Marketplace Redwood, BAA, which was British Airports Authority, and another one from a company called Tishman Developers.
Aramark was not necessarily qualified to respond, since they were actually a master concessionaire and not a developer. The RFP was specifically for a developer.
A master concessionaire actually operates the concessions themselves, where a developer subleases 167 Whole - Bills 040255, et al - 5/18/04 them to another operator.
Developer does capital improvements, and leasing, and management.
Okay. And what was the amount of the bid or... I mean, I understand with concessions, regular contracts it's the lowest responsible bidder; concessions it's the highest responsible bidder. Was the winning bid?
The final financial consideration was tied to the number of enplanements, number of passengers that actually go through the airport, and a share of a profit-sharing arrangement.
Okay. The City participates in -- Is the City the other participants in the profit-sharing?
Okay. What does this contract generate? Is it for the City 168 Whole - Bills 040255, et al - 5/18/04 or for the Airport?
In 2003 the Airport received just over $7 million from the Marketplace concession program.
And is there a schedule of what the City expects to receive during the life of the contract?
Well, is there a minimum amount of money that the City has to generate from the contract?
I'm going to ask -- 169 Whole - Bills 040255, et al - 5/18/04 Councilman, if I may, I'm going to ask Ed Anastasi, Deputy director for Finance Administration, to respond to that a little more specifically.
Councilman, looking at the feasibility study that was submitted over to Council within the last week --
I'm looking at the feasibility study for the parking acquisition that was submitted over to City Council within the last week.
Okay. I don't remember seeing it, but I'm not saying that you didn't send it.
Okay. In Exhibit E 170 Whole - Bills 040255, et al - 5/18/04 of that feasibility study, there are projections for Marketplace Redwood revenues to the City for the fiscal years 2004 to 2009. And the projection for the current year which is fiscal 2004 is $8.6 million, and then that escalates to $9.3 and $10 million, and so on, up to a total for 2009 of $12,174,000.
This is in the feasibility study for the Airport Parking Acquisition bonds. And I'm referring to the Exhibit E...
Why would -- I mean, why am I trying to get information about Marketplace Redwood and their contract out of a feasibility study related to the City acquiring the parking garages?
Because a feasibility study not only includes information and 171 Whole - Bills 040255, et al - 5/18/04 financial projections from the Parking Authority, but on the Airport as a whole because --
May I try to just respond to your original question, Councilman? I think, in terms of when the award was made back in 1994...
...associated with this, my understanding -- And remember, I don't believe any of us was part of that negotiating team. So, we're recreating this as best we can. But at the time, you would have been looking at per emplaned passenger offerings by the different competitors. And then we would be projecting -- As the Airport, we would be projecting --
-- out how many emplaned passengers we would have over that 15-year period.
And then we would do a calculation that would show the projected revenues.
Right. I mean, the companies had to show us, as a part of their bid, I assume, some minimum amount of revenues that the City would expect to get if they were the winning bidder, right?
Yes. And I do want to just clarify, too, it was not a bid situation. It was done as a request for proposals. And then the existing lease was then negotiated, as a result of that original request for proposals. So, it wasn't, as you characterized it, normally a concession bid. The winner would be the high bidder. In this case, I believe the Airport set forth a number of criteria, including that payment per 173 Whole - Bills 040255, et al - 5/18/04 emplaned passenger, as well as a minimum annual guarantee, regardless of the number of emplaned passengers, and then a number of service criteria that were built into the negotiating process. And essentially, the agreement was reached with Marketplace as a result of that process.
Well, but now something that you said causes me to now ask: Was the winning bidder subsequently the highest responsible bid?
I -- I -- I -- I don't believe -- I don't believe so. The winning -- the highest financial offer, I believe, actually came from BAA, if you Could quantify it as such. But negotiations were unsuccessful with BAA.
As best I recollect, BAA was unwilling to provide a certain number of other criteria that were required as part of the bid process.
