Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8d
ACTION ITEM
Date of Meeting
December 10, 2019
DATE: December 3, 2019
TO: Stephen P. Metruck, Executive Director
FROM: James Jennings, Interim Director, Properties and Airline Affairs
Wayne Grotheer, Director, Aviation Project Management
SUBJECT: Delta Airport Communications Center (ACC) Relocation Tenant Reimbursement
Agreement (TRA) (CIP #C801146)
Amount of this request:
$3,356,000
Reimbursement amount:
$2,370,000
Total estimated project cost:
$5,000,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to (1) execute a tenant
reimbursement agreement in the amount of $2,370,000 with Delta Air Lines Inc. for both design
and construction of a new airline-specific airport communications center at Seattle-Tacoma
International Airport and the design only of nearby restroom improvements and (2) expend
$986,000 of non-tenant reimbursement port costs associated with this project. The total
request is $3,356,000 out of a total project estimate of $5,000,000.
EXECUTIVE SUMMARY
Delta Air Lines Inc. (Delta) requires additional space to relocate and modernize their airline
specific Airport Communications Center (ACC) at the Airport. The ACC is the backbone and
control center for Delta’s airport operation. Delta’s current facility located on the ramp level of
the South Satellite is undersized and no longer suitable for its growing operation. This project
will develop unused outdoor space on the ramp level of Concourse B into additional enclosed
lease space. This build-out is eligible for port reimbursement. Delta will not be reimbursed for
tenant improvements including equipment fit-out for this space. This project will also design
improvements to nearby restrooms, currently in poor condition, and used by Delta’s workforce
and other users. This work is also eligible for port reimbursement. Authorization to reimburse
Delta for the construction of these nearby restroom improvements will be requested separately
once design of those improvements is complete.
This project was not included in the 2020 – 2024 capital budget and plan of finance. The budget
will be transferred from the Aviation Aeronautical CIP Reserve resulting in no net change to the
Aviation capital budget.
COMMISSION AGENDA – Action Item No. __8d__ Page 2 of 6
Meeting Date: December 10, 2019
Template revised June 27, 2019 (Diversity in Contracting).
JUSTIFICATION
There is not enough existing leasable space available at the airport to meet Delta’s growing
operational requirements without constructing new space. This project further supports the
Century Agenda goal to meet the region’s air transportation needs through cost effective
expansion at the Airport by providing additional leasable space in a currently unoccupied area.
This allows Delta to operate their ACC more efficiently and provides the port with additional
lease revenue.
Authorization of most TRAs has occurred at a point where both the tenant and the port have
agreed on a reimbursement amount, typically determined far enough into design (undertaken
at the tenant’s risk) that remaining risks to scope or cost growth are minimized and covered by
project budget contingency. As the need for improvements to the restrooms adjacent to the
Delta ACC project was raised late during the development of this TRA, seeking sufficient design
of these restrooms in order to authorize this full amount of the TRA was not possible without
delaying the construction of the ACC; therefore, only a design authorization is being sought at
this time, and a construction component of this TRA to cover the restrooms will be brought
forward at a later date.
Diversity in Contracting
The goals and objectives of relevant policy directives have been communicated to Delta for
guidance on Project Labor Agreements (PLAs), apprentice hiring, and women- and minority-
owned business enterprise (WMBE) utilization on tenant and tenant reimbursement
construction projects. Delta has been encouraged to incorporate these goals and objectives
into their bid documents and will work with the port’s Diversity in Contracting Department as
needed to support this opportunity.
DETAILS
This project will construct approximately 1,500 square feet of new leasable shell space on the
ramp level of Concourse B under a TRA with Delta for its design and construction. Delta will
improve this new shell space and combine it with existing adjacent lease space to satisfy their
total ACC size needs. The existing lease space is currently occupied and requires Delta to
relocate two tenants at its own cost. The project does not trigger building code requirements to
provide additional restroom capacity; however, Delta and the port have agreed to improve four
restrooms nearby that are in poor condition for Delta’s workforce and other users under this
TRA. To expedite this project, Delta has begun design at its own risk for this project.
The non-tenant reimbursement portion of the project budget covers port staff costs, overhead
costs, and project contingency.
Scope of Work
The project scope will design and construct new leasable space for use by Delta, and includes
though strictly not limited to, such items as:
COMMISSION AGENDA – Action Item No. __8d__ Page 3 of 6
Meeting Date: December 10, 2019
Template revised June 27, 2019 (Diversity in Contracting).
