Metropolitan Airports Commission

Transcription

1 Metropolitan Airports Commission Management and Operations Committee Agenda Regular Monthly Meeting on Monday, June 02, 2014 at 1:00:00 PM

2 SEE ATTACHED SECURITY CHECKPOINT INFORMATION MANAGEMENT AND OPERATIONS COMMITTEE Rick King, Chair Don Monaco, Vice Chair Dan Boivin, Commission Chair Timothy Geisler, F&A Chair Mike Madigan Lisa Lebedoff Peilen, Commission Vice Chair Paul Rehkamp, PD&E Chair Patti Gartland METROPOLITAN AIRPORTS COMMISSION NOTICE OF REGULAR MEETING MANAGEMENT AND OPERATIONS COMMITTEE Monday, June 2, :00 p.m. Room 3048A, Terminal 1-Lindbergh Minneapolis-St. Paul International Airport AGENDA OPEN FORUM The Open Forum is a portion of the Committee meeting where persons will be allowed to address the Committee on subjects which are not a part of the meeting agenda. Speakers are asked to limit their remarks to two minutes each. Persons wishing to speak must complete a sign-up card prior to the start of the meeting. The sign-up card should be given to any staff person. The Committee may take action or reply at the time of the statement or may give direction to staff at the end of the meeting regarding investigation of the concerns expressed. CONSENT 1. PURCHASING/SERVICE CONTRACTS a. Automated People Movers Operations and Maintenance Contract Recommendation b. Baggage Carousel Maintenance Contract Recommendation c. Fire Suppression Systems Testing, Repairs and Certification Contract d. Rental Auto Operator Service Site Agreement e Property and Minnesota Risk Management Fund Renewal f. Anoka County/Blaine Airport Contract Tower Equipment Maintenance Contract Recommendation g. Microsoft Office 365 Software License Purchase Jeff Nawrocki, Assistant Director Operations/Facilities Brad Johnson, Manager - Purchasing Karen Racek, Assistant Manager Airside Leasing and Tenant Relations Bill Hoyt, Manager Insurance/Risk Management Gary Schmidt, Director Reliever Airports Jeff Bjorklund, Manager Information Services Dave Ruch, Director Information Services

3 2. CONCESSION AWARDS a. Automated Teller Machine Concession Request for Bid (RFB) Elizabeth Grzechowiak, Assistant Director Concessions and Business Development Bruce Rineer, Manager Concessions and Business Development DISCUSSION ACTION 3. MSP ARTS & CULTURE PROGRAM: SPONSORSHIP & FILM SPACE AGREEMENTS Jana Vaughn, Executive Director MSP Airport Foundation Robyne Robinson, Arts & Culture Director MSP Airport Foundation 4. HEARING OFFICERS REPORT AND RECOMMENDATION Evan Wilson, Attorney DISCUSSION INFORMATION 5. RELIEVER AIRPORTS 2014 AVIATION EVENTS Gary Schmidt, Director Reliever Airports 6. PROPOSED REVISED RELIEVER LEASE POLICIES Gary Schmidt, Director Reliever Airports Evan Wilson, Attorney 7. NEW DEVELOPMENT AT THE FLYING CLOUD AIRPORT Gary Schmidt, Director Reliever Airports 8. COMMISSION CHAMBERS VIDEO UPDATE Patrick Hogan, Director Public Affairs and Marketing Rebecca Brown, Information Services Coordinator Materials for this meeting are available at the following website: Meetings/Board-Meetings.aspx SECURITY CHECKPOINT INFORMATION Stop by the information booth near the tram station on the Tram Level. At the information booth, you will be asked to complete a security checkpoint access form and show valid, government-issued photo identification, such as a driver s license. Take your completed access form with you up two floors, to the Ticketing Level security checkpoints. Show your approved access form to security checkpoint personnel. You will then be screened just as if you were traveling. Access forms are only valid for the purpose of attending a public MAC meeting at a particular date and time. Commission Chambers are located on the Mezzanine Level overlooking the airport s central shopping area (above Chili s Restaurant), past the main security checkpoints. Allow yourself at least 30 minutes to park, complete the access form and get through the security checkpoint prior to the meeting. Parking will be validated; please bring your parking ticket to the meeting.

4 Directions to the Tram Level Information Booth From short-term parking: At the Lindbergh Terminal entrance, take the escalator or elevator down to the Tram Level. The information booth is straight ahead, in the center of the room. From general parking: If you park in the Blue or Red ramps, take the elevator down to the tram, which will transport you directly to the Lindbergh Terminal s Tram Level. When you exit the tram, the information booth is straight ahead, in the center of the room. If you park in the Green or Gold ramps, take the skyway to the Lindbergh Terminal s Mezzanine Level. From there, take an elevator or escalator to Tram Level. The information booth is straight ahead, in the center of the room.

5 MEMORANDUM ITEM 1a TO: Management and Operations Committee FROM: Jeff Nawrocki, Assistant Director - MSP Operations/Facilities (612) SUBJECT: AUTOMATED PEOPLE MOVERS OPERATIONS AND MAINTENANCE CONTRACT RECOMMENDATION DATE: May 16, 2014 On December 16, 2013, the Commission authorized staff to issue a Request for Proposals (RFP) for Automated People Movers Operations and Maintenance Contract at the Hub and Concourse Automated People Movers (APM.) On April 14, 2014, MAC staff conducted a mandatory pre-bid meeting and tour, attended by three APM companies. On May 2, 2014, proposals in response to the RFP were received from Leitner-Poma, Otis Elevator Company (Otis) and Schwager Davis Incorporated (SDI). On May 15, 2014, interviews of Leitner-Poma, Otis and SDI took place. SUMMARY OF RECOMMENDATION This public memo will address (a) the Minnesota Government Data Practices Act, (b) the RFP requirements, (c) key business terms, (d) the Review Team evaluation process, and (e) the award recommendation. MINNESOTA GOVERNMENT DATA PRACTICES ACT Under state law, information submitted by proposers to MAC and information created or maintained by MAC as part of the evaluation process remains not public until MAC has completed negotiating the contract with the selected proposer(s). The names of the proposers, however, are public at the time and date the proposals are due. Information in the proposals and the Not Public Memorandum is not public and should not be disclosed to anyone other than MAC Commissioners and staff. Notwithstanding the foregoing, Commissioners may discuss the information in the proposal(s) or the Not Public Memorandum at the Committee and Commission meetings to the extent reasonably necessary to conduct the business at hand. The information in this memorandum is public data. BACKGROUND In 2009, the Commission awarded an operations and maintenance contract for two APM systems to Schwager Davis Incorporated (SDI). The contract began on May 5, 2009, and expired on May 5, The Commission extended this agreement on a month-to-month basis until a vendor is chosen through this RFP process. MINIMUM REQUIREMENTS To submit a proposal, proposers must have met the following Minimum Requirements, as set forth in the RFP: 1. Vendor must have a valid Elevator Contractor license issued by the State of Minnesota

6 or be able to obtain same prior to July 12, Vendor must have a Director of APM Operations available for assignment to this contract by July 1, Assigned Director subject to review and approval by MAC. 3. Vendor must have a 24-hour staff of service technicians trained to service the equipment listed in the Technical Specifications section. Service technicians must meet the minimum training and licensing requirement detailed herein. 4. Vendor must stock routine repair items for each APM system included in the specification. KEY BUSINESS TERMS The term of the agreement shall be five years, with one three-year renewal option exercised by future Commission action. The facilities to be covered under the maintenance agreement include the MAC Hub Tram and Concourse Tram APM systems in Terminal 1-Lindbergh. Both MAC APM systems are covered under the Master MAC APM Operating and Maintenance agreement. The contract includes detailed specifications governing how the APM systems are operated on a 24 hours per day, 7 days per week, 365 days per year basis and performance based criteria which require the contractor to comply with specified parameters for staffing, availability, maintenance procedures, testing, certification, event log monitoring, recordkeeping/reporting, insurance and parts/tool inventory management. Under the terms of this agreement, the MAC may assess predetermined liquidated damages when contractor performance falls outside of certain specified parameters. Conversely, the contractor may earn a bonus if they exceed the specified performance criteria by a predetermined amount. Contractor performance and associated reporting data for availability, mode events and completed preventative maintenance procedures are reviewed monthly to confirm if a payable bonus or enforceable liquidated damages are applicable for the reporting period. The amount of any bonus payments or liquidated damages is calculated based on contractual formulas using a percentage of the contract amount. The contract is administered by MAC Facilities with technical assistance provided by Van Deusen & Associates (VDA), an independent APM consulting firm. EVALUATION CRITERIA Each proposal was evaluated by the Review Team based on the following criteria: 1. Minimum Requirements Pass/Fail 2. Service Approach 300 points 3. Personnel 300 points 4. Related Work Experience 300 points 5. Pricing 300 points 6. Interview 300 points TOTAL POINTS 1500 points

7 REVIEW TEAM The Review Team consisted of: Jeff Nawrocki, Assistant Director - MSP Operations/Facilities Kurt Marka, Supervisor - Facilities Adrian Kregness, Electrical Foreman - Trades Tom Grad, VDA (APM Consultant) Non-scoring advisors included: Sallie Karels, Buyer - Purchasing Matt Krogh, Attorney - Legal Mike Batt, Financial Analyst - Finance Dennis Kowalke, Project Manager - Airport Development Dennis Stocke, VDA (APM Consultant) PROPOSAL REVIEW PROCESS/RESULTS Each review team member reviewed the proposals individually, a meeting was held to discuss them collectively, and each firm was interviewed. Based on the analysis, it is the review team s unanimous recommendation that Schwager Davis Incorporated be awarded the MAC APM Operating and Maintenance Contract. COMMITTEE ACTION REQUESTED: RECOMMEND THE FULL COMMISSION AWARD THE AUTOMATED PEOPLE MOVERS OPERATION AND MAINTENANCE CONTRACT TO SCHWAGER DAVIS INCORPORATED FOR A FIVE-YEAR TERM AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

