Committee Hearing, May 8, 2007

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, May 8, 2007 10:45 a.m. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM GREENLEE COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO BILL 070220 - An ordinance authorizing the Director of Commerce to enter into Use and Lease Agreements between the City of Philadelphia and each of the airlines... BILL 070221 - An ordinance constituting the Seventh Supplemental Ordinance to the Amended and Restated General Airport Revenue Bond Ordinance... V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2

Good morning, everyone. This is a public hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the titles of Bill Nos. 070220 and 070221. MR. McPHERSON: Bill No. 9 070220, an ordinance authorizing the Director of Commerce to enter into Use and Lease Agreements between the City of Philadelphia and each of the airlines servicing Philadelphia International Airport, under certain terms and conditions. Bill No. 070221, an ordinance 17 reconstituting the Seventh Supplemental Ordinance to the Amended and Restated General Airport Revenue Bond Ordinance.

Mr. Isdell. Good morning. Welcome. Please identify yourself for the record and proceed with your testimony.

Good morning, 3 5/8/07 - WHOLE - BILL 070220, ETC. President Verna and members of City Council. My name is Charles Isdell and I'm the Director of Aviation for the City of Philadelphia. To my right is James Tyrrell, our Deputy Director for Property Management and Business Development, and on my left is Ed Anastasi, our Deputy Director for Finance and Administration. Before I begin my testimony, I would like, with your indulgence, to present a technical amendment to Bill No. 13 070220, which has been distributed to the Councilmembers this morning, and it basically corrects an error in which the advertisement indicated that the Lease itself was attached as Exhibit A and corrects that, because the Lease was not attached to a new section that says "the Chief Clerk of City Council shall keep on file the document referred to as Exhibit A and make it available for inspection by the public during regular office hours." And the City Solicitor's Office has asked me to present that amendment to correct 4 5/8/07 - WHOLE - BILL 070220, ETC. the advertising error.

Well, will the Chief Clerk be receiving it and when?

They have already, Madam President.

Oh, they have already. Very well. I believe everybody has a copy of the amendment. Please proceed.

Once again, good morning and I'm pleased to have this opportunity to testify in support first of Bill No. 070220, an ordinance 16 authorizing the Director of Commerce to enter into a new Use and Lease Agreement between the City of Philadelphia and each of the airlines servicing Philadelphia International Airport. The Agreement before you today replaces an Agreement that was effective beginning July 1st of 1974. With the current state of flux in the airline industry and with recent advances in 5 5/8/07 - WHOLE - BILL 070220, ETC. technology, the need for a new Agreement is critical. This Agreement will be of a much shorter duration than the 32-year agreement it replaces. The Agreement's term is for four years. That is the current standard for this type of Agreement currently in the industry. We believe the new Agreement provides important management flexibility and reflects the current best airport management concepts in use throughout the country. Before we commenced negotiations with the airlines, we identified the goals and objectives that we wanted to reach by reviewing our experience with the old Agreement, identifying areas of concern from financial rating agencies, reviewing other large hub airport best practices and evaluating our internal concerns along with a recognition of our specific facility status. I am pleased to report that the 6 5/8/07 - WHOLE - BILL 070220, ETC. new Agreement accomplishes the goals and objectives that we identified. Specifically, the new Agreement gives us greater flexibility in managing our facilities. It has streamlined the process for airline approval of new capital projects; created new financial reserves to achieve credit enhancement; simplifies our rates and charges calculations by removing three cost centers; and, finally, maintains reasonable airline rates and charges. 6 million in necessary capital improvement projects; the establishment of an Operating and Maintenance reserve, or O&M Account, which will grow to $20 million over the 7 5/8/07 - WHOLE - BILL 070220, ETC. four-year term of the Agreement; and the establishment of a Bond Redemption/Improvement Account equivalent to percent of our annual debt service; 6 the generation of a discretionary cash 7 flow to fund airport projects of 8 approximately $45 million, again, over 9 the four-year term of the Agreement; and, 10 finally, a cost per enplaned passenger 11 that keeps our airport competitive with 12 other major hubs throughout the country. 13 I greatly appreciate the 14 opportunity to speak on behalf of Bill 15 070220. And before answering questions, 16 I would like to present testimony on its 17 accompanying bill, 070221. 18 Bill 070221 is the Seventh 19 Supplemental Ordinance to the Amended and 20 Restated General Airport Revenue Bond 21 Ordinance. 22 The purpose of this Seventh 23 Supplemental Ordinance is to amend 24 certain technical provisions of the 25 General Ordinance that relate to the new 8 5/8/07 - WHOLE - BILL 070220, ETC. Use and Lease Agreement. Specifically, the Seventh Supplemental Ordinance will permit the incorporation of the Airport's Outside Terminal Area Cost Center revenues and expenses into the revenue bond pledge of the General Ordinance. The Outside Terminal Area Cost Center consists of the roadways, parking operations, hotel and certain rental car facilities. The inclusion of the net revenues of the Outside Terminal Area will improve the Airport's annual revenue bond coverage and also enable the Airport to finance future Outside Terminal Area capital projects with Airport Revenue Bonds. In addition, the Seventh Supplemental Ordinance will revise certain definitions in the General Ordinance so as to be consistent with the terms and conditions of the new Use and Lease Agreement. When the General Ordinance was amended and restated last in 1995, this 9 5/8/07 - WHOLE - BILL 070220, ETC.

change was anticipated and provided for at that time by including a provision to the General Ordinance giving the Division of Aviation the option to bring the Outside Terminal Area into the revenue pledge of the General Ordinance. The Division of Aviation, with the concurrence of the signatory airlines, has determined that exercising this option is in the Airport's and the City's best interest. It should be noted that the Seventh Supplemental Ordinance does not authorize the issuance of any additional Airport Revenue Bonds. I appreciate the opportunity to speak on behalf of both bills today, and we'll be happy to answer any questions you may have. Thank you very much.

Thank you. Mr. Isdell, the bill specifies that the Agreement will be effective on 10 5/8/07 - WHOLE - BILL 070220, ETC. July 1, 2007. What is the expiration date of the current Agreements with the airlines?

The existing Agreement, the 32-year Agreement that ran from 1974, expired on June 30th of 2006. Since that time, we have operated under a regulation that was promulgated through the City's Records Department which has basically minimum terms/conditions for airport activity and airline use of the facility and also, most importantly, prescribes the rates and charges that the airlines are paying to us today. It's kind of a bridge arrangement that we have entered into.

I was just wondering why it took so long for the Administration to seek approval of City Council for the continued operation of the Airport.

Well, I believe that these negotiations have been ongoing for approximately three years now. We 11 5/8/07 - WHOLE - BILL 070220, ETC. had a number of very high-spirited negotiating sessions with the airlines. It was a lengthy process. The negotiators, each time we have a session, have to fly in from various parts of the country. They are generally the real estate vice-presidents for the various airlines, and it has been a difficult process. We think that during that time of negotiation, we have learned a great deal from a number of other airports whose leases expired in the years between 2003 and the present time. So we gained valuable experience each time we did that. We tried to incorporate the best practices from other airports into our negotiations, and ultimately it has taken longer than -- we would have liked to have presented this, a new Agreement, to you before the old one expired, but we had to live with the realities of tough negotiations.

The 12 5/8/07 - WHOLE - BILL 070220, ETC. term of this Agreement is four years. Your testimony is that this is the current standard of the industry. Why is there such an abrupt change in the term length?

Many major U.S. airports entered into long-term leases in the 1970s, as Philadelphia did, and at that time, the term of the Lease Agreement was tied to the term of bonds that were sold for facility construction. In the years and the decades since then, the industry and the market has proven that a city like Philadelphia is not dependent, that our ability to repay debt service on bonds is really much more connected to the large population and the market that we serve in Philadelphia and that the Lease Agreement with the carriers is not necessarily appropriately connected to the term of revenue bonds. So those long-term agreements as they've expired in the new millennium since 2000, most of them have been 13 5/8/07 - WHOLE - BILL 070220, ETC. replaced with much shorter terms, and that's a mutually agreeable situation for both the airlines and the City. We would prefer a shorter term agreement and they would as well, because we've also learned this is a very changeable industry and it's best not to be tied down for two or three decades to terms and conditions that were written by another generation.

It has been suggested that the Airport be sold or leased to a private operator. In your opinion, would this make any economic sense for the City? If so, what would be the financial benefits for the City? If not, what is the financial downside for the City?