And one of the most 174 Whole - Bills 040255, et al - 5/18/04 critical --
-- Councilman, was MBEC -- or MBE participation. The City had a very aggressive requirement, and I believe that BAA ultimately was not agreeable to meet the goals that were set forth originally by the City.
That I don't have off the top of my head. We can -- We can probably dig that out. Actually, Jim Tyrell does have that.
Actually the, goals as required under the Marketplace agreement, provide for a two-tiered test. One is based on the number of locations. Another is based on percentage of sales. For example, in the food and beverage category, the goal is 40 percent of all locations have to be leased to DBEs. In addition to the 40 percent --
I'm sorry. Say 175 Whole - Bills 040255, et al - 5/18/04 that again.
40 percent of all food and beverage locations must be leased to DBE companies. In addition to the number of locations, 45 percent of all sales are to be generated from those 40 percent of locations. It's a two-tier test.
40 percent of all food and beverage locations must be...
Must be leased to DBE owned firms. And the second part of that goal is, those 40 percent of locations must produce 45 percent of the total sales. They are goals.
45 percent of sales... of all sales must come from those companies?
45 percent of all sales from food and beverage locations must come from those 40 percent of locations owned and operated by DBE companies.
Who developed this? 176 Whole - Bills 040255, et al - 5/18/04
It was actually negotiated with Marketplace. As best I recall, the lead negotiator was Stephanie Franklin Suber.
I presume, again -- and not having been a part of this -- I believe MBEC participated in the setting of the goals at that time.
Absolutely. I mean, the idea of setting the goal and percentage sales is a two-tiered test is actually beneficial to the DBE firms because it ensures that they will get prosperous locations because they have to produce a higher percentage of sales. It's not just a single one-tier test where you would give a certain number of locations, possibly not necessarily in the best locations to the DBE owned firms.
Can you provide us, through the Chair, with a list of -- You gave 153 locations. Does that mean there are 153 individual businesses?
I can give you a 177 Whole - Bills 040255, et al - 5/18/04 breakdown of those, if you'd like.
Well, for example, of the 153, there are 53 food and beverage locations, there are news gift, there 8 are 38 specialty retail. 9
Yes. There are up to 11 but not always 32 retail merchandising 12 units, which are the carts, and 13 13 services, es such as check cashing, foreign 14 currency. 15
Okay. Actually, what I was going to ask you for is, I'd like the names and the principals of all of the locations and a designation, if you can, of the, I guess, demographic status by gender and race regarding those locations. Now, what are the criteria to be a concessionaire at the Airport? 178 Whole - Bills 040255, et al - 5/18/04
Well, as opposed to... Basically, we try to operate the program the way you would operate a retail mall, and that's why we have the developer doing it. So, the developer essentially maps out, you know, how many retail shops; where the best place, for example, to put a shoe store is, as opposed to a TGI Friday's. That work is done, and then when they have identified the types of vendors that they're seeking, they do their own RFPs, and they select the tenants to fill those slots, based on criteria that I think are probably unique to each individual case. You know, whether it's a bar restaurant versus a retail -- specialty retail shop. I'm not sure if that's the type of information you're looking for.
Well, a person shows up and says, I want to run whatever it is that I want to run type of business. Is there any process or procedure through 179 Whole - Bills 040255, et al - 5/18/04 which a determination is made that the person either has the financial wherewithal to open this business, or own this business, or run this business, or has any particular background or expertise in that particular business?
