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HomeMy WebLinkAbout1989/10/12-Minutes-City CouncilCouncil met Members present Introduced a Resolution RECESSED CITY COUNCIL MEETING OCTOBER 12, 1989 On the 12th day of October, A.D., 1989, the City Council met in recessed session with the following members and officers present, to -wit: Mayor Bob Bolen; Mayor Pro tempore Garey W. Gilley; Council Members Louis J. Zapata, William N. Garrison, Kay Granger, Eugene McCray, Steve Murrin, Jr., and David Chappell; City Manager David Ivory; City Attorney Wade Adkins; City Secretary Ruth Howard; Council Member Virginia Nell Webber temporarily absent; with more than a quorum present, at which time the following business was transacted: Mayor Pro tempore Gilley introduced a resolution and made a motion that it be adopted. The motion was seconded by Council Member Zapata. The motion, carrying with it the adoption of said resolution, prevailed by the following vote: AYES: Mayor Bolen; Mayor Pro tempore Gilley; Council Members Zapata, Garrison, Granger, McCray, Murrin, and Chappell NOES: None ABSENT: Council Member Webber Minutes of City Council N-3 Page 180 Resolution NO. 1474 T' , ,, r'ct ThRr- cy. October 12, 1989 The resolution, as adopted, is as follows: RESOLUTION NO. 1474 WHEREAS, in September 1965, in response to a 1964 Civil Aeronautics Board order that the Cities of Fort Worth and Dallas join together to develop a single airport to alleviate air safety concerns at Dallas Love Field and duplication of facilities at Fort Worth's Greater Southwest International Airport, the two cities established a Dallas -Fort Worth Airport Board and identified a site for a new regional airport that today is the Dallas -Fort Worth International Airport; and, WHEREAS, to accomplish the goal of building an outstanding regional airport, the City of Fort Worth agreed to close permanently its Greater Southwest International Airport to remove air space conflicts with the new airport while at the same time allowing Dallas Love Field to remain open as a municipal airport to serve general aviation, air cargo and air maintenance interests; and, WHEREAS, both Fort Worth and Dallas agreed that the success of Dallas -Fort Worth International Airport depended on it becoming the sole commercial aviation facility to serve the two cities and the North Texas region and consequently, the two cities, through the Dallas -Fort Worth Airport Board, executed the Concurrent Agreement of 1968 in which the eight commercial carriers which served the region at the time agreed to relocate to the new regional airport and further agreed to a ban whereby they could not offer service from any existing or future airport in the two cities as long as Dallas -Fort Worth International Airport operated; and, WHEREAS, as a result of an unsuccessful effort in the federal court system by the Cities of Fort Worth and Dallas to prohibit a new airline company created after 1968 from providing commercial air service from Dallas Love Field, an erosion of the commercial air service operating philosophy mandated by the CAB in 1965, U.S. Congressman Jim Wright in 1979 introduced in Congress and won approval for what has come to be known as the "Wright Amendment"; and, WHEREAS, the Wright Amendment had the support of the entire region as a tool to limit adverse exposure to the development of Dallas -Fort Worth International Airport.by expressly prohibiting non-stop commercial air carrier service from Dallas Love Field except to destinations within Texas and contiguous states, thereby protecting the $1.4 billion investment which the citizens of Fort Worth and Dallas have in the airport; and, WHEREAS, Fort Worth has lived up to the letter of both the legal and moral agreements which the two cities entered into and complied with the Wright Amendment by expressly prohibiting non-stop commercial air service to destinations throughout the U.S. and the world from its current and future aviation facilities; and, WHEREAS, today, Dallas -Fort Worth International Airport is the second busiest commercial service airport in the U.S. serving in 1988 more than 44 million passengers who fly on one or more than 635,000 flights out of the airport which is serviced by more than 100 gates and is credited with being a prime factor in major corporate relocations or new industrial facilities coming to the North Texas area, including the relocation of American Airlines corporate headquarters from New York to Fort worth, construction in Fort Worth of nation's first currency printing facility outside Washington, D.C., relocation of the J.C. Penney headquarters to Plano, the construction of Supercollider in Ellis County, the Fujutisu Corp. facility in Richardson among others; and, WHEREAS, federal legislation has been introduced to repeal the Wright Amendment, thereby allowing any commercial air carrier to use Dallas Love Field to provide service to any U.S. point as well as international destinations which would be in direct competition with Dallas -Fort Worth International Airport; and, WHEREAS, the City of Dallas has passed a resolution calling for a modification of the Wright Amendment