I think we have to first present the background that under the current federal Authorization Act for the FAA and the funding of airport improvements around the country, there is a provision for pilot projects in the privatization mode that's been described, 14 5/8/07 - WHOLE - BILL 070220, ETC. but there are limitations on the number of airports that are allowed to experiment like that, and currently, there is only one slot allowable for what's called a large hub airport. Philadelphia is a large hub airport. There are about 30 of those in the country. That slot has now been filled by Midway Airport in Chicago, Chicago's second airport behind O'Hare. And the process of putting together a request for proposals and negotiating a similar type of agreement has been, I believe, a couple years in the making in Chicago and I presume will probably be another year or two before it's finalized. For Philadelphia to do something similar, first of all, a new federal Aviation Authorization Act has to be passed that would in fact allow additional large airports to participate in this program. And that is a possibility, but it has not happened as of yet. It's been proposed. 15 5/8/07 - WHOLE - BILL 070220, ETC. And then, secondly, I think that our best ability to measure whether or not such an arrangement would be beneficial to the City would be to monitor the Chicago experiment. It is the closest airport in size to our airport that would in fact be embarking on this type of project. The other thing that would be different under the current rule in order for an airport to do such a privatization, the airlines, the majority of the airlines operating in that airport, have to approve the deal. The new proposal takes away that condition. Again, that has not been approved by Congress yet, but it's been proposed. So I think that we need to watch the happenings in Chicago very carefully. If there is a benefit to the greater community, certainly Philadelphia should consider that, but the numbers that are being proposed, I cannot really comment on them or speak to them. I 16 5/8/07 - WHOLE - BILL 070220, ETC. don't know how those calculations are made. But I do believe the other big difference under the privatization program is that under today's rules, an airport that generates revenue under federal law today must reinvest that revenue in the airport property, in the airport facility. The pilot projects, I believe, are exempted from that requirement, and that would mean potentially that some additional surplus dollars would be available for other uses in the City, but at the present time, again, that is not existing law. It's merely been proposed.

Thank you. The Use and Lease Agreement is a rather complicated document. I think you'll agree with me.

Yes.

Is there anyone here who is prepared to go through the document to highlight the 17 5/8/07 - WHOLE - BILL 070220, ETC. significant difference between it and the previous Use and Lease Agreement? I'm sure you can do that.

I think we can do it relatively quickly.

That's great. The definition of "Airfield Area M11 Formula" provides that capital improvements impacting the airfield area requirements requires no 12 less than 50 percent plus one of the number of eligible signature airlines, et cetera, to approve. Has the percentile approval rate remained the same as they required prior to this new Agreement?

For the most part, the percentages --

I'm sorry. Identify yourself for the stenographer, please.

I'm sorry. My name is James Tyrrell. I'm the Deputy Director of Aviation for Property 18 5/8/07 - WHOLE - BILL 070220, ETC. Management and Business Development. Council President, I believe the percentages required to approve an airfield project remain the same. The differences between the new Agreement and the old Agreement come in the threshold amounts of the project as being approved. The previous Agreement, I believe, required approval of any contract in excess of $100,000. The new Agreement is 1.5 million, I believe -- I'm sorry; a single project of $500,000. So we increased the threshold by 500 percent.

Also, the definition of, quote, "Airline Cost Centers," end of quote, includes the Northeast Philadelphia Airport Cost Center. Does the proposed Agreement cover all of the costs of operating and maintaining the Northeast Airport?

Yes, Madam President, it does.

Also, Paragraph 6, I believe it is, "Hotel 19 5/8/07 - WHOLE - BILL 070220, ETC. Service Station, Car Rental Facilities," et cetera, do these areas provide revenues for the operation of the Airport? If so, why and what are the arrangements?

Good morning. My name is Ed Anastasi, Deputy Director of Aviation for Finance and Administration. The Outside Terminal Area is a cost area that, frankly, it's really a profit center. It generates a profit, for the most part, each year, and the chief sources of revenue is what you mentioned, the parking facilities, because at the end of the year, the Parking Authority submits a net revenue or net payment to us after it pays off all of its expenses for the parking operation. The other principal sources of revenue are the revenues received from the Marriott Hotel. We receive a percentage of their gross revenues. Another one would be the rental cars. 20 5/8/07 - WHOLE - BILL 070220, ETC. There are land agreements we have with the rental car companies so that they provide a rental to us. And also there are certain rental cars for which we receive ten percent of gross revenues that is allocated to the Outside Terminal Area Cost Center. So if you take all of those revenues and you subtract from it the expenses of the Outside Terminal Area, we normally come to a surplus or a net revenue for that cost center. And the net revenue presently is about between $8 and $10 million annually.

Thank you. I have a number of other questions, but I note that my colleagues would also like to be recognized. At this time, the Chair recognizes Councilman Rizzo.

Thank you, Madam President. First of all, I think the 21 5/8/07 - WHOLE - BILL 070220, ETC. Airport is a real asset to our region. When I say that, I mean just the environment there, how clean it is. It's a pleasure when you hear people coming through the airport in recent years since you've been in charge and your colleagues have been in charge to hear nice things about the airport. So congratulations on that.

Thank you.

Is it safe to say that what you just described as a result of President Verna's question -- as you know, there's a lot of conversation of privatization. I assume the same scenario would be for a lease, that leasing the airport to a private person, would those comments that you just made apply to that also?

Yes. That is correct. Without injecting us into the mayoral campaign, I mean, the answer to the question is what I just responded to the Council President, that that type of 22 5/8/07 - WHOLE - BILL 070220, ETC. arrangement depends on the next round of federal legislation.

And that legislation would have to allow another airport like Philadelphia to lease. That couldn't happen unless that federal piece occurred; is that correct?

Yes, that is correct. And relative to today's presentation, I think the important point is that the City or whoever is operating the airport needs to have an agreement between the operator and the airlines that defines what each side's responsibilities and rights are and, very importantly to the airlines, defines how much they have to pay to use the facility. So this agreement is really a completely separate issue from the proposals that we're talking about relative to privatization. And it's an important point that as this is written, this Lease Agreement, this four-year 23 5/8/07 - WHOLE - BILL 070220, ETC. Agreement is assignable if the City should decide that that's appropriate during the four-year term, and it does give us a basis to charge the airlines and to operate in the ensuing period. And, again, a four-year term is relatively short compared to what we had in the past.

In reviewing the bill, I think another good thing, at least from my perspective, is the fact that you have, I think, listened carefully and the way that the gates are going to be dealt with where additional carriers that want to come in, there's going to be some opportunities for growth, if that's even possible to grow more than you have already, but if you could just take a minute and explain the difference in the way the gates are going to be dealt with where they just can't be controlled by one particular carrier.

Right. Under this Agreement, unlike the previous Agreement 24 5/8/07 - WHOLE - BILL 070220, ETC. which afforded exclusive rights to the leased gates that airlines controlled at the airport, all the gate leases under the new Agreement have been converted from exclusive to preferential or common-use type arrangements. This will enable the City to accommodate another airline on a preferential use gate if it's not being used by the leasing airline at a minimum of four times a day, and it also will accommodate airlines on common-use gates at our discretion. So the new Agreement gives the City a great deal of flexibility to make gates available for competition, which we were impeded from doing under the old Agreement.

Would you be able to manage the fact that that can't be manipulated where that gate will, all of a sudden, become -- let's say that there's eight flights at one particular gate, that they just manage it better and use it four times a day to meet the 25 5/8/07 - WHOLE - BILL 070220, ETC. requirement. Are you going to keep an eye on the fact that that isn't manipulated by any of the carriers there?

Yes. That is one of our responsibilities, and one of the ways we're looking at doing that, copying some of the other major airports in the country, is, there are gate management systems, software systems, that assist us monitoring the daily use of every gate in the terminal. Under the old Agreement, the use of the gates in the exclusive areas was really self-reported by the airlines. But we will now have the ability -- and hopefully we can move from a manual monitoring system to a more sophisticated system, but we will now have the ability to monitor the use of all the gates and make sure that they are used and that there isn't any manipulation going on to basically occupy a gate to keep competition out. That's one of the things that motivated us. 5/8/07 - WHOLE - BILL 070220, ETC.

My last question is, I received an e-mail recently from a visitor to our city that said a flight coming from a foreign destination that landed in, I think it was, BC, that here it is at o'clock at 8 night, they parked the plane at the 9 furthest gate at the airport and the 10 people had to walk from A-26 or B-26, whatever it is out there, when all of these other gates were available. What was the need for U.S. Airways to park the plane all the way at the furthest gate in the airport?

Well, I don't have the specific answer to that incident. There may have been some reason why they did that. My guess is that it was more about convenience of the airline than it was about the convenience of the customer. And we can in fact -- again, we can monitor that activity. One of our problems, of course, is that in Terminals B and C a departing 27 5/8/07 - WHOLE - BILL 070220, ETC. passenger may park their car at the terminal they depart from, such as C, and then U.S. Airways when they return, because U.S. Airways utilizes gates in A West, A East, B, C and F, their return flight might bring them into a completely different part of the airport and they have quite a long way to go to get back to their car. Part of that is facility driven, but I do think we will continue to monitor that type of activity. When I get complaints like that, I go over them with my staff and the airline management people and just try to emphasize the fact that we serve the citizens of this community and sometimes the most expedient type of operation that saves the airline a few dollars may not be in the best interest of the public service, and that's the role that we play as the public operator.

