Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8i
ACTION ITEM
Date of Meeting
July 23, 2024
DATE : July 16, 2024
TO: Stephen P. Metruck, Executive Director
FROM: Jeffrey Wolf, Director, Aviation Commercial Management
Khalia Moore, Senior Manager, Airport Dining & Retail
SUBJECT: SmarteCarte International Arrivals Facility (IAF) Luggage Cart Operation Contract
Increase Request
Amount of this request:
$11,000,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to execute a purchase order with
SmarteCarte to continue to provide passenger amenity operations within the International
Arrivals Facility (IAF) including luggage cart operations and the potential to add porter services
as needed.
EXECUTIVE SUMMARY
• In November 2020, Commission approved the execution of an agreement with
SmarteCarte which included the proposed purchase of 1,100 luggage carts for the IAF
and provide recirculation of those carts to a designated area adjacent to the passenger
access areas within the IAF building. The total Commission approved amount at that
time was $3,250,000.
• Recirculation includes the collection and return of luggage carts from various areas at
the airport- primarily the parking garage- and return to the IAF for subsequent
availability and use by incoming international passengers.
• The initially negotiated contract with SmarteCarte was for five (5) years ending in 2026
with an annual contract amount of $650,000 per year for a total of $3,250,000. As a
part of the COVID relief process, all contracts were given term extensions, and an
additional one-year term extension was given to SmarteCarte extending the term to
December 31, 2027.
• The initial contract amount was calculated during the height of the pandemic and the
international passenger forecast projected a slower international passenger rebound
than ultimately was experienced at SEA which led to higher usage of luggage carts than
initially projected.
COMMISSION AGENDA – Action Item No. 8i Page 2 of 5
Meeting Date: July 23, 2024
Template revised June 27, 2019 (Diversity in Contracting).
• The initial contract scope was limited regarding recirculation requirements supporting
the IAF as operations within the building were to be handled by another Port 3rd party
contractor. Prior to the opening of the IAF, the SmarteCarte contract scope was
expanded as it was identified that the other Port 3rd party contractor did not have the
capacity to manage any level of IAF luggage cart recirculation operations.
• The Port initiated negotiations with SmarteCarte to amend and restate the contract
adding the additional scope of IAF luggage cart recirculation with service beginning upon
the facility opening on April 19, 2022.
• The Port renegotiated the contract from a flat annual fee (with the initial annual base
amount of $650,000 per year) to a variable fee based on the number of recirculated
carts with the initial rate set at $2.95 per recirculated cart (with an annual CPI
adjustment.) Port staff negotiated the lowest possible rate given the time sensitive
necessity for the IAF operations.
The initial approved contract amount of $3,250,000 to supplement being able to provide
international passengers with free luggage carts upon arrivals has now been exhausted. This
request will allow for continued operations of luggage cart recirculation through the expiration
of the SmarteCarte contract scheduled for December 31, 2027. As part of contract expiration,
staff will evaluate overall luggage cart services at SEA and consider updated agreement scope
and terms at that time.
JUSTIFICATION
Post-COVID, SEA has continued to demonstrate dynamic rebounds in both domestic and
international passenger traffic passing through the terminal. Accordingly, luggage cart usage
within the IAF has been extremely high, and funds associated with the recirculation have been
quickly depleted. This funding request considers projected international passenger growth and
CPI adjustments over the remainder of the contract term (12/31/2027).
This agreement is critical in providing passengers with continued premium luggage cart service
and a standard amenity expected for international passengers at airports across the country.
Approval of this request allows SEA to continue to provide international passengers use of the
luggage carts without a fee as their first introduction and welcome to SEA and
Seattle/Washington State/the United States.
Diversity in Contracting
Port staff will continue working with SmarteCarte in looking to find possible WMBE partners for
the domestic cart operations.
COMMISSION AGENDA – Action Item No. 8i Page 3 of 5
Meeting Date: July 23, 2024
Template revised June 27, 2019 (Diversity in Contracting).
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Don’t execute purchase order with SmarteCarte for IAF recirculation operations.
Cost Implications: No new additional cost (note: payments for April and May totaling $543,892
have been accrued and is anticipated to be paid as part of new approved purchase order. In
addition, June invoice will also be accrued as the amount is not yet known.)
Pros:
(1) Minimizes future costs to the Port for luggage cart services in the IAF, so decreased
incremental costs added to the IAF rate base.
Cons:
(1) SmarteCarte would cease luggage cart service in the IAF. This is not feasible
operationally and is poor customer service, as international arrival passengers typically
have more luggage and bulky parcels to transport out of the facility upon arrival.
(2) The Port will still be required to pay the outstanding balance for the months of service
that have continued since the previous purchase order was exhausted (March 2024).
This is not the recommended alternative.
Alternative 2 – Similar to the fee charged to domestic use of luggage carts, allow SmarteCarte
to implement a fee for international passenger use of carts and pay the Port 15% of all
revenues.
Cost Implications: Most likely no additional costs to the Port in the future.
Pros:
(1) Would eliminate or offset the costs to the Port associated with recirculation of luggage
carts.
Cons:
(1) Upfront costs would still be required to install infrastructure for the cart rack
collection system which will impact passenger flow in the IAF for cart layout within the
IAF. The Port would also still need to pay accrued invoices for previous recirculation
costs.
(2) The international arriving passenger experience would be extremely degraded as
international customers would be required to purchase (rent) carts upon entry into
SEA.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. 8i Page 4 of 5
Meeting Date: July 23, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 3 – Execute purchase order with SmarteCarte for IAF cart recirculation operations.
Cost Implications: $11,000,000
Pros:
(1) Given the expansive size of the IAF, this option maintains passenger luggage cart
recirculation services and allows for continued free use of carts by international
passengers arriving in the IAF through 2027.
(2) Opportunity to pilot an expansion of services to include potential porter services within
the IAF.
Cons:
(1) Incremental annual operating expense added to the International Rate Base for this
service over the remaining contract years.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Annual Budget Status and Source of Funds
The chart below depicts the projected annual spend through the remaining contract term
based on 2023/2024 actuals, enplanement models as of June 2024, Q2 accruals, and assumed
annual CPI adjustment. The projected total of approximately $10.4 million is the basis of this
funding request of $11 million allowing for additional funds based on potential increased
passenger numbers in the future.
The annual cost of recirculation services under this agreement will be included in the annual
operating budget for SEA, charged to the Federal Inspection Services (FIS) cost center which is
recovered from airlines using the International Arrivals Facility.
Future Revenues and Expenses
• The SmarteCarte agreement will continue to generate revenue to the Port through
domestic cart rental fees of $8 per use with the Port paid 15% of annual gross sales, as
well as massage chairs rental fees of $5 per use with the Port paid 25% of annual gross
sales per the Lease and Concessions agreement.
• The annual cost of the IAF luggage carts will be paid by the IAF cost center and
recovered through airline fees in the IAF rate base for international carriers.
Projected annual spend
COMMISSION AGENDA – Action Item No. 8i Page 5 of 5
Meeting Date: July 23, 2024
Template revised June 27, 2019 (Diversity in Contracting).
ATTACHMENTS
None.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
November 17, 2020– The Commission authorized the Executive Director to execute an
agreement with SmarteCarte to provide luggage carts and massage chair passenger services at
Seattle Tacoma International Airport (SEA). This agreement included a Port paid fee of Six
Hundred Fifty Thousand ($650,000) Dollars adjusted annually for SmarteCarte to provide and
maintain eleven hundred (1,100) carts within the new International Arrivals Facility (IAF).
November 3, 2009 – Commission authorized the request for the Chief Executive Officer to
execute an Amendment to the Lease and Concessions Agreement of SmarteCarte, Inc. at
Seattle Tacoma International Airport that would extend the term for an additional 5-year
period as provided in the current agreement, under new negotiated terms.