8 MEMORANDUM ITEM 1b TO: Management and Operations Committee FROM: Jeff Nawrocki, Assistant Director - MSP Operations/Facilities (612) SUBJECT: BAGGAGE CAROUSEL MAINTENANCE CONTRACT RECOMMENDATION DATE: May 5, 2014 On December 16, 2013, the Commission authorized staff to issue a Request for Proposals (RFP) for Baggage Carousel Maintenance at Terminal 1-Lindbergh and Terminal 2-Humphrey. On April 7, 2014, MAC staff conducted a mandatory pre-bid meeting and four companies attended. On April 28, 2014, proposals in response to the RFP were received from Alltech Engineering Corporation (Alltech), Lovegreen Industrial Services, Inc. (Lovegreen), Egan Company (Egan) and Elite Line Services, LLC (ELS.) SUMMARY OF RECOMMENDATION This public memo will address (a) the Minnesota Government Data Practices Act, (b) the RFP requirements, (c) the Review Team evaluation process, and (d) the award recommendation. MINNESOTA GOVERNMENT DATA PRACTICES ACT Under state law, information submitted by proposers to MAC and information created or maintained by MAC as part of the evaluation process remains not public until MAC has completed negotiating the contract with the selected proposer(s). The names of the proposers, however, are public at the time and date the proposals are due. Information in the proposals and the Not Public Memorandum is not public and should not be disclosed to anyone other than MAC Commissioners and staff. Notwithstanding the foregoing, Commissioners may discuss the information in the proposal(s) or the Not Public Memorandum at the Committee and Commission meetings to the extent reasonably necessary to conduct the business at hand. The information in this memorandum is public data. BACKGROUND In April 2008, the Commission awarded the Baggage Carousel Maintenance Contract to Alltech. That agreement expired March 31, 2014, and on April 21, 2014, the Commission approved the contract for extention on a month-to-month basis until a vendor is awarded the next contract through this RFP process. MINIMUM REQUIREMENTS To submit a proposal, proposers must have met the following Minimum Requirements, as set forth in the RFP:

9 1. Vendor must have a minimum of five years experience in maintaining baggage carousel systems similar to MAC s. 2. Vendor must have the ability to maintain equipment as described in the scope. 3. Vendor must be able to respond 24 hours a day with a staff of service technicians trained to service the equipment listed within the specifications. 4. Vendor must stock routine repair items for each system included in the specification. KEY BUSINESS TERMS The term of the agreement shall be three years, with one renewal option for an additional threeyear term exercised via future Commission action. The facilities to be covered under the maintenance agreement include Terminal 1-Lindbergh (inbound system only), Terminal 2- Humphrey (inbound and outbound system) and the MAC Materials Storage Building. Pricing for necessary minor improvements to the baggage systems were also included in each proposal. EVALUATION CRITERIA Each proposal was evaluated by the Review Team based on the following criteria: 1. Service Approach 300 points 2. Personnel 300 points 3. Related Work Experience 300 points 4. Fee Structure 600 points TOTAL POINTS 1500 POINTS REVIEW TEAM The Review Team consisted of: Jeff Nawrocki, Assistant Director - MSP Operations/Facilities Les Ellesson, Assistant Manager - Facilities Adrian Kregness, Electrical Foreman - Trades Ben Humphrey, Delta Airlines General Manager for Customer Service Rick Valentino, Assistant Manager - Terminal 2-Humphrey Non-scoring advisors included: Sallie Karels, Buyer - Purchasing Matt Krogh, Attorney - Legal Mike Batt, Financial Analyst Finance PROPOSAL REVIEW PROCESS/RESULTS Each review team member reviewed the proposals individually, then a meeting was held to discuss them collectively. Based on the analysis, it is the review team s unanimous recommendation that Alltech be awarded the Baggage Carousel Maintenance Contract.

10 COMMITTEE ACTION REQUESTED: RECOMMEND THE FULL COMMISSION AWARD THE BAGGAGE SYSTEM MAINTENANCE CONTRACT TO ALLTECH ENGINEERING CORPORATION FOR A THREE-YEAR TERM AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

11 MEMORANDUM ITEM 1c TO: Management and Operations Committee FROM: Jeff Nawrocki, Assistant Director - MSP Operations (612) Brad Johnson, Manager - Purchasing (612) SUBJECT: FIRE SUPPRESSION SYSTEMS TESTING, REPAIRS AND CERTIFICATION CONTRACT DATE: May 23, 2014 INTRODUCTION The Metropolitan Airports Commission (MAC) solicited bids for fire suppression systems testing, repairs related to testing, and certification of dry systems, pre-action and fire pumps. All systems are located on the MAC campus. The six Reliever airports may be added at a later date through direct negotiation with the successful vendor of this solicitation. The current contract with Viking Automatic Sprinkler expired May 31, The current vendor has been in place six years and the annual expenditure averages $143,228. TERM The term of the new contract will be five years with no renewal options. The pricing will be firm for the five-year period. MINIMUM REQUIREMENTS To qualify to bid, the vendors must be able to respond within one hour to the Minneapolis-St. Paul International Airport and must be an established fire sprinkler business with fire sprinkler fitters on staff. The Request for Bids was posted to the MAC website and advertised on the State of Minnesota s online solicitation page. BID RESULTS See attached Bid Tabulation. RECOMMENDATION MAC staff recommends award to the low bidder, Summit Companies, for five years, with no renewal options. COMMITTEE ACTION REQUESTED: RECOMMEND TO THE FULL COMMISSION AWARD OF A FIVE-YEAR CONTRACT WITH SUMMIT COMPANIES IN THE AMOUNT OF $254,926, PLUS ANY NECESSARY STANDPIPE TESTING AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

12 Bid Tabulation VENDOR FIVE-YEAR TOTAL PRICE Summit Companies $254,926 Brothers Fire Protection $330,614 Viking Automatic Sprinkler $692,688 Vendors also submitted separate pricing for standpipe testing (to be performed on a time and material basis). Summit Companies was also the low bidder for parts markup and labor rates.

13 MEMORANDUM ITEM 1d TO: FROM: SUBJECT: Management and Operations Committee Karen Racek, Assistant Manager - Airside Leasing & Tenant Relations (612) RENTAL AUTO OPERATOR SERVICE SITE AGREEMENT DATE: May 21, 2014 Staff is seeking authority to enter into a Rental Auto Service Site Agreement with Auto Rental II, LLC d/b/a Sixt Rent A Car MSP in support of its off-airport rental auto operation. BACKGROUND In April 2014, staff was contacted by representatives of Walser Commercial Services regarding off-airport rental auto opportunities at MSP for their Sixt Rent A Car franchise. Sixt Rent A Car is the No. 1 car rental company in Germany, Austria and Switzerland. Sixt started operations in the United States in 2010, and began franchising in 2013, as a new low cost car rental alternative servicing the Tampa airport. Today, Sixt has franchises servicing airports in Charlotte, Myrtle Beach, and Las Vegas, as well as local markets in Connecticut and Massachusetts. Off-airport rental auto operations provide MSP customers with additional options to those of the on-airport operators. For MSP, off-airport refers to rental auto operators that lease counter space within the Terminal 1-Lindbergh Transit Plaza and Terminal 2-Humphrey Customer Service Building but have no return/ready vehicles in the terminal parking ramps, requiring customers be shuttled to an off-site location to pick up and return the rented vehicles. On-airport operators are selected through a competitive bid process for an On-Airport Concession Agreement, with preferential terminal counter and ready/return space in the terminal parking ramps. The On-Airport Concession Agreement bid process was completed in The term of the Concession Agreement is five years with two one-year option periods at MAC s sole discretion. In May 2014, the Commission approved an Off-Airport Counter Lease Agreement with Auto Rental II, LLC d/b/a Sixt Rent A Car. Additionally, representatives of Walser further inquired about the availability of any airport property that could accommodate the ready/return and operational activities needed to support the Off-Airport Counter Lease Agreement. Staff previously identified a five acre parcel on the southwest side of the airport as an auto rental facility redevelopment site, given the close proximity to the Avis Car Rental and Budget Rent A Car service site locations (Attachment A). Staff has pursued development of the site with existing on-airport operators presently performing service site operations at off-site locations in St. Paul and Eagan, but those operators have not shown any serious interest in the parcel. Therefore, the parcel remains available for development as a rental auto facility. PROPOSAL In support of the Sixt Rent A Car MSP off-airport operation, Auto Rental II, LLC proposes to develop a rental auto service site facility on this five acre parcel. MAC shall have no financial responsibility for any costs associated with the development. The proposed facility will consist of an approximately 3,500 square foot administrative and customer support area, car wash bay, light vehicle servicing and maintenance area, fueling station, and surface area for vehicle

14 fleet storage. No vehicle sales shall be permitted from the premises. All construction shall be in accordance with MAC s Building and Design Standards. The term of the Service Site Agreement will be ten years from Date of Beneficial Occupancy. Ground Rental Rates per MAC Ordinance No. 103 shall apply. At the expiration of the Agreement, title to the improvements shall revert to MAC. COMMITTEE ACTION REQUESTED: RECOMMEND THE FULL COMMISSION AUTHORIZE STAFF TO NEGOTIATE A DEVELOPMENT AND LEASE AGREEMENT WITH AUTO RENTAL II, LLC D/B/A SIXT RENT A CAR AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

15 Attachment A (Redevelopment Site)

16 MEMORANDUM ITEM 1e TO: Management and Operations Committee FROM: Bill Hoyt, Manager - Insurance/Risk Management (612) SUBJECT: 2014 PROPERTY AND MINNESOTA RISK MANAGEMENT FUND RENEWAL DATE: May 15, 2014 BACKGROUND The MAC continues to use alternative methods of risk transfer by obtaining insurance and services through risk pools with other governmental entities, i.e. the Public Entity Property Insurance Program (PEPIP) for property/boiler/machinery/cyber risk and the Minnesota Risk Management Insurance Fund for auto/inland marine/garagekeepers. This method provides an excellent transfer of risk and reduces costs compared to traditional insurance markets. The risk transfer configuration of the pools has been evaluated by staff to ensure that MAC would not be adversely affected by one catastrophic loss of a pool member. The insurance risk pools obtain insurance from international and domestic markets in addition to self-insurance based upon actuarial review. While insurance rates have been stable, MAC s loss history and the existence of risk mitigation programs positively impacts premiums compared to other entities. MAC s deductibles and self-insurance is evaluated by staff using our loss history, risk exposures, mitigation, control following a loss and insurance market conditions. PROPERTY INSURANCE MAC procures insurance coverage for property, contents, business interruption, cyber risk, boiler and machinery insurance along with fire engineering consulting, appraisals, regulatory boiler and machinery inspections through the Public Entity Property Insurance Program (PEPIP), which is an insuring product of Alliant Insurance Services. Approximately 34 worldwide insuring entities with an A.M. Best rating of at least A- provide the insurance for PEPIP. This is a national program of diverse governmental entities with a collective insurable property value of approximately $355,000,000,000. Members are placed in towers with other entities located in different parts of the United States that share some insurance limits such as earthquake and flood to reduce costs. MAC s insurable values increased 10.4 percent this year due to an appraisal study at MSP. These studies are conducted at least every five years for property with values in excess of $5,000,000. It is important to have accurate values in the event of a catastrophic loss so that sufficient insurance funds are available to address business interruption and reconstruction costs. MAC s greatest risk has a maximum foreseeable loss (MFL) of approximately $1,050,000,000. Insurance limits are obtained to the MFL instead of the full insurable values.