Thanks again. And to end it, they wound up sending the luggage to another terminal, 28 5/8/07 - WHOLE - BILL 070220, ETC. where then the people had to go from where the plane arrived to another terminal to get their luggage. So it must get better, because if that scenario is accurate, that is not a good thing for the airport.

Right. And I think you would generally think that there are greater challenges when you have common-use arrangements in terms of the fact that airlines from a day-to-day basis might be using different gates based on the Airport's management, but the reality is, under the old exclusive arrangement which the airlines operated under -- and not to pick on one airline, but U.S. Airways does handle two out of every three passengers in Philadelphia, but even under the old exclusive Agreement we had these problems, where there didn't seem to be a lot of concern for where the returning flight was bringing someone who went out of one terminal and came back to another and, as 29 5/8/07 - WHOLE - BILL 070220, ETC. we said, parked their car one place to another. So we think that more involvement by the City and by the Airport management will improve things rather than make them go the other direction.

Again, thank you, Madam President. And I appreciate the good work of everyone there at your airport.

Thank you, Councilman.

Thank you. The Chair recognizes Councilman Kenney.

Thank you, Madam President. Mr. Isdell, could you give the major reasons why we would experience delays and where does the airport rank nationally as far as delayed flights? Because periodically you hear like a lot 30 5/8/07 - WHOLE - BILL 070220, ETC. of complaints about it. Then you don't hear too much. Then it starts up again. I don't know whether it's seasonal, it's cyclical. What are the causes of flight delays?

The number one cause of flight delays is weather, weather and wind. Our airport has some specific challenges relative to the way the runways were designed and built over the last 50 years so that we do experience more delay on average. Currently, the average delay at our airport is about 11 minutes per flight, which may not sound like much, but that's averaged over a half a million flights a year. So that includes the ones that come in on time, but also averages in the ones that are an hour and a half stuck out on a taxiway. Besides weather-related delays, which we experience obviously with winter storms and also summer thunderstorm 31 5/8/07 - WHOLE - BILL 070220, ETC. activity, we have a situation where our two main runways -- one is 9,500 feet long, the other one is 10,500 feet -- those two runways were built too close together to operate simultaneously under current FAA rules. So even though we have two very large runways that can accommodate just about every type of aircraft, the stream of planes coming in is a single stream, for the most part. So you don't get the benefit of those two runways. We have two smaller runways that are about 5,000 feet long. They were designed and built really to handle turbo prop and small regional jet service. And the airline industry in the '90s seemed to be moving very rapidly into replacement of big jets more and more with regional jets. They're going in a different direction now and they're switching from 50- and 75-seat regional jets to hundred seat jets. Those two runways, which would give us a total of 32 5/8/07 - WHOLE - BILL 070220, ETC. four runways and a lot of flexibility, right now can't be used by a lot of the main line aircraft. An example is Southwest Airlines. Every plane that Southwest Airlines owns is a 737. A 737 can land on a short runway, because when it's coming in for a landing, it's light without as much fuel, but it can't take off from those runways. So to a large extent, we only have two out of the four runways that are usable for most of our aircraft activity. We are under -- at the moment we're extending one of those two short runways, the one that runs north and south, Runway 17-35. We're going to turn that from a 5,400 foot runway to a 6,500 foot runway, which will make it more useful for takeoffs of those larger regional jets, those hundred seaters, and also smaller narrow-body planes like 737's. That will help us a lot. The other generator of delay in Philadelphia, which we've all read about 33 5/8/07 - WHOLE - BILL 070220, ETC. in recent weeks, is the management of the airspace over our heads, which is entirely under the control of the Federal Aviation Administration. We are, unfortunately, layered underneath airspace that's used by the New York and Washington airports. So there are a lot of planes flying over us that are not coming or going from Philadelphia. Our airspace goes up about 10,000 feet. When we have problems of weather that might be between here and Atlanta, between here and Chicago, we tend to get pushed down to the bottom of the priority list relative to New York and their three airports and Washington and their three airports. We fight about that frequently with the FAA. They claim that there's no 21 favoritism, but I think if you're an FAA employee who lives in New York and your place of employment is on Long Island, you're going to tend to want to deal with New York problems first. 34 5/8/07 - WHOLE - BILL 070220, ETC. We're governed by the New York center, which is based on Long Island. We don't have a center in Philadelphia. The next nearest one is in Washington. So a lot of factors involved. Again, I don't want to pretend that weather isn't the main one, but we need to continue pushing for improved use of the airspace and some runway improvement that will give us a wider separation between our big runways so we can use them more effectively.

As far as space is concerned, I mean, we're pretty much constrained, aren't we, relative to expansion?

Yeah; 2,300 acres. We have some opportunities whenever we see them to pick up little pieces of property on our perimeter. But if you compare Philadelphia's 2,300 acres with a new airport that's been built in the last decade or last 20 years, Denver is 34,000 acres. Orlando is a fairly new airport. 35 5/8/07 - WHOLE - BILL 070220, ETC. It's over 10,000 acres. Dallas/Fort Worth is 17,000 acres. Twenty-three hundred, we're about the same size as Newark. The only major airport smaller than Philadelphia in terms of total acreage is LaGuardia, which is a real postage stamp up in New York. So we have the river to the south. We have I-95 to our north, the Navy Yard to the east and Tinicum Township to the west. I think what we try to do every day is just squeeze as much as we can into a relatively compact package and try to do everything we can to make passengers comfortable if they're stuck in the facility, but long term there needs to be runway improvement and I also believe some fair spreading of traffic among other regional airports, which up until today has not happened.

But the long-term opportunity to expand is probably not there?

There's not really 36 5/8/07 - WHOLE - BILL 070220, ETC. room to expand appreciably. One alternative that we had suggested for FAA review, which would have given us a runway model or template similar to what a new airport would have, like Atlanta or Dallas or Denver, where we would have two what we call dual parallels, two east/west runways on either side of a midfield terminal complex, that was ruled out. Within the constraints of our 2,300 acres, we had figured out a way to shoehorn in a dual parallel concept, but that concept would have taken a lot of flights over the Heinz Wildlife Preserve. The FAA felt that that was risking a bird strike catastrophe and that the risk was certainly not worth taking, so that alternative was discarded and we're back to trying to squeeze in another runway down by the river or something like that.

Could you just quickly explain the -- and I don't think we've had it here, as far as I can remember, but some of the horror stories 37 5/8/07 - WHOLE - BILL 070220, ETC. of other airports where for weather or any other delay people wind up sitting in an aircraft on the runway or at the gate for three, four, five, six, hours? 6 What are the rules that require that to 7 happen? Is it an airline decision? Is 8 it an FAA regulation? And why can't they 9 just taxi back to the gate and let the 10 people sit in the waiting room as opposed 11 to keeping them on the plane? 12

Well, the most prominent recent example was JetBlue at JFK. I think that was on Valentine's Day. We had an ice storm and they in fact did have people stranded on planes, and the subsequent investigation indicated that some of that at least could have been alleviated. I don't know exactly how they operate at JFK, but recently when we had the more recent ice storm in Philadelphia -- I think it was March 16th -- our Deputy Director for Operations, Mark Gale, who is seated 38 5/8/07 - WHOLE - BILL 070220, ETC. behind us, he actively contacted U.S. Airways. We had our operations staff out on the airfield in vehicles monitoring whether any aircraft in fact were sitting out there for any great length of time. We offered -- what we got back -- and I think this goes to the heart of your question. U.S. Airways' local management responded that the reason they were sitting out there even though they couldn't take off was because they didn't have any gates to bring them back into to unload them. So Mark and his team found them four or five gates. I think we had about a dozen aircraft that had been sitting for a number of hours. And Mark in fact said to the U.S. Airways manager, We do not want a JetBlue in Philadelphia. So we got them four or five gates immediately that they could use over in the international terminal, which were open at the time. We also reminded them, as we had reminded them the day before, that we 39 5/8/07 - WHOLE - BILL 070220, ETC. have a fleet of six passenger transfer vehicles which can hydraulically hook up with an aircraft and each one can take about 125 people. We can unload a plane very quickly and at least get people back into the building so they can get something to eat, they can use the restrooms, they can make phone calls, et cetera. So we were able to literally unload a dozen planes with our PTVs with gates that normally would not be available to U.S. Airways. And also we reminded them that they have a fleet of their own buses out on the airfield and they have stair trucks, which in a real emergency could be used to unload an aircraft. But in that case, the people would have gotten exposed to the weather. So the PTV is a better alternative to unload people without putting them out in the snow and ice. That's, I think, a pretty good illustration of the role that we can play 40 5/8/07 - WHOLE - BILL 070220, ETC. in a situation like that. Airlines are focused a lot of times on systemwide situations. U.S. Airways is managed out of Phoenix. They're looking at what's going on in Pittsburgh, Charlotte, New York, Boston, Atlanta, and the airport management sometimes has to be the squeaky wheel to protect really our own citizens that are the customers of the airport.

