Broward County Commission Regular Meeting
Director's Name: Mark Gale
Department: Aviation Division: Business
Information
Requested Action
title
A. MOTION TO AUTHORIZE Director of Aviation to negotiate and execute a Rental Car Concession Lease and Operating Agreement, in substantially the form attached hereto, between Broward County and each of the following companies: (1) Enterprise Leasing Company of Florida, LLC, d/b/a Enterprise Rent-A-Car, National Car Rental, and Alamo Rent A Car; (2) The Hertz Corporation d/b/a Hertz Rent A Car, Thrifty Car Rental, and Dollar Rent A Car; (3) Avis Budget Car Rental, LLC, d/b/a Avis Rent A Car, Budget Rent A Car, and Payless Car Rental; (4) Sixt Rent A Car, LLC, d/b/a Sixt Rent A Car; (5) Fox Rent A Car, Inc., d/b/a Fox Rent A Car; (6) Advantage Opco, LLC, d/b/a Advantage Rent A Car and E-Z Rent A Car; and (7) Roam Rental Car of Fort Lauderdale LLC, d/b/a Ace Rent A Car; all subject to approval as to legal sufficiency by the Office of the County Attorney.
(Commissioner Furr pulled this item.)
ACTION: (T-10:54 AM) Approved. The Board requested that Aviation Director Mark Gale explore the addition of electric cars into negotiations with rental car fleets. (Refer to minutes for full discussion.)
VOTE: 8-0. Commissioner Sharief was out of the room during the vote.
ACTION: (T-11:22 AM) Commissioner Sharief requested being shown voting in the affirmative.
VOTE: 9-0.
B. MOTION TO WAIVE Chapter 39, Fees and Other Charges, Aviation, Broward County Administrative Code, Section 39.3, Non-Terminal Rates and Charges - Fort Lauderdale-Hollywood International Airport and North Perry Airport, Subsections (b)(2) and (b)(3), to allow for alternate rental rates in the agreements referenced in Motion A.
(Commissioner Furr pulled this item.)
ACTION: (T-10:54 AM) Approved. (Refer to minutes for full discussion.)
VOTE: 8-0. Commissioner Sharief was out of the room during the vote.
ACTION: (T-11:22 AM) Commissioner Sharief requested being shown voting in the affirmative.
VOTE: 9-0.
C. MOTION TO DIRECT Office of the County Attorney to draft an Ordinance amending Chapter 2, Airports and Aircraft, Article IV, Consolidated Rental Car Facility at the Broward County’s Fort Lauderdale-Hollywood International Airport, of the Broward County Code of Ordinances, to change the definition of “Contract Day” to allow for a grace period for customers to return their rental vehicles before imposing an additional Customer Facility Charge.
(Commissioner Furr pulled this item.)
ACTION: (T-10:54 AM) Approved. (Refer to minutes for full discussion.)
VOTE: 8-0. Commissioner Sharief was out of the room during the vote.
ACTION: (T-11:22 AM) Commissioner Sharief requested being shown voting in the affirmative.
VOTE: 9-0.
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Why Action is Necessary
Motion A. Broward County Board of County Commissioners (“Board”) approval is required to authorize the Director of Aviation to negotiate and execute the Rental Car Concession Lease and Operating Agreements.
Motion B. Board approval is required to waive provisions in the Broward County Administrative Code.
Motion C. Board direction is required for the Office of the County Attorney to draft an Ordinance amending the Broward County Code of Ordinances.
What Action Accomplishes
Motion A. Authorizes the Director of Aviation to negotiate and execute all Rental Car Concession Lease and Operating Agreements at Broward County’s Fort Lauderdale-Hollywood International Airport (“FLL”).
Motion B. Waives Chapter 39, Fees and Other Charges, Aviation, Broward County Administrative Code, Section 39.3, Non-Terminal Rates and Charges - Fort Lauderdale-Hollywood International Airport and North Perry Airport, Subsections (b)(2) and (b)(3), to allow for alternate rental rates in the agreements referenced in Motion A.
Motion C. Directs the Office of the County Attorney to draft an Ordinance amending the Code of Ordinances.
Is this Action Goal Related
No
Previous Action Taken
None.
Summary Explanation/Background
THE AVIATION DEPARTMENT RECOMMENDS APPROVAL OF THE ABOVE MOTIONS.