17 Attachment 1 is a historical graph depicting the rate of cost per $100 of insurable property values with the annual premium. The 2014 renewal rate is approximately 5.3 percent lower than the expiring rate. Staff and Alliant Insurance Services will continue to negotiate the rate and coverage until the renewal is finalized. Attachment 2 represents MAC s insurable values as compared to the annual premium. While values increased 10.4 percent, the premium increase is 4.5 percent due to the 5.3 percent reduction in rates. The premium also includes Boiler and Machinery and Terrorism along with surcharges paid to the State of Minnesota. RENEWALS Limits $1,050,000,000 $1,050,000,000 $1,050,000,000 Values $2,649,958,117 $2,769,269,859 $3,056,425,325 Base Deductible $250,000 $250,000 $250,000 Premium $839,558 $912,423 $953,190 AUTO PHYSICAL DAMAGE AND LIABILITY/INLAND MARINE/GARAGEKEEPERS LIABILITY The MAC obtains coverage for this risk group through the Minnesota Risk Management Fund established by State Statute and managed by the State Risk Management Department. The Fund participants consist of state agencies, political subdivisions and other governmental entities in Minnesota that are allowed to participate in the Fund by Statute. The Fund selfinsures and obtains reinsurance from traditional insurance markets. The Fund reports it has saved participants a combined total of $5,000,000 in the past five years compared to obtaining traditional insurance. MAC s licensed and non-licensed (inland marine) fleet liability is insured to Minnesota Tort Cap Limits per Minnesota Statue while operating off MAC property in Minnesota, and $5,000,000 out-of-state through the Fund. In addition, MAC s Aviation Liability Insurance through ACE USA provides insurance coverage in excess of the $5,000,000 to $25,000,000 for licensed vehicles out-of-state. The Fund is also used to insure physical damage for licensed and non-licensed fleet and equipment (e.g. noise monitoring equipment, fine arts.) The deductible is $1,500 for licensed vehicles, $2,500 for unlicensed vehicles up to $500,000, $10,000 for units valued at $500,000 to $999,999 and $25,000 for vehicles with a value in excess of $1,000,000. The Minnesota Risk Management Fund rewards participants that have a favorable multi-year loss history. MAC received a premium rebate of $57,693 during the current policy year for physical damage, vehicle liability and general liability for previously insured non-aviation property. MAC has utilized the rebate for the Operations Division to enhance fleet safety and other priority safety enhancements. Attachment 3 is a historical graph which represents each dollar of physical damage as compared to each dollar of premium after investment and administrative costs. It should be noted that the 2014 data only represents the first nine months of the policy year.

18 MAC s premium increase is attributed to its loss experience and a greater number of siren vehicles, which have a higher risk. MAC has a cross-functional team that assesses each loss and takes countermeasures to minimize recurrence. Garagekeepers Liability is for vehicles owned by others and subject to MAC s obligation at MSP parking facilities. RENEWALS Auto Liability/Physical Damage $107,028 $110,363 $133,836 Inland Marine $126,094 $134,935 $144,008 Fleet Values $52,041,461 $55,127,096 $54,911,085 Garagekeepers $ 2,898 $ 2,898 $ 2,898 Premium $236,020 $248,196 $283,742 COMMITTEE ACTION REQUESTED: RECOMMEND TO THE FULL COMMISSION THE FOLLOWING INSURANCE RENEWALS AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS: PROPERTY ALLIANT INS. SERVICES $912,423 $953,190 AUTO LIABILITY/INLAND MARINE MN RISK MGMT. FUND $248,196 $283,742 TOTALS $1,160,619 $1,236,932 (Please see attachments 1, 2, and 3)

19 ATTACHMENT 1

20 ATTACHMENT 2

21 ATTACHMENT 3

22 MEMORANDUM ITEM 1f TO: Management and Operations Committee FROM: Gary Schmidt, Director - Reliever Airports (612) SUBJECT: ANOKA COUNTY/BLAINE AIRPORT CONTRACT TOWER EQUIPMENT MAINTENANCE CONTRACT RECOMMENDATION DATE: June 2, 2014 In 1996, the air traffic control tower was constructed at the Anoka County/Blaine Airport as part of the federal Contract Tower Program. Funding for construction of the tower, which also included equipment, was made possible by a unique MAC/MNDOT partnership. MAC continues to own the tower and equipment, while the FAA staffs the facility with contract employees. As owner of the tower equipment, MAC is responsible for the equipment maintenance which must be in compliance with all applicable FAA Orders and Directives. Historically MAC has solicited bids for the tower equipment maintenance contract every three to five years. On March 19, 2014, MAC staff posted a Request for Bids (RFB) on MAC s website as well as the State of Minnesota s website. The RFB called for a three-year agreement, with three one-year renewal options exercised via future Commission action. For the second contract in a row, the incumbent, Aviation Consulting Engineering Services (ACES), was the only bidder. Although ACES has provided excellent services for the MAC, staff is also aware that there are other capable vendors providing similar services for other contract towers. One particular vendor said they were not aware of MAC s RFB, but if they had been, they would have submitted a bid. That fact alone causes us to pause and question whether ACES bid should be rejected and a more extensive bid solicitation process started anew. It is difficult however, to know whether another bid process will result in any savings. The type and age of equipment, which is approaching 20 years old, as well as the indemnification requirements, have a huge impact on the cost of a contract. In trying to compare the maintenance costs for other airports around the country, staff discovered a wide variety in the sophistication of equipment, the tasks required in the contract, indemnification requirements, and the level of maintenance outsourced. One airport received no bids on their maintenance contract and was forced to create a new position and train their own employee. Another airport uses one branch of their county to perform equipment maintenance and another to handle the building maintenance. Still another airport performs some inspections themselves and contracts out the more complicated inspections and maintenance. Because there was a lack of responses to the bid process, and because there may be other strategies to reduce the overall maintenance expense, MAC staff is recommending that the bid be rejected. It is also recommended that MAC staff be given adequate time to review other strategies that might reduce this maintenance expense before a new request for bids is issued. To maintain uninterrupted service and bridge the gap between the now expired contract and the next executed contract, it will be necessary to enter into a month-to-month maintenance agreement. ACES has indicated they are willing to extend service on a month-to-month basis at a three percent increase over last year s contract.

23 COMMITTEE ACTION REQUESTED: RECOMMEND THAT THE FULL COMMISSION REJECT THE BID FOR MAINTENANCE OF THE EQUIPMENT IN THE ANOKA COUNTY/BLAINE AIRPORT CONTROL TOWER; AUTHORIZE STAFF TO ENTER INTO A MONTH-TO-MONTH CONTRACT FOR MAINTENANCE OF TOWER EQUIPMENT FOR A PERIOD NOT TO EXCEED ONE YEAR; AUTHORIZE MAC STAFF TO ISSUE A NEW REQUEST FOR BIDS AFTER CONSIDERING STRATEGIES TO REDUCE MAINTENANCE COSTS; AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

24 MEMORANDUM ITEM 1g TO: Management & Operations Committee FROM: Jeff Bjorklund, Manager - Information Systems (612) Dave Ruch, Director - Information Systems (612) SUBJECT: MICROSOFT OFFICE 365 SOFTWARE LICENSE PURCHASE DATE: May 20, 2014 This is a request to approve the purchase of licensing for Microsoft Office 365 to upgrade all existing users from Office 2003 to Office BACKGROUND Currently, the majority of MAC computers and laptops are running Microsoft Office As part of the upgrade process, staff has explored many options available from Microsoft, and one of them is moving to Office 365. Office 365 is a suite of programs that will replace the traditional Microsoft Office suite. No current capabilities will be lost in moving from Office 2003 to Office 365, and in addition to the existing capabilities today, users will benefit from other programs that are now included like Microsoft Lync, an online collaboration tool that provides service like that of WebEx, should the MAC decide to deploy this tool. Office 365 is a subscription service where you pay per user rather than per device. With the move to the mobile world, more employees are starting to use multiple devices like desktops, laptops, tablets and smartphones. Office 365 allows a user to install Office on a certain number of these devices without having to buy separate licenses for each. This allows for more timely upgrades to the newest software and a more predictable cost spread out over the years. Currently MAC has to buy a fully licensed copy of software as well as software assurance on top of that to be eligible for upgrades. That software assurance needs to be renewed every three years and becomes costly. As part of Office 365, we true-up our user base annually and pay one time per year rather than buy Office licensing throughout the year when new computers or users are added. Office 365 also comes with many additional licensing capabilities that we currently pay for as part of our software assurance renewal every three years. Some of these licenses include Exchange Standard and Enterprise CALs, Windows Server CAL, Sharepoint Standard and Enterprise CALs and the Lync Standard and Enterprise CALs. In addition to all of the other functionality, MAC will also have access to Microsoft System Center, which is a suite of management products that allow the IS staff to manage and maintain the workstations and servers on the network. This includes the ability to more efficiently image workstations as well as upgrade and deploy software remotely. This purchase would be made with Software House International, who is an authorized Microsoft reseller, through the state of Minnesota purchasing contract. With this purchase of the Office 365, subscription the MAC can expect to realize a cost savings up front of approximately $80,000 over purchasing individual software licenses, as well as a savings of $80,000-$100,000 per year on annual software maintenance. The software agreement will be for three years and the cost will remain the same for those three years.

