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HomeMy WebLinkAboutStaff Report 1931City of Palo Alto (ID # 1931) City Council Informational Report Report Type: Informational Report Meeting Date: 8/1/2011 August 01, 2011 Page 1 of 4 (ID # 1931) Title: Palo Alto Airport Informational Update Subject: Acceptance of Palo Alto Airport Informational Update From:City Manager Lead Department: City Manager Recommendation Staff recommends that the City Council accept the Palo Alto Airport Informational Update Report. Executive Summary The City Council last received an update on the Palo Alto Airport (PAO) at its meeting held December 6, 2010. At that meeting, the City Council was provided with a report completed by R.A. Wiedemann & Associates, Inc. R.A. Wiedemann identified various business plan options the City could consider for the eventual transfer of the PAO from Santa Clara County (County) to the City. This brief report provides an informational update on activities taken since the City Council meeting held in December 2010. A more extensive report will be provided in the fall. Background The City Council directed staff to move forward with discussions with the County to take over the PAO operations prior to the current ground lease termination in July 2017. In December 2010, Staff identified that they needed to analyze and understand the full policy and fiscal impacts of the various business alternatives identified. The City Council may recall the three options included: 1.The City operate the PAO and manage all PAO operations directly using City staff; or 2.The City manage a fixed base operator(s) (FBO) who would operate the PAO; or 3.The City contracts the PAO operations out to a third-party with expertise in airport operations. The City Council was provided with information showing that the PAO could produce a positive income stream for the City under certain assumptions. The City Council appropriated funds for staff to move forward with: August 01, 2011 Page 2 of 4 (ID # 1931) 1.A Phase 2 Hazardous Materials Analysis; 2.Legal work associated with this matter; and 3.Hiring a firm, with expertise in airport operations, to assist the City in evaluating which management option, listed above, the City should move forward with to provide expert guidance on the key issues the City should consider in the transition of airport control from the County to the City. Discussion Due to unanticipated staff vacancies and retirements staff is approximately six months behind the initial schedule established in 2010. Some of the vacancies have been filled and staff anticipates a potential takeover date from the County in 2013. Staff is approximately six months behind schedule with the subsequent timeline. However, staff believes the prior schedule identified was overly aggressive, optimistic, and not practical given the project complexity and scope. There are many reasons for the current scheduling status. No one could have predicted the number of unanticipated key staff vacancies, retirements, and competing priorities Based on current information, staff believes it is more likely the City can take over airport operations in January 2013, which is eighteen (18) months away. This is still considerably earlier than the 2017 termination date of the existing airport lease between the County and the City. Activities undertaken since the last report include: 1.A Phase 2 Hazardous Materials Analysis. The initial work has been completed by Northgate Environmental Management Inc., and a draft report on the subsurface sampling has been submitted to the Public Works Department. The draft report on lead paint and asbestos containing materials (ACM) for buildings on the site has not yet been received. Recently, the Public Works Department requested that Northgate Environmental provide the scope,cost, timelines, and related items so they could perform additional sub-surface sampling for areas identified for additional work from the Phase 2 Analysis. Three different areas of the site were recommended for further investigation. These are the fuel facilities, the airplane wash rack, and an area that once contained underground storage tanks. The estimated cost of the additional investigation work is $120,000. 2.Legal expertise retained for this matter. The City Attorney’s Office has retained two law firms to assist the City. The law firm of Morrison & Forester has been hired to assist the City Attorney’s Office review and analyze land title issues, arising in connection with the State Land Commission’s (SLC) jurisdiction, over the land on which the PAO is located, and the application of the public trust doctrine to the City’s subsequent exercise of ownership and control of the PAO. The law firm of Kirsch Kaplan & Rockwell LLP has August 01, 2011 Page 3 of 4 (ID # 1931) been retained to assist the City Attorney’s Office on general airport related matters. 