Motion A
This action authorizes the Director of Aviation to negotiate and execute a Rental Car Concession Lease and Operating Agreement, in substantially the form attached hereto as Exhibit 1 (“Form”), between Broward County (“County”) and each of the following companies: (1) Enterprise Leasing Company of Florida, LLC, d/b/a Enterprise Rent-A-Car, National Car Rental, and Alamo Rent A Car (“Enterprise”); (2) The Hertz Corporation d/b/a Hertz Rent A Car, Thrifty Car Rental, and Dollar Rent A Car (“Hertz”); (3) Avis Budget Car Rental, LLC, d/b/a Avis Rent A Car, Budget Rent A Car, and Payless Car Rental (“Avis”); (4) Sixt Rent A Car, LLC, d/b/a Sixt Rent A Car (“Sixt”); (5) Fox Rent A Car, Inc., d/b/a Fox Rent A Car (“Fox”); (6) Advantage Opco, LLC, d/b/a Advantage Rent A Car and E-Z Rent A Car (“Advantage”); and (7) Roam Rental Car of Fort Lauderdale LLC, d/b/a Ace Rent A Car (“Ace”). The executed agreements must be approved as to legal sufficiency by the Office of the County Attorney.
The Office of Economic and Small Business Development (“OESBD”) established an Airport Concession Disadvantaged Business Enterprise (“ACDBE”) participation goal of 2% for the agreements referenced in Motion A. At the time of submission of this Board action, the OESBD was in the process of reviewing the proposed ACDBE participation. The Director of Aviation will execute the Form agreements subject to the committed ACDBE participation approved by the OESBD for each of the companies listed in Motion A.
Additional information on the previous agreements, procurement process and subsequent Board actions is included in Exhibit 3.
The Broward County Aviation Department (“BCAD”) utilized the services of Ricondo & Associates, Inc. (“R&A”), to provide rental car concession business planning and consulting services in conjunction with preparing its next rental car concession solicitation packages for FLL. R&A is recognized in the aviation industry as an expert on rental car concessions in airports. R&A recommended that the occupancy of the Rental Car Center (“RCC”) be divided into four separate packages, representing up to seven agreements: Packages A (one slot), B (two slots - B1 and B2), C (two slots - C1 and C2), and D (two slots - D1 and D2).
Motion A references each of the seven agreements (“Agreements”), which, if approved and executed by the Director of Aviation, will grant the corresponding rental car company (collectively, the “Concessionaires”), the right and privilege to conduct and operate a high-quality, well-managed rental car concession from its premises in the RCC. The RCC was divided during the Request for Proposal (“RFP”) and negotiation process as follows: (1) Package A - Enterprise; (2) Package B1 - Hertz; (3) Package B2 - Avis; (4) Package C1 - Sixt; (5) Package C2 - Fox; (6) Package D1 - Advantage; and (7) Package D2 - Ace (Exhibit 2).
The Form has an Effective Date of October 1, 2019, a Commencement Date of November 1, 2019, and will terminate ten years after the Commencement Date. The one month period of time between the Effective Date and the Commencement Date (“Transition Period”) was agreed upon to allow the Concessionaires time to become operational before imposing full rent. The Form allows the Board to terminate for convenience with not less than one year notice, but no earlier than the beginning of the sixth agreement year.
During the Transition Period, the Concessionaires will pay Facility Rent at a 50% rate (as compared to year 1), but only once deemed operational by the Contract Administrator. Commencing on November 1, 2019, the Concessionaires will pay Facility Rent, as defined in the Form. Facility Rent will be $2.35 per year per square foot in year 1; $4.69 per year per square foot in year 3; and $6.26 per year per square foot in year 6. Facility Rent for years 2, 4, 5, 7, 8, 9, and 10 will be adjusted in accordance with Section 4.1.2 of the Form to account for the Consumer Price Index or percentage increases.
In addition to Facility Rent, the Concessionaires will pay Privilege Fees, as defined in the Form. Privilege Fees due for each calendar month during the Transition Period will be equal to 10% of the Concessionaire’s monthly Gross Revenues from the applicable month as defined in the Form. Privilege Fees due for each calendar month after the Commencement Date will be the greater of (1) 10% of the Concessionaire’s monthly Gross Revenues from the applicable month or (2) the monthly installment of the Minimum Annual Guarantee (“MAG”), as defined in the Form.
The MAG for year 1 for Sixt, Fox, Advantage, and Ace (“Proposers”) was submitted during the RFP process. The MAG for year 1 for Enterprise, Hertz, and Avis (“Negotiators”) is equal to their respective Gross Revenues for Airport Customers for August 1, 2018, through July 31, 2019. The amounts are as follows: (1) Enterprise - $10,099,934.86; (2) Hertz - $7,182,313.27; (3) Avis - $6,190,825.09; (4) Sixt - $2,764,308.45; (5) Fox - $2,025,000.00; (6) Advantage - $1,511,864.01; and (7) Ace - $762,000.00.
