PORT'OF SEATTLE
MEMORANDUM
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gQMMrssmN AGENDA           Item No.     5b
Date of Meeting      August 9, 2011

DATE:   July 28, 2011 '

TO:     Tay Yoshitani, Chief Executive Ofcer
#75'
FROM:   James R. Schone, Director, Aviation Business Development
Deanna Zachrisscn, Manager, Concessions Business
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SUBJECT:  Lease and Concession Agreement with US. Bank Corporation for the
'                    Management and Operation of an On-site Banking Facility and Automated Teller
Machine Concession.

ACTION REQUESTED:

Request for authorization for the Chief Executive Ofcer to execute a Lease and Concession
Agreement (Exhibit A) with US. Bank Corporation for the Management and Operation of an On~
' site Banking Facility (Bank) and Automated Teller Machine (ATM) Concession
at Seattle-
Tacoma International Airp01t (Airp01t) for a term of seven (7) years with one one"year option at
the Port's sole discretion. The total minimum annual revenue to the Port, including rent for the
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bank space, is $673,350.

SYNOPSIS:
.

In April 2011, Airport Concessions staff issued a Request for Proposals (RFP) for a ill~se1vice
bank, as well as approximately 22 ATMs throughout the Airport and at the new Rental Car
Facility. This request yielded responses from three large commercial banks. One proposer was
not interested in building or operating the Bank and, therefore, Was deemed non-responsive. The
remaining two proposals were evaluated based on predetermined scoring criteria which placed
weight on experience of banking operations in an airp01t or other high trafc environments, the
nancial offer to the Port, and customer service provided to both the tenant community and the
traveling public. Based on this evaluation, staffrecommends award to US. Bank Corporation
under the terms proposed as part ofthe Request for Proposals process. US. Bank Will hire
approximately 10 employees to operate the bank and service the ATMs.

BACKGROUND:

The Airport is often characterized as similar to a small city, and as with any community, the easy
availability of quality banking services is a basic necessity. Particularly for the tenant
businesses, services such as Coin and bill change and a merchant depository for tenant busineSs
deposits greatly enhance the ability to do business at the Airport. For many years, tenant

COMMISSION AGENDA
T. Yoshitani, Chief Executive Ofcer
July 28, 201 1
Page 2 of 4


business owners have shared their desire to have a bank branch cnsite at the Airport, and the
Concessions staff is now pleased to be able to make this service available. US. Bank
Corporation will pay the Port a Minimum Annual Guarantee of $639,000 for the duration of the
contract plus rent for space, totaling a minimum of $673,350.

The banking industry is comprised of very large companies in erce competition with each other
for market share. Therefore, Airport Concessions staff deemed a competitive RFP to be the tool
most likely to generate the best nancial terms and customer service offering for the Airport. "
Proposers were required to propose for operation ofboth the Bank and ATM service. The
Airport received proposals from three large commercial banks. Several other banks and one
large local credit union expressed interest in submitting a proposal but ultimately chose not to do
so. This opportunity was not attractive to small business because ofthe upfront investment cost,
Two proposals moved. forward for nal evaluation, while one was deemed non-responsive due to
a lack of a proposal for the Bank. A panel consisting of Airport staff representing Aviation
Business Development & Analysis, Concessions, and Operations reviewed and scored proposals.
US. Bank Corporation's proposal was deemed to best suit the needs of the Airport and its
customers. -

The Airport currently has 20 ATM machines in every part of the Airport, and a merchant
depository kiosk on the Mezzanine level in the Main Terminal. The current contract holder is
also US. Bank, which was selected in a competitive process in 2004. The ATM business is
culrently in a state of incremental decline at airports around the country as well as at the Airport.
The industry belief is that usage is in decline due to the increased use of debit cards instead of
cash. Nonetheless, ATM operations remain a good business opportunity and an important part of
the Airport concessions program.

This Agreement will add a fullservice bank to the concessions program. The Bank will offer all
of the services customers would expect in a typical bank, including a merchant depository. In
addition, US. Bank has committed to providing non-customer services such as check cashing
and change for nominal fees or free of charge. The Bank will vastly improve the level of
banking service at the Airport for US. Bank customers and noncustomers; however, it is not
anticipated to be a particularly protable operation for US. Bank. Therefore, rather than
employing a percentage rent based on gross sales (which would be typical in our concession
program), a square footage rent charge has been set at the rental rate for concessions support
space of $25 a square foot ($34,350) annually for the bank space. The 1,374squarefoot bank
location will be located in the very center of the presecurity main terminal between Checkpoint
3 and Starbucks Coffee (see Exhibit B). US. Bank is responsible for the tenant build-out of the
space which is estimated'to cost a minimum of $350 per square foot or approximately $500,000.
The lease term of seven (7) years was determined to be necessary for the amortization ofthe
initial buildout investment.

COMMISSION AGENDA
T. Yoshitani, Chief Executive Ofcer
July 28, 2011
Page 3 of 4


US. Bank has agreed to pay the Port a minimum annual guarantee (MAG) for both operations
totaling $639,000. This MAG will be in effect for the duration ofthe contract. Additional
revenue to the Port beyond theMAG may be generated by a fee to the Port of $1 .75 for every
ATM transaction. The fee to the customer by US. Bank is $2.50. A June 2011 survey ofUS.
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airports by the Airports Council International-North America (ACLNA) conrmed that $2.50 is
the average fee at an Airport ATM.

SCOPE OF AGREEMENT:
The draft Agreement accompanies this request for authorization. If approved, Airport staff will
proceed to execute the Agreement.

FINANCIAL 1MPL1CAT10Ns:

Under the currentpAgreement with US. Bank Corporation for the operation ofthe Airport ATM
service, the Port receives a MAG of $579,000. Despite declining usage of the ATM service,
Airport staff believes that the requirements of this RFP were structured to generate greater
competition between banks than in 2004. In fact, the previous REP only attracted one proposer,
U.S. Bank. As a result, the Port will command a higher MAG in this Agreement. Total
minimum annual revenue to the Port (including square footage rent for the bank space) is
$673,350.
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ECONOMIC IMPACTS:

The addition of a bank at the Airport is anticipated to generate new employment opporumities
for bank management and staffpositions and make it easier for the Airport's tenants and
passengers to conduct their banking business if they decide to use the new bank branch.

STRATEGIC OBJECTIVES:

This p1oposal supports the strategy 0f "Ensuring Airport and Seaport Vitality" by ensuring
viability for businesses at the Airport. .

ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS:

@  Alternative 1: Retain US. Bank ATM service under current monthto-month terms
The initial veyear lease term for the ATM operation ended 011 July 29, 2009. Since that
time, the Agreement has been in month~to~month holdover per the terms of the Agreement.
Continuing in holdover with their current MAG of $579,000 yields $48,250 a month for the
ATMS and space rent of $130 a month for the Merchant Depository Kiosk. This is not a
recommended alternative.
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COMMISSION AGENDA
T. Yoshitani, Chief Executive Ofcer
July 28, 201 l
Page 4 of 4

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0  Alternative 2: Execute Lease and Concession Agreement under proposed terms
The proposed Agreement allows the Anport to add a long~desired on-site Bank to serve
tenants and the traveling public. The proposed Agreement will also increase the MAG to
$639,000, or $53,250 a month for the ATMs and space rent of $2,862 for the Bank. This is
the recommended alternative.

OCMENTS ASSOIATE WIHT THIS QUES

Exhibit A: Draft Lease and Concession Agreement for US. Bank Corporation.
Exhibit B: Map ofBank Branch Location in the Main Terminal (pmsecurity).

PREVIOUS COMMISSION ACTION:

None.