Well, unfortunately, since the lease is about six inches thick, and I got it last week, and I've been busy reading a couple other documents recently, I haven't had a chance to go through the entire lease. But I'm left with the impression almost, that since you have this lease with the company, does the Airport have any role or responsibility in any of this? Do you get to say anything about what goes on or do you just you sign a lease and kind of turn it over to them and they do whatever they want? I mean, I understand they're not flying airplanes out there, but... 180 Whole - Bills 040255, et al - 5/18/04
The Airport does retain the ultimate right of approval, but we have allowed Marketplace to negotiate the leases in accordance with the -- with the lease that you're referring to, the big thick lease. And they do the necessary industry type of background check, in other words, to see if the company has experience, if the company has the financial wherewithal. There is a review also as part of the process if there is a DBE component or if the vendor is a DBE prime vendor, then that has to be reviewed and approved by MBEC. And ultimately, the leases that are agreed to between Marketplace and the individual tenants are... As I understand it, those are reviewed and approved by the City's Law Department, to make sure that they're correct as to form and in accordance with the master agreement before ultimately we, the Airport, representing the City, say, okay, you can proceed. 181 Whole - Bills 040255, et al - 5/18/04
Well, I heard about everyone else's involvement in the process. What I'm still trying to understand is what is the Airport's involvement. I mean, does the Airport have any say, in terms of whether company X or company Y or person Z or person A or B gets to have a concession out at the Airport?
I didn't ask you -- I didn't ask you about your policy. I'm asking about the contract. Do you have that right, under the contract, to exercise that kind of decision making or discretion or veto?
I do believe we have the right of veto. I do not know that it's ever actually been used in the -- in the term of the lease.
That was my next question. Have you ever turned down a company trying to do business out at the 182 Whole - Bills 040255, et al - 5/18/04 Airport?
We have never disproved a sublease that has been submitted to us by Marketplace.
And if I can just say, again, to be a little more specific, my sense, as the Director of Aviation, is that the reason we've contracted out with a shopping mall development company that specializes in retail and food and beverage, not only in our Airport but at other locations in the United States, that it's best to leave them -- those who have the expertise to do the negotiation of those leases, and as I say, to merchandise the available locations in the Airport in a way that makes sense to them as retail management people. COUNCILMAN DiCICCO: Point of information.
Sure. COUNCILMAN DiCICCO: On that same line of questioning, are you saying that you leave it up to the sole discretion of 183 Whole - Bills 040255, et al - 5/18/04 the developer to decide on the tenant mix, if you will, based on their experience of running larger retail shopping mall kinds of facilities?
Yes. COUNCILMAN DiCICCO: And if you do, does not -- and I'm kind of going where Councilman Nutter is, I think, is what does the Airport involvement -- I mean, you must want a certain type of tenant in the facility, and there's certainly tenants you probably would not want to see in the facility. I mean, you certainly would not want -- I don't mean this to be funny, but you wouldn't want a gentleman's club in the facility either. I suspect you would not, although that would probably be rather interesting, I guess. But there's some point the Airport --
There would be a lot of people missing their flights. COUNCILMAN DiCICCO: A lot of people 184 Whole - Bills 040255, et al - 5/18/04 missing their flights, yeah. Brings a new meaning to take it off -- taking off, but anyway...
We do have the right to veto these leases, but I guess fortunately we've never had an incident where there was a disagreement on the part of the Airport or City management, with what the retail developer was proposing. And we could if we did -- if there was something inappropriate. COUNCILMAN DiCICCO: We could. That's the question. We can. You do have veto power, if you will, to suggest that this particular tenant or tenants that are part of the development's suggestions, recommendations or leases, to reject those, if, in fact, you felt as though they did not complement the operation of the Airport.
And I think, if I can 185 Whole - Bills 040255, et al - 5/18/04 just also say this: When this agreement was first signed in 1994, in many ways it was ground breaking, not only in terms of the high percentage requirements for minority and female participation, but also in terms of a number of other criteria that were in the deal, including local -- There's a percentage of local participation that's mandatory. There's a street pricing provision. And so, our focus generally in managing this process has more to do with making sure that those criteria are being met, in terms of service, price, local and DBE participation. And as I said, fortunately we've never had a shop or a restaurant proposal brought to us that we felt didn't meet all the necessary criteria. COUNCILMAN DiCICCO: Thank you. Thank you, Councilman.