by prohibiting non-stop flights to and from Love Field to airports more than 650 miles from Dallas; and, WHEREAS, based on information provided to the City of Fort Worth to date,.repeal or modification of the Wright Amendment would have a severe adverse impact on the operations and economic viability of Dallas -Fort Worth International Airport and the Minutes of City Council N-3 Page 181 _�}12 Minutes of City Council N-3 Page 182 Resolution No. service which it provides to the citizens of Fort Worth and the 1474 cont. western half of the North Texas region. NOW THEREFORE, be it resolved that the Fort Worth City Council unanimously opposes the repeal or modification of the Wright Amendment because such action will undermine and violate both the legal and moral obligations entered into by the Cities of Fort Worth and Dallas in 1965 to build an airport which would serve commercial air needs of the entire region; and, BE IT FURTHER RESOLVED, that the Fort Worth City Council will dedicate its best efforts to assure that the interest of the entire region are served now and in the future by maintaining the integrity of Dallas -Fort Worth International Airport as the commercial air service center for Fort Worth, Dallas and North Texas; and, BE IT FURTHER RESOLVED, that the Fort Worth City Council will take any and all steps necessary to insure that the Wright Amendment is not repealed or modified in any manner. M&C C-11926 re There was presented Mayor and Council Communication No. C-11926 from the City Management agree- Manager, as follows: ment and ground lease agreement SUBJECT: MANAGEMENT AGREEMENT AND GROUND LEASE AGREEMENT WITH with Pinnacle Air PINNACLE AIR SERVICES, INC., FOR MANAGEMENT AND OPERATION Services, Inc. OF FORT WORTH ALLIANCE AIRPORT for Management and RECOMMENDATION: Operation of Fort Worth Alliance Airport It is recommended that the City Council: 1. Authorize the City Manager to execute the attached Management Agreement with Pinnacle Air Services, Inc., for the management and operation of Fort Worth Alliance Airport, subject to Council approval of the Ground Lease Agreement with Pinnacle Air Services, Inc., described in Recommendation 2 hereof; and 2. Authorize the City Manager to execute a Ground Lease with Pinnacle Air Services, Inc. (appended as Exhibit "D" to the attached Management Agreement), subject to City Council approval of the Management Agreement as described above. DISCUSSION: On August 8, 1989, the City Council, by M&C C-11802, authorized the City Manager to enter into contract negotiations with Pinnacle Air Services, Inc., for the management of Fort Worth Alliance Airport. The authorization to negotiate was based upon the review by a committee (consisting of members of the City staff and members of the Aviation Advisory Board) of bids submitted by the two bidders desiring to manage the Airport. The recommendation by the committee was that Pinnacle Air Services, Inc., was the bidder with the lowest cost proposal, and that the City should attempt to negotiate with Pinnacle a final contract acceptable to the City. Attached hereto is the proposed Management Agreement, together with the proposed Ground Lease, both of which have been subject to extensive negotiations since September 21, 1989. The City Manager recommends that the City Council adopt both the Management Agreement and the Ground Lease Agreement, with particular attention being given to: Management Agreement ° Paragraphs 11.3.1(a)(2)(ii), 11.3.2(c)(ii) and 11.3.3(b)(ii) of the Management Agreement, which require the City to pay to Pinnacle the market value ground rent for the City's use of City owned land occupied by the Capital Improvements after the occurrence of certain events. ° Paragraph 12.3 of the Management Agreement, which provides for the levying of additional taxes by the City to secure the City's obligation under the Agreement to repay the Management Capital Account should the City condemn the Ground Lease within 15 years after the effective date of the Management Agreement. Ground Lease Agreement ° Paragraph 1.3 of the Ground Lease Agreement, which provides that the primary term of the Ground Lease shall be 40 years, Minutes of City Council N-3 Page 182 M&C C-11926 cont. Mrs. Anne Cozart re M&C C-11926 Mr. Jim Atkins re M&C C-11926 Messrs. Bill Wood and Gary Stein- berger re M&C C-11926 Mr. Hays Lindsley re M&C C-11926 Mr. Timothy Stewar` Sr. re M&C C-11926 Mr. Bob Shryoc re M&C C-11926 Mr. J. Lyndell Kirkley re M&C C-11926 Mr. Reed Pigman, Jr. re M&C C-11926 Mr. Don Hansen re M&C C-11926 Mr. Henry L. New- man re M&C C-11926 a.. ^��;, , ,• ;;� :;:� Thursday, October 12, 1989 with the right by Pinnacle to extend the Primary Term for three successive periods of 20 years each. Each agreement should be conditioned upon City Council approval of the other. Mrs. Anne Cozart, Chairman of the Aviation Advisory Board, appeared before the City Council and expressed the concerns of the Aviation Advisory Board regarding the proposed contract with Pinnacle Air Services, Inc., for the management and operation of Fort Worth Alliance Airport and requested that the decision regarding the contract be delayed in