3.Hiring a firm with expertise in airport operations. This firm would assist the City in evaluating which management options, listed above, the City should move forward with and guidance on the key management issues in transitioning airport control from the County to the City. Following an informal bidding process in which three parties were contacted, Staff has determined that Ms. Klaasje Nairne, Certified Airport Executive (CAE) and Certified Member of American Association of Airport Executives (C.M.), is highly qualified to provide assistance to staff. Ms. Nairne previously performed general management, operations, and fiscal management for the San Luis Obispo and Oceano County airports in San Luis Obispo County. Staff is processing a professional services contract with CommuniQuest, Inc., with which Ms. Nairne is associated, to provide airport advisory services to the City. Staff recently signed a Santa Clara County Airport Authority Federal Aviation Administration (FAA) grant application for the County to secure funding for engineering work associated with the repair and rehabilitation of the PAO runway and taxiways. If all goes well, the County plans to submit a funding application in 2012 to pay for the actual improvements made. Staff has recently reached out to the larger of the two fixed-based operators (FBO)’s at the PAO to explore their interest in continuing as an FBO. Staff has determined that the City must retain funds generated at the PAO within the Airport Enterprise Fund. However, the City can be reimbursed for General Fund expenditures incurred for PAO purposes under a six-year reimbursement schedule. The City’s Airport Enterprise Fund and the General Fund can enter into a Memorandum of Understanding whereby the Airport Enterprise Fund may reimburse the General Fund and the Utilities Enterprise Fund for resources (e.g., administrative support, legal services, police and fire services, storm drain fund, utilities services) that the General Fund generally provides to all City enterprise funds. However, by FAA directive, the payment of rent to the General Fund is not a permissible expenditure. Attachment A contains the original schedule and a new revised schedule for the work to be done based on current available information. Next steps Staff anticipates returning to the City Council with a more detailed update in the fall. This update will include preliminary analysis and recommendations from the management consultant retained by the City to evaluate the management and financial alternatives identified in the R.A. Wiedemann report. In addition, Staff hopes to accumulate sufficient data on the current status of any environmental contamination at the PAO, and report on the quality of title to the PAO property. In the future, the City will need to formalize its long-term plans for the PAO. This action may require extensive California Environmental Quality Act (CEQA) review. August 01, 2011 Page 4 of 4 (ID # 1931) The City is embarking on a long road to taking full charge of the PAO upon the early termination of the ground lease. This will require careful review, planning, drafting and execution of policies, rules and procedures related to the PAO. Attachments: ·Attachment A: August 1, 2011, Airport Informational Report (DOC) Prepared By:Danille Rice, Department Head:James Keene, City Manager City Manager Approval: James Keene, City Manager ATTACHMENT A 2012 DELIVERABLES (12/2010)2012 REVISED SCHEDULE (7/2011) March Complete hiring of airport staff to run airport operations July City assumes airport operations based on successful negotiations Summer/Fall Complete hiring of airport staff to run airport operations 2013 REVISED SCHEDULE Winter/Spring City assumes airport operations based on successful negotiations *Note: If a third-party management model is selected, the FAA will regard this as a semi-privatization effort. Based on recent actions,at other airports that considered this model,the FAA took considerable time on the review process. In short, this model could add at least two additional years to the FAA review of the airport transfer. 2011 DELIVERABLES TIMELINE (12/2010)2011 REVISED SCHEDULE (7/2011) January Hire professional services firm with airport expertise February Establish Airport Advisory Commission & identify outside legal expertise March Begin discussions with the County and current FBO’s re: City control April Phase 2 Environmental report completed July Phase 2 Environmental report completed August Present to Council recommended airport operation option Hire professional services firm with airport expertise September Issue (RFP) if FBO or third party management option selected Present to Council recommended airport operation option September/October October See aboe December Complete negotiations with the County and FBO’s and date for City control Underway Begin discussions with the County and current FBO’s re: City control, completion to be determined To Be Determined Establish Airport Advisory Commission & identify outside legal expertise Issue (RFP) if FBO or third party management option selected (*) Complete negotiations with the County and FBO’s and date for City control