25 COMMITTEE ACTION REQUESTED: RECOMMEND TO THE FULL COMMISSION THAT STAFF BE AUTHORIZED TO EXPEND $137, FOR MICROSOFT OFFICE 365 LICENSING FROM SOFTWARE HOUSE INTERNATIONAL, AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

26 MEMORANDUM ITEM 2a TO: FROM: Management and Operations Committee Elizabeth Grzechowiak, Assistant Director - Concessions and Business Development (612) Bruce Rineer, Manager - Concessions and Business Development (612) SUBJECT: AUTOMATED TELLER MACHINE CONCESSION REQUEST FOR BID (RFB) DATE: May 5, 2014 Staff recommends issuing a Request for Bid (RFB) for operation of the Automated Teller Machine (ATM) concession at MSP. BACKGROUND In 2009, the Metropolitan Airports Commission (MAC) issued an ATM RFB for two different packages. US Bank was the sole bidder and was awarded both packages. At MSP, US Bank currently has seventeen ATM locations, which will expire on October 31, 2014, and one location inside of their US Bank Branch expiring February 28, TCF Bank has three locations on the G Concourse under its agreement with Delta Air Lines expiring December 31, Wings Financial has three ATM locations under an agreement with the MAC on month-to-month terms and one ATM location under an agreement with Delta Air Lines expiring December 31, Under its current agreement, US Bank pays a minimum annual guarantee (MAG) of $636,000 in year five (November 2014 October 2015). In addition, half of all out-of-network transaction fees are paid to the MAC, capturing $1.50 of each $3.00 out-of-network transaction fee. Total revenue to the MAC in 2013 was $818,000. Based on the Airport Service Quality (ASQ) MSP customer prioritization spectrum, MSP customers rank availability of bank, ATM, and money changing facilities as a low priority. As compared to a benchmark panel of 24 North American airports, MSP currently ranks 12 th. According to the most recent survey data, MSP does slightly better than the panel average. On a scale of 1-5, with 5 being the best, the five year average scores bottomed out at 3.56 in Quarter 1 of 2011, and peaked at 4.0 in Quarter 2 of Airports scoring higher than MSP have a higher percentage of originating and destination (O&D) traffic. Of airports with O&D and connecting traffic ratios similar to MSP, only two airports ranked higher. Dallas/Fort Worth International Airport ranked first with a single ATM provider (Chase Bank) and Salt Lake City International Airport ranked second with a single ATM provider (US Bank). Based on this information, staff believes that providing multiple ATM operators does not guarantee a more satisfied passenger and potentially limits the revenue by devaluing the program by opening the bid up to multiple operators. Staff is requesting authorization to issue a Request for Bids for the operation of twenty ATM sites located within Terminal 1-Lindbergh and Terminal 2-Humphrey. Staff proposes one package awarded to the highest bidder to assume operations of seventeen ATM locations

27 currently operated by US Bank beginning November 1, 2014, and three ATM locations currently operated by TCF Bank located on the G Concourse beginning January 1, This RFB will not include the existing US Bank Branch ATM or the Wings Financial Branch ATM located within their leased premise. Two additional Wings locations will remain in areas accessed mainly by airport employees. DBE participation is encouraged. MINIMUM REQUIREMENTS The minimum bid requirements are as follows: A. Bidder must submit a bid deposit in the amount of $5,000. B. Bidder must be licensed to do business in the State of Minnesota and currently manage or operate a banking facility that provides personal and business banking services in Minnesota at one or more location for at least the previous three years. C. Bidder must provide a minimum of three business and one financial reference. D. Bidder must be a Federal Deposit Insurance Corporation Approved Financial Institution. E. Bidder must have no pending, active or previous legal action that could, in MAC s sole judgment, prevent the bidder from fulfilling the terms of an agreement. F. Bidder must submit all required bid documents. SUMMARY OF KEY BUSINESS TERMS A. The term of this Agreement shall be five years. B. Bidders shall set a MAG for each year of the agreement. The Year 1 MAG must be no lower than $655,065. The MAG must escalate by a minimum of two percent annually. C. The MAG will increase by a minimum of $60,000 starting January 1, 2016, with the inclusion of the three G Concourse locations. This addition to the MAG will escalate at the same rate as the bid MAG. D. Bids will be evaluated by calculating the net present value formula of all five years MAG s to determine the total bid amount. E. In addition to the MAG, the successful bidder shall pay to the MAC 50 percent of all surcharges including out-of-network fees. REVIEW TEAM The Review Team will consist of:

28 Elizabeth Grzechowiak, Assistant Director - Concessions and Business Development Bruce Rineer, Manager - Concessions and Business Development Mike Willis, Director - Internal Audit Mike Batt, Financial Analyst - Finance Jeff Nawrocki, Assistant Director MSP Operations/Facilities Additions and substitutions may be made as the team determines necessary. Cameron Boyd, Attorney will serve as an advisor to the review team. COMMITTEE ACTION REQUESTED: RECOMMEND THE FULL COMMISSION AUTHORIZE STAFF TO ISSUE A REQUEST FOR BIDS FOR THE OPERATION OF AN AUTOMATED TELLER MACHINE CONCESSION AT MSP AND THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

29 MEMORANDUM ITEM 3 TO: FROM: SUBJECT: Management and Operations Committee Jana Vaughn, Executive Director - MSP Airport Foundation Robyne Robinson, Arts & Culture Director - MSP Airport Foundation MSP ARTS & CULTURE PROGRAM: SPONSORSHIP & FILM SPACE AGREEMENTS DATE: May 22, 2014 AIRPORT FOUNDATION MSP & THE ARTS AND CULTURE PROGRAM The Airport Foundation MSP (Foundation) was created as a 501(c)(3) in The Foundation s mission is to enhance the experience and exceed the expectations of travelers at MSP International Airport, as well as to support the Airport, MSP Airport System, and the broader aviation community. In pursuit of its mission, the Foundation provides a number of services to the Airport. These services include administering the Travelers Assistance program (which provides 400 volunteers to staff information booths in the terminals), contributing funding to Airport beautification projects (such as the hanging flower baskets on the inbound roadway and the floor mosaics in both terminals), contributing to the cost of lifesaving defibrillators in the Airport, improving customer service outreach through a volunteer ambassador program, administering the MSP Airport Employee of the Year Award, and coordinating with MAC and Airport tenants to provide critical passenger needs (such as stranded passenger services and oxygen delivery). In 2013, Foundation volunteers assisted 1,453,248 guests and contributed 61,525 hours of service, which can be valued at $1.343 million. The Foundation also administers the MSP Arts and Culture Program (Program). In 2008, the Commission adopted the MSP Arts and Culture Program Master Plan (Master Plan), as presented by the Foundation and developed by the Arts and Culture Steering Committee (Steering Committee), which is appointed by the Foundation and includes representatives from the Foundation, MAC, and local arts and culture communities. The mission of the Program is to enhance MSP Airport s image, enrich the public's experience, and promote a sense of place through arts and culture." There are three components of the Program: performing arts, rotating exhibits, and commissioned artwork. The Foundation is responsible for managing day to day operations of the Program, while the Steering Committee is responsible for oversight of the Program. Steering Committee members are Tom Anderson (General Counsel, MAC), Phil Burke (Director MSP Operations, MAC), John Edman (Director, Explore MN), Alan Howell (Senior Airport Architect, MAC), Sherri Mullery (VP Business and Foundation Partnerships, Bloomington CVB), Denny Probst (Executive Vice President, MAC), Robyne Robinson (Arts & Culture Director, MSP Airport Foundation), and Jana Vaughn (Executive Director, MSP Airport Foundation.) There is currently an open seat on the Steering Committee for a MAC Commissioner. The Foundation is funded through a number of sources, including donations, fundraisers, charitable gambling, lottery sales, and proceeds from the Minnesota Store in Northstar Crossing and the Marketplace concession in the bag claim area at Terminal 1-Lindbergh. It has been suggested that consideration be given to moving the MAC and Foundation to a feefor-service arrangement, as an alternative to using concessions as a funding source. The

30 sponsorship agreement described below may be a step in that direction; however, the analysis of altering the current relationship is ongoing and will continue to be evaluated in the context of the upcoming MSP Concessions rebid. SPONSORSHIP AGREEMENT The Arts and Culture Program has been searching for additional funding to support the Program. The Master Plan identifies sponsorships as possible, additional sources of funding, and we are now coming forward with a request that the Commission enter into a Sponsorship Agreement with the Foundation to permit it to seek Arts and Culture corporate sponsorships. The Sponsorship Agreement would allow the Foundation to provide sponsorship rights to the Concourse C Art Gallery, the concourse art cases being constructed as part of the ongoing restroom remodel project; and Foundation-administered musical or performance events, subject to time and place approval by the MAC Executive Director/CEO or a designee. Sponsorship rights may range from displaying the sponsor s name to curating art exhibit space. For example, the Foundation envisions allowing local art galleries to sponsor and curate concourse art cases. The Sponsorship Agreement will set certain parameters for the provision of sponsorship rights, including: (a) that installation of sponsorship displays and exhibits be at no cost to MAC and subject to MAC staff design approval; (b) that sponsorship selection, rights, displays and exhibits, term length, and revenue be subject to Steering Committee approval; (c) that any revenue generated through sponsorships be used by the Foundation primarily to support the Arts and Culture Program; and (d) that access to the approved locations be provided at no charge to the Foundation. The Foundation will select all sponsors through the Steering Committee. After discussing the issue with MAC Staff, we are requesting that the Sponsorship Agreement contain a two-year term. In light of the relative novelty of sponsorships at the Airport, MAC staff intends to revisit the Sponsorship Agreement after the two-year term to assess its workability and success. With the hiring of an Arts and Culture Director, the Foundation has approached several companies regarding possible corporate support for the Arts and Culture Program. As a result of these efforts, the Foundation has received interest from the Thomson-Reuters Corporation in a sponsorship of the Concourse C Art Gallery. In exchange for a two-year sponsorship right, Thomson would provide to the Foundation payment of $50,000, in-kind website design services valued at $25,000, and access to its art collection valued in excess of $75,000. The Foundation intends to continue to pursue additional sponsorship opportunities from other companies. Any locations other than those referenced in this memorandum would be brought to the Commission for approval. However, MAC is not being asked to approve Thompson- Reuters as a sponsor nor will it be asked to approve any other sponsors in the future. FILM & PERFORMANCE SPACE The 2014 Capital Improvement Program includes a project to develop a short film and performance space, which is currently under construction, on Concourse C. The short film and performance space is being pursued through the Arts and Culture Program, and will primarily be used to feature short films that have a connection to the Minnesota region. The space is expected to be completed and opened in August of this year.