order to allow the Aviation Advisory Board time to study the contract. Mr. Jim Atkins, a member of the Aviation Advisory Board, appeared before the City Council and expressed his concerns about the 100 -year term of the lease and the proposed development of the airport by Pinnacle Air Services, Inc., without City approval and Mr. Atkins was questioned by Council Member Chappell concerning his knowledge of the future source of payment for development costs at Alliance Airport should Pinnacle Air Services, Inc., decided to put additional improvements in place at Alliance Airport; by Council Member Garrison about Mr. Atkins knowledge of the value of the unexpired portion of the lease; and by Mayor Pro tempore Gilley regarding the quantity of acres subject to third -party leases at Alliance Airport. At this time, Council Member Webber assumed her place at the Council table. Council Member Granger requested that the City Council receive a briefing on the contract with Pinnacle Air Services, Inc., for management of Alliance Airport. Messrs. Bill Wood and Gary Steinberger appeared before the City Council regarding various aspects of the proposed contract with Pinnacle Air Services, Inc., for the management of Alliance Airport and their interpretations thereof. Mr. Hays Lindsley, representing Pinnacle Air Services, Inc., appeared before the City Council regarding capital expenditures and default provisions in the contract for management of Alliance Airport. Mr. Timothy Stewart, Sr., 6209 Vel Drive East, a member of the Aviation Advisory Board, appeared before the City Council and requested that the City Council delay the decision on the contract with Pinnacle Air Services, Inc., for management of Alliance Airport and expressed his concerns regarding the annual payment of $500,000.00 by the City to the airport manager and stating that, in his opinion, there are no benefits to the City of the Fort Worth tax payers in the contract. Mr. Bob Shryoc, 3808 Overton Park West, appeared before the City Council and expressed opposition to the $1.00 a year lease and stated that, in his opinion, previous rules on airport management are being disregarded and that the contract should be tabled. Mr. J. Lyndell Kirkley, 203 Fort Worth Club Building, representing Texas Jet, Inc., appeared before the City Council and expressed opposition to the proposed contract with Pinnacle Air Services, Inc., for the management of Alliance Airport and expressed his concerns regarding the competitive bid process, to the term of the contract, to the budget, to the default process, to the payment of estimated taxes, contract compliance with bid specifications, and the amount of land to be used, and stated that, in his opinion, the proposed contract with Pinnacle Air Services, Inc., discriminates against Fort Worth Meacham Airport and Spinks Airport. Mr. Reed Pigman, Jr., representing Texas Jet, Inc., appeared before the City Council and expressed opposition to the proposed contract with Pinnacle Air Services, Inc., for the management of Alliance Airport and expressed his concerns regarding the City's annual payment of $500,000.00; the return of ad valorem taxes; major expenditures; the City services to be provided to the airport; the airport crash, fire, and rescue provisions; default provisions; and provisions requiring the City to make all airport revenues available for use by the airport manager (6.1(d)); and stated that, in his opinion, the contract will destroy Fort Worth Meacham Airport and part of the Fort Worth economy, that a monopoly will be created and will restrict competition, and requested that the decision on the contract be delayed for two weeks. Mr. Don Hansen, Meacham Field, appeared before the City Council and expressed concerns regarding Pinnacle Air Services, Inc., and requested that Pinnacle Air Services, Inc., be required to submit a financial statement and that it be required to operate under the same terms and conditions imposed upon other leasees of aviation property. Mr. Henry L. Newman, representing the Aircraft Owners and Pilots Association, appeared before the City Council and advised the City Council that the Aircraft Owners and Pilots Association is concerned about the alleged lack of control over the contract, and the preparation by the airport manager of written specifications for, (and, where necessary, preparation of public bidding documents), and the negotiation, and submission for final approval by the City Council of all vendor contracts (4.3); and stated that, in his opinion, allowing Pinnacle Air Services, Inc., to prepare FAA documents is a conflict of interest. Minutes of City Council N-3 Page 183 Thursday October 12 1989 Mr. Will William- Mr. Will Williamson, 5424 Odom Avenue, appeared before the City Council and son re M&C C-11926 expressed opposition as a tax payer to the proposed contract with Pinnacle Air Services, Inc., for the management of Alliance Airport. Mr. Robert Decker Mr. Robert Decker, Jr., 3712 Parkcrest Court, appeared before the City re M&C, C-11926 Council and expressed his opposition to the buy-out provision and stated that, in his opinion, the City should have total control