Template revised September 22, 2016.
COMMISSION
AGENDA MEMORANDUM
Item No.
6e
ACTION ITEM
Date of Meeting
December 5, 2017
DATE: November 29, 2017
TO: Dave Soike, Interim Executive Director
FROM: James Schone, Director, Aviation Commercial Management
Dawn Hunter, Senior Manager, Airport Dining and Retail
Sean Anderson, Program Leader, Aviation Project Management Group
SUBJECT: Tenant Reimbursement for Temporary Central Terminal Food Carts and Shared
Cooking Facility (CIP #C800154)
Amount of this request:
$2,000,000
Total estimated project cost:
$2,000,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to: (1) authorize $1,600,000 of
project spending via a Tenant Reimbursement Agreement (TRA), see Attachment 1, between
the Port and Ivar’s, Inc. for the design and construction of a shared cooking facility and venting
system in support of temporary food carts offering hot food in the Central Terminal at Seattle-
Tacoma International Airport (Airport); (2) execute a lease and TRA with Ivar’s for this purpose
under the Airport’s AV-2 Policy, and (3) authorize an additional $400,000 of project spending to
support this tenant project. This request seeks a single authorization to approve the TRA and
complete design and construction. The total estimated cost for this project is $2,000,000.
EXECUTIVE SUMMARY
On August 8, 2017, the Commission authorized the construction of the Central Terminal
Enhancements Project (Project). Phase 1 of the Project requires the shutdown of five (5) food
and beverage units located on the south-side of the Central Terminal for approximately one
year. This work is scheduled to start in the first quarter of 2018. Phase 2 will require the closure
of the sit down restaurant on the north-side of the Central Terminal in early 2019.
In order to maintain an adequate level of hot food service to the travelling public during Phase
1 of the Project, staff worked with the operators of the affected south-side Central Terminal
units (Ivar’s, Pallino, Maki of Japan, and LaTrelle’s operating a Wendy’s) to explore their interest
in installing and operating temporary food carts within the Central Terminal. Maki of Japan has
elected not to participate in the food cart program. Qdoba, the fifth operator on the south side
of the Central Terminal was awarded a new location as part of Lease Group 2 and thus, is not
interested in participating in this program.
COMMISSION AGENDA – Action Item No. 6e Page 2 of 6
Meeting Date: December 5, 2017
Template revised September 22, 2016; format updates October 19, 2016.
Ivar’s, Pallino, and LaTrelle’s will execute a Temporary Food Cart Lease and Concession
Agreement (Agreement), prior to beginning operations. A draft copy of the Agreement is
included in Attachment 2. The term of this Agreement will be for a period of one year or the
completion of Phase 1 whichever is greater. A shared cooking facility, located at CB-4, that is
necessary for the operation of the temporary food cart program, will be leased to Ivar’s as part
of the Agreement. However, the Agreement will allow Pallino and LaTrelle’s the right to utilize
the shared cooking facility for the installation of their proprietary equipment and food
preparation. The shared cooking facility is only available for use by these three companies
during Phase 1 of the Project. All three companies are responsible for providing their own
temporary cart and equipment to service that cart in the Central Terminal. All proprietary
equipment installed in both the shared cooking facility and the Central Terminal will be
removed at the completion of Phase 1 of the Project in approximately February 2019.
Due to the fact that these carts cannot cook any food, rather only heat food, a shared cooking
facility is required for food preparation. Staff had previously identified a location on Concourse
B (CB-4), a former Starbucks unit, for a future project as part of a long-term food kiosk program.
This location, once remodeled, could serve as the shared cooking facility for the temporary food
cart program. A remodel of this location is required to bring it into compliance with the building
and health codes for such an operation.
