Title
Airport Concessions Relief and American Rescue Plan Act (Ordinance S-48008)
Description
Request to authorize the City Manager, or his designee, to apply for and accept airport-specific American Rescue Plan Act of 2021 (ARPA) funds allocated by the Federal Aviation Administration (FAA) in the amount of $15,374,984 for Small Business Concessions and $3,843,746 for Large Business Concessions. If approved, these grant funds would be applied to terminal concessionaire accounts in the form of a credit to be used toward rent payments subject to the stipulations outlined in this report. Further request to authorize the City Treasurer to accept the funds and the City Controller to disburse all funds related to this item. The total value of the funding will not exceed $19,218,730.
Report
Summary
The COVID-19 global pandemic created a downturn in airline passenger travel by over 93 percent at Phoenix Sky Harbor International Airport (PHX). In direct correlation to the reduced passenger activity, concessions sales plummeted for PHX's concessionaires. As a result, established rents were unsustainable for concessionaires in the terminals. On April 4, 2020, the FAA provided guidance to airport sponsors encouraging them to consider business circumstances created by the public health emergency. In response, subject to stipulations the City Council approved rent relief to concessionaires and extended food, beverage and retail contracts by three years to assist Airport Concessions Disadvantaged Business Enterprise (ACDBE) business partners to refinance their existing debt.
Since April 2021, PHX has experienced significant increases in passenger volumes. In June 2021, PHX reached 80 percent of total enplanement traffic for two consecutive months as compared to 2019. Per the stipulations contained in the City Council action on Dec. 2, 2020, all concession operators were notified that the contractual Minimum Annual Guarantee (MAG) amounts must be paid beginning Aug. 1, 2021.
Previous Federal Relief Funds for Airport Concessionaires
On April 9, 2021, the Aviation Department received notification of its allocation of Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA) funds appropriated for PHX’s concessions program in the amount of $4,804,683. In accordance with FAA guidance, the monies received by the FAA served as a partial reimbursement towards the more than $20 million in rent relief provided by PHX to date.
American Rescue Plan Act
On June 16, 2021, the Aviation Department received notification from the FAA regarding its concessions relief allocation of airport-specific ARPA funds in the amount of $15,374,984 for small business concessions and $3,843,746 for large business concessions.
As with CRRSAA, if an airport sponsor accepts its ARPA allocations for concession relief, “the airport sponsor must provide relief from rent and MAG to eligible small airport concessions and eligible large airport concessions in an amount that reflects each eligible airport concession’s proportional share of the total amount of rent and MAG of all eligible airport concessions at the airport.”
For the Aviation Department to be eligible to apply for and receive its federal concessions relief appropriation of ARPA funds, the City of Phoenix would offer rent relief in the form of grant-funded rent credits for in-terminal concessionaires. These ARPA funds would effectively pay up to 100 percent of the MAG or percentage rents owed to the City until the appropriation is exhausted.
The ARPA credits would provide rent relief subject to the following conditions:
- Stipulation 1 - Concessionaires must be operating to receive rent relief as stipulated by the FAA.
- Stipulation 2 - In order to encourage reactivation of concessions with appropriate staffing levels to meet customer needs and expectations, concessionaires will receive the percentage of their ARPA allocation as a rent credit that is commensurate to their staffing percentages as compared to 2019 baseline staffing levels. For example, 60 percent staffing would enable a concessionaire to apply 60 percent of their rent for that month from ARPA rent credits.
- Stipulation 3 - Rent relief recipients will be required to share these credits equitably among their sub tenants and joint venture partners. Staffing levels over 80 percent would be eligible to have 100 percent ARPA rent credit allocation.
Financial Impact
The $19,218,730 of relief funding comes directly from the federal ARPA grant. This portion of the federal airport ARPA grant will provide the funding for the credit to rent due to the City, and can only be used for the purpose of airport concessionaire relief as explained above.
Public Outreach
Aviation staff documented holding 21 different meetings with Airport Concession Disadvantaged Business Enterprise (ACDBE) small business concessionaires to discuss the certification requirements for coronavirus relief funds, where the proposed ARPA stipulations were part of the agenda of topics discussed. Staff also held nine meetings with concessions primes, including Host and SSP, to cover these same topics. In addition to these one-on-one meetings, staff presented the rent relief overview at the Aviation Department’s bi-monthly Terminal Tenant Meeting on July 20, 2021 where representatives of SSP and Host were invited, and the proposed rent relief criteria was discussed.
Aviation staff also conducted one-on-one meetings with more than 20 concessionaire primes, joint venture partners, and Airport Concession Disadvantaged Business Enterprises (ACDBEs) and a teleconference meeting with terminal concessionaires on Sept. 27, 2021. The one-on-one calls and larger teleconference were conducted in order to describe the ARPA rent relief grant, how it would be applied, and potential stipulations. These calls were helpful for staff in crafting the proposed stipulations to be both achievable and a strong incentive to get fully staffed and operating at pre-pandemic levels.
Location
Sky Harbor International Airport - 3400 E. Sky Harbor Blvd.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.