(1) Demolition of existing exterior wall and pavement within the footprint of the new
construction
(2) New concrete foundation slab and exterior sidewalk
(3) New exterior wall, doors and glazing
(4) New interior wall, ceiling, lighting and floor finishes
(5) Expansion of the fire suppression deluge system
(6) New heating, ventilation, and air conditioning (HVAC) system including temporary
roof-top air handling unit and associated duct work to ramp level
(7) Necessary life/safety and other utility infrastructure connection points to the lease
line
(8) Design of improvements to existing restrooms
Schedule
Activity
2019 Quarter 2
2019 Quarter 4
2020 Quarter 1
2020 Quarter 4
TBD
Cost Breakdown
This Request
Total Project
$483,000
$483,000
$2,873,000
$4,517,000
$3,356,000
$5,000,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Construct approximately 3,460 square feet of new lease space on the ramp level
of Concourse B under the concourse level between Gates B6 and B8 to accommodate Delta’s
projected space requirements for their ACC. Improve four nearby ramp-level restrooms in poor
condition for Delta’s workforce and other users.
Cost Implications: $7,832,000
Pros:
(1) Fully satisfies Delta’s additional lease space requirement for the ACC
(2) Satisfies Century Agenda objectives for cost-effective expansion of domestic and
international service
Cons:
(1) Infrastructure deficiencies on Concourse B require costly stand-alone HVAC solutions
for this location
(2) Gates surrounding this location are preferentially leased by Southwest Airlines who
would be negatively impacted by this project
COMMISSION AGENDA – Action Item No. __8d__ Page 4 of 6
Meeting Date: December 10, 2019
Template revised June 27, 2019 (Diversity in Contracting).
This is not the recommended alternative.
Alternative 2 – Postpone Delta’s request for the new office lease space until the port can
construct the infrastructure upgrades necessary to support the buildout of additional space on
Concourse B ramp level.
Cost Implications: $0
Pros:
(1) Defers capital investment and lessens future tenant reimbursement for costs
expended for the proposed temporary HVAC roof-top air handling unit required to
serve the new ACC buildout
Cons:
(1) Does not allow the Delta ACC to accommodate additional capacity for at least 5 years
(2) Delta would need to consider moving this critical function to an off-site location, as
the current location only provides 33% of their projected space requirement
(3) Does not satisfy Century Agenda objectives
This is not the recommended alternative.
Alternative 3 – Construct approximately 1,500 square feet of new lease space adjoining existing
lease space on the Concourse B ramp level between Gates B3 and B5 to accommodate Delta’s
projected space requirements for their ACC. Improve four nearby ramp-level restrooms in poor
condition for Delta’s workforce and other users.
Cost Implications: $5,000,000
Pros:
(1) Fully satisfies Delta’s additional lease space requirement for the ACC
(2) Lower cost option than Alternative 1
(3) Gates in this location are preferentially leased by Delta and construction will only
impact their operations
(4) Satisfies Century Agenda objectives for cost-effective expansion of domestic and
international service
Cons:
(1) Infrastructure deficiencies on Concourse B require costly stand-alone HVAC solutions
for this location
(2) Requires relocation of existing tenants (costs of this are borne solely by Delta,
however).
This is the recommended alternative.
FINANCIAL IMPLICATIONS
COMMISSION AGENDA – Action Item No. __8d__ Page 5 of 6
Meeting Date: December 10, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Cost Estimate/Authorization Summary
Capital
Expense
Total
$5,000,000
$0
$5,000,000
$50,000
0
$50,000
$3,356,000
0
$3,406,000
$3,406,000
0
$3,406,000
$1,594,000
$0
$1,594,000
This project was not included in the 2020-2024 capital budget and plan of finance. The budget
will be transferred from the Aeronautical Reserve CIP (C800753) resulting in no net change to
the Aviation capital budget. The funding sources will include the Airport Development Fund and
future bonds.
Financial Analysis and Summary
Project cost for analysis
$5,000,000
Business Unit (BU)
Terminal Building
Effect on business performance
(NOI after depreciation)
NOI after depreciation will increase due to inclusion of
capital (and operating) costs in airline rate base
IRR/NPV (if relevant)
N/A
CPE Impact
$0.01 in 2021
Future Revenues and Expenses (Total cost of ownership)
The project creates new lease space for Delta. The port will receive terminal rent of more than
$500,000 per year. New assets will be included in the port’s maintenance asset management
system and are standard building systems and components with 15- to 20-year life
expectancies.
ADDITIONAL BACKGROUND
The project is not required by building code to provide additional restroom capacity. The port
and Delta have recently agreed to improve two women’s and two men’s restrooms nearby in
poor condition for Delta’s workforce and other users, under this TRA, in a combined good faith
effort to mitigate complaints and reduce maintenance calls. The restroom improvements are a
new addition to Delta’s ACC project scope and the design is not yet available. Reimbursement
of design costs to Delta for the restroom improvements are included with this funding
authorization request. Once the design has defined the restroom improvements and
construction costs are better known, authorization for construction funding will be requested
and the TRA will be amended. Delta will include the restroom improvements as a construction
change order to their ACC project upon commission’s approval and amended TRA.
COMMISSION AGENDA – Action Item No. __8d__ Page 6 of 6
Meeting Date: December 10, 2019
Template revised June 27, 2019 (Diversity in Contracting).
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
None