Report Title:

Airports; Concessionaires; Economic Relief

Description:

Provides further economic relief for airport concessionaires. (HB2291 HD2)

HOUSE OF REPRESENTATIVES

H.B. NO.

2291

TWENTY-SECOND LEGISLATURE, 2004

H.D. 2

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to transportation.

 

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

SECTION 1. The legislature repeats and reaffirms all findings in previous legislation passed relating to the events of September 11, 2001, that recognized in part that the terrorist attacks had a profound impact on air travel in the United States and that the subsequent events of the Iraq War and severe acute respiratory syndrome (SARS) further reduced air travel to Hawaii and other major airports in the United States.

The purpose of this Act is to provide further relief to previously qualified concessionaires who received relief following the events of September 11, 2001, but have not yet negotiated further relief with the State. While most concessions since the ending of the regular session of 2003 have negotiated relief with the State, some have not been able to complete negotiations due to the fact that these concessions may have been permanently damaged by the new federal security requirements imposed after September 11, 2001, and because the State may need added authority to provide necessary relief to those concessions.

Shortly following the events of September 11, 2001, the legislature, during its Third Special Session of 2001, provided short-term relief to Hawaii's airport concessions and various airlines. The 1egislature indicated it would consider extending such relief at its next session. The United States Congress subsequently provided relief to the airline industry but not to airport concessions.

In legislation passed during the regular sessions of 2002 and 2003, the legislature extended relief for airport concessionaires, recognizing the historically significant role airport concessions played in contributing over sixty per cent of airport revenues compared to about twenty-five per cent by the airlines. The legislature believed it was important to try and support qualified airport concessions that needed relief, since some income from concessions was better than no income, until the airport system could find tenants willing to pay more rent.

The legislature further recognized that while Hawaii's airport system had provided significant benefits and waivers to the airlines over the years (by some estimates in excess of $200,000,000), no similar benefits have been provided to concessionaires especially during their time of greatest need, i.e., the events of September 11th, subsequent events of the Iraq War, and SARS.

Two nationally recognized experts during the 2003 session testified that from its reported $575,000,000 in unrestricted surplus funds, the airport system could afford to provide relief to airport concessionaires. These experts also recognized that the relief being provided was consistent with and, in at least one case, far less than the relief provided by one major airport in the United States that allowed concessions to terminate their contracts without penalty. These experts pointed out that Hawaii's airport concessions are very unique in generating about sixty per cent of airport revenues when concessions at most other airports generate about twenty per cent of those revenues.

The legislature believes that the State as a landlord must set an example and be fair to all of its airport tenants. It should not seek or support favoring some tenants over others by providing relief opportunities and benefits to some airport tenants and not others who are in dire need of relief for survival and who historically have contributed over sixty per cent of all airport revenues. This fairness helps to correct Hawaii's negative image and seeks to promote Hawaii as a reasonable and fair state to do business.

In addition, the legislature finds that fifteen or more airport concessions did not have multi-year contracts but rather month-to-month contracts since their long-term contracts had expired more than one year prior to the events of September 11, 2001. Many of these concessions had been on month-to-month contracts for two or more years and contrary to state policy and law that require such contracts be for no longer than one year and put out to bid for multi-year contracts. These fifteen or more concessions have been allowed to escape the dire consequences of the events of September 11, 2001, the Iraq War, and SARS since their month-to-month contracts allow them to terminate their contracts on thirty-day notice without penalty if they could not afford or did not want to continue paying their full rents to the State.

By failing to follow public policy and state law, these fifteen or more concessions benefited from the actions of the State as its landlord. Due to the State's failure to follow public policy, it has allowed certain airport tenants to receive benefits that it has not been willing to extend to other tenants. As a landlord, for the State to ignore public policy and to favor such concessions in this way and not seek to provide fair relief to qualified concessions on multi-year contracts is not fair treatment to all airport tenants. Also, for the State to demand that those multi-year tenants who suffered operational losses due to the events of September 11, 2001, to pay full rent or risk being evicted, to forfeit their bond/deposit, and to be barred from doing business with the State for five years is not fair treatment of all airport tenants.

The legislature finds that as a landlord, the public expects the State to treat all of its airport tenants fairly and the State must seek to do so. If the State, by failing to follow public policy, has allowed fifteen or more tenants, if they so desire, to escape eviction by the State without penalties following the events of September 11, 2001, to be fair, the State must likewise afford qualified airport tenants on multi-year contracts a similar opportunity. The legislature supports fair treatment by the State of all airport tenants. The public expects public policy and state laws to be followed by the State in its dealing with all airport tenants.

In keeping with the foregoing, the legislature last session provided fair relief to qualified multi-year airport tenants seeking rent relief due to the events of September 11, 2001. However, the governor vetoed the bill in spite of the fact that her administration indicated that one or more concessions on multi-year contracts may be permanently damaged and that a bill may be necessary to provide added authority and flexibility for relief. Since vetoing the bill, the governor and her administration, to their credit, have managed to provide relief to most of the concessionaires who qualified for relief. However, one or more qualified concessions have not been provided relief by the State in spite of the many months that have passed since the last legislative session.

Concessions who have received additional relief after the regular session of 2003 or whose sales have increased significantly since September 11, 2001, will not qualify for relief under this Act. One such concession that received relief but did not qualify for relief under this Act is DFS Group Ltd. who testified and stated that if it negotiated relief with the State, it had no objection to the State being more generous to smaller business concessions needing relief.

The only concessions entitled to relief under this Act are concessions that previously qualified for relief due to the events of September 11, 2001, by suffering a reduction in gross receipts of fifteen per cent or more and who have continued to suffer a reduction of gross receipts of fifteen per cent or more. Thus, such concessions appear to be permanently damaged due to the events of September 11, 2001, due to new federal security measures, which in part now require a person to have a plane ticket before being allowed to shop or eat at airport concessions.

In summary, the purposes of this Act are to:

(1) Provide retroactive relief for previously qualified airport concessions still suffering from the terrorist attacks of September 11, 2001, who have not negotiated relief with the department of transportation and whose gross receipts are still reduced by fifteen per cent or more when compared to pre-September 11, 2001, gross receipts; and

(2) Help ensure that the department as a landlord treats all of its airport tenants fairly and does not, contrary to public policy, provide benefits to some tenants while not providing similar benefits to other tenants.

SECTION 2. Notwithstanding any law to the contrary, the governor may, in the event of an economic emergency, grant rent relief to airport concession lessees in amounts as determined by the governor, in the governor's sole discretion. As part of the authority granted to the governor hereunder, the governor may, or may permit the department of transportation to:

(1) Negotiate changes to the airport concession leases with the lessees and modify the airport concession leases to implement the grant of relief; and

(2) Waive any contract obligation owed to the state during the economic emergency period.

SECTION 3. If the governor implements the grant of rent relief in section 2, the governor shall waive and discharge the effects of section 171-13 as it applies to airport concession lessees receiving relief.

SECTION 4. This Act and its economic emergency period shall only apply to concessions that:

(1) Qualified for and received relief pursuant to Act 15, Third Special Session Laws of Hawaii 2001;

(2) Continue to suffer a reduction in gross receipts of more than fifteen per cent since September 11, 2001, and are in need of relief for the concession to economically survive for the duration of its lease or contract; and

(3) Have not had their leases or revocable permits withdrawn or modified since September 11, 2001.

SECTION 5. This Act shall take effect on July 1, 2010.