Sure. Are you told at some point in time, other than your normal rounds around the 186 Whole - Bills 040255, et al - 5/18/04 Airport, when a company becomes a lessor out at the Airport?
Yes, Councilman. We have periodic meetings with Marketplace, depending on what's going on at the time. For example, in the new International Terminal, Terminal F, leasing projects were ongoing. We would meet with Marketplace at least every couple weeks to talk about their leasing plan, to talk about their progress in their leasing activities.
I understand that. What I'm asking you is, are you told before a lease is signed or after a lease is signed about a leasing arrangement?
By the time a lease is signed, we will... we would have known that the lease is going to be signed because of the progress reports and the meetings we have with Marketplace.
Okay. Let's talk about DBE or MBE or any other type of participation. You have a test here, 40 percent of the locations must be DBE owned 187 Whole - Bills 040255, et al - 5/18/04 firms, 45 percent of sales must come as a result of those 40 percent firms. What are the criteria for minority participation?
I'm not sure I exactly know. I know they need to be certified by the City's Minority Business Enterprise Council.
Okay. And is there any requirement that they have any particular background or expertise in the business in which they're seeking to operate or have a joint venture relationship?
I'm not sure exactly what the requirements are for certification.
I'm not asking you about certification. If you're going 188 Whole - Bills 040255, et al - 5/18/04 to operate a concession out at the Airport, what I'm asking you is, is there any requirement, within either the lease arrangement or Airport rules and regulations, that if you're going to have a business out there, that you have any particular background or expertise in running that business?
Yes. I would say yes. And again, I'm not a hundred percent sure if I'm responding to your question directly, but if we are presented with a proposed lease that involves a partnership, and the minority partner is part of that partnership in order to meet the... these DBE goals that we've been describing, our position is that the prime proposer clearly has to have experience and expertise in the area required. The partnership that's made up between that prime person and their minority partner or sub is really -- That 189 Whole - Bills 040255, et al - 5/18/04 is something we have not, I don't think, participated in. In other words, if that partnership is approved by MBEC, and the --
Hold on for a second. Does the MBEC approve partnerships or do they approve individual businesses to be certified in whatever their area is?
I think, to be honest with you, it would be best to probably have the MBEC answer that question. I'm not a hundred percent sure of the answer to that question.
Well, I appreciate your honesty. But, I mean, you are the Director of the Airport. You've got 153 locations. You've got a contract 190 Whole - Bills 040255, et al - 5/18/04 with a company that's responsible for putting people in business out at the Airport. How is it possible that you wouldn't know what the criteria are to have a business out at the Airport or to be a joint venture partner?
Well, I'm telling you that our criteria would be that the prime operator of either the restaurant or the store would clearly have to have experience in the business.
Well, I understand that, and that's a good thing. What's the purpose of the... Maybe it just kind of begs the fundamental question. What's the purpose of the participation goal?
Well, my assumption is that the purpose is to get participation for a disadvantaged class, either minority or female or disabled, and an opportunity for that --
In the 191 Whole - Bills 040255, et al - 5/18/04 particular area of expertise or just because they happen to be black or female or, you know, Serbian or Croatian or, I mean, whatever the issue of the day is. What's the goal?
Clearly, there should be... I think there should be a criteria that they also have experience in that -- in the area that they're going to work in, but I'm not really sure that that is a legal requirement. I'm not able to answer that. I think that in some cases --
I'm not asking you a legal question or a legal requirement. This is a policy issue. I mean, what is the purpose of having a joint venture relationship between company a, that at least according to your perspective, at least -- you can call them the prime, you can call them the major, you can call them the majority company, that they at least flow what they're doing. And then somehow we have this arrangement where we have to meet, as laid 192 Whole - Bills 040255, et al - 5/18/04 out and established, certain minority participation goals, which I support. What I'm asking you is is the purpose of that to further enhance a particular business person who's in the same business or similar business as a partnership, a mentorship -- you can call it whatever you want to call it -- or are we just trying to fill out the forms right, check off the boxes, and make sure that we can say that there was minority participation, regardless of whether or not the person is actually in that business or knows that business or operates that business anywhere else other than this partnership. So what's the purpose of the participation?
