Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
6h
ACTION ITEM
Date of Meeting
October 22, 2019
DATE: October 4, 2019
TO: Stephen P. Metruck, Executive Director
FROM: Michael McLaughlin, Director Cruise Operations
Marie Ellingson, Cruise Services Manager
SUBJECT: Fourth Amendment to Cruise Facility Lease Agreement with
Cruise Terminals of America (CTA)
ACTION REQUESTED
Request Commission authorization for the Executive Director to execute the Fourth
Amendment to the Cruise Facility Lease Agreement with Cruise Terminals of America for Smith
Cove Cruise Terminal at Terminal 91 substantially as described in this agenda memorandum.
The amended and restated lease would continue the current agreement for two years with two
additional one-year extension options at the port’s discretion.
EXECUTIVE SUMMARY
The current lease agreement with CTA, which commenced in 2005, includes Smith Cove Cruise
Terminal at Terminal 91. The agreement was amended and restated in 2015 to remove Bell
Street Cruise Terminal at Pier 66. The Port has contracted with CTA to manage cruise
operations since 2000 when the port began its homeport cruise business. CTA has been an
important partner in the Port’s success in the cruise business.
As the Port continues to grow our cruise business and develop a new cruise terminal,
maintaining consistent operations and continually improving customer service at our current
terminals is key. As the Port’s cruise terminal operator, CTA has done an excellent job of
meeting cruise ship schedules with outstanding customer ratings. They run a safe and secure
terminal and pier operation and maintain cruise facilities in compliance with the lease. They are
in good standing with the United States Coast Guard and Customs and Border Protection and
have a full understanding of regulatory requirements.
JUSTIFICATION
The term of this amendment is aligned with the remaining term and options to extend as
defined in the Port’s current preferential berthing agreements and the target opening of the
new cruise terminal proposed at Terminal 46. This timing allows the Maritime Division to
approach the future development of the Port’s cruise business in a more strategic manner.
COMMISSION AGENDA – Action Item No. _6h_ Page 2 of 4
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Should the port decide to compete the terminal management at this time, the Port may not
successfully negotiate terms that would realize the same financial return for a short-term
agreement and may experience a low level of interest in a short-term opportunity.
DETAILS
The basic terms of the existing agreement remain the same. Changes include extension of lease
period as described in the action requested and the following:
Additional sections to Article 14 (Compliance with Environmental Laws) incorporates language
on continued implementation of the Best Management Practices, Stormwater Management
and Environmental Covenant consistent with other current port agreements.
Required Security in section 5.1 will be updated from three hundred thousand dollars
($300,000) to three million five hundred dollars ($3,500,000) to meet current port policy and
state requirements.
Additional language has been added regarding tenant’s responsibility of providing courtesy
shuttle service of passengers at the terminal to meet the needs of growing cruise operations.
CTA provides shuttle services between terminal building, parking facilities and App-Based Ride
Share Hub.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Do not amend the lease. The current lease with CTA will expire in December
2019. This would require the Port to seek a new terminal operator for the 2020 cruise season
and beyond and negotiate a new agreement.
Cost Implications: unclear what the financial implications would be.
Pros:
(1) The Port issuing an RFP for a new terminal operator would open an opportunity for a
new organization.
Cons:
(1) The Port may not successfully negotiate terms that would realize the same financial
return for a short-term agreement. May experience a low level of interest in a short-
term opportunity.
(2) The new operator would need to learn the terminal and operation, put new measures
in place to meet regulatory requirements such as the terminal security plan, and
execute new agreements for security, transportation, vendors, etc.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. _6h_ Page 3 of 4
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 2 – Approve the Fourth Amendment to the Cruise Facility Lease Agreement.
Cost Implications: Obligates the port for $25,000 additional maintenance allowance. Port
retains approval of use of maintenance allowance expenditures.
Pros:
(1) Approval of the fourth amendment ensures consistency in operations and regulatory
compliance and continues efforts to exceed our customers’ expectation and high
standards of the cruise industry.
(2) Allows for flexibility and increases options for the Port’s cruise business development
plan in the future.
(3) Aligns future decisions to be more holistic for the port’s future cruise business
regarding cruise terminal operations at Terminal 91 and projected date of opening a
new cruise terminal at Terminal 46.
Cons:
(1) This action is not consistent with previous recommendations provided to staff from
Commission at the approval of 2
nd
amendment to exercise option to extend term for
seven years (2013-2019 cruise seasons) Recommendation then was to have a
competitive solicitation for next terminal operator starting in 2020, although the ports
cruise business has significantly changed over this period with expectation of
continued growth creating opportunity for others with the addition of a new proposed
cruise facility at Terminal 46.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
The CTA agreement is structured as a revenue-sharing lease. CTA collects the passenger and
dockage fees (per Marine Terminal Tariff No. 5) from the cruise lines, and the Port bills CTA for
its share of the fee revenue. The Port’s revenue-share remains the same in this fourth lease
amendment.
The Port provides CTA with annual allowances for use in meeting their repair and maintenance
obligations. These allowances include a Maintenance Allowance of $75,000, a Capital Allowance
of $200,000, and a Per Passenger Allowance of $0.08 per passenger up to 5 million passengers
then $0.05 per passenger thereafter.
ATTACHMENTS TO THIS REQUEST
Draft Fourth Amendment to the Cruise Facility Lease Agreement.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
• August 11, 2015 – Commission approved the Amended and Restated Cruise Terminal
Lease to remove Pier 66.
• September 11, 2012 – The Commission authorized the Second Amendment to the Cruise
Facility Lease Agreement exercising the option to extend seven years: 2013-2019
COMMISSION AGENDA – Action Item No. _6h_ Page 4 of 4
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
• April 11, 2006 – The Commission approved the First Amendment to the Cruise Facility
Lease Agreement to incorporate future move from Terminal 30 to Terminal 91.
• December 11, 2005 – The Commission authorized the execution of the Cruise Facility
Lease Agreement: 2006-2012
• Management Agreement between the Port of Seattle and Cruise Terminals of America
in place 2000-2005
