Title
Airport Concessions Relief and American Rescue Plan Act (Ordinance S-48797)
Description
Request to authorize the City Manager, or his designee, to issue rent credits to eligible airport terminal concessionaires pursuant to 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, the ARPA funds would be applied to terminal concessionaire accounts in the form of credits toward rent payments. Further request to authorize the City Treasurer to accept, 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, sales plummeted for PHX's concessionaires. As a result, 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. On June 22, 2020, the FAA requested that airports consider temporary rent abatements and Minimum Annual Guarantee (MAG) waivers for tenants during the health emergency. In response, subject to stipulations, the City Council approved rent relief to concessionaires and extended the terms of food, beverage, and retail contracts by three years in order 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. According to the stipulations in the City Council action on Dec. 2, 2020, all concession operators were notified that the contractual MAG amounts were to resume beginning Aug. 1, 2021. Since that time, passenger traffic has continued to recover with recent months returning to pre-pandemic levels. As of June 1, 2022, terminal concessionaires are being held to contractually required operating hours in order to meet growing passenger demand.
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.”
The City Council considered the ARPA grant funds at its Oct. 27, 2021 Formal Meeting and authorized staff to apply for the grant, subject to a set of stipulations on the concessionaire rent relief. In its subsequent review, the FAA responded on Dec. 30, 2021 that the stipulations could not be implemented.
An ARPA grant agreement has been executed with the FAA. In order for the Aviation Department to be eligible to receive its federal concessions relief appropriation of ARPA funds, the City would offer rent relief in the form of grant-funded rent credits for in-terminal concessionaires. The ARPA funds would effectively reimburse up to 100 percent of the MAG or percentage rents owed to the City until the appropriation is exhausted.
Financial Impact
The $19,218,730 of relief funding comes directly from the federal ARPA grant. This portion of the federal 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.
Public Outreach
Since April 2022, the Aviation Department staff held 20 different meetings with terminal concession primes and ACDBE small businesses to discuss resuming contractual hours, and the proposed ARPA rent relief. Staff also hosted six job fairs between November and May for the concessionaires to augment their hiring efforts and rebuild their workforce. These job fairs have been well attended and successful.
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.