The purpose is as you stated, that they should be participating in, as you said, a partnership or mentorship. And I think that the other part of a partnership, at least as I understand it, also has to do with investment, in that 193 Whole - Bills 040255, et al - 5/18/04 even the primes who invest in these locations, there's a capital expenditure, obviously, that they have to make to fit out the spaces, to buy materials and supplies to get the business started. And I believe that there is an appropriate role for a partner in a business like that to be an investor and ultimately to make a return on the investment, without being necessarily an active, you know, worker at the Airport. I'm not sure, again, about the legalities, but my --
So what you're saying to me is that we have a program that in essence places a requirement on the overall business operation out at the Airport that 40 percent of the locations must be owned by DBE firms, 45 percent of the sales... of all sales in food and beverage must come from those firms, whatever the 40 percent of 153 locations is.
Yes. If I could 194 Whole - Bills 040255, et al - 5/18/04 clarify that to you just --
And... Hold on. And whether or not the DBE has any experience in that particular business, if they can either capitalize themselves, make a partnership or a relationship with another company, they can be in business in a business that they may have no expertise in. Is that what you're saying?
I think that that's possible. It's... I don't think it's the preferable situation. I was just trying to give you an honest response, that I do think that that is possible, yes. It's not -- it's not the objective.
Well, let's take it from the possible to the real. I mean, are there people in business out at the Airport, in whatever those businesses are, who either have not been in those businesses before or who are not actively operating or managing those particular businesses or have no particular background or expertise in that business, but they're 195 Whole - Bills 040255, et al - 5/18/04 in a partnership or have a location of their own?
I do not know. To the best of my knowledge, that is not the case. But I don't know specifically if every partner in every deal at the Airport is an active, you know, worker in the store or have experience in that particular area.
Let me ask you a question. As Director of the Airport, wouldn't you generally want to know that all of your vendors actually do know either what they're doing or have some background in the particular business that they're in?
What we would want -- Yes, I would want that. And I would anticipate that that would --
-- that Marketplace Redwood would manage that appropriately for us. That's what they were hired for.
Can you tell me today that you know for a fact that all 153 196 Whole - Bills 040255, et al - 5/18/04 locations are either owned or operated or have a joint venture relationship with someone who actually knows the business that they're in or has previous business experience in that particular industry?
Okay. So let me make sure I'm understanding this. Let me go back to my original question. How do you get a concession out at the Airport?
You get a concession by going to the Marketplace Redwood development people...
...making yourself known, or in the alternative which I think is more likely, is that Marketplace Redwood would be soliciting for proposals for locations where there is a specific need; there's a vacancy for a need, for a --
How do they conduct their solicitations? Are these newspaper advertisements? Is there an 197 Whole - Bills 040255, et al - 5/18/04 industry magazine? Is there a... You know, is it -- Would I found a notice in the In Flight magazine in the back of the seat in front of me on U.S. Air or Southwest or whomever? Where would you find a notice about being a concessionaire out at the Airport?
Marketplace has leasing experts who are very heavily into airport leasing now. They also run programs in other airports. They attend trade conferences. They go to shopping center conferences. For example, they'll be going out to the IC -- the International Conference for Shopping Centers in Las Vegas in the next week, I think.
Do you know if they contact -- Let's say, for instance, it's a bar or a cafe or a... you know, a food stand or something like that. Do you ever talk to any of the people in the bar business in Philadelphia?