Thank you. And just one suggestion, and I don't know whether you guys have looked at this or not, but I flew into O'Hare recently and I think it was Delta had -- as you were beginning your descent into Chicago, they had a film about the City of Chicago and the events that were going on in that particular month and some of the new projects and buildings that were being constructed and just a general overview of the city as you were landing. Is there anything that's been investigated for Philadelphia with U.S. 41 5/8/07 - WHOLE - BILL 070220, ETC. Air especially since it's such a dominant carrier?

Actually, they do play a video like that on international flights arriving into the City.

This was the domestic one.

The one that I'm thinking of, first it explains to you the customs procedures and the passport processing. It actually has a video of our terminal to show people where they're going to be, and then it has some highlights of things to do in Philadelphia and some of the great attractions of the City. There's no reason why we couldn't do that on domestic flights. That's a great idea.

I was impressed with it because it just really gave you a good feeling about the City of Chicago as you were landing. If you could check it out, I'd appreciate it. 42 5/8/07 - WHOLE - BILL 070220, ETC.

Okay. Will do.

Thank you.

The Chair recognizes Councilman O'Neill.

Don't overpromise on that one, Charlie.

Don't overpromise?

Chicago doesn't have to worry about overpromising. But it's a great idea and worth pursuing. I'm just glad to see the day has finally come. I've been sitting in meetings when it seemed like an eternity when this Agreement was going to expire and you were going to bring modern management principles into the equation with the new Agreement. So you'll be able to move somebody out now, an airline out, if they're not using or fully using a gate so another airline can share it or use it --

Yes. 43 5/8/07 - WHOLE - BILL 070220, ETC.

-- entirely? And it's long overdue. A question while we're on the terminal, though, and you may have answered it and I didn't quite understand it. Many times I've heard you asked the question in meetings, How come such-and-such gates are in such deplorable condition or tattered or not very clean or the rug is ripped up and another one you walk in and it's very, very nice. And your answer at the time was, Well, the airlines are in charge of that for their gate areas. Does that change or has it already changed so we can walk in as a good landlord and say, There's a certain condition that we require and we're going to either have you do it or we're going to do it and bill you for it? I mean, how does that kind of thing work?

There are a couple of new things in the Agreement, and I'm going to defer to Jim, I think, to 44 5/8/07 - WHOLE - BILL 070220, ETC. respond further, but I know one of the issues was we had to get -- if we were going to take responsibility to, for example, replace carpeting and seating in hold rooms that are predominantly used by one carrier, where were we going to get the money to do that, and I think that we had to build into the capital -- the pre-approved capital spending that we got as part of this Agreement with the airlines, it includes money for us to do repairs like that if we feel it's necessary to go in. That was one of the things we had to struggle with them about, which they resisted. The Agreement also provides -- we do have the authority to -- they have an obligation to maintain their facilities and we have the authority to go in and push them in that direction with some tools, not necessarily a default, but some fines and other things. But I think the main thing is our ability, if we see fit, to go in -- 45 5/8/07 - WHOLE - BILL 070220, ETC. particularly over the last dozen years or so when you have an airline that might be in bankruptcy, on the verge of bankruptcy and you say to them, There's holes in your seating and it's embarrassing and everybody thinks that it's the City, we will now have the ability in those kinds of circumstances to go in and either reupholster or replace that seating with money that we drove through the negotiations. And I don't know if Jim wants to add to that.

Councilman, we agree with exactly what you said, and within the budget mechanism in the Agreement, the Airport will create or we'll create a reserve fund so that we do have the ability to go in. At first we'll advise the airlines of our intention that -- or the fact that their facilities are not up to the Airport standard. If the airline does not correct that condition themselves, then 46 5/8/07 - WHOLE - BILL 070220, ETC. the Airport will go in and correct that condition if it's an airport-leased facility and then charge the airline a surplus for the cost of doing that. In the event it's an airport-owned facility where it's not leased to an individual airline, we also had the right to go in and use those funds to upgrade the condition of that facility as well.

Okay. Thank you. That's a big improvement. The 50 percent threshold for -- you were going through this, where U.S. Air as a dominant carrier or in Chicago where United and American can decide together and try to stop things because they control more than half, is there any break in this? When I say "break," is there any break for the airport where there are any conditions under which you can overrule the 50 percent when there's such a need, or is it strictly if you have more than 50 percent, you pretty 47 5/8/07 - WHOLE - BILL 070220, ETC. much can stop anything from happening on the capital side?

Well, our recent experience has been -- let me kind of answer the question from a different direction, which is if improvements are needed that are going to benefit a particular carrier and there's a need for a majority-in-interest vote to support those improvements and that vote does in fact bind all the carriers -- so in this case, U.S. Airways wanting to do improvements to their baggage system, for example, they would like to see a project like that move forward. The City would like to see that project move forward as well, but, in fact, there is an impact on the other carriers. Even if they only have three, four, five percent of our total passengers, they're going to pay part of that debt service, and their attitude is, Well, what benefit are we getting from that? The role that we have played -- 48 5/8/07 - WHOLE - BILL 070220, ETC. and I think we've done it very effectively -- is, we try to maintain a balance. We present MII projects in a way so that if there is one beneficiary airline, we will propose projects that will be of benefit to the other carriers as part of a package. We also have passenger facility charge money which we use for various capital projects, and we can try to balance the equation sometimes by agreeing to use passenger facility charge revenues to do projects that would benefit the greater good but still push for the project that benefits the one carrier. And, again, our reasoning is -- and Ed has pointed this out very eloquently to me many times -- is that in the end, we want the customer, we want our citizens, our passengers, to have a good experience at the airport, and if two-thirds of those passengers are running on one airline, it does make sense to help that airline to improve its 49 5/8/07 - WHOLE - BILL 070220, ETC. infrastructure. So I think a lot of it has to do with the way we manage the MII process, the majority-in-interest voting process. And even though U.S. Airways is quite aware and has been aware for as long as I've been at the airport that they have the ability unilaterally to shove projects down everyone's throat, figuratively speaking, I think we've done a really good job -- and credit to them as well -- that we've been able to balance those types of improvements to the airport by just good negotiating skills, rational thinking and reminding them -- and this doesn't always involve us, but they work in a different capacity at another airport where they're not the dominant carrier, and if they become Draconian or self-serving too much at one airport, they can suffer the consequences at another airport where they're the minority carrier. So among the airlines 50 5/8/07 - WHOLE - BILL 070220, ETC. themselves, there is a certain amount of fair treatment, because United can dominant Chicago, American can dominate Dallas, and Delta can dominate in Atlanta, but they all have to operate different outposts in airports around the country. So they do tend, I think, to be reasonable, and we play a pretty significant role in coordinating that as negotiators.

Is that threshold that we have in the MII, is that common in Atlanta, Chicago, Dallas?

That is the standard in the industry we found when we tried to rewrite it.

D and E -- everyone loves B and C, what you did there. I think it's nice as anything in the country from a user standpoint. I mean, our physical limitations, we have nothing on the outside of security. I mean, some airports have the ability to allow people to have some amenities prior 51 5/8/07 - WHOLE - BILL 070220, ETC. to security or if they're waiting and they're not flying. We're sort of limited by geography there, but I think we do really well with what we have. B and C was done before Southwest. Southwest now has what percentage of your traffic?

About percent. 10

Which is 11 probably double anybody else, except U.S. Air?

U.S. Airways, I guess, is about 65 percent, most recently Southwest at 11, and the next group of Delta, American, United, they're all hovering around three or four percent.

So it's almost triple or quadruple what anyone else has. I know something is going on at D and E. I don't know if it's going to be quite what is B and C, but can you describe it? Because I think it will be -- I mean, Southwest has really made 52 5/8/07 - WHOLE - BILL 070220, ETC. an impact in the airport. I think it actually helps with competition with U.S. Air for the consumer. Maybe not for the airline, but for our traveling public. Could you just go over those improvements that are going on?

