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Page 1 of 5 Ogden City Council Work Session: November 1, 2016 New Commercial Air Service – Ogden Hinckley Airport Purpose ofWork Session: To Review and Discuss a Proposal to Bring Additional Commercial Air Service to the Airport Executive Summary The Administration is proposing a strategy to entice additional commercial air service to the Ogden Hinckley Airport. The Administration is encouraging participation from both Weber and Davis counties as well as local businesses. Background Ogden Hinckley Airport- History Ogden City has operated a municipal airport since 1928. The original airport was the brainchild of a local flying club. It 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 and consisted of two asphalt-surfaced runways. 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. ---PAGE BREAK--- Page 2 of 5 Ogden City Council Work Session: November 1, 2016 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 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. It is also a designated alternate facility for SLC air carrier operations. The airport currently accommodates all segments of the aviation industry--passenger service, general aviation, air cargo, 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. Proposal The Administration is proposing an aggressive proposal to entice new commercial air service to Ogden Hinckley Airport. The CED Director, Tom Christopulos, believes a “catalytic” project is the only way to change the financial trajectory of the Airport. The City’s General Fund ---PAGE BREAK--- Page 3 of 5 Ogden City Council Work Session: November 1, 2016 has been subsidizing the Airport Fund between $500,000 and $750,000 per year for at least the last decade, and probably much longer. Increasing demands on the General Fund for other City Services makes this subsidy unsustainable. Based on the results of the 2015 Feasibility Study, CED staff concluded 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 and Oakland initially, with service to Orlando and Cancun added later. Incentives The Administration is proposing an incentive package of $1.5 M to entice airlines to provide charter service to Ogden Hinckley Airport. This package would include funds for escrow and assurances to support operations for at least one year. The Administration hopes to receive an FAA grant to cover some or all of the marketing costs. The Administration is also requesting that Davis and Weber Counties contribute toward the project Costs/Benefits The City will incur other costs if this project is approved: Capital improvements (parking, bathroom, etc.) Shuttle services Additional airport personnel Additional public safety services Additional equipment (standby engine starter) ---PAGE BREAK--- Page 4 of 5 Ogden City Council Work Session: November 1, 2016 CED highlights the following benefits that could come from a successful project: Reduction in operating losses ($250,000 to $500,000 per year) Additional landing and fuel flowage fee revenues ($500,000 to $1M, after two years) Greater business attraction to the airport Potential for additional airlines Additional FAA funds Lower future incentives for other airlines Increased tourism and visitor expenditures ($10-$75 M) New hospitality jobs Timing To take advantage of the heavy travel season, the services need to be available June 1, 2017. Council Actions A summary of the Council approvals needed to fully authorize this project is attached. The first action will be to consider a Parameters Resolution outlining the terms and conditions of the program. Attachments 1. Summary - Council Actions 2. Draft MOU 3. Draft Notice of Entrant Incentive Program 4. Administrative Transmittal Questions 1. Please review all costs associated with this project and highlight the revenue sources for each cost. Please indicate what revenue sources have not been verified to date grant funds, county funds, etc.) 2. Could there be additional costs to execute the proposed program that have not been outlined? If so, where would additional funds come from to cover those costs? Council Staff Contact: Janene Eller-Smith (801)629-8165 ---PAGE BREAK--- 1 MEMORANDUM OF UNDERSTANDING (Non-Binding) This non-binding MEMORANDUM OF UNDERSTANDING (“MOU”) is entered into effective the day of 2017, by and between Ogden City, a municipality and political subdivision of the state of Utah (“City”) and Davis County, a body politic and corporate ("County"). City and County are referred to collectively herein as the "Parties" and sometimes individually as a "Party." R E C I T A L S: A. The City commissioned a feasibility study approximately two years ago to ascertain possible opportunities related to the Ogden-Hinckley Airport and the potential economic impact to the surrounding areas of expanded airline services and destinations. B. The study reveals that the current Allegiant Airlines service between Ogden and Mesa Arizona has experienced high passenger demand with a high load factor of 89%. C. Experience in other metro markets has shown that passengers located in suburban areas will use local airport facilities if the facilities are more convenient and if the flights and fares are comparable. The study estimates that 25% of the passenger bookings for the Salt Lake City International Airport come from the Ogden catchment area, which includes both Weber and Davis Counties. D. The study estimates that the total economic impact to the catchment area to be between $25 and $187 million, which will create a healthy catalyst to sustained economic development, positioning both Weber and Davis Counties to better compete with other growing counties in Utah. E. Even though the market clearly exists for service