They personally went to several of what were identified as Philadelphia establishments and canvassed those owners to see if they were interested in doing business at the Airport. COUNCIMLAN NUTTER: Well, who would be on the list of Philadelphia establishments? Isn't everybody in Philadelphia a Philadelphia establishment?
Yeah, I would think so. But they went to some of the more popular spots, such as I recall them going personally to Bookbinders. I know they've gone to Chickie's and Pete's. I know they've been to a few of the other local fare.
Well, is this just kind of on the fly, think about ten places that come to mind real quick, and go to them and ask them do they have to have a concession out at the Airport?
No. Actually, part of the Marketplace partnership is Redwood 199 Whole - Bills 040255, et al - 5/18/04 Airport Management which is a local company, and I think the local influence was pretty much inserted by Redwood.
In addition to what Jim has already described, we also pretty regularly have done... What do we call them, workshops or --
Outreach. We work with MBEC on a regular basis, particularly to seek out new minority vendors into the retail merchandising unit. The concept of the program as it was originally developed was that the end user carts or kiosks, as they're known, would be an opportunity for entry into the Airport marketplace for small, local, minority or female owned businesses. And then based on a projected record of success, those companies would have an opportunity to move from a kiosk into an inline store. And so, in order to recruit new entrants for the kiosk program, we have 200 Whole - Bills 040255, et al - 5/18/04 worked with MBEC on a regular basis to recruit local vendors.
Let me ask you two last questions. One, can you provide to us, through the Chair, the number of... Now, the 153 locations, do you call them businesses or do you call them locations? I want to make sure I'm using the right terminology.
All right. Of the 153 locations, can you provide us a list, a separate list, of how many of them are pure investor opportunity locations, as well as how many have non-involved partners?
I don't know that we would categorize it that way. We can -- We can absolutely give you a list of every vendor and every partnership that's doing business at the Airport right now. 201 Whole - Bills 040255, et al - 5/18/04
So you're saying that you wouldn't know in a partnership whether both partners are actively participating or whether one partner is doing the work and the other partner is acting more either as an investor or is taking advantage of a DBE opportunity.
That's correct, Councilman. I mean, there are a number of -- There are a number of stores that operate at the Airport where there are no 13 principals ever on site.
No; I understand that. But I guess part of my question here is, if you're a big company and you're going for a concession out at the Airport, are you then told that you have to have certain DBE participation, based on this formula of the 40 and the 45?
I think, really, what's evolved since 1994, it's almost a matrix, where Marketplace knows that they have to meet the local and the DBE criteria. 202 Whole - Bills 040255, et al - 5/18/04 They also have a merchandising plan that says they need a shoe store here and a candy store here because that's what Airport customers want.
And they, in order to plug in the right vendor, and make sure they get minority participation and also meet the local goals, that's really the challenge that was presented to them. Actually, I forgot the original question.
They don't have a minority partner or there's no DBE. I mean, could they still get the concession or do they have to figure out a way to have that relationship?
I'm sorry. I remember why I was -- I was trying to answer your previous question --
-- but saying one of the other problems we've experienced, and I think this is a national problem, is that 203 Whole - Bills 040255, et al - 5/18/04 there is also a requirement that they have a certain number of national brands, like the Gap or Brookstone.
Some of those companies are completely unwilling to have minority participation in their deals. So again, it kind of puts the developer in between a rock and a hard place.
I mean, how -- I mean, it's Brookstone. I'm assuming it's a national company. I've bought a few items from them. I mean --
You can't make somebody a part of Brookstone. It's like, you know, I want you to...
Right. So all I'm 204 Whole - Bills 040255, et al - 5/18/04 saying is, in order for them to meet that criteria --
-- it increases the pressure or the requirement that in those other available slots, that they do --
And it's been 205 Whole - Bills 040255, et al - 5/18/04 successful.
So let's say you're not Brookstone. You're, you know, Sam Jones; and, you know, you want to... I don't know... sell burgers, orange juice, you know, whatever.