associated with adding
capacity through larger aircraft, more flights, or new markets. The promotion of new or
additional capacity can be a critical factor in its success, acknowledging that airlines
may redeploy valuable aircraft assets to other markets if targets are not achieved.
The Palm Springs International Airport (PSP) Air Service Development Incentive
Program (the "Program") is designed to encourage and promote the expansion of
commercial passenger airline service, both seasonally and year-round. Such growth
can take place in new routes that are not currently served and/or through additional seat
capacity being added by incumbent carriers in existing markets. Funds are to be used
by the airline(s) to market and promote new services and/or significant year -year
increases in seating capacity.
The Program is non-discriminatory; any airline that meets the criteria can qualify to
receive benefits as outlined in this document. However, the airlines serving PSP today
are our valued tenants and customers, and it is greatly anticipated that both existing and
new carriers can take advantage of this program to expand service successfully,
2. TIMING OF PROGRAM AND DISTRIBUTION OF FUNDS
This Program is effective June 1, 2010, and may be continued until allocated funds
expire or at the discretion of Palm Springs International Airport.
Airlines meeting the requirements outlined in this document will be allocated the
qualifying funds on a first -come, first -served basis until the Program expires or total
funds for the Program are expended.
3. QUALIFYING REQUIREMENTS
To qualify for incentives provided by the Program, the airline must take action in one of
the following categories:
NEw ROUTE. Initiate a new route to/from PSP, defined as not being served within the
12 months prior to the qualifying service. The category of market, frequency, and
duration of operations as stated in Exhibit 1 (below) will determine the amount of
maximum funding.
PALM SPRINGS INT'L AIRPORT, 3400 E. TAHOUITZ CANYON WAY, PALM SPRINGS, CA 92262
PALM SPRINGS INT'L_ AIRPORT AIR SERVICE INCENTIVE PROGRAM
EXISTING ROUTES. Increase total monthly seating capacity, through additional flight
frequencies and/or larger aircraft, compared to the same month in the prior year
between PSP and the same airport. Note: For monthly year -year increases to
qualify, the additional capacity has to be in effect for a two week minimum within that
month.
In both cases, the metrics outlined in Exhibit 1 will be used to determine qualifications
for Program funds. In order to receive funding, each airline must do the following for
EACH qualifying route:
• Submit in writing (an emailed document is acceptable) confirmation of the new
route and/or year -year increase in monthly capacity;
■ Request the funds in writing;
■ Provide an outline of how the funds will be deployed. The Program funds shall
be utilized solely for the purpose of promoting the new route and/or year to year
capacity addition. These promotional initiatives must be approved by PSP staff,
and copies of program specifics may be requested.
■ In the event that a service or capacity increase is suspended prematurely, the
airline shall be responsible for a pro -rated reimbursement of all marketing funds
spent.
EXHIBIT 1
(up to amounts) (up to amounts) (up to amounts)
New Long Haul Hub 1,500 miles or longer $100,000 $250,000 $400,000
or Focus City Not served within most recent 12 months
Focus City - 50+ daily departures
If NEW carrier to PSP (past 12 months) $200,000 $500,000 $800,000
New Long Haul 1,500 miles or longer $50,000 $100,000 $150,000
Key Markets Top 25 0&D's with no nonstop service from
the region
If NEW carrier to PSP (past 12 months) $100,000 $200,000 $300,000
New Hybrid or No existing markets served nonstop from $50,000 $100,000 $150,000
Complementary Markets that specific airport (past 12 months)
If NEW carrier to PSP (past 12 months) $100,000 $200,000 $300,000
Increased Capacity - Existing markets - served within 12 months $7,500 $10,000
Shoulder or Peak Season Based on monthly year -year seat increases (Per Route) (Per Route)
PALM SPRINGS INT'L AIRPORT, 3400 E. TAHQUITZ CANYON WAY, PALM SPRINGS, CA 92262 2
PALM SPRINGS INT'L AIRPORT AIR SERVICE INCENTIVE PROGRAM
4. DEFINITIONS AND PROVISIONS
For purposes of determining the specifics of each qualifying route, the following
definitions shall apply.
