Broward County Commission Regular Meeting
Director's Name: Mark Gale
Department: Aviation Division: Business
Information
Requested Action
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MOTION TO APPROVE Fifth Amendment to First Amended and Restated Duty Free Concession Agreement between Broward County, Florida and Broward Duty Free, LLC to extend the term for one year, followed by a month-to-month extension for up to an additional one year through December 31, 2026, and allow for the sale of duty paid merchandise at Broward County’s Fort Lauderdale-Hollywood International Airport; and authorize the Mayor and Clerk to execute same.
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Why Action is Necessary
In accordance with Chapter 26 of the Broward County Administrative Code, Concession Agreements require Broward County Board of County Commissioners (“Board”) approval.
What Action Accomplishes
Extends the term of the First Amended and Restated Duty Free Concession Agreement (“Agreement”) between Broward County, Florida (“County”) and Broward Duty Free, LLC (“Duty Free”) for one year, followed by a month-to-month extension for up to an additional one year through December 31, 2026, and allows the sale of duty paid merchandise at Broward County’s Fort Lauderdale-Hollywood International Airport (“FLL”) pursuant to the Agreement.
Goal Related Icon(s)
☐County Commission
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Previous Action Taken
None.
Summary Explanation/Background
THE AVIATION DEPARTMENT RECOMMENDS APPROVAL OF THE ABOVE MOTION.
This action extends the term of the Agreement for one year followed by a month-to-month extension for up to an additional one year through December 31, 2026, and permits the sale of duty paid merchandise under the Agreement.
On December 3, 2013 (Item No. 30), the Board approved the Agreement providing Duty Free with the non-exclusive right to operate a duty free concession at FLL. The Agreement commenced on January 1, 2014, and is set to expire on December 31, 2024. The Agreement required a capital expenditure of no less than $4,550,000 and permitted only the sale of duty free merchandise at FLL to passengers traveling internationally.
On February 25, 2020 (Item No. 5), the Board approved the First Amendment to the Agreement reducing the percentage of privilege fees due to the County from Duty Free on the first $1,000,000 of annual gross revenue from 17% to 9.37% for a five-year period, providing relief to mitigate Duty Free’s increased costs resulting from the increase to the Living Wage Ordinance.
On September 29, 2020, the County Administrator, authorized by Board action on June 16, 2020 (Item No. 68), approved the Second Amendment to the Agreement to waive the monthly Minimum Annual Guarantee (“MAG”) portion of the privilege fee payments for the months of April 2020, May 2020, and June 2020, resulting in a total MAG waiver amount of $534,234. MAG relief was provided through the Coronavirus Aid, Relief, and Economic Security Act.
On September 29, 2021, the County Administrator, authorized by Board action on June 1, 2021 (Item No. 70), approved the Third Amendment to the Agreement providing for MAG relief in the amount of $2,136,936 for the County’s 2021 Fiscal Year. MAG relief was partially funded by the Coronavirus Response and Relief Supplemental Appropriation Act in the amount of $139,601 and the remaining was funded by other unrestricted FLL funds in the amount of $1,997,335.
On June 1, 2022, the Director of Aviation, authorized by Board action on January 25, 2022 (Item No. 64), approved the Fourth Amendment to the Agreement providing rent and MAG relief in the amount of $930,124. The relief was provided by a grant through the American Rescue Plan Act of 2021.
The Agreement currently allows Duty Free to sell duty free merchandise only to international ticketed passengers in all four terminals at FLL. Duty Free pays the County a privilege fee that is the greater of the MAG (currently $2,191,006) or the percentage fee of gross revenues, as established in the Agreement. The Agreement also requires Duty Free to invest a minimum capital expenditure for improvements of certain assigned areas, including $225,000 for improvements to locations in the terminals within one calendar year following the commencement date (“Phase 1”), and to build out five new locations following the completion of FLL’s Terminal Modernization Program in the amount of no less than $4,550,000 (“Phase 2”). Duty Free certified that it has spent $229,418 for Phase 1 and $4,553,199 for Phase 2 in capital expenditures for improvements at FLL.
On March 30, 2022, Duty Free submitted a letter to the County requesting a term extension, the ability to sell duty paid merchandise at FLL and additional relief. In the letter, Duty Free explained how the effects of the COVID-19 pandemic and schedules from the Terminal Modernization Program impacted their overall program and capital investments. Broward County Aviation Department (“BCAD”) staff evaluated the impacts of the construction schedules and the reduction of international travel due to the pandemic, and recommended proceeding with a four-year term extension pending Federal Aviation Administration (“FAA”) approval, and the ability to sell duty paid merchandise.
On May 1, 2024, the Office of Economic and Small Business Development (“OESBD”) approved a request from Duty Free to substitute its joint venture partner for purposes of the United States Department of Transportation’s Airport Concessions Disadvantaged Business Enterprise Program (“ACDBE”) with a new ACDBE firm, and proceeded to perform a commercially useful function (“CUF”) review to verify the new ACDBE firm’s role under the joint venture partnership. BCAD, in accordance with ACDBE regulations governing the ACDBE Program, submitted a request for the FAA’s approval to extend the lease term, which was the only one of its type at FLL, beyond a ten-year term. Upon completion of its review of the ACDBE’s role, OESBD concluded that Duty Free was not in compliance with the ACDBE program and required Duty Free to submit a corrective plan of action to bring it back into compliance. The FAA requested and reviewed supporting documentation related to the request to extend the term of the lease agreement as well as OESBD’s CUF. The FAA ultimately approved a one-year extension with a month-to-month extension thereafter not to exceed an additional year.
The proposed Fifth Amendment allows BCAD to extend the term of the current Agreement, allowing Duty Free to continue serving the passengers at FLL. It will also permit Duty Free to sell duty paid merchandise (excluding tobacco products and alcohol) to domestic passengers, generating additional revenue, and offer more shopping options to passengers at FLL.
The proposed Fifth Amendment has been reviewed and approved as to form by the Office of the County Attorney.
Source of Additional Information
Mark E. Gale, A.A.E., CEO/Director, Aviation Department, 954-359-6199
Fiscal Impact
Fiscal Impact/Cost Summary
Duty Free will pay the County on an annual basis a Privilege Fee that is greater of the MAG (currently $2,191,006) or the percentage fee of gross revenues, as established in the Agreement.