6b
PORT OF SEATTLE MEMORANDUM COMMISSION AGENDA Item No. 6b ACTION ITEM Date of Meeting May 17, 2016 DATE: May 11, 2016 TO: Ted Fick, Chief Executive Officer FROM: Mike Tasker, Senior Manager, Aviation Facilities & Infrastructure SUBJECT: Additional Space for Outbound Baggage within the International Arrivals Facility (CIP #C800836) Amount of This Request: $18,500,000 Source of Funds: Future Revenue Bonds Est. Total Project Cost: $18,500,000 Est. State and Local Taxes: $1,600,000 ACTION REQUESTED Request Commission authorization for the Chief Executive Officer to (1) approve the design and construction of the Additional Space for Outbound Baggage Project in an amount not to exceed $18,500,000 and (2) approve design and construction of the project scope to be completed via a change order to a contract executed for an existing project; the International Arrivals Facility (IAF) design/build contract. The total estimated cost of this project is $18,500,000. SYNOPSIS A major limitation of the baggage systems at Seattle-Tacoma International Airport (Airport) is make-up capacity. The required space necessary for efficient make-up operations is not available within the existing footprint. Two current projects, Baggage Optimization and NorthSTAR, will create additional baggage make-up space; however, system capacity will still not meet anticipated requirements in the near future. This project is the opportunity to add additional space to the IAF at the ramp level that can be used to reduce outbound baggage constraints. Adding this scope to the IAF program is the most cost effective and timely option to increase baggage make-up capacity. In order to seize this opportunity, this scope of work must be incorporated into the IAF program by June 30, 2016, when the design/build contractor procured for the IAF will start procurement of structural steel and foundations which establish the shape and scale of the IAF building. Executing this project will add the scope necessary to construct and reserve additional space for outbound baggage, but it does not include design or installation of any baggage handling equipment. That scope will be detailed in coordination with evolving baggage handling operations and the Baggage Optimization program. Template revised May 30, 2013. COMMISSION AGENDA Ted Fick, Chief Executive Officer May 11, 2016 Page 2 of 6 This request also authorizes the design and construction of the project by the design/build contractor procured for the IAF project. The rationale for choosing this delivery method is simply pragmatic: The purpose of this project is to capitalize on the opportunity presented by the existing South Ground Transportation lot development. Th at development is being performed by the IAF design/build contractor. BACKGROUND The outbound baggage system at the Airport is composed of four parts. 1. Input, where the bags are inserted into the system (e.g., ticket counters) 2. Screening, where the bags are scanned 3. Sortation, where the bag gets directed to the right airline 4. Make-up, where the bags are transferred to carts, going to the airplane The outbound baggage system's operational capacity can be constrained by any of these four. The Baggage Optimization project is currently designed for 45 Million Annual Passengers (MAP), with the ability to expand operations beyond that number in the future. Screening and sortation for the baggage systems can be handled inside the existing footprint of the facilities yet make-up devices will be constrained as there is not enough floor space in the existing facilities to accommodate them. To accommodate baggage operations beyond 45 MAP additional useable building footprint will have to be created in which to place make-up devices, and associated conveyor systems. PROJECT JUSTIFICATION AND DETAILS Growth in airline traffic at the Airport has exceeded planning projections putting pressure on all aspects of airport operations gating aircraft, ticketing passengers, baggage screening and handling. A major limitation of the Airport's systems today, and in the future, is make-up capacity. Baggage make-up capacity is defined by the number of cart positions that can be staged to transfer bags from the make-up device to carts that go to airplanes. As the number of passengers and flights increase, the number of cart positions required to transfer the bags increases as well. The required space necessary for efficient make-up operations is not available within the existing footprint. Two current projects, Baggage Optimization and NorthSTAR, will create additional baggage make-up space; however, system capacity will still not meet anticipated requirements in the near future. Revised March 28, 2016 pjw COMMISSION AGENDA Ted Fick, Chief Executive Officer May 11, 2016 Page 3 of 6 Make-up position synopsis: (assumes carts parked with hitch in the raised or "tongue up" position for maximized count) Cart Staging MAP Shortfall Timeline (Carts) (Calculated Positions Capacity) Available (Today) 322 38.6 Required (Today) 370 48 42.3 Max Cap in Terminal 431 49.8 Required (Future) 473 42 54.0 Proposed 481 54.9 Maximum capacity in the terminal is after Baggage Optimization, NorthSTAR, and an additional baggage make-up device in South Satellite. Make-up capacity shortfalls are currently being addressed by operationally inefficient workarounds, such as keeping transfers and bags for later flights out of the system. IAF is the only programmed new facility footprint that has the potential to be useable as operational space for baggage make-up, as it connects to the ramp. It is anticipated that the IAF space could provide at least an additional 48 cart positions. Project Objectives This project provides the opportunity to: Create floor space in the IAF that can be used for operational needs, increasing operational flexibility within Airport's limited footprint Realize additional floor space that is operationally contiguous and balance the disparity of cart positions on the south side of the airport Capture additional floor space without significant impact to the IAF schedule Reduce existing facilities constraint ahead of SAMP recommendations being implemented Scope of Work This project directs a change to the included scope of a current, in-progress project, the IAF, in order to reserve an area of approximately 40,000 square feet for future outbound baggage handling expansion use. That space is made available by directing the IAF to consolidate and relocate programmed US Customs and Border Protection (CBP) support and office space and transfer baggage re-check screening from the ground/ramp by adding an additional floor and a raised equipment platform. Revised March 28, 2016 pjw COMMISSION AGENDA Ted Fick, Chief Executive Officer May 11, 2016 Page 4 of 6 In the short-term, approximately 35,000 square feet will be made available for new baggage make-up at the completion of the IAF, currently scheduled for the third quarter of 2019. In the long-term, an additional approximately 5,000 square feet will be available to add to the initial 35,000 square feet of outbound baggage make-up space when the in-progress Baggage Optimization project completes its scheduled tie-in of the IAF re-check baggage to the central inline system, currently scheduled for the third quarter 2023. Schedule In order to seize the opportunity presented here without delaying the in-progress IAF project, this project must be incorporated into the IAF design prior to June 30, 2016, when procurement of the foundations and structural steel are scheduled to begin. FINANCIAL IMPLICATIONS Budget/Authorization Summary Capital Expense Total Project Original Budget $18,500,000 $0 $18,500,000 Previous Authorizations $0 $0 $0 Current request for authorization $18,500,000 $0 $18,500,000 Total Authorizations, including this request $18,500,000 $0 $18,500,000 Remaining budget to be authorized $0 $0 $0 Total Estimated Project Cost $18,500,000 $0 $18,500,000 Budget Status and Source of Funds This project is not included in the 2016-20 capital budget and plan of finance. In the interest of expediting the project, the Port is electing to utilize the Discretionary Projects budget as defined by Article 6.4 of the Signatory Lease and Operating Agreement (SLOA III). Under this provision, the Port may categorize as exempt up to $30 million on new projects that would otherwise require a MII vote. During the term of SLOA III the Port has not previously used any of the Discretionary Projects budget. The funding source will be future revenue bonds. The cost estimate for this project is $18.5 million and budget will be transferred from the Aeronautical Allowance C800404 resulting in no net change to the Airport capital budget. Revised March 28, 2016 pjw COMMISSION AGENDA Ted Fick, Chief Executive Officer May 11, 2016 Page 5 of 6 Financial Analysis and Summary CIP Category Renewal and Enhancement Project Type Renewal and Replacement Risk adjusted discount rate N/A Key risk factors N/A Project cost for analysis $18,500,000 Business Unit (BU) Terminal Effect on business performance NOI after depreciation will increase IRR/NPV N/A CPE Impact CPE $.05 in 2024 Lifecycle Cost and Savings This project adds additional square footage to the ground/ramp area by relocating other functions to a mezzanine. The floor space created in this project will be part of the IAF building and will not appreciably change the life cycle cost for that facility. STRATEGIES AND OBJECTIVES This project addresses the Port's Century Agenda strategic objective to advance this region as a leading tourism destination and business gateway by making Seattle-Tacoma International Airport the West Coast "Gateway of Choice" for international travel. ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Accept status quo - continue labor intensive and inefficient methods to transfer bags, for example, tail-to-tail (sorting bags on the ramp at the arriving aircraft and shuttling them to the departing aircraft). Cost Implications: Manpower intensive and lost/misconnected bags. Airline costs not quantified. Pros: (1) Saves $18.5M in current project costs (2) Provides opportunity for the SAMP to consider and prescribe solution Cons: (1) Strains the Airport's ability to sustain international service in a manner consistent with the Port's Century Agenda (2) Future operational requirements for baggage make-up go unmet and will constrain Minimum Connect Time (MCT) (3) Loss of potential lease revenue for use of subject space This is not the recommended alternative. Alternative 2 - Add a pre-engineered building on the ramp to create additional operational footprint. Revised March 28, 2016 pjw COMMISSION AGENDA Ted Fick, Chief Executive Officer May 11, 2016 Page 6 of 6 Cost Implications: $24M Pros: (1) Adds additional baggage make-up footprint to meet demand Cons: (1) Impacts/reduces number of operable gates (2) Constrains flexibility and volume of aircraft operations This is not the recommended alternative Alternative 3 Leverage IAF design and capacity to create additional operational footprint Cost Implications: $18.5M Pros: (1) Adds additional baggage make-up footprint to meet demand (2) Creates additional leasable space (3) Least cost new footprint option (4) No impact to gates or aircraft operations Cons: (1) Requires rapid decision process to take advantage of opportunity (2) Requires the expenditure of $18.5M that could be used for other purposes This is the recommended alternative. ATTACHMENTS TO THIS REQUEST Computer slide presentation PREVIOUS COMMISSION ACTIONS OR BRIEFINGS April 26, 2016 IAF 1Q2016 Update Revised March 28, 2016 pjw
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