At the conclusion of Phase 1, the Port will utilize the facility and infrastructure upgrades made
to the shared cooking facility, such as the Type 1 hood and electrical upgrades, for the long-
term food kiosk program. This program will support small businesses interested in operating
food and beverage units at the airport but that aren’t ready for the commitment of a long-term
lease. This program will require additional investment in this location by the Port in order to
prepare it as a full service dining unit. This amount is not yet determined and staff will request
funding for this program at a later date. It is important to note that the design for this shared
cooking facility is in conformance with the needs for this later program. A design requirement
for the future program will be to re-use as much of the improvements proposed today as
possible.
JUSTIFICATION
Airport Dining and Retail (ADR) staff has been planning for the closure of the food and beverage
units on the south-side of the Central Terminal since these units were authorized by the
Commission on June 14, 2016 for competitive solicitations as part of Lease Group 3 (LG 3). The
initial plan was for other LG 3 food and beverage units located in proximity to the Central
Terminal to open prior to the closure of the Central Terminal units. This plan also included
setting up temporary “Grab and Go” locations in the Central Terminal offering pre-packaged
sandwiches and salads. However, those new LG 3 food and beverage units in proximity to the
Central Terminal will not be ready to open prior to Phase 1. Yet, there is still a need to meet
passenger demand for hot food in the Central Terminal.
COMMISSION AGENDA – Action Item No. 6e Page 3 of 6
Meeting Date: December 5, 2017
Template revised September 22, 2016; format updates October 19, 2016.
The closure of the five south-side Central Terminal restaurants will result in a loss of
approximately $3 million in revenue to the Port in 2018. The 2018 budget projects the
proposed temporary food cart program to generate approximately $380,000 in revenue to the
Port. The temporary food cart program is just one aspect to recover the revenue loss associated
with the closure of the south-side Central Terminal food and beverage units. The opening of
new food and beverage locations near the Central Terminal during Phase 1, additional Grab and
Go units set up throughout the terminal, as well as increased capacity of other food and
beverage locations near the Central Terminal will all contribute to maintaining adequate levels
of customer service to the travelling public and revenue to the Port.
In order to expeditiously complete the work necessary to provide this service, Ivar’s has
engaged a designer, initiated design, and engaged a construction contractor prior to the
completion of design. The TRA will only pay for the direct invoiced costs of design and
construction for these improvements.
DETAILS
The scope of work for the TRA includes among other things:
• Installation of a Type 1 hood system and associated HVAC and fire sprinkler upgrades in
the shared cooking facility;
• Electrical upgrades to support the cooking equipment and operations in the shared
cooking facility;
• Installation of a fire-rated wall and double doors in front of the shared cooking facility;
• Installation and upgrade to plumbing to meet health code requirements for the shared
cooking facility;
• Purchase of refrigeration and freezer units, prep tables, and shelving for use in the
shared cooking facility that will be turned over to the Port after Phase 1 is completed;
• The installation of three (3) type 2 hoods along the construction barricades in the
Central Terminal to support the food carts in this area.
The three (3) operators are required to provide:
• Their own cooking equipment associated with their operations in the shared cooking
facility; and
• All equipment associated with their temporary food cart operations in the Central
Terminal.
PROJECT SCHEDULE
Activity
Bids received for the Central Terminal
Enhancement Project
Commission Authorization of the TRA
Begin Demolition of the Shared Cooking
Facility Space
COMMISSION AGENDA – Action Item No. 6e Page 4 of 6
Meeting Date: December 5, 2017
Template revised September 22, 2016; format updates October 19, 2016.
Complete Shared Cooking Facility Design for
Port and Building Department Review
Port and Building Department Review
Period
Building Permit Issued
Shared Cooking Facility and Central
Terminal Hood Construction Begins
Closure of the South-side Central Terminal
Restaurants
Completion of the Shared Cooking Facility
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 - Status Quo – Do not approve the TRA, do not provide hot food in the Central
Terminal
Cost Implications: $0
Pros:
(1) Grab and Go units (kiosks with refrigeration) offering pre-packaged sandwiches and
salads will be available when the construction barricade is installed.
(2) There is significantly less cost to the Port.
Cons:
(1) There will be a decrease in hot food available for the passengers in the Central
Terminal.