31 We are seeking approval to enter a five-year lease between the Commission and the Foundation for the short film and performance space. The lease will give the Foundation exclusive use of the space for screening short films, hosting performances, and operating a story booth, all subject to selection approval by the Steering Committee. The equipment in the space will be provided and maintained by MAC. Consistent with the Master Plan, the space and janitorial services will be provided at no charge to Foundation. The lease will also allow the Foundation to provide sponsorship rights to the space. COMMITTEE ACTION REQUESTED: RECOMMEND TO THE FULL COMMISSION: 1. EXECUTION OF A SPONSORSHIP AGREEMENT BETWEEN MAC AND THE AIRPORT FOUNDATION MSP, AS GENERALLY DESCRIBED ABOVE; AND; 2. EXECUTION OF A FILM AND PERFORMANCE SPACE LEASE BETWEEN MAC AND THE AIRPORT FOUNDATION MSP, AS GENERALLY DESCRIBED ABOVE; AND; 3. THAT THE EXECUTIVE DIRECTOR/CEO OR A DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

32 MEMORANDUM ITEM 4 TO: Management and Operations Committee FROM: Kelly Gerads, Assistant Director - Reliever Airports (612) Evan Wilson, Attorney (612) SUBJECT: HEARING OFFICERS REPORT AND RECOMMENDATION DATE: May 27, 2014 The Management and Operations Committee served as Hearing Officers for a public hearing conducted on May 5, 2014, to receive public testimony regarding the proposed adoption of a revised rates and charges ordinance for the Reliever Airports (currently Ordinance 114). After careful consideration of all public testimony at the public hearing, MAC staff is recommending adoption of the Draft Amendment to Ordinance 114 as presented at the public hearing. At the June 2, 2014, Management and Operations Committee meeting, a Hearing Officers Meeting will be conducted. At this meeting, the Hearing Officers may discuss the proposed ordinance and suggest any additional revisions. The Hearing Officers will consider adoption of the Hearing Officers Report (HOR), including any revisions made by the Hearing Officers. In addition, the Hearing Officers will consider a recommendation to the Full Commission to approve the proposed Findings, Conclusions, and Order (see HOR, attachment 1), and to adopt the proposed ordinance (see HOR attachment 2). If adopted by the Full Commission, the Ordinance will take effect on July 1, Please find attached the Hearing Officers Report and its attachments. COMMITTEE ACTION REQUESTED: 1. ADOPT THE HEARING OFFICERS REPORT; 2. RECOMMEND THAT THE FULL COMMISSION: A. APPROVE THE PROPOSED FINDINGS, CONCLUSIONS AND ORDER; B. ADOPT THE RELIEVER AIRPORTS RATES AND CHARGES ORDINANCE; AND C. THAT THE EXECUTIVE DIRECTOR/CEO OR HIS DESIGNEE BE AUTHORIZED TO EXECUTE THE NECESSARY DOCUMENTS.

33 Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance METROPOLITAN AIRPORTS COMMISSION HEARING OFFICERS REPORT FOR THE MAY 5, 2014 PUBLIC HEARING ON THE DRAFT AMENDMENT TO ORDINANCE 114: RELIEVER AIRPORTS RATES AND CHARGES

34 Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance METROPOLITAN AIRPORTS COMMISSION HEARING OFFICERS' REPORT MAY 5, 2014 PUBLIC HEARING ON DRAFT AMENDMENT TO ORDINANCE 114: RELIEVER AIRPORTS RATES AND CHARGES Page 1. INTRODUCTION 3 2. PUBLIC HEARING 3 A. Purpose, Time, and Place 3 B. Attendance 3 C. Presentations 3 D. Public Testimony 4 E. Transcript with Exhibits 5 F. Written Comments 5 G. Website Information 5 3. PUBLIC HEARING COMMENTS AND RESPONSES 5 4. SUMMARY 8 ATTACHMENT 1: ATTACHMENT 2: ATTACHMENT 3: FINDINGS, CONCLUSIONS AND ORDER PROPOSED RELIEVER AIRPORTS RATES AND CHARGES ORDINANCE (Clean & Redlined Versions) PUBLIC HEARING TRANSCRIPT 2

35 METROPOLITAN AIRPORTS COMMISSION HEARING OFFICERS' REPORT MAY 5, 2014 PUBLIC HEARING ON DRAFT AMENDMENT TO ORDINANCE 114: RELIEVER AIRPORTS RATES AND CHARGES Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance 1. INTRODUCTION Metropolitan Airports Commission ( MAC ) Ordinance 114 is the ordinance that sets the rental rates and other charges for property at the MAC s minor and intermediate use airports ( Reliever Airports ) as provided by Minn. Stat Proposed amendments to Ordinance 114 relate to modification of the Facility Acquisition Fee. 2. PUBLIC HEARING A. Purpose, Time, and Place A public hearing was conducted at 7:00 p.m. on May 5, 2014, at the MAC General Office Building, th Avenue South, Minneapolis, MN to receive verbal and written comments relative to amending Ordinance 114. The public hearing was held pursuant to Minnesota Statutes Chapter 473, with public notice of the public hearing provided. B. Attendance Present at the public hearing were the following MAC Commissioners, who served as Hearing Officers: Don Monaco, Mike Madigan, Lisa Peilen, and Paul Rehkamp. MAC staff present at the public hearing included Roy Fuhrmann, Vice President Management and Operations; Gary Schmidt, Director of Reliever Airports; Kelly Gerads, Assistant Director of Reliever Airports; Joe Harris, Airport Manager; Melissa Galvan Peterson, Airport Manager; Evan Wilson, Attorney; Kelly Ubel, Administrative Assistant; and Gina Ballweber, Administrative Assistant. Sixteen people signed in on the attendance sheets. C. Presentations Kelly Gerads, Assistant Director of Reliever Airports, gave a presentation as described below: Gerads began by providing background information regarding the Facility Acquisition Fee ( Fee ) in Ordinance 114. Governed by Section 7 of Ordinance No. 114, the Fee generally applies to tenants acquiring an existing facility on a MAC Reliever Airport and where the lease being transferred includes the requirement to pay the Fee. Currently, the vast majority of leases include the requirement to pay the Fee upon transfer. 3

36 Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance Gerads indicated that the Fee is a component of the General Aviation Financial Model and was originally implemented in 2008 to help fund the Model by capturing a portion of the increased value of the public land that was being realized by tenants when they sold their leasehold facilities. Gerads elaborated on the decrease in hangar prices from the time of implementation of Ordinance 114 to post economic recession. Tenants who have sold their hangar, as well as tenants contemplating selling their facility, have complained that the Fee is onerous and has impacted the sale of hangars in the airport system. Gerads explained that based upon concerns raised by tenants, changes in economic times, and MAC s desires to keep active flyers on our airports, staff is proposing to modify the Fee. Gerads commented on the informal feedback collected from tenants on how to modify the Fee. Some tenants suggested merely lowering the Fee, others suggested tying it to the assessed value of the facilities, and others suggested charging a flat Fee. In response to these ideas, staff collected valuation information from the respective counties for the Reliever Airports. Surprisingly, the values with respect to the land varied widely from county to county. Given the wide range of values, follow-up discussions with assessors, and the administrative challenge of obtaining the values at the time of a sale, staff does not recommend tying the Fee to the assessed value of the land. Gerads stated that Staff has concluded that a more appropriate way to modify the Fee is to base it on a percentage of the aircraft storage ground rental rates for the respective Reliever Airport, as set forth in Ordinance 114. These ground rental rates have been set with consideration given to a market rent analysis and the operation and maintenance expenses of the Reliever Airports. Gerads explained that the proposal is to assess a Fee equal to 50% of the aircraft storage ground rental rate. Based on this proposal, a tenant leasing 2,900 sq. ft. at the Anoka County-Blaine Airport would pay approximately $820 versus the current Fee of $3,538 (charged at the current rate in Ordinance 114 of $1.22 psf). Gerads concluded that Staff recognizes that reducing the Fee will impact the General Aviation Financial Model. However, Staff believes that reducing the Fee will return rewards derived from hangar sales, potential new activity, and tenant relations. D. Public Testimony All persons in attendance and wishing to do so were given the opportunity to testify and introduce evidence regarding the issues set forth in the Notice of Public Hearing. The comments are described generally below, in Section 3. The verbal comments are set forth in full in the Public Hearing Transcript (Attachment 3). The following six members of the public testified (in order of appearance): 1. John Krack 2. Dale Seitzer 3. Roger Gomoll 4. Charlie McDonald 5. Jim Staloch 6. Bryan Sieve 4