and approval of the budget, total control of leasing of the property at the airport, and that the buy-out provision should be redefined and the formula for the buy-out provisions stated, and expressed opposition to the contract without major changes being made in it. Mr. Jeff Leuschel re M&C C-11926 Mr. Jeff Leuschel, representing McCall, Parkhurst, and Horton, appeared before the City Council and advised the City Council that the key question for McCall, Parkhurst, and Horton is the nature of the ground lease and whether or not it, in and of itself, would cause the airport to not be an airport for federal income taxation purposes, particularly the bond section of the Internal Revenue Code. Mr. Dub Holloway Mr. Dub Holloway, representing First Southwest Company, appeared before the re M&C C-11926 City Council and advised the City Council that First Southwest Company is concerned about the duty of the City to appropriate funds, which, in its opinion, is a disclosure matter which will remain with the airport for some time in the future and which would constitute an obligation on the part of the City of Fort Worth and would have to be disclosed in future financial statements for the issuance of bonds and that First Southwest Company is uncomfortable with the way the contract is written; that the agreement creates a pledge of airport revenues which may conflict with the City's outstanding senior lien bonds and which may conflict with some of the City's obligations under the 1968 joint ordinance with DFW Airport; that First Southwest is not clear as to whether or not the duty on the City to appropriate funds to reimburse the airport manager for taxes assessed on the property covered by the agreement is an extension that goes beyond that which was originally proposed and requested clarification of this issue; and stated that its overriding concern is that the City must preserve its ownership and control of the airport because of the impact on standing commitments with American Airlines and outstanding certificates of obligation, and in order to preserve the ability of the City of Fort Worth to receive funds from the FAA for the remainder of the City's airports. At this time, Council Member Granger assumed her place at the Council table. Mayor Bolen expressed his concerns regarding the City's right of first refusal on tenants and not ending up with a unilateral right of default on one side and nothing on the other side. Mayor Pro tempore Gilley requested that Pinnacle Air Services, Inc., be required to provide annual audited financial statements, that "preferred return" (Item 40 of Exhibit A) be redefined to its original statement, and that the $300,000.00 referenced in Section 11.2 be changed to 20 percent of the total budget estimated by Pinnacle Air Services, Inc. Council Member Chappell expressed his concern that the City of Fort Worth maintain a continuing relationship with the Perots. Council Member Murrin expressed his concerns on the following issues: I. a covenant needs to be included in the contract that the City of Fort Worth will continue to conduct business with the Perot Group on this contract 2. that the City of Fort Worth have a separate right of first refusal to pick up the position of the Perot Group 3. that language in Section 12.9 of the contract regarding the renaming of the airport be removed 4. outside legal counsel to supplement City staff needs to be employed to concentrate exclusively on the contract for the management of Alliance Airport 5. the ownership of Pinnacle Air Services, Inc., should be disclosed in the contract 6. the manager of Alliance Airport should be required to maintain his primary office in Fort Worth 7. the negative effect on airport operation should Perot cease to be a part of the management group should be studied 8. a table of contents should be included in the contract 9. doesn't agree with a list of recitals and assumptions 10. question whether or not the manager should act as an agent of the City of Fort Worth Minutes of City Council N-3 Page 184 Thursday;,, October 12, 1989 Council Murrin's 11. any and all powers can be delegated in the contract and all statement re contracts into which the airport manager enters in which the M&C C-11926 City has an interest should be approved by the City of Fort Worth at the City's selective option 12. a corporate resolution stipulating the name of the official empowered to enter into the contract should be included in the contract 13. contract should include right of City to buy out Pinnacle Air Services at every five year interval and give them a return on their invested risk capital and not just for one time and then forever forfeit that option 14. remove from contract provision regarding forfeiture of one-half of potential revenues 15. the submission of the City of Fort Worth's potential cost under the CPI, average of last 10 years, and what effect it would have on the City's $500,000.00 annual payment should be stated 16. a comparison that parallels the amount of money Pinnacle Air Services, Inc., is committing and the amount of money the City of Fort Worth is committing should be submitted, not as a part