The MAG for the Concessionaires is subject to annual adjustments, as further described in the Form. For the Proposers, forty-five days after the end of the first agreement year, and forty-five days after the end of each agreement year thereafter, the annual MAG will be adjusted to equal the greater of the following: (i) 85% of the total Privilege Fees due to the County by the Concessionaire for its operations for the preceding agreement year; or (ii) the previous agreement year’s MAG. For the Negotiators, forty-five days after the end of agreement year 1, the MAG for agreement year 2 will be adjusted to equal 85% of the total Privilege Fees due to the County by the Concessionaire for its operations for agreement year 1. Forty-five days after the end of agreement year 2, and forty-five days after the end of each agreement year thereafter, the annual MAG will be adjusted to equal the greater of the following: (i) 85% of the total Privilege Fees due to the County by the
Concessionaire for its operations for the preceding agreement year; or (ii) the previous agreement year's MAG. The result is that the floor MAG for the Proposers is set in year 1 while the floor MAG for the Negotiators is set in year 2. BCAD recommends this approach because the Proposers were able to bid on their MAG while the Negotiators were not. Additionally, the data used to calculate the MAG for the Negotiators is based on Gross Revenues for August 1, 2018, through July 31, 2019 when Sixt, Fox, and Ace were not present at the RCC. BCAD recommends setting the MAG floor for the Negotiators in year 2 to allow the market to adjust to the new entrants.
In addition to Facility Rent and Privilege Fees, the Concessionaires will collect a Customer Facility Charge, together with any applicable sales taxes thereon, from each Airport Customer of Concessionaire pursuant to Section 2-122 of the Broward County Code of Ordinances and Chapter 39 of the Broward County Administrative Code, as each may be amended, and remit such amounts to the County.
Motion B
Motion B waives Chapter 39, Fees and Other Charges, Aviation, Broward County Administrative Code, Section 39.3, Non-Terminal Rates and Charges - Fort Lauderdale-Hollywood International Airport and North Perry Airport, Subsections (b)(2) and (b)(3), to allow for alternate rental rates in the agreements referenced in Motion A. Section 39.3(b)(2) states that, when leasing existing facilities, rent shall be 8% to 15% of the appraised value. Section 39.3(b)(3) states that rent shall be adjusted annually based on the adjustments in Consumer Price Index or 3% over the prior year’s rent, whichever is greater.
On April 2, 2018, AMH Appraisal Consultants, Inc., appraised the Cypress Garage, consisting of levels 1 through 9. The Cypress Garage appraised at $325 Million. The RCC, which consists of level 1 through 5 only, appraised at $220 Million. After negotiations, the County agreed to charge the rental car companies 1.5% of the appraised value of the RCC in years 1-2; 3% in years 3-5; and 4% in years 6-10.
Motion C
This action directs the Office of the County Attorney to draft an Ordinance amending the Broward County Code of Ordinances.
Approval of this action will direct the Office of the County Attorney to amend Chapter 2, Airports and Aircraft, Article IV, Consolidated Rental Car Facility at the Broward County’s Fort Lauderdale-Hollywood International Airport, of the Broward County Code of Ordinances, to change the definition of “Contract Day” to allow for a grace period for customers to return their rental vehicles before imposing an additional Customer Facility Charge.
Section 2-120(c) of the Code defines Customer Facility Charge as: “A charge imposed on each rental vehicle transaction, which shall be a fixed uniform amount applied to each contract day (as defined below), or fraction thereof, to each Customer’s rental car contract and shall be added to the amount collected from the Customer by the Rental Car Companies having a concession agreement with the County. A “Contract Day” shall mean each twenty-four (24) hour period or fraction thereof within the rental period which shall constitute a separate day for which the Customer Facility Charge shall be levied and collected. Each fractional period less than a twenty-four (24) hour period shall be deemed a contract day.”
Section 39.2(s) of the Broward County Administrative Code sets the Customer Facility Charge at $3.95 per Contract Day.
The above definition of Contract Day within the definition of Customer Facility Charge requires rental car companies to collect a Customer Facility Charge from customers for each part of a day, even if such rental car companies offer their customers a grace period to return their vehicles before imposing additional fees. Most rental car companies offer some form of a grace period. BCAD recommends that the definition of Contract Day be amended to allow for a grace period for customers to return their rental vehicles before imposing an additional Customer Facility Charge.
This item 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 of Aviation, (954) 359-6199
Fiscal Impact
Fiscal Impact/Cost Summary
Motions A and B: Revenues for Fiscal Year 2020 will be approximately $74 Million, which is included in the Fiscal Year 2020 Revenue Budget. Motion C: Fiscal impact to be determined upon presentation of a draft Ordinance.