37 Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance E. Transcript and Exhibits The proceedings of the public hearing were transcribed by a qualified court reporter. The Public Hearing Transcript is included herein as Attachment 3, and is also available at Meetings/Other-MAC-Meetings.aspx. Exhibits A through H were entered into the record by MAC during the public hearing. Exhibits A through H are listed below and are available upon request to Kelly Gerads at F. Written Comments Exhibit A Management and Operations Memo Request to Conduct Public Hearing on Amendment to Ordinance No. 114, dated February 18, 2014 Exhibit B Letter to Tenants by Kelly Gerads, dated April 14, 2014 Exhibit C Notice of Public Hearing, dated April 14, 2014 Exhibit D Affidavit of Mailing, dated April 14, 2014 Exhibit E Affidavit of Publication in State Register, dated April 14, 2014 Exhibit F Affidavit of Mailing, dated April 15, 2014 Exhibit G Affidavit of Posting to Website, dated April 16, 2014 Exhibit H Draft Rates and Charges Ordinance (Clean and Redlined versions included) The public hearing record was kept open until 4:00 p.m. on Friday, May 9, 2014, to receive written comments from interested parties. No written comments were received. G. Website Information Please refer to the Reliever Airports webpage on the MAC website at Meetings/Other-MAC-Meetings.aspx for documents related to the public hearing record, including: Notice of Hearing Officers Meeting Management and Operations Committee Memo Tenant Letter Draft Hearing Officers Report Att. 1: Findings, Conclusions, and Order Att. 2: Proposed Reliever Airports Rates and Charges Ordinance Att. 3: Public Hearing Transcript 3. PUBLIC HEARING COMMENTS AND RESPONSES Comments received in this public hearing process and relating to the proposed changes are described generally below, but in such a way as to retain accuracy. MAC s responses are also provided below. 5

38 Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance All verbal comments can be found in full in the Public Hearing Transcript (Attachment 3). All comments have been noted, reviewed and considered, even though they may not be specifically reiterated and responded to below. Comment: The ordinance contains a plethora of little fees that the tenants find annoying, including the Facility Acquisition Fee. Since none of them are big revenue generators, I suggest eliminating them altogether. If MAC feels that it must keep the Facility Acquisition Fee, I am happy with the proposed reduction. Response: In 2008, MAC staff developed a financial tool to manage the revenue and expenses related to general aviation in MAC s airport system. Transactionbased fees were included in an effort to keep ground rents lower and to allocate certain costs to tenants engaging in particular transactions. Without transactionbased fees, ground rents may have to be increased for all tenants to support the revenue requirements. Comment: This Fee was implemented at a time when hangar values were rising rather dramatically. This looked like a good idea at the time, but in the past few years hangar values have fallen and there is really no profit in hangars anymore. Response: Staff recognizes that, shortly after the implementation of the Facility Acquisition Fee, the economy declined and hangar prices followed suit. In recognition of these events, staff is recommending a significant decrease in the Fee. However, the Fee is still necessary to support the General Aviation Financial Model; without the Fee, ground rents may have to be increased to support the revenue requirements of the Model. Comment: If we must have the Facility Acquisition Fee, the proposal is a lot more reasonable than the current Fee today. Response: Comment noted. Comment: The Facility Acquisition Fee, as it stands, is arbitrary. I recommend that the MAC develop all transaction-based fees based upon an analysis of the actual cost to administer the respective type of transaction. We pilots do not object to paying our fair share. This is how a business would determine a cost. Response: Comment noted. The Administration Fee in the ordinance was developed based upon the actual employee costs of administering certain transactions. The Facility Acquisition Fee, however, was originally implemented to help fund the General Aviation Financial Model by capturing a portion of the increased value of the public land that was being realized by tenants when they sold their leasehold facilities. The Model is built on the principle that users of MAC s system of airports should all pay their fair share of the costs of the system. The Facility Acquisition Fee is still necessary to support the Model, but is being adjusted in recognition of economic changes, in response to tenant concerns with its impact on hangar sales, and to encourage investment within the Reliever Airport system. 6

39 Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance Comment: I recommend that the MAC provide an invoice for the Facility Acquisition Fee. The fee is a closing cost and may be used to reduce the basis of the facility for tax purposes. Response: At the time lease transfer documents are mailed to a tenant, a cover letter is included in the package. The dated cover letter includes a description of the Facility Acquisition Fee and identifies the magnitude of the fee. Should a tenant request an invoice, Staff is willing to provide one. Comment: The airport is a value to the city and the county as a public space and an attraction to businesses in the area. As you make recommendations for additional charges to the hangar owners, I recommend that there be some statement of what portion of that total value to the city and county is being supported by the hangar owners and what portion is being supported by the cities and counties that benefit from the existence of an airport within its boundaries. Response: Comment noted. Staff is recommending a significant reduction in this particular Fee, not an addition. MAC has numerous relationships with local cities and counties. A specific valuation has not been done for what portion of the value, brought to the cities and counties by the airport, is being supported by hangar owners versus the cities and counties. Comment: The Facility Acquisition Fee is an impediment to transferring hangars from people that are not using them or are no longer active in aviation. We would like to see hangars transferred to people who will use them and help support the airports with their activity. Response: Staff concurs with the comment, and therefore is recommending a significant reduction of the Fee. In large part, the goal of reducing the Fee is to encourage investment within the Reliever Airport system. Comment: I am a tenant at the Lake Elmo Airport and have been trying to sell my hangar for the last year. I have lost five potential buyers primarily because of the current magnitude of the Facility Acquisition Fee. Eliminating the Fee, or bringing it down to the staff recommendation, would certainly help. Response: Comment noted. Please see the previous response. Comment: We have stored our plane at the Crystal Airport for the last ten years. We depend on general aviation aircraft to run our business. Many of the hangars at the Crystal Airport are in disrepair because the magnitude of the Facility Acquisition Fee, as a large percentage of the cost of the hangar, is making lease transfers difficult. People don t want to pay the Fee because they will never get it back in the next sale. A mortgage registration tax on purchasing a home is only 1 or 1.5% of the sale price. We are interested in purchasing a hangar at the Crystal Airport, but the purchase of the facility does not make sense given the current Fee. General aviation utilization by small businesses is going to increase. Let s do what we can to bring private money back into our airports and not have this Fee stand in the way. If the money from the Fee is needed for the General Aviation Financial Model, let s adjust the ground rent instead. 7

40 4. SUMMARY Proposed Hearing Officers Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance Response: The Facility Acquisition Fee is being adjusted in recognition of economic changes, in response to tenant concerns with its impact on hangar sales, and to encourage investment within the Reliever Airport system. The Facility Acquisition Fee is still necessary to support the General Aviation Financial Model. At this time, MAC staff believes it is appropriate to maintain this transaction-based fee, as an alternative to increasing ground rent, to preserve the allocation of certain costs to those tenants engaging in particular transactions. Comment: I am in the process of investing in a facility and have calculated the current Facility Acquisition Fee to be $274,000 for my transaction. If the Fee does not go away in its entirety, maybe we could put a cap on the Fee. I would prefer to put the money into the operation of the business. Response: Comment noted. The Facility Acquisition Fee, as applied to the purchase of commercial leaseholds, is based on the footprint of the buildings, not on the entire leasehold (as was assumed by the party making the comment). As an alternative to a cap, MAC staff is recommending a significant reduction to the Fee to encourage investment in the Reliever Airports system. Attachment 1 sets forth the proposed Findings, Conclusions, and Order regarding the proposed amendments to Ordinance 114. It is the recommendation of the Hearing Officers that the Commission approve the Findings, Conclusions, and Order, and adopt the proposed ordinance on rates and charges for the Reliever Airports. Adopted by the Hearing Officers: on: Hearing Officers: Rick King, M&O Chair Don Monaco, M&O Vice Chair Daniel Boivin, Commission Chair Timothy Geisler, F&A Chair Mike Madigan, Commissioner Lisa Peilen, Commission Vice Chair Paul Rehkamp, Commissioner Patti Gartland, Commissioner 8

41 Proposed Hearing Officers' Report May 5, 2014 Public Hearing Draft Reliever Airports Rates and Charges Ordinance Attachment I ATTACHMENT 1 LEGAL AUTHORITY; FINDINGS, CONCLUSIONS & ORDER EVTRODUCTION Metropolitan Airports Commission ("MAC") Ordinance 114 is the ordinance that sets the rental rates and other charges for property at the MAC'S minor and intermediate use airports ("Reliever Airports") as provided by Minn. Stat MAC staff has engaged in a review of the magnitude and method of calculating the Facility Acquisition Fee ("Fee") that is governed by Section 7 of Ordinance 114. MAC staff is recommending an amendment to Ordinance 114 to reduce the Fee, as described more fully in the May 5, 2014, Hearing Officers' Report. The Commission, having reviewed the record before it, hereby summarizes MAC'S legal authority in setting rates and charges; and finds, concludes and orders as follows. I. LEGAL AUTHORITY MAC s legal authority to set and charge rents and fees is found in federal law, state law, and lease agreements with airport tenants. Key points of that authority are provided in summary form below. A. State Law MAC is a public corporation, with powers and duties defined by Minnesota Statutes through One of the purposes of MAC is set forth in Minn. Stat (1): [P]romote the public welfare and national security; serve public interest, convenience, and necessity; promote air navigation and transportation, international, national, state, and local, in and through this state; promote the efficient, safe, and economical handling of air commerce; assure the inclusion of this state in national and international programs of air transportation; and to those ends to develop the fill! potentialities of the metropolitan area in this state as an aviation center, and to correlate that area with all aviation facilities in the entire state so as to provide for the most economical and effective use ofaeronautic facilities and services in that area... Some of the powers granted to MAC, for example, are listed in Minn. Stat , subd. 1: The corporation, subject to the conditions and limitations prescribed by law, shall possess all the powers as a body corporate necessary and

