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| TITLE: |
| Consideration and Approval of Lease of City-Owned Property: Rental Car Concessions/Lease Agreement Extensions at the Flagstaff Pulliam Airport Terminal. |
| RECOMMENDED ACTION: |
Approve the Rental Car Concessions/Lease Agreement Extensions with Avis Budget, Enterprise, Hertz, National, and Alamo.
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| Executive Summary: |
- On February 1, 2011, the Council entered into Rental Car Concessions/Lease Agreements ("leases") with Avis Budget, Enterprise, Hertz, National, and Alamo to provide rental car services at the Flagstaff Pulliam Airport Terminal ("airport").
- The terms of the leases required that the rental car agencies pay a Concession Fee of 10% based on the monthly Gross Revenues. This has provided a significant revenue for the City.
- On or about February 1, 2014, the Council approved Amendment I, authorizing a three (3) year extension of the leases.
- The leases expired on February 1, 2017 with a temporary extension. This Amendment II will extend the terms of the leases five (5) years.
- Staff considered the interest of other rental car agencies when proposing the five (5) year extension.
- The terminal has limited spaces available, all counters are fully occupied. By adopting Amendment II, the City will continue to collect significant Concession Fees as ridership increases.
- The last bid was based first on counter and land space options. The highest bidder selected the first option. A percentage of gross from the bid was 10% of the gross from each company.
- Cars are not only rented by travelers flying into Flagstaff, but by local citizens.
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| Financial Impact: |
- The leases are a large revenue generator and since 2011, the market for rental cars at the airport has increased. Staff anticipates an increase in the revenues for the City, based on the historical growth of the current lease.
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| Policy Impact: |
| None |
| Connection to Council Goal, Regional Plan and/or TeamFlagstaff Strategic Plan: |
- Regional Plan Goal T.10. Strengthen and expand the role of Flagstaff Pulliam Airport as the dominant hub for passenger, air freight, public safety flights, and other services in Northern Arizona.
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| Has There Been Previous Council Decision on This: |
- In 2010, the City issued an Invitation for Bid for Rental Car Concessions - Flagstaff Pulliam Airport. Avis Budget, Enterprise, Hertz, National, and Alamo responded to the bid and went through the procurement process.
- On or about February 1, 2011, Staff went before Council who voted to approve the leases.
- On or about February 1, 2014 . Council voted to extend the leases an additional three (3) years.
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| Options and Alternatives: |
- Council can approve this lease extension, which will give six name brand car rental options to Flagstaff. This is the most we currently have office space for at the Airport Terminal. It would continue to provide a growing revenue source to operate the airport.
- Council could select individual lease extensions and refuse others. This option would reduce revenues produce and could have a complaint filed with the Federal Aviation Administration by the companies not selected.
- Council can reject this lease extension, and not provide rental cars to the flying public and Flagstaff Citizens. This would also substantially reduce the revenue generated to support the airport. This would require increased general fund support to operate the airport.
- Council could request a new bid process.
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| Background/History: |
In or about 2010, Airport ridership was increasing and the Airport saw a need for rental car services. The Airport placed an Invitation for Bid which required, among other things, a Concession Fee of 10% of all monthly Gross Revenues. Through the procurement process, the City chose Avis Budget, Enterprise, Hertz, National, and Alamo to open rental counters at the Airport.
On February 1, 2011, the City Council adopted the Leases. Then, on or about February 1, 2014, the City Council adopted Amendment I extending the term of the Leases another three (3) years.
These are the largest rental car companies in the industry. They have consolidated to three main names, Avis/Budget, Hertz and Enterprise. Between these companies, they own Alamo, National, Thrifty and Dollar. The other smaller brands expressed that they would not do enough business in the Flagstaff market to be successful. This lease extension provides the most options to the citizens of Flagstaff. Under the agreement revenues come from a base rate on counter and land space. The agreement also provides a percentage of gross which grows with the amount of cars rented. Over time, the City has benefited from receipt of a substantial revenue based on the terms of these Leases. The City believes that ridership will grow and the use of the rental company's services will also grow. |
| Key Considerations: |
- The extension of the Leases for five (5) years will:
- Assure car rental services for the public.
- Assure continued revenue that will grow with increased passenger service at the airport.
- Reduce costs because the rental car companies will not have to construct new counters.
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| Community Benefits and Considerations: |
- Rental cars at the Airport are not just rented by the flying visitors. Many local citizens rent from the Airport for various reasons.
- This Lease Amendment II gives flying visitors and citizens multiple options for rental car agencies at one location.
- Currently there are five brands available with this Amendment a sixth brand will be added.
- Multiple brands gives the public more rental car options, at a competitive price.
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