PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA
Item No.
5b
Date of Meeting
May 10, 2011
DATE: April 29, 2011
TO: Tay Yoshitani, Chief Executive Officer
FROM: Michael Ehl, Director, Airport Operations
George England, Program Leader, Project Management Group
SUBJECT: Rental Car Facility (RCF) Small Operator Area (SOA) Ready Return Area
Buildout Project (CIP # C100266)
No Funds Requested Source of Funds: Airport Development Funds (ADF)
State and Local Taxes paid: $28,000 Jobs Creates: 12
Total Estimated Project Costs: $389,500
ACTION REQUESTED:
Request authorization for the Chief Executive Officer to advertise for bids, execute, and award
major construction contracts and perform contract administration for the SOA Ready Return
Area Buildout Project (SOA project) as part of the RCF program at Seattle-Tacoma International
Airport (Airport). The funding for this project was previously authorized under the May 13,
2008 Commission Authorization to proceed with construction of the RCF.
SYNOPSIS:
The RCF program provides a long-term solution for rental car company operations at the Airport
by centralizing all rental car operations in a single facility located at the north end of the Airport.
As defined in the Consolidated Rental Car Facility Lease Agreement: “’Small Operator’ shall
generally mean and refer to an Operator whose market share constitutes less than two percent
(2%) of the overall market share for rental cars at the Airport and who operates from the Small
Operator Area.” All Small Operators will operate from shared space in the RCF that the Port
agreed to buildout (other than tenant-specific finishes) under the Lease Agreement.
The SOA project constructs the shared operational space within the RCF for up to three (3) small
operator rental car companies. The project will employ sustainable “green” building practices
consistent with the rest of the RCF. As previously authorized under the RCF construction, the
project was initially scoped and estimated to be constructed as a small works project. At the 90%
design stage the estimated cost of construction under the Port’s Small Works provision is close
to the project budget and staff is concerned that the project could possibly exceed the allowable
State Small Works limits. Therefore, this memorandum requests the approval to advertise for
construction bids and to construct the SOA project in the RCF as a major construction contract.
This project will be under the 1999 Airport Modernization Project Labor Agreement (PLA) as
part of the RCF program.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 29, 2011
Page 2 of 6
BACKGROUND & PROJECT SCOPE OF WORK:
Completion of the SOA project at the RCF is required per the Consolidated Rental Car Facility
Lease Agreement between the Port and the rental car companies operating at the Airport. The
project is designed to accommodate three (3) Small Operators in the new RCF. During the
design of the RCF, it was not known how many Small Operators or how large of an area would
be required to accommodate the Small Operators. It was decided during the General
Contractor/Construction Manager (GC/CM) negotiations with Turner Construction that certain
portions of the SOA project integral to the construction of the building would be included in their
contract. The remaining scope consisting of installing kiosks for the SOA staff, electrical/data
communications infrastructure to support SOA operations, infrastructure for SOA signage, and
other related infrastructure systems to support SOA operations, is the subject of this
memorandum. This work was left to be designed and constructed by the Port to allow flexibility
in accommodating up to three future Small Operators. Since construction has been underway on
the RCF, the Port’s Business Development Department now has a better understanding that there
will be two Small Operators in the facility. The RCF design team is currently in the process of
developing the final design of the SOA project in accordance with the RCF lease agreement for
three (3) Small Operators. Since the build-out for the Small Operators represents costs that
would typically be paid by the tenant, the Port will fund these costs with the ADF (rather than
Customer Facility Charge revenues) and will establish and collect rent from the Small Operators
to recover these costs.
PROJECT STATEMENT/OBJECTIVES:
Project Statement:
Provide rental car operations space for up to three (3) Small Operators at the RCF.
Project Objectives:
Provide an effective and economical operational area for Small Operators.
Provide for a sustainable environment for Small Operators to maintain competiveness and be
successful.
Provide a level playing field for new Small Operator entrants
STRATEGIC OBJECTIVES:
This project supports the Port’s strategy to:
“Ensure Airport Vitality”
“Be a Catalyst for Regional Transportation Solutions,” and to
“Exhibit Environmental Stewardship Through Our Actions.”
The SOA project is part of the RCF program, which provides a long-term transportation solution
for the region and supports the Port’s Small Business initiatives by supporting a variety of rental
car operators at the Airport. As part of the Aviation Division’s demonstration project for
sustainable design, the design team also considered the total cost of ownership as part of
significant design decisions for the this project.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 29, 2011
Page 3 of 6
FINANCIAL IMPLICATIONS:
The following is an estimated cost breakdown for the SOA Project.
Project Cost Breakdown
Construction Costs
$294,100
Sales Tax
$27,940
Outside Professional Services
$35,300
Port Costs
$32,200
Total
$389,540
Budget/Authorization Summary
The following budget and authorization summary is for the RCF program and includes RCF
Design (CIP # C102167), RCF Construction (CIP # C100266), and Rental Car Buses (CIP #
C800032). This summary does not include the RCF Property Acquisition (CIP # C101110). The
SOA project elements associated with this request for authorization are included within the
Consolidated Rental Car Facility budget noted below.