(2) Customer service at existing operators in the vicinity of the Central Terminal offering
hot food may suffer due to their inability to handle the increase in passenger demand.
(3) The three Central Terminal operators who chose to participate in the temporary food
cart program would cease operations at the Airport once the construction barricade is
installed.
This is not the recommended alternative
Alternative 2 – Do not approve the TRA and authorize the Port to commence with design and
construction of the full build-out of the kitchen for the long-term food kiosk program. Port staff
would need to complete the project definition, authorize the project, secure a designer to
complete the design, and advertise for construction bids to complete the build-out. Based on
these steps, staff estimated that the kitchen for the food kiosk program would be available on
April 2020, after Phase 1 of the Central Terminal Enhancement Project is completed.
Note: An alternative of having the Port complete the work described in the TRA is not viable as
the soonest this could be completed, undertaking many of the steps above, would be August
2019, after Phase 1 is completed. Thus, it is not presented as an alternative to this request.
Cost Implications: Approximately $1,800,000
COMMISSION AGENDA – Action Item No. 6e Page 5 of 6
Meeting Date: December 5, 2017
Template revised September 22, 2016; format updates October 19, 2016.
Pros:
(1) The Port would have total control of all phases of design, construction and equipment
purchases.
(2) The Port would spend less money to create the facility envisioned to accommodate
the long-term food kiosk program in the Concourse B unit.
Cons:
(1) Due to the length of time to complete design and construction, this alternative would
provide no offset to the impacts from the closure of the five food and beverage units
on the south-side of the Central Terminal during Phase 1.
(2) Does not provide hot food options for the travelling public during Phase 1.
(3) The three Central Terminal operators who chose to participate in the temporary food
cart program would cease operations at the Airport once the construction barricade is
installed.
(4) Customer service at existing operators in the vicinity of the Central Terminal offering
hot food may suffer due to their inability to handle the increase in passenger volume.
This is not the recommended alternative
Alternative 3 – Authorize the TRA.
Cost Implications: $2,000,000
Pros:
(1) The construction would be completed approximately six (6) weeks after the start of
Phase 1.
(2) This alternative provides additional hot food options for the travelling public in the
Central Terminal during the majority of Phase 1.
(3) The Port would be able to utilize some portion, as yet undetermined, of the
infrastructure for the full build-out of the shared cooking facility for the long-term
food kiosk program as well as the purchased equipment.
Cons:
(1) The Port is not in control of the project delivery.
(2) Unknown site conditions within the shared cooking facility space encountered during
construction may result in cost overruns that would require additional Commission
authorization.
This is the recommended alternative
COMMISSION AGENDA – Action Item No. 6e Page 6 of 6
Meeting Date: December 5, 2017
Template revised September 22, 2016; format updates October 19, 2016.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$0
$0
AUTHORIZATION
Previous authorizations
0
Current request for authorization
$2,000,000
$2,000,000
Total authorizations, including this request
$2,000,000
$2,000,000
Remaining amount to be authorized
$0
$0
$0
Annual Budget Status and Source of Funds
The budget for the tenant reimbursement amount of $2,000,000 will come from CIP (C800154),
the tenant reimbursement CIP. The funding source will be the Airport Development Fund.
Financial Analysis and Summary
Project cost for analysis
$2,000,000 (Depreciated over 10 years)
Business Unit (BU)
Airport Dining and Retail
Effect on business performance
(NOI after depreciation)
($1,687,000)-First year. Kiosk sales in future
years not known.
IRR/NPV (if relevant)
Undetermined
CPE Impact
Impact on CPE not yet known.
ATTACHMENTS TO THIS REQUEST
1. Draft TRA Agreement
2. Draft Temporary Food Cart Lease and Concession Agreement
3. Slideshow Presentation
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
11/28/2017 – A request was made of commission to authorize the Tenant Reimbursement for
Temporary Central Terminal Food Carts and Shared Cooking Facility (CIP #C800154)