Boston-Logan International Airport: Proposed Consolidation of Rental Car Operations

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1 Boston-Logan International Airport: Proposed Consolidation of Rental Car Operations ACI Legal Conference April 17, 2008 Prepared by: Trudy P. Reilly, Senior Legal Counsel, Massport

2 Presentation Outline The Current Airport Conditions RAC Customer Profile Existing RACs at Logan Logan is land constrained The Challenge Air passengers will increase Rental vehicle demand will grow The Proposed Solution Build a consolidated RAC and parking facility On currently occupied Logan parcel Legal Role in Advancing the Solution

3 Logan is land constrained

4 Logan s land area compared

5 Who are our customers? Logan is an Origin-Destination Airport 90% of air passengers use ground access Multiple ground access options Private automobile 40% Taxicabs 21% Public transit 19% Rental cars 12% Business travelers (65%) Average contract days 3.25 Limos 8%

6 Who are our rental car companies? RACs and their market shares Hertz 32% Avis/Budget 30% Alamo/National 22% Enterprise (off-airport) 7% Dollar 4% Thrifty (off-airport) 4% Hertz has lease; others have tenancy agreements All have signed a concession agreement

7 The Challenge Rental car demand expected to increase 2%/yr Number of air passengers will continue to grow (1% to 3%/yr) 12% growth in RAC demand by 2012 High demand for commercial parking but supply constrained by local regulation (parking freeze) Small airport land area (2,500 acres) Airport land use is almost fully built out No land is available immediately adjacent to airport New airport facilities must re-use existing land area If no change, on-ground congestion will intensify

8 The Proposed Solution Consolidate Into One New Facility Rental car operations Commercial parking operations Construct the Combined Facility on Airport In a Location Currently in Use by RACs Use a Common Bus System to Serve the Facility Double busing for off-site RACs

9 The Southwest Service Area

10 Existing Land Uses on the Site

11 Conceptual Site Development Plan

12 The Proposed Benefits Consolidated busing reduces curb congestion at terminals Reduces vehicle emissions (reduce # buses from 92 to 42 buses) Cleaner emissions (clean diesel; CNG) RAC Facility expands capacity reduces car shuttle trips off airport Commercial Parking frees up space in other locations on airport Flexible Facility Design phasing of combined facility allows for growth

13 Legal Role: Lawyer is active member from inception: Project team (multi-departmental) Business negotiating team (multi-disciplinary) Information gathering Visits to other ConRAC facilities Meetings with other Airport professionals Consultants Teams meet regularly with RACs Share information Elicit responses, recommendations Business, legal negotiations

14 Early Legal Issues Is special legislation required for early CFC collection Title, Survey: What are the existing conditions Current leases, contracts, tenancies affecting existing uses RAC contract requirement for early CFC collection CFC application if project is not built How to engage and commit RACs before early CFC collection Environmental permitting process for Full Build project Community discussions Managing interim RAC moves, no business interruption Combined busing, cost allocation, cost recovery

15 Legal Documents (2007) New Concession Agreement: includes provision for early CFC collection (2008) MOA: execution prior to early CFC Includes expression of intent to occupy (2008) RFI: Are other RACs interested? Sets universe of RACs at initial occupancy (2008-9) Interim Tenancy Agreements Methodology for RAC interim moves

16 Concession Agreement Provision Section 4.9 RAC will collect an early CFC, if the Board votes it. Sets up the process for collection and remittance to Massport If RACs won t sign the negotiated lease for a ConRAC, then Massport may choose to: (a) stop CFC collection and use the $$ for design costs and some targeted airport roadway improvements, or (b) require RACs to continue collecting CFCs, and Massport uses CFCs for at-grade parking, consolidated busing, purchase of clean fuel shuttle buses.

17 Memo of Agreement with RACs Contains minimum terms of ConRAC Lease the size, location, features and ingress/egress modes of the proposed facility anticipated capital costs respective responsibilities for operating costs the basic finance and fee payment structure Expresses RACs intent to occupy and lease space Non-binding, but best efforts, reliance Good-faith deposit ($25,000) forfeitable

18 MOA: Fee Payment Structure Capital costs (structure and bus fleet) to be repaid by: CFCs ($ range) If needed, an Additional Fee from RACs (but also consider temporary increase in CFCs) Contingent fee, for sudden shortfalls in CFC collection during lease term, to pay debt service (also create CFC reserve fund) RACs pay separately for their exclusive space build-out Operating Costs of the facility to be paid by: Occupancy fees from RACs Maintenance reserve fund (from RACs and airport) Ground rent is paid by RACs separately Concession fee is paid by RACs separately

19 Managerial Responsibilities in MOA Quality Control Massport sets standards in consultation with the RACs Develop performance standards Provide management oversight Develop annual O&M budget; plan for annual true-up of costs Operational Control Massport to retain O&M responsibilities for: Common busing system Public Parking O&M ConRAC common areas: O&M, public safety and security Major Maintenance for ConRac and Public Parking through a reserve fund RACs to retain O&M responsibilities for: RAC operating areas, both exclusively leased and RAC-only ramps and roads

20 MOA Exhibits Project Location Map and Narrative Description ConRAC Plans (Feasibility Stage) Section 4.9 of the Concession Agreement Current Finance Plan Capital and Operating Cost Elements and Responsible Party Preliminary RAC relocation phasing plan, timing Initial Allocation, Re-Allocation of Space in CSB and in Garage New Entrants Draft Project Schedule

21 Request For Interest Is any other RAC interested in Logan? RAC must meet minimum standards to be eligible If interested and eligible, agree to 2007 concession agreement, pay good-faith deposit, sign MOA and participate during final design If not, then no access to ConRAC at initial occupancy May occupy at first re-allocation if meet market share Double busing applies to all off-airport RACs

22 Interim Tenancy Agreement Form: month to month tenancy Applicable during phasing of ConRAC construction Each RAC acknowledges it is part of ConRAC plan of interim moves Exhibits demonstrate full plan of interim relocations and time frame for all RACs Best efforts standard applicable to participants Time is of the essence

23 Next Steps: (?) After Board approval, early CFC collection Design commences Continue team meetings with RACs Draft EIR Continue community meetings Negotiate interim tenancy Include new RACs, if any after RFI Obtain TIFIA approval after permits received

24 Lease Lease Negotiation During Design Phase Initial Allocation (bid or market share) Re-Allocation (schedule) Cost Share Refinements Program Refinements After Lease Execution, Bond Financing and Construction Begins New Concession Agreement At ConRAC Occupancy If No Lease for the Proposed Project, then alternate solutions needed

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