PROCEEDINGS OF THE CITY COUNCIL OF SALT LAKE CITY, UTAH
THURSDAY, MAY 12, 1983
THE CITY COUNCIL OF SALT LAKE CITY, UTAH, MET IN SPECIAL PUBLIC SESSION ON THURSDAY, MAY 12, 1983 AT 5:00 P.M. IN ROOM 301 CITY AND COUNTY BUILDING.
ON ROLL CALL THE FOLLOWING COUNCIL MEMBERS WERE PRESENT: GRANT MABEY ALICE SHEARER SYDNEY R. FONNESBECK IONE M. DAVIS PALMER DEPAULIS EDWARD W. PARKER.
Council Chairman Grant Mabey presided at and Councilmember Edward Parker conducted this meeting.
Albert Haines, chief administrative officer, and Wally Miller, deputy city attorney, were present at the meeting.
DEPARTMENTAL BUSINESS
AIRPORT AUTHORITY
#1. RE: Discussion of the proposed construction and expansion project for the Salt Lake City International Airport, proposed method of financing and allocating costs for the project, objections raised by certain airlines, proposed letter of agreement between the City and certain airlines, and related matters. Lou Miller, director of airports, said that there were no longer any airlines protesting this project. He then introduced Alan Blodgett, chairman of the Airport Authority Board, to discuss how the situation had been resolved.
Mr. Blodgett said that there were four airlines that expressed concern about the method by which the cost of the airport expansion would be distributed among them; they were concerned primarily with the concept of equalized rentals. Mr. Blodgett said that the airport authority has given considerable thought to this matter and has been in continual discussions with the airlines and representatives of the airlines for the past two weeks.
Mr. Blodgett said that the Airport Authority Board had a special meeting on May 11, and proposed a letter that would resolve the issue; all of the airlines have responded accepting the adjustment of the use agreement. Mr. Blodgett said that the adjustment was reasonable and fair to the City and the airlines. Mr. Blodgett then reviewed what adjustments would be made. He said that the parties hereto agree to establish one or more new cost and revenue centers under the agreement which will include the following:
1. The proposed new concourse and aircraft parking apron, related support facilities, and other costs related to said concourse. Those facilities would be made into a new cost center separate from Terminal Unit #1 and #2. 2. The proposed Terminal Unit #2 expansion and modification, related support facilities, and costs contained in the 1983 project would become another separate cost center. In effect those that benefited from the expansion would be paying the investment service for the expansion rather than distributing the cost to all of the airlines. 3. The new connector building proposed to be constructed between Terminal Unit #2 and the new concourse “D” as well as the old connector building between Terminal Units #1 and #2, and all future connector buildings between the terminals (all connector buildings now existing and yet to be built) would be in a separate cost center which would be distributed to all of the airlines. In a sense this is spreading the cost of all connectors to all of the airlines based on their usage because all of the passengers benefit from the connectors.
4. All future and new terminal units and/or concourses and all major expansions or existing terminal units and/or concourses. In the future if there is a major expansion the airport would negotiate with the airline benefiting from that facility to determine how the costs should be allocated. It would not be spread over the existing facilities. This relates just to the investment cost (the cost of the facility, the operating cost would be spread out equally among the airport). Mr. Blodgett said that this is a provision that is common in many airports. It was felt that since Western has become so dominant there was some justification in the arguments of the other airlines.
The adjustment has been agreed to and it is recommended that the Council accept the modification to the use agreement. Mr. Blodgett also said that the use agreement wouldn’t be modified at this time but the city would commit to negotiate in good faith to work out the actual wording as quickly as possible. This would allow the city to proceed with the bond issue. Mr. Blodgett commended the airport staff and the city staff for the work that they have done; they handled themselves very well in New York in dealing with the rating agencies and the lawyers.
Mr. Blodgett said that the board had been pleased with Lou Miller and the city attorney’s staff. Councilmember Shearer asked if the agreements would be changed and signed by all parties before the bonds were sold. Mr. Miller said that a letter of agreement has been signed by the carriers and is awaiting execution by the City. The letter of agreement is an agreement to enter into good faith negotiations based on the principals that Mr. Blodgett outlined. Mr. Miller said that the principals are fairly well defined but it still has to be determined how costs will be handled in various areas.