Current
Revised Budget
Current
Authorization
Requested
Authorization
Total Revised
Authorization
$350,772,000
$350,772,000
$0
$350,772,000
$26,382,000
$28,282,000
$0
$28,282,000
$16,313,000
$19,542,000
$0
$19,542,000
$3,383,000
$3,383,000
$0
$3,383,000
$12,415,731
$16,000,000
$0
$16,000,000
$409,265,731
$415,097,746
$0
$417,979,000
$10,040,269
$0
$0
$0
$419,306,000
$415,097,746
$0
$417,979,000
Remaining Budget to be Authorized
$1,327,000
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 29, 2011
Page 4 of 6
The following budget and authorization summary is for the entire RCF program.
Original Budget
$412,320,000
Budget Increases
$6,986,000
Revised Budget
$419,306,000
Previous Authorizations
$417,979,000
Current request for Authorization
$0
Total Authorizations, including this request
$417,979,000
Remaining Budget to be Authorized
$1,327,000
Source of Funds
The RCF construction project (CIP # C100266) is included in the 2011-2015 capital budget and
plan of finance as a committed project. The source of funds for the RCF project, as identified in
the plan of finance, includes CFC revenues, existing revenue bond proceeds, and the ADF.
This current authorization request is for the SOA project elements that will be funded with the
ADF.
Financial Analysis Summary
The SOA project supports the operations at the RCF. The requested action does not reflect an
increase in the budget for the RCF project and therefore does not change the overall financial
analysis for the RCF program as presented to the Commission on June 30, 2009 and as reported
in monthly progress briefings to date. The following information is provided for reference
purposes.
The RCF program is categorized as a Revenue/Capacity Growth project. This project represents
a business expansion of our existing rental car operations.
CIP Category
Revenue/Capacity Growth
Project Type
Business Expansion
Risk adjusted Discount Rate
See below
Key risk factors
See below
Project cost for analysis
$419,306,000
Business Unit (BU)
Operations, Landside – Rental Cars
Effect on Business Performance
See below
IRR/NPV
N/A, see below
CPE Impact
Less than $0.01 in 2012
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 29, 2011
Page 5 of 6
As a cost recovery project, traditional financial analysis measures such as net present value
(NPV) and internal rate of return (IRR) are not meaningful. The CFC is set and adjusted as
needed to cover the costs paid by CFC’s (including debt service). The current CFC is $5.00 per
transaction day. As earlier briefed to the Commission, it is anticipated that the CFC will need to
increase to accommodate the anticipated CFC funded costs (bond requirements and consolidated
busing) by the startup of rental car operations in early 2012. Assuming the total project costs
identified above, and current assumptions for rental car transaction days, the CFC will increase
to $6.05 per transaction day at the startup of rental car operations.
The costs for the improvements to the SOA are anticipated to be recovered through a rent
surcharge to the Small Operators.
SUSTAINABILITY AND LIFE CYCLE COSTS:
The project is under the same conditions as the main RCF and has the same sustainability and
lifecycle costs. The annual cost of maintaining this additional space will not have a significant
budgetary impact.
ECONOMIC IMPACTS:
The RCF program provides a long-term solution for rental car company operations at the Airport
enabling the region to continue to receive the economic benefit of the Airport rental car market.
ENVIRONMENTAL SUSTAINABILITY/COMMUNITY BENEFITS:
An environmental review effort was completed for the RCF program in 2004 that met State and
Federal environmental review requirements. No adverse environmental or community impacts
were identified and this project is part of the overall RCF program.
TRIPLE BOTTOM LINE SUMMARY:
The RCF SOA project, as part of the RCF program, will provide a long-term solution for Small
Operators at the Airport enabling the region to continue to receive the economic benefit of the
Airport rental car market. The RCF program will improve the level of customer service for rental
car customers at the Airport, and the local community will benefit with transportation
improvements included in the program.
PROJECT SCHEDULE:
The following is a list of key milestone dates for the SOA project.
Bid Advertisement June, 2011
Construction Start October, 2011
Construction Complete December, 2011
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 29, 2011
Page 6 of 6
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION:
Bid as a Major Contract – Under this alternative, the SOA project will be bid as a major
construction project and completed as part of the RCF program. The completion of this project
will provide the necessary facilities and operations for Small Operators required as part of the
business plan and which is essential to the overall success of the RCF operation. This is the
recommended alternative.
Do-Nothing – Under this alternative, the project would not be completed as part of the RCF
program and the Port would not meet its lease/concession obligations to the Small Operators.
This will put at risk the successful operation of the RCF and significantly decrease customer
service and the Port’s ability to meet its strategic objectives. This is not the recommended
alternative.
Bid as a Small Works – Under this alternative, this project will be bid and constructed under the
small works program. Due to staff concerns that the current estimate is near the upper threshold
of the small works requirements, the Port would be at risk for complying with State small works
regulations and Port policies and procedures and put the RCF schedule at risk. This is not the
recommended alternative.
Turner Bids Project – Under this alternative, the project will be bid out under the GC/CM
contract with Turner Construction. Staff determined that given Turner’s current workload and
that construction is entering the critical phases of completion by the end of the 2011, the Port
would be better served to bid this project. The concern was adding this work to Turner’s scope
might potentially add additional costs or schedule impacts to the project. This is not the
recommended alternative.
Small Operators Construct Area – Under this alternative, the individual small operator
companies would be responsible for building out the space allocated to them. Per the Port lease
with the Rental Car industry, the Port is required to do the work and to be paid back through
small operator improvement rent. This enables the Port to own the improvement and provide
maximum flexibility as the small operators come and go. This is not the recommended
alternative.