Report Title:

Airports; Passenger Facility Charge; Concessionaires

 

Description:

Provides relief beyond April 30, 2002 for airport concessions; Establishes a passenger facility charge to finance costs related to implementing new security measures at state airports. (SB2306 HD2)

 

THE SENATE

S.B. NO.

2306

TWENTY-FIRST LEGISLATURE, 2002

S.D. 2

STATE OF HAWAII

H.D. 2


 

A BILL FOR AN ACT

 

relating to transportation.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that the September 11 terrorist attacks have had a profound impact on air travel in the United States. For a brief period, the nation's airports were shut down completely, and since reopening, security has been at heightened levels.

The enactment of the federal Aviation and Transportation Security Act in November 2001 has meant the implementation of new security measures at airports across the country to protect the public. These new security measures, however, have not come without a price.

The legislature further finds that concessionaires historically have contributed over sixty per cent of the revenues to Hawaii's public airports while airlines have contributed about ten per cent. The airports division of the department of transportation at the time of the Third Special Session 2001 had surplus funds of about $390,000,000 in its special fund account. It is noted that in years immediately prior to the tragic events of September 11, 2001, airlines received waivers in landing fees totaling approximately $76,000,000 while the concessionaires received no similar benefit. In addition, Congress has assisted airlines (and may do so again) but has provided no assistance to concessionaires and is not likely to do so.

The ongoing problems for some concessions, especially those selling to international (eastbound) passengers or those severely affected by ongoing security restrictions, may never change and will continue to suffer hardship beyond April 30, 2002, the date on which economic relief granted by the Third Special Session 2001 is scheduled to end. The department of transportation must seek to provide further relief to concessions still suffering hardship. These concessions should continue to provide services and opportunities to arriving and departing passengers.

During the relief period, the department should allow the concession to recover its loss of business volume to the extent the department can afford to do so. If the department cannot afford to provide this level of relief, then the concession should be provided relief by the department that will at least allow the concession to remain in business without suffering operating losses until the concessions gross receipts return to pre-September 11th levels. By giving such relief that will allow the concession to break-even in its operations and suffer no operating losses, the department will likely be in need for more revenues. Thus, in exchange for such relief the department shall have the option of terminating the concession agreement if there is someone willing to pay the department at least ten per cent more than what the existing concessionaire is paying the department. This option will ensure some level of continuing income to the department with a possible upside if a new concession operator is willing to pay more.

In case of such termination, the concessionaire will suffer the loss of its unamortized improvements, jobs, contractual damages and possibly other losses and damages. The concessionaire shall have no recourse against the department for any and all such damages and losses.

In case of such termination and for purposes of avoiding discretionary mistakes or abuse, the department may only award the new concession operator a contract by way of either: (a) a revocable permit not to exceed two years upon terms negotiated by the department at its sole discretion (present law limits such discretionary actions by revocable permits to only one year); or (b) a public-sealed bid under present law for a period longer than two years as deemed appropriate by the department. The existing concessionaire would be allowed to compete with others for a new contract by way of such a public-sealed bid process. These two options limit the possibility of discretionary mistakes and abuse and provide the department with the flexibility of temporarily allowing a new operator to pay it more revenues until economic conditions improve at which point the concession can be put out to public-sealed bid for a longer term in accordance with present law.

Deliberations and the passage of Act 15, Third Special Session Laws of Hawaii 2001, provided relief to concessionaires that could have been avoided if the present law providing relief in the event of construction disruption was similarly applied to economic events such as those resulting in the aftermath of September 11, 2001. The relief mechanism under present law for construction activities should be adapted to provide relief during economic downturns resulting from unexpected and significant drop in arriving passengers. Unlike the Third Special Session of 2001 where there was a tight schedule for considering a number of legislative bills, the legislature now has the time to consider a mechanism for relief for such economic downturns.

The purposes of this Act are to:

(1) Provide relief beyond April 30, 2002, for airport concessions still suffering from the terrorist events of September 11, 2001;

(2) Require that such concessions suffering any losses and damages due to such termination as set forth in Chapter 102-10(d) have no right to make any claim for damages or losses against the State;

(3) Avoid the need for another regular or special legislative session to consider relief for concessions by adopting a mechanism that will allow concessions to receive relief due to the events of September 11, 2001 and similar future events; and

(4) Establish a passenger facility charge to finance costs related to implementing new security measures at state airports.

