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Page 1 of 7 Ogden City Council Meeting: March 14, 2017 New Commercial Air Service – Ogden Hinckley Airport - Parameters Resolution – Partnerships and Incentives Package Action: Approve or Not Approve Resolution Executive Summary The Council will consider a Resolution establishing the parameters for partnerships with Weber and Davis Counties and a local business, and an incentive package to attract new commercial air service to the Ogden Hinckley Airport. The Resolution also authorizes the Mayor to execute documents related to the project. Background Ogden Hinckley Airport- History Ogden City has operated a municipal airport since 1928. The original airport was located on 200 acres in the South Birch Creek area and consisted of three gravel runways. The current airport is located on approximately 706 acres of land west of Ogden City. Construction of the airport was completed in December of 1941. The Airport was originally known as the Robert H. Hinckley Field, named for the serving Assistant Secretary of Commerce, an Ogden native, and one of the original members of the flying club that initiated construction of the first Ogden airport. The military began training Navy pilots at the Airport under a joint-use lease agreement in 1942. More than 500 Navy cadets were trained at Hinckley Airport. After the military uses were transferred to Hill Air Force Base the Airport was renamed the Ogden Municipal Airport. In 1943, Western Air Airline began mail and passenger service from Ogden. United Airlines followed in 1946. Both of these services were discontinued in 1960 due to decreased demand for service. In 1988, the airport was given its current name—Ogden-Hinckley Airport. In 1993, the City Council and Mayor entered into a Joint Resolution establishing an Ogden-Hinckley Airport Development Task Force to determine, in part, how to develop the airport into a Commercial ---PAGE BREAK--- Page 2 of 7 Ogden City Council Meeting: March 14, 2017 Service/General Aviation Facility. It wasn’t until 2012 that the City was able to enter into an agreement with Allegiant Air to provide commercial passenger service to and from the Ogden area. Allegiant currently operates a few flights per week from Ogden to Mesa, Arizona. The Ogden-Hinckley Airport is currently a designated “reliever” for the Salt Lake City International Airport and a designated alternate facility for SLC air carrier operations. The airport currently accommodates all segments of the aviation industry--passenger and cargo service, general aviation, military, corporate, emergency medical, and agricultural users. 2015 – Ogden Airport Development Feasibility Study In 2015, the City completed a feasibility study that highlighted several opportunities for growth and development at the Airport. The study identified growth potential in general aviation, non-aviation commercial development, mixed-used aviation, MRO (maintenance, repair and operations) development, and cargo and commercial airline development. The Study also specifically addressed the opportunities for growth that may come with Hill’s F-35 program. The consultants estimate that when the fully developed, the Airport could add more than 4,000 new jobs to the local economy. February 21, 2017 The Council Office received an Administrative Transmittal outlining an aggressive proposal to entice new commercial air service to Ogden Hinckley Airport. March 7, 2017 The Council held a work session to review and discuss the Administration’s proposal to entice new commercial air service to Ogden Hinckley Airport. The City’s General Fund has been subsidizing the Airport Fund between $500,000 and $750,000 per year for at least the last decade. Increasing demands on the General Fund for other city services makes this subsidy unsustainable. It is the Administration’s ---PAGE BREAK--- Page 3 of 7 Ogden City Council Meeting: March 14, 2017 belief that this “catalytic” project is the only way to change the financial trajectory of the Airport. Based on the results of the 2015 Feasibility Study, CED staff determined that the quickest way to improve the financial condition of the airport was to take a multi-faceted approach towards development. CED has had some success in increasing general aviation. They would like to now focus on getting additional commercial air service. The Administration is