Mr. Miller said that the most important issue related to future expansion after this expansion. The airport wants to get the use agreement established so that when future expansion takes place the situation is well defined and there are not problems. Mr. Miller said that the use agreement will not be amended by the time the bonds are sold but the letter of agreement permits the airport to sell the bonds, the objections have been withdrawn, and the airport can proceed as scheduled. Mr. Blodgett said that the airlines have agreed that the proceeds from the concessionaires would not become a point of concern when the agreement is revised; they agreed not to disturb the method by which concession revenues are distributed. Bill Morrison, staff of American Airlines at the airport, read a message from the vice president of properties of American Airlines, Mr. Jamison. “Business demands have required my presence in Dallas-Fort Worth, however, I want to express our sincere thanks both personally and on behalf of American Airlines for the patience and consideration of the Salt Lake City Airport Authority Board in developing a sound and workable compromise that will allow the expansion of Salt Lake City International Airport’s passenger terminal facility without financially burdening carriers who will not materially benefit from the expansion.
I wish particularly to thank and commend your director of airports, Lou Miller for his leadership and determination in reconciling the various interests that had been at odds. Mr. Miller played an indispensable role in bringing about this settlement and demonstrated what a profound impact a dedicated professional airport operator can have not only on his community but also on the air transportation industry.” Mr. Robert Grow, attorney representing American and Frontier Airlines, thanked Mr. Lou Miller and his staff for the long hours and extra effort that were put into the negotiations. He said that it is unusual in an adversary circumstance when the other side is as cooperative as they have been.
Also Roger Cutler, Wally Miller, and Wallace Earl of the attorney’s staff have been very helpful. Mr. Grow said that the Airport Authority Board has spent many hours as well working on the negotiations and they are appreciated. Mr. Grow urged the Council to pass the bond issue based upon this settlement. He said that they were delighted that the issues could be resolved so that the bond issue and expansion could go forth to the benefit of Salt Lake and the airlines that will be using the expansion. Mr. Jerry Barnack, Republic Airlines, seconded everything that Mr. Jamison had said in his message. He said that Mr. Miller was good to work with and the agreement that was reached is the best one that could be hoped for all parties.
Don Drews, director of properties and facilities for Western Airlines, said that Western had executed and delivered to the airport the letter of agreement with the City. He said that this action by Western further demonstrates Western’s continuing commitment to the growth of the Salt Lake City metropolitan area. Over the past year Western Airlines has been restructured around the Salt Lake City airport and the fleet schedule has been realigned to better respond to the traveling needs of the community.
Western has proved the viability of the hub operation at Salt Lake City both from the passenger service standpoint and from the operations point of view. Mr. Drews said that the 1983 expansion project will provide the terminal facilities necessary to complete the hub transition and enable Salt Lake City to become a truly competitive airport for the western United States. Western is pleased that the construction of the 1983 airport expansion may go forward as planned and without further delay; the airline is confident that the Council and others in the community will be pleased with the results. Mr. Drews added Western’s commendation to the airport authority and specifically to Lou Miller and his staff for the understanding and support shown Western Airlines through this difficult time.
Mr. Drews said that it has been a long a arduous task. George Siggins, regional manager of properties for Delta airlines, said that the agreement provides a good framework and a proper framework for the continuing negotiations that will go on to develop the specific components of each new cost and revenue center. Mr. Siggins said that Mr. Miller and his staff handled this situation in a very professional manner.
Councilmember Shearer moved and Councilmember DePaulis seconded that the Council recommend to the Mayor that he sign the letter of agreement on behalf of the city and that the Council commend the airport authority and airport director for their good work and the airlines for their good faith in staying with Salt Lake, which motion carried, all members present voting aye except Councilmember Davis who was absent when the vote was taken.
Mr. Miller said that on May 17 the Council would need to approve an amendment to the resolution which was approved on April 28. He said that the amendment is required because the available discount rate will be changed from 98.5 to 96.5; this will be to allow the potential bidders of the bonds to bid the bonds with or without insurance depending on the ratings received from the rating agencies.
(Q 83-11)
The meeting adjourned at 5:20 p.m.