Yes. S. Airways as the majority-in-interest vote at the airport for the bond issues that are supporting this construction. The primary construction that you would see today is between the ticket counters of Terminal D where United, Continental and AirTran operate today and Terminal E where we have Southwest, Northwest and Delta. There's an empty space, which is actually being filled in as we speak. Structural steel is going up, and that will be -- that one connector will consist of three levels. 53 5/8/07 - WHOLE - BILL 070220, ETC. The bottom level will primarily be a state-of-the-art outbound baggage system for both Terminals D and E, for all those airlines that I mentioned, and it will include an in-line explosion detection system, which is the newest way to handle bags so they don't have to be taken on and off conveyor belts to be checked for explosives. The second level, which is where the passengers board aircraft, as you can come up from new ticket counters that are going to be created downstairs, you'll come up to a giant merged security checkpoint. And whereas today over at Terminal D we have four lanes, in Terminal E we have four lanes in what are really very temporary and not ideal configurations that have evolved since 9/11, in the new construction we will have a 14-lane checkpoint that will serve both terminals. So you'll come upstairs outside security. You'll go through, I guess, the shortest line that you can 54 5/8/07 - WHOLE - BILL 070220, ETC. find, and after you're screened, you will be in a common secure side space whereby you can walk to E or D, and we will present passengers immediately with a beautiful new concession program right at that point after they've come through security. Not quite as large as what we have in B and C, but similar in concept. And the other great thing about that is that you will then be able to walk freely inside security from Terminal E all the way down past D, C, B, A East, A West. That will all be common inside security. So we think it will be a great improvement. The next phase of the project will be the addition of three more gates down at the end of the Concourse E, and we will combine the two baggage claim buildings, D and E, into one giant bag claim building, very similar to what we did at B and C in the '90s. And I think that not only will this be an improvement in terms of the 55 5/8/07 - WHOLE - BILL 070220, ETC. passenger experience going through a lot of naturally lit space where the security checkpoint will be not as threatening, it will be very welcoming, but we will focus, as we have in the past, on trying to get local vendors into those concession areas, again, to help promote the notion that this is the City of Philadelphia and that we have a lot of great offerings here as well. So that's sort of an overview. There's a lot of other stuff. The third floor, they're going to move our offices and some other facilities from the second level where they are today up to this newly created third floor, and that will help to create the additional space for these concessions and for the checkpoint. It's an ambitious project, but it keeps us competitive with other airports and, again, helps us to be moving toward an evolution that has more and more common use ability for people to circulate from one end to the other to 56 5/8/07 - WHOLE - BILL 070220, ETC. the airport without regard to which particular airline or which terminal their gate is. I didn't want to forget. One of your first points, though, was, we do have very few offerings outside security, and what we have discovered since 9/11 is that they have a very hard time making ends meet. Passengers, for the most part, want to get through the screening process before they do their shopping and buy their coffee, et cetera. So, in fact, we've lost some vendors over time who tried to operate outside security. We do have Lamberti's in Terminal D outside security. We have some news and gift offerings.

We have some small concessions in the baggage claim areas. S. Airways left about -- I think a thousand people or so were stuck in the ticket lobby. They were outside 57 5/8/07 - WHOLE - BILL 070220, ETC. security and they couldn't get back in because they didn't have -- they weren't rebooked yet. They didn't have a boarding pass. We actually fed 300 people with sandwiches and coffee during that procedure, but that's one of the things we recognized, was in a situation like that, we really need to find a way to bring the food and concessions outside security. Although it's a highly unusual situation, it is something we learned from.

When is that job going to be completed, Charlie, that project?

It will be done in phases. The connector building will be done late next year. The new gates and the baggage claim connector will not be completely done until '09. And we're actually looking right now at some ways to accelerate that process. So I'm giving you conservative dates.

And is 58 5/8/07 - WHOLE - BILL 070220, ETC. anything being done as part of this overall project, now that you're going to have this great security in '09 at D and E, with B and C?

Yes.

B and C is kind of tight. They don't have a lot to work with there.

B and C, which were considered state of the art when they opened in 1998, they each have four checkpoint lanes. Mark Gale and his team have come up with a very creative initiative that will add one lane to each of those before this summer. So by the end of this month, B and C will each have five security checkpoint lanes. That is only a temporary improvement, though. We are working with U.S. Airways to find a way to make something bigger like a common-use checkpoint that has more lanes. They have in fact also driven a lot of their traffic in the last few years over to Terminal F. So Terminal F 59 5/8/07 - WHOLE - BILL 070220, ETC. is actually the busiest terminal in the airport today, even though it was just built for small planes. That checkpoint used to be the easiest one to get through. It's pretty congested today. So it's kind of a never-ending evolution, but you're right on target. We do have to work on B and C next. We do have a really great checkpoint at A East that opened recently, though, that if you haven't been through it, it's worth checking out.

Last thing, do we control the cabs at the airport or does the Parking Authority?

We control them in the sense of we dispatch them. When a passenger needs a cab, we have employees who call down the cabs. The actual regulation and the regulatory authority over the cabs rest with the Parking Authority, and we've been working with the Parking Authority on some initiatives, because obviously we have 60 5/8/07 - WHOLE - BILL 070220, ETC. joint objectives to try to make cab service pleasant and clean, et cetera, for our passengers. We do things when we have big conventions come into town. You've probably seen where we do a cab wash. We bring in a portable like a tank truck with car wash equipment, and every cab as it's dispatched, the cabbie gets a free lunch, the cab is washed, interior and exterior, if they're willing, and we also when they're not looking we stick a deodorant on the rear-view mirror to make sure that the arriving passengers have a good experience.

That's nice to hear. I wish we had it in the City. The main problems I've been hearing about cabs lately is that they require to have credit card machinery on their cab. They have it. They don't like using it. They tell people it doesn't work. I mean, it's been on Channel 29 or some other stations. And 61 5/8/07 - WHOLE - BILL 070220, ETC. it's really tough on visitors, particularly businesspeople. But in the City we have so many students and students that we want to encourage to stay here, tell other students to come here, and they're driven by ATM cards often times because parents don't want them to have cash. They'll put money in their ATM and they use it like cash. They get in a cab and they're all broken. And we know they're not broken. But you seem to have a little more ability to regulate that on the airport, because if they're doing that -- they pretty much made some just obscene gestures at the people from the TV stations that were asking them and had to get out of their cab because they wouldn't take a credit card. You can keep them off the airport ground, can't you?

We do have that authority. I'm not sure. I'm going to look for Mark Gale, if he's still here. 62 5/8/07 - WHOLE - BILL 070220, ETC. That enforcement is entirely done by the Parking Authority.

Do you do anything in concert with them on the airport ground where you've got double-barrel authority? Because you could keep them off if you want, right?

I'm going to ask Mark to come up since he's closer to that issue than I am.

Good morning. My name is Mark Gale. I'm the Deputy Director of Aviation at the Airport for Operations and Facilities. Councilman, we do meet regularly with the Parking Authority officials, along with the taxicab association and the limousine operators and whatnot. We do have airport operations personnel that do monitor all the roadway systems in the cab lot. Our monitoring and enforcement is primarily aimed at trying to make sure that the taxicab drivers and other ground 63 5/8/07 - WHOLE - BILL 070220, ETC. transportation operators adhere to the rules and regulations of the roadway, no 4 solicitation, making sure that their vehicles are properly marked and registered and whatnot. The actual enforcement and issuing of monetary fines, violations, removing operators from the airport, for the most part, on the taxicab side falls within the Parking Authority's jurisdiction. However, our operations people, along with our ground transportation management provider, do remove individuals and taxicab operators and limousine operators for failure to abide by rules and regulations, and if we do have somebody that we witness that is refusing to accept either a credit card or to take a short haul, we do remove them from the airport and penalize them and keep them or suspend them from operating at the airport for given periods of time, depending upon the infraction. 64 5/8/07 - WHOLE - BILL 070220, ETC.

So it's safe to assume that if you get in the cab at the airport, you're going to have a cab that takes a credit card or you're going to have a cab that's not using the airport anymore?

Councilman, I think that's a pretty safe assumption, and we're trying to, along with the Parking Authority, rigorously enforce that everybody is adhering to the rules.

Thank you, Mark.

You're welcome.

I'm finished.

Mr. Isdell, what taxes and assessments are the airlines liable for payments to the City or School District of Philadelphia?

Taxes or assessments, was that your question?

Taxes 65 5/8/07 - WHOLE - BILL 070220, ETC. and assessments.

The airlines would be responsible for essentially real estate taxes --

Move the mike closer to you, please.

Council President, the airlines would be essentially responsible to pay real estate taxes on facilities that they lease other than the terminal complex. So that would mean, for example, U.S. Airways, who leases an aircraft maintenance hangar just to the east of Terminal F, they are responsible to pay real estate taxes on that facility. For the most part, I believe that is the only facility that is owned by an airline outside of -- within the City limits that is outside of the terminal complex.

And I know that the airlines pay -- their employees pay the City wage taxes, and I do know that because we sit -- we straddle the border 66 5/8/07 - WHOLE - BILL 070220, ETC. between the City and County of Philadelphia. There are reporting requirements that all of our tenants have to adhere to when they have employees who may work part of the time in Delaware County and part of the time in the City of Philadelphia. I know there's a lot of paperwork associated with that, but to the best of our knowledge, the airlines do comply with the requirement that their employees all pay the City wage tax.

Do the airlines have any other tax liabilities to local governments?

To the local governments? Not that I'm aware of. This might be an Ed Anastasi question.

Well, in the airport complex itself, there are restaurants.

Oh, sure. I'm sorry.

They do sell liquor, so we get liquor by the 67 5/8/07 - WHOLE - BILL 070220, ETC. drink taxes.

Right. I apologize. I misunderstood.

Do they pay the business privilege tax also?