42 convenient to accomplish the objects and perform the duties prescribed by sections to , including but not limited to those hereinafter specified. In particular, authority for MAC to set and charge rents and fees is established by Minn. Stat : The corporation shall have the authority to determine the charges for the use of any property under its management and control, and the terms and conditions under which such property may be used. Where there is a reasonable basis for classification of users as to any use, the corporation may classify users, but charges as to each class shall be reasonable and uniform for such use and established with due regard to the value of the property and improvements used and the expense of operation to the corporation. The corporation shall have and may enforce liens as provided for in sections to , to enforce the payment of any such charges. Minn. Stat has been interpreted by the Minnesota Court of Appeals. In G & R Transportation v. Metropolitan Airports Commission, the court of appeals analyzed whether fees charged to vehicles using the commercial vehicle lane to pick up passengers at the airport were reasonable under Minn. Stat See 538 N.W.2d 717 (Minn. Ct. App. 1995). The court of appeals found that "[t]he record indicates that the fees are being charged to recover costs directly associated with the use of the commercial ground transportation roadways and facilities. The district court properly concluded that the fees are patently reasonable." Id. at 720. The United States Court of Appeals for the Eighth Circuit has also interpreted Mirm. Stat In Enterprise Leasing Co. v. Metropolitan Airports Commission, the court found that MAC had the authority to impose an 8.5% gross receipts fee on off-airport rental car companies that pick up passengers at the airport. See 250 F.3d 1215 (8 Cir. 2001). In particular, the court stated: In making the assessment that Ordinance 85 is authorized by section , we also find that MAC gave "due regard" to the value of property and improvements used by off-airport rental car companies. The statute does not define the term due regard except to the extent that it specifies to what MAC must give such regard: the value of the property and improvements used and the expense of operation. See Minn. Stat. Ann When aterm is undefined, Minnesota law directs that we construe the term "according to [its] common and approved usage." Minn. Stat (1) (1947). Black's defines due regard as consideration in a degree appropriate to demands of the particular case." Black's Law Dictionary 501 (6th ed. 1990). This definition tells us that some measure of discretion is inherent in the phrase due regard, [citation omitted] Such discretion is also apparent from the context of the enabling legislation in which section occurs, [citation omitted] To effectuate section , the legislature granted MAC "all the powers as a body corporate necessary and convenient to accomplish" user fees. Minn. Stat. Ann , subd. 1. MAC'S general authority under section , juxtaposed with its specific authority under ,

43 empowers MAC with broad discretion to calculate and impose fees on Airport users. 250F.3datl221. The authority of MAC with respect to the use of Reliever Airports is addressed by Minn. Stat , subds, 6, 7 (authority to "hold, maintain, operate, regulate, [and] police" airports) and subd. 27: The corporation shall develop and implement a plan to divert the maximum feasible number of general aviation operations from Minneapolis-St. Paul International Airport to those airports designated by the federal aviation administration as reliever airports for Minneapolis-St. Paul International Airport. B. Federal Law There are federal laws and policies that govern the airport fees that may be set. The Secretary of Transportation may approve a project grant application for an airport development project only if the Secretary receives written assurances, among other things, that: [T]he airport will be available for public use on reasonable conditions and without unjust discrimination; 49 U.S.C (a)(l); see 62 Fed. Reg. 29,761, 29,766 ("Grant Assurance 22"); and that: [T]he airport owner or operator will maintain a schedule of charges for use of facilities and services at the airport... that will make the airport as self-sustaining as possible under the circumstances existing at the airport, including volume of traffic and economy of collection U.S.C (a)(13); see 62 Fed. Reg. 29,761, 29,767 ("Grant Assurance 24"). The Department of Transportation issued a Policy Regarding Airport Rates and Charges (Rates and Charges Policy") that applies not only to airports devoted to commercial air traffic, but also "to general aviation airports and fees charged to general aviation users." 61 Fed. Reg. 31,994, 31,997 (1996). In comments to this policy, "the Department recognizes that airport proprietors, especially proprietors of general aviation airports, may use different methods for setting fees for general aviation users than those commonly used for setting fees paid by airlines." Id. In addition, "[t]he Department understands that many general aviation airports operate at a loss, calculated according to generally accepted accounting principles." Id. Some of the parameters for establishing appropriate rates are set forth in the Rates and Charges Policy and the Policy and Procedures Concerning the Use ofaiqiort Revenue, 64 Fed. Reg. 7,696 (1999)("Revenue Policy"). "Rates, fees, rentals, landing fees, and other service charges ('fees') imposed on aeronautical users for aeronautical use of airport facilities ('aeronautical fees')

44 must be fair and reasonable." Rates and Charges Policy at 32,019, para. 2. The Revenue Policy also explains that "in the case of aeronautical uses, user charges are also subject to the standard of reasonableness." Revenue Policy at 7,710. "Revenues from fees imposed for use of the airfield ('airfield revenues') may not exceed the costs to the airport proprietor of providing airfield services and airfield assets currently in aeronautical use unless: (a) [otherwise agreed to by the affected aeronautical users; or (b) the fee includes charges in accordance with paragraph or paragraph 2.5.4(a), and there is a corresponding reduction in fees for users that would otherwise have paid those charges." Rates and Charges Policy at 32,019, para. 2.2, as amended at 73 Fed. Reg "The costs of airport development or planning projects paid for with federal government grants and contributions or passenger facility charges (PFCs) may not be included in the fees charged for aeronautical use of the airport." Rates and Charges Policy at 32,021, para An airport proprietor is not prohibited "from making reasonable distinctions among aeronautical users (such as signatory and non-signatory carriers) and assessing higher fees on certain categories of aeronautical users based on those distinctions...." Rates and Charges Policy at32,02l, para Both the Rates and Charges Policy and the Revenue Policy address the self-sustaining requirement: If market conditions or demand for air service do not permit the airport to be financially self-sustaining, the airport proprietor should establish long-term goals and targets to make the airport as financially self-sustaining as possible." Rates and Charges Policy at 32,02 1, para At some airports, market conditions may not permit an airport proprietor to establish fees that are sufficiently high to recover aeronautical costs and sufficiently low to attract and retain commercial aeronautical services. In such circumstances, an airport proprietor's decision to charge rates that are below those needed to achieve self-sustainability in order to assure that services are provided to the public is not inherently inconsistent with the obligation to make the airport as self-sustaining as possible in the circumstances." Id. at 32,021, para In comments to the Revenue Policy, the FAA explains that the self-sustaining requirement is "to minimize the airport's reliance on Federal funds and local tax revenues." Revenue Policy at 7,710. "Because of the limiting effect of the reasonableness requirement, the FAA does not consider the self-sustaining requirement to require airport sponsors to charge fair market rates to aeronautical users. Rather, for charges to aeronautical users, the FAA considers the self-sustaining assurance to be satisfied by airport charges that reflect the cost to the sponsor of providing aeronautical services and facilities to users." Revenue Policy at 7,720, 7,721.

45 "The standard of reasonableness and the standard of self-sustainability are not identical in application. The requirement of a fee and rental stmcture that will make the airport as self-sustaining as possible does not apply to the setting of a panicular fee.... Even if we interpreted the self-sustainability requirement to apply to individual fees, that requirement does not override the requirement of reasonableness." Rates and Charges Policy at 32,0\0, comment 14. Federal law regarding the use of airport revenue and the federal Rates and Charges Policy explicitly permit using airport revenues generally, as well as charges to aeronautical users, to subsidize general aviation ("GA") airports in the same system. See 49 U.S.C (b)(l); 61 Fed. Reg. 31,994, 32,020, para (1996). Airport revenue may be used for the capital or operating costs of the airport, "the local airport system" or certain other facilities (b)(l). The Rates and Charges Policy, regulating charges to aeronautical users, allows the rate base of an airport to include costs associated with another airport if the airports have the same proprietor, the other airport is currently in use, and the costs of the other airport "are reasonably related to the aviation benefits that the other airport provides or is expected to provide to the aeronautical users of the first airport. Rates and Charges Policy at para The last element "will be presumed to be satisfied if the other airport is designated as a reliever airport for the first airport in the FAA's" plan. Id. c. Lease Provisions II. FINDINGS Reliever tenant lease forms include a provision entitled "Revision of Rents," which allows MAC to adjust the rates. The leases also require tenants to abide by all laws, rules and regulations, including those adopted by MAC. The current lease forms state: Under Minn. Stat , MAC has the authority to determine the charges for the use of property under its management and control, and accordingly MAC reserves the right, from time to time, to amend the rents, charges, fees, and assessments set forth in this Lease in a manner consistent with the requirements ofminn.stat A. Oriein of the Facility Acquisition Fee In January 2005, then MAC Chair Vicki Tigwell appointed Commissioner Jack Lanners to lead a study of the Reliever Airports. Specifically, Commissioner Lanners was asked to make recommendations to the Commission regarding the future operation and development of MAC'S Reliever Airports. After a year of extensive study, the Reliever Airports Task Force presented its recommendations to the Commission. The Task Force recognized legal and philosophical challenges to the historic practice of using non-aeronautical revenue generated at the Minneapolis-St. Paul International Airport ("MSP") to subsidize the Reliever Airports system, and noted a growing demand for the adoption of business management practices and business plans for each Reliever Airport. In addition, the Task Force stated that selfsufficiency of the Reliever Airports is the long-term goal, and made some

46 recommendations relating to funding and revenue generation. recommendations was to implement a Facility Acquisition Fee. One of the In January, 2006, the Commission approved the "Recommendations Regarding the Future Operation and Development of the Reliever Airport System", and directed MAC staff to move forward with implementation of the various recommendations contained therein. Some of the recommendations required an amendment to the Reliever Airports Rates and Charges Ordinance (then Ordinance 101). In 2008, the Commission revised Ordinance 101 by adopting Ordinance 107. Ordinance 107 became a part of the business model developed to assist the Commission in attaining its long-term goal of making the Reliever Airports as financially self-sustaining as possible. Changes made by Ordinance 107 included the addition of the Facility Acquisition Fee. Other changes included a modification to the reverse sliding scale and a 20% exemption from net gross revenue used to calculate percentage rent for commercial tenants; the addition of a formula for calculating a ground rent surcharge or credit; the addition of a sublease fee applicable to certain storage tenants who sublease space within a hangar; the inclusion of the non-aviation/complementary business license fee applicable to commercial tenants who have this type of license agreement with MAC; an increase in the administration fee applicable to tenants for costs associated with the review and processing of certain lease requests and transactions; and the addition of a waiting list fee for prospective tenants wishing to have a name held on a list for future hangar space. By 2010, however, the Relieve? Airports were experiencing a significant decline in operations and corresponding revenue as a result of the economic downturn. Also, depreciation associated with three major capital projects that were completed on the Reliever Airports was scheduled to impact the Reliever Airport business model. Finally, anticipated non-aeronautical revenue had not materialized. In short, the assumptions that were the foundation of the strategy implemented through Ordinance 1 07 were developed during a completely different economic environment than what existed in 2010, and assumed revenue projections did not materialize. The impact of these factors was projected to create a shortfall of approximately $2 million in the Reliever Airport financial standing by the end of B. Development of the General Aviation Financial Model Beginning in 2010, MAC thus embarked, through several phases of public process, on a reexamination of revenues, funding, operational practices, and fees associated with GA activity within MAC'S airport system. In June, 2011, staff presented and the Commission approved the Recommendations Regarding Operational Practices and Capital Funding for General Aviation in the MAC System" ("2011 Report"). The goal of the study was to set the foundation for business plans for GA in the MAC airport system, and to develop a corresponding new financial model reflecting the revenue and expenses of GA activity in the MAC airport system that would be sustainable into the future. The new financial model for GA within MAC'S system of airports ("General Aviation Financial Model" or "Model") is built on the following foundational principles: 1. MAC'S statutory mission includes the mandates to "promote air navigation and transportation... promote the efficient, safe, and economical handling of air

47 commerce. and to those ends to develop the full potentialities of the metropolitan area in this state as an aviation center, and to correlate that area with all aviation facilities in the entire state so as to provide for the most economical and effective use of aeronautical facilities and services in that area...." Minn. Stat (1). MAC is specifically tasked, via statutory mandate, to develop and implement a plan to divert the maximum feasible number of general aviation operations" from MSP to the Reliever Airports. Minn. Stat , subd MAC'S Reliever Airports are an essential asset to the efficient and economical functioning of MSP, MAC'S airport system, and the aviation system in the metropolitan area; and they are a critical component to fulfilling the legislative mandates described above. The interdependent relationship between MSP and the Reliever Airports, and the value provided to MSP by the Reliever Airports, necessitates that GA activity at all seven MAC airports, and the costs and revenues associated with GA activity at all seven MAC airports, should be considered in the development of the new financial model. 3. GA users, non-signatory airlines, and Signatory airlines should all, respectively, pay their fair share of the costs of MAC'S system of seven airports. 4. GA and non-signatory airline fees within MAC'S system of airports should be designed to reflect the services and facilities provided and thus drive aircraft operator decisions on which facility to use, and to encourage the maximum diversion ofga operations from MSP to the Relievers. The primary pillars of the Model include: 1. Define and fund the operational and capital expenditures necessary to properly maintain the Reliever Airport system, including a spending allowance for the preservation of the existing system and replacement of capital equipment to maintain the system (i.e. the amount needed to maintain the system and funding sources to carry out the maintenance program). 2. Treat net capital expenditures consistently between MSP and the Reliever Airports (i.e. moving from depreciation to debt service to account for capital projects on the Reliever Airports, as we did for MSP). 3. Rebalance the fee structure within MAC'S system of airports to provide consistency and fairness to the GA operators (i.e. landing fees and fuel flowage fees). 4. Fairly allocate the appropriate share of expenses to the parties that use and benefit from the services and facilities provided. 5. Encourage tenant investment in MAC'S system of airports by eliminating the uncertainty created by the surcharge mechanism in Ordinance 107. The redesign of the Model addresses MAC'S statutory mission and MAC'S goal of sustainability for its GA system. The revised Model recognizes the GA system within MAC'S system of seven airports and allocates costs to the appropriate users. The revised

48 Model also treats GA activity consistently, fairly, and equitably throughout MAC'S system of airports; and accounts for an appropriate amount of GA revenue generated at MSP. The new strategy accounts for operating revenue, nonaeronautical revenue, operation and maintenance costs, administrative costs, project costs, all appropriate funding sources, and the value provided to MSP by the Reliever Airports, among other things. The new strategy is anticipated to allow preservation of the existing infrastructure system, allow limited future enhancement projects, set future rent rate expectations for tenants, and provide for long-term sustainability of the portions of the MAC airport system that is utilized by GA. C. Ordinance 114 Certain elements of the General Aviation Financial Model were implemented by Ordinance 114, which was adopted by the Commission in August Key changes implemented by Ordinance 114 included expanding landing fees to FCM and ANE, implementing a fuel flowage fee at STP, removing the tiered structured of the percentage of gross sales fee, eliminating the ground rent surcharge, and reducing the annual escalator applied toward the operation and maintenance component of ground rent to 3%. D. Development of Proposed Amendments to Ordinance 114 Although the Facility Acquisition Fee was originally implemented in 2008 by Ordinance 107 and retained in Ordinance 114, the vast majority of tenants were not affected by the Fee until the Reliever Lease form revision in Since that time, hangar values have continued to decline, and MAC has received numerous and steady complaints from tenants that the Fee is onerous and adversely impacting the sale ofhangars. After collecting informal feedback from tenants on proposed modifications to the Fee and conducting research, MAC staff developed a recommendation to modify the Fee. The proposal, as set forth in the proposed amendment to Ordinance 114, is to set the Fee at 50% of the aircraft storage ground rental rates for each respective Reliever Airport. These ground rental rates, as set forth in Ordinance 114, have been set with consideration given to a market rent analysis and the operation and maintenance expenses of the Reliever Airports. Based on this proposal, a tenant leasing 2,900 sq. ft. at the Anoka County-Blaine Airport would pay approximately $820 upon lease transfer versus the current Fee of $3,538 (charged at the current rate in Ordinance 114 of $1.22 psf). Although the Facility Acquisition Fee is still necessary to support the General Aviation Financial Model, staff believes it is appropriate to reduce the Fee in recognition of economic changes and its current adverse effect on hangar sales. Staff believes that reducing the Fee will return rewards derived from additional hangar sales, investment in the Reliever Airport system, potential new aviation activity, and tenant relations. E. Presentation to the Reliever Airports Advisory Council

49 MAC staff made a presentation on the proposed amendments to Ordinance 114 to the Reliever Airports Advisory Council on March 11, F. Public Hearing III. CONCLUSIONS Pursuant to notice duly given, a public hearing was held on May 5, 2014, to receive testimony and introduce evidence regarding the proposed amendments to Ordinance 114. In addition to public comments received, eight exhibits were entered into the record by MAC. The "Hearing Officers' Report for the May 5, 2014, Public Hearing on the Draft Amendment to Ordinance 114: Reliever Rates and Charges Ordinance" ("Hearing Officers' Report") summarizes the hearing, describes the public comments received, and provides MAC'S responses to those comments. The Hearing Officers' Report, and the exhibits referenced in that Report, are incorporated into this document. NOW, THEREFORE, having given due consideration to the legal authority, public testimony, exhibits and other evidence submitted and made part of the record, the Metropolitan Airports Commission makes the following conclusions: 1. The Metropolitan Airports Commission ("MAC") is a public corporation operating under Minnesota Statutes Chapter 473 to serve the public interest and promote air navigation and transportation, and has broad discretion and statutory authority to set rental rates at the Reliever Airports; 2. MAC'S statutory mission includes the mandates to "promote air navigation and transportation... promote the efficient, safe, and economical handling of air commerce... and to those ends to develop the full potential ities of the metropolitan area in this state as an aviation center, and to correlate that area with all aviation facilities in the entire state so as to provide for the most economical and effective use of aeronautical facilities and services in that area...." Minn. Stat (1). MAC is specifically tasked, via statutory mandate, to "develop and implement a plan to divert the maximum feasible number of general aviation operations" from MSP to the Reliever Airports. Minn. Stat ,subd.27; 3. MAC'S Reliever Airports are an essential asset to the efficient and economical functioning ofmsp, MAC'S airport system, and the aviation system in the metropolitan area; and they are a critical component to fulfilling MAC'S legislative mandates; 4. GA users, non-signatory airlines, and Signatory airlines should all, respectively, pay their fair share of the costs of MAC'S system of seven airports; 5. The purpose of the Reliever Airports Rates and Charges Ordinance is to set the rental rates and other charges for property at MAC'S Reliever Airports as provided by Minnesota Statutes ; 6. The proposed amendments to Ordinance 114, which reduce the Facility Acquisition Fee, are consistent with MAC'S statutory mission, state and federal law and policy, and with MAC'S primary goal of long-term sustainability;

50 7 The proposed amendments to Ordinance 114 are reasonable and fair because they are based on a consideration of aviation economic and market conditions, the value of MAC'S airport system, the value of the property and improvements used by GA operators in MAC s airport system, the effect on hangar sales and levels of aviation activity, the expense of operating the portions of MAC'S airport system that are utilized by GA, and the sources and amounts of funding and revenue, among other things; 8. The proposed amendments to Ordinance 114 are reasonable because they are based on a consideration of a General Aviation Financial Model that allows preservation of the existing infrastructure system, allows limited future enhancement projects, sets future rent rate expectations for tenants, and provides for long-term sustainability of the portions of the MAC airport system that is utilized by GA; 9. The proposed amendments to Ordinance 114 are reasonable because they seek to encourage investment and aviation activity in MAC'S system of airports; 10. The proposed amendments to Ordinance 114 are fair and equitable because they allocate an appropriate share of costs to those engaging in particular transactions, and are uniformly applied; 11. MAC has made significant progress in working towards self-sufficiency of the portions of the MAC airport system that is utilized by GA. The MAC airport system already meets one of the objectives of the self-sustaining requirement by not using local tax revenues, even though MAC has the authority to tax; 12. Sufficient notice and opportunity for public review and comment on the proposed amendments to Ordinance 114 were provided to interested parties; and 13. MAC has given due consideration to all public input. IV. ORDER Based upon the Findings and Conclusions, and all of the testimony, exhibits, and other evidence presented; IT IS HEREBY ORDERED THAT the Metropolitan Airports Commission adopt the proposed Reliever Airports Rates and Charges Ordinance, as MAC Ordinance 119,to amend and restate MAC Ordinance 114. Dan Boivin Chair Metropolitan Airports Commission 10