On October 28, 2002, the City entered into a Restaurant/Lounge Concession Agreement with Air Host Billings, Inc. to operate the restaurant, lounge, and concourse deli in the Airport Terminal Building.  This Agreement included a Mid-Term Refurbishment Clause that required Air Host to spend at least $50,000 to maintain the appearance and furnishings of the facilities.  Air Host had previously spent $25,000 of the original $50,000 refurbishment amount on equipment upgrades.  Staff and Air Host compiled a list of items required to return the restaurant facilities to near new condition, as required in the Agreement.  The improvements included mostly furnishings such as carpet, flooring, wall coverings, and counter finishes, plus some cabinetwork and small construction items.  Air Host's cost for these additional items was approximately at $70,000.  Since this was approximately $45,000 more than the remaining refurbishment amount that was required by the original Agreement, Air Host requested an additional two years of term over which to amortize the added costs.  The City Council approved Amendment One on February 28, 2008, and extended the term to October 31, 2014.  The Airport is currently engaged in long-term planning regarding improvements to the Airport's Terminal Building.  The outcome of these planning efforts will likely have a significant impact on the size and location of the future food/beverage and news/gift concession programs.  To allow adequate time to complete the long-term planning before future material changes are made in these concession programs, the Airport and Air Host desire to extend the term of the Agreement to January 31, 2016.  Air Host also has the Airport's Gift Shop Concession, which expires January 31, 2016.  Air Host would like to have the Restaurant Agreement expire at the same time as the Gift Shop Agreement since the planning effort could impact both concessions.  A copy of Amendment Two is available for viewing in the City Clerk's office.

City Council may:

• Approve Amendment Two with Air Host, Inc.; or
• Disapprove Amendment Two with Air Host, Inc.

The Amendment guarantees the collection of an additional fifteen months of concession revenues from Air Host.  Additionally, Air Host has increased its revenue share with the Airport during this extension period, from the current 8% of annual gross revenues generated on the first $800,000, and 9% on annual gross revenues over $800,000, to 10% of annual gross revenues generated on the first $800,000, and 11% on annual gross revenues over $800,000. Current annual concession revenues for the Restaurant/Lounge Concession Agreement are approximately $103,000.  The additional percentage would add approximately $25,000 to $30,000 annually.

Staff recommends that Council approve Amendment Two to the Restaurant/Lounge Concession Agreement to allow adequate time for the Airport to complete the long-range planning regarding Terminal Building improvements.  The Amendment extends the term for an additional fifteen (15) months and amends the expiration date to January 31, 2016.