Report Title:

Airports; Concessionaires

Description:

Provides relief beyond 4/30/02, for airport concessions.

HOUSE OF REPRESENTATIVES

H.B. NO.

56

TWENTY-SECOND LEGISLATURE, 2003

 

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 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 ended. 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 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. However, upon termination, the concessionaire shall be allowed to recover its performance bond, security deposit, or similar instrument without penalty and will not be barred from doing business with the State for five years as provided under present law.

In case of 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 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) Allow airport concessions still suffering from those events, but whose concession agreements are terminated due to a new concession operator, to recover their bonds and deposits and not be barred from doing business with the State for five years as provided by present law;

(3) Require that concessions suffering any losses and damages due to termination have no right to make any claim for damages or losses against the State; and

(4) 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.

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] that 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;

(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; and

(11) For operation of concession or concession spaces at the convention center under chapter 201B.

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) Construction relief. 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] the 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] that will allow the concessionaire to recoup the amount lost by [such] the 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) Economic relief. 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 and 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 that will allow the concessionaire to recoup the amount lost by the 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 concessionaire if the application thereto may impair any contractual obligations with bond holders of the State or with any other parties.

(c) Other relief. For public-airport concessionaires requesting economic relief as provided for in subsection (b), if the State does not provide relief that will allow the concessionaire to recoup the amount lost due to the reduction in volume of business in accordance with subsection (b), the State shall provide relief to the concessionaire that will allow it to break even in its concession operations until such time that the concessionaire'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) Termination. If a concessionaire is receiving relief from the State under subsection (c), as a condition for the 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 that shall not exceed more than 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 in keeping with 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 right of termination by the State under this subsection, 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.

(e) Security or collateral. Upon termination in accordance with subsection (d), the State shall return to the concessionaire the entire and full amounts of all deposits, collateral, bonds, or similar instruments securing the concessionaire's performance except for such amounts as may be owed to the State prior to the commencement of the period of relief."

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 that 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. 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 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval; provided that sections 1, 2, 3, 4, and 6 shall apply retroactive to September 11, 2001.

INTRODUCED BY:

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