of the contract but for review and consideration 17. disagree with including in the capital cost the additional 15% leeway with no control by the City; would rather see no more than 5% which would have to be agreed upon and reasonable agreement would not be withheld 18. a need for a mutual agreement regarding the ability of the manager to upgrade the airport for design compatibility but requiring the City to pay for the upgrade through the improvements being added to the capital costs 19. in Exhibit B, Paragraph 2, capital improvement variables which do not require the approval of the City should be no more than 5% without mutual agreement and which mutual agreement will not be withheld 20. term of office after first 30 -year period should be at a negotiated amount between the two parties under fair and equitable negotiations 21. contract should include some realistic obligations on the part of the manager regarding defaults 22. contract should provide for the marketing of the airport 23. contract should include objective of making Alliance Airport a world-class airport 24. contract should include specifics about intent of the parties and, should either party violate the spirit of the objectives of both parties, that there be a right to call a default and a cure period be provided 25. contract should include indemnification and hold harmless clause and, if one is not needed, a legal opinion so stating this fact 26. the current proposal for payment of taxes wherein the manager estimates the amount of taxes payable during the following year and then sends in the estimate to the City and the City on the first day of the fiscal year returns the full amount to the manager should be removed and a mutual agreement on the amount of estimated taxes for the following year should be determined 27. in Section 8.1, the power of the assignment by the manager of the contract to an affiliate without the consent of the City is not written with a full intent to disclose intent and said section should be revised 28. remove from contract provisions giving manager complete ability to mortgage all of the improvements at Alliance Airport 29. the ability of the manager to mortgage property towards the end of the agreement and to the subsequent responsibilities of the City should this occur Minutes of City Council N-3 Page 185 Council Member Murrin's statement re M&C C-11926 Council Member Zapata re M&C C- 11926 Adjourned 30. Section 4.5 should include provisions that require manager to provide monthly trial balance and monthly income and expense reports on a timely basis 31. CPI needs to have as cap of not more than 5% 32. conflict between one clause of the contract stipulating that $500,000.00 annual payment will never be waived and another clause stipulating that $500,000.00 annual payment is eliminated because profits "get up there" 33. the need to add the words "reasonable and necessary" to Paragraph 6.1 (c) on Page 8 if they are over $20,000.00 34. a clause that waives manager's taxes on private property should be removed 35. the definition of "all airport revenues" should be redefined 36. the necessity that the contract be signed by the City Attorney as to form and legality City Attorney Adkins advised Council Member Murrin that the Charter of the City of Fort Worth requires that all contracts be signed by the City Attorney as to form and legality. Council Member Zapata expressed his concerns on the following issues: 1. the ownership of the airspace 2. a cap on the CPI 3. a better definition of major improvements 4. the equity of reimbursement of taxes 5. the establishment of the ownership of Pinnacle Air Services, Inc. 6. the setting of an amount for default 7. the role of the new airport director in the management of the airport 8. the responsibilities of the fire rescue squad 9. the difference in terms of the leases of the management contract and the ground lease which should be parallel 10. a dollar value should be attached Mayor Bolen requested that the City Council members submit their written concerns to the City Attorney or the City Manager. Council Member Granger requested that the City Council be kept informed of the progress of negotiations. City Attorney Adkins advised the City Council of his staff's efforts in the negotiation process with Pinnacle Air Services, Inc. City Manager Ivory requested clarification from the City Council regarding future negotiations with Pinnacle Air Services, Inc., and the amount of outside legal counsel involvement and it was the consensus of the City Council that the City Manager or his designee would continue to negotiate the contract with Pinnacle Air Services, Inc., and that the City of Fort Worth's bond counsel and financial advisory be called upon to provide professional advice, if required. Mayor Pro tempore Gilley made a motion, seconded by Council Member Webber, that consideration of Mayor and Council Communication No. C-11926 be continued until --- the next regularly scheduled City Council meeting. When the motion was put to a vote by the Mayor, it prevailed unanimously. There being no further business, the -CITY SECRETARY Minutes of City Council N-3 Page 186