expansion at the Airport, airline companies are hesitant to invest in new locations and flight destinations, particularly in secondary airports, without first receiving substantial incentives and commitments from local governmental entities. F. The cost of providing new service and flights should be funded by the governmental entities most likely positioned to benefit from the increased passenger activity. NOW, THEREFORE, the parties agree as follows: I. GENERAL. A. Purpose of Project. The Parties recognize the need to enhance the gateways to their communities and provide access for their citizens and businesses to the economy at large. A local, more active airport will raise the quality of life for ---PAGE BREAK--- 2 residents and help maintain a competitive environment for future community vitality and economic development. B. Purpose of MOU. To begin documenting the Parties intent to participate in the funding of certain incentives listed below which will be given to either an incumbent or a new entrant air carrier. The Parties intend to provide an incentive only for a carrier who provides service to and from the Ogden- Hinckley Airport and Los Angeles, Oakland and Orlando, with additional flights and destinations to be added later. C. Summary of Deal Points. It is proposed that the participants in the air carrier incentive program fund two $500,000 escrows. The first $500,000 escrow amount, to be named the Mobilization Guarantee Escrow, will be held in an interest-bearing trust account to give assurances to the air carrier that the City and the County will support operations for at least one year (but no more than two years), and to help offset the cost of relocation of the plane, equipment and parts should the program cease within the first year of operation. At the end of each quarter of the first year of operation, $125,000 will be disbursed from the Mobilization Guarantee Escrow and transferred to the Revenue Guarantee Escrow. The Revenue Guarantee Escrow, the second $500,000 escrow to be established, will be held in an interest-bearing trust account to assure the air carrier a guaranteed revenue per flight (“Guaranteed Flight Revenue”). The Guaranteed Flight Revenue will be negotiated with the selected air carrier, and is estimated by the Parties to be $14,500 per flight. Revenue generated from ticket sales for flights the first year above the Guaranteed Flight Revenue will be deposited into the Revenue Guarantee Escrow to replenish and keep healthy the Revenue Guarantee Escrow. Revenue shortfalls during the first year below the Guaranteed Flight Revenue will be transferred from the Revenue Guarantee Escrow and paid to the air carrier. At the end of the first year of operations, all money left in the Revenue Guarantee Escrow will be disbursed to the parties making the contributions in their ratio of contribution 23.81% to the City, 33.33% to Weber County, 33.33% to Davis County, and 9.52% to the local merchant). II. PARTICIPATION. A. Contribution Agreement with Davis County. The Parties expect to sign a Contribution Agreement, agreeing to the following: a. Contributions. The County will agree to contribute $350,000 to the project. The amount will be allocated as follows: i. $130,000 will be direct deposited into the Mobilization Guarantee Escrow account and used as described in paragraph Section I. above. ii. $200,000 will be direct deposited into the Revenue Guarantee Escrow account and used as described in paragraph Section I. above. ---PAGE BREAK--- 3 iii. $20,000 will be used to help fund the Familiarization Tour. b. No Further Expectations. After making the $350,000 contribution, the County will be under no further obligation to make any additional contributions. B. Contribution Agreement with Weber County. The City expects to sign a Contribution Agreement with Weber County on the same terms and with the same contribution amounts as contained in this MOU with Davis County. C. Contribution Agreement with Local Merchant. The City expects to sign a Contribution Agreement with a local merchant through which the local merchant will contribute $100,000 to the Revenue Guarantee Escrow account. D. Ogden City Contribution. In each of the Contribution Agreements referred to above, the City will agree to contribute the following from non-airport City funds: a. $240,000 of City funds will be direct deposited into the Mobilization Guarantee Escrow account and used as described in paragraph Section I. above. b. $10,000 of City funds will be used to help fund the Familiarization Tour. c. In addition to contributing the funds identified above, the City will also be responsible for the city undertakings and additional contributions described below. III. ADDITIONAL CITY UNDERTAKINGS. Further, the City proposes to do the following: A. Invite proposals from all national and local air carriers, including indirect air carriers, for the purpose of securing a new entrant air carrier with the capability, capacity and financial strength to undertake development of new routes between the Ogden-Hinckley Airport and Los Angeles, Oakland, and Orlando (the “New Routes”), and other routes and destinations as the market proves it will support. The City will request responses or proposals to be submitted to the City within an appropriate deadline. B. If more than one proposal is received, City staff will recommend to City Council the most qualified air carrier to accept, based on criteria to be established in the request for proposals. City Council will select the successful proposal and will direct that negotiations begin. C. Draft and execute a contract with the selected air carrier to the New Routes. D. Draft and execute Contribution Agreements with the parties referred to