hoping to attract charter flights that will complement efforts of the local company Get Away Today to deliver controlled experiences for vacationers. Destination Express, a new startup company, will work with Get Away Today and other businesses to provide charter air service to Los Angeles, Oakland and Orlando initially, with service to Cancun and other markets added later. March 8, 2017 The Council office received a proposed Parameters Resolution outlining the terms and conditions under which an airline incentive package may be issued. Proposal The Administration is proposing an incentive package valued at $1.1 M to entice airlines to provide charter service to Ogden Hinckley Airport. The proposed package includes escrow funds for mobilization and revenue guarantees and fee waivers. The Council has been asked to consider a Parameters Resolution outlining the terms and conditions under which an airline incentive package may be issued. Key points of the Parameters Resolution are summarized below: Parameters Resolution Findings: The Airport loses more than $500,000 each year The Airport has the potential to have a much larger economic impact on the region A second air carrier at the Airport will make the airport more competitive and bring in additional tourism dollars to the region ---PAGE BREAK--- Page 4 of 7 Ogden City Council Meeting: March 14, 2017 Air carriers are hesitant to invest in new locations and flight destinations at secondary airports without receiving some level of incentives and commitments from local governmental entities and/or the business community The City desires to provide an incentive to attract new air carrier service to Los Angeles, Oakland, and Orland The City intends to fund the incentives, in part, through agreements with Davis County, Weber, County, and a local business Authorizations: Request. Publish a Request for Letters of Interest to the air carrier industry Memoranda of Understanding - Counties. o Enter into Memoranda of Understanding with Davis and Weber Counties for a contribution of $200,000 each to the Revenue Guarantee Escrow, a contribution of $130,000 each to a Mobilization Guarantee Escrow, and a contribution of $20,000 each to cover Familiarization Tours Memorandum of Understanding - Business. o Enter into a Memorandum of Understanding with a local business for a contribution of $100,000 to the Revenue Guarantee Escrow Contribution Agreements. Contribution Agreements for the three parties will be presented to the Council for final approval Carrier Selection. Issue a Request For Proposal to carriers who submitted a Letter of Interest (if more than one) and select a carrier with priority given to proposals that can meet the following requirements: o Provide service beginning no later than July 1, 2017 o Provide at least 13 round-trip flights each week to Los Angeles, San Francisco/Oakland, and Orlando o Provide service at least 4 days a week ---PAGE BREAK--- Page 5 of 7 Ogden City Council Meeting: March 14, 2017 Incentive Agreement. The Mayor may sign an Incentive Agreement that meets the following parameters: o Complies with federal, state and local laws o Airport may waive landing and fuel flowage fees for up to one year o Air carrier must be a new entrant to the Ogden market and provide cost-per- flight data (Flight Cost) o Provide a Mobilization Guarantee Escrow not to exceed $500,000 with $125,000 transferred to Revenue Guarantee Escrow each quarter and discontinued after first year of operation. If air service is discontinued within first year then remaining Mobilization Guarantee Escrow funds will be disbursed to air carrier and closed o Provide for a Revenue Guarantee Escrow not to exceed $500,000. Revenues that air carrier receives in excess of Flight Cost during first year of operation shall be paid by air carrier to the Revenue Guarantee Escrow account. Revenue shortfalls shall be paid to carrier from Revenue Guarantee Escrow account. Balances at the end of the year shall be paid to the contributing parties on a pro-rata basis Escrow Agreements. The Mayor is authorized to sign escrow agreements for the Mobilization and Revenue Guarantee Escrow funds Fiscal Note The following shows how the costs of incentive package and other costs will be distributed: ---PAGE BREAK--- Page 6 of 7 Ogden City Council Meeting: March 14, 2017 The City will incur other costs if this project is