SECTION 2. Section 102-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The bidding requirements of subsection (a) shall not apply to concessions or space on public property set aside for the following purposes:

(1) For operation of ground transportation services and parking lot operations at airports, except for motor vehicle rental operations under chapter 437D;

(2) For lei vendors;

(3) For airline and aircraft operations;

(4) For automatic teller machines and vending machines, except vending machines located at public schools operated by blind or visually handicapped persons in accordance with section 302A-412;

(5) For operation of concessions set aside without any charge;

(6) For operation of concessions by handicapped or blind persons; except concessions operated in the public schools by blind or visually handicapped persons in accordance with section 302A-412;

(7) For operation of concessions on permits revocable on notice of thirty days or less; provided that no such permits shall be issued for more than a one year period; provided, however, that revocable permits issued by the department of transportation for use of state airports may be for a period not to exceed two years if the director of transportation determines that an extension to the term of a contract or revocable permit is necessary in light of:

(A) A natural disaster; or

(B) A continuation of an adverse economic condition occurring within the previous twelve months that would adversely affect, in the assessment of the director of transportation, the State's ability to solicit and obtain favorable bid proposals;

(8) For operation of concessions or concession spaces for a beach service association dedicated to the preservation of the Hawaii beachboy tradition, incorporated as a nonprofit corporation in accordance with state law, and whose members are appropriately licensed or certified as required by law;

(9) For operation of concessions at county zoos, botanic gardens, or other county parks which are environmentally, culturally, historically, or operationally unique and are supported, by nonprofit corporations incorporated in accordance with state law solely for purposes of supporting county aims and goals of the zoo, botanic garden, or other county park and operating under agreement with the appropriate agency solely for such purposes, aims, and goals; and

(10) For operations of concessions that furnish goods or services for which there is only one source, as determined by the head of the awarding government agency in a writing that shall be included in the contract file.

For purposes of this subsection, "adverse economic condition" means a reduction of fifteen per cent or more in the volume of business of the concessionaire as set forth in section 102-10(b)."

SECTION 3. Section 102-10, Hawaii Revised Statutes, is amended to read as follows:

"102-10 Modification of contract terms. (a) If during the term of the contract (including contracts which have been executed and are presently in force) there has been a reduction of fifteen per cent or more in the volume of business of the concessionaire for a period of sixty days or more, computed on the average monthly gross income for the eighteen months just prior to the period or as long as the concessionaire has been in the business, whichever period is shorter, and such reduction as determined by the officer letting the contract is caused by construction work conducted during the period of time on, or within or contiguous to, the public property upon which the concession is located by either the state or county governments, or both, the officer, with the approval of the governor in the case of a state officer and the chief executive of the respective county in the case of a county officer, may modify any of the terms of the contract, including the agreed upon rent, for a period which will allow the concessionaire to recoup the amount lost by such reduction; provided that if the contract includes provisions allowing modification for the above contingencies, this section shall not be applicable thereto; provided further that this provision shall not apply to any particular concession if the application thereto may impair any contractual obligations with bondholders of the State or counties or with any other parties.

(b) If during the term of any public-airport-concession contract (including contracts that have been executed before the effective date of this Act and are presently in force) there has been a reduction of fifteen per cent or more in volume of business of the concessionaire for a period of thirty days or more, computed on the average gross monthly receipts for the six months immediately prior to the period or as long as the concessionaire has been in business, whichever period is shorter, and that reduction, as determined by the officer letting the contract is caused by a reduction in the east bound or west bound passengers arriving during the period of time on, or within or contiguous to, the public property upon which the concession is located by state government, the officer, with the approval of the governor may modify any of the terms of the contract, including an extension of the contract term for not more than two years and the agreed upon rent, for a period which will allow the concessionaire to recoup the amount lost by such reduction; provided that:

(1) The period of recoupment shall end when for three consecutive months the average gross monthly receipts is equal to or greater than the average gross monthly receipts computed and used for the six months or less prior to the start of the recoupment period;

(2) If the contract includes provisions allowing for modification for the above contingencies, this section shall not apply; and

(3) This subsection shall not apply to any particular concession if the application thereto may impair any contractual obligations with bond holders of the State or with any other parties.

(c) For public-airport concessions requesting economic relief as provided for in subsection (b), if the State does not provide relief that will allow the concession to recoup the amount lost due to the reduction in volume of business in accordance with subsection (b), the State shall provide relief to such a concession that will allow it to break even in its concession operations until such time that the concession's average gross monthly receipts for three consecutive months is equal to or greater than the average gross monthly receipts computed and used for the six months prior to the start of the recoupment period.

(d) If a concession is receiving relief from the State under above subsection (c), as a condition for such relief the State shall have the right to terminate the concession contract and require the concessionaire to vacate the concession premises when the State has a new concessionaire for the premises who is willing to pay the State at least ten per cent more than the latest rental amount the concessionaire receiving relief was paying to the State. That new concessionaire may take over the premises pursuant to a revocable permit which shall not exceed two years, or if for a period longer than two years, the takeover of the premises shall be pursuant to the award of a public bid in accordance with this chapter. A concessionaire receiving relief pursuant to subsection (c) shall be allowed to participate in such a public bid. A concessionaire whose contract is terminated pursuant to this subsection shall have no claims for damages or losses against the State and shall forfeit to the State all of its leasehold improvements in the premises. As an alternative to the foregoing right of termination by the State, a concessionaire receiving relief pursuant to subsection (c) and the State may agree to terminate the concession contract on terms mutually agreeable to both parties."