above. E. Establish procedures for and monitor the flow of funds to and from the escrows. F. Provide from Ogden-Hinckley Airport funds: a. Up to a two-year waiver of landing and fuel flowage fees. b. A standby engine starter at an estimated cost of $50,000 c. Enhanced police and fire protection and support as required by FAA regulations at an estimated cost of $75,000. ---PAGE BREAK--- 4 G. Provide reimbursement, if any, to the parties to the Contribution Agreements of all amounts remaining in the Revenue Guarantee Escrow account at the end of one-year of operations. H. Provide a loan and incentives (from non-airport City funds) of approximately $500,000 to the selected air carrier or associated entity for the purpose of organizing the company, (ii) marketing the flights and destinations, (iii) marketing Weber and Davis Counties and their amenities and attractions, and/or (iv) organizing, promoting and selling travel packages in the Weber County and Davis County markets. I. Arrange for and supervise a Familiarization Tour to help familiarize the travel industry of the new travel opportunities. J. Spend an additional $100,000 (from non-airport City funds) in the initial marketing of the project and the familiarization tour. K. Apply for and employ due diligence in obtaining a $500,000 Small Community Air Service Development (SCASD) grant from the U.S. Department of Transportation to cover additional marketing costs for additional destinations. IV. BINDING EFFECT. A. City. The parties acknowledge that the Mayor of Ogden City may sign this non- binding MOU since no binding obligations are intended to be created hereby. The parties further acknowledge that once the parties intend to enter into a binding agreement, such agreement must first be drafted then signed by the City and the other parties to the agreement before being bound. B. County. The parties acknowledge that any one of the three Davis County commissioners may sign this non-binding MOU since no binding obligations are intended to be created hereby. The parties further acknowledge that once the parties intend to enter into a binding agreement, such agreement must first be drafted then signed pursuant to Davis County procedures and requirements and the other parties to the agreement before being bound. IN WITNESS WHEREOF, the parties have executed this MOU on the date set forth opposite their respective signatures below. CITY: OGDEN CITY, a municipality and political subdivision of the state of Utah By: Date: Michael P. Caldwell Mayor ---PAGE BREAK--- 5 ATTEST: Tracy Hansen, City Recorder Approved as to Form: Office of City Attorney DAVIS COUNTY a body politic and corporate By: Date: Its: ATTEST: Approved as to Form: Office of County Attorney ---PAGE BREAK--- Ogden-Hinckley New Entrant Incentive Program Request for Letters of Interest The City of Ogden, Utah (the “City”) is seeking Letters of Interest from air carriers not currently serving the Ogden-Hinckley Airport (OGD) to provide new air service between OGD and a large or medium hub airport serving the Los Angeles, San Francisco/Oakland, and Orlando metropolitan areas with the support of an Incentive Program. Purpose The City seeks to improve the competitive landscape at OGD by introducing a second air carrier that will provide scheduled service to and from OGD, and (ii) increase access from OGD to the national system and significant O&D markets. Eligibility The Incentive Program is open only to new entrants air carriers not currently serving OGD), including indirect air carriers that operate or plan to operate as public charter pursuant to 14 C.F.R. part 380. Carriers must plan to provide regularly scheduled service to large or medium hubs serving at a minimum the Los Angeles, San Francisco/Oakland, and Orlando metropolitan areas. Carriers who can provide service beginning June 2017, will serve multiple target markets, and will provide service at least four days a week with at least 13 round trip flights per week will be favored. Incentive Program The Incentive Program will consist of two components: Revenue Guarantee. The City has appropriated up to $1 million from non- airport funds as a revenue guarantee for the selected carrier’s qualifying flights for one year following the commencement of air service. Fee Waiver. In addition to marketing incentives provided by the City from non-airport funds, OGD will waive fuel flowage fees and landing fees for the selected carrier’s qualifying flights for one year following the commencement of air service. OGD will consider extending this component of the Incentive Program for one additional year, in which case OGD would offer a comparable fee waiver to any incumbent carrier serving the target markets at that time. Procedure Interested carriers should send an informal Letter of Interest to Mindy Nicholas, preferably by email to [EMAIL REDACTED], or by mail to Mindy Nicholas, 2549 Washington Blvd., Ste. 420, Ogden, UT 84401, no later than March 24, 2017. All carriers that have expressed an interest in the Incentive Program by that time will be directed to submit formal proposals and apprised of the selection criteria, process, and timeline. Submitters will be provided a form agreement to expedite negotiations. Submitters should expect that the timeline for submission of a formal proposal will be very fast since the objective of the City is to have the proposed service begin in June 2017. Due to funding limitations, the City will select only one carrier for this program. Questions regarding the Incentive Program should be directed to Melven Smith at [EMAIL REDACTED] or by phone at 1-[PHONE REDACTED]. ---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--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK---