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HomeMy WebLinkAbout10/20/2020 05 Deferral of 2021 Airline and Terminal Building Rate Increases a\'4\lyy bxk ik 1 1-:41 PPPPPP+Pd s' lii it tYlltYlA.\ta. BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 5. For Meeting of: October 20, 2020 ITEM TITLE: Resolution authorizing deferral of previously adopted 2021 airline and terminal building rate increases for the Yakima Air Terminal- McAllister Field SUBMITTED BY: Rob Peterson,Airport Director, 509-575-6149 SUMMARY EXPLANATION: On December 3, 2018, City Council approved Resolution 2018-136, which included an annual three percent(3%) increase in airline landing and terminal building fees for 2019 and each of the next two years thereafter. As City Council prepares to adopt the 2021 budget, it's imperative we consider the economic distress much of the transportation industry is facing due to the Coronavirus. Airlines for America reports U.S. passenger volumes remain 75% below 2019 levels and anticipates the airline industry is unlikely to see a return to 2019 passenger volumes before 2022; resulting in a devastating impact on the airline industry and the concessions providers within the terminal building. In response to the economic challenges during the ongoing Coronavirus pandemic, it's recommended to defer the 2021 three percent(3%) increase in airline landing and terminal building fees for one year where the fee increase will be reinstated on January 1, 2022. This change will have an approximate 0.7% impact on the airport's 2021 budget and will help airlines as well as car rental companies recover from historic low passenger activities. Additional information regarding the impacts of the Coronavirus can be located in the attached memo. ITEM BUDGETED: Yes STRATEGIC PRIORITY: Economic Development APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: 2 Adopt Resolution ATTACHMENTS: Description Upload Date Type D resolution 10;12'2020 Omer Memo © Council Memo 10160020 Coker Memo 3 RESOLUTION NO. R-2020- A RESOLUTION authorizing deferral of previously adopted 2021 airline and terminal building rate increases for the Yakima Air Terminal-McAllister Field. WHEREAS, the City owns and operates Yakima Air Terminal-McAllister Field in accordance with applicable Federal, State and Local regulations; and WHEREAS, the Yakima Air Terminal-McAllister Field is an enterprise fund where revenues collected are to be utilized in support of the daily operations and maintenance functions at the airport; and WHEREAS, the Yakima Air Terminal-McAlister Field has established rates and charges for aeronautical and commercial airport property; these rates and charges are reviewed annually to ensure they are comparable to rates and charges imposed at neighboring airports; and WHEREAS, the City is obligated under Federal Aviation Administration Grant Assurances to maintain a fee and rental structure for the facilities and services provided at the airport, which will make the airport as self-sustaining as possible; and WHEREAS, on December 3, 2018, City Council approved Policy #12, which included an annual three percent (3%) increase in airline landing and terminal building fees for 2019 and each of the next two years thereafter; an increase in the aeronautical ground lease rate to $0.19 per square foot per year and commercial ground lease rate to $0.21 cents per square foot per year; and WHEREAS, the 2019-20 Coronavirus pandemic is an ongoing pandemic of Coronavirus disease 2019 (COVID-19) that has reached more than 190 countries causing economic distress on all forms of businesses including the transportation industry; and WHEREAS, Airlines for America have reported U.S. passenger volumes remain 75% below 2019 levels and anticipates the airline industry is unlikely to see a return to 2019 passenger volumes before 2022, resulting in a devastating impact on the airline industry and the concessions providers within the terminal building; and WHEREAS, in response to economic challenges during the ongoing COVID-19 pandemic, City Council has determined the best course of action is to defer the 2021 three percent (3%) increase in airline landing and terminal building fees for one year, the revenue of which was to be included in the 2021 budget, and reinstate the fee increase on January 1, 2022; now, therefore BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager is hereby authorized and directed to defer the previously adopted 2021 three percent (3%) rate increase in airline landing and terminal building fees for the 2021 budget and reinstate the deferred increase beginning January 1, 2022. ADOPTED BY THE CITY COUNCIL this 20'h day of October, 2020. ATTEST: Patricia Byers, Mayor Sonya Clear Tee, City Clerk 4 Yakima Air Temnai- McAIliste€Field 2406 W. W'asltington Ave,Suoe£3 Yakima,WA 98903 (509)575-6419 www.flyYKM.cam To: Honorable Mayor and Members of City Council Cc: Bob Harrison, City Manager From: Robert Peterson, Airport Director Date: Thursday, October 1, 2020 Subject: CONSIDERATION TO DEFER TERMINAL BUILDING AND AIRLINE LANDING FEE RATE INCREASES UNTIL JANUARY 1, 2022 History On December 3, 2018, City Council approved Resolution 2018-136, which included an annual three percent (3%) increase in airline landing and terminal building fees for 2019, 2020, and 2021. Situation The transportation industry has been severely impacted by the Coronavirus pandemic, where airports nationwide have witnessed record low passenger activities. These impacts have had a ripple effect on a variety of businesses that serve the airline industry including rental car companies, vehicle parking contractors, airport concessions, and ground transportation services. Domestic air travel has declined approximately 73 percent and international travel has decreased by 90 percent compared to 2019 data (as reported by Airlines for America). Specifically, on May 22, 2020, Hertz Global Holdings filed for Chapter 11 bankruptcy in order to deal with the impacts of the pandemic and to strengthen the organization's capital structure. Alaska Airlines also reported in 2020's second quarter a net loss of$214 million compared to the second quarter of 2019, which had a net gain of $262 million. Due to the decrease in passenger ridership, Alaska reduced their flight schedule to one flight per day between May and August of 2020. As the transportation industry slowly recovers from the pandemic, Alaska reinstated a second flight beginning August 1, 2020, in which Yakima's flight schedule will remain with two flights until early 2021. The airport administration office continues to monitor key performance indicators to determine how the transportation industry is slowly recovering during the Coronavirus pandemic. The following performance measures have been recorded from January 1, 2020 through August 30, 2020: 5 Transportation Sector 2019 2020 Variance Airline Passenger Ridership: 91,196 39,994 (51,202) Airline Load Factors: 72% 45% (27%) Passenger Vehicle Parking: $446,775 $121,507 ($325,268) Car Rental Companies: $969,029 $342,451 ($626,578) Rented Vehicles: 13,663 3,893 (9,770) Air Cargo Landing Weight: 12,542,282 11,551,989 (990,293) In response to the economic challenges during the ongoing Coronavirus pandemic, it is recommended that Council consider deferring the 2021 three percent(3%)increase in airline landing and terminal building fees for one year to be reinstated on January 1, 2022. This change will have an approximate 0.7% impact on the airport's 2021 budget and will help airlines as well as car rental companies recover from historic low demands.