Template revised September 22, 2016. COMMISSION AGENDA MEMORANDUM Item No. CTION ITEM April 11, 2017 Amount of this request: ,448.66 880,448.66 ACTION REQUESTED EXECUTIVE SUMMARY COMMISSION AGENDA Action Item No. _ Page of ��Template revised September 22, 2016. JUSTIFICATION This project supports the Century Agenda objective of meeting air transportation needs at Seattle Tacoma International Airport by providing cost effective expansion of domestic and international passenger capacity. The p oject does so by supporting Alaska ’s operational expansion and ticketing capacity. This project furthers the Port’s goals of renewal and replacement of the Port owned baggage system , through the replacement of a baggage belt that was at the end of its useful life Alaska made capital impr ovements to the Zone 7 ticketing area that conformed to Port standards and created new Port owned baggage system assets. Reimbursement of the requested improvements in alignment with the Port’s AV Tenant Reimbursement Guidelines and Policy Although the total cost of the Alaska tenant improvement project was $2,411,085.98 the Port agreed to reimburse $880,448.66 for Port standard assets only. Tenant Improvement Scope of Work The scope of work included: Install 30 kiosks and 24 proprietary ticket counter positions not reimbursed by the Port) Install new mainline baggage belt and controls behind the ticket counters which connect Zone 7 to the C1 bag gage system (reimbursed by the Port) Install 24 proprietary baggage scale “finger piers, which al low the passenger to directly place the bag into the baggage system without the agent’s assistance ( not reimbursed by the Port) ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Port Denies Alaska Reimbursement of Baggage System Improvements Cost plications: No tenant improvement funds applied Pros (1) Port benefits from updated baggage conveyor support systems without committing any capital towards the project. (2) The Port maintains budget for dedicated tenant reimbursement funds to apply to other tenant improvement projects. Cons (1) This would be inconsistent with the Port’s treatment of other airlines where the Port paid for similar baggage system project scope in associated tenant projects. (2) It may create unclear ownership and warrant of systems the Port typically owns and maintains. This is not the recommended alternative COMMISSION AGENDA Action Item No. _ Page of ��Template revised September 22, 2016. Alternative 2 Port Approves Alaska Reimbursement of Baggage System Improvements Cost Implications: $880,448.66 Pros (1) The Port ’s reimbursement would be consistent in its application of tenant reimbursement of baggage system assets as part of other tenant projects. (2) Continues clear and consistent ownership , warrant and maintenance lines as sociated with baggage system assets. (3) Would follow through on the Port ’s commitment to reimburse Alaska based on their ability to provide the required documentation to substantiate a tenant reimbursement per Port Tenant Reimbursement Guidelines and Policy Cons (1) The budget of $880,448.66 could not be used for other future tenant improvement reimbursements. This is the recommended alternative. FINANCIAL IMPLICATIONS Cost Estimate /Authorization Summary Capital Expense Total COST ESTIMATE Original estimate 880,448.66 880,448.66 AUTHORIZATION Previous authorizations Current request for authorization 880,448.66 880,448.66 Total authorizations, including this request 880,448.66 880,448.66 Remaining amount to be authorized Annual Budget Status and Source of Funds Funds for this tenant reimbursement are included in the 2017 2021 capital budget and plan of finance within the tenant reimbursement CIP C800154 . The funding source will be the Airport Development Fund Financial Analysis and Summary Project cost for analysis $880,449 Business Unit (BU) Baggage System Effect on business performance (NOI after depreciation) NOI after depreciation will decrease IRR/NPV (if relevant) CPE Impact Less than $.01 in 2018 COMMISSION AGENDA Action Item No. _ Page of ��Template revised September 22, 2016. Future Revenues and Expenses (Total cost of ownership) Incremental operating and maintenance costs associated with this project are expected to be minimal. The expected life of the asset is uncertain given the potential nee d to reconfigure the north end of the ticketing area. The estimated CPE impact above is calculated based on a ten year life. ATTACHMENTS TO THIS REQUEST Exhibit A Tenant Reimbursement Agreement (“TRA”) Exhibit B PREVIOUS COMMISSION ACTIONS OR BRIEFINGS None