approved: These costs will be covered with Airport funds where appropriate, BDO Lease Revenues, additional parking revenues, and other departmental funds. If the project is successful, the City would recognize the following benefits: Reduction in Airport operating losses (Between $250,000 and $750,000 per year) Additional landing and fuel flowage fee revenues Revenue Guarantee Escrow 500,000 $ 400,000 $ 100,000 $ Mobilization Guarantee Escrow 500,000 $ 240,000 $ 260,000 $ Fuel Flowage and Landing Fees* 120,000 $ 120,000 $ Sub Total Incentive Package 1,120,000 $ 360,000 $ 660,000 $ 100,000 $ Familiarization Tours 50,000 $ 10,000 $ 40,000 $ TOTALS 1,170,000 $ 370,000 $ 700,000 $ 100,000 $ *Estimated Initial Marketing 100,000 $ Capital Improvements 250,000 $ Shuttle Services, PT Staff 125,000 $ Equipment - Engine Starter 50,000 $ Additional Service Costs/Wages 75,000 $ Ongoing Marketing Efforts 500,000 $ TOTALS 1,100,000 $ ---PAGE BREAK--- Page 7 of 7 Ogden City Council Meeting: March 14, 2017 Additional parking revenues Greater business attraction to the airport and potential for additional airlines Additional FAA grant funds Increased tourism and visitor expenditures ($10-$75 M) New hospitality jobs Lower future incentives for future airlines Council Actions A summary of the Council actions required to fully authorize this project is attached. Attachments 1. Summary - Council Actions 2. Summary – Cost Distribution of Airport Proposal Costs 3. Administrative Transmittal Questions 1. Please provide an in-depth review of the proposed Parameters Resolution. 2. Please provide an update on negotiations with Weber and Davis Counties. Council Staff Contact: Janene Eller-Smith (801)629-8165 ---PAGE BREAK--- Action Date Effect Approve Parameters Resolution March 14 Authorizes Mayor to Issue Request for Letter of Intent to Airlines (FAA Requirement) and enter into MOU's with Davis and Weber Counties * Approve Program Guidelines Changes March 21 Authorizes CDBG funds to be used City-wide for economic development purposes * Approve FY17 Annual Action Plan Amendment #1 March 21 Approves amendments to HUD budget to provide additional funds for economic development projects * Approve FY17 Annual Action Plan Budget Amendment March 21 Authorizes FY17 City budget amendments to provide additional funds for economic development projects Approve Loan Agreement with Destination Express March 21 Authorizes the Business Information Center to enter into a $500,000 Loan with Destination Express to allow the new start-up to purchase ticketing software. Approve FY2017 Budget Amendment March 21 Authorizes Funding (BDO Lease Revenue) in the Amount of $1,440,000 for required FAA and Travel Agency reserves, parking upgrades, equipment, additional wages, and marketing Approve Loan Agreement- BDO Fund to Airport Fund March 21 Establishes the Loan terms for the $50,000 from the BDO Fund to the Airport Fund Approve Contribution Agreement with Davis County TBD City Attorney evaluating whether this will required City Council action Approve Contribution Agreement with Weber County TBD City Attorney evaluating whether this will required City Council action Approve Resolution Authorizing Mayor to Enter into Contract with Selected Airline TBD Authorizes Mayor to negotiate terms of the contract Approve FY17 (or FY18) Budget to Receive Contributions from Counties and Local Businesses, and Marketing Grant Funds TBD Authorizes City Budget Amendment to recognize the revenue received from the Counties Council Office has not received * In process Waiting for public hearing to be set Received. Waiting for approval of funding City Council Actions Required to Move Proposal Forward Commercial Air Service – Ogden Hinckley Airport ---PAGE BREAK--- Revenue Guarantee Escrow 500,000 $ 500,000 $ 400,000 $ 100,000 $ Mobilization Guarantee Escrow 500,000 $ 500,000 $ 240,000 $ 260,000 $ Familiarization Tours 50,000 $ 40,000 $ 10,000 $ 40,000 $ Initial Marketing 100,000 $ 100,000 $ 100,000 $ Capital Improvements 250,000 $ 250,000 $ 250,000 $ Shuttle Services, PT Staff 125,000 $ 125,000 $ 125,000 $ Equipment - Engine Starter 50,000 $ 50,000 $ 50,000 $ Additional Service Costs/Wages 75,000 $ 75,000 $ Ongoing Marketing Efforts 500,000 $ 500,000 $ Fees Waivers 120,000 $ 120,000 $ TOTALS 2,270,000 $ 1,565,000 $ 1,470,000 $ 700,000 $ 100,000 $ ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK---