Template revised April 12, 2018.
COMMISSION
AGENDA MEMORANDUM
Item No.
6e
ACTION ITEM
Date of Meeting
February 26, 2019
DATE: February 15, 2019
TO: Stephen P. Metruck, Executive Director
FROM: James Jennings, Senior Manager, Aviation Properties
Wayne Grotheer, Director, Aviation Project Management
James R. Schone, Director, Aviation Commercial Management
SUBJECT: Airport Main Terminal Space Conversion (CIP #C801055)
Amount of this request:
$1,337,000
Total estimated project cost:
$3,500,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to (1) proceed with design for all
phases of the Main Terminal Space Conversions project at Seattle-Tacoma International Airport,
(STIA) (2) construct Phase 1 of the project, and (3) use Port crews and small works contracts for
construction. The amount requested under this authorization is $1,337,000 out of a total
estimated project cost of $3,500,000.
EXECUTIVE SUMMARY
The purpose of this project is to convert, and upgrade vacant spaces located in the pre-security
area at the Airport on the Ticketing, Mezzanine, and Second Floor levels. The offices affected
meet an immediate need and accommodate anticipated new entrant airlines.
With the growth in passenger traffic at the airport, there is a need to provide additional
leasable support space for existing tenants and new tenants. Vacancy levels are critically low in
many areas, especially pre-security. As demand continues to grow for tenant, contractor, and
Port needs throughout the airport, finding ways to quickly maximize leasable area within the
terminal is needed.
This project was included in the 2019 – 2023 capital budget and plan of finance with an
estimated cost of $2.515 million. The cost increase was driven by the need to provide more
office space to new airline tenants.
JUSTIFICATION
This project supports critical objectives of the Port’s Century Agenda to meet the region’s air
transportation needs at the Airport for the next 25 years and encourage the cost-effective
COMMISSION AGENDA – Action Item No. __6e__ Page 2 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
expansion of domestic and international passengers and cargo service. This provides STIA with
much needed leasable space to meet the needs of our growing airline partners. It also supports
the Aviation Division’s financial performance by increasing occupancy of leasable space without
constructing new facilities.
Diversity in Contracting
For the immediate construction of Phase 1, staff anticipates a significant proportion of small
works contract work to be completed by small businesses which include woman and minority
businesses. For Phase 2, Women and Minority Business Enterprise (WMBE) aspirational goals
will be established by the Diversity in Contracting Department.
DETAILS
This project will be completed in two phases. The first phase will address an immediate need to
construct two office spaces for two new entrant airlines on the mezzanine level of the main
terminal. These spaces will be designed and constructed by this request. Additional space on
the Ticketing and Second Floor levels will be designed with a request for construction of these
spaces to follow in a future Commission request.
The work includes sub-dividing spaces where required, modifying heating, ventilation and air
conditioning (HVAC), electrical, communications and lighting systems, completing interior
finishes including ceilings and flooring, and installing Port standard telecommunications
demarcation packages.
The first space will be constructed in an expedited manner to provide two offices by Q2 2019,
which is needed to support recently announced service by two new Airlines. The remaining
spaces are needed to be able to respond to anticipated growth and will follow a more
traditional timeline.
Scope of Work
The project scope of work includes the following:
(1) Sub-dividing the existing vacant areas where required to provide manageably sized
offices meeting airline needs and Port standards
(2) Modifying heating, ventilation, and air conditioning (HVAC), electrical,
communications and lighting systems
(3) Constructing basic interior finishes including finished walls, ceilings, and flooring
(4) Installing a Port standard telecommunications demarcation package for new tenants
(5) Prepare related amenities as necessary or required by code
Office furnishings, equipment, and any discretionary tenant improvements will be provided by
the tenant and are not included in this project scope.
COMMISSION AGENDA – Action Item No. __6e__ Page 3 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Schedule
Activity
Complete construction of first two spaces
Anticipated construction
authorization for remaining work
Complete remaining construction
Cost Breakdown
This Request
Total Project
Design
$720,000
$720,000
Construction
$710,000
$2,780,000
Total
$1,430,000
$3,500,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Build out all spaces to leasable condition through a single design and
construction project
Cost Implications: $3,500,000
Pros:
(1) The Port would complete all the spaces to a leasable condition as a single action.
(2) The Port would be able to take full advantage of the new Diversity in Contracting
program with this construction contract.
Cons:
(1) Would take approximately 28 months to design, bid and construct, which would not
meet the needed occupancy schedule.
This is not the recommended alternative.
Alternative 2 – Build out Phase one to provide two of the requested office spaces immediately
and start the design for the other spaces now.
Cost Implications: $1,430,000
Pros:
(1) This alternative will provide the new entrant international airlines key operational
resources they are requesting on the timeframe they require.
(2) Completing the design for the entire scope will expedite the process to complete the
remaining spaces, in the hopes that they can be constructed to meet the anticipated
airlines start-up schedules.
(3) The Port would receive revenue from the lease of these spaces sooner than the other
alternatives.
Cons:
(1) For the immediate construction scope, the Port would use Port crews and small works
contracts and therefore not able to use the Port’s Diversity in Contracting program.
COMMISSION AGENDA – Action Item No. __6e__ Page 4 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$2,515,000
$0
$2,515,000
Current change
$985,000
$985,000
Revised estimate
$3,500,000
$3,500,000
AUTHORIZATION
Previous authorizations
$93,000
$0
$93,000
Current request for authorization
$1,337,000
$0
$1,337,000
Total authorizations, including this request
$1,430,000
$0
$1,430,000
Remaining amount to be authorized
$2,070,000
$0
$2,070,000
Annual Budget Status and Source of Funds
Main Terminal Space Conversions (CIP #C801055) was included in the 2019-2023 capital budget
and plan of finance at $2,515,000. A budget increase of $985,000 was transferred from the
Aeronautical Allowance which will have no impact to the plan of finance. The project will be
funded with the Airport Development Fund and revenue bonds.
Financial Analysis and Summary
Project cost for analysis
$3,500,000
Business Unit (BU)
Terminal Building
Effect on business performance
(NOI after depreciation)
NOI after depreciation will increase
IRR/NPV (if relevant)
N/A
CPE Impact
Less than $0.01 in 2021
Future Revenues and Expenses (Total cost of ownership)
Once occupied, maintenance of exclusive premises is the responsibility of the lessee, thus
freeing the Port of our current obligation to maintain the space. In addition, these premises are
currently leased to signatory airlines at the rate of $183.03 per square foot per year. The final
billable lease area is dependent on exactly how the space gets divided, and how much space is
consumed to create a shared access vestibule (which would not be leased premises).
ATTACHMENTS TO THIS REQUEST
Presentation slides
COMMISSION AGENDA – Action Item No. __6e__ Page 5 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
None