Yes, they pay business privilege tax. The gross sales of retail food and beverage last year I believe came in at somewhere over a hundred million dollars.

126.

And sales tax is paid on all that revenue. The parking tax is paid on the parking revenues that come in through the garages and the economy lot. The rental cars pay the stadium tax. I had those numbers in my head last night and I don't have them right now, but the rental car operations are all located within the City limits, so each and every one of them pays toward the stadium tax. And that's all that I can think of right now. 68 5/8/07 - WHOLE - BILL 070220, ETC. Anything else?

And I would just add that they're required to pay, not only the airlines but our concessions, are required to pay any taxes that --

Any other business would have to pay.

-- the Revenue Department requires them to pay.

Thank you. Does the City purchase policies of insurance for the airport or is the airport self-insured?

We actually have property insurance and we also have liability insurance.

That's correct.

We're guided by the Office of Risk Management in terms of how those policies are entered into. And I'm not sure if we have any other policies. I think the reason we carry those as opposed to being self-insured is 69 5/8/07 - WHOLE - BILL 070220, ETC. a result of the relationship we have with the tenants and the airlines that in some cases requires us to be insured.

That's correct.

What are the premiums that we pay; do you know?

We pay annually in property insurance and in liability insurance approximately, I would say, between $1 million and $1.3 million annually.

Are these considered as airport expenses which are paid to the City pursuant to the Use and Lease Agreement?

Yes, they are. They are part of the definition of "operating expenses" which the airlines have to pay through their rates and charges.

Do the terms and conditions of the proposed Use and Lease Agreement alter in any 70 5/8/07 - WHOLE - BILL 070220, ETC. manner the obligations of the City to the holders of the Airport Revenue Bond?

I would say that they do not. The only legislation which we put forth was the Seventh Supplemental Ordinance, which will be an amendment to the General Airport Revenue Bond Ordinance, but the purpose of that is really to bring in to the revenue bond pledge the Outside Terminal Area Cost Center, which actually improves revenue bond coverage and it really will be a benefit to the bondholders.

Thank you. The Chair recognizes Councilman Kelly.

Thank you, Madam President. Mr. Isdell, I just want to know, are you responsible for the short-term parking garages?

No. Those are operated by the Philadelphia Parking 71 5/8/07 - WHOLE - BILL 070220, ETC. Authority.

I guess I just want to know if there's any plans to expand any of those facilities. And the reason why I say this is because numerous times that I've been into Terminal D and any time I arrive there, they're always full, and I'm told that, Oh, if it's a Wednesday or a Friday, it's impossible. You end up going to A. If you're lucky, you'll find a space up in the top, somewhere up in the top level. And I just wanted to know if there's any possibility of adding a couple more levels onto those facilities.

We're actually working with the Parking Authority on a couple of initiatives. One right now has to do with expanding the economy parking lot. I believe they are also interested in some new construction, some garage construction, which would have to be done as -- they would sell parking revenue bonds. I think they would have to come 72 5/8/07 - WHOLE - BILL 070220, ETC. to City Council to do that. And we would like to see that happen. We definitely -- we have 18,000 total parking spaces at the airport, but it never seems to be enough. As you mentioned, there's certain days of the week when we literally turn people away and they go and spend their money in a lot that's off airport. That's not the optimum for us, not only because we lose the money, but because it's less convenient for the passenger and they have further to go to get back and forth to their cars.

That's very true.

I think the economy lot improvement would come first, though, before the new garages could be built.

Another question that I have, is it possible to make it more comfortable for people who are waiting for passengers to come out of 73 5/8/07 - WHOLE - BILL 070220, ETC. a secured area; in other words, the secured terminal? I've noticed many times that you're waiting there an hour, sometimes more, waiting for passengers to come out and there's nowhere to sit, there's nowhere to do anything other than just stand there and wait.

We've added not very much permanent seating -- that's a result of 9/11 where you can't go down to the gate with your relative or friend and you can't go down to meet them when they come off the plane. So, yes, people congregate right at the exit lane at the checkpoint. We've done some things. We've put more flight information displays in that area. We've put rocking chairs wherever we could fit them in there, because permanent seating, unfortunately, in most of those locations, we just can't fit it in in a way that doesn't end up becoming a safety hazard. But you will see an improvement 74 5/8/07 - WHOLE - BILL 070220, ETC. with the D/E project in that project I described earlier. There will be a lot more room for us to have seating outside security. And as we do -- as we work through the design for improvements to B and C checkpoints, the same thing will happen. This is a consideration. Under the present situation, though, we're pretty much constrained by the space there. But I'll have our people take another look at that, Councilman. We might be able to do something better than what you've experienced.

Thank you. Thank you, Mr. Isdell. Thank you, Madam President.

You're welcome. The Chair recognizes Councilwoman Tasco.

Thank you. Let me ask you a question about the insurance. Is that a bid contract, a no-bid contract for the insurance? 75 5/8/07 - WHOLE - BILL 070220, ETC.

The process is for the Risk Management Department within the Finance Department to handle the actual initiation, and that is done through an RFP process that is handled by their organization, and we have a liaison that works with them regarding getting them the information they need to put into that RFP so they can receive proposals.

Let me just ask you a question, Mr. Isdell. Who has the responsibility for keeping the bathrooms clean?

That is the City's responsibility. If they're the public bathrooms that the passengers use, that's our responsibility.

A number of times I've come through the airport at night -- and you know I've called you about that -- and sometimes the bathrooms are in deplorable condition.

We do have -- we 76 5/8/07 - WHOLE - BILL 070220, ETC. use in-house staff. We have close to 300 custodial workers who are responsible for cleaning the bathrooms, the terrazzo floors. A lot of the work does get done overnight, because during the day hours -- and it seems like we never have a lull anymore -- it's very difficult to do some of that cleaning while the passengers are moving through the building. But what we have found is with dispatching of custodial crews, even if we keep them posted at the busiest restrooms, really in a matter of minutes a restroom that was cleaned can be completely trashed by an arriving flight. It is a never-ending battle. It is our responsibility. We focused in 2005, we called it "The Year of the Restroom" and we focused a lot of our forces, our activity, on making the restrooms more presentable, brighter lights. Ladies' rooms in particular there are concerns about where to put 77 5/8/07 - WHOLE - BILL 070220, ETC. your pocketbook, security, et cetera, and we made a number of improvements. We also put artwork in the restrooms, changed some of the interior finishes. But cleanliness is really just basically a day-to-day operation. I think on the whole we do a pretty good job, but I do get complaints like yours, and I think it's just a product of the fact that we're now squeezing almost 32 million people through a facility that we never thought would have that many people in it. So we continue to hire. The hiring process sometimes can be a problem. We go through the City Civil Service system. We tend to use up the custodial worker list very quickly. A lot of the people when we go to interview them, they have to go through this federal background check process and they get eliminated before we can even interview them. So it's not an easy challenge, 78 5/8/07 - WHOLE - BILL 070220, ETC. but I certainly apologize for any negative experience that you've had, and we will try to do better. And I don't know whether Mr. Gale wants to add anything to that as the Deputy in charge of operations and maintenance.

The other thing is the issue of hot water. The water never seems to be hot. Do you have hot water at the airport?

Do you want to address the hot water issue?

And the bathrooms.

Thank you, Councilwoman.

You know, I'm a member of the Airport Advisory Board. I'm of counsel. So when I go into a ladies' room and people are complaining, I just listen to the complaints and then, of course, I come back and I call Phyllis about what's going on. But it's hard to listen to 79 5/8/07 - WHOLE - BILL 070220, ETC. that, or they blame Philadelphia and this is the worst airport in the country and all that kind of stuff.

I appreciate you sharing that with us, and we're embarrassed and we apologize for that, but I think Mark could shed a little bit more light on the daily operation.

I would like to echo Mr. Isdell's comments and apologize. It is an area of responsibility of mine directly to oversee that operation, and we are working hard to make sure that the bathrooms are clean and well stocked every day. We do a lot of the heavy clean work at night, cleaning carpets, terrazzo floors, restocking the bathrooms, and during the day we do a lot of going in quick, making sure that we have paper towels, toilet paper, soap and detergents. But to follow up again, yes, we do have hot water. Most of the facilities that we have now are 80 5/8/07 - WHOLE - BILL 070220, ETC. hands-free facilities for sanitary reasons and so there is no longer any individual hot or cold knobs in any of the bathrooms. It's a blended mix, which ends up being more of a warm temperature water with automatic sensors to save water and the like. In addition to going in and doing a lot of the improvements that Charlie already mentioned, as part of the D/E project, we're going to be going in and renovating some bathrooms in those two concourses. We do have in our capital improvement program, the pre-approved capital improvement program that's in the Lease, a project to go in and actually renovate and restore some bathrooms with different finishes that hold up a lot better and look a lot cleaner than what you may find in some of our older restrooms today. So it's an ongoing process, as Charlie indicated, and it's one that we have to stay atop of. And, again, I 81 5/8/07 - WHOLE - BILL 070220, ETC. apologize for any inconveniences that you've had.

When you have the automatic sensors for the water, if a unit -- say the end unit is used more, so the water may be warmer on this end than the one down the corner. Is there some way that the water stays -- when you use the faucet, the water comes out cold and then it goes off and then it takes a while before it warms up. I mean, is there something you can do about it?

It shouldn't work that way, Councilwoman, but I promise that I'll go back and I'll talk to our maintenance personnel and see if there's things that we do to help better adjust it and make sure that we avoid either particularly cold water in the winter and overly hot water in the summer when you're looking for the exact opposite when you're washing your hands.

You should 82 5/8/07 - WHOLE - BILL 070220, ETC. have hot water all the time.

All the time. Absolutely.

One other question. You talked about the cabs. Is there notice in the taxi, in the cab, where you notify the rider that this cab does accept credit cards and if you are turned down, they can report it someplace?

I believe that is required, Councilwoman. I'll have to double-check, but I believe that the Parking Authority regulations do require for that to be posted, along with their other tariffs.

Okay. Oh, one other thing, Mr. Isdell. Once I came in from out of town, I wasn't on the international flight, I was on a local flight, but I went into the international terminal for some reason, but the bags weren't there, and it was winter and we had to walk down to B/C. Does that 83 5/8/07 - WHOLE - BILL 070220, ETC. happen often?

I have heard that complaint before and I think it's similar to Councilman Rizzo's story that he told, and the only thing that I know from experience is that if U.S. Airways, for example -- and most likely it was U.S. Airways -- if they bring you into a common-use gate, as we call it, on the international terminal with a domestic flight, which could result if all their other gates are in use, or for some other operational reason, they may be planning to take that same plane after it's empty and fly it to the Caribbean, for example. So it goes -- it's easier for them to put it in the international terminal. What we have asked them to do -- and more and more we supplement this type of service with our own staff. We have a growing public relations staff, but what we think they should do is have either the flight attendant or some airline employee as you're getting off 84 5/8/07 - WHOLE - BILL 070220, ETC. the plane say to you, We are in Terminal A West, for example, but your bags will come out in Terminal A East because this is a domestic flight, it's not an international flight. Our experience is that they don't go to that trouble and people assume, Well, I'm in A West, so my bags should be in A West, or I'm in A East, my bag should be in A East. It's a small thing, but it's the kind of thing that we need to be, I think, a little more aggressive about explaining to them what a negative impact this has on the passenger experience. And the old story in this business as long as I've been here is that they kind of -- the airlines in general, not to mention any one in particular, but they tend to forget about you once you get off the plane, and looking for your bags and all, you're suddenly -- you have no one to call on. There's nobody in the baggage office to talk to. If you want to call somebody on the phone, you get an 85 5/8/07 - WHOLE - BILL 070220, ETC. 800 number and you're speaking to someone far away. So these are airline service standards that -- we have put some language in the new Lease that calls upon them to live up to best practices in their industry and certain industry standards. We would prefer not to have to actually fine them or default them or take any extraordinary action, but we can be a vocal advocate with the airlines to do a better job with service, and that's what we're trying to do.

Thank you. I'm finished, Madam President.

The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good afternoon, gentlemen.

Afternoon. COUNCILMAN DiCICCO: You may have testified to this earlier, Mr. Isdell, the number of people passing 86 5/8/07 - WHOLE - BILL 070220, ETC. through our airport on an annual basis?

The number? COUNCILMAN DiCICCO: Yes.

In 2006, it was 31.8 million passengers. The year before, 31.5 million. And the year before that, 28.5 million. So we've continued to grow. COUNCILMAN DiCICCO: Do you expect continual growth?

Yes. I believe the FAA forecasts that by 2010 we'll have about 35 million passengers. By 2015, it could be as many as 40 million. COUNCILMAN DiCICCO: What is the average stay that a passenger will spend in any of the terminals? You go in, you get a ticket. If you have a ticket, you go through the cuing, through the security, and then there's a certain amount of time that you spend before you board generally. Do you have a number, general number, or time that a person spends 87 5/8/07 - WHOLE - BILL 070220, ETC. there?

I don't have a scientific answer for you. My own experience has been that the airlines and the TSA encourage passengers to come to the airport an hour before their flight, at a minimum, and two hours before an international flight. Whether you get through security and your ticketing process, which could take five minutes or it could take closer to a half an hour depending on time of day, day of the week and which terminal you're in, I think in many cases, though, people once they get through security, they have a half an hour or more to spend before their flight actually departs. And, again, that's just observation. I don't have science on that, but we have found obviously since 9/11 that people have a lot more time and they spend a lot more money after they go through security than they did in the old days. And also part of that is because 88 5/8/07 - WHOLE - BILL 070220, ETC. the airlines are not providing them with much to eat on the planes. COUNCILMAN DiCICCO: That's kind of where I'm going with this. Aside from the folks who are cuing up, bought a ticket, go in to take an airline to leave, you also have people who are transferring from one airline to another. Is there a number that identifies the amount of time those folks would spend at the airport? Because, I mean, when you go through there, the bars and the restaurants are pretty much full all the time, which is a good thing. I'm just trying to get a sense of --

Well, I think first let's remember that about two-thirds of our passengers are originating passengers from the Philadelphia area. So the other third, which -- so on an annual basis, about 10 million passengers are connecting from one flight to another and they're never leaving the airport. The airlines have a 89 5/8/07 - WHOLE - BILL 070220, ETC. minimum that you can't really connect unless -- I think you have to have at least 45 minutes between flights, your arriving flight and your departing flight, or they won't sell you a ticket, because they know that they might not be able to meet that turn-around time. So let's say we have a minimum of 45 minutes and probably a maximum up in the range of two hours before you're going to get a connecting flight. COUNCILMAN DiCICCO: A significant amount of time.

Yes. COUNCILMAN DiCICCO: One other question. There are one or two hotels that are connected directly to the airport?

The Marriott is the only one. COUNCILMAN DiCICCO: Are there any plans for any additional hotels to be built that you know of?

Not on our 90 5/8/07 - WHOLE - BILL 070220, ETC. property. From time to time the Marriott, because they've enjoyed very good occupancy rates, they've talked about expanding, although not recently. But currently on our property, there are hotel deals going on, I think, all around our perimeter that we're not always privy to. COUNCILMAN DiCICCO: I'm talking specifically to your property.

No. 13 COUNCILMAN DiCICCO: And is there room for expansion?

Hotel expansion particularly? COUNCILMAN DiCICCO: Yes.

I would say we could find room. COUNCILMAN DiCICCO: Any idea how many square feet? They're all laughing. I gave this to Rendell two, three years ago. He told me I was nuts. Thirty million people a year going through our airport. 91 5/8/07 - WHOLE - BILL 070220, ETC. Great casino business. They're only anticipating five in each of the casinos on Delaware Avenue, five million visitors a year. We already got 30 million already. We got a captive audience. I'm not asking you to promote casinos. I'm just curious if we have enough space to accommodate. I know it's the Council President's district.

Thank you. COUNCILMAN DiCICCO: But it's well beyond 1,500 feet from a residential community. Just curious. There's enough room to build a hotel?

Yes, and I think one thing we've learned --

Enough room for a hotel but not a casino. COUNCILMAN DiCICCO: Or a casino attached to the existing hotel.

No, no, no. Stop right there. 92 5/8/07 - WHOLE - BILL 070220, ETC.

If you look at Terminal A West, though, one thing we've learned is, you can always create available square footage by building over top of roadways and parking lots and things like that. COUNCILMAN DiCICCO: Okay.

So that's one idea. COUNCILMAN DiCICCO: Thank you. No further questions. Thank you.

Thank you. Mr. Isdell, on (C) under Mechanics Liens, this section starts with, quote, "Although prohibited by law," end of quote. Does this prohibition apply to the inclusion of this condition in the Agreement or to the filing of mechanics liens or other liens or orders against airport facilities?

I think I need the Law Department to help me answer that 93 5/8/07 - WHOLE - BILL 070220, ETC. question. I have Joe Messina, Divisional Deputy City Solicitor, standing by.

Good afternoon, Council President. I'm Joe Messina of the City Law Department.

Good afternoon.

The specific provision that you've referred to, first of all, states that it's prohibited to file any mechanics lien against airport property. If a mechanics lien is filed, if it's not immediately removed, it's an event of default under the Agreement. If you look at the last phrase --

So it does not apply?

That's correct.

Thank you.

Very often the airlines are doing their own work and a mechanic or other tradesman thinks they can file a lien. In the past we've seen 94 5/8/07 - WHOLE - BILL 070220, ETC. them filed. My staff sends out a letter and they're immediately removed.

Okay. I just wanted that to be addressed because of the section starting "although prohibited by law."

Yes.