1. New Market: The route between PSP and another airport that has not had
nonstop scheduled service within the most immediate 12 month period.
2. New Long Haul Hub or Focus City: An airport meeting the nonstop mileage
requirements stated in Exhibit 1, with the qualifying airline serving that airport
with 50 or more daily departing flights.
3. New Long Haul Key Markets: An airport meeting the mileage requirements
stated in Exhibit 1 and having sufficient passenger demand to be in the Top 25
Palm Springs (PSP) market list as defined by U.S. DOT data.
4. New Hybrid or Complementary Market: Includes specific airports that have not
had nonstop flights to/from PSP within 12 months, with no mileage limitations.
5. Existing Routes: Service between PSP and airports that currently have service
or have had nonstop scheduled flights within the most immediate 12 months.
6. New Carrier: Any airline brand that has not served PSP within the most
immediate 12 months. The addition of branded partners, such as the mixing of
mainline and regional carrier operations, does not qualify under this category, nor
does brand change due to merger or acquisition. An airline is no longer
considered "New" after one year from the initial commencement of service into
PSP.
7. Frequency Requirements: Due to PSP's seasonality, we encourage entry of new
service that includes low frequency operations. Exhibit 1 outlines qualifications
based on a combination of weekly flights and the duration of operations
expressed in calendar months.
8. Increased Capacity: To encourage growth in existing markets, this category
addresses currently served routes and measures year to year changes in total
monthly seating capacity. Due to seasonal service variations, a minimum of two
weeks of service is required within the month qualifying for funds.
9. Competitive Applications: If two air carriers announce plans to serve the same
new market, the incentives available under this Program shall be payable to the
first carrier that initiates service.
10. Funding Amounts: All values shown in Exhibit 1 are to be considered "up to this
amount" or "maximum" limits and are subject to availability of remaining funds in
the Program.
11. Payment of Program funds to qualifying airlines will be on a first come, first
served basis and determined by the date of initiation of the qualifying service.
Payments will be made at the end of each month of qualifying air service; in
cases where an airline qualifies for an amount of $200,000 or more, payments
will be prorated over a 12 month period beginning with the first month of
qualifying service.
12. Any carrier availing itself of the Program will be required to execute a
Memorandum of Agreement in a form determined by PSP. All marketing and
promotional funds are subject to approval by the Palm Springs City Council. The
PALM SPRINGS INT'L AIRPORT, 3400 E. TAHQUITZ CANYON WAY, PALM SPRINGS, CA 92262 3
DI
PALM SPRINGS INT'L AIRPORT AIR SERVICE INCENTIVE PROGRAM
Program may be discontinued at any time or cease at any time due to expiration
of funds, and PSP reserves the right to modify the program or adjust funding
according to the level of air service provided.
13. Uses and Applications of Funds: It is not the intent of PSP to impose creative
control over promotional initiatives; Airport staff approval is required to ensure
that allocated funds are used to promote the new service or increased capacity.
Staff reserves the right to request specific information including copies of
advertisements or other details. Promotional actions and activities may include,
but are not limited to the following:
a. Specific advertising highlighting the qualifying PSP route;
b. Familiarization tours or events;
c. Media events;
d. Online contests and promotions;
e. Other activities as agreed to by both PSP and the airline.
14.Any carrier availing itself of the Program will be required upon request from PSP
to provide written certification that any and all funds provided under the Program
to the carrier were utilized solely for the purpose of promoting the new route
and/or year to year capacity addition. Failure to provide said written certification
shall result in repayment of any and all funds provided to the carrier under the
Program.
5. ADDITIONAL INFORMATION
This Air Service Incentive Program is consistent with the mission of Palm Springs
International Airport to preserve and enhance the City of Palm Springs' status as a
premier tourist destination and provide the region's citizens with access to the global
aviation system. All airlines are encouraged to review opportunities for expanded
service and discuss potential applications with airport staff. For more information
please contact Executive Director Thomas Nolan at (760) 318-3901.
PALM SPRINGS INT'L AIRPORT, 3400 E. TAHQUITZ CANYON WAY, PALM SPRINGS, CA 92262 4
PALM SPRINGS INT'L AIRPORT AIR SERVICE INCENTIVE PROGRAM
AIR SERVICE INCENTIVE AGREEMENT
This Memorandum of Agreement is entered into by and between the City of Palm
Springs (City), acting by and through its Executive Director of Aviation, and WESTJET
(Airline) organized and existing under the laws of the PROVINCE of ALBERTA, and is
intended to memorialize the agreement between the City of Palm Springs and the
Airline under the terms of the Palm Springs International Airport Air Service
Development Incentive Program (Program), approved by City Council on T-B-D ,
a copy of which is attached hereto and incorporated herein by reference.
The City and the Airline, by their signatures to this Memorandum of Agreement,
acknowledge that their agreement related to marketing incentives is to be governed by
the Program. Airline will provide nonstop twice weekly round trip flights between PSP
and Toronto Pearson International Airport (YYZ) for the full three months of Februarv.
March, and Aoril 2011. It is understood and agreed that the Airline and the eligible new
non-stop service or year-to-year increased capacity that Airline is offering at the Palm
Springs International Airport fall into Section 3 (New Lonq Haul Hub or Focus Cites of
the Program and the maximum eligible marketing incentive is $100.000 for the period
from February 2. 2011 to April 30, 2011. . The funds shall be utilized solely for the
purpose of promoting the new route and/or year to year capacity addition. Upon
request from the City, the Airline shall provide written certification that the funds have
been so utilized.
It is the intent of this Agreement that the total amount of incentives shall be distributed
to the Airline in the form of monthly partial payments as determined by the City. Once
the total amount is paid to Airline by City, City will not assert any claims against Airline
for such total amount, and the total amount will not be subject to route or increased
capacity continuation.
These funds must be reimbursed or refunded on a pro -rated basis, rounded to the
nearest completed month, to City by Airline if Airline leaves the market and/or
discontinues the new non-stop route or increased service earlier than the qualifying
period for which funds were allocated. These funds must be reimbursed if Airline fails to
provide written certification as detailed above. In the event that Airline fails to refund or
reimburse such funds within thirty (30) days of City's request, Airline expressly consents
to City's right to issue an invoice for the unpaid amount and have legal claim to
payment. This remedy shall be cumulative upon all other remedies available to City.
In the event of any conflict between the provisions of this Agreement and the Program,
the provisions of the Program shall control.
The term of the Agreement shall be one year starting from the effective date of this
Agreement. At the end of the period, the Agreement is not subject to extension, but
shall terminate automatically.
PALM SPRINGS INT'L AIRPORT, 3400 E. TAHQUITZ CANYON WAY, PALM SPRINGS, CA 92262 5
10
PALM SPRINGS INT'L AIRPORT AIR SERVICE INCENTIVE PROGRAM
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement as of the date first written
above.
ATTEST:
By:
City Clerk
APPROVt;�;w
By:
dity Attorney
CONTRACTOR: Check one:
By:
CITY OF PALM SPRING
a municipal corporation
City Manager
Individual Partnership Corporation
Corporations require two notarized signatures: One from each of the fo2_(ff��e
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any Vice President: AND B. Secretary, Assistant Secretary, Treasurer,hief Financial
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who proved to me on the basis of satisfactory
evidence to be the person(e} whose name(e)
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certify under PENALTY OF PERJURY
under the laws of the State of California that
the foregoing paragraph is true and correct.
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personally appeared Fyn Ch ns6r,&A
who proved to me on basis of satisfactory
evidence to be the person(s) whose name(s)
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capacity(ies), and that by his/her/their signature(s) on
the instruments the person(s) or the entity upon
Of which the person(s) acted, executed the
I certify under PENALTY OF PERJURY
under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand official seal. WITNESS my hand and official seal.
Notary Signatur Notary Signature:
Notary Seal: Notary Seal:
PALM SPRINGS INT'L AIRPORT, 3400 E. TAHQUITZ CANYON WAY, PALM SPRINGS, CA 92262 6