SECTION 4. Section 171-13, Hawaii Revised Statutes, is amended to read as follows:

"171-13 Disposition of public lands. Except as otherwise provided by law and subject to other provisions of this chapter, the board may:

(1) Dispose of public land in fee simple, by lease, lease with option to purchase, license, or permit; and

(2) Grant easement by direct negotiation or otherwise for particular purposes in perpetuity on such terms as may be set by the board, subject to reverter to the State upon termination or abandonment of the specific purpose for which it was granted, provided the sale price of such easement shall be determined pursuant to section 171-17(b).

No person shall be eligible to purchase or lease public lands, or to be granted a license, permit, or easement covering public lands, who has had during the five years preceding the date of disposition a previous sale, lease, license, permit, or easement covering public lands cancelled for failure to satisfy the terms and conditions thereof[.] except for a termination which occurs pursuant to section 102-10(d) and provided the concessionaire has paid to the State the amounts owed prior to the commencement of the period of relief."

SECTION 5. Section 261-7, Hawaii Revised Statutes, is amended to read as follows:

"261-7 Operation and use privileges. (a) In operating an airport or air navigation facility owned or controlled by the department of transportation, or in which it has a right or interest, the department may enter into contracts, leases, licenses, and other arrangements with any person:

(1) Granting the privilege of using or improving the airport or air navigation facility or any portion or facility thereof or space therein for commercial purposes;

(2) Conferring the privilege of supplying goods, commodities, things, services, or facilities at the airport or air navigation facility;

(3) Making available services, facilities, goods, commodities, or other things to be furnished by the department or its agents at the airport or air navigation facility; or

(4) Granting the use and occupancy on a temporary basis by license or otherwise any portion of the land under its jurisdiction which for the time being may not be required by the department so that it may put the area to economic use and thereby derive revenue therefrom.

All the arrangements shall contain a clause that the land may be repossessed by the department when needed for aeronautics purposes upon giving the tenant temporarily occupying the same not less than thirty days' notice in writing of intention to repossess.

(b) Except as otherwise provided in this section, in each case mentioned in subsection (a)(1), (2), (3), and (4), the department may establish the terms and conditions of the contract, lease, license, or other arrangement, and may fix the charges, rentals, or fees for the privileges, services, or things granted, conferred, or made available, for the purpose of meeting the expenditures of the statewide system of airports set forth in section 261-5(a), which includes expenditures for capital improvement projects approved by the legislature. Such charges shall be reasonable and uniform for the same class of privilege, service, or thing.

(c) The department shall enter into a contract with no more than one person ("contractor") for the sale and delivery of in-bond merchandise at Honolulu International Airport, in the manner provided by law. The contract shall confer the right to operate and maintain commercial facilities within the airport for the sale of in-bond merchandise and the right to deliver to the airport in-bond merchandise for sale to departing foreign-bound passengers.

The department shall grant the contract pursuant to the laws of this State and may take into consideration:

(1) The payment to be made on in-bond merchandise sold at Honolulu International Airport and on in-bond merchandise displayed or sold elsewhere in the State and delivered to the airport;

(2) The ability of the applicant to comply with all federal and state rules and regulations concerning the sale and delivery of in-bond merchandise; and

(3) The reputation, experience, and financial capability of the applicant.

The department shall actively supervise the operation of the contractor to insure its effectiveness. The department shall develop and implement such guidelines as it may find necessary and proper to actively supervise the operations of the contractor, and shall include guidelines relating to the department's review of the reasonableness of contractor's price schedules, quality of merchandise, merchandise assortment, operations, and service to customers.

Apart from the contract described in this subsection, the department shall confer no right upon nor suffer nor allow any person to offer to sell, sell, or deliver in-bond merchandise at Honolulu International Airport; provided that this section shall not prohibit the delivery of in-bond merchandise as cargo to the Honolulu International Airport.

(d) The department, by contract, lease, or other arrangement, upon a consideration fixed by it, may grant to any qualified person the privilege of operating, as agent of the State or otherwise, any airport owned or controlled by the department; provided that no such person shall be granted any authority to operate the airport other than as a public airport or to enter into any contracts, leases, or other arrangements in connection with the operation of the airport which the department might not have undertaken under subsection (a).

(e) The department may fix and regulate, from time to time, reasonable landing fees for aircraft, including the imposition of landing surcharges or differential landing fees, and other reasonable charges for the use and enjoyment of the airports and the services and facilities furnished by the department in connection therewith, including the establishment of a statewide system of airports landing fees, a statewide system of airports support charges, and joint use charges for the use of space shared by users, which fees and charges may vary among different classes of users such as foreign carriers, domestic carriers, inter-island carriers, air taxi operators, helicopters, and such other classes as may be determined by the director, for the purpose of meeting the expenditures of the statewide system of airports set forth in section 261-5(a), which includes expenditures for capital improvement projects approved by the legislature.

In setting airports rates and charges, including landing fees, the director may enter into contracts, leases, licenses, and other agreements with aeronautical users of the statewide system of airports containing such terms, conditions, and provisions as the director deems advisable.

If the director has not entered into contracts, leases, licenses, and other agreements with any or fewer than all of the aeronautical users of the statewide system of airports prior to the expiration of an existing contract, lease, license, or agreement, the director shall set and impose rates, rentals, fees, and charges pursuant to this subsection without regard to the requirements of chapter 91; provided that a public informational hearing shall be held on the rates, rentals, fees, and charges.

The director shall develop rates, rentals, fees, and charges in accordance with a residual methodology so that the statewide system of airports shall be, and always remain, self-sustaining. The rates, rentals, fees, and charges shall be set at such levels as to produce revenues which, together with aviation fuel taxes, shall be at least sufficient to meet the expenditures of the statewide system of airports set forth in section 261-5(a), including expenditures for capital improvement projects approved by the legislature, and to comply with covenants and agreements with holders of airport revenue bonds.

The director may develop and formulate methodology in setting the various rates, rentals, fees, and charges imposed and may determine usage of space, estimate landed weights, and apply such portion of nonaeronautical revenue deemed appropriate in determining the rates, rentals, fees, and charges applicable to aeronautical users of the statewide system of airports.

The rates, rentals, fees, and charges determined by the director in the manner set forth in this subsection shall be those charges payable by the aeronautical users for the periods immediately following the date of expiration of the existing contract, lease, license, or agreement. If fees are established pursuant to this section, the department shall prepare a detailed report on the circumstances and rates and charges that have been established, and shall submit the report to the legislature no later than twenty days prior to the convening of the next regular session.

If a schedule of rates, rentals, fees, and charges developed by the director in accordance with this section is projected by the department to produce revenues which, together with aviation fuel taxes, will be in excess of the amount required to meet the expenditures of the statewide system of airports set forth in section 261-5(a), including expenditures for capital improvement projects approved by the legislature, and to comply with covenants and agreements with holders of airport revenue bonds, the department shall submit the schedule of rates, rentals, fees, and charges to the legislature prior to the convening of the next regular session of the legislature. Within forty-five days after the convening of the regular session, the legislature may disapprove any schedule of rates, rentals, fees, and charges required to be submitted to it by this section by concurrent resolution. If no action is taken by the legislature within the forty-five-day period the schedule of rates, rentals, fees, and charges shall be deemed approved. If the legislature disapproves the schedule within the forty-five-day period, the director shall develop a new schedule of rates, rentals, fees, and charges in accordance with this section within seventy-five days of the disapproval. Pending the development of a new schedule of rates, rentals, fees, and charges, the schedule submitted to the legislature shall remain in force and effect.

Notwithstanding any other provision of law to the contrary, the department may waive landing fees and other aircraft charges established under this section at any airport owned or controlled by the State whenever:

(1) The governor declares a state of emergency; and

(2) The department determines that the waiver of landing fees and other charges for the aircraft is consistent with assisting in the delivery of humanitarian relief to disaster-stricken areas of the State.

(f) To enforce the payment of any charges for repairs or improvements to, or storage or care of any personal property made or furnished by the department or its agent in connection with the operation of an airport or air navigation facility owned or operated by the department, the department shall have liens on the property, which shall be enforceable by it as provided by sections 507-18 to 507-22.

(g) The department from time to time may establish developmental rates for buildings and land areas used exclusively for general aviation activities at rates not less than fifty per cent of the fair market rentals of the buildings and land areas and may restrict the extent of buildings and land areas to be utilized.

(h) The department may establish passenger facility charges not to exceed $4.50 for each overseas or international passenger who uses a state airport. The department shall establish the charges in accordance with applicable federal laws and regulations. No passenger facility charges shall be assessed on interisland passengers who use state airports."

SECTION 6. For purposes of qualifying for and receiving economic relief under this Act, a concessionaire who qualified for and received relief pursuant to Act 15 of the Third Special Session 2001 shall be deemed qualified. All others seeking relief under this Act may rely upon the reduction in volume of business to their concessions following the aftermath of the September 11, 2001 terrorist attacks against the United States.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval; provided that:

(1) Section 5 shall take effect on July 1, 2002; and

(2) Sections 2, 3, and 4 shall apply retroactive to September 11, 2001.