Thank you. Can we talk about the airport security program? Can someone briefly describe what the City's TSA-approved security program is comprised of?

That's a Mark Gale question.

Council President, Mark Gale, Deputy Director for Operations and Facilities. The TSA is the Transportation Security Administration, and under federal law, the airport is required to produce a document called -- what we refer to as our ASP, or Airport Security Program, which essentially spells out an 95 5/8/07 - WHOLE - BILL 070220, ETC. agreement between the TSA and ourselves as to what we are responsible for looking after with respect to our security provisions, whether they be access control, ID badging, how we deal with our tenants, the process that individual tenants or airlines would have to go through in order to get security clearances at the airport to be able to move in and about our facility.

Thank you very much. Rule 15(C)2-12, this refers to the airline as an obligated party under the rule. Can anyone explain what are the duties of an obligated party?

Council President, do you have a page reference there?

-- I'm sorry; . (C), SVC Rule 15(C)2-12.

Madam President, Ed Anastasi. Each time the Airport issues 96 5/8/07 - WHOLE - BILL 070220, ETC. General Airport Revenue Bonds --

I'm sorry. I can't hear you.

Each time the Airport issues General Airport Revenue Bonds, the City and an obligated party has to sign an agreement. It's called a Continuing Disclosure Agreement, and that agreement requires the City to prepare financial statements and provide them to certain repositories at some period after the end of the fiscal year. An obligated party is, for instance, a party who at Philadelphia International Airport has a majority of the traffic, and under that circumstance, the obligated party would have to provide financial information on an annual basis.

I'm sorry.

Under that Continuing Disclosure Agreement, which we have to sign for every bond issue, an obligated party in this case for 97 5/8/07 - WHOLE - BILL 070220, ETC. Philadelphia International, U.S. Airways, would have to provide continuing financial information or make that financial information available to the City. So that language is in the Use and Lease Agreement to make sure that U.S. Airways is cognizant of the fact that, number one, it is an obligated party and, number two, it has to abide by this Continuing Disclosure Agreement.

Thank you. On (G), Passenger Facility Charges, "City should have the right to use such PFCs collected in any lawful manner." Does this mean that the collected fees can be used for purposes not associated with the airport?

The PFCs can be used for eligible projects, and what projects are eligible are really determined by the PFC regulation that the FAA has put forth. Each use of Passenger Facility Charge has to be approved by the 98 5/8/07 - WHOLE - BILL 070220, ETC. FAA, and the eligible projects are only projects which are on the airport.

Thank you. The Chair recognizes -- oh, he's on the phone. Councilman O'Neill has a question or two.

Councilman Kelly has requested that I make it short, and I promise to. Councilwoman Krajewski is not here, so Councilman Kelly is sitting in for her on the brevity orders. And since I just got off the phone with Councilwoman Krajewski, it's only fitting. Wireless Philadelphia, we are internationally known for this make-or-break project that's going to attract young people and make us hip. And I'm looking at Councilwoman Blondell Reynolds Brown, who is very much involved with this. We don't know how successful it's going to be, but we know it's cutting edge and we're trying to keep a 99 5/8/07 - WHOLE - BILL 070220, ETC. lot of these students here and attract the younger workforce from all around the world and companies that might be attracted to that. And when these people get tied up for three and four hours in the airport or when they get stuck because their planes are late or they go on them with their laptops, they find out that we're not so wireless friendly. Of all the WiFi hot spots in the City, we're not one of them. We've talked about this privately, Charlie, I know, and I just think there should be, even if it's just the Food Court area or something -- and now you're going to have two major food courts with your D and E -- there should be a place where people don't, as young people would say, get ripped off, because they feel if they're paying to use a computer in that circumstance, that particularly in a hip "next great city" atmosphere like Philadelphia, that they get WiFi. 100 5/8/07 - WHOLE - BILL 070220, ETC. Is there anything you can really do about this and do it in a way that is not going to bankrupt the airport? But other airports seem to be able to do it and it seems to me it's just a matter of will.

Well, we'd like to point out that we were one of the first airports in the country to have wireless Internet availability. That actually started back in 2004. The way we were able to get ahead of the power curve, though, was without getting airline approval. We would have had to have the airlines approve a capital project to install the antenna infrastructure, and at that time, U.S. Airways in particular, struggling through bankruptcy, did not see it as an essential need. So to get it done, what we did was essentially have the provider install the system at their own expense, and the result is that they are recapturing their investment through the user fees that are charged. We think 101 5/8/07 - WHOLE - BILL 070220, ETC. the user fees are reasonable, but certainly compared to zero or free, it's not -- it never sounds good.

Charlie, there's a difference between something on an expense account that thinks anything is reasonable that they can submit and somebody who is a student or a traveler who is always online. And this comes up and it's just -- it's a very unfriendly gesture. And I think most airports -- I mean, the City is doing it. We're doing it in our public places. What could be a more public place than the airport in terms of friendliness. So we have no plans to do it at this point?

Well, we have -- and based on your stimulus, we've been looking into this. What we tried in the second half of last year, we actually made the entire Food Court and concession area free for a period of three or four months, and the way we did that was that 102 5/8/07 - WHOLE - BILL 070220, ETC. we paid the bill. We paid the user fees, which are six ninety-five a day. Or how much a month? I think there's a monthly option. But it was prohibitively expensive for us to continue doing that.

Well, that's prohibitively expensive, but how about --

Because what happened was by making it free, we had mobs of people with laptops sitting on the floor, and we thought we would offset the expense by the fact that they would buy hamburgers and ice cream, and that is not really what happened. So it was a noble experiment, but it didn't work.

Well, Charlie, you were being hosed, as they say on the street, the same way the users are being hosed right now by your contractor. Now, each District Councilmember was asked to pick a WiFi hot spot, at least one in their 103 5/8/07 - WHOLE - BILL 070220, ETC. districts. If you would just give the Council President a second one, she could have it as the airport, and it's free whenever we get our Wireless Philadelphia infrastructure in. Could I suggest that would be a nice, friendly gesture to the Council President to have the airport be a WiFi hot spot that doesn't cost her another one at a rec center or somewhere or a park that she may be choosing?

If there's a way that we can do it that passes legal muster, because we also looked at buying out the existing agreement, and, again, I think we would have needed airline approval to get the money we need to buy out early.

I just ask you to be --

But I would certainly consider that. We would love to make Philly free. I did recently research this, and at least the most recent article that I could find, 104 5/8/07 - WHOLE - BILL 070220, ETC. Councilman, says that of the top 40 airports, only six of them are offering WiFi for free. Most of the others are charging something. It's a pretty developing area. We are happy about the fact that we had it early, but we're paying the price relative to the free service that you're talking about.

Just remember, Charlie, we're "Wireless Philadelphia." There's no Wireless Atlanta or Wireless Detroit. It's us. We're the ones in National Geographic. We're the ones that are trying to get on the front page of the New York Times and all that. I just ask you to be more aggressive on it. And the last question, parking lots, short term, any plans to build any more?

Councilman Kelly, I think, asked us that question --

Then I apologize. I'll get the answer from 105 5/8/07 - WHOLE - BILL 070220, ETC. Jack.

We're working with the Parking Authority both to expand economy and garage parking.

Okay. Thank you.

Thank you. Are there any other questions from members of the Committee? (No response.)

Do we have anyone else that would like to testify on the bills before us? (No response.)

Seeing no one, this will conclude our public hearing. We will now go into our public meeting, and the Chair recognizes Councilwoman Blackwell regarding Bill No. 22 070220.

Thank you, Madam President. I make a motion for the adoption of the amendment to said 106 5/8/07 - WHOLE - BILL 070220, ETC. bill. (Duly seconded.)

It has been moved and seconded that the amendment be adopted. All in favor will say aye. (Aye.)

Those opposed? (No response.)

The ayes have it and the amendment is adopted. The Chair again recognizes Councilwoman Blackwell.

Thank you, Madam President. I move that Bill 19 No. 070220 be reported out of Committee as amended with a favorable recommendation. (Duly seconded.)

It has been moved and seconded that Bill No. 25 070220 be reported out of Committee with 107 5/8/07 - WHOLE - BILL 070220, ETC. a favorable recommendation as amended. All in favor will indicate by saying aye. (Aye.)

Those opposed? (No response.)

The ayes have it and the motion carries. Again, the Chair recognizes Councilwoman Blackwell for the purpose of making a motion on Bill No. 070221.

Thank you, Madam President. I move that Bill 16 No. 070221 be reported out of Committee with a favorable recommendation. (Duly seconded.)

It has been moved and seconded that Bill No. 21 070221 be reported out of Committee with a favorable recommendation. All in favor will say aye. (Aye.)

Those 108 5/8/07 - WHOLE - BILL 070220, ETC. opposed? (No response.)

The ayes have it and the motion carries. Thank you all very much. Thank you. (Committee of the Whole adjourned at 12:30 